Monday, December 21, 2009

My One String Harp

If you've followed this blog with any regularity, you'll be familiar with my peculiar bugbear with regard to vacant land. If so, feel free to skip this post as it devolves into the typical rantings and raving you'd expect from someone who's obsessed with things like "tax increments" and "the name of Captain Picard's fish on Start Trek: The Next Generation."* If you don't know what the hell I'm talking about, keep reading.

From the P-G:

Blight and abandoned properties are a "growing crisis," robbing this region of millions of dollars. So says a report just released by Sustainable Pittsburgh, the host of a summit on the topic last week.

Vacant and decrepit land is a regional liability in marketing and attracting investment, said John Kromer, a senior consultant at the Fels Institute at the University of Pennsylvania and the keynote speaker.

"If people actually knew how much money they are losing by not having these properties on the tax rolls it might spur them to action," said Ginette Walker Vinski, communications manager for Sustainable Pittsburgh. "If you make the economic case on a regional level, there's so much money we could be making..."
Mike Madison jumps in with a proposal over here, in which he argues for a University sponsored land banking system, which the City does not have at this point in any workable form (although several other Cities do... the land bank bit, not the University part, that is). However, the most important bit being
Most of that vacant land is taxable in theory, but there is no tax revenue associated with it. It's not being developed.
Which brings me to my one string harp:

Back in the day, when the Sabre Systems property assessments first came in, the Pittsburgh City Council, in an effort to cut off its nose to spite its face, eliminated the land/building split on property taxes. Up until this point, land was taxed at a higher rate than the building that sat upon it. When the land/building split was removed, the combined value of the land & building were taxed at the same rate.

So, what this means is that under the old system, if you had a vacant property with a low value, but you were taxed at a really high rate; under the new system you have a vacant property with a low value with a really low rate. If you are a rational actor, therefore, under the new system it is in your best interest to keep a property vacant or a low value building in a state of disrepair, else your taxes go up. Moreover, because I depend on tax money to feed my family, if you're sitting on a piece of vacant property for an extended period of time, you're still paying a really high rate to the City.

I would be curious, therefore, to see what the rate of vacant and abandoned properties was prior to the elimination of the land/building split and the rate is currently. My sense, from nothing more than driving down Fifth Avenue, is that the rate of vacant and abandoned properties has gone up.

Now, I'm not saying that reinstituting the split is going to fix this property problem, but I am saying that it should provide negative incentives for people to leave property vacant.

But that's my one note tune and I guess I'm the only one singing it.

* A virtual cookie to the first one to know this one. No Googling.


C. Briem said...

Bad assessements acting as an anti-land tax? Gotta ponder that some, but it works out. There is this abatement which impacts the most over-assessed neighborhoods in the city which mitigates that a bit, but the point is still valid overall. Bigger problem is that the land tax theory breaks down for the truly dead parcels, with no meaningful ownership, which we have in abundnance. Without a taxpayer it's hard to use tax incentives as policy.

Anonymous said...

I don't think people who don't pay taxes are worried about the amount of taxes they are not paying.

That same posit holds true for people who are dead, yet still own land in the City - they are dead, they do not care how much in taxes they are not paying.

EdHeath said...

The change in tax valuation for land and property is only one factor in the changes in population and the economy in the City. I suspect you are right ADB, there probably has been an increase in abandoned properties, and the change in taxation may well have had an effect on how many had their structures torn down. But I think a lot of the abandonment has more to do with our shrinking City.

On the other hand, if taxing the land at a higher rate would serve to reduce the rate of abandonment (or at least reduce the rate of increase of the rate), or if it would simply have a positive effect on revenues, then I am all for it. Yay negative incentives.