Will big box stores financially ruin your city or town?
- Thread starter capitalcityguy
- Start date
To bring balance to this problem, I propose from this day forward we value property tax solely by type (residential/commercial/etc) and total area of the lot. Building values will not be considered
Let me know if the motion passes and I'll email Pollard
Let me know if the motion passes and I'll email Pollard
I was thinking about that yesterday reading this. If the concern is not generating revenue because the value of the taxable real estate isn't there, then why don't municipalities change to a total area charge? And why wouldn't that be fair? If flies in the face of everything we know about how RE taxes are currently conducted. But if a town is say approximately 10 square miles, and they need to generate $20 million in property tax revenue from that area, just divide it out. Obviously people that don't live on the developed area will be ****** but then everything would be fair.
The majority of new infrastructure is paid by a combination of the City (typically to get any necessary services to the development) and the developer. But in many smaller municipalities we work with (50k and under) they will require the developer to extend water/sewer/roads to their development. TIF districts are not uncommon for larger developments (I'm not a huge fan). Otherwise GO bonds or similar are used to pay for major infrastructure upgrades. I don't think using a 20 year bond if its done in a planned way is necessarily a bad thing for cities.
Unless its an interstate you aren't getting many federal funds for transportation related projects (very rare) and you need a state highway to get state funds. So as for your bolded, I don't see many cities relying on state funding for development projects. It happens but its the exception not the rule. Most cities have an economic development fund they can use as an incentive for luring certain businesses and developments.
Best video I've watched on this subject, I definitely try to avoid Walmart at all costs.
[video=youtube;RXmnBbUjsPs]https://www.youtube.com/watch?v=RXmnBbUjsPs[/video]
[video=youtube;RXmnBbUjsPs]https://www.youtube.com/watch?v=RXmnBbUjsPs[/video]
I haven’t watched the video, but believe I can guess what a lot of the content will be about.
My slight push-back on including it within this discussion would simply be this.
I think we’ve all heard one form or another of these arguments before…yet big box stores keep popping up and are generally (with exceptions of course) celebrated as a positive sign of growth for a city. I don’t believe the standard anti-big box arguments tend to move people to change habits all that much because in the end, we want to get the best value for each dollar we spend.
The reason I think the discussion on this thread is different and more effective, is that it opens our eyes up to a reality that most of us were completely ignorant of before. That is, their appearance on the landscape in the form they have been popping up for last few decades, is actually hurting out cities and eventually could lead to their demise. This hits closer to home to more people IMO as we all hear about and see first-hand stories of cities and towns struggling with budget issues (e.g..cuts in police force, streets in disrepair, etc.) and now we can tie some of the shortfall in revenues to these large big box store developments that can be a net drain on the city finances.
As for your first bolded: That's never happened in the history of the United States, I don't believe.
Second: I still don't agree with this statement. Strong Towns and you seem to be suggesting that the land outside of town will develop NO MATTER WHAT and that the idea development is a downtown-like style. In the video example, the downtown still had a net revenue of around $1 million while the Big Box development on the outskirts of town had $600,000. If City's do not allow this Big Box development, how can anyone be assured it would develop with something "better"? Because I don't think it will in most cases.
So then the real debate is would the City rather have $1 million of revenue for their downtown + minimal revenue on the outskirts or $1.6 million in revenue for both? Again - comparing two types of development in two completely different locations and trying to make a blanket statement that one is bad is logically incorrect.
As I mentioned before, target your tax breaks to smaller companies. 10-20 employees. If they go under or go away, they are easier to replace, and the potential for growth is better.
But those companies don't bring in the revenue (specifically sales tax revenue).
Its more complicated than that. The majority of distributors were also producing the gasoline, and the contaminant in question for groundwater was MTBE. You can read the history of the chemical, but its water solubility led to the above problems, and it restricted the use of MTBE. Most refiners produced MTBE, and its ban forced them to buy expensive corn ethanol for emission controls. Problem is MTBE was a more effective emission control agent, and cheaper. My guess is the joint refiners and gas station operators would have wanted to keep the MTBE in the gas. From an emission standpoint everyone should have as well. But ethanol baby.....
In 20-25 years the population of Ankeny will be 90k. Even if people shop at box stores less, those ones will be fine.
What would you say has driven growth in Ames in recent years? I would say:
1. Huge grants to ISU, USDA, etc., such as the one on bioterrorism related to the Patriotic Act. Brings jobs for construction as well as the ongoing operations.
2. ISU enrollment increases has led to apartments being built everywhere followed by businesses (West Towne pub area, now Sports Page).
3. Workiva type companies. Some are based here because of previous roots. Others are attracted to the research emphasis.
I don't think retail has been a big factor in the growth of Ames. Rather, it has been a trailer to the growth. Just my two cents from an armchair economist.
1. Huge grants to ISU, USDA, etc., such as the one on bioterrorism related to the Patriotic Act. Brings jobs for construction as well as the ongoing operations.
2. ISU enrollment increases has led to apartments being built everywhere followed by businesses (West Towne pub area, now Sports Page).
3. Workiva type companies. Some are based here because of previous roots. Others are attracted to the research emphasis.
I don't think retail has been a big factor in the growth of Ames. Rather, it has been a trailer to the growth. Just my two cents from an armchair economist.
So what you are relying on, essentially, is the reliance on future growth to subsidize past obligations that are not fully funded and adequately financed. That is how ponzi schemes work....and they eventually fail because the growth can not continually cover for obligations created in the past that are not fully funded.
If cities continue to allow their land to be developed with low per acre value structures, eventually all the obligations created by all the expensive corresponding infrastructure built to support them, will come due.
Sorry, been in Colorado on vacation...just now getting back to you.
I want to start by addressing this item first, because it is the key to this entire discussion. I would suggest some form of "demise" has happened and is happening to varying degrees in certain cities across the country. but I don't want to start going example by example, because there is a larger point I don't want to get drown out by being too specific.
We forget that the style of development is still relatively new when you consider the history of city building. We've only built this way for 50-60 years. Cities have been around for 1000's if years, We are only just now entering into the 3rd life cycle of this pattern of development and the financial trends suggest that something has to give:
http://static1.squarespace.com/stat...69d25/1410192655834/Curbside+Chat+Book-LO.pdf
(see page 15 -- we haven't seen wholesale financial collapse by most cities...yet. But how do you ignore the trend-lines or explain them away? The mistake is to look around and say, I don't see many problems yet. The point instead is to look into the future and recognize this can't realistically continue. The money is simply not there. )
Last edited:
Ironically, the President and founder of Strong Towns (and the author of the blog that was referenced in the original post for this thread), Chuck Marohn will be in Mason City this week as one of the keynote speakers at the Iowa Downtown Conference. While his talk isn't focused on Big Box stores specifically, it is the same general message.
This is not fringe stuff and the message is getting around and being delivered to very mainstream bodies like this. IMO, it is important to everyone to begin to understand this as citizens of towns, voters, and land owners.
http://www.iowaeconomicdevelopment.com/downtown
http://www.strongtowns.org/eventspage/2016/8/4/mason-city-ia
8am-8:50am: Keynote Speech
This is not fringe stuff and the message is getting around and being delivered to very mainstream bodies like this. IMO, it is important to everyone to begin to understand this as citizens of towns, voters, and land owners.
http://www.iowaeconomicdevelopment.com/downtown
http://www.strongtowns.org/eventspage/2016/8/4/mason-city-ia
8am-8:50am: Keynote Speech
- Why are our cities and towns so short of resources despite decades of robust growth?
- Why do we struggle at the local level just to maintain our basic infrastructure?
- What do we do now that the economy has changed so dramatically?
Last edited:
I don't want to continue to argue just to argue but to blame city all city financial issues on the way we have developed is silly. Pensions, larger staffing, increased prices of construction/equipment, etc, etc. all contribute.
Just like saying all big box store development is great is not accurate, neither is saying all big box development is bad.
I’m confused by the comment “arguing to argue”.
I thought we were having a back and forth dialogue that wasn’t’ filled with personal opinions or preferences. I think I introduced several references each time I brought up a new point or answered a questions/challenge.
The financial health of our cities is an important issue and I’m very passionate about it because I don’t think people fully grasp the issues a lot of cities are facing. It is not like we are arguing about what makes for the best new uniforms.
Also, if you look back, I never claimed that unproductive development was to blame “for all city financial issues”. Did I? Your last comment was the first time anyone said anything about that. I was very specific and consistent, I believe, that we were talking about infrastructure and more specifically infrastructure costs and eventual related budget shortfalls.
I respect if you’re tired of the topic. I would be curious however as to what you thought of the graph I referenced in the attached pdf that shows we are now essentially in the 3rd life cycle of this suburban development style, but now we are highly leveraged with debt that was used to help create it. Does that not suggest to you that we have some fundamental monetary issues to face? (page 15) http://static1.squarespace.com/stat...69d25/1410192655834/Curbside+Chat+Book-LO.pdf
We are. But I've said the same thing numerous times that a blanket "big box developments don't work" or "ruin cities" is just not accurate. Just like anything SMART development and SMART growth is the key. What works for WDM or Urbandale doesn't work for Ames or Mason City.
Private sector debt has exploded primarily due to sustained historically low interest rates. Why use capital if you can get low interest money and leverage it? The author has in large block title "MASSIVE LEVELS OF PRIVATE SECTOR DEBT WILL LIMIT FUTURE GROWTH" Maybe, maybe not. If we have another dip and head towards another recessions - of course it will. But it might not either. I do not necessarily see the large amount of private sector debt as a bad thing. People are limited where they can get returns on their money, again since interest rates are so low, and are turning more and more to real estate.
And even that graph shows public sector debt is below the "real economy" line. So public debt is exactly in line with what is expected and actually slightly lower. This does not suggest to me that cities are on the brink of financial disaster (some are of course but many are in very good financial situations).
I'll say once again that "loss leaders" in the public sector are not uncommon nor are they necessarily a bad thing. If you take a loss to bring in Jordan Creek Mall but make up for it with huge levels of growth that will pay dividends in the future (I don't think many can argue that the Jordan Creek area has been a failure). Or let's make an incorrect blanket statement that ALL development loses money for cities. That would be okay if they made up for it in residential property taxes, sales tax, etc. A city is not a business. A business would just drop the Development arm of the company because its losing money. If a city did that, no one would want to live there.
