The City of Champaign released their draft Cost of Land Uses Fiscal Impact Analysis, and held a public meeting on it yesterday:
The study found that among six types of residential development, only high-priced single-family detached homes in the $400,000 to $600,000 range, such as Trails at Brittany and Chestnut Grove subdivisions, and downtown apartments, like at One Main, generated income surpluses for the city, primarily due to their higher taxable values.
High-priced single-family homes generated a surplus of $813 per house for the city and downtown apartments generated a surplus of $325 per unit.
Other types of housing were net money losers, including medium-priced single family homes, like in Sawgrass and Boulder Ridge subdivisions (a loss of $888 per unit); low-priced single family homes, like in Ashland Park (an average $641 per unit loss); apartments on the city fringe (an average loss of $764 per unit) and attached housing units, such as townhomes, duplexes and triplexes (an average loss of $334 per unit), the study said.
And this:
Among nonresidential developments, big box retail generates a $6,245 surplus for the city per 1,000 square feet of space, and neighborhood retail generates $4,639 per 1,000 square feet. Sales taxes generated by retail sales accounts for the surpluses.
But the city loses an average of $314 per 1,000 square feet of office space, loses $63 per 1,000 square feet of industrial use and loses $51 per 1,000 square feet for health care clinics.
The City of Champaign has planned on raising fees on developers to assist with balancing this year's budget.
(Disclosure: I work for the Devonshire Group, which sometimes consults for developers.)
(UPDATE: Typo in title fixed. Sorry!)
Vacant Building fees, increase in liquor license fees, developer impact fees, etc. etc....Seems like Champaign is intent on raising income at the expense of the business owner, but has no problem spending $96,000 for a consultant from Maryland that has told them exactly what they wanted to hear....
Vacant Building fees, increase in liquor license fees, developer impact fees, etc. etc....Seems like Champaign is intent on raising income at the expense of the business owner, but has no problem spending $96,000 for a consultant from Maryland that has told them exactly what they wanted to hear....
I doubt that the the city fathers wanted to hear that only the development of retail and high priced residential properties return money to the city's coffers. Champaign has encouraged outlying residential development for as long as I can remember on the theory that all growth was good and paid for itself. It should not come as a surprise that residential development comes with an annual cost and that the higher density, lower value impose higher costs than they fund with new tax dollars. It is important to remember that the study does not consider the costs that development imposes on non-city taxing authorities; the school district; the Sanitary District; MTD; or Public Health District. Factor those costs in and the annual costs swell.
Developer Impact Fees can not cover the annual short fall imposed by new middle or low cost residential development. Such fees can cover the extension of infrastructure to the developmental tracts. The study supports an argument for a policy that favors redevelopment of existing housing stocks as opposed to sprawling into the adjacent farm land.
3 Score + 10
Keith Hays
'
Yep, Champaign and Urbana should both make development as expensive as possible - then sit back and watch Savoy become the biggest city in the county.
There are several problems with a study of this sort, some of which are highlighted by RSW's quip.
The only reason that a big box is going to bring in the surplus is because of the population of people who live in the area. Maybe this needs to be said, but simply putting up more big boxes does not guarantee more tax dollars. There is a saturation, or tipping, point in which there is too much. Empty big boxes are nothing but a drain on an economy, to say the least. But most importantly remember: it is those "drains" on services, the middle class, that spend that money in those stores. Without them the whole system falls apart.
The same with high-priced housing developments. Who is going to live there? There are only so many people who can make that choice. Not to mention the other obvious fact: rich people rarely shop at big box stores. More high priced developments and more big boxes don't mix.
So the idea that Savoy is going to take away all of the competition if we increase impact fees is silliness. The most important factor in the decision of a retailed or developer moving to town is customer base. Can they sell enough TVs? Will the population support the development? This is the fundamental issue, not small percentages turned over to local governments in impact. Otherwise towns like Naperville, with massive impact fees, would be struggling instead of thriving.
This is why these kinds of surveys can be so misleading. The obvious conclusion to draw is that we need more big boxes and upscale housing, right? Not necessarily.
So the idea that Savoy is going to take away all of the competition if we increase impact fees is silliness. The most important factor in the decision of a retailed or developer moving to town is customer base.
I was mainly referring to housing. People have choice in this area - C and U cannot keep people from building houses in Savoy (or Tolono, or St. Joe, etc). With our minimal commutes, many would consider the small addition to drive time worth the savings.
The use of a "snap shot" average cost based analysis has serious draw backs that can tend to overstate the cost burdens of new development. For example new development clearly requires less than an average amount of attention from the Neighborhood Services Dept.. Also new development with new infrastructure (built to higher standards) requires less than an average expenditure from the Public Works Dept. Most development probably starts out as a winner (subsidizing older neighborhoods) and more or less gradually becomes a breakeven neighborhood or a subsidized neighborhood.
More when I've had a chance to read the study.
I think this poses a dilemma for the City. If more modest priced homes are a net drain, then logically, the City imposes more fees on them--the developer passes those fees along--the houses become less affordable.
It is important to remember that the study does not consider the costs that development imposes on non-city taxing authorities; the school district; the Sanitary District; MTD; or Public Health District. Factor those costs in and the annual costs swell.
A minor distinction: the Sanitary District doesn't collect property tax revenue. Operating and replacement costs are funded by user fees, and expansion is funded by connection fees (which are essentially impact fees), so it's a lot easier for the UCSD to keep expansion revenue-neutral than it is for, say, the school district or the MTD.
Champaign's study simply points out the most obvious limitation of the use of property taxes as a funding mechanism: value has little correlation with impact. On average, someone living in a million-dollar home consumes the same level of services as someone living in a hundred-thousand-dollar home, but they pay ten times as much property tax. By definition, unless the city drastically shifts its revenue model away from property taxes, it is always going to "make" money on expensive homes and "lose" money on inexpensive homes.
Something of a danger to moving away from the RE tax model. It implies middle class homeowners would have to shoulder more of the tax burden in whatever other form it would take if not property tax based. If someone wants to live in a castle, let them pay for that public display of wealth with their RE tax bill. They knew going in what the tax consequences were.