Do The Math: Creating Our Community’s Balance Sheet

Oct. 7, 2016

Campbell Agents with 0 houses 1. Adolfo Sanmartino 2. Andrea Reznick 3. Anghele Tchividjian 4. Ave Maria Furey 5. Betty Jean LaBarbera 6. Christian Coniglio 7. Connie Stanziale 8. Corey Feinstein 9. Most residents and elected officials understand that a city brings in more tax revenue when people shop and eat out, but they often underestimate just how much more valuable this economic activity is when it happens downtown versus in outlying areas.

In fact, cities compile very little information to help them make decisions on development. According to Charles Marohn, PE-AICP and president and founder of Strong Towns, "Despite running corporations that have billions of dollars in assets and liabilities and annual cash flows in the tens, and sometimes hundreds of millions of dollars, few ever consider some very simple questions."

"What are our total assets and the value of the tax base that constitutes our community’s wealth?"; "What are the long term obligations for infrastructure maintenance associated with sustaining those assets?"; and "In terms of geography, what parts of our community have a positive Net Present Value and which have a negative Net Present Value?"

The answers to these questions constitute a community’s balance sheet – the most basic of accounting requirements for any family or business – but one which many cities ignore.

To their credit, the City of Traverse City, Grand Traverse County, the Traverse City Downtown Development Authority, the National Association of REALTORS® and the Traverse Area Association of REALTORS® have started asking these questions. They have combined funding for the city to contract with Joe Minicozzi, AICP and the principal at Urban3, a firm that analyzes the financial implications of municipal development strategies, including the relationship between building design and tax production. He plans to study and present on the economic productivity of all of the parcels in Traverse City and Grand Traverse County.

Urban3 is nationally recognized for simplifying complex information in order to include everyone in conversations about community growth. Their 3-D graphic visualization models are extremely eyeopening and easy to understand. Their work tells the financial story of a community.

This study will use historical tax data and market analysis to determine the tax revenue potential of development projects. Their impact on surrounding property values can be projected well into the future, and the regional analysis will display real estate valuation trends across the region. Minicozzi will be able to show how interactions between Grand Traverse County and Traverse City impact phenomena in the built and natural environment as well as the market.

"As a community, if you have a finite amount of land, would you want $6,500 or $20,000, or $634,000 per downtown acre?" Minicozzi asks. "People understand the cash-crop concept, so why aren’t we doing that downtown?"

Developing real estate downtown generates short-term economic activity in the form of retail sales and dinners out. Over time, it also raises the value of the buildings in that area, which generates even greater tax revenue for the city. And buildings downtown do this on much less land than, say, a shopping mall.

Minicozzi often cites an example from his hometown of Asheville, North Carolina. There, a Super Walmart two-and-a-half miles east of downtown is valued at an incredible $20 million – but it sits on 34 acres of land, meaning that it yields about $6,500 an acre in property taxes. A department store in downtown Asheville that’s now home to retail, offices, and condos, is worth $634,000 in tax revenue per acre – nearly ten times the property tax productivity per acre.

One of the main reasons I continue to advocate for denser, walkable downtown development is because this approach has been proven, again and again, to greatly benefit a municipalities’ finances. Contrary to Judge Rodgers’ recent opinion on the Special Land Use Permit for the River West in Traverse City, density is far more efficient than sprawl.

Regardless of whether or not you support the Brownfield Redevelopment Authority or the Downtown Development Authority’s Tax Increment Financing plans, it’s important to remember that denser projects downtown not only generate more revenue, but incredibly, cost less to serve and maintain than the average Traverse City home.

"This study will be extremely valuable in educating the City voter prior to the Proposal 3 referendum on next month’s ballot," says City Commissioner Brian Haas. "Before we limit development to 60 feet, we should fully understand what it is we’re giving up."

There will be two public presentations of Urban3’s study: Monday, October 10th at 7:00 p.m. at the State Theater, and Tuesday, October 11th at 7:00 p.m. in Lars Hockstad Auditorium at Central Grade School.

It is my hope that our community sees enough benefit from this study that we bring back Urban3 to complete their analysis to include the cost of physical infrastructure and public services. This method allocates costs and matches them to revenues across a community. Armed with this information, city and county officials will be able to calculate the true costs and benefits of any future development proposal that comes before them.

Christie Minervini owns Gallery Fifty at The Village at Grand Traverse Commons, and is active in causes of education and homelessness in the Grand Traverse region.