Where I live, there seems to be acceptance by just about everyone that cities seeking additional tax revenues are best served by the development of business parks, particularly high-tech light industrial parks. What's not clear to me is why this might be so. My efforts to find some kind of economic development primer either locally or on the web in general have turned up nothing useful, so I thought I'd bring the matter up here to see if someone can enlighten me.
Some of the questions and comments that have occurred to me:
Is the per-acre assessed value of the improvements associated with business parks substantially higher than for residential development? I wouldn't think so. Despite the need for heavier street sections to accommodate truck traffic, the buildings themselves tend to be tilt-up boxes with little in the way of architectural adornment, and surrounded by basic landscaping and parking lots.
Even with high-tech industrial tenants, wouldn't most of the expensive equipment be taxed as personal property? Do cities get any of that back from the counties?
With industrial development there wouldn't be any significant sales tax revenue, because sales would be almost exclusively wholesale.
The business park employees would generate some sales tax revenue when they shop in town, but enough to make a big difference?
Demand for housing would increase as a result of the employment bump, but I've been told repeatedly that residential development is a break-even deal at best from a city's viewpoint, at least in California.
Thoughts, anyone?
Thanks!
Just one thought, if an area were developed as residential, generally the only taxes the property generates is a property tax, although if you have more residents you have more income taxes too, but you can only count more income taxes if they moved from another state.
With a business, there's sales taxes, and property taxes. But if the building isn't occupied there are no sales tax revenues.
There was an article in the SacBee over the weekend about the office market in the Sacramento Region looking up at least in some locations.
There are many other items that you haven't considered. In Texas, damn near everything is taxed at sale, so you have a huge influx of sales tax. Also, when considering industrial sites, in Texas, you have Freeport and Super Freeport tax and tax exemptions. These taxes are for holding areas that do not produce, but simply take in, and ship out.
Other than that, building permits go up, new water and sewer customers, more employees, new houses, people moving to town and buying goods in the stores, etc. You see how one business with 10 employees new to the area, can have a significant impact on a LOCAL economy, which is the purpose of smaller towns.
It is proven that if folks shop locally, that same dollar will turn over, in the same town, 6 to 10 times. That is VERY substantial.
I finally asked our assistant city manager. He explained that they're currently evaluating all the variables in order to determine a long-term business park strategy, noting that the issues are many and few of them are simple. However, he was quickly able to answer some of my more significant questions:
1. Certain type of businesses have real-property assessments that are higher than those of residential property.
2. Cities do, in fact, get a share of the unsecured property tax revenue. For a high-tech facility, this can be substantial.
3. Cost of city services to businesses is typically lower than for residential.
4. Sales and use taxes are complicated, with some types of businesses returning much higher volumes than others.
5. The jobs matter comes into play in mostly in the form of age demographics, i.e. the predominant age range of employees of high-value businesses is also the one that spends the most, thus returning more dollars to the local economy in both purchase amounts and sales taxes. (This may be partially countered by the higher cost of servicing the new residential required to accommodate the new workers. However, the actual number depends on the deal the city works out with the county when new residential comes on line.)
6. New residential brings with it subsidized low-cost housing requirements. These units often get built on land owned by non-profits, which wholly or partially removes the land from the tax rolls. Business park developments aren't subject to these requirements, so all the land remains fully taxable.
The overarching theme of his response will sound very familiar to land surveyors: "it depends." However, I now have a much better understanding of the factors involved, and greatly appreciate his taking the time to respond.
I have always lived by the motto -- "If you build it, they will come"
If you want to see evidence of economic development, build a Walmart in the middle of nowhere and wait 10 years. You will have a thriving metropolis.
> I have always lived by the motto -- "If you build it, they will come"
Yes, but the "when" is pretty important if you're trying to figure out return on investment. We have one business park in town that's taken almost 30 years to fill. If the owner had it to do over again, I'm not sure he'd follow the same path.
> If you want to see evidence of economic development, build a Walmart in the middle of nowhere and wait 10 years. You will have a thriving metropolis.
Unfortunately, many of those "middle of nowhere" Walmart-centered metropolises are associated with a formerly-thriving-but-now-dead downtown in a nearby city. Urban planning at its worst; fortunately, we've learned that lesson around here and won't be repeating it.
