Urban Freeways: A Question of Value

Was it worth it to run interstates right through built-up areas of Minneapolis and St Paul? That’s a tough question to answer, and maybe an impossible one given the complexities of the discussion.

I35W Minneapolis Proposal

These fine gentlemen sure thought it would be worth it. (Source: Star Tribune)

And yet we constantly hear public officials tout the benefits of our freeway capacities, and the economic value they bring, not only to their respective downtowns but the city and its residents at large.  When the I-35W bridge collapsed in 2007, not a single person from the mayor’s office up to the President of the United States bothered to pause and wonder if life (and our regional economy) would go on without that link, did the estimated economic losses justify the amortized capital and annual maintenance costs of the replacement bridge, or if that money would be better spent on other transportation projects.  Ask a friend or random stranger on the street if it was worth it – my guess is the response is simply pure shock that you’d even ask.

Defining the System, Outcomes

The 1960s and early 70s gave rise to the majority of our urban freeways, with the last connection (I-394) finishing in the early 1990s.  Others were planned – some even cleared out buildings in preparation; some real, some satirical:

Minneapolis Planned Freeways

Astute readers will know the difference (Image Sources: Left – Adam Froehlig, Right – The illustrious Minnesota Citizens for Roads, Asphalt, and Parking)

Neighborhood group opposition and a change in federal highway planning processes halted progress on some routes, but we still ended up with about 67 centerline miles of freeways ( ex. I-35W) and highways (ex. Hiawatha Ave and Olsen Memorial Highway) inside Minneapolis.  What did this new found mobility give Minneapolis residents? The ability to leave, for one:

MplsPopHistory

The media can’t stop reporting on Minneapolis’ recent surge, that small nudge up on the right there.

Population peaked in 1950 at about 520,000 residents and began plummeting afterward. Yes, other factors were certainly at play in the city’s population decline; household sizes began dropping after the 50s, home preferences changed, etc. But it’s pretty hard to ignore the interstates’ effect on housing location and transportation choices.

Property Taxes: A Proxy for Value

But Minneapolis leaders (and, presumably, many residents) believed this was still a positive for the city, or at least necessary to compete with burgeoning suburbs.  Were they right?  Did property values increase city-wide as a result of the mobility gains afforded to its residents and businesses?  I took a bike ride to the Minneapolis Central Library to gather some data:

MplsRealPropValuesHistory

Data collected every 5 years because, well, 80 years is a lot of annual city budgets to look through.

Tough claim to make.  In real (2013) dollars, property values after 1940 began dropping.  The post-1995 crazy valuations make my head spin (housing market bubble? crazy county estimators? urban revival?), but it’s hard to say freeways made Minneapolis a substantially more valuable place to live or do business in the decades following WWII.  What about the taxes collected in the same period?

MplsRealPropTaxesHistory

Missing data points are a result of bad smartphone camera skills…

Again, tough to discern a positive pattern here.  Aside from a bump in 1970, the 80s and 90s saw lower taxes collected city-wide.  Plus, prior to the freeway era, property taxes accounted for a larger share of the city’s revenue stream:

MplsPropTaxesPercentRevenue

Once the city began bleeding residents (I’m not sure if the same can be said for businesses/jobs, but I do know there are plenty urban-friendly office jobs along the 494/694 beltway), Minneapolis began relying more on sales taxes, state aid, and other forms of revenue to provide services, to say nothing of the tax burden per-capita.  Only in the last decade, as the state has cut back on LGA and other programs to Minneapolis, do we see property taxes, both absolute value and share of revenue, climbing back up.

What could have caused the stagnant-to-declining property values and taxes collected during that timeframe?  Well, there’s a big difference between putting a freeway through this:

…and this:

35W_SouthMpls

Image Source: UrbanMSP

The land freeways paved over not only has value, but it had even more value when buildings were there.  Using road and highway area calculated here, I was able to calculate the foregone revenue to Minneapolis given average property taxes per developable square mile:

Mpls_EP_SP_PropTaxes

Plus St Paul, Eden Prairie, and some other measures to stir up debate.

Minneapolis gave up over $23 million in property taxes to ram freeways through itself. That’s over 7% of what it’s currently taking in.  This is likely conservative since the per-square mile tax rate is higher as a result of non-profits, government buildings, and universities – entities that consume large swaths of city land but pay no property taxes, effectively raising other properties’ rate.

We also know that freeway noise de-values nearby properties (0.40% per decibel according to one study), and pollution is disproportionally high near them as well (we won’t even tabulate those health costs here).  At least the noise study notes that housing mobility isn’t affected – time on the market isn’t longer near freeways, just price (I guess that’s one way to build affordable housing).  I calculated the opportunity cost of property taxes near freeways by using I-35W between 36th and 37th Streets (a neither exceptionally wealthy nor slummy area of our city) as a sample:

35W_PropValue_Drop

Without the aid of GIS, I had to manually grab property taxes radiating outward from I-35W and average the two slopes representing lost dollars by distance from the freeway. This yielded the lost revenue within 1,000 feet of freeways, per 1/8 acre parcel, which I then multiplied by all 67 miles of freeways and highways in the city (minus space for local streets and parks).  The total bill came to roughly $20 million.  Again, this is likely conservative as high value places with apartments, small condos, and commercial properties pay far more per acre in property taxes than the single family homes evaluated.

That brings the total property taxes foregone to $43 million city-wide, a solid chunk of change.  To put that in perspective, the roughly 580,000 vehicles driving on Minneapolis highways and interstates would need to pay $0.22 per trip on an urban freeway to cover just the property tax losses alone.  Am I suggesting every mile of freeway in the country charge users this way?  Not necessarily, but it’s a real cost that not a single driver is currently paying (at least not directly).

Moving Forward

While the investments of the past should pragmatically be viewed as sunk costs, we need to have the tough conversations like this, which is why I encourage commenters to poke holes in my numbers and theories. Seriously. I believe this is a debate worth having, since it’s been nearly 50 years and we’re still replacing bridges over freeways without even considering mitigation options (to my knowledge).  A 50-year plan to slowly convert freeways to value-building boulevards and parks (with thru-traffic taking our soon-to-be 6 lane beltway, adding a couple minutes of drive time) is a laughable proposition at best.  Let’s be honest about the costs, impacts, and, yes, benefits of our current system, but constantly push for better and challenge the status quo.

Note: I apologize for some loose data referencing. There’s so much buried in this post that doing so would be a challenge.  I’m more than happy to send my mess of an Excel spreadsheet if anyone is interested in reviewing my work.

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32 Responses to Urban Freeways: A Question of Value

  1. Adam Miller
    Adam Miller July 23, 2014 at 9:19 am #

    I’m honestly not sure if freeways are a cause, effect or unrelated to population decline in the city.

    • Alex Cecchini
      Alex Cecchini July 23, 2014 at 9:26 am #

      Probably both cause and effect. People did begin leaving the city (or those who lived in outlying areas and began owning cars) before they were built, and wanted expressways in. There was pressure from businesses and residents alike to alleviate congestion on streets or legacy highways (not that different from today – read Strib comments sections of people howling for more capacity). But it’s hard to argue their presence didn’t allow many more people (along with other government programs aimed at housing) to move out who might otherwise have stayed.

      • Froggie July 23, 2014 at 9:34 am #

        I wouldn’t say freeways are a cause or effect. More like a corollary or supplemental catalyst.

        Given the times, another significant factor in the depopulating of the cities was segregation and the underlying racial tones of the day. I’d argue that this was a more significant factor than the freeways. Those folks were likely going to leave the city anyway….the freeways just made it easier for them to leave and come back to the city whenever desired (hence my “supplemental catalyst” comment above).

        • Janne Flisrand
          Janne Flisrand July 23, 2014 at 11:38 am #

          How can there not be some cause, given the number of homes and apartment buildings that were knocked down to make space for those cars?

      • Monte Castleman
        Monte Castleman July 24, 2014 at 8:25 am #

        Ultimately that generation wanted the benefits of suburban living, so there would have been a population decline regardless of freeways; instead we’d probably have a much more developed transit system to the suburbs. Besides the appeal of the suburbs and, to put it bluntly, white flight, that’s the era where massive urban redevelopment projects cleared out a lot of the housing stock.

  2. Bill Lindeke
    Bill Lindeke July 23, 2014 at 10:02 am #

    Even if we have other factors involved in suburbanization, wouldn’t it be nice for Minneapolis to have all that building stock back? To have continuity instead of barriers between neighborhoods? To have safer streets that didn’t encourage 40+mph speeding?

    • David Levinson
      David Levinson July 23, 2014 at 11:11 am #

      Do freeways encourage or discourage speeding on local roads? In the absence of freeways, motorists would take longer to get where they were going and be even more incentivized to speed. I suspect freeways reduce total casualties (in the absence of things like banning or pricing out cars altogether).

      • Matt Steele
        Matt Steele July 23, 2014 at 11:20 am #

        My anecdata is that city streets which feed to freeways see high speeds, since people are either thinking about getting onto a freeway or they’re in freeway mode because they just got off one. Speeds of 40-45 MPH in 30 MPH zones are common. I’m working on collecting some data that documents this on one street, but I’m not sure how it compares to other streets or what the factors truly are. The causation is purely a personal hypothesis.

      • Bill Lindeke
        Bill Lindeke July 23, 2014 at 11:37 am #

        I can’t remember the source exactly, but I once read that anywhere near an on- or off-ramp are the most dangerous spots in the city. People speed because their perception of what kind of space they are occupying shifts when they get near a high-speed roadway. You can easily see this in practice, (e.g. by 35W near the U of MN), but there is data out there too to support it. It doesn’t help that these kinds of road areas are designed especially with wide radii & lanes etc. to encourage speeding.

        OTOH, I guess not having freeways would have more incentive to design high-speed one-way roads (e.g. Pork Partland, 26th 28th University, 4th etc), but it doesn’t automatically have to be that way. And having the freeway hasn’t made those roads disappear…

        The way to reduce total causalities is to reduce design speeds in cities. It’s shockingly simple. That said, I’m not against freeways. As you suggest, they are also relatively safe in general. It’ s just that there should be a greater degree of difference between freeway spaces and city streets.

        • Matt Steele
          Matt Steele July 23, 2014 at 11:53 am #

          Would one solution be to require significant traffic calming, addition of “side friction” and amenities, and greater care of the non-vehicular space within our public right of way immediately adjacent to urban freeways?

          We’ve missed a significant opportunity in this regard with recent urban freeway reconstructions such as the Crosstown Commons, 35W bridge rebuild, or 35E rebuild.

          The problem is that freeway engineers are often the ones designing the bridges and ramps, and how they interact with surface streets that provide connection to their freeway. Thus they have a significant impact on the design of our urban streets at some of their most critical sections, despite designing for the movement of traffic at the exclusion of other community values.

          • Rosa July 23, 2014 at 12:35 pm #

            specifically, there are the metering systems for stopping cars to wait for the benefit of highway speed – but I’ve never seen a stoplight at the beginning of a highway onramp where pedestrians and cyclists have to cross. They would be nice to have in a lot of places – specifically I’m thinking of the on-ramp off Lyndale where the bike lane crosses it.

          • Joe DeVore July 25, 2014 at 11:57 am #

            The problem with trying to slow down traffic right at an off-ramp is that freeway engineers design signals so that ramp queues never back up into the freeway mainline. It is important to not disrupt the flow off of the freeway, but to design the local road with “side friction” a block or two from the interchange

            • Bill Lindeke
              Bill Lindeke July 25, 2014 at 12:20 pm #

              lack of side friction = highly dangerous areas where people get hurt

              another example of sacrificing neighborhood quality of life to the god of traffic flow

  3. Janne Flisrand
    Janne Flisrand July 23, 2014 at 11:41 am #

    Alex, thanks for the shout out to health. I read the health as including a variety of things, in particular respiratory disease from air pollution. It can also include casualties from crashes, obesity from making so much of our world car-required, and stress from both driving and noise. Those numbers get big fast.

    • Alex Cecchini
      Alex Cecchini July 23, 2014 at 1:09 pm #

      Yes to all of the above.

  4. Evan Roberts
    Evan Roberts July 23, 2014 at 12:06 pm #

    The health effects are really quite significant. Low birthweight and prematurity declined 10% in close proximity (2km) to freeways when E-Z Pass was introduced (http://www.aeaweb.org/articles.php?doi=10.1257/app.3.1.65), compared to 2-10km away.

    The long-term effects are pretty significant, since children seem to be particularly affected. Even after they move away, respiratory conditions can persist.
    http://europepmc.org/abstract/med/18468221

    • Alex Cecchini
      Alex Cecchini July 23, 2014 at 1:08 pm #

      Agreed. These issues manifest themselves from the city’s perspective in reduced property values (and thus tax revenue), but the costs to the individuals themselves (and society through healthcare premiums, subsidized care, etc) are totally separate. I 100% agree we should tabulate these costs as part of the equation, because they exist, but I didn’t want to include it in the direct city revenue discussion.

  5. Sean Hayford Oleary
    Sean Hayford Oleary July 23, 2014 at 12:38 pm #

    San Francisco provides an interesting alternative approach, where two freeways (CA 1 and US 101) become city streets through the urban core, 19th Ave/Park Presidio Blvd and Van Ness Ave/Lombard St, respectively.

    Park and Portland are not the most aesthetic or safe streets in the world, but to look at San Francisco’s 19th Ave, it could definitely be a lot worse.

    I suspect there are similar issues related to air pollution, loss of value, etc in these extremely high-traffic city streets as there are to true freeways.

    The freeway is more space-intensive, but I think in the metro core, it’s as much the volume of traffic as it is the type of roadway that’s built for it.

    And for what it’s worth, I would gladly pay $0.22 (or better yet, a couple dollars) to use our freeway system. We’d have more money to maintain the system, smoother traffic flow at rush hour, and less need to expand the system.

  6. Alex Cecchini
    Alex Cecchini July 23, 2014 at 1:17 pm #

    “I suspect there are similar issues related to air pollution, loss of value, etc in these extremely high-traffic city streets as there are to true freeways”

    Yes, probably. But freeways act as a multiplier in the sense that they also dump cars onto those streets. Obviously reducing car traffic (whether on freeways or busy arterials) is one mitigation strategy of many (electrification being another) to one problem of many, and we can’t be myopic. But for the foreseeable future, even with electric vehicle programs, the fleet will be largely powered by gasoline.

    “And for what it’s worth, I would gladly pay $0.22 (or better yet, a couple dollars) to use our freeway system”

    Keep in mind this is only on freeways within Minneapolis, and I should clarify that I counted an AADT number on every freeway and added them up as a “trip.” So if you went from 35W to 94, that’s two payments in this calculation (plus doing the reverse on the way home). Given the complete lack of political will at the national and often state levels to increase the gas tax (even by a dime, which would be good for 25 plus miles vs at most 5-6 in a Minneapolis freeway segment), I doubt the general public would support that tolling scheme…

    • Sean Hayford Oleary
      Sean Hayford Oleary July 23, 2014 at 1:23 pm #

      My understanding is that the usual American political strategy for tolling schemes is to have it related to an improvement. This has been done in far more conservative areas of the country, like Atlanta. The tolling has a specific goal, to “pay off” the improvement. Both the St. Anthony Falls Bridge and the Crosstown Commons would have been good opportunities to implement one. Perhaps a “big dig” for 94 or 35W might be such an expense to justify initial tolling.

      Tolling to mitigate congestion might be a tougher sell. Tolling because motorists “ought to” pay the costs of expensive roads seems like a near-impossible sell.

  7. Evan Roberts
    Evan Roberts July 23, 2014 at 4:15 pm #

    There’s a good article in the Quarterly Journal of Economics (Nathaniel Baum-Snow, “Did Highways Cause Suburbanization”) that estimates”one new highway passing through a central city reduces its population by about 18 percent. Estimates imply that aggregate central city population would have grown by about 8 percent had the interstate highway system not been built … highways account for about one-third of the decline in aggregate central city population relative to that in entire metropolitan areas between 1950 and 1990.

    Freeways are a big part of the story, but not the whole story.

    http://www.jstor.org/stable/25098858

    • Alex Cecchini
      Alex Cecchini July 23, 2014 at 8:08 pm #

      Thanks for that link. Surprised I hadn’t seen it before…

  8. James Warden
    JamesWarden July 23, 2014 at 5:53 pm #

    The whole tax revenue piece of this doesn’t work because it’s based on a flawed understanding of Minnesota’s property tax system.

    Minnesota’s property taxes are collected using a levy system that does not directly link property values to tax revenues. Unlike the millage system used in other states, cities don’t get more money as values increase. The city sets a specific dollar amount to collect at the end of the year, and that’s what the city collects. Period. In other words, property values don’t determine how much the city gets; they only determine each property owner’s share of the levy.

    Bloomington has a great explainer that should be required reading:

    http://bloomingtonmn.gov/cityhall/dept/finance/topics/levy_2011/property_values.htm

    If all values go up equally and the levy stays the same, you will have the exact same tax bill.

    More realistically, levies that climb slower than the increase in property values (as happened often during the bubble) will cause tax revenue to increase slower than property values. Something similar happened when values fell. Cities often had small levy increases even as values fell, so residents saw their bills grow even as their values shrank.

    Under Minnesota’s system, it’s not politically feasible for cities to grow their budgets at the same level as property values during boom times because residents would see huge increases in their tax bills without any additional income to pay those bills. Residents would riot. Conversely, it wasn’t politically feasible for many cities to cut their budgets in line with falling values during the Great Recession. Residents would have balked at the loss of services.

    Your analysis of tax revenues also ignores the ways we’ve rejiggered our tax system in the decades since the start of the Twin Cities freeway boom in 1956. This isn’t a response to “bleeding residents,” as the post alludes. It’s part of an ongoing debate over the fairest way to collect the revenue we need, as well as outside pressures on all the various revenue streams.

    Legislators created a statewide sales tax in 1967 that gave a fourth of revenues to cities and school districts. They created the Fiscal Disparities program in 1971 to redistribute development benefits among communities. The Legislature also created the Local Government Aid program and has tinkered with funding levels and formulas several times, ranging from sharp cuts to sharp increases.

    The state overhauled its school funding system so that the bulk of the money comes from the state now instead of property taxes (although the balance is shifting with the passage of so many operating levies). These aren’t city taxes but it likely changes the political equation for cities and counties since residents are more attuned to their total tax bill than its individual components.

    TIF districts, tax abatement and other subsidies have gone through periodic cycles in response to market conditions, legislation and the ever-changing political winds. Between 2001 and 2010, for example, the number of TIF districts certified dropped 74 percent.

    Finally, there’s additional noise because the Legislature periodically imposes levy limits that restrict how much cities can grow their budgets.

    Taking this into account, your calculations on forgone tax revenue don’t make sense. At all.

    There’s no tax revenue to be lost or gained under Minnesota’s system. It’s not just a simple equation of 2.29 square miles of highways/freeways X $10.1 million taxes per square mile of developable land. All we can say is there are fewer property owners to divvy up the tax burden.

    This likely increases the tax burden on the remaining property owners because there are fewer people to share in the cost. But with the data available, we can’t say how much because the additional taxpayers who’d have been there without the freeways would likely have required some unspecified amount of additional city services, too.

    Ultimately, a hypothetical City Council in a Minneapolis without freeways would have set a levy based on perceived needs and political realities. That levy probably would have been bigger than what we have now, but we can’t say how much bigger.

    Your larger point is sound: Big roads have costs. But why not just focus on property values and leave tax revenues out of it? It doesn’t change anything.

    • Bill Lindeke
      Bill Lindeke July 23, 2014 at 7:40 pm #

      It’d not about the size of a hypthetical levvy, it’s about the size of the tax capacity. That’s the figure a geographic scientist like Myron Orfield uses to measure wealth disparities. (See his books Region or American Metropolitics).

      Take a list like this: http://en.wikipedia.org/wiki/List_of_Minnesota_locations_by_per_capita_income

      A wealthy city might levy X amount of dollars, and everyone pays Y % of their property tax. Y will be low because the capacity (and land values) are so high. Minneapolis is relatively poor, and so their levy will be far higher PLUS they have to provide more services for all sorts of reasons. Cities like Minneapolis (or anywhere else) are constantly trying to increase the tax base because it increases their ability to pay for these services.

      That’s all Alex is talking about here. Your semantic point doesn’t change the fact that freeways have devalued property all throughout Minneapolis at the expense of the city-wide tax base in favor of faster commute times for people living elsewhere…

      Trying to put an exact number on that figure is always going to be an inexact science. But this guess is as good as I’ve seen. Perhaps you can suggest an alternative methodology?

    • Alex Cecchini
      Alex Cecchini July 23, 2014 at 7:43 pm #

      Thanks for the reply, James. I appreciate the discussion.

      I do understand how Hennepin County sets the rates, but it’s difficult to convey that in the broader sense of what freeways meant to the tax base here. I should have been more clear: assuming a fixed population, the loss of tax-paying parcels due to freeways shifts the (fixed tax levy) cost structure onto other families for the same level of service, which is bad for making Minneapolis a desirable place to live, all things considered equal (lot size, home size, etc). You are slightly right in that removing those properties for freeways removed some cost for the city (fewer square miles of road to maintain, etc), but in actuality ends up costing the city more – the freeway actually makes serving properties on either side more costly in many ways (pipes, police, schools, etc).

      With that in mind, we could also say that adding back those parcels would mean that every household in the city could pay the same amount they are today, and the city would have additional revenue if they chose to levy it. Why would the city do that? Perhaps to provide better transit through capital budgets, handle school funding on their own without state rules/requirements/etc, or anything else. The city sets the budget based on the needs of the community and levies the tax – if you believe (as I do) that the cost of operating a city sans freeway is more than likely equivalent-to-less than with freeways bisecting it, this affords them many options.

      I don’t ignore the ways we’ve re-jiggered our tax system. I mention in the post that property taxes represent a far lower share of total revenue for Minneapolis now than in the past. I don’t believe city sales taxes or state money from state sales taxes are very progressive. Not only does it adversely affect lower income residents based on spending habits, it also incentivizes Minneapolis (along with freeways that easily carry people in by car) to be a place to come and spend money but not to live or necessarily work. I also touched on LGA in the post – our dependence on outside funding from general funds rather than a reliable tax base is a bad thing in my opinion, as evidenced by unpredictable property taxes as LGA has been cut recently.

      I’m glad you brought many of these points to light regarding state laws/regulations on how cities operate their budget – it was too much to go into in the post, but I believe it highlights how cities are extremely constrained on how they can fund things on their own, handle growth, etc. They are anti-urban policies, in a way, as they (combined with the state/federal road building ability) allow new cities and suburbs to handle region-wide growth instead.

    • James Warden
      JamesWarden July 23, 2014 at 9:24 pm #

      Don’t get me wrong: I agree with your thesis 100 percent. I just got back from Vancouver and loved how the big roads skirt the central city. If you want to enter the central city, you have to go down the smaller roads. It increases the city’s connectivity and encourages density. In Hopkins, where I live, it’s clear that 169 is a barrier that splits the city from both a connectivity and psychological standpoint, as well as valuable undeveloped land in a city of just four square miles.

      But that’s why I think the tax revenue argument is misguided (and not a semantic point, as Bill said). The way Minnesota’s system is set up, you can’t use tax revenue over time as a proxy for value (as a snapshot in time, yes, but that’s not what the decades-long graph did). The way the process is designed, it is inherently disconnected from property values. That, along with the other factors I’ve mentioned, confounds any attempt to use it as a proxy. Attempting to do so undercuts the larger point you’re making without adding anything to the other analyses you present.

      And to Bill on Orfield: Market value more closely tracks tax capacity. Tax revenue, on the other hand, would track levies.

      To answer Bill’s challenge that I come up with something better, I actually think everything else in the post is spot on. I loved your analysis of taxes vs. distance from I-35 because that’s a single snapshot in time of taxes and works great as a proxy for value.Elegant and beautiful.

      I also suspect the total market value graph would make the trend pop out clearly if you could compare an interstate corridor to an urban corridor, but that’d be a ton of work and might require data that isn’t available. I totally recognize that it’s outside the scope of this post.

      At any rate, I’d try as much as possible to compare values if the goal is to determine the amount of lost value. Why use a proxy if you don’t need one?

      And hey, while I don’t agree with Bill that it was a semantic point, I do understand I was being nitpicky about an extremely thought-provoking post that contained so much solid analysis. Misunderstanding/muddying the waters over the state’s property tax system is my peculiar pet peeve because I’ve seen it confuse so many other discussions about complex issues.

      • Alex Cecchini
        Alex Cecchini July 24, 2014 at 9:16 am #

        Thanks again for the thoughtful response. I think, at its core, the disparity in our view is whether or not you believe city costs to handle the development that freeways displaced scale in proportion to the number of [people businesses structures] there. I don’t. Some things do scale (though many of those are covered by service charges separate from property taxes – garbage, water/sewer, etc). There are fixed costs within government and the services provided that would not scale up if you added back those properties.

        Therefore, under the current levy system, the city could lower the taxes for everyone by some amount by keeping the levy the same as it is today (or scaled slightly up to match the increase in required budget), lowering everyone’s individual tax burden, or the city could keep the per person/business burden the same and have more on hand to do things (or rely less on state money and the strings attached to it).

  9. Matt Steele July 23, 2014 at 7:41 pm #

    Good background, but isn’t it fair to generalize these points?

    – If house value A stays relatively constant, but a local government has tens of thousands of additional housing units and hundreds of millions more in building stock, the percentage of the total levy goes down. Thus as development increases, an individual’s property tax incidence decreases.

    – Assuming a city grows in a financially sustainable way (urban, not suburban, land use generally fits this bill), the marginal growth in tax base outpaces the marginal growth in city liabilities (infrastructure replacement costs, city services, etc). As a city densifies, its costs per capita or per land owner decrease. Meaning it could theoretically lower the tax levy or it could increase service levels.

    – As a city grows its tax base and average tax incidence goes down unrelated to property values, cities could raise their levy in proportion to the growth in tax base and, theoretically, average tax property incidence would stay flat. Thus the city would likely have the political cover to raise the total levy, and raise revenues, without really raising anyone’s tax incidence.

  10. Matt Steele July 23, 2014 at 7:48 pm #

    Also, Minneapolis losing a double digit percentage of its taxpaying building stock was probably in a similar situation to school districts facing declining revenue due to declining enrollment. You still have the same geographic area to cover with services – you can’t cut fire stations, reduce total miles of streets to maintain, lower city staff at an equal rate to the decline in population, etc. Most costs are either fixed or do not decline at the same pace as population or taxable building stock. You’re right, “All we can say is there are fewer property owners to divvy up the tax burden.” But when fewer taxpayers are sharing the same burden, the real tax incidence necessarily increases.

    This is another reason why the “Minnesota Miracle” was anything but. It ended up being a major subsidy of low-value land use and sprawl, because it largely disconnected public investment from value creation at a fine-grained level. We’d achieve significantly more progressive results if we went back to a system where local municipalities (or even neighborhoods) were direct recipients of the sales tax. “Old and blighted” in the traditional development pattern vastly outperforms “new and shiny” in the automobile-oriented development pattern. Every time, usually by large margins.

  11. Joe S July 25, 2014 at 1:21 am #

    I love your idea for creating a 50 year goal of eliminating highways inside Minneapolis. I wish it would happen tomorrow, but I think developing a solid transit system and bike infrastructure, should remove the argument that without the highways people have no way of getting into or around the city. There is an existing ring of highways surrounding Minneapolis and St. Paul. This is done in every European city. If people need to get around Suburbs they can use the ring. Then charge for people to entering/exiting the city. That will only accelerate the move of people into the city.

  12. Auto Bahn July 26, 2014 at 8:37 am #

    The reason no one questioned replacing the 35W bridge is it would be mindless to do so. Any person over five could see 35W efficiently moves immense amounts of people, goods and services to the very areas where it’s needed- A brilliant and marvelous extension of efficiency man sought when he first straddled an Ass or lashed logs together for a raft. One could only imagine Mr. Cecchini ranting at the ports that literally built human society up through the ages.
    If there’s flaws with the freeway system, it would be that they’re not extensive enough. Their problems are only due to their own wild success.

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  1. Sunday Summary – July 27, 2014 | streets.mn - July 27, 2014

    […] starters 2: Big topics thoughtfully considered with (1) Urban Freeways: A Question of Value and value sacrificed when “Minneapolis gave up over $23 million in property taxes to ram […]

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