In 1978, three real estate developers in Boston set their eyes on a decaying waterfront property south of downtown. The lot, owned by the bankrupt Penn Central station, was up for $3.5 million. The deal fell apart. A few years later, one of the trio, Frank McCourt, bought the land for around three times the rate and set up shop on the 24 acres, using them mostly as a parking lot. He and his wife became the largest private developers in South Boston. In the coming decades, state and city leaders made a series of heavy infrastructure investments stretching into the McCourts’ acres. They broke ground on the Central Artery and Tunnel, a $14.6 billion highway project known as the Big Dig, and launched the Silver Line, a massive bus rapid transit operation that put a station at the center of the property. Frank McCourt contributed $25 million to fund the station project, but only after the city reimbursed him $30 million for the land that was seized. And after McCourt, in an eminent domain suit, won an additional $57.5 million. McCourt was not just a real estate guy. He was a baseball fan. In 2002, the grandson of a one-time Boston Braves owner attempted to buy the Red Sox and move them south, to the land on the waterfront. When his bid failed, he quickly put the property on the market. Then he bought the Los Angeles Dodgers. He sold his waterfront acres for
more than $200 million. Even if McCourt didn’t build the baseball field of his dreams, it’s fair to say he made a killing on the attempt. For diehard fans of Fenway, the botched bid was a disaster narrowly missed. Yet the city also missed something significant with McCourt’s departure. A hefty chunk of the nearly $190 million he made on the sale of his waterfront property came from the improvements to his land backed by the city and by taxpayers. Had the government operated differently, it could have claimed some of the value it helped create on McCourt’s property as its own. It could have deployed value capture, the principle that the economic gain generated by a public policy — a zoning change or infrastructure investment — should make its way back to the public. As the gap between the infrastructure our cities need and the money we have to fund it continues to widen, more cities are aiming to avoid their own McCourts. And value capture, an idea long en vogue with economists and policy wonks, is now starting to bleed slowly into City Halls, changing the way we pay for our cities.
More than a century before McCourt bought his waterfront property, Henry George, a Philadelphia-born economist, was scripting a philosophy that applies aptly to the Boston developer. All taxes, George argued, should be scrapped and replaced with one: A single tax on land.
[Read More...]