At Lincoln House June 2015

State of the property tax

The Lincoln Institute of Land Policy released the annual 50-State Property Tax Comparison Study, a comprehensive analysis of effective property tax rates in each state's largest city, one rural area in each state, and the District of Columbia.

The study, produced in partnership with the Minnesota Center for Fiscal Excellence, tracks the property tax as the primary revenue source to fund local government to provide basic services. The Northeast and Midwest generally have higher property tax burdens as compared to the West and Southwest.

In part because the study measures effective property tax rates - that is, the actual tax payment as a percentage of market value - many struggling post-industrial cities, where property values have dropped, show up at the top of the rankings. National Public Radio aired this report on how this dynamic is at work in Detroit for commercial properties, citing the study.

"The property tax remains the foundation of sound municipal fiscal health," said George W. "Mac" McCarthy, president of the Lincoln Institute. Cities such as Detroit are working hard to make adjustments in valuations to bring balance back to this essential covenant, said McCarthy, who was quoted in an article at CityLab this month about increased reliance on fees and user charges.

Bridgeport, Connecticut continues to impose the highest taxes on homes worth $150,000 to $300,000, followed by Detroit, Aurora, Ill., Newark, and Milwaukee. Cities with the lowest effective residential property tax rates include Denver, Birmingham, Washington D.C., Honolulu, and Boston.

Cities with the highest apartment property tax rates - in contrast to "homestead" or owner-occupied housing - include New York, Detroit, Des Moines, Aurora, and Bridgeport. The lowest in the rankings are Salt Lake City, Washington, D.C., Denver, Cheyenne, and Honolulu.

In terms of commercial property taxes, cities with the highest effective commercial rates include Detroit, New York, Chicago, Providence, Des Moines, and Bridgeport. The lowest taxes can be found in Wilmington, Del., Virginia Beach, Seattle, Honolulu, and Cheyenne.

Cities with the highest industrial property taxes are Columbia, South Carolina., Memphis, Jackson, Miss., and Houston. Cities with the lowest industrial property taxes are Cheyenne, Wilmington, Honolulu, and Virginia Beach.

"Cities are making unwarranted choices to make fiscal ends meet in the short term while compromising long term security and stability," said George W. "Mac" McCarthy, president and CEO of the Lincoln Institute of Land Policy, who called for a revisiting of the fundamental covenant of property taxes - the focus of opposition and tax limits - to fund services and restore "municipal fiscal health."

The study is most useful when analyzed alongside other information about state and local tax structures, said Mark Haveman, executive director of the Minnesota Center for Fiscal Excellence. Some jurisdictions are more dependent on the property tax and have limited alternative options; some have higher income and sales taxes to finance a greater share of the cost of local government. There are also many policies to redistribute property tax burdens across the classes of property through exemptions, differential assessment rates, or other classification schemes.

Other highlights: For median-valued homes (urban), rates range from a high of 4.0 percent (Bridgeport) to low of 0.3 percent (Honolulu); burdens range from a high of $6,601 (Bridgeport) to low of $529 (Birmingham). The economic recovery appears to be creating additional amounts of excluded homestead value benefiting long time property owners; the effects can be very large -a new owner of the median valued home in New York City, Los Angeles and San Francisco pays 30 to 40 percent more in property taxes than the average tenured resident of the same home.

In terms of business property versus residential property taxes, New York City and Boston are at the high end - each with effective tax rates for business property that are at least 4 times higher than those for residences; states with no parcel-specific assessment limitations and low differentials between residential and business effective tax rates have had slower growth in property taxes.

The nexus of water and land

Water is everywhere in the news these days - too much of it as a result of volatile weather leading to flooding and mudslides, or too little of it, very much in evidence in California's struggles with drought. And because policies related to water have a critical relationship with land use and land policy, the Lincoln Institute is looking more closely at that nexus.

In the latest in the Lincoln Institute's spring lecture series last month, Scott Campbell,
a joint fellow with the Lincoln Institute and the Loeb Fellowship at the Graduate School of Design at Harvard University, reported on his research about how land trusts play a role in the protection and management of water resources. As he explained in Surface Tensions: Large Landscape Conservation and the Future of America's Rivers, Campbell, most recently the director of a major land trust in Colorado, noted that local, state, and national land trusts have protected more land in the United States than is encompassed by America's national parks. Working with private landowners-and using voluntary as opposed to regulatory frameworks-land trusts protect an additional 2,000,000-plus acres every year. But as the land trust movement matures, so does the thinking about the water resources, which flow from, through, and across the nation's lands.

In contrast to land, preserving the integrity of a resource that moves is inherently complex, Campbell said, especially when that resource is subject to vast sets of laws, regulations, and bureaucratic systems that have evolved over centuries. Including new components such as water rights makes the land trust transaction even more complicated. He recommended building on market mechanisms, incentives, and appropriate pricing to encourage maximum efficiency and conservation. Inter-basin compacts, water networks, and water trusts require water owners to be a "different kind of neighbor," he said, with a big-picture view of how the management of the resource can benefit wilderness, agricultural land, and urban development.

Campbell has worked in conservation, preservation, economics, and community development in southern Colorado-where large cities and agricultural towns face radically juxtaposed trends of growth and decline due to consumptive land use patterns and competition for scarce water resources. Under his leadership, the Palmer Land Trust earned the Jane Silverstein Ries Award from the American Society of Landscape Architects and the Award for Excellence from the El Pomar Foundation. Before his time at Palmer, he served in the Colorado Office of Economic Development and International Trade, under Colorado Governor Bill Owens. There, he led the team that launched Colorado's Heritage Tourism Program-helping communities capitalize upon the more than $1.2 billion in natural and cultural resource preservation investments Colorado has made through the Great Outdoors Colorado Trust Fund and the Colorado State Historical Fund. Colorado College recently awarded Scott the 2015 Livesay Award for Social Change.

The lecture can be viewed in full here.

Harriss, Lincoln Fellows

The Lincoln Institute of Land Policy announced recipients of the C. Lowell Harriss and David C. Lincoln Fellowships, named as part of a continuing effort to support research on the cutting edge of tax and land policy.

The C. Lowell Harriss Fellowships, named in honor of the Columbia University economist (1912-2009) who served for decades on the Lincoln Institute's board of directors, support work on dissertations. Administered through the departments of Valuation and Taxation and Planning and Urban Form, the program provides a link between the Lincoln Institute's educational mission and its research objectives by supporting scholars early in their careers. The recipients and their topics are:

  • Kyoochul Kim, Pennsylvania State University: Analysis of the Effect of Land Value Taxation on Land Value and Land Intensitys
  • Ross Milton, Cornell University: The Political Economy of Property Tax Structure
  • Alexander Bartik, Massachusetts Institute of Technology: The Efficiency and Incidence of Improvements in Local Amenities: evidence from Census Data and Local Property Values
  • Lyndsey Anne Rolheiser, Massachusetts Institute of Technology: The Local Tax Implications of Inefficient Land Use
  • Paul Edward Bidanset, City of Norfolk, Virginia: Using Locally Weighted Regression with Simultaneous Spatial, Temporal and Attribute Weighting Functions to Improve Accuracy of Mass Appraisal Models
  • Charles J. Gabbe, University of California: Why are regulations adopted and what do they do? The case of Los Angeles
  • Andrew McMillan, University of Illinois at Urbana-Champaign: After the Foreclosure Crisis: Measuring Neighborhood Recovery and Contributing Factors
  • Linda Shi, Massachusetts Institute of Technology: Resilient regions: U.S. Experiments in Metropolitan Climate Adaptation?

The David C. Lincoln Fellowships in Land Value Taxation (LVT) were established in 1999 to develop academic and professional interest in this topic through support for major research projects. The fellowship program honors David C. Lincoln, former chairman of the Lincoln Foundation and founding chairman of the Lincoln Institute, and his long-standing interest in land value taxation (LVT). The program encourages scholars and practitioners to undertake new work in the basic theory of LVT and its applications. These research projects add to the knowledge and understanding of LVT as a component of contemporary fiscal systems in countries throughout the world. The 2014-2015 DCL fellowships announced here constitute the fifteenth group to be awarded:

  • Alex Anas, Professor of Economics, State University of New York at Buffalo: The Effects of Land Value Taxation in Los Angeles and Paris in a Computable General Equilibrium Model
  • Kevin C. Gillen, Economist and Senior Research Consultant, Fels Institute of Government, University of Pennsylvania; and Guy Thigpen, Director of Research, Philadelphia Redevelopment Authority: The Empirical Development and Application of Land Price Indices
  • Tina Beale, Program Director, Land Economy and Valuation Surveying Division, University of Technology at Jamaica; Rochelle Channer-Miller, Assistant Lecturer, Land Economy and Valuation Surveying Division, University of Technology at Jamaica; Cadien Murray-Stuart, Senior Lecturer, Land Economy and Valuation Surveying Division, University of Technology at Jamaica; and Amani Ishemo, Associate Professor, Urban and Regional Planning Division, University of Technology at Jamaica: Towards Property Tax Compliance: A Case Study of Attitudes Toward Paying Property Taxes in Jamaica
  • Robert W. Wassmer, Professor, Department of Public Policy and Administration, California State University at Sacramento: Property Taxation, Its Land Value Component, and the Generation of "Urban Sprawl": The Needed Empirical Evidence
  • Zhou Yang, Assistant Professor of Economics, Robert Morris University: Differential Effects of Two-Rate Property Taxation: New Evidence from Pennsylvania

The Lincoln Institute invites new applicants for the David C. Lincoln Fellowships for 2015-2016; the applications process is spelled out here.

Odds & Ends

Re-using vacant industrial buildings for makers spaces in Baltimore, what Regenerating America's Legacy Cities co-author Alan Mallach calls strategic incrementalism ... Lincoln Institute Fellow Alexander von Hoffman joined HUD Secretary Julián Castro, Gary, Indiana Mayor Karen Freeman-Wilson and Ralph Becker, mayor of Salt Lake City and president of the National League of Cities, at Opportunity in Urban America at the Urban Institute earlier this month ... In the news: Lincoln Institute President George W. "Mac" McCarthy on the New York City real estate market, and in The Boston Globe on the wisdom of public financing in Boston's 2024 Olympics bid ... The Sonoran Institute recently celebrated the release of over 100,000 acre-feet of water in the Lincoln-Institute supported Colorado River Delta Pulse Flow initiative ... Lincoln Institute Fellow Daphne Kenyon on the strains on municipal fiscal health brought on by a police misconduct case outside Detroit, and Armando Carbonell on the siting of homeless shelters in Yakima ... This month's highlighted Working Paper: The CIPUV Residential Land Use Regulatory Index: A Measure of the Local Regulatory Environment for Land and Housing Markets in Argentina's Municipalities by Cynthia Goytia, Guadalupe Dorna, Jonathan Cohen, and Ricardo Pasquini.

— ANTHONY FLINT, Lincoln Institute of Land Policy

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