Looking Back at Yesterday’s Property Tax

It’s 1896.  The Presidential campaign involving William Jennings Bryan and William McKinley is heavily colored by the Panic of 1893 – the worst economic depression yet experienced in the U.S. Susan B. Anthony and Elizabeth Cady Stanton are championing the right of American women to vote, a campaign separated from success by twenty more years of hard organizing.  In St. Paul, “empire builder” James Hill is at the peak of his influence as a railroad monopolist.  Near the Cathedral in September, future literary master F. Scott Fitzgerald is born.

And finally (lest I neglect the dictum that only two things resist change), the St. Paul City Council in 1896 passed a measure establishing what became known as the “St. Paul method” of assessing property taxes. 

The method streamlined the process of assessing property in the city for tax purposes, by establishing values per foot of frontage on various types of streets.  In other words, with certain exceptions, the core assumption was the wider a lot on a given street, the higher the assessed value of its property.  In the modern discussion around property tax, this comes close to what is now characterized as a land tax.  In theory, builders and property owners of the time would have been encouraged by this tax system to plat narrower lots and build higher, longer structures, rather than lower, wider structures.  Over the last year, my efforts to engage a full GIS analysis of this dynamic have been stymied for lack of records indicating when the St. Paul method was forced out of use by the state, which at some point likely mandated a more uniform statewide assessment system.  View an 1896 article describing the system by clicking here.

Still, I have run some initial analysis.  Below is a graph (click on it for a larger version) showing citywide property data, and plotting the year each parcel was built versus its floor-area ratio (“FAR”).  FAR represents the total square footage of a building divided by the total land area, and serves as a measure of the density of building on the property.  The blue dots represent buildings constructed in a given year, and the red line represents the annual average FAR for the year.  Unfortunately, it’s difficult to draw conclusions around the impact of the St. Paul method without an end date, but the trend of density in the city is certainly of interest. 

Stp_far_wavg

1896 is, in fact, a high point, and the years that follow suggest a significant drop in the density of buildings constructed, which lasted until the end of World War I.  However, a range of issues may explain these dynamics beyond the impact of a property tax regime:

• The cost of labor and/or materials related to buildings more than one story;

• Availability of desirable land as the city became more continuously developed;

• Changes in the streetcar and auto transportation system.

Also notably, the current year’s property data have a significant inherent bias, in that many buildings of low and high density have been demolished over time, and so the available data by no means represents a full accounting of when and how construction occurred in St. Paul. But while imperfect, this exercise does suggest how powerful contemporary analysis may be in tracing success and failure in past development and policy.

Include Financial Sustainability in Comprehensive Planning

Sustainability will get lots of ink in this decade’s comprehensive plans for local governments.  And, to be sure, as is evident from past posts, I agree there are many good reasons for planning and development to reflect environmental costs and other externalities ignored by previous generations.

Still, one critical form of sustainability will remain largely invisible:  Financial sustainability.  Ramsey_co_emv

As cities allocate resources to develop workforce, cultural amenities, quality schools, housing stock, multiple modes of transportation and other initiatives, comprehensive plans must establish an approach for financing these core public functions.  Not only is this as critical as ever, it is also potentially at its most difficult.  Two suggestions for how planners and citizens engaged in this work can consider financial sustainability:

Developing alternatives to the property tax will strengthen cities’ financial stability for years to come; failing to do so will be at a community’s own risk. Beyond the anecdote that seniors are on fixed incomes and are therefore more sensitive to property tax increases, this fall’s polling for school referenda reveal a heightened antipathy to this funding source by voters ages 45-65.  Evidence from the 2006 elections nationally suggests that property taxes are a watershed issue for voters – and the stakes are high for candidates who promise to “solve the problem.”  Long-term public planning needs to include both some analysis of alternatives to the current form of property tax as well as concerted education about the fact that public services aren’t free. 

The relationship between local governments and their state and federal counterparts has shifted in recent years, and the shift may be long term or permanent in nature.  In Minnesota, local government aid (“LGA”) reductions have received much attention as the source of diminished services and increased property taxes; a list of Minnesota cities and the LGA received from 2002-2007 is included here.  The infrastructure and services required for future urban development (in a physical sense and in terms of human resources and capacity) are in Minnesota provided primarily by cities, counties and school districts:  Streets, stormwater and wastewater, to start.

More quality analysis is available today than ever before that reveals the many factors contributing to a robust residential tax base.  Data is available to evaluate the impact of physical amenities integral to formation of a comprehensive plan, on property values and tax base.  For example, view articles examining a comparison of high-profile, big-ticket arts investments to neighborhood arts facilities; the impact of a quality K12 system on local property values; and how nearby parks boost home values.  The volumes of data available through residential listing services even allow valuations of a single mature tree (in 2002, its minimum value was estimated to be $10,000) in a residential yard.

With multiple chapters to update, it’s difficult for municipalities to explore each issue in detail.  Moreover, readers will fairly note that social and political issues transcend municipal boundaries, making efforts to reduce reliance on property taxes (for example) very difficult. However, with federal and state support ebbing, local governments cannot afford not to consider financial sustainability in their long-term planning process, property taxes and all.

GIS map courtesy of Prof. Paul Lorah, University of St. Thomas.