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Wednesday, May 21, 2008

Let's talk tax structure and streetcars

There is no doubt that residents and businesses, in Downtown/OTR/Uptown, see the value in the proposed streetcar system. It is also quite understandable that community leaders in neighborhoods like Westwood, Price Hill, and Mt. Washington may not exactly see the benefits to their respective communities.

Every community would like to have more amenities and improved services. These are the things that help make neighborhoods successful and great places to live. At the same time they understandably don't want to see their taxes rise. So lets break down the tax structure and how the streetcar will play into this whole situation...

Residential properties are accepted losers when it comes to taxes. They simply demand far more services than they pay for in taxes. Those services (i.e. trash, police, fire, schools, etc) are made possible by those that pay exceedingly more than they demand (i.e. office, industrial).

Therefore the commercial and industrial bases are the most important tax bases to preserve and grow in order to maintain service levels for your residential base. Of the Top Ten taxpayers, in 2006, 9 were based out of Downtown* (for what I could find).

With that said, residential properties can get close to offsetting their service demands. The best opportunity for this to occur is in the most densely populated (or built) areas where economies of scale factor in big time. In Cincinnati's case there is no other residential neighborhood that has a potentially better return on taxes than Over-the-Rhine.
Chart illustrating the functionality of Economies of Scale

These most densely built areas need to be focused on first and foremost, and need to be populated with as many people as possible. This allows you to grow your residential base without significantly growing the demand for services (in OTR's case you may actually decrease demand for services like police and fire by repopulating the neighborhood).

So while a streetcar line only serving Downtown, OTR, and Uptown seems to only benefit those 3 is really affecting the financial stability of the entire city, and allows for a growth in tax base without a significantly higher demand for services. This means extra tax revenues can then be used for increased services and funding for the other 49 great Cincinnati neighborhoods.

*Tax data from City of Cincinnati's 2006 Annual Financial Report (pdf 5mb)

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Anonymous said...

Your argument suggest that the streetcar would drawn new residents, which would generate more tax revenue for the entire city.

What about the fact that nearly 80% of Cincinnati' revenues comes from income tax, of people who mostly don't live here and don't require any residential services.

If they were to live here there maybe some services that aren't at capacity, or that can take advantage of economies of scale, but there would still need to be a plethora of new services, especially schools, which are one of the more costly services to provide.

And what if a streetcar doesn't draw a vast amount of new residents?

I like the idea of good transit and also the idea of downtown catering to more residential needs, but I don't see how a streetcar makes that inevitable.

Randy Simes said...

The meat of my argument is not about the system attracting new residents. The streetcar line will attract new residents, but the point of this argument is for those other Cincinnati neighborhoods that are unclear as to how this will help them.

We need to maintain and grow our job base Downtown and Uptown...the streetcar will help that happen by making it easier for the businesses to attract new/young talent. If you don't want to take my word for it then ask someone from one of these places. They need young talent and streetcars are just the type of thing to help make that happen.

Anonymous said...

So it is not about attracting residents, but young fleeting talent. Isn't this the same as chasing smokestacks, except the incentive is cool flashy streetcars as a toy rather than a means of movement.

I do believe you that they want talent, but I don't believe that there is anything, anywhere that shows that if you build a streetcar in Cincinnati that talent will be drawn here.

Build a streetcar for transit first and foremost.

Randy Simes said...

This post and my response isn't THE reason as to why to build a streetcar system, but rather it is one of many reasons.

There are the transit and environmental reasons, there are the economic development reasons, the retention/atraction of new residents, etc. This post is a response to a hot topic right now which is how the other neighborhoods (in Cincinnati) will benefit.

The transportation and environmental pros will be felt predominantly along the route only. However the economic development impacts along with the impications they'll have on the tax base will positively affect the entire City.

Paul Wilham said...

Cincinnati is one of the few midwestern cities to have not effectivly revitilized its downtown residential core. With gas prices rizing it is within easy projections to see that urban neighborhoods will come back. A big part of that is infrastructure. As someone moving there from Indianpolis, where we have a restored downtown. I can tell you that with planning and incentives the typical OTR brownstone could sell in excess of 500-750K.This will substanciallly increse the city tax base. Not to mention tourism dollars and new business. Most cities would 'Die' to have a resource like OTR. The streetcars make perfect sense. The very people "panning" the streetcars are the people who will find themselves living downtown in 10 Years because the burbs will be in decline.

Jason said...

Nice post. I think its important to point out to the rest of the city how the streetcar will positively affect everyone. I strongly agree with Paul Wilham's response also. Cincinnati is already behind the times when it comes to revitalizing its downtown core. As Paul mentioned Indianapolis has a wonderful downtown. Downtown Indy on a friday or saturday night is booming with people doing all sorts of things. Cincinnati is still not like that at all. As pointed out already I think things are going to change rather rapidly, especially with the rising fuel costs. People are going to start waking up and seeing the benefits of living downtown and close to their place of work.
Also, in answer to what justforview said "I like the idea of good transit and also the idea of downtown catering to more residential needs, but I don't see how a streetcar makes that inevitable."
I'm telling you from my prospective and that of many other 20 somethings that I know who are looking for a place to live and work after college, a city with a streetcar system or a subway is a city that seems instantly more interesting than one without. A streetcar system would say to those people "wow, this city actually cares about its urbancore, it actually has people who live, work and hang out downtown." A streetcar system would represent stability and an alternative to living in the suburbs and depending on gasoline to get everywhere.
Once the city has it in place, the number of people moving downtown will grow exponentially.
When my wife and I were deciding where to move after I finished med school we looked very seriously at 2 or 3 different places, new york, chicago, perhaps wash d.c. All for the same reason, we knew they had awesome city life with excellent public transit. The only thing stopping us was the high cost of living in those areas. When we heard that cincinnati was trying to revitalize otr and even had plans of putting in a streetcar, we instantly changed our minds and moved here. We knew we could live like we were in a place like new york, be close to family and live relatively cheaply.
Trust me, there are LOTS of other people just like us that are making the same sorts of decisions right now. A streetcar system in place, coupled with a beautiful historic neighborhood, next to a bustling downtown entertainment district will seal the deal for a TON of people.
I think our city officials see this and are going to try very hard to make it happen. We just need to convince everyone else that its worth it.

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