Close Allentown SD Budget Gap With NIZ Land Windfall

When the state created the NIZ tax district, they made the land downtown more valuable. Overnight, landowners there became eligible for a boatload of state subsidies to build buildings. Lots of people wanted to get in on that, but there is only so much land within the NIZ borders, so land prices got bid up. It’s pure inflation. Lots of money chasing a fixed quantity of land has pushed up land prices.

Ed Pawlowski told me last week that land prices downtown have jumped 15-20% since the state passed the NIZ into law.

That means that people who happened to own land downtown before the NIZ passed got a 15-20% windfall in property wealth. The landowners aren’t responsible for that increase in wealth – the state created it.

The city of Allentown is well-positioned to capture back some of that windfall to pay for public services, since they tax land at a higher rate than buildings. Unfortunately, the Allentown School District never followed the city’s lead, and still taxes land and buildings at the same rate.

The best way for the ASD to close their budget gap this year is to copy the city’s millage rates for land and buildings. The School District has been looking for ways to capitalize on the NIZ, and I think this is the best strategy. By taxing land at 5 times the rate for buildings, ASD can capture some of that state-created wealth to pay for public education.

As the land tax raises the cost of owning vacant land in the NIZ, landowners will either build new buildings or sell their land to somebody else who wants to build. As more office buildings get built in the NIZ, there will be more ratables for the Allentown School District tax base.

Why We’re Going Over the Cliff

Jonathan Chait:

“Where are the president’s spending cuts?” asks John Boehner. With Republicans coming to grips with their inability to stop taxes on the rich from rising, the center of the debate has turned to the expenditure side. In the short run, the two parties have run into an absurd standoff, where Republicans demand that President Obama produce an offer of higher spending cuts, and Obama replies that Republicans should say what spending cuts they want, and Republicans insist that Obama should try to guess what kind of spending cuts they would like.

Reporters are presenting this as a kind of negotiating problem, based on each side’s desire for the other to stick its neck out first. But it actually reflects a much more fundamental problem than that. Republicans think government spending is huge, but they can’t really identify ways they want to solve that problem, because government spending is not really huge. That is to say, on top of an ideological gulf between the two parties, we have an epistemological gulf. The Republican understanding of government spending is based on hazy, abstract notions that don’t match reality and can’t be translated into a workable program.