Allentown NIZ’s Income Tax Changes Are Progressive, Not Regressive

A couple more points on the controversy over the Allentown NIZ’s earned income tax collection policy.

Bernie wants to say that using earned income tax revenue from the suburbs for the NIZ is a “Reverse Robin Hood” policy – a transfer from the poor to the rich. This is incorrect:

The 1st and 2nd Class Townships are richer than Allentown. The townships have most of the region’s earned income tax revenue. That’s how they are able to fund a much larger share of local government with earned income taxes instead of property taxes. Allentown has fewer earned income tax-paying residents, so they have to rely more heavily on regressive property taxes to fund public services.

So the net effect here is going to be a very progressive transfer from wealthier areas to a poorer area. Bernie’s going to have to find something else to dislike about the NIZ, because calling it an upward transfer of wealth is not correct.

LVCI raises some points that aren’t factually wrong, but that I disagree with:

Expand on this idea of “earn it here, keep it here” and Fogelsville, because of it’s industrial park, would become one of the richest local governments in the area. How much money do you think is coming into Allentown from money earned there and in Whitehall with it’s employment of sales associates? How many who live in Allentown actually work in Allentown? Most work outside they city.

What about Cherryville, Laurys Station, Catasauqua and tons of other burgs and villages that have little to no employment opportunities? Places where people commute to somewhere else for their income. Where are they supposed to get their tax revenue from? Yeah I know screw them on property taxes. The farmers, seniors on fixed incomes too?

I’ll just ask again what the justification is supposed to be for your earned income tax revenue returning with you to the municipality where you live. Can anyone explain what the rationale for this practice is supposed to be? I haven’t seen anyone make a full-throated defense of this argument yet and I would like to see one.

“Earn it here, keep it here” makes sense. The business where you work is located in a city. You and all your coworkers travel there to do business, using public roads, parking facilities, water and sewer, electricity infrastructure, broadband, police and fire protection, etc. Why shouldn’t the host city collect the earned income taxes on labor performed in the city to finance these public services? I haven’t heard a real argument against this.

LVCI is saying that if everyone adopted this policy, this would cause some dislocations. Areas who profit under “Earn It There, Bring It Here” would take a loss and areas currently doing poorly would benefit. Fair enough, but I don’t see why that would be a reason not to do it.

Maybe Fogelsville should receive more earned income tax revenue for hosting an Industrial Park. Maybe Whitehall should receive more because of the Mall, but do sales associates even pay much in earned income taxes?

All I know is that, because of the NIZ, Allentown’s going to be getting more high-paying white collar professional jobs, and that EIT revenue should stay in the city. I don’t see what LVCI (and Michael Molovinsky in the comments of a previous post) think they are getting at when they say most people living in Allentown work outside the city.

Which is larger:

a) the amount of EIT revenue produced by Allentown residents in other municipalities
b) the amount of EIT revenue produced in Allentown by residents of other municipalities

Obviously b is larger. That is why a “earn it here, keep it here” policy would be good for Allentown. Areas with higher job density that contribute more to the region’s GDP would benefit, and areas with fewer employers that contribute less to GDP would be worse off.

If you’re in one of the areas that would be worse off under an “earn it here, keep it here” approach to EIT, it’s perfectly sensible to be opposed to the change. That’s basic political economy. But LVCI lives in Allentown, and would personally be better off if Allentown was collecting amount b.

More importantly, the net effect would make the whole Lehigh Valley better off, even if a few individual municipalities were made worse off. If you buy into the “regionalism” agenda that many local public officials cop to, then that’s what matters most. If a policy change would make a few municipalities worse off, that’s less important than if it will make the whole metro region more prosperous and productive overall.

Here’s where I really disagree strongly with LVCI, and where I think he has some misplaced loyalties for someone who cares about inequality. I read this as a full-throated defense of the White Flighter perspective:

I know someone will come up with the idea they consolidate. BULL. No one who lives in these areas are ever going to let that happen. Why should they? Many of these people worked very hard to achieve an education or commute for hours to secure a good job so they can live in a community that suits their needs and lifestyle.

Since when is it being an elitist to study and work hard to want to give yourself & family a better life? Only to be de-incentivized for it.

Everyone needs a goal. Be it people who live in poor neighborhoods and seek higher objectives or someone who is more industrious from the next. To nullify their achievements through consolidation is not what will most benefit this nation. Since the days of cavemen people have always sought after a better standard of living or people like minded as they. If you take that away, you take away their reasons for doing so.

Just like the wealthiest 1% of Americans don’t see themselves as benefitting from government subsidies or a tax and regulatory regime designed to funnel wealth to the top, neither do suburban homeowners see themselves as benefitting from a comprehensive pro-suburban industrial policy at the federal and state level.

But in both cases, they’re wrong. I think people who have done well under the government-structured market and generous subsidies that make suburban homeownership so artificially cheap have a moral responsibility to help sustain the core cities. Maybe LVCI is right that some people see themselves as having worked hard to avoid paying taxes to Allentown, but the question we need to ask is whether the state should be allowing suburbs to sequester their tax revenue from core cities in the first place. I think the hyper-local tax base system is unfair and regressive, and that’s why I support County-wide tax bases.

It’s the same economic justice argument for progressive taxation at the federal level, applied to the regional level. I know that LVCI supports higher taxes on the top 1% of US taxpayers, so it is hard to understand why he doesn’t support more progressive taxation of the 1% of Lehigh Valley taxpayers.

Comments

  1. john.jay says:

    I imagine the rationale for the “earn it here take it there” policy was, back in the day, to allow suburban townships to raise tax money from new suburban residents without having to raise property taxes on the original rural township residents, but that is just a guess. However, if it is correct, then, yes, it is just an anachronistic policy meant to favor suburban development over urban development explicitly at the expense of the urban core. As usual, you make a really well-thought-out and well-developed argument.

  2. John says:

    Now JB Reilly wants to destroy someone’s livelihood because they were 3 days late on their rent.

    You’re in with the rich white guys Jon, the people who destroy the hopes and dreams of black, asian and latino people every day. Hope you like it there.

    • john.jay says:

      Wow, there is a lot of ridiculousness packed into that one short comment. First of all, I read the Morning Call Article and if the tenant’s only breach of the lease was being 4-days late, then, a judge is going to laugh this eviction out of court. Landlords and tenants have an obligation to deal with one another in good faith and obviously it is not good faith to evict someone over a mere technical violation. If the only breach is being 4-days late, I think the landlord should tuck his tail between his legs and run home. Not only that, but the tenant should demand attorney’s fees because any legal action would simply have been vexatious.

      So, as you can see, I’m not on the side of the monied interests in this matter. I try to be on the side of what is “right” or “just” as can be defined through a rational moral system. Does a moral interest sometimes align with a monied interest. Sure. I think there are moral imperatives to supporting urban life–and if this can be brought about someone is going to make money off the idea. But, don’t forget, suburban real estate developers also made a huge amount of money back in the day. But, they made money for the sake of making money and did serious moral and human harm in the process. Money is always going to be made by someone. The point is whether we as a community can try to direct the money making in ways that are good for the community.

      And, when we think of community, I’m not just talking about white, middle-class folks. It involves everyone. One of the amazing things about a city is that people mix and assimilate much more quickly. Look how Eastern European culture mixed with the Pa. Dutch in the start of the 20th century. No one even recognizes a distinction between the shades of white anymore. Cities, where people interact on a daily basis (in inconsequential ways like going to the Latin grocer on the corner) foster and encourage that integration. I’m all for it continuing to happen now and in the future in Allentown and any urban redevelopment or law must be sensitive to that.

    • Jon Geeting says:

      John Jay basically made the point I was going to make in his second paragraph. You have to take a regional view of these things. This person is entitled to due process, and should get whatever he’s due. But if your point is that it’s worth calling off the arena just to avoid evicting one guy, obviously that does not pass a cost-benefit test. More mixed-use development and higher job and population density is easily the best thing that could happen for people of color in Allentown. I realize you’re only trying to score a few cheap political points on me, but if you actually see this issue as a zero-sum contest between rich developers and current incumbent businesses then your analytical skills are just as dull as Bernie’s.

  3. John says:

    Everything you said is correct, but we’re not dealing with correct here.

    We have a developer here who is being handed tens of millions of taxpayer money for the project and he’s sending an eviction notice at 3 days, signed by him personally. Reilly wants that building because he can make a hell of a lot more money with that minority-owned shop out of there.

    Why are you skipping the part about being fair and settling on the point that it’s OK to screw people as long as you have a laudable goal?

    • Jon Geeting says:

      John Jay’s not “skipping the part about being fair,” he addressed it head-on in his first paragraph. If the shop owner’s legal rights are being violated, then he’s going to win in court.

      • John says:

        You honestly think that shop owner has the budget to win in court with Reilly? They’ll get buried in paperwork and run out of cash long before they win. You really are naive.

        And that still doesn’t address the main issue – neither of you gives a crap that Reilly is trying to steamroll a minority owned business that took a big risk in Allentown. Why do you hate them so much that you’re happy they’re getting screwed?

        • Jon Geeting says:

          That’s a problem with the justice system then. The only thing that proves is that we need a better public defender system or better options for low-cost legal assistance.

          I don’t know why you keep bringing up “minority owned business.” What difference is that supposed to make?

          I’ll take that last sentence to mean that you realize you’ve lost the argument.

          • John says:

            At least you admit that those merchants stand no chance in court with Reilly. And surprise! Your solution is another way to increase government spending rather than a suggestion to reform the legal system so that it costs less to defend your rights. There’s a shock.

            I keep bringing it up because if it were a project you were against you’d be all over the racism and ‘rich white guys’ claims. Just pointing out the hypocrisy of those arguments for the next time you try to make them.

            Jon, it’s been obvious from the first time you wrote that you hate small business, think very little of the people who run them, have accused them of being indolent rubes on more than one occasion, and don’t mind at all when they get screwed by their own government as long as it furthers your interests.

            I thought liberals were supposed to be the compassionate ones and conservatives wanted their opponents to rot in slum? You’re the exact opposite and I’m struggling to understand how someone could care so little about other people.

          • Jon Geeting says:

            As long as somebody’s got enough money to keep dragging the process out, I don’t see how you can stop them from doing that. What is a legal system reform you would support that would make it cost less to defend your rights? I can think of two things right off the bat 1) reduce regulatory obstacles to becoming a lawyer 2) free trade – let lawyers compete across borders. Both would reduce lawyers’ wages and make it easier for non-wealthy people to afford high quality legal assistance.

            I don’t throw racism claims around frivolously, I’m not in the habit of attacking “rich white guys” for being rich, and I don’t base my political views on who I do and don’t like. That’s your bad habit, not mine.

            I’ve very compassionate. I genuinely believe all of the policies I’ve advocated for on the blog would improve human welfare relative to the status quo. Again, anytime you want to change anything you create losers. It isn’t that I don’t care about the people who’d be worse off, but I’m always looking at the net change. You never are. Any time some incumbent would lose out from a policy change, you see that as a reason not to do it. That’s the kind of thinking thats holding back progress at every level of government.

          • john.jay says:

            How in the world does trying to get more people into the downtown, more money into the downtown, and more commerce into the downtown hurt the small business owner? WHAT IS ABSOLUTELY ESSENTIAL to small businesses is foot traffic. That is exactly what urban life is all about! It is only when you have the suburban model with people zooming by in cars that you can make shopping a destination event (like the Mall or Wegmans) and thus are able to create huge stores which compete with and put the little guy out of business. Moral reasoning is MORE complex than what happens to one person or one business. Sometimes that means hurting one little guy to give a 100 more a shot.

    • john.jay says:

      I indicated that I don’t think it is fair, in this case, for the developer to “screw” the tenant. In fact, I indicated that if he goes forward with this, it would be in such bad faith that the tenant should demand attorney’s fees. Additionally, this type of public scrutiny and outrage at Reily’s actions is appropriate and right. Because he is benefiting from tax-payer dollars he should be held to a higher standard. And, in fact, he has just been held to that higher standard.

      Maybe you are trying to make a larger point about why it is fair for us to use tax payer money (predominately from the white middle class) to redevelop a downtown where minority businesses will be displaced. If this is the claim you are making, then, I am very sensitive to it. However, I think for a huge host or reasons (way too long to describe here) that people should live mostly in urban centers. I think once people live in those urban centers instead of suburbia, America will be a better place. That is a political and moral conviction of mine. It is essentially an axiom from which all my other arguments flow.

      To get to that better place, however, will require government and private developers to invest in the downtown. Will this lead to disruption and displacement and occasional inequity to an individual. Yes. But, moral reasoning doesn’t just end with the individual, sometimes you have to look at how a whole group benefits or is hurt by an action. If on the whole, the displacement of a few individuals to create a vibrant downtown is a catalyst that sparks a movement back to the cities, then we were justified in causing the displacement.

      And, a rising tie lifts all ships. If the downtown revitalizes, that means more money and more patrons for these business when they relocate.

      • John says:

        So far, the only true winners that we know of are rich, connected white guys – Reilly, Jaindl, Davison, Topper, etc. Oh, and Pat Browne’s wife – she was hired by Reilly as a lobbyist making $250k / year.

        Top that with the fact that we’re only beginning to see who loses in this deal, and that list is growing daily. So far it’s every township in the Lehigh Valley and every commercial property owner not located in the NIZ who is going to have their rents depressed by a taxpayer funded project.

        How would you like to own a commercial building across the street from the NIZ right now? That person will never be able to hang on long enough to combat the depressed rents and see an upside – they’ll be in bankruptcy pretty damn quick.

        It’s not ok to destroy people’s lives like this.

        • Jon Geeting says:

          Obviously any positive spillover effects will come after all this stuff gets built. Does it ever work any other way with development projects?

          What do you want me to say? There are going to be losers. There always are anytime you want to change anything. That in itself is not enough to prove that a change isn’t worth making. You have to show that on net more people will be worse off. You haven’t shown that.

          Up until the NIZ, all of the government development incentives pointed outward, away from the core city. The NIZ points incentives inward, but is still not powerful enough to fully offset the pro-suburban policies at all levels of government. This makes the market slightly less pro-suburban than it was. Some people will be worse off because of this. On net, most people will be better off when we’re 5-10 years into this.

          Ultimately, my goal is for all development incentives at all levels of government to point inward, not outward. That would mean a whole lot more dislocation than this, but would still be worth doing.

          • John says:

            Here’s what you should have said –

            All the reasons you support the project.

            BUT

            The way the merchants in Allentown were treated is disgraceful. These people took huge risks in investing in Allentown when no one else would, and to just shove them aside violates every tenet of decency and compassion for our fellow man. JB Reilly is being handed upwards of $100 million in taxpayer money for this project. Before he takes one dime out of this back to Saucon Valley, those merchants need to be taken care of out of HIS pocket, not the taxpayers. After all, if all that happens here is rich white guys get richer with the taxpayer picking up the tab, then this will be an utter failure.

            The way Mayor Pawlowski and Sara Hailstone treated property owners is also disgraceful. Hiding behind shell buyers who started out by threatening eminent domain, denying it was the city when in fact it was, then lying about how open the process was were wrong. Those two should grow a pair and meet publicly with all the people who were hurt and tossed aside by this process. They’ll get blasted and they should sit there and take it like the grown ups they proclaim to be.

            Pat Browne needs to direct his wife to exit the lobbying contract with JB Reilly immediately and return any payments made with interest. It may be legal but it is slimy. We need to hold politicians to some sense of decency and we need to start doing that now.

            Browne, Pawlowski and anyone else with a hand in it need to meet publicly with all the surrounding towns and apologize for their reprehensible actions in this legislation. We need everyone in the Lehigh Valley working together to make this project work, and the worst possible way to start that process was to hide critical facts and bury them in legislation no one read.

            This is just a start.

          • Jon Geeting says:

            But have the business owners actually been mistreated? I don’t consider eminent domain objectionable. If they were unduly compensated, that would be a problem, but no one has shown that they weren’t. I also don’t have a problem with Reilly playing hardball with one shop owner to get an important land parcel if it will be put to a higher and better use. If the shop owner’s legal rights were violated, then I want to see the justice system correct that.

            I also don’t have a problem with the EIT collections. I like this plan very much. Do you really think if Browne and Pawlowski had proposed it as such to the surrounding municipalities they’d be walking away with the same arrangement? Hell no. They’d have a huge fight on their hands and it probably wouldn’t have passed. You don’t have to feel good about it, but the all the right things happened even if the process was ugly. That’s what’s most important.

  4. John says:

    What it boils down to is your belief that the end justifies the means. I don’t – I have a much higher level of respect and compassion for the people harmed than you do.

    Can you really ask how a business owner was mistreated when their store was closed, the building they rented torn down, no assistance from the city to relocate nearby, the clinetele they built over the years gone because they can’t relocate nearby, all the work they put in destroyed, and no compensation paid by anyone? You’re honestly asking that question?

    And by the way, do you think anyone will trust Ed Pawlowski or Pat Browne any more? Never.

    • Jon Geeting says:

      But they did receive relocation assistance.

    • FutureDowntownArenaAttendee says:

      John. They were all given relocation assistance. That is a fact.
      Also since you believe that the owners were “mistreated” lets look at the facts of the their mistreatment. Lets take NY Fashion for example since they were one of the most if not most vocal owners. NY Fashions purchased that property in Feb 2006 for $150,000. In Sept 2011 ACIDIA bought it for $700,000… a profit of $550,000! Sounds like a huge mistreatment. Lets pick just another profit one of my favorite persons to be very vocal to the media, Patrice Sidoione who owned All that Salon on 28 N 8th. (you can watch her very unprofessional outburst here http://www.youtube.com/watch?v=OssIibfChJw)
      She purchased her property in May 2000 for $65,000 and sold for $365,000 in Oct 2011. A profit of $300,000. Seems like she was mistreated as well. This trend continues all around the block. These people were treated very very well. You didnt see them in the paper when they received their huge payouts for properties that were not even close to the value of what they were purchased for. f

  5. LVCI says:

    Patrice Sidoione who owned All that Salon.. A profit of $300,000
    FDAA: Why don’t you tell the whole story?

    The Morning Call Nov 05, 2001: <A HREF="http://articles.mcall.com/2001-11-05/business/3383540_1_salon-downtown-earthquake"Business owner brings her style downtown

    .. Then came the zoning and code enforcement…
    then came the work on the building. Contractors blew through their estimates. Walls that should not have crumbled did. Workmen assured her they would do a complete job, then walked away with work undone, check in hand…
    A quarter million dollars ($500,000) later, she was able to open for business

    Sounds like she got her clock cleaned to me!

    I’d comment further but I have no idea how you have access to this information. The rest of us don’t seem to have these figures. You have a link or just good connections?

    • Jon Geeting says:

      Even if she ultimately didn’t profit, it sounds like she got fair market value for the building. Bottom line is, nobody’s shown that the merchants weren’t fairly compensated.

    • FutureDowntownArenaAttendee says:

      OK LVCI. You posted a couple of days ago why no one comments on your posts. Here is a perfect example of why. First of all “A quarter million dollars ($500,000) later, she was able to open for business”. I dont know where you went to school but a quarter of million dollars is 250,000 not 500,000.

      Also “I’d comment further but I have no idea how you have access to this information. The rest of us don’t seem to have these figures. You have a link or just good connections?” If you are going to write a blog you should at least know the tools that you have available to you. In this case I will throw you a bone. All Lehigh County transactions and assessment records are public knowledge. So drop the I am an insider rhetoric… you make yourself look like a fool. Hence why no one comments on your blog. So like I said, here is the bone I am throwing you. In the future it is best that you do your own homework.

      http://lehighcounty.org/Departments/Assessment/SearchRecords/tabid/315/Default.aspx

  6. urban_LV says:

    I’m in favor of the arena, the NIZ, and all policies that help redirect investment into our urban core.

    However, I think its important that new developers (and especially the government) act in a compassionate way. Everyone downtown needs to be pulling in the same direction. If JB Reilly has a vision that requires that storefront for a particular use, maybe he can help the business owner relocate to another storefront he owns. It sounds like he’s going to have a lot of storefronts to fill, that could be a great start.

  7. LVCI says:

    FDAA– I dont know where you went to school but a quarter of million dollars is 250,000 not 500,000

    You are absolutely correct. My mistake for trying to multitask and not being diligent enough to focus when I commented here.
    ~~

    FDAA– If you are going to write a blog you should at least know the tools that you have available to you… In the future it is best that you do your own homework

    First of all I stand by everything on my own blog where I spend a huge amount of time and research to get things right on it . I do my “homework”. My sin in this case was I slapped this comment together much too quickly w/o looking it over.

    And my biggest mistake of all is once again leaving a comment on someone else’s blog. I get insulted, argued with and demeaned 100% of the time!. DAMN DAMN DAMN when am I ever going to learn.. never ever comment on another’s blog. This happens every f&*$g time.

  8. John says:

    FDAA and Geeting have also forgotten that out of the ‘profit’ you’ve ascribed her, she owes a big slug in taxes that was forced upon her. Misses out on future rental streams. Doesn’t get a chance to enjoy the benefits of all the work done on the property. Didn’t want to sell in the first place.

    Other than that she was treated fine.

    You guys are pathetic. Why do you hate these people so much that you can’t show a shred of compassion at what happened? You love rich white guys that much? You love slimy politicians that practice in smoked filled back rooms that much?

    Pathetic is an understatement.

  9. John says:

    Oh, and took all the risk, with no government support, when people like you were running for the hills.

    For that she deserved to get screwed and for you two to dance on her grave, all in the name of progress?

    Yep, pathetic is definitely an understatement.

    • Jon Geeting says:

      The properties were bought for more than the owner paid for them. The costs she incurred in between have nothing to do with Reilly, the NIZ or anything. You have a bad habit of throwing a bunch of unrelated factors into these debates when you are losing.

      • john.jay says:

        @ Jon Geeting. I can actually see where the other John is coming from on this. I was actually very moved by the Morning Call article about this woman’s earnestness in trying to help the downtown by starting her business there. The costs she incurred really seemed to be out of a devotion of love to her city and I can see why she is angry and have compassion for that. That said, the city took care of her and she recouped her loss financially and even made some money in the process. I hope she has a big enough heart to see her relocation is part of something bigger that was done to help the downtown. I also sincerely hope she reopens again downtown and if she does I will go there to get my hair cut!

        • Jon Geeting says:

          I totally agree, but to get meta for a second, I just think that what this debate really needs right now is an unreasonable extremist. All the other people who are NIZ blogging want to use this story to say the whole thing is bad and not worth doing. I’d be more inclined to agree with some of the nuances of John’s point if there were some other pro-NIZ bloggers out there, but there aren’t, so I’m playing the pro-NIZ extremist role.

          • john.jay says:

            Sounds good. I just wrote a lengthy article for the South Whitehall Patch on the NIZ / EIT issue. The editor is checking today whether I will be allowed to run it on their blog as it is much longer than what is typical. You have any interest in hosting a guest article from time to time if Patch says no go?

          • Jon Geeting says:

            Of course. I’d be happy to run it.

  10. GDub says:

    I realize I’m speaking out of turn here, but why is “pro-urban” necessarily better than “pro-suburban” other than that you yourself prefer urban lifestyles? That doesn’t seem to be particularly rigorous from an academic standpoint.

    Your logic on where earned income tax should be directed makes equally little sense. Your logic, if I understand it right, is that you’d prefer that cities got these tax dollars (to build arenas?) so they should. Why would the opposite not be the case? Maybe people like their hometown and want to live there. Maybe they like the road to work paved.

    I’d say anyone that invested a quarter of a million dollars or more in any project deserves more than “market value”–you speak as if the city/state is granting her some special dispensation that she in no way deserves.

    People can quite logically be against the corporatism, back-handed deals, and blatant corruption that this project demonstrates on a daily basis. All for perhaps the SINGLE WORST and LEAST SUCCESSFUL redevelopment strategy known to urban dwellers everywhere: using public money to build a sports stadium. I’m excited to find out why this one will be different.

    • Jon Geeting says:

      My priors are that suburban development is environmentally destructive and economically wasteful. The first is a political value, the second is well-established in the economics literature. There is a strong correlation between higher pop density and higher productivity, and lower density with lower productivity. If the LV wants to keep increasing its share of PA’s GDP – which I think it should – it needs to stop sprawling out and intensify development in the core cities. If you don’t care about climate change or productivity growth, I guess this isn’t going to be terribly persuasive to you, but that’s where I’m coming from.

      As for EITs, because I care about increasing productivity, I want to see our tax system reward places that are actively working to create jobs, and disfavor areas that are not trying to become employment centers. Because I care about the environment, I want the tax system to reward people who choose to live close to work instead of commuting in by car. Allentown is trying to become a job center with this NIZ plan. If it works, a lot of new EIT revenue will be produced. Who should get it? I say, Allentown should. The suburbs shouldn’t get to skim the cream off the top. They won’t have done anything to deserve that.

      Why do you think people should be paid more than market value for their properties? The market will take into account all the relevant value added by the owner, and that will be reflected in the price. I don’t understand what the case is supposed to be for paying more than that.

  11. john.jay says:

    @ GDub. You ask an essentially political question why we should prefer one place over the other. The answer to this has to come from the narratives we form about our life–essentially an aesthetic conviction. I will briefly lay out a few factors of why I think urban life, however, is better. You may very well disagree with these factors and that is cool because we all have to value things for ourselves.

    But, the first hing I would say to you is that urban density creates the possibility of variety, different experiences, and different perspectives. This means many things. But, at its simplest it may mean that there are bakeries that compete with one another and because of the competition create a better loaf of bread. The multiplicity of small business also means lots more possibility for the small businessman to actually make a livelihood. (As I have said elsewhere, car cultures support giant stores like wall-mart, a walking culture promotes small bodegas).

    The density also means interaction, it means that I am able to create friendships, on my own terms, with people of many different socio-economic and cultural backgrounds. However much I choose to open myself up to these relationships allows me to challenge myself and my assumptions. It is an important first step to not being isolated and alone and lets me search out ultimate truths about the human condition more easily. And, it makes me care about other people more in little ways (like telling a child not to run out into a street to get a ball) and reminds me constantly that we are all our brother’s keepers–that we all touch the spirit of our communal humanness. I think when you live in suburbia you miss out on a lot of these type of little and meaningful interactions.

    I also like the idea that urban areas are inherently efficient. I think Mr. Geeting has already written to you about this, about high density encouraging commercial growth. But, they are also efficient because they require less gasoline for automobiles and less energy to heat and cool inherently efficient vertical spaces. From a political perspective, this efficiency argument is the most persuasive because it is axiomatic that the government should try to do the most good, for the most people, at the lowest possible cost. There is simply NO question that urban space is MUCH more efficient than the suburban model and saves LOTS of money and taxes.

    Finally, I would say that I find urban space more aesthetically welcoming. Or, at the very least, I find suburban architecture disgusting. And, even more so, I think the workmanship that goes into suburban homes reflects a mantra of quantity over quality and consumerism over spirit, which I find inadequate. There is much more, and books could be written about all these things, but, it is something to think about for the time being.

  12. john.jay says:

    Also, very briefly about the EIT. I recognize that there are good and reasonable arguments on both sides of the issue here. The home municipality can claim that they should get the EIT because the person “earned” the money and that money should be distributed to where the person spends most of his time. On the other hand, the work municipality created the conditions and environment that allowed someone to “earn” the money in the first place. Where there are such reasonable arguments on both sides, I don’t think government should favor one over the other in the first place, but, if they do, they should not structure a benefit to create huge inefficiencies and ethical issues like sprawl and pollution.

    • GDub says:

      Gents,

      I don’t think your arguments are in any way invalid, but I think you are making political arguments on aesthetic grounds.

      1. I think you are confusing the question of municipality with the question of development type. Many of the LV towns you disparagingly call “suburbs” were actually once (or still) small industrial towns, which you can still see in their architecture. Emmaus was the home of Air Products and many other small companies, and is the home of Rodale Press. It still has a walkable feel and a person could live and work there. Please explain to me what they’ve done wrong to lose tax revenues to a city like Allentown?
      2. Living in cities is fine. I grew up near Allentown but have lived in big cities for the last 6 years. Some things are good, some are bad. I suppose I could get all emotional about shows like “Friends” and what cities do for the human person. But then I walk down the street and for every mom and pop grocery store or coffee shop I see, I see 8-10 Caribou Coffees, Starbucks, Whole Foods, and Giants. I recall well the cattiness of downtown life in “old Allentown” when your business was everybody’s business. I don’t have a problem with people living in separate homes so long as they pay the cost of their energy.

      Again–as a city resident I’m not going to say that city people are somehow more lovely than the rest of the population. Favoring one lifestyle over another politically doesn’t seem to be particularly useful.

      3. Economic development doesn’t require this concept of ‘core cities’. Germany–a country with a similar geography and topography as Pennsylvania–has lots of small towns with a big business or two to keep things going, and they seem to be doing fine. Few cities in Germany are even as big as Philadelphia, and none are like New York, Chicago, or LA. Your “plan” from Allentown seems to rest not on “developing” new business but stealing existing businesses from other municipalities and then having a few bakeries open up. How that is “development” I don’t see.
      4. I’d love to see Allentown bounce back, but it is a poorly-run and poorly-governed city that has a well-deserved reputation for blowing cash on poorly-thought out development programs. Again, sports arenas are nearly universally shown–in economic literature–to have almost NO economic impact and no development spur. Those cities that have had anything good come of it (Washington, Denver) were those that got their acts together ahead of time long before the arena was built.

      So this, to me, is another Hamilton Mall–but worse–one that takes money from communities that citizens actually like and turn that cash into a patronage tool for a few crooked pols. Why am I wrong?

      • Jon Geeting says:

        Yes, at the root there is a political point, and it is that people should have the option of living wherever they want without needing to own a car. And not in a spartan self-sacrificing way, it should be convenient not to own a car. It’s a simple political goal, but it has radical implications for land use patterns.

        I think your point is mistaken re: “communities that citizens actually like”. That implies that the status quo is the result of market preferences, which couldn’t be further from the truth. Car-oriented development is massively subsidized in the United States. Without the subsidies, more people would choose walkable areas. Personally, I think our land use and tax policies should nudge people to live and work in central cities, by fully pricing in all the external costs associated with suburban living. But even if you just removed subsidies like the mortgage interest deduction, the post-1965 EIT policy, and anti-density zoning laws (like minimum lot size and maximum lot occupancy rules, etc), I think you’d see central cities increase as a percentage of the “communities that citizens actually like” because the government wouldn’t have its thumb on the scale in favor of low-density cornfield development.

        As for the NIZ, I think it will “steal” certain kinds of businesses but not others. For example, Homebase skateboards on Southside Bethlehem is not moving to Allentown. Niche shops like that are going to stay put. There’s a strong sense of community identity there and a relative price change on rent isn’t going to uproot them. Likewise with large warehouses in the townships’ industrial parks. I think the businesses that we’re mainly talking about are professional services, who are going to be choosing between suburban office parks or a downtown central location. If Allentown “steals” these businesses from office parks, I think that’s great. Those industries benefit from agglomeration in a central location. It’s better for the whole region if that kind of work moves to the cities.

        Over the long term, I think it’s the agglomeration effects of density that are going to drive real development of *new* businesses, rather than just poaching businesses from other places.

        • GDub says:

          Subsidy is a nice word that a person of any political stripe can apply when the government funds something he or she doesn’t support.

          I’m with you. Living without a car in many areas can be hard these days. But I think you aren’t getting that there are reasons other than “subsidies” that “caused” people (and firms) to get out of cities in the first place. Strangely enough, they seemed to have plenty of good reasons.

          Are you going to say that, for example, Silicon Valley, North Carolina’s Research Triangle Park, the Microsoft campus, Apple’s headquarters, and Google are somehow “inefficient” because they aren’t located in traditional city centers? Or that they missed out of the full milieu of human existence and therefore are limiting human productivity and existence? What was Thomas Edison thinking leaving New York for Menlo Park, or those Mack Brothers heading to Allentown???

          Companies that can change the future of Allentown–and I’m not referring to skateboard shops–need good schools, reasonable rents, and access to human capital. Building an arena with other peoples’ money with no price limit (http://www.mcall.com/news/local/mc-allentown-hockey-arena-tab-20120203,0,1910964.story) is not the answer to those problems? What company is going to feel good about future taxes and governance when Allentown right now has to pay cops disability to play more golf?

          Trying to force firms to compete in high-cost urban areas is not going to help the local economy. Maybe Allentown can get some investment banks?

          • Jon Geeting says:

            Do you really want to argue that suburban living is not heavily subsidized in the US? We’ve had a 50 year industrial policy based on the assumption of perpetually cheap gas that just isn’t going to work when gas is $8-10.

            I’m not saying there isn’t a real market demand for suburban living, but I am saying that if all the external costs were priced in, fewer people would do it. If more high quality housing was legally allowed to be built in our central cities, more people would live there. Not all or even most, but more. About 30% of Americans say in surveys they would like to live in walkable urban places, but only about 10% of our housing fits that description. I think if the free market were allowed to supply more of this kind of housing, unrestricted by anti-density zoning rules, more people would choose it.

            I’m also not saying that those areas aren’t efficient, but I think there’s no question they would be more efficient if they were located in dense cities. Silicon Valley is actually an excellent example of anti-density zoning and NIMBYism depressing the supply of housing and office space, and making that region way too expensive. With cheaper rents, more people and businesses would choose to locate there, but they’re getting priced out by the supply restrictions.

            My sole argument for the NIZ is that it will work if Allentown uses this opportunity to become a much larger city with a higher pop density. I do not see the hockey arena as a driving force. The mechanism that I think is going to do all the work is cheap rents for new high quality office space.

  13. GDub says:

    Buyer beware. Just one prominent example of these sorts of train wrecks. And their arena deal is even worse. http://www.delawareonline.com/article/20120203/BUSINESS05/120202067/Super-Bowl-sacks-taxpayers-stadium-deal-sours

  14. GDub says:

    Um, interesting puff-piece. As an alternative perspective, it is all wrong.
    1. The stadium and the arena were built after the downtown renovation. Indianapolis had a vibrant downtown, to include a great shopping center, long before the Fieldhouse and the Lucas Oil Stadium were built. I know–I used to live there. (The Hoosier Dome wasn’t really anywhere near the rebuilt downtown).
    2. The Indiana Sports Corp. isn’t just “non profit”–it is going broke. The city is essentially paying the Colts and the Pacers to play there, and it is driving the agency that runs the arenas to pull money out of the general fund. Strangely enough, this comes at the cost of other things.
    3. Indianapolis has LONG been a major convention city. The Super Bowl doesn’t change that.

    The idiotic “swing for the fences” comment makes one wonder why the same effort failed in a lot of other cities that were trying hard: Cleveland, Baltimore, Sacramento, just to pick a few. It is selective argument to prove an emotive feel, while ignoring (again) years of economic evidence to the contrary. Just a lot of pseudo-sophisticate snobbery dressed up in b-school language. Nice try though.

  15. GDub says:

    I’m actually generally with you (and thank you for the great blog and the thoughtful posts).

    I think the prices are more indicative of “real costs” than you give credit for. The real cost of a gallon of gas in 1950 was about $1.80, which wasn’t cheap and this was for a fleet of vehicles that was far less efficient and safe than today’s. Yet even with these conditions in the 1950s–and earlier–people and businesses still left cities for suburbs. So it has to be something other than fuel prices.

    Silicon Valley and RTP are more expensive now. But they weren’t when they started. SV was cheaper than San Francisco to do business, so start-ups went there–their cost today is a sign of success. California would certainly be a cheaper place to do business if taxes were a bit lower and growth restrictions were a bit less onerous. But people feel like they are worth keeping that way.

    If the arena isn’t a driver of development, then why do it as a public policy project? It almost certainly won’t be used as often as people suggest (lets say 80 major events a year) and its cost will be astronomical, surely exceeding any nominal proceeds from the arena. And surely when it is finally built it will have enough restaurants and shops to take business from whatever competitors try to establish themselves in the area–with all revenue to the team? Why couldn’t a “good enough” arena be built for less than $100 million even, like in Reading or Scranton?

    Why not just leave aside the completely crooked “no-bid/no oversight” arena project and take the NIZ and do something like have a very low tax rate and generous tax credits for a period of time for any business that establishes itself there or residential building that gets built there, or even for people who choose to live there? The answer, of course, is that Allentown politicians see “benefits” as something they own and as something not to be given away for “free” without their “input.”

    That, I think, is the “cost” of doing business in Allentown that you aren’t factoring in.

    • Jon Geeting says:

      I would just note that downtowns are more popular than they’ve been in 50 years. Something’s changing in the real estate market, and I’d chalk it up to a combination of Millenial preferences, rising gas prices, and credit-constrained borrowers. As for the original suburban migration, I think the biggest factors were mass auto ownership, cheap housing, crime avoidance, tax avoidance, and of course racism.

      The cost of those areas may be a sign of success, but there’s no reason they need to be expensive. Rather, it’s a sign that supply of housing and office space isn’t being allowed to keep up with demand. Incumbent property owners may like it that way, but it’s bad for those regions, and ultimately for the county, if the most productive areas are pricing people out.

      I think they did the arena this way because in PA you aren’t allowed to use eminent domain to seize some land and then sell it to a private developer, which I think is unfortunate even though it strikes most people as repugnant. Personally, I would’ve preferred to see a tall office building on that site, but I think because of the eminent domain rule, this is one of the few options the city had if they wanted to see that block get redeveloped.

      I would be perfectly happy to see the arena project scrapped, and the city try to maximize growth inside the NIZ. My favorite idea is to eliminate the tax on buildings, and replace the revenue by raising the city’s land value tax – simultaneously making it cheaper to build, and more expensive not to build.

      • GDub says:

        I don’t necessarily agree with you on the reasons to leave. But I think your tax proposals are quite thoughtful and well worth exploring.

        I would only point out though that while SOME downtowns are more popular, there are plenty that are not.

        • Jon Geeting says:

          Ok, but in this case we’re talking about the third largest metro in PA, equidistant from NYC and Philadelphia. I think there are good reasons to believe Allentown is well-positioned to become a larger, more prosperous city if they can get out of this low-growth, low-investment equilibrium.

  16. Quantum flux says:

    The exhange with DGrubb says it all. Jon, you are arguing from a purely ideological slant and will view any data through that lens. It’s a classic problem in discussions like this. In your view the suburbs were created by xenophobes and racist who are so self focused in their drive to escape diversity that they were willing to destroy the planet to get away. Born and raised between NYC and Seattle I have experienced your point of view as a defacto standard aggressively (ironically) forced on non believers. The sad part is in glossing over the realities of what is happening in Allentown because they don’t suit your ideology you are ending up supporting most elite of the elite who want nothing more than to keep you, and the rest of the working poor) herded like cattle while they limo out to a 12,000 sq ft estate with private heliport. You’re ok with that, though, as long as the “greater good” is served and fewer working schmucks are driving home to a 3 bedroom in their Volvo.

    • Jon Geeting says:

      Actually I think sprawl is a direct result of federal, state and local tax and regulatory subsidies for this kind of development. I’m sure urban crime and racism were part of the equation, but I don’t see any point in blaming people for that. The government made it artificially cheap to do this, and people took advantage of it. I don’t blame them. My point is that the government should at least be a neutral player in the real estat market, and probably even nudge people toward cities since we know that there is a direct relationship between productivity and density. You seem to be the one arguing from a suburban identity politics angle. I’m arguing from economic efficiency.

      • GDub says:

        I think you are overdetermining this question to a certain extent. I do like how the charge that something is “artificial” when someone doesn’t like it. Sort of a softer version of “subsidy”. I suppose the Roman Empire made it “artificially” cheap to get from Rome to Damascus by road since a “true” cost of the transit would require the traveler to hack down trees, ford rivers, and fight off bandits. So any effort to ameliorate those conditions becomes a “subsidy” on “inefficient” commerce since our Roman should have been satisfied by going to Padua.

        I think it is important to have some perspective on human movements. Without a doubt racial tension played a role–but so did overcrowding, pollution, crime, small tenement apartments, dissatisfaction with renting, and changing economic opportunities. A small house in a quiet suburb probably looked VERY nice to folks living in Manhattan in the 1920s and 1930s. If technology and democratic governance–as well as loans for getting shot at in Europe and the Pacific–made that a little more accessible to people, I find it hard to see how we can talk like it was the worst phase of human history.

        Looking at DC–getting any kind of reasonably priced apartment or house here costs a LOT of money, and I would say it is debatable at best whether the “car free” lifestyle pays for itself–unless you are a very rich person. Given that the pesky democratic process will likely prevent Washington from looking like Beijing or Seoul (also very expensive), I don’t see that changing.

        • Jon Geeting says:

          Subsidies make things artificially cheap. If you give a person or a developer or a business some money to defray the cost of doing some thing, they pay less of the cost themselves and have an incentive to do or buy more of that thing. You’re welcome to argue that subsidies for suburban development have served the country well, but nobody can seriously argue that suburban development isn’t heavily subsidized, moreso than urban development.

          As for DC, the Height Act is the reason it’s so expensive to live there. That’s a perfect example of anti-density zoning restrictions pricing people out into less productive areas.

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