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.
I would ask again–what is this project for and what is the measure of success? I find the Mayor’s pronouncements rather unsatisfying–though at least he is a slightly more credible source than the real estate agents you cited the last time.
I agree that both Allentown and ASD need to adjust how they raise revenue, but I don’t want to see the rates, I want to see the revenues. I would say “success” is a city that has increased absolute rates of business activity and a higher amount of tax revenue to pay its bills.
Relying on “windfall” taxes and further obscuring the revenue system only adds another level of complexity and potential corruption to city governance. If the point of the project is to make city land more attractive, why would you punish the success of the project? Is there any evidence that with the NIZ that builders need additional incentive to build?