Digging a tunnel to replace the unsafe viaduct won't increase property tax revenue

The reasons why the tunnel won’t help Seattle’s tax base go back to what I wrote here a little while back in long drawn out piece on Tax Increment Financing. Even if the tunnel gets built, Washington’s budget based tax system doesn’t create additional tax revenue for the City no matter how much the project increases property values. In Washington State, annual property taxes are collected based on a city’s previous annual budget plus 1 percent, regardless of how high or low property values go.

The “Uniformity Clause” in the state constitution means Washington has a peculiar property tax system that doesn’t set a rate of taxation on property. In most places, like Oregon for example, where there is a set rate of taxation on property, infrastructure improvements can incrementally increase tax collections without raising rates by increasing the value of the property. A increase in property value with a 1 percent rate of taxation means more tax revenue.

But Washington doesn’t have a rate based property tax. So it is a false statement to say that the tunnel will help Seattle’s property tax base. Tax collections can only go up 1 percent. The tunnel won’t boost revenue from property taxes and neither will any other project that might improve property values. This is why TIF doesn’t work in Washington without a constitutional amendment.

Which takes us back to the point of the seminar. We agree on a lot of things. Amending the constitution to allow a rate based system for Tax Increment Financing is an idea both business and environmentalists can embrace. It would make a lot of sense to turn our energies and influence toward that end where there is pending legislation to make just such a change. Once we put the tunnel fight to rest, business and sustainability advocates need to turn our fire away from each other and toward Olympia.

Photo credit: jppi from morguefile.com

Census results, to some of us, are a like a very slowly breaking pinata. First we got the 2010 state totals. Lately we’ve been getting the local figures and their components. This has set the Nerdisphere on a protracted sugar rush while the media has been attempting to make sense of it all with varying success.

Some of the results were close to what was expected, such as the city of Seattle’s 8% growth rate for the decade…pretty impressive for infill in a place already occupied. Others were outright shocking to many. Either way, it’s important to remember some basics. 

First, the Census, while the “official” count, is not perfect. It’s a different methodology from the Census Department’s own annual estimates, but one fraught with its own pitfalls. When the cities of Chicago, Detroit, Atlanta, Houston, and New York each had counts six figures below what they expected based on estimates from the Census Department and local agencies, the estimates might have been way off, the count might have been way off, or both.

The estimates use imperfect assumptions and indicators to gauge trends. The Census attempts to count people who are often very difficult to count, or who actively try to avoid being counted. This will be more clear as analysts dig in, but anecdotally it seems like surprisingly low numbers were common in places with more language barriers, immigration issues, and/or poverty. We know that these factors correlated with lower mail-back rates for the basic form, and it’s a good bet that they also related to the ability to find a lot of people at all…even people that the estimates did catch by looking at trends such as housing.

Local governments will challenge results in some cases. They will probably fail to win major revisions, as in the past. I’m just guessing, but even very strong evidence will probably only achieve moral victories and not significantly revised official counts, because the bar will be extremely high. Another guess is that this is because courts have prioritized timely apportionment and districting over precise fairness.

The Census Department has done an impressive job with an astonishingly difficult task in many ways. Good PR effort and budget performance for example. But here’s a major criticism: the census.gov and 2010.census.gov websites are horrible. This is a major topic online…legions of tech-savvy nerds are trying to find information and failing, sometimes because it’s hidden, or only on the other site, and other times because it’s apparently not on either site at all. So aside from what’s in the basic press releases, the best information is generally from second parties who aggregate data. It’s appalling that an agency whose mission is to collect and share data could fail so utterly in one of its basic functions. Census Department, please hire some help, and consider qualifications!

Onward. A standard nerd debate has to do with municipal populations vs. broader city populations. The term “city” can refer an administrative district, but in the urban/demographics Nerdisphere, it usually means some variation of “entire developed area,” which is most similar to Urban Area (UA), Metropolitan Statistical Area (MSA), or “Combined Statistical Area” (CSA, for a city comprised of multiple MSAs). When Houston or Phoenix claim to be #4 or #6 in population among US cities, that gives us nerds fits. They’re talking about their central municipalities, i.e. subsets of the whole, which were drawn with wider-than-average boundaries. If Boston annexed a bunch of land tomorrow, would that make it a bigger city in any way that really matters?

Another suggestion is to use past tense. The Census says nothing about what “is.” Even if accurate, the count was a snapshot of 4/1/10.

Regarding what “is,” it’s interesting to wonder what’s happened since early 2010. In Seattle (the central municipality), we’ve already eaten up much of our vacancy rate. As some economic indicators and general hope have improved, we might be sharing housing a bit less. We’ve probably grown a little. You might also wonder what’ll happen in the coming years and decade, but that’s another story.

Dan Bertolet of hugeasscity and PubliCola fame has started a new blog called Citytank. Its mission is “to propagate ideas that help fulfill the promise of cities to both expand the human spirit, and sustain a thriving

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This morning on my bus commute, I assessed the newly completed suicide-prevention fence on the Aurora bridge. How’d it turn out? Depends on your perspective.

Aurora bridge lit up. Enhanced photo by Kenji Tachibana.

It isn’t so bad if you’re looking at it close up as the bus whizzes by. The view of the Olympics from the southbound coach was nearly transparent. Due to the speed of the coach and the narrow spacing of the fence “sticks,” I could hardly tell the new fence is in place.

Conversely, looking south and east at the skyline and Mount Rainier, the fence was as clear as the beautiful sunrise. But I do not deem it a disaster because you can still see the view.

Yes, it’s a change, but not too unsettling. People would have something to kvetch had WSDOT put an opaque fence in place

I doubt Seattleites will ever pine for the “good ol’ days.” Think how ridiculous such reminiscences would sound:

Remember back when depressed people jumped to their deaths off this bridge?

Yeah, that was sad, but at least we had slightly better views…

Before running off to a Super Bowl thing, I thought I’d share a few ideas about….the ease of entering/exiting residential buildings! (Channeling Steve Martin and the free oven mitt.)

A lot of this is criticism of my own building. As a preface, I love my place! These issues are pretty minor

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Arriving as a pedestrian, the options are the front door and the alley door. The alley door is typically the most direct route, so I typically use it. Plus its card reader is at pocket height. You just stand there and the door unlocks. The reader at the front door is too high. You have to shift whatever you’re carrying, pull out your wallet or keys, and hold them up to the reader. (Purses must be easier.) Also, the door handle is about eight feet away, which can be a security issue in addition to being kind of annoying.

In the lobby, hard floor surfaces were a design problem that the building management has solved. Entering on a rainy day used to be an exercise in not slipping on the smooth tiles, and hoping that day’s shoes weren’t the squeaky ones. The tiles are now covered by carpet pads 30′ into the building. Carpet pads have also been added to the bare concrete hall from the alley door.

About the alley hall: It’s a fire exit and retail store back entry, but does it have to be so rudimentary? I’d rather walk along dinged painted walls than dinged unpainted ones. The interior doors could be kept in non-slam mode.

The alley can also be easier for exiting. The front door has an unfortunate touch-sensor system where touching the inside handle deactivates the lock. But this requires careful calibration. For years, you couldn’t exit while wearing gloves. Apparently small kids initially couldn’t trigger it at all. Today it works with thin gloves, though I haven’t tried it with thick ones. I’d suggest that whatever the code might say (?), an exit that doesn’t work unless it’s calibrated is inherently unsafe, and unfriendly to residents.

Elevators can be done well, or not. One is simple numbers — in a 200-unit midrise, three seems about right. Two is ok, unless someone is moving in, or it’s a busy time of day, etc. Door timing is key. Much appreciation to my building’s management for cutting a few seconds from the door closes, avoiding a lot of little waits (a few seconds is a big deal on elevators, just like the interwebs!) while also improving the system’s efficiency during busy times.

It’s January 9 and the economy remains horrible. But doesn’t it feel like spring is in the air, and something is starting to happen?

Nationally, holiday sales figures were way up this season. The private sector added jobs in every month of 2010 (ok, at a slower rate than population growth). The financial and auto sectors have survived and even prospered to some degree, avoiding catastrophes that might have spread throughout our economy. In both residential and commercial real estate, for various reasons, there seem to be more deal-making and delaying and less foreclosing than was expected. Fundamentally, the US appears to have avoided a depression, and started to tick upward.

Locally, the return of apartment construction is great news, because each project is both a jobs machine and a tax revenue machine. It’s also related to population growth, which, along with business spending and jobs, is tied to filling up our glut of commercial space. It’ll take years to eat up our excess office space, but Seattle has more than its share of growing companies and organizations, and who knows, maybe things will recover more quickly than we’ve thought. And long before new buildings make sense, the moves of any down and recovery period are sure helping those of us who build renovations and tenant improvements. 

The Seattle area’s public capital spending is interesting. Some is getting cut, perhaps necessary but certainly a damper on jobs. But light rail is going strong. The 99 tunnel will (knock on wood) be a huge stimulus, with money already being spent. Say what you want about your preferred 99 option, but the tunnel is starting at a time when the construction industry badly needs a big project, and the public is getting pricing it’ll never see again.

Optimism isn’t just about feeling good…it’s an ingredient to recovery. Optimism is probably a big reason why consumer spending has risen so quickly. It’s helping companies choose to lease more space. It’s why apartments are breaking ground. There might even be a trend toward buying homes again, as suggested by this article (as they say, not a clear trend yet), and anecdotally by what seems to be a declining condo glut as fire sales continue. Much of the down economy has been money sitting on the sideline, and now a lot of that money is jumping in again.

Of course there’s plenty of reason for pessimism too. Due to the the wild stock gains of the past 23 months, it now seems like a riskier, moderate-upside time to buy stocks. Declining public spending is cutting jobs and probably doing more immediate and long-term damage than it’s saving. Foreclosures might still keep home prices down. Commodity prices have risen dramatically and, with the sharp rises of other economies, perhaps permanently diminished the US “birthright” of cheap stuff. The latter is a problem for the economy not because plastic lawn chairs and 3,000-calorie restaurant meals might cost a couple dollars more, but because a lot of commodity consumption is less flexible, and higher prices will, particularly in the short term, deduct money from the rest of people’s budgets. Of course it’s all the worse if you’re poor and the issue is the price of 600-calorie meals for your kids.

Yet things are looking up. In 2008 and early 2009 the issue was stemming the decline, and now the issue is the pace of recovery, both for the general economy and the A/E/C/RE industry.

That, plus the Seahawks, is why I’m smiling today.

Portland's Pearl District (Photo free from File Morgue--portland-pearl-district-photo-by-gilbert928)

Let’s say you’re the mayor of a medium-sized city in Washington state —let’s call it Northlakeshoreline —and your city has a problem. The country’s economy is a mess, of course, and the closing of a large factory in your city hasn’t helped things locally. You’d like to be able to make some significant improvements in a part of your city that is really run down. But your budget is tapped out dealing with bigger demands on social services and just keeping up with basic city needs.

You have an idea. Why not draw a line around the part of the city — let’s call it the Sherwood Forest neighborhood — that has some of the lowest property values and the biggest problems with roads, drainage, and basic infrastructure needs. You ask the assessor to give you a snapshot of how much all that property is worth and you partner with a local developer who gives you a sense of how the value of the property could be increased. After a lot of discussions, meetings, and number crunching you realize that if you fixed the infrastructure problems you could attract new development that would significantly improve tax revenue from Sherwood Forest — enough revenue, in fact, to pay for the improvements. But that revenue is off in the future. What do you do?

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What a great solution, you think. Borrow money now to fix up a neighborhood, create some jobs and economic activity in the process, and pay back the loan with the increased taxes you can collect. You’ve just invented Tax Increment Financing (TIF).

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Tax increment financing is one example of something called value capture. It’s the idea that a good with future benefits that is out of reach today can be paid for with loans, and those loans can be paid back with the benefits of the good created with those loans. The increase in property values in the Sherwood Forest TIF district pay for the annual loan payments. This means as mayor you don’t have to make any cuts in order to pay for the improvements. And the best part is that after the loan gets paid off, the city can keep the extra tax revenue for use in the general fund. Tax Increment Financing has been used most notably in Oregon where the Pearl District in Portland is often cited as a big TIF success story.

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Of course, in the real world, the implementation of TIF is far more complicated. But the concept is pretty straightforward. Cities and counties in Washington State don’t have access to this tool. Why not?

Washington State doesn’t collect taxes using a rate based system. Believe it or not, part of what makes the story I just told work is that there is a fixed rate of taxes assessed on the property from year to year. Attaching a rate—x percent of tax of the total value of a property—is important because as the value increases incrementally, a city can capture that incremental increase and pay off the debt.

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Washington has what is called a budget based system of collecting taxes to fund the operation of government. That means that our fictional city of Northlakeshoreline would come up with its budget first, then levy a tax on all the properties so that they share the burden equally. That means the tax assessment is evenly distributed over all the taxable properties in the city.

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Under Washington’s constitution a city is able to borrow money to improve public infrastructure and those improvement might result in increased property values. But the taxes that the city collects on those properties are NOT based on their assessed value. Those properties are taxed based on a rate set by the value of new construction throughout the city, the previous year’s city budget, and up to an additional one percent of the previous year’s city budget. That rate is applied, equally per $1000 of value, to ALL properties across the city.

Confused? Join the club. This budget-based problem is what makes TIF in Washington such a challenge. The framers of the Washington State constitution were aiming to create a fair and predictable system for assessing property taxes. They wanted to be sure that some people wouldn’t be unfairly targeted for extra taxes. Taxing all property uniformly—essentially a flat tax—seemed to them the best way to create a fair system. But it also creates other problems.

One problem is figuring out how to capture tax revenue to provide services that benefit just one part of a tax district. If I have a mosquito infestation near the river, why should the people who live across town have to pay to fix that problem? But I can’t tax the folks by the river more than the others because of uniformity. That means I have to pay to fix the problem out of the general fund that everyone pays into, in order to fix a highly localized problem.

But the framers, in their wisdom or by accident, allowed for the creation of taxing districts. So the city of Northlakeshoreline can create a Mosquito Control District (yes they exist!) so that people who live by the river can get taxed—uniformly—to attack the mosquito problem. So they will pay more property tax per $1,000 of value of property, but they also get the benefit of the services their taxes are paying for. A TIF district wouldn’t be providing services but infrastructure—roads, drainage, and parks for example—and paying for them over time. It is possible that the TIF challenge will be met by creating a new kind of taxing district.

And the other option might be to just amend Washington’s constitution to exempt properties in designated TIF areas like Sherwood Forest. There ARE already exemptions (in sections 10 and 11 of Article VII of the constitution) that tax property owned by senior citizens and certain kinds of farm and timber land, and open space at a different rate than other properties in a taxing district. A similar carve out could be made for properties in TIF areas so that they could be taxed with a rate that would allow the capture of additional value.

No matter what, the time is now for TIF. But the next part of the story will be whether the openings left by the framers for creating new districts are wide enough or whether a constitutional amendment is needed.

The Economist has an interesting article about how some private equity firms are investing in care homes. The firms are hoping to make money from aging populations in rich countries, but they may face obstacles, the story says.

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We love travel, and we hate it. Seeing places is great…getting to anything distant is an ordeal. Flying means waiting, invasive security, and being wedged into a seat made for people less than 6’1″, plus hours of time wasted just getting to and from the airport at each end. Driving is tiring, even without traffic, and standing up means stopping first. The saving graces are anticipation, aerial views, and roadside pancakes.

Taking Amtrak can be a revelation. If you’re already downtown, you can simply walk to the station. It’s best to show up 15 minutes early of course! The seats in coach are like business class on a plane, but with more leg room. You can head to the head or grab a beer or cup of soup from the dining car anytime you want. You can even be productive, keeping up with email, or playing a sketch game as my coworkers and I did the other day.

People have apparently noticed these advantages. Our trains to Portland and back were full both ways.

Train riders don’t get waited on. But the service I’ve gotten, in a handful of trips, has been excellent. Mostly this has been friendly efficiency, like flight attendants who aren’t being pushy. Where Amtrak staff have really shined is when something has gone wrong.

Two of us returned on Friday, and traveled by business class rather than coach. We’d stood in the wrong seat assignment line in the terminal, and been assigned coach seats. This became clear when we got to Coach Car 8. A worker was inside helping passengers stack luggage. We pointed out the error. He smiled and jumped into action, guiding us to his golf cart, securing new seat assignments by radio (with a full train), and taking us right to Car 1. Five minutes later we even had $3 menu coupons. Taking the blame and focusing on a solution without being totally wrong…that is service.

The Seattle-Portland route’s popularity is great evidence that rail can be popular even at “regular” speeds, at least between big cities at intermediate distances where the timing isn’t much longer (if at all) than other methods. Our region has the right idea for short-term improvements. Aided by federal grant money, we’re supposed to get two additional trips each way, along with continued small improvements that will improve speed. I’m ok with the controversial move to an inland route in Tacoma vs. the scenic waterfront route. Some of the improvements will help freight and commuter rail too.

Long term, the math is probably good to establish true high speed rail on the Portland-Seattle-Vancouver route, or at least much of the route. Whether a new ROW or incremental improvements to the existing, the cost would be huge. But it should prove to be good value, compared the many billions it would require to improve three airports, build a second Seattle airport, and expand highways, all of which are projected by some in the coming decades. A train every 30 minutes each way would replace quite a few commuter planes and cars on the highway. Further, it would help a lot of people reduce or eliminate their car use, and gain those personal savings.

(If you have an opinion or experience to share please do!)

The New York Times has an interesting article about how some architecture firms are moving away from

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