Nationally-recognized real estate developer Joe Minicozzi last week presented an economic development analysis of the region that says local governments get more return for their money when they put the tax revenue potential of land in the city center at the forefront of their urban planning decisions. The perspective is contrary to conventional wisdom that big-box retailers bring big tax revenue and challenges economic developers in communities across southeast Tennessee to look at the value-per-acre return on their “Main Street” investments.
At a public meeting and luncheon sponsored by the Chattanooga Hamilton County Regional Planning Agency, Southeast Tennessee Development District, River City Company and the Lyndhurst Foundation, Joe Minicozzi of Urban3, a consulting company of the real estate developer Public Interest Projects out of Asheville, N.C., highlight the fact that dense, mixed-use urban development pays better dividends than suburban mall counterparts when comparing on a value-per-acre basis.
To illustrate his point, Minicozzi studied Chattanooga and Hamilton County property taxes from 2012 to derive a yield-per-acre. In local comparison, Buffalo Wild Wings in downtown Chattanooga yielded a total of $39,555 in combined city and county sales tax revenue per acre compared with Courtyard by Marriott’s $300,765 and Republic Centre’s $524,537 per acre. When compared with the $5,940 combined per-acre tax revenue for Walmart in Cummings and the $26,452 per-acre tax revenue for Hamilton Place, it is clear the outright annual tax benefit lies in downtown development, said Minicozzi.
On a per-acre comparison, it would take 6.8 acres of mixed-use buildings, like the One North Shore condos in the Northshore District, to yield as much total property tax income as the 86.4-acre Hamilton Place site. Still, he notes that there is a place for both types of development in meeting the needs of a community and its residents, though decision makers should be conscious of the cost and benefits of each.
“As smaller communities throughout the region look for a return on the investment of tax-payer dollars, there is a significant lesson to be learned from Mr. Minicozzi’s presentation regarding the cost of developments throughout Chattanooga that should encourage reinvestment and revitalization of their small downtowns and central business districts,” said Beth Jones, executive director of the Southeast Tennessee Development District.
Minicozzi said that regardless of the size of the city or town, community leaders need to broaden their perspective in tax revenue opportunities. He said it’s like comparing the value of a car based on miles per tank (looking at the total value of the project) versus miles per gallon (looking at how each acre of development yields tax revenue).
“As a whole, we’ve tended to look at real estate on a miles per tank basis,” said Minicozzi. “But our perspective on that vehicle may be totally different if you look at it on a miles-per-gallon basis.”
He says the cost-versus-benefit numbers become even more clear-cut when you compare the cost of public services to accommodate a large-scale development in an outlying area with a dense urban site. An outlying area development means increased capital investment and operating costs needed to provide public infrastructure and services such as roads, utility lines, garbage collection, emergency services and transportation.
“In today’s constrained fiscal environment, understanding the math of development choices is critical to making smart policy decisions about how we grow,” said John Bridger, executive director of the Regional Planning Agency. “This study gives urban planners and community leaders alike new perspective on the many ways in which to assess the fiscal value of any development – urban or suburban.”
Minicozzi believes Chattanooga is a good example of the value-per-acre assessment of development because property values are even stronger in a walkable, energetic downtown. Still, he cautioned that the city has a long way to go in addressing the dichotomy of the East and West sides of US-27 and tying BlueCross BlueShield back into the fabric of the city. “We need to focus on missed opportunities as we plan for the future, because currently, there may as well be a mountain range bisecting the two sides of downtown.”
Minicozzi’s presentation, which has spurred conversation about the financial implications of how to grow a community, comes on the heels of River City Company’s recently-concluded Urban Design Challenge, which sparked public discourse about the future growth of the City of Chattanooga.
Source: River City Company