One of the main reasons Smart Growth America advocates for compact, walkable urban development is because this approach can greatly benefit the finances of municipalities. Smart growth strategies can reduce infrastructure costs and ongoing expenses for cities while also boosting tax revenues. Smart Growth America’s own work has shown that, and we know this to be true too because of the outstanding work of others in the field like Joe Minicozzi, AICP and the principal at Urban3, LLC, a consultancy based out of Asheville, NC. We’re fans of their work and and cite it often as yet another illustration of how good smart growth can be for city finances. We want to take this opportunity to highlight some of the evidence Minicozzi has amassed over the years demonstrating smart growth’s fiscal benefits.
Urban3 has been hired by cities and towns across the United States and Canada to analyze the financial implications of their development strategies. Most city planners and elected officials understand that a city brings in more tax revenue when people shop and eat out, Minicozzi explained in 2012, but they often underestimate just how much more valuable this economic activity is when it happens downtown rather than on a city’s outskirts.
Developing real estate downtown generates short-term economic activity in the form of retail sales and dinners out. Over time, it also raises the value of the buildings in that area, which generates even greater tax revenue for the city. And buildings downtown do this on much less land than, say, a shopping mall.
“As a community, if you have a finite limit of land, would you want $6,500 or $20,000, or $634,000 downtown an acre?” Minicozzi told Atlantic Cities. “People understand the cash-crop concept, so why aren’t we doing that downtown?”
Minicozzi often cites an example from his hometown of Asheville. There, a Super Walmart two-and-a-half miles east of downtown is valued at a whopping $20 million—but it sits on 34 acres of land, meaning that it yields about $6,500 an acre in property taxes. A department store in downtown Asheville (that Public Interest Projects, Minicozzi’s parent company, bought and renovated) that’s now home to a beauty salon, retail, offices, and 19 condos, is worth $634,000 in tax revenue per acre—nearly ten times the property tax productivity per acre. Add sales tax revenue in to the equation and the downtown property is still worth more than six times as much as the Walmart per acre.
In addition to their work across the United States and Canada, Urban3 has conducted recent analysis in places like Santa Rosa, CA and Durango, CO. Anyone curious about the return on investment for different development strategies would be well-served to know about Urban3’s work. Visit Urban3’s website to learn more.