6 ms·

> Recent attempts to get the developers to shoulder more of this cost is often the next fight these communities face. Why would the people building the housing

by davmre 10y ago

> Recent attempts to get the developers to shoulder more of this cost is often the next fight these communities face. Why would the people building the housing be responsible for these costs? If new people are moving to a community and consuming services, can't they pay for those services through taxes like everyone else?

dragonwriter 10y ago
> Why would the people building the housing be responsible for these costs? If new people are moving to a community and consuming city services, can't they pay for those services through taxes like everyone else? Prop 13's property tax rate limitations made developer fees more important as a source of revenue to support city services (raising up-front property prices.) Under Prop 13 -- both the rate limitations and the assessment increase limitations -- "everybody else" isn't paying for the (full, prorated costs of) services through taxes, new homeowners are paying full-freight from full-value assessment and direct taxes, and by paying (or, for new purchasers of existing houses, in effect reimbursing the prior owner) for the development fees. Homeowners that have held their property longer still paid (or reimbursed) the development fees when they bought the house, but pay reduced share through direct property taxes.
- ghaff 10y ago
  You don't even need to bring Prop 13 into the discussion. Depending upon both existing demographics of a town and the expected demographics of a new project, the development can lead to tax increases. Because, in many cases (especially outside of cities) most property taxes go to the schools, a development catering to young families is going to put a lot of pressure on an existing tax base in a community tending toward singles and couples with their kids off to college and beyond.
- adrr 10y ago
  Community could always implement Mello-Roos tax which can be used to fund new infrastructure. Its how a lot of new communities pay for their schools and roads.
  - refurb 10y ago
    This is a great point that a lot of people miss. Yes, Prop 13 limits the increase in property taxes, but there are other ways to raise taxes collected on homeowners. When I was looking to buy a house in SF, I dug up a lot of the tax information and the Mello-Roos tax seemed pretty common.
kabulykos 10y ago
The cost to deploy most services does not increase linearly with the tax base. Usually it's capital expenditure. Maybe (but not necessarily!) the number of police can grow linearly with the growth in taxable property. But police cars and police stations must be acquired from scratch. Same with sanitation workers vs an expanded water treatment plant, bus drivers and buses. Some of those costs can maybe be amortized via debt issue (bonds), but the cost of servicing those would still be borne by the community overall and not necessarily the newcomers' taxes alone. When a new development is proposed, it's the developer who's there in the moment, hoping to make business and a profit. The prospective-and-still-hypothetical newcomers are not yet there to make a case that housing be built for them. So it's not insane that the developer be put in a position to minimize negative effects of new building. This isn't a perfect system, and it's certainly one that can be abused by nimbys as everyone now knows. In particular things get unintuitive for (usually older) folks who are house-rich but cash-poor ... accommodations might leave them with a house worth more, even as a fixed income prevents them from absorbing, say, increased taxes. But, since Proposition 13 passed in 1978, California has been pretty clearly biased towards disproportionately helping out those sorts of people though. Can't say we weren't warned.
- TulliusCicero 10y ago
  > The cost to deploy most services does not increase linearly with the tax base. In the long run, infrastructure for dense housing developments is cheaper per resident than infrastructure for sprawly housing developments. An apartment complex of 100 units requires far fewer miles of road, water pipes, electrical wiring, sewer pipes, etc. per $ of local tax revenue generated than a development composed of 100 detached SFHs. But, you're right about the immediate impact vs tax revenue that comes in slowly.
- davmre 10y ago
  > Some of those costs can maybe be amortized via debt issue (bonds), but the cost of servicing those would still be borne by the community overall and not necessarily the newcomers' taxes alone. This seems like another way of saying money is fungible. Suppose there is School A used by current residents and School B we propose to build for new residents. The annualized cost (labor+amortized capital) of a School is $X/year, which registers as a tax burden on current residents. Building School B doubles the total tax burden, but in response to a doubling in population, so per-person taxes are unchanged. (assuming that new residents pay taxes at or above the average rate, which is certainly true in the Bay Area). It's meaningless in this case to distinguish who is paying for which schools - you could say "newcomers are paying the entire cost for School B" since the marginal revenue increase equals the marginal cost, or you could say that the costs of servicing both schools are "borne by the community overall". But in the latter case, in order to claim that current residents are contributing to new infrastructure, you have to acknowledge the reciprocal contribution of new residents to existing infrastructure: increased tax revenue helps to pay off the bonds that built the current schools, and that will eventually be sold to renovate and rebuild them. Either way it balances out.
davidw 10y ago
Interestingly enough, in terms of taxes, dense does better: http://www.strongtowns.org/journal/2016/5/13/101-productive-building-types http://www.strongtowns.org/journal/2016/5/13/101-productive-...
jedberg 10y ago
It's the timelines. Let's take an example: A new 100 unit building opens in April of year 1. 25 new students move in. This means overall the school district now needs one extra classroom. Usually the schools are at capacity already, so they need to roll in a portable and hire a teacher. The problem lies in the fact that these kids are going to be in school in September of Year 1. Assuming it took a year to build the building, that means the district had to start spending money for the construction in year 0, and the teacher in year 1. But the building won't get their first post-construction tax payment until Year 2. And that won't hit the school budget until Year 3. So for 3 to 4 years, the school has had to front the costs of supporting those new students. By year 4 they'll have the revenue to support those new students, but they had to eat those first few years. And they won't hit efficiency until a few years down the line still. If the developer has to make a direct payment to the school, it helps the absorb that cost. As it turns out, in Cupertino at least, the developer has to pay $100 per new unit when they open the building, which at least helps offset the costs, but the school still comes out behind.
- jcranmer 10y ago
  It turns out that there's a long-established financial mechanism for paying upfront for something when you'll get the income to pay for it later--bonds. Major capital projects (such as building new schools) are usually financed via bonds, so timelines aren't that much of an issue.
  - jedberg 10y ago
    Except practicality gets in the way. "Dear voters, please approve a bond that will increase your taxes to help pay for all the new people who are moving in, who will increase your traffic and suck away resources from your children." Those don't usually go very well.
    - davmre 10y ago
      Why would you need to raise taxes to pay off bonds? Why isn't the increased revenue from the new residents' taxes sufficient? If your population doubles, sure you need to sell enough bonds to double your infrastructure, so the annualized cost (labor + amortized capital) of providing Government Services will double. But your tax base also doubles, so as long as the new residents pay at least the average tax rate (and wealthy gentrifiers usually pay higher rates), you'll collect double the revenue and everything balances out.

by davmre 10y ago

dragonwriter 10y ago

> Why would the people building the housing be responsible for these costs? If new people are moving to a community and consuming city services, can't they pay for those services through taxes like everyone else? Prop 13's property tax rate limitations made developer fees more important as a source of revenue to support city services (raising up-front property prices.) Under Prop 13 -- both the rate limitations and the assessment increase limitations -- "everybody else" isn't paying for the (full, prorated costs of) services through taxes, new homeowners are paying full-freight from full-value assessment and direct taxes, and by paying (or, for new purchasers of existing houses, in effect reimbursing the prior owner) for the development fees. Homeowners that have held their property longer still paid (or reimbursed) the development fees when they bought the house, but pay reduced share through direct property taxes.

ghaff 10y ago
You don't even need to bring Prop 13 into the discussion. Depending upon both existing demographics of a town and the expected demographics of a new project, the development can lead to tax increases. Because, in many cases (especially outside of cities) most property taxes go to the schools, a development catering to young families is going to put a lot of pressure on an existing tax base in a community tending toward singles and couples with their kids off to college and beyond.
adrr 10y ago
Community could always implement Mello-Roos tax which can be used to fund new infrastructure. Its how a lot of new communities pay for their schools and roads.
- refurb 10y ago
  This is a great point that a lot of people miss. Yes, Prop 13 limits the increase in property taxes, but there are other ways to raise taxes collected on homeowners. When I was looking to buy a house in SF, I dug up a lot of the tax information and the Mello-Roos tax seemed pretty common.

kabulykos 10y ago

The cost to deploy most services does not increase linearly with the tax base. Usually it's capital expenditure. Maybe (but not necessarily!) the number of police can grow linearly with the growth in taxable property. But police cars and police stations must be acquired from scratch. Same with sanitation workers vs an expanded water treatment plant, bus drivers and buses. Some of those costs can maybe be amortized via debt issue (bonds), but the cost of servicing those would still be borne by the community overall and not necessarily the newcomers' taxes alone. When a new development is proposed, it's the developer who's there in the moment, hoping to make business and a profit. The prospective-and-still-hypothetical newcomers are not yet there to make a case that housing be built for them. So it's not insane that the developer be put in a position to minimize negative effects of new building. This isn't a perfect system, and it's certainly one that can be abused by nimbys as everyone now knows. In particular things get unintuitive for (usually older) folks who are house-rich but cash-poor ... accommodations might leave them with a house worth more, even as a fixed income prevents them from absorbing, say, increased taxes. But, since Proposition 13 passed in 1978, California has been pretty clearly biased towards disproportionately helping out those sorts of people though. Can't say we weren't warned.

TulliusCicero 10y ago
> The cost to deploy most services does not increase linearly with the tax base. In the long run, infrastructure for dense housing developments is cheaper per resident than infrastructure for sprawly housing developments. An apartment complex of 100 units requires far fewer miles of road, water pipes, electrical wiring, sewer pipes, etc. per $ of local tax revenue generated than a development composed of 100 detached SFHs. But, you're right about the immediate impact vs tax revenue that comes in slowly.
davmre 10y ago
> Some of those costs can maybe be amortized via debt issue (bonds), but the cost of servicing those would still be borne by the community overall and not necessarily the newcomers' taxes alone. This seems like another way of saying money is fungible. Suppose there is School A used by current residents and School B we propose to build for new residents. The annualized cost (labor+amortized capital) of a School is $X/year, which registers as a tax burden on current residents. Building School B doubles the total tax burden, but in response to a doubling in population, so per-person taxes are unchanged. (assuming that new residents pay taxes at or above the average rate, which is certainly true in the Bay Area). It's meaningless in this case to distinguish who is paying for which schools - you could say "newcomers are paying the entire cost for School B" since the marginal revenue increase equals the marginal cost, or you could say that the costs of servicing both schools are "borne by the community overall". But in the latter case, in order to claim that current residents are contributing to new infrastructure, you have to acknowledge the reciprocal contribution of new residents to existing infrastructure: increased tax revenue helps to pay off the bonds that built the current schools, and that will eventually be sold to renovate and rebuild them. Either way it balances out.

davidw 10y ago

Interestingly enough, in terms of taxes, dense does better: http://www.strongtowns.org/journal/2016/5/13/101-productive-building-types http://www.strongtowns.org/journal/2016/5/13/101-productive-...

jedberg 10y ago

It's the timelines. Let's take an example: A new 100 unit building opens in April of year 1. 25 new students move in. This means overall the school district now needs one extra classroom. Usually the schools are at capacity already, so they need to roll in a portable and hire a teacher. The problem lies in the fact that these kids are going to be in school in September of Year 1. Assuming it took a year to build the building, that means the district had to start spending money for the construction in year 0, and the teacher in year 1. But the building won't get their first post-construction tax payment until Year 2. And that won't hit the school budget until Year 3. So for 3 to 4 years, the school has had to front the costs of supporting those new students. By year 4 they'll have the revenue to support those new students, but they had to eat those first few years. And they won't hit efficiency until a few years down the line still. If the developer has to make a direct payment to the school, it helps the absorb that cost. As it turns out, in Cupertino at least, the developer has to pay $100 per new unit when they open the building, which at least helps offset the costs, but the school still comes out behind.

jcranmer 10y ago
It turns out that there's a long-established financial mechanism for paying upfront for something when you'll get the income to pay for it later--bonds. Major capital projects (such as building new schools) are usually financed via bonds, so timelines aren't that much of an issue.
- jedberg 10y ago
  Except practicality gets in the way. "Dear voters, please approve a bond that will increase your taxes to help pay for all the new people who are moving in, who will increase your traffic and suck away resources from your children." Those don't usually go very well.
  - davmre 10y ago
    Why would you need to raise taxes to pay off bonds? Why isn't the increased revenue from the new residents' taxes sufficient? If your population doubles, sure you need to sell enough bonds to double your infrastructure, so the annualized cost (labor + amortized capital) of providing Government Services will double. But your tax base also doubles, so as long as the new residents pay at least the average tax rate (and wealthy gentrifiers usually pay higher rates), you'll collect double the revenue and everything balances out.