Here's Another Way to Fund Easton's NID

With the Neighborhood Improvement District back in the news, and the different funding options apparently still in flux, it's worth taking another look at some of the economic questions around this issue. We want to figure out which funding option achieves the city's aims in the most fair, efficient, and cost-effective way for taxpayers.

To review, the city of Easton has a limited supply of land.

In recent years, the land closest to the downtown has become more attractive, and accordingly, more expensive.

Most people seem to roughly agree that the Ambassadors program and the Easton Main Street Initiative deserve some of the credit for this.

But now the funding for those programs will end unless city council comes up with a way to fund them. 

Greater Easton Development Partnership has proposed funding the programs with a 5 mill fee on businesses and a 1 mill fee on homes inside of the Neighborhood Improvement District's boundaries.

The assumption GEDP is making is that the benefits created by the Ambassadors and EMSI programs will more than offset the cost of the fee. I find this persuasive, but I  with using the property tax.

The main thing to keep in mind is that when you tax something more, you get less of it.

So in figuring out what to tax, you should first ask what the city wants more of, and what it wants less of.

Over the long term, I think Easton will want more businesses, more people, more buildings, and more recreation choices.  It will want less vacant land, blighted properties, and congestion in parking and traffic.

You might disagree with these priorities, but my point is simply that the city's tax choices should reflect its development goals. In this view, it would make little sense to fund programs that improve the quality of public and private properties downtown by raising the property tax.

The property tax penalizes people for adding value to their land through building and remodeling - things the city wants landowners inside the NID to do. 

A sales tax sounds better, since the city would collect more revenue from tourism, but you wouldn't want to discourage people from shopping downtown. Funding the NID with earned income taxes at this point in time might work against efforts to attract more professional service employers.  

What kind of taxes wouldn't work at cross-purposes with the goals of the NID?

Anything that raises money from things the city wants to have less of.  In my view, that's blighted buildings, vacant land, and parking congestion. Fortunately, it is possible to tax all of these things.

The city has already been , and city councilman Roger Ruggles is , where the city would charge a fee to landowners whose properties are left vacant for more than a year, with the fines escalating the longer the building stays vacant.  

I'm not sure how much money Mr. Ruggles expects this to raise, but it wouldn't make much sense to rely on it as a stable source of funding for the Ambassadors and EMSI. If it worked, it would raise less and less money.

I think this leaves parking and land taxes as the best choices for funding the NID in a way that doesn't work against the NID's objectives.

Some on city council are interested in the option of increasing parking meter rates, and Planning Commissioner Dennis Lieb's proposal to create a parking benefit district also seems to have attracted some interest.  The parking benefit district that Mr. Lieb has in mind could be used to help fund the NID, although in some versions of the parking benefit district, the money raised from parking is returned to the same block to fund improvements.

I think GEDP and city council should take a serious look at some of the studies on parking benefit districts and see if they don't think it would achieve the NID's aims outright.  The ease of revenue collection is another good reason to prefer it to property taxes.

If a parking benefit district won't cut it, the tax that best compliments Easton's goals for the NID is the land value tax.

The point of the NID is that the land downtown is increasing in value, and GEDP wants to keep doing things that increase the land value. 

Well-maintained properties add value to downtown land, and vacant lots and surface parking lots subtract value.  Vacant land lowers the value of neighboring properties. Having vacant plots of land within the NID territory undermines the city's goals, but funding the NID with the property tax does nothing to discourage this.

If the NID was funded with a land value tax, owners of vacant lots would pay the same taxes for their use of expensive downtown land as someone with a well-maintained property next door.  

Idle owners of land inside the NID would be free to pay the land value tax on the lot if they didn't wish to build anything, but this would ensure that the landowner - not his neighbor - pays the whole cost of speculation.

Funding the NID with a land value tax would create an incentive to build value-creating buildings on all vacant land inside the NID, just as fines for vacant buildings create an incentive for property owners to find tenants. 

High impact public programs are worth raising revenue for, but it's important to think about what can also be done through tax changes.  Some political leaders in Easton have warmed to taxing blighted properties, but it's not much of a conceptual jump to see how blighted land can be just as much of a drag on the pace of development. If city council is going to ask property owners inside the District to pay more, idle landowners should have to pay more too.