What is Main Street Worth?

The Weldon Cooper Center for Public Service estimates that in Virginia real property taxes make up an average 57.8 percent of local revenue for cities and 31.2 percent for large towns. How significant a contributor is your Main Street district to this revenue stream?

Joseph Minicozzi, the principal of Urban3 LLC, argues in a post on Planetizen that rather than compare building to building, it makes more sense to look at the per-acre value of different land uses. For example, Minicozzi compares the per-acre property tax revenue of his local Super Wal-Mart with a six-story, mixed-use building in Asheville’s historic commercial district. As any good Main Streeter probably already knows in his or her heart, but may be a surprise to others, the multistory, mixed-use building brings in far more revenue per-acre than the big box development. The Wal-Mart, sitting on 34 acres of land, only generates the equivalent of $6,500 in property taxes per-acre, while the mixed-use downtown development, sitting on only 0.2 acres of land, contributes the equivalent of $634,000 per-acre. Minicozzi consistently finds that the type of land use that characterizes the historic commercial districts of Main Street communities – compact, mixed-use buildings of six-, three- and two-stories – produce substantially more property tax revenue per acre than big box stores, malls and single-family developments.

Comparison of Asheville big box with downtown mixed-use development. Source: http://www.planetizen.com/node/53922

Comparison of Asheville big box with downtown mixed-use development. Source: http://www.planetizen.com/node/53922

The compact, mixed-use development found in historic commercial districts built in the mid-19th and early 20th century now serves as a guide for smart growth development. And, it turns out, smart growth is not only good for the environment, but also very good for local government pocketbooks. In a recent report, Smart Growth America found that when compared to conventional suburban development, local governments benefit from smart growth development because (1) it costs one-third less for upfront infrastructure, (2) it saves an average of 10 percent on ongoing delivery of infrastructure services, and (3) it generates 10 times more tax revenue per acre than suburban development.  Why is this?

Peter Katz, Executive Direct of Place First, explains in his article The Missing Metric that compact, mixed-use developments generate property tax revenue at a much higher rate than do single-use suburban style developments by producing more rapid payback of public investments. The payback is more rapid because taller, more compact buildings make more efficient use of a limited footprint and typically require less of the horizontal infrastructure (roads, water and sewer lines) that local governments pay for.

The whole idea is pretty simple. But it is sort of baffling that we have not been looking at our land this way for years. Cities are woefully ignorant about exactly which types of neighborhoods and development put the most financial strain on public coffers and which kick in the most money.” – Joseph Minicozzi, Principal of Urban3 LLC

Per-acre, Main Street is some of the most valuable and productive real estate in any community. By creating a downtown environment that attracts private investors, property developers and entrepreneurs to develop new mixed-uses in the empty buildings, abandoned “white elephants” and vacant lots in the historic downtown, Main Street organizations can help local governments tap a valuable revenue source to help build a healthy, balanced and economically-sustainable community.

How does an acre of your Main Street stack up against an acre of other types of development in your community (big box store, strip mall, single-family subdivision)? You may be surprised and may find the numbers interesting to share with your Main Street organization’s financial supporters.

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