Nature Sending the Bills
Early to the Ratable Rich
The theory of ratables sounds
good to municipal officials who are struggling to balance a short-term
budget. If a commercial development
pays more in taxes than it costs in services, then this surplus can be used to
hold down the residential property taxes of the residents (their voters.) Officials are often mystified a few years
later when their budget is still in trouble, so they seek out another infusion
of funds from another good ratable. In
many New Jersey communities, this cycle has spiraled out of control,
transforming rural hamlets and semi-rural towns into sprawling corporate
centers, mind-numbing housing developments, and sterile malls. The only things that remain constant are
budgets in trouble and the misapprehension that a good ratable will solve the
problem. Local citizens can protect
their communities from these bad business decisions by playing an active role
in local and regional planning.
The
ratables chase starts out on the wrong foot—the very fact that commercial
developers are willing to offer cash to communities in exchange for permission
to locate within their borders signals the presence of a significant
downside. The question then becomes,
“Do commercial ratables pay enough to compensate for the negatives?” The answer is, “Almost never.”
Hamilton & Wehn (1992) studied all 39 municipalities in Morris County, New Jersey calculating the accumulated value of commercial ratables added in each municipality during the previous 20 years. Here are the results:
· The Top 13 ‘ratable rich’ communities together had added more than $4 billion in ratables and owned 58 percent of the county’s total assets.
· The theory would suggest that they should be paying considerably more than 58 percent of the taxes (to help supplement residential taxes), but in fact they were paying only 57% of the taxes. The “investment” in ratables had not yielded results.
Why
would such a simple idea—money for nothing – not work? In most cases, municipal officials focus their attention on the
tax dollars that are coming in, but fail to make two very important additional
calculations:
What
are the costs of development? Most
applicants claim that their commercial enterprise will cost the town virtually
nothing, turning their large infusion of taxes into pure profit. Here are some of the hidden costs:
Does
open space have a financial value? Whether it
is agricultural or parkland, open space does not require services. True, it does not generate taxes either, but
indirectly it does have a positive impact on the municipal coffers:
There is growing evidence that the ratables chase not only fails in its initial goal to balance the municipal budget, but also creates a fragile economy that, like a poorly conditioned body, cannot stand up against normal challenges. For example, in 1993, the nation’s economy flagged a bit and realtors from Morris County reported dramatic drops in the value of homes. A more careful look, however, revealed that these declines were clustered within the ratable rich communities. These Top 13 communities (see Table) collectively lost some $384 million in housing value, compared to a loss of $165 million for the middle tier and the 13 ratable poor communities actually gained $65 million in housing value.
There
are, of course, many factors that go into home values, but the same pattern
emerged in the year 2000 when property taxes throughout New Jersey took a sharp
turn upward. In Morris County,
homeowners in the ratable rich communities were hit with an 8 percent increase,
while the two lower tiers saw more modest increases of 5.7 and 5.5 percent,
respectively (see Table).
This
fragile economy should not come as a surprise.
When open space is transformed into over-crowded housing, suburban
sprawl, and frustrating traffic jams, all of the community’s resources are
challenged. Former Secretary of the
Interior, Stuart Udall, said it best in his opening chapter of The Benefits
of Open Space when he pointed out that “nature has a good memory, and at
times of her own choosing, has belatedly presented bills for this waste and
mismanagement to later generations, just as the bills for our generations will
surely be presented to our own children.”
The
ratable rich communities are getting their bills early.
What
if it’s in the town next door?
A final and especially thorny issue is the regional impact of commercial development. Often, applicants will argue that their facility will not harm the home municipality because the workers will live in other towns. Municipal officials have the nasty habit of locating their industrial and commercial zones away from their central areas and next to the borders of neighboring towns. Of course, people live in these other towns already, and will end up subsidizing the bad decision of their neighbors with higher costs for infrastructure, school costs, and the blight of suburban sprawl. It is increasingly important for residents and officials to participate in the decisions that are being made in the town next door.
Regional
participation will help more than anything else to point out the true costs of
commercial development. Clearly,
commercial production is needed as a part of a complex, modern society. But, the decisions about where and how these
facilities are built should be made with a broad view to ensure that we do not
squander our most valuable community resources for the short-term gains of the
few.
What
can ordinary citizens do about all of this? More
than you think. When commercial
developers come before local boards, they bring along expensive professional
planners and other experts to testify before the board. These experts are not exactly disinterested
parties, and they do not go out of their way to bring in all of the
negatives. And, far too often, the
municipal officials do not take a stand against the corporate experts. There is almost never any formal discussion
of the project in neighboring towns.
This is where you come in: In many ways, it is the local citizen who is
the real expert—you know your town.
Here are some of the things you can do:
The
fallout from poorly planned commercial development in Morris County is all
around us. Mind-numbing traffic,
skyrocketing school costs, ugly housing developments, endless strip malls, the
wholesale destruction of the natural landscape—in a word, sprawl. Individual citizens are often reluctant to
get involved with commercial development decisions, leaving that to the
‘experts’. This is a mistake. Ordinary citizens are the experts, because
they know their towns. They have the
ability to sit down and make reasonable estimates of the impact of change in
the same way that they calculate the effects of adding two bedrooms and a deck
onto their own house. Make the
calculations. Make your views public.
Make a difference.
Resources
Log
onto www.greatswamp.org and download a
copy of The Benefits of Open Space, a collection of chapters by
economists, planners, and other professionals.
It includes theories, surveys, practical how-to guidance and a lot of
additional references. They can also
supply copies of Hamilton and Wehn (1992) The Myth of the Ratables.
Log
onto www.anjec.org for additional links and
information about environmental issues.
Science and Technology Advisor
Great Swamp Watershed Association
February 2001