Thinking Like a Farmer?

Study Demonstrates Efficiency of Downtown Land Use

Building up, not out, in the center of cities, yields more property tax revenue than building land-intensive developments on the periphery, according to a new study. The San Joaquin Valley Municipal Revenues Study showed that investing in downtown Modesto, Merced and Turlock yielded more property tax revenue per acre and used land more efficiently than the expansive urban sprawl on the edge of the cities.

The review of city and county property tax revenues in the three showed that establishing growth in downtown areas makes more sense for struggling local governments than trying to build elsewhere. Even small mixed-use developments near the centers of Modesto, Merced and Turlock generated more revenue, on a per acre basis, for local governments than developments that consume much more land in more remote places, where land values are typically lower. The reasoning, based on the agricultural understanding of land economics, which is calibrated on a per acre basis, was that multi-story structures, which are more likely to be in downtown areas, use land more efficiently than “expansive single-story structures with adjacent parking lots.”

The report offered two important findings about the San Joaquin Valley region and other California communities. It determined that big-box style retail developments, such as large freestanding stores and malls, provide significantly less property tax revenue per acre to local governments than the average of all downtown properties. In addition, some downtown properties, particularly those designated as mixed-use, had much higher per-acre revenues than others. 

Conducted by Joseph Minicozzi of Urban 3 for the Local Government Commission and the Council of Infill Builders, the report gives California communities a different look at evaluating growth, instead of simply predicating decisions on the potential sales tax revenue from big retail developments on the edge of cities and towns. It urges cash-strapped cities to think about varying their building stock and not “relying too heavily on retail sales tax revenue from chain stores and other resource intensive developments.

Authored by Jim Simon, President of RSG