Build Up, Not Out, for Property Tax Revenue

The current property tax system assesses the overall value of a development project without reference to the size of the lot; instead, says Joseph Minicozzi of consulting firm Urban3, we ought to tie a project’s value to its per-acre productivity. An acre of land might become the clothing department or parking lot of a big-box store, but it could produce far higher tax revenue by supporting stacked retail, residential, and parking uses.

Minicozzi analyzed data from 12 communities in North and South Carolina, Colorado, Florida, Idaho, Montana, and Wyoming. On average, an outlying Wal-Mart generated $7 per acre in annual property taxes, while a two-story mixed-use building generated $53.70 per acre, and six stories in mixed use generated $415 per acre, surpassing the average sales tax revenue from a sprawling retail store. The current system, says Minicozzi, places too little value on land and encourages “disposable buildings” by assessing lower taxes, so that “the community loses, both in terms of the property tax it collects and the long-term legacy of cheap, single-use buildings.”