Predictably enough, cutting or eliminating new-home taxes in our area is causing an outbreak of vein-popping hysteria among those who always oppose economic growth if it means either more people here, or developers make money.
Some only see nefarious money-grubbing in the Sarasota County Commission’s decision to cut road impact fees in half for two years. The School Board already eliminated school impact fees because of a drop in students that means other schools will not be needed for several years.
Sarasota attorney and anti-developer extraordinaire Dan Lobeck wrote recently that the impact-fee cuts mean that “developers who bankroll political campaigns will benefit and the rest of us will pay.” He sees the decision as nothing more than crony payoffs by corrupt county commissioners. Unwarranted and predictable, but he has a following.
Others see a tax shift. Sarasota Herald-Tribune columnist Eric Ernst started a recent column with, “My taxes just went up. So did yours if you are a property owner in Sarasota or Manatee counties.”
He points the crooked tax-raising finger at the Sarasota and Manatee county commissions’ impact fee cuts, acting on the long-engrained assumption that growth does not pay for itself but costs existing taxpayers. We all like to blame the other guy. It’s easiest when whatever is wrong is someone else’s fault. And so if you are paying more in taxes than you want to, or if the roads are more congested, just blame it on newcomers. Politicians have generally enjoyed this game because future taxpayers can’t vote now — tax the dudes not here!
The fallacies in this argument are myriad.
First, Ernst’s taxes did not go up. In fact, they probably went down because his property value is declining and the county has not increased the millage rate. A small point, but being factually wrong ought to diminish the effect of an otherwise fine rhetorical flourish.
Second, the charge is made that we have a glut of homes, and so cutting impact fees won’t make any difference in new home construction. But we don’t necessarily have the available houses people moving here want. And the existing stock can be readily taken up with workers in construction and the businesses spun off from there.
For instance, Manatee County cut impact fees last year — and the Manatee School District has also eliminated impact fees for now — and the county just extended those cuts. What has resulted is a steady increase in building permits.
Third, the primary issue is the assumption that newcomers cost us money by having to build new roads, schools, libraries and so on. But it turns out newcomers pay taxes, too. Who knew? And since most new homes are more expensive than the average existing home base, newcomers pay on average more taxes than existing residents.
There was a fascinating study done two years ago that documented — contrary to popular beliefs — how newcomers actually do pay more than their own way.
Elliot Eisenberg, senior economist for the National Association of Home Builders in Washington, D.C., did an in-depth study of impact fees in Collier County in 2009. While Eisenberg’s employer cannot be considered objective, his numbers are numbers pulled from the database and are fascinating. And Collier is a reasonable comparison with Sarasota and Manatee.
Eisenberg used the same formula adopted by many institutions and universities, including the University of Florida, to demonstrate concretely what many of us thought intuitively: Growth does pay its own way. And more.
Here’s how he did the numbers.
Eisenberg broke the study into three parts: construction, the ripple effect and occupancy. The benefits of those three phases are combined and compared against the costs of the new house and people during the same time frames. The costs include all services from education, fire and police to sewer, water and roads to parks, libraries and public health care.
For the 565 single-family homes and 283 multifamily units built in Collier County in 2008, the construction phase created 2,538 jobs — 1,754 in construction, the rest in spin-offs — plus $31 million in taxes and $149 million in local income.
During the ripple effect phase, which includes spending that income on goods and services in the local economy, the new housing created 1,531 jobs, plus $6.6 million in local taxes and $82 million in local income.
And then come the numbers that are so often left out: occupancy, when people are living and working in the community. That created another 556 permanent jobs, plus $5 million in local taxes and $28 million in local income. Every year. Ad infinitum.
The point overlooked or willfully ignored is that people in these new houses buy food and cars, go to the dentist and the bank and use child care. That obvious benefit is often what the growth opponents won’t consider.
So over 15 years, the cumulative take in taxes for local governments was $115 million. But the total cost during those years in all public services was $55 million. Taxes flowing into government coffers as a result of new home construction and people growth generated nearly twice their costs to the local government in services.
Stunning news. Yet Eisenberg has reproduced this study all over the country and shows consistent findings.
Not only does growth pay for itself, it subsidizes those of us already here.
Ernst ends his column using the rusty old Lobeck postulation that “someone is making money off this. It’s just not you and me.”
The point? There must be sleaze involved here. Probably those dirty developers. Maybe some commissioners on the take.
Actually, it may well be that we are making money off of growth, because these newcomers pay more than their fair share. Impact fees tilt the field even more in financial favor of those of us already here.
Rod Thomson is editorial pages editor of the Observers and can be reached at email@example.com.
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