Making Great Cities: The Dollars and $ense of Downtown Development

 

A large and diverse audience packed the Downtown Athletic Club’s Conference Center last Thursday evening for the third of the Making Great Cities series of community-wide forums about design excellence at the building, urban, and metro scales. Like the others in attendance, I was there to hear what proved to be a provocative and persuasive presentation by Joe Minicozzi, AICP about the simple math of smart urban growth. 

 

Joe is the principal of Urban3, a consulting company created by Asheville, North Carolina real estate developer, Public Interest Projects. Joe was born and raised in Rome, New York. During his youth, he witnessed the “sacking of Rome,” the systematic destruction of what was the coherent urban fabric of his hometown in favor of the kind of block-busting, car-oriented development characteristic of the time. Partly in response, he chose to study architecture at the University of Miami, where he was greatly influenced by the pioneering New Urbanists Andres Duany and Elizabeth Plater-Zyberk. Joe later attended Harvard’s Graduate School of Design before settling in Asheville, North Carolina, where his wife is from. Prior to creating Urban3, he served as the Executive Director for the Asheville Downtown Association. 

 

Joe described how Asheville, a city smaller and more impoverished than Eugene at the time, largely escaped the ravages of post-WWII urban renewal. For this reason, it retained a significant stock of older buildings downtown that had fallen into disuse and lay fallow for many years. Public Interest Projects (founded in 1990 by the late Julian Price) took a pioneering approach by renovating numerous properties, guided by the belief that downtown development could be both the greenest form of growth and good business. The success of PIP’s projects is a testament to the validity of the developer’s core principles, ones shaped and guided in recent years by Joe and his colleagues at Urban3. In no small part due to PIP’s efforts, the city now enjoys such accolades as being named as one of the “10 Most Beautiful Places in America” and one of the “Top Seven Places to Live in the U.S.” 

 

So, what is the key to Asheville’s success? Certainly, favorable historic circumstances and Asheville’s inherent charms played a part. It was Urban3’s analysis, however, that provided concrete evidence dense downtown development is more productive and returns a greater investment to the community than sprawl. There are many advocates for fostering smart, sustainable urban centers; what sets Urban3 apart is its use of geo-spatial tools to represent economic productivity and the economic potency of urbanism. 

 

Joe argued during his talk that per acre, dense, highly valued downtowns generate much more public wealth than low-density subdivisions or massive malls by the highway. He pointed out how low-density development isn’t just a poor way to generate property tax revenue, it’s also extremely expensive to maintain. By comparison, dense downtowns cost considerably less to maintain in public services and infrastructure. 

 

Cities can generate wealth not by raising taxes, but by better exploiting the economics of land use. Joe offered a simple analogy: When shopping for a new vehicle, we often evaluate its fuel economy. We look at miles-per-gallon, not miles-per-tank, because tanks come in all different sizes. Joe says we should look at buildings in exactly the same way. An illustrative comparison is the tax revenue per acre generated by a sprawling Walmart Supercenter versus that of even a modest multistory downtown mixed-use development: the downtown project returns a much higher level of tax revenue per unit area in return for the services it draws upon. 

 

The larger a tract of land, the more expensive it becomes to provide services to it, especially when those large parcels sit on the periphery of the community. Our current tax structure rewards buildings that fall apart and results in too much of our land being over-serviced and under-developed. We need to cultivate wealth in our communities, which the present and prevailing models for development largely work against. Simply put, density delivers more bang for the buck. 

 

Drawing upon another analogy, Joe cited Moneyball, the analytical, evidence-based approach employed by baseball’s Oakland Athletics. The team utilized rigorous statistical analysis to determine that on-base and slugging percentage were better indicators of offensive success than batting average, runs-batted-in, or stolen bases. Similarly, Urban3 evaluates a potential development from the perspective of its per unit productivity as opposed to its overall cost. There’s a greater return to cities if landowners are required to pay in proportion to the value of public goods and services they receive (like a public services user fee) rather than in proportion to their own investment. This is evidence-based thinking. Examples such as Asheville prove such a perspective encourages more construction, improvement, and maintenance of buildings. A welcome dividend is greater employment and economic vitality. 

 

Joe Minicozzi, AICP

 

Joe’s presentation was chock-full of information, engaging, brisk, and entertaining throughout. He quoted such luminaries as Jane Jacobs, Ian McHarg, Michael Bloomberg, and Charles Montgomery to convincingly drive home his point. In rapid-fire fashion and coupled with illustrative charts and graphics, he explained the value of using geo-spatial tools to represent economic productivity and the economic potency of urbanism. I struggled to keep up, reflexively oscillating between affirmative nodding and furious scribbling on my notepad. Forty-five short minutes elapsed and his riveting message was over. I thought his speech was brilliant.

 

And yet here I am, mere days removed from Joe’s presentation, scratching my head. His basic premise—that dense downtown development is the golden goose of urban economics—is so logical it appears self-evident. So too is his point that “form follows finance.” The numbers don’t lie. Regardless, I can’t recall if he actually described how cities are supposed to implement his ideas and methodology. Given how coherent and commonsense his ideas are, why haven’t they already taken root everywhere? How do we overcome the intransigence of those who favor and/or profit from the status quo? What is the blueprint? 

 

I’m sure I’m simply naïve. This isn’t baseball. The problem has many more layers of complexity and cannot be modeled after a game (even if Elizabeth J. Magie Phillips modeled the board game that would become Monopoly upon the Georgist principle that economic value derived from common opportunities and resources should belong equally to all residents of a community, but that people own the value they create). The controversy surrounding Eugene’s Multiple-Unit Property Tax Exemption (MUPTE) is a case in point. The MUPTE program offers a property tax exemption on the new structure or incremental change in the property value of the building that comprises the project for a maximum of 10 years. Advocates argue MUPTE encourages dense development that otherwise would not occur (ultimately resulting in enhanced property tax revenue once the exemption expires). Opponents claim developers do not require the subsidies. Using tax policy to shape urban form is obviously fraught with political challenges. 

 

What’s obvious to Joe and those of us who understand the desirability of vibrant, dense urban centers may not be so clear to those who adhere to a different set of values. Development patterns that evolved over much of the past century will be difficult to undo. The suburban lifestyle, fostered by decades of pleasant imagery and appeals to independent American sensibilities, remains desirable to many but is also sustained by the current economics of real estate. The fact it is also ultimately unsustainable (in both the environmental and fiscal senses) is what many civic leaders fail to understand. 

 

Perhaps the key is to reveal to everyone the clarity of what is hiding in plain sight. Money is a measure everyone understands. If governments overhaul their tax codes such that the inherent value of the land and commonly shared infrastructure is taxed rather the buildings that take advantage of them, the disparity between the value of the land and the tax revenue it generates per acre will be ameliorated. Maybe Joe was simply driving home the point that data is our guide, that all we need to do is the math, trust the numbers, and thereby understand the physical form of cash flow. Who knew tax-literacy could be a key to achieving design excellence? 

 

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Kudos to the members of AIA-SWO’s Design Excellence Committee for bringing in Joe Minicozzi as the 2015 Making Great Cities speaker. The committee definitely “hit it out of the ballpark” with Joe (there’s another baseball idiom). And big thanks to the sponsors for this year’s program—The Barn Light, the City of Eugene, Downtown Eugene Inc., Dustrud Architecture, the Eugene Association of Realtors, Mindbox, PIVOT Architecture, and Rowell Brokaw Architects—for supporting this excellent installment of the Making Great Cities series. The bar has been set very high for all future presentations. I’m looking forward to them.