Making the New West: Sprawl, Tax Increment Financing, and the Not-So-Invisible Hand

In my last Zephyr essay, I observed that the residential development pattern that prevails in the New West is a far more consumptive way for humans to occupy the land than any form that has come before. Since that issue’s publication, we have been witness to a particularly grim example of another of the many negative consequences of this development pattern, namely, the increased risk and devastating toll of wildfire due to changes in the wildland-urban interface (WUI) over the past 20-30 years.

In California, for example, the WUI expanded by 20% between 1990 and 2010, and the number of homes occupying the WUI grew by about 33%, which translates to a total increase of nearly 4.5 million homes in California’s WUI. In percentage terms, many other western states show an even more pronounced shift, with states like Arizona, Colorado, Idaho, and Utah expanding the area of their WUI footprint by up to 70% or more. As a result, several western states have more than doubled the number of homes built in the WUI.

Among the factors that contribute to calamitous wildfire, the sprawling New West development pattern doesn’t get nearly the attention it deserves, and no link is ever made between the marketing of nature by New West boosters and the increase in demand to develop property in the WUI. Given the timing of this sad object lesson, I thought it would be worthwhile to draw your attention to the connection. But that is not the focus of this essay. Instead, I’d like to return to another consequence that follows the shift in predominant rural land use from Old West to New, and look at how this is unfolding in San Juan County, Utah.

Objects May Be Smaller Than They Appear

As we have observed before, many Old West towns have economies that work pretty well for their permanent inhabitants. Recall, for example, that the median household income in Monticello is about 15% higher than Moab’s while the median home in Moab costs over 45% more than Monticello’s. Appearances can be deceiving in another important way: the development projects that are contributing the most to your community’s fiscal well-being are probably not the ones you think.

When a new residential subdivision is built, most improvements to the property — utilities, pavement, curb-and-gutter, sidewalk, etc. — are constructed at the expense of the developer and then dedicated to the public. In turn, these costs are bundled into the price of a finished building lot or home and ultimately into mortgage or rent payments. Commercial development follows the same general template.

This is the essence of greenfield development and, on its face, it seems like a great deal for a city and its residents: a free bump to total public assets plus an expanded tax base plus usually the payment of impact fees or other exactions.

The catch is that this process also creates a long term liability for the city in the form of the maintenance and eventual replacement of the constructed public works. The (usually unasked) municipal finance question becomes whether the new revenue stream associated with the new land use at least matches the new liability. And the answer, when it comes to the suburban development pattern is that it doesn’t and it isn’t even close.

Here are a few comparative examples to illustrate the tax potency of humble, relatively compact forms of development compared with alternatives that appear to be more prosperous and, in some cases, more environmentally conscious.

The Wealthy & Enlightened New West Settler

Project: Kayenta, Ivins, UT
Type: Single family residence (typical)
Assessed value: $846,800
2018 property tax: $5,015
Area occupied: 2.32 acres
Tax per acre: $2,161
Tax $ per linear foot of public works/street frontage: $19

The “Underclass”

Project: Bella Vista/Riverside Apartments, St. George, UT
Type: 148 1- and 2-bedroom apartments
Assessed value: $8,369,400
2018 property tax: $46,243
Area occupied: 6.54 acres
Tax per acre: $7,071
Tax $ per linear foot of public works/street frontage: $81

National Chain

Project: Rite Aid/Walgreen’s, St. George, UT
Assessed value: $1,720,500
2018 property tax: $17,284
Area occupied: 1.50 acres
Tax per acre: $11,523
Tax $ per linear foot of public works/street frontage: $31

Local Mom & Pop

Project: Stapley Pharmacy/Dixie Bowl, St. George, UT
Assessed value: $971,600
2018 property tax: $9,761
Area occupied: 0.80 acres
Tax per acre: $12,201
Tax $ per linear foot of public works/street frontage: $94

The Best Defense is a Good Offense

A common question is “what can a town do to prevent or reverse New West gentrification?” The honest answer is probably “little or nothing.”

That said, a constructive step the communities of San Juan County could have begun two years ago (or even earlier) would be to undertake a comprehensive county-wide planning effort along the lines of Envision Utah or Vision Dixie. The process might somewhat resemble the San Juan Lands Council process, but would focus on elements entirely within local control. Much more LUDMA than FLPMA.

A comprehensive planning effort would establish a strategic blueprint that would better enable decision-makers to fashion coherent policy as specific, individual issues present themselves. Instead, the cart is ahead of the horse and county institutions are in “react mode.” Concrete consequences include Bluff’s absurd new city limits and the school board struggling to find a sound basis from which to set tax-subsidy policy.

If launched even today, a comprehensive regional planning initiative might repair of some of the damage done to community solidarity by the monument controversy. A healthy process would implicitly acknowledge a shared destiny and love for San Juan County while also providing space for the differences among its individual communities to play out at the local level. Such a process also would have the virtue of explicitly excluding the influence of groups external to the county.

Of course, such an effort is not merely a feel-good exercise in participative democracy. Some planning issues can only be addressed at the regional scale and many more issues are better addressed at that level.

The Trouble with TIF

As San Juan County grapples with their post-Bears Ears reality, a variety of economic development tools are being considered or actively deployed. One such tool is a form of development subsidy generically known as tax increment financing (TIF). This is the source of considerable confusion and consternation among some locals, not least for the school board that has a central role in its implementation.

TIF is a heavily used tool in some places and San Juan County is of course well within their legal rights to adopt such an approach to economic development. But as they work their way through the process, it is worth carefully considering whether the realities of TIF live up to the promise of its theory.

One common criticism is that providing a TIF subsidy often does not actually create new economic activity, it simply moves existing activity around. This potential drawback is easiest to see in larger urban regions where population growth has stalled or reversed. In that context, it is common for individual municipalities to use TIF incentives to lure a new round of development into their boundaries.

Assume, for example, that a developer wishes to build a large Costco-anchored project and begins scouting viable locations. (A splashier example might be a professional sports team or Amazon’s second headquarters.) Since there is only room for one such project across quite a large geographic area, individual cities are almost certainly pitted against one another to attract the project. The “winner” of this contest is often the city willing to offer the biggest public subsidy.

Is it worth it? The answer to that is arguable and highly fact-sensitive. In a zero- or low-growth environment, such a project is surely worth much more to tax rolls than what it replaces onsite, but will also hasten the demise of the prior generation of commercial projects and their tenants located elsewhere. Maybe those projects are concentrated in the next town over. Or maybe not. Maybe City Creek kills Gateway kills Crossroads kills Main Street and around and around we go.  But what is beyond dispute in such an instance is that the use of a TIF incentive did not expand the overall size of the regional economy. At that scale of analysis, it is clear that the use of TIF was the economic development equivalent of rearranging deck chairs on the Titanic.

A second common problem with the use a TIF subsidy is probably more relevant to the San Juan County case, and that relates to TIF’s original intent. The underlying logic of a TIF incentive is that development (and therefore the increase in taxable value) will not occur “but for” the subsidy. The incremental increase in tax is framed by this logic as “found money” and the cost of the subsidy to the public as zero.

With this in mind, it should come as no surprise that the classic case for the use of TIF is the neighborhood or city facing depopulation and disinvestment. Whether TIF works to reverse decline in such instances is, again, arguable and highly fact-sensitive. The relevant point here is that the problem in San Juan County post-Bears Ears is probably not one of stimulating tourism-related development activity. In fact, the problem is probably about to become the opposite. In technical terms, deploying tourism-based TIF incentives in San Juan County right now is the use of a countercyclical development tool in a procyclical growth context. In colloquial terms, it’s like handling gas around a fire.

Project: Fairfield by Marriott, St. George, UT
Assessed value: $6,832,200
2018 property tax: $68,636
Area occupied: 1.85 acres
Tax per acre: $37,101
Tax per acre “If TIF”: $9,275 (under proposed SJC TIF regime)

Project: Sands Motel, St. George, UT
Assessed value: $1,248,600
2018 property tax: $12,534
Area occupied: 0.95 acres
Tax per acre: $13,204

None of what I’ve written here should be taken to mean that the New West can simply be tamed through planning and zoning, or that tax increment financing is categorically bad. In fact, I find such blanket assertions to be insulting in their superficiality. It’s also worth noting that the very citizens who self-identify as the proper, enlightened keepers of planning and zoning authority are very often the worst culprits in establishing and perpetuating dysfunctional places. But having a conversation about your community that spans city limits and voting precincts, and tries to look 10 or 20 or 30 years into the future is at least better than not having that kind of conversation at all.

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