Posts Tagged ‘NJ’

There are plenty of influences on our country’s economic development including geography, natural resources and luck. However, government policy plays a powerful but sometimes unseen role.

Over the years government policies have contributed mightily to the American landscape

• The FHA loan program funded the suburban dream
• School desegregation gave rise to white flight
• Interstates made commuting possible
• Rural Electrification made far flung settlements possible
• Federal Housing projects enforced government ghettos

However one of the most powerful but least understood policies affecting cities and suburbs is the property tax structure.

A couple of illustrative examples make the point.

• In Barbados, if you don’t paint your house it’s considered under construction and is taxed at a lower value. Therefore there were plenty of unpainted houses in the country.
• In Philadelphia, houses were taxed by their width; therefore you see a lot of old narrow houses in Philly.

Today, most property taxes are based on the assessed value of a building. This is a progressive tax meant to more heavily tax the wealthy. However, by tying taxes to property value there is a built-in incentive to avoid property improvements. Therefore neighborhoods don’t improve like they might otherwise.

This is bad for both the payer and the collector. It’s expensive to continuously re-assess property values. In fact, it’s so painful, that Trenton rarely does it, making our revenue problem even worse.

Trenton’s property tax rate really hurts

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If you’re paying attention to this blog, you’ll know that yesterday wrote an article about the best way to spend government revitalization dollars. Many projects are pitched as revitalization but if they don’t have even the punch of my little hypothetical test project then they shouldn’t be called revitalization.

To be honest, I hurried up to get this test written in advance of a review of of Capital Park Master Plan.

Happily the Capital Park plan does not claim to be revitalization but instead is just a very nice state park.

Having not yet read the Master Plan, I expected to read all sorts of claims about how the park was key to Trenton’s economic development. As it turns out, the opposite is true.

There are next to no claims about revitalization.

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Trenton is far from average

Trenton’s median income is in the bottom 9% of communities in New Jersey. Our schools are in the bottom 2% and our crime is in the bottom 1%. Real median income (adjusted for inflation) in Trenton actually declined 6.7% during the ‘90s while New Jersey’s median income rose 4%.

Because our income level and resulting tax base is so low we receive subsidies from the rest of the state most notably Abbott funding. To be a sustainable community we need to pay our own way which means our income must be in the 50^th percentile, roughly that of Hamilton.

One can argue though that an urban city in New Jersey with “average” income would be a great place to live.

Making revitalization decisions isn’t easy

Trenton has been trying to revitalize for many years but with little success, therefore its time to realize that if revitalization were easy everybody could do it. Read the rest of this entry »