Comment 66033

By Ryan (registered) - website | Posted July 12, 2011 at 09:23:59

I just did some rough, back-of-the-envelope calculations, assuming a cost to the city of $100,000,000 divided among 200,000 households. (I'm also using 5% interest on the municipal debt.)

If we borrow the capital and amortize it over 25 years, the additional average annual property tax per household would be around $40. At $125 per household, it would be paid off in five years.

Remember that this does not take into account the increased tax revenues from new developments along the LRT line. These developments would actually result in a net improvement in the city's finances, because the cost of public infrastructure would be so much lower than the cost to service greenfield development on the edge of the built area.

Again, if we don't direct new development into the existing built area, the city's finances will gradually erode since the city receives much less money in development charges than it costs to provide low-density suburban infrastructure.

Not only that, but economic research clearly demonstrates that urban economies are more innovative and productive than suburban economies because of the positive network externalities that urban land use make possible.

Put bluntly, an economy composed mainly of home building and big box stores - with a bit of low-value industrial assessment for warehousing and logistics - has no hope of being able to pay for the public cost of providing the infrastructure that makes it possible.

If we want affordable suburbs, we need an urban economic engine that generates enough surplus wealth to pay for it.

Comment edited by administrator Ryan on 2011-07-12 09:26:01

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