How to Fix Potholes Without Raising Taxes
Over the last number of years, I've participated in many discussions with City of Saskatoon administration, Councillors and the Mayor about the positive impact that redevelopment of older areas has on the city. We've talked about infill, densification, streetscaping, new art galleries, River Landing, bike lanes, parking, transit and literally have left no stone unturned.
I know what you're thinking. Infill? Densification? Most people only have vague understanding of what I'm talking about. And why should they? But on the cusp of a municipal election, I find it more important than ever to bring together core neighbourhoods and suburbs to understand the ripple effects of infill development on the entire city.
Why should the suburbs care about infill development?
I started with a simple question: "Why should a resident in Fairhaven (the 1970's suburb I grew up) care about a redevelopment project in Riversdale?" It's a tough question, and the answer surprised even me: it's because redevelopment in Riversdale can help pay to fix the potholes in Fairhaven. Let me explain.
I began by looking back over 5 projects that we've completed at Shift: the Fairbanks Lofts (which I worked on through Olstar Developments in 2005), The Two Twenty in 2011, Mosaic (in partnership with Quint Development in 2011), 228 20th St W in 2013 and Element Urban Village in 2015.
After completion, our commercial properties pay an average of 3 times the amount of property taxes they paid before redevelopment. Our residential properties? 7 times the property tax! To be exact, these projects combined now pay $113,815 MORE in taxes each and every year as a result of redevelopment in core neighbourhoods.
Infill development keeps taxes low
So, where does this money get spent? If you go to the City's Property Assessment and Tax Tool you can see exactly where your property taxes get spent: Police, Fire, Transportation, Roadway Improvements, Transit and Parks combined consume 69% of our property taxes.
The interesting thing is that all of Shift Development's projects utilize roads that are already built. They're on existing transit routes, and served by existing fire halls and police. The water and sewer systems are already in place. And the parks were built long ago.
I wouldn't go so far as to argue that there's zero demand on city services by our new projects, but it's pretty clear that of all the new tax revenue created, there's a surplus that can get redirected to other services. The city's 2015 Hemson Report on financing growth agrees with me, as does this interesting infographic based on Halifax.
Said another way, infill development is the low hanging fruit that grows the income from property taxes faster than growing our expenses to maintain infrastructure. This is so important! Let me say it again. Infill development means property taxes grow faster, expenses are kept low, which means everyone's taxes stay low.
What could we do with the extra property tax revenue from infill development?
Well, we could fix the potholes. Or replace aging sidewalks. Or do more frequent street sweeping. Or more snow clearing. These are all things that residents want. But they also DO NOT want higher taxes. Who would? So why not let higher density infill development projects pick up the tab on behalf of the other tax payers?
Let me paint the picture...
Here's one way to look at it. Let's pretend the City is an office building. I'll use our commercial workspace, The Two Twenty as an example. If I ran The Two Twenty the way the City currently treats development, I would only fill my building to 60% capacity. I'd leave 40% empty.
It makes it a lot harder to build a solid business when the building is only 60% full. I might have to raise rent to make it work. I might have to charge for extra services, like meeting rooms, to make ends meet. I certainly wouldn't have enough room to give back to the community, create extra services or have fun. Cut sponsorships to local arts organizations. And that studio space we donate to our artist in residence, Kevin Pee-ace? Gone. Friday beers. Well, that turns into BYOB.
In Saskatoon, that 40% vacancy appears as undeveloped potential (like surface parking lots) in areas that are fully served by existing infrastructure. We, the taxpayers of Saskatoon, already pay the bill of servicing it. But when they go undeveloped, those properties pay next to no taxes.
The opportunity cost is huge. Until we can add density by developing those spaces to their full potential, we'll never get to realize the benefits additional tax dollars could create.
Like supporting arts, sport and culture. Improving services. Investing in existing neighbourhoods as opposed to allowing them to fall into a state of disrepair.
City roadblocks to infill development
Now here's the part of the story that really troubles me: our City Administration is moving in a direction that is preventing infill development from happening. They don't necessarily realize it. It's not intentional. If you look at the City's Growth Plan, they claim to want to encourage infill development! But the vision hasn't trickled down to influence and change the small decisions made in numerous different departments everyday that can either make or break a development project.
For example, we recently had the opportunity to create a 4 unit condo project in a core neighbourhood and increase the density of that lot. With very little support or rationale, the City decided we would have to pave 386 feet of the back alley--despite the fact that the city standard for back alleys is gravel and the older neighbourhoods don't seem to suffer for it. That imposed a massive cost on the project and killed it. Instead of working with us to find solutions to add density, the City put up road blocks that ultimately prevented it. I've talked with a number of other developers, including ones working to provide affordable housing in core neighbourhoods. They face the same challenges.
Don't listen to me! Let the numbers do the talking
Since 2005, I've seen our project costs related to city infrastructure grow exponentially. Over the course of 4 projects since 2005, we've seen our costs of providing city infrastructure grow from $2,626/condo to $46,000/condo for a project we are currently considering.
At the same time, we've seen programs aimed at encouraging redevelopment (tax breaks, rebates) go from providing $15,584/condo down to zero. Given these rising costs, the prospective project we're looking at is dead in the water. It never even had a chance.
Now I know what you're thinking: why would the city invest $15,584/condo back in 2005? Because they understood that by investing in these projects and encouraging infill development, they could realize a 13% Return On Investment.
Are we ready to change our path and reap the rewards?
How do we fix our potholes without raising taxes? It's simple. Change the city's development path and aggressively pursue the low hanging fruit: get construction happening on downtown surface parking lots and level the playing field between suburban and infill development. And then we're poised to reap the financial rewards.
The City already gets it. Their Growth Plan states that 50% of all growth needs to happen within the core areas inside Circle Drive--a significant shift from the City's current trajectory. Their goals for increasing infill development make it clear they understand what's at stake. Now it's time to change actions, decisions, policies and behaviours in order to realize those goals.
The City’s Vacant Lot and Adaptive Reuse (VLAR) Program, which we have benefitted from at 228 20th St W and on Mosaic, is exactly the kind of incentive the City can implement to promote infill development. We need to think more in this direction and take cues from other cities across the country who are addressing similar issues in innovative ways.
Election time: why should you care?
Which mayoral candidate is going to boldly move forward and make the decisions, create policy and change behaviour in a way to keep our taxes low and grow our City in a smart, efficient way? So far, our leadership has not successfully shifted the City administration's path when it comes to infill development. I'll be asking questions of all the candidates to see who best understands how infill development can create significant benefits for all people in Saskatoon.