Expanding the tax base ... in an anti-growth community?

I hear it a lot from the city council candidates, especially the ones that lean conservative: instead of raising taxes, we need to expand the tax base

So, is that something a city council can actually do? For this blog post, I decided to do some *gasp* actual reporting and call College of St. Scholastica Economics Professor Tony Barrett to make sure I understood 1) what's meant by expanding the tax base (you're reading the scribblings of a journalism major here) and if the city council has any effect on changing it.

So, let's start with the easy part. Expanding the tax base can mean lots of things, Barrett said, from increasing real estate property values (council can't control, Barrett said), increasing spending and consumption at stores/restaurants (council can't control, Barrett said -- though through taxes/fees it controls how much residents have to spend), and, the most obvious, bringing in new business.

Can the council control that?

"Yes," said Barrett. "To the extent that the city council can help direct economic development."

And in the past, Barrett said, the focus of city councils to attract new businesses is "usually has to do with subsidies or TIFs."

A TIF is basically an area set up where the taxes created by new growth goes back toward the district. Barrett brought up Uniprise on Rice Lake Road as an example of a successful TIF district.

Are there other types of subsidies that the council can use?

"That's about it," he said. "When you're trying to figure out how to increase the tax base, there aren't a whole lot of options the council can control. There really aren't."

But, he noted, indirectly there's a lot they can control. If a business wants to expand or develop in the city, it often needs approval for zoning permits or variances from the council. He brought up the example of the Residence Inn by Cub Foods where zoning had to be approved by the council in order for the space to be developed.

"They can also work to eliminate steps and make it quicker" for businesses to develop, he added.

So let's say the council and city administration do succeed in expanding the tax base, does that mean our property taxes will go down? 

"Work with me on the math here," he said. "If we kept our spending constant, and we had a balanced budget, which we don't, but if we did, then if one source of tax revenues goes up, then we can reduce taxes from another place. But given that our city government is in a state of deficit, and balancing the budget's a challenge, that's probably pretty unlikely."

Barrett also noted another roadblock in expanding the tax base. In Duluth, he said, some people just don't want that to happen.

"Every community has certain groups that oppose growth; environmentalists who don't want to see trees cut down, or less green space... people who fear that growth is going to require higher taxes," he said. "Duluth has a strong element of people who just don't want Duluth to change. They like it the way it is. That's why they didn't move away to the Twin Cities, maybe get a better job. Duluth, of all the communities I've lived in, has the strongest anti-growth sentiment. And I think it's really our culture of people liking Duluth just the way it is."

Barrett explained that he grew up "an oil company kid" and has bounced around several cities. When he moved to Duluth, he said, "I was stunned by the number of people born and raised here. I never experienced that."

"If you go back to 1920s, and you have a risk taking kid, that kid is going to leave, the kids who are more risk-averse stay home," he continued. "They then are going to raise their kids, pass those values on. And after two or three generations, I think we have bred in ourselves a risk-averse culture and an anti-growth culture."

If that doesn't give you something to think about, I don't know what will...

Posted by: Stahl on 10/13/2009 at 10:33 AM | Comments (26) | Permalink

Tags: elections, taxes