 e-Mail this page to a Friend!
Regional Tax-Base Sharing
The drive for increased property tax revenue, and in some cases sales tax revenue, can lead local governments to make land use decisions that conflict with other planning and economic development goals. A community might reject much needed affordable housing in favor of expensive homes, for example, or forego office buildings with high-paying jobs in favor of big box retail stores with low-wage jobs, in anticipation of generating more tax revenue with a comparatively smaller burden on public services.
The quest for revenue-generating development creates competition among neighboring jurisdictions, which may engage in bidding wars to offer developers the biggest tax breaks or least stringent environmental regulations. From a regional perspective, providing subsidies for businesses that have already decided to locate in the area is unnecessary and even destructive. A big box store, for example, will cannibalize sales from existing local businesses and shopping centers and, for the region as a whole, there will be no net gain in economic activity.
In metro areas, the "fiscalization of land use" or "cash box zoning," as this problem is known, fosters sprawl and polarization. Some jurisdictions are winners; others are losers. New suburbs on the urban fringe with extensive new commercial development and relatively affluent homes will have high quality public services with a relatively low tax rate. The central city and older suburbs, with declining commercial centers and lower-income families, will be forced to impose higher tax rates and deliver poorer quality services. This disparity tends to snowball and engender a cycle of sprawl as more middle-income families flee to the suburban fringe.
Regional tax-base sharing offers one way to alleviate this problem. Under tax-base sharing, all of the municipalities within a metropolitan area agree to share tax proceeds from new development. This eliminates interregional competition; facilitates other planning goals such as preserving open space or maintaining a vibrant downtown; encourages suburbs and central cities to cooperate on regional economic development goals; and leads to a more equitable distribution of tax burdens and public services.
State legislation is generally required to implement regional tax-base sharing. Two regions of the U.S. have adopted this approach: the Twin Cities metropolitan area in Minnesota and the Hackensack Meadowlands area in New Jersey. The California state legislature is currently considering a bill that would establish tax base sharing in the Sacramento metro area.
(Note: Some states have adopted tax-base sharing for public school funding, which reduces interregional competition for commercial development as well as disparities in education spending between poor and rich districts. See our Equity in School Funding Section for more.)
RULES:
Minnesota's Metropolitan Revenue Distribution - MN Statutes ยง473F
Regional tax-base sharing was implemented in the seven-county Twin Cities metro in 1971. Each community contributes 40 percent of the growth of its commercial and industrial property tax base after 1971 to a regional pool. The funds are redistributed based on a formula that takes into account a jurisdiction's population and fiscal capacity (defined as per capita real property valuation).
According to former Minnesota State Representative Myron Orfield, an expert on regional revenue-sharing, the system has reduced tax-base disparities among Twin Cities communities from 50:1 to roughly 12:1. The system has not eliminated disparities, because 60 percent of any new revenue from commercial development remains in the host community. Only about 20 percent of the region's total tax-base is shared.
Sacramento's Proposed Tax-Base Sharing Legislation - 2002
Sponsored by Assemblyman Darrell Steinberg of Sacramento, AB 680 would establish a system for sharing sales tax revenue among the 18 municipalities in the Sacramento metropolitan region. Because of limitations on how much revenue cities can raise through property taxes, California cities are especially dependent on sales taxes.
As initially drafted, Steinberg's bill called for full revenue-sharing, where all of the sales tax revenue in the region would be pooled and redistributed based on each community's population. The bill has since been modified to enhance its chances of passing. As currently structured, the bill would pool only sales tax revenue generated from new development. One-third of the pooled revenue would be redistributed to the cities based on population. Another third would stay in the city where the development is located. The final third would also go to the host city provided it meets certain "smart growth" goals, including affordable housing creation, open space preservation, and infill development.
More:
|
