The Strong Towns Podcast

Land Value Tax with Joe Minicozzi

As an engineer, I worked for cities doing public improvement projects; building and maintaining streets, sewer pipes, water mains, and drainage systems. One project opened my eyes to a crazy world of perverse incentives I didn’t know existed.

It was a rehabilitation project in a struggling neighborhood, the kind of place filled with rental properties badly in need of some attention. The project I was working on would not only replace the underground utilities; it would fix the potholed street and broken sidewalks, restoring the streetscape to something seen only in the more affluent parts of town.

This work was being paid for mostly by a grant with some city funds thrown in, so the property owners weren’t expected to pay anything directly. I went to the public hearing to present the plans, expecting to be embraced as a hero. That is not what happened.

First, the “public” at this hearing was not the people I was expecting: the people who lived in the neighborhood. The neighborhood’s residents were almost all renters and, since the official public notice was mailed to the property owners, the renters didn’t even know.

The owners of the properties did know, and they were the ones out in force. They were mad. With each slide in my presentation, the tension in the room only grew. My cheerfulness about what we were doing for them only made them more irritated. Finally, courtesy drained from the room.

“We don’t want this.”

The ice was broken and now they all started to speak in succession. Whose idea was this? Why was this necessary? Did we have to do this project? The tone was accusatory where it wasn’t defensive.

It took some time for me to understand their central concern: they were worried this project would raise their taxes. In the narrow margins of the low-end rental business, they were worried that improving the street would improve their property values, and improved property values would mean increased taxes. They preferred the run-down street and the cracked sidewalks.

How Taxes Shape Human Behavior

My friend Joe Minicozzi, the founding principal of the consulting firm Urban3, is one of the most brilliant people I know when it comes to analyzing the consequences of tax policy for our cities. He frequently observes in his talks that what we tax—and what we don’t tax—has consequences. To recognize this, he says, we need only look at the way taxes on cigarettes are used to discourage smoking. They are tremendously effective at doing so. If you want less of something, tax it.

So what message do cities send when they institute property taxes? By taxing the value of the buildings on a piece of land—the “improvements”—and not just the land itself, we indicate that we don’t want people to improve their land. We’re going to punish them with higher taxes for doing so.

The property owners in that struggling neighborhood I described weren’t short-sighted or irrational. They had a working business model: buy property in a poor neighborhood, do minimal maintenance, charge whatever rent they could get, and enjoy the benefits of low taxes. The project I was proposing—by improving the value of the properties in that neighborhood—was a threat to their business model.

A Better Alternative: The Land Value Tax

It doesn’t have to be this way. A few weeks ago, we at Strong Towns published an in-depth series about an alternative to taxing—and thus discouraging—property improvements. That alternative is a land value tax.

Under a land tax, you are taxed only on the value of the location you own. You thus have an incentive to improve that property and get the most out of your real estate. And your incentives are aligned with those of the community as a whole, which needs to get a return on its investment in the public infrastructure—streets, sidewalks, pipes, and so on—that serves your land and makes it developable.

I invited Joe Minicozzi to record a podcast with me on land value taxation and related issues. The genius of Joe and Urban3 is to look at tax revenue geospatially: they are able to map out a city’s expenses and sources of revenue and tell them, “Here’s where your money is coming from. Here’s where you’re bleeding it.” We can then have a conversation with eyes open about how to bring private incentives more into line with what we say we, as a community, want to accomplish—strong, financially solvent cities and neighborhoods.

Have a listen to our latest episode of the Strong Towns podcast to hear more from Joe, including:

• How cities can recoup their investment in public amenities like access to lakes for recreation

• How big-box chains operate like urban slumlords when it comes to property tax

• What Pittsburgh did better than other Rust Belt cities during the late-20th century wave of deindustrialization

• How we reconcile the moral questions around taxation—who pays their fair share?—with the cold hard math of local government solvency

Memphis’s U-Turn: Interview with Doug McGowen

The strongest and most resilient communities, just as with people, are often those that have endured unusual hardship and come out stronger for it. There’s a clarity of focus and purpose that you develop because you have to. You don’t have the luxury not to be resourceful or not to define and fight for the future you want.

Cities and towns that have struggled tend to develop, and prize, a culture of what Doug McGowen calls “grit and grind.” Memphis, Tennessee certainly has that culture.

McGowen is the Chief Operating Officer for the City of Memphis. Coming out of a long military career, he and his family weighed moving to any number of places, but McGowen’s kids said, unanimously, “We love it here,” so they stayed in Memphis. McGowen ended up on the Mayor’s innovation team and eventually as the city’s COO.

Memphis is a city that’s been through some hard times. It has struggled with, and continues to struggle with, poverty and segregation. For decades, Memphis saw its historic core neighborhoods suffer blight and abandonment, as people and wealth fled to the suburbs. The city made a number of bad investments over the years out of a desperate desire to chase economic growth. They were far from alone in any of this. Nearly every place in America made the same set of mistakes in the post-WWII era, but in some ways, Memphis was a poster child.

But now, as a conversation with McGowen makes clear, Memphis is becoming a trailblazer when it comes to recognizing the fallout of the suburban experiment and embarking on a better path.

And this shouldn’t be surprising. The places that went all-in and suffered the most might just be the places that can show us a better way. They’re ahead of the rest of us because they have to be. The stakes of the Strong Towns mission—a nation of financially resilient communities that make thoughtful, incremental investments in their core strengths—are as evident in Memphis as in any city in America. And so is the potential.

A 180-Degree Turn

When asked what Memphis is doing differently than it used to, McGowen describes a remarkable 180° turn in regard to the way city leaders address growth and development. For decades, Memphis annexed territory with zeal, doubling the city’s land area even as its population decreased. It was believed that this was the way to avoid a downward spiral of inner-city decline: take in prosperous suburban areas. Memphis adopted an explicit policy of extending sewer service beyond the edges of the city to juice growth.

And so, says McGowen, “We got exactly what we asked for. We got a heck of a lot of suburban growth. And as a result, we’re a city that’s probably too big—we’ve outgrown our ability to serve anyone effectively.”

Instead of producing prosperity, Memphis’s approach accelerated inner-city decline. The city found its sources of tax revenue spread ever thinner, while the cost of providing essential services like sewers and police protection escalated. Memphis ballooned to a city of 650,000 that had to provide services to a land area of 340 square miles—as large as New York City’s five boroughs, and comparatively emptier than famously-empty Detroit.

At a certain point, to make matters worse, the city found itself essentially dependent on continued annexations to balance its budget: each addition of territory provided a short-term infusion of revenue in exchange for long-term liabilities. It’s as clear a case as any of what Strong Towns has labeled the Growth Ponzi Scheme.

In the past few years, though, the city’s leadership has undergone a paradigm shift. According to McGowen, this was driven by a clear-eyed look at the data on the costs and benefits of annexation and decentralized development. But it also required a willingness on the part of the ones with the data—the city’s elected officials and staff—to have open, tough conversations with the citizenry. Says McGowen:

“You’re threading the needle. But the data pointed us in the right direction. If we did not have good data that showed us that this was the right thing to do, we wouldn’t be able to have the conversation as richly as we had.”

McGowen and his staff were able to present the tough fiscal realities about the near-impossibility of providing the services people expect and desire—transit, police protection, parks—to twice as large an area without a corresponding increase in revenue.

“It’s pretty stark. It does hit you in the face about what you have done by [adopting] this pattern of growth.”

Memphis recently completed a new comprehensive plan: Memphis 3.0. Unlike the previous one, which emphasized horizontal expansion, this one is all about reinvestment in Memphis’s existing neighborhoods. The city has even “de-annexed” some outlying territory.

The plan was the product of an intense amount of community involvement—15,000 Memphians attended the planning meetings—and it was members of the community that ultimately identified the “anchors” around which neighborhood investment would be focused. With this “anchor” strategy, Memphis’s leaders recognized that spreading investment evenly across the entire city would only dilute its impact. They needed to be tactical about where there were centers of economic and cultural activity could build on and seek to bolster.

If you want to know what the beginnings of a shift to a Strong Towns approach actually look like on the ground, here’s somewhere to look. Memphis is doing it. You start with your neighborhoods. Start with your existing residents and their concerns and needs. Make incremental investments in th estability and prosperity of these places. And base it all on an unflinching look at the data, including whatever uncomfortable conclusions it leads to.

Ask Strong Towns #8: April 2019

Here's the audio from our April 2019 edition of Ask Strong Towns, a bimonthly webcast in which you can ask anything you want of our founder and president, Chuck Marohn, and our communications director, Kea Wilson.

Questions answered:

2:05: Strong Towns regularly advocates for street trees. The arguments made make sense, but I have yet to see my biggest concern about street trees addressed. Trees roots can wreak havoc on water and wastewater lines, creating huge repair costs. Are there strategies to plant new street trees while protecting the underground utility infrastructure?

9:55: How does a land value tax work in predominantly rural areas? How would it affect the taxing of agricultural land?

19:45: In our city, we are dusting off a tool we had on paper but have not used much in practice: our Land Bank. What does a Strong Towns approach to a Land Bank look like?

28:00: What is the definition of a vibrant Downtown and why is it important to have one?

38:50: Does the higher density of the traditional development pattern require urban infrastructure (water/sewer lines, complete streets networks, etc.) to function? If so, how does a rural town/area incrementally grow in the traditional development pattern without building pricey infrastructure first?

What to Expect From Strong Towns: the Book

The wait is over. Chuck Marohn, Strong Towns’s founder and president, is back with an all-new episode of the Strong Towns Podcast!

Thank you to all our listeners who were patient with us during our several-month hiatus. We did share a Greatest Hits series featuring eleven of the best Strong Towns Podcast episodes from the early days—before most of our current listeners were with us—and if you didn’t have a chance to give those a listen, we definitely recommend checking them out. You can find them in the Strong Towns Podcast feed wherever you get your podcasts (iTunes, etc).

If you’re a regular listener, you’ve probably caught on by now as to why Chuck took some time off from recording new podcasts. Since last fall, he’s been furiously writing his first real, honest-to-goodness book: Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity. The book is available for pre-order now, and will be available in stores and online October 1st.

We’ve even got some goodies available for those who pre-order. Pre-order details and instructions are here, so go reserve your copy!

Yes, we’ve self-published a few Strong Towns essay collections before, but this is an all-new, full-length work that aims to capture the heart of the Strong Towns message and distill it for a much larger audience than we’ve ever been able to reach before. And we could not be more excited.

Check out this brand new podcast to get the full scoop from Chuck, including a number of details that haven’t been shared yet anywhere else. This episode discusses:

• Why Chuck started writing a book years ago, and why he didn’t finish it.

• How this one is different. And why he thinks this time, the time was right.

• Who this is for, and what we hope readers will get out of it.

• How we hope the Strong Towns conversation can be your “antidote” to the crazy, overheated rhetoric of national politics as another election season ramps up.

• A full breakdown of what all ten chapters are about.

Maybe most exciting of all, Chuck will give you a little sneak peek of what we have planned for the Strong America Tour, kicking off in fall 2019. This national tour will take not just the book but the Strong Towns movement on the road in a way we’ve never done before. Chuck will be:

• Presenting a brand new presentation, including some “Choose Your Own Adventure” content so audiences can vote on what they want to hear that’s most relevant to their community;

• Spotlighting local efforts to build stronger towns, and helping local advocates connect with each other;

• Signing copies of Strong Towns, of course; and last but not least,

• documenting the tour, with the help of Strong Towns staff and volunteers, in a special Strong America e-book to be released afterwards!

We’re so excited about this. And glad to have you on board the movement to build a nation of Strong Towns.

Greatest Hits #11: Economic Gardening With Chris Gibbons (2013)

If you’re looking for an example of the Strong Towns mindset applied to local economic development, you couldn’t do much better than Economic Gardening. It’s an approach to growing a city’s job base and economic prosperity that doesn’t involve a dollar of subsidy to a large, outside corporation—and produces better results than those subsidy programs, too.

Economic Gardening predates the Strong Towns movement by 20 years, but you can think of it as the economic-development analogue to our Neighborhoods First approach to public infrastructure: a program that seeks to make small, high-returning investments instead of big silver-bullet gambles, by capitalizing on a community’s existing assets and latent potential.

The approach has its origins in the Denver suburb of Littleton, Colorado, in 1988. Martin Marietta, a predecessor of Lockheed Martin, was Littleton’s dominant employer in the 1980s. The company was in the war business—it’s a major military contractor. As the Cold War wound to an end, the U.S. found itself, as a country, divesting from the war business, and in 1988, Martin Marietta laid off thousands of its Colorado employees.

Littleton’s City Council tasked economic developer Chris Gibbons with a challenge: find local businesses that already exist that want to grow. Figure out what these startups’ needs are and how we can help them. Provide them with technical support, access to databases and analytical tools that can help them find customers, resources to help them manage the challenges of rapid growth. We’re going to grow our own jobs locally, instead of trying to import them from outside.

Gibbons’s efforts were phenomenally successful, and sparked a whole alternative movement in economic development: Economic Gardening. Numerous cities and states now have Economic Gardening programs, and Gibbons and the Edward Lowe Foundation continue to develop and promote the concept through the National Center for Economic Gardening.

In 2013, we had Chris Gibbons on the Strong Towns Podcast as a guest to explain what economic gardening is, what kinds of companies it can benefit, and the many successes the approach has enjoyed. It’s one of our most popular podcast episodes of all time, and so we’re featuring it as the final entry in our Strong Towns Podcast Greatest Hits series.

Yes, we said “final.” Next week—Monday, April 22nd—Charles Marohn will be back from hiatus with a brand new episode of the Strong Towns Podcast. And we’ll keep rolling out new episodes on Mondays after that, so keep us in your iTunes feed or wherever you get your podcasts, and keep doing what you can to build strong towns.

Strongest Town Contest: Championship Round

Here's the audio from the championship round of our Strongest Town Contest. We invited representatives of our final two contestants—Quint Studer of Pensacola, FL, and Nancy Pearson of Portsmouth, NH—to join us for a live Q&A webcast and each make the case for why their city should be voted America's Strongest Town.

Now it's your turn to vote—visit www.strongtowns.org/strongesttown before noon CDT on Thursday 4/11/19 to cast your vote for either Portsmouth or Pensacola!

Strongest Town Semifinals: Portsmouth, New Hampshire

Nancy Pearson shares her vision for downtown and the steps the city is taking to get there, how Portsmouth capitalizes on its port, and answers a question from a Strong Towns member about how Portsmouth prepares for potentially catastrophic floods.

Strongest Town Semifinals: Guthrie, Oklahoma

Justin Fortney shares plans for a traffic calming project to better connect neighborhoods to Guthrie’s downtown, how the city engages its residents, and answers a question from a Strong Towns member about how Guthrie listens and responds to the needs of its residents.

Strongest Town Semifinals: Pensacola, Florida

Quint Studer discusses the current projects Pensacola is working on to make the best use of its existing infrastructure, how Pensacola encourages local business creation, and answers a question from a Strong Towns member about how Pensacola encourages infill development.

Strongest Town Semifinals: Safety Harbor, Florida

James Fogarty discusses the current projects Safety Harbor is working on towards becoming more financially resilient, what steps the local leaders are taking to foster Safety Harbor's walkable downtown, and answers a question from a Strong Towns member about how Safety Harbor plans to expand its core areas.