It seems like the root problem is that the way property taxes are assessed doesn’t actually line up with how much demand a given development puts on the city for services/infrastructure. Property taxes are based on, “how much would someone else pay for this”, which isn’t the relevant metric from the city’s perspective, it should be, “approximately how expensive is this property to service year by year, including eventual replacement of infrastructure?”
If you did it that way, low density developments would pay their true costs, and would become more expensive to the ‘end user’ and thus less popular. And if they didn’t, well, they're paying their true costs anyway, so problem solved.
I've always found it weird and funny that in many parts of Europe taxes used to be based on the width of the front of houses. That's why you'll find extremely narrow houses in some older downtown areas. Cologne is an example of this.
As soon as the author started doing the math on street maintenance per lot, this medieval taxation system made instant sense to me (although I believe there also were taxes on windows...). Maybe something like this would be more beneficial. In general zoning that encourages density rather than discouraged it is definitely more in the interest of cities. Yet, most people get angry with me when I mention this.
Historic taxes like the window tax etc. were as much a result of the government having very limited access to economic data at the time as anything. You couldn't say how much someone was earning, but the size of their domicile was a pretty good indicator, and one they couldn't hide. Well, until the unexpected consequences, like fake windows, kicked in, anyway.
That's an interesting point! I just listened to an interview with the founder of Give Directly on the Rationally Speaking podcast where he explained that they used to look at houses to identify if someone should get the direct cash donations. So again proxy for wealth
An issue with the present system is that the status quo is virtually immutable. How cities can tax is rigidly constrained by state laws. Attempts to change those laws run into every possible obstacle, especially if it's perceived that someone is getting more goodies, and someone else less. Often, divided along urban / rural lines.
Now, it's not entirely rigid. In my state, each city sets its budget, then your tax bill is simply the budget weighted by the value of your property. Some kinds of extra expenditures such as bond issues can be approved through referendum. Others can be tacked onto the homeowners whose goodies are getting fixed, through special assessments. When the street in front of my house was rebuilt, I got a bill from the city for X amount based on Y feet of frontage.
It's a tiny bit complex because you also live in a county which is doing the same thing.
But the fundamental of assessing real estate and using it as the foundation of your tax bill is practically carved into stone. And it does have the advantage of being relatively straightforward to compute. In a town with a relatively brisk market, your assessment is going to be pretty close to what you paid for the house plus an inflation factor based on your neighborhood. And you know that your neighbor isn't somehow wriggling out of their tax obligation. That's overlooking the exceptions of course, but it captures the gist of it.
Partially, but only partially if you take this sentence literally:
"our town is essentially a corporation where the citizens are the investors and stakeholders.. We are a real estate development company that also provides services... with holdings totaling $1.29 billion,"
Apple is essentially the stakeholder in the Apple ecosystem. Some decisions are made as you suggest. Apple price phones and laptops such that costs are covered and profits are made.
Some decisions are "strategic." There's no direct revenue from their photo app, but a photo app helps sell phones and (more importantly) if Apple doesn't provide one then FB or Google will. A lot of Apple's decisions are like this.
Some, currently very important decisions are all about leveraging power to extract revenue. Apple charge Google $15bn to be safari's default search option. They apply similar logic to all activity on iphones. As in-app purchases emerge, subscriptions, digital goods, physical goods or any other category emerges... Apple study that market and determine how much they can charge. It has nothing to do with how much these cost apple to support.
IDK if this applies to Galesburg, but I think most towns/governments/municipalities have the power to generate a lot more revenue than they do... certainly during a building boom. What Apple would be doing in this position is (a) determining where real estate profits are being made (b) moving to claim the majority of those profits as revenue. I'm not saying they should do this, but the point of difference is worth noting.
Please, this idea that business is universally better at producing value than any other form of social organization has to die.
I'm pro business. I founded my first money-making venture when I was 4 years old (selling "art" to strangers on the street-- the business was quickly closed by the regulators-- Mom).
But business is best when the value created by an investment can be (mostly) captured by a single entity, and also generally when the ROI is short term.
Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education.
NOTING that the diffuse value created by government is often many orders of magnitude greater than the value which can be captured by a single organization.
Another example: value of the internet vs value of Google. Google is an insanely valuable organization, but a) it wouldn't exist without the internet, and b) the other FANGS also derive their value from the internet. So clearly the internet's value is many times greater than that of any internet-based company.
> Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education.
The charter school industry is the textbook example of this: what usually happens is that some school will have a good couple of years, and we’ll get some Slate piece about how they’ve discovered the secret of cost-effective education. Unfortunately, over time regression to the mean usually sets in and results start to look statistically similar to public school students of similar socioeconomic status while the few which maintain a performance edge inevitably turn out to have found a way to cherry-pick higher SES students and exclude the most expensive students because that’s what they’re incentivized to do.
I think they often skip the first step of even bothering to outperform after correcting for socioeconomic differences. If you can cherry-pick students, education can be both more effective and cheaper for those whom you decide to serve.
Often, yes, but sometimes it does happen because they got the most enthusiastic staff (not yet worn down) and attracted the most prepared poor kids with the most motivated parents (the ones who’ll take a chance on a new school pledging higher academic standards).
The one I really wish the United States was better at accounting for is assistance for students with special needs. That hammers public school budgets and also means that those kids are discouraged from trying a new school because that’ll reset their support plan even if the new school offers services.
That helps a lot but there are some challenges: e.g. you have therapists at a big school with lots of students and they’re all reasonably fully booked but a small charter needs 15% of a person in three different specialties.
Or worse, the charter school interview and disciplinary practices ensure that these kids are not admitted or are expelled and the small charter school then takes the full payment but needs 0% of a specialist.
I think the point is that, like a lot of cost problems, a relatively small proportion of users end up accounting for a relatively large share of costs. Just excluding those expensive users (implicitly or explicitly) is a ‘neat’ way to reduce costs and improve outcomes at a particular school. Unfortunately under a funding-follows-kids system that leaves a small population with $X in funding that costs $10X to serve. Maybe grouping all of those users provides enough economy of scale, but that’s not obvious, and sounds a bit like an asylum to boot.
> Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education.
But this ignores the fact that private schools do exist and are successful in many countries. The incentives are aligned in some cases - if the education is bad, the parents will take their kids to a different school, or never go to the bad school in the first place. If it's good, they'll be willing to pay higher fees.
I'm not sure what is meant by "unless every single student goes to work for the company, then the value they create is lost to them" - (some of) the value they create is captured by the school by charging fees. Isn't that the whole point of private education? This is the idea of markets in general: when a voluntary transaction takes place, both sides believe they benefit. If fees are $10,000, the parent will only pay this if they value the education at more than $10,000, although they may not think about it in these terms. Some parents will make gigantic sacrifices in the millions of dollars (in lost earning potential if nothing else) for their kids.
You are right that private schools don't always have an incentive to provide good education. The schools have that incentive if and only if the parents care about the child's education and have the ability to choose schools. In many cases they don't care, and the children are the innocent victims in that case. In many cases parents care, but cannot afford to move and the school effectively has a local monopoly on poor people forced to go there. No market system can really work with a monopoly.
Agreed that universal private education wouldn't be the best, but I think it's because the buyer of the service and the beneficiary are different, and there is an element of monopoly. I don't think it's because the schools lack a mechanism to capture value, they can just charge fees.
You're ignoring the possibility that the value of the private school is in network effects via filtering out poorer people. That would be beneficial to the students who attend, but neutral or even negative for society as a whole.
>>>>>>You are right that private schools don't always have an incentive to provide good education. The schools have that incentive if and only if the parents care about the child's education and have the ability to choose schools. In many cases they don't care, and the children are the innocent victims in that case.
You are missing out on a key feature of the free market.
I know someone that is very well off but is very specific when buying grocieries. This person will resort to going to a supermarket 10min farther away.
Supermarket chains know this and offer prices for such people. Now, this person may reflect 5% of the population. However, note the positive externality:
Thanks to this person, we dont have to worry about prices, yet we benefit from the penny pincher's efforts.
This is why a free market works in education. Parents may not care, but schools will cater to all parents including those that do and everyone benefits.
Of course, for this to work, there cannot be public (or private) monopolies
First, apologies, yes, I was clearly over-generalizing from what you wrote.
And to be very clear, I am addressing a deep pet peeve of mine, which is related to the topic but not necessarily a direct descendant.
Your post uses Apple as an example of how a company prioritizes cost/pricing decisions, and suggests that this, if applied to Galesburg, might allow them to fix their budget.
> What Apple would be doing in this position is (a) determining where real estate profits are being made (b) moving to claim the majority of those profits as revenue.
In the real world it's just the opposite. Apple has a monopoly on the Apple ecosystem, but nobody has a monopoly on land. Corporations will play one city against another to see which will give them the biggest subsidies and tax breaks.
Tying property tax to market value is a form of this, I think. The town doesn’t realize substantially more costs when property values go up, but wants to participate in the growth of ‘its’ property. So it structures its relationship with its users to capture some of the growth in value.
Unfortunately the leverage of a small town is relatively low, so they don’t have much power to capture their users growth
In my area all new housing developments have their own “metro tax district” that residents pay. It funds the infrastructure for their neighborhood. Some people don’t pay attention to it when budgeting for and buying a new house. I know that has caused many families to lose their homes. Usually those districts have a sunset built in though once they have covered the building costs.
If you did it that way, low density developments would pay their true costs, and would become more expensive to the ‘end user’ and thus less popular. And if they didn’t, well, they're paying their true costs anyway, so problem solved.