How about an “urban wealth fund”?

http://marginalrevolution.com/marginalrevolution/2017/07/urban-wealth-fund.html

by jseliger • 9 years ago

43 40 9 years ago

Better, IMO, is a relatively simple accounting change. Start charging rents for the real estate used by departments, and use the proceeds to fund those departments. It's a win-win: departments can more efficiently use their funding, and constituents get a better sense of the true costs of the services involved.

huac2• 9 years ago

Leasing space in subway stations to shops might detract from the “historic” character of the US’s barbarous public transit systems, but the revenues could fund needed improvements, such as ventilation, without the need for debt or higher passenger fares.

All the public transit systems I've rode in Europe and Asia have lots of infrastructure (especially stores) built into their train stations. I found them to be a welcome convenience rather than a distraction - and the many travelers in the stores indicates that others did too.

If private shops in the subway is the price we pay for efficient public transit, then please, may I have some more?

g00n• 9 years ago

Makes sense to have some shops, a quick bite on the way through vs having to go look for a shop when you get topside. Lowering costs, improving the facilities, and providing those quick resources while on the move would help. People might lose some of their excuses and start using the public transport systems more. Which feeds the businesses, which pay for the upgrades. Becomes a self-feeding circle. I like.

kasey_junk3• 9 years ago

Are they rare in the US? Every stop I use regularly (in Chicago) has shops in it. The only ones I can think of off the top of my head that don't are ones where there isn't space or where businesses have left on their own volition.

mertd• 9 years ago

Do they really have shops in them or are they accessible through a building that has shops?

ebiester• 9 years ago

NYC has them. They're in some stations in Boston, but many just don't have the space for it. IIRC, they're non-existant in the Bay Area.

wenc• 9 years ago

The majority of the L stops I use in Chicago don't have shops (mostly blue line, some red line and brown line).

Which ones do you use that has shops?

jlrbuellv• 9 years ago

I'm sure someone will show up with a counterexample, but DC doesn't have any that I've ever seen. I feel like they'd make a killing if they just stepped up their vending machine game to be more like Japan, though eating and drinking on the metro is supposed to be banned in DC, so I guess that would send mixed messages.

twobyfour• 9 years ago

NYC already has shops in some subway entrances, as well as newsstands on a tiny minority of subway platforms.

That said, I believe the shops in the entrances are actually leased from private landlords who constructed those entrances when building new highrises.

jaggederest• 9 years ago

This seems like a really bad idea for all sorts of perverse incentive reasons.

Primarily I'd guess related to the fact that the costs of running a city of a given size are basically entirely fixed costs, rather than being marginal. Especially when you add that most of the essential services a metro-area government provides are revenue negative.

Trying to make (for example) the health department "pay fair market rents" means you either have no health department or a drastically less effective one.

fwn2• 9 years ago

If the health department is not paying the actual price, someone else is paying the difference.

The department therefore does not get cheaper, it just looks cheaper on paper since the real costs are hidden. The reduced transparency is what stands in the way of creating democratic or market based decisions on the departments funding.

nostrademons• 9 years ago

"Democratic" and "market-based" decisions are two different things. You get a democratic decision when a majority of people believe that a good should be available to everyone at a price less than their share of the additional taxes needed. You get a market-based decision when an individual person believes that a good should be available to them, at a price less than the offering price.

Most public goods are public goods precisely because a majority of people will purchase them under the former conditions but not under the latter. There are a wide variety of public services which you personally would not be willing or able to purchase for the total cost of providing the good, but would happily go in on if the rest of a large population could be made to pay their fair share.

A number of die-hard libertarians believe this is theft, which it is in a way, but relatively few of them are willing to move to a remote location and live off the grid to avoid this. Perhaps this is because they know that the alternative is also theft (or worse), because the common defense and the legal system are also public goods, and so you have no way of enforcing your property rights without relying on taxpayer-funded systems.

michaelt• 9 years ago

  If the health department is not paying the actual
  price, someone else is paying the difference.

If the health department owns a city centre hospital outright (with no mortgage, and paying no rent) whom do you think is paying the difference?

Obviously there's an opportunity cost from not closing the hospital - close the hospital and you could save on the running costs /and/ sell the building! But "Government finances can be improved by cutting public services" isn't a new or surprising idea.

dsl• 9 years ago

...and have the option to borrow against or sell their shares if desperate for cash.

Do you want to fast track privatization of all public infrastructure for pennies on the dollar? Because that is how you get it.

mathattack3• 9 years ago

Could this be used to fund Universal Basic Income? A starter is looking at the wealth fund in Norway or citizen dividends in Alaska.

ThrustVectoring3• 9 years ago

Not really. Unless you get efficiency gains, all the income from the government charging itself rent gets eaten up as expenses for paying itself rent. Basically what it's doing is making imputed rent an explicit budget item, and then allowing financial ~stuff~ to be done with those budget items explicitly (say, letting a department save money by using real estate more efficiently).

mathattack3• 9 years ago

My interpretation was they charge other people rent for the services, no?

josefwasinski• 9 years ago

In London, Transport For London (TFL) is the largest land holder, and operates all public transport (trains, underground, buses, taxis) and only 23% of its funding comes from Government, the rest are from things like tickets, licenses, fees, rents etc. The government is pushing for them to become self-funded by 2018.

So there is an example of how something like this could work - if you have the assets to leverage. I think the obvious risks can be easily mitigated with safe-guards around selling assets and debt limits.

TheCoelacanth• 9 years ago

I think public transportation agencies owning land is a model that actually makes a lot of sense if you think about it.

A large portion of the land's value comes from its proximity to public transportation service, so it makes sense that the public transportation service would be directly funded by collecting rent on the land value that it created.

pm215• 9 years ago

This is somewhat similar to what the Metropolitan line did in the first third of the 20th century -- https://en.wikipedia.org/wiki/Metro-land -- though in that case I think they mostly sold off houses and building plots on the estates to gain an immediate capital return on the increased land value, rather than retaining the land and collecting rents.

crdoconnor2• 9 years ago

That's what the train companies do in Japan. They sell tickets virtually at cost and make their profits by building malls and shops next door to their stations and leasing the space out.

In the UK surplus value from land next to public transport is usually captured by private landlords while train tickets have gone up and up and up.

lmm2• 9 years ago

The part that's missing is that much of the market value of property in the city comes from having these public buildings in place. Libraries, hospitals, transit stations and so on could be funded entirely out of the value they add to nearby homes and business land - it's just that value can't be captured so easily, because ownership is diversified.

A land/property value tax that was applied equally to public and private land would achieve the article's goals but also ensure that government was properly incentivised to produce value for those in the city, by rewarding them for property value increases with increased tax revenue.

jnordwick• 9 years ago

More likely they would just reward themselves by making a hand wavy argument about how value isn't flowing to them like it should be in their idea of a rational market and increase the tax.

A land value tax would also put the onerous cost on citizens nearby and make rents and property cost even more. Then you would probably see a stream of subsides come in to support low income renters.

It seems like it is a much more intrusive government solution with a lot of downside.

lmm2• 9 years ago

More likely they would just reward themselves by making a hand wavy argument about how value isn't flowing to them like it should be in their idea of a rational market and increase the tax.

Well, no tax system is immune to people arbitrarily raising the tax rate.

A land value tax would also put the onerous cost on citizens nearby

It means the costs are shared in proportion to the benefits rather than everyone in the city paying for improvements that only benefit one area. (And if the city builds a prison or incinerator in your backyard that harms your property value, then at least it lowers your taxes).

make rents and property cost even more

It should lower the cost of property (since property now comes with a tax liability) and encourage putting land to productive use (i.e. building houses rather than "land-banking") or selling it to people who can use it, which would lower rents. What it penalizes is using property as an investment.

(Land value tax is not just some random idea I came up with; it was advocated by Adam Smith, Ricardo and others. Look at the writings of Henry George, and look at SF property prices today and tell me he was wrong: gains in economic productivity are captured by the rentiers who own land rather than going to those who produced them).

crdoconnor2• 9 years ago

A land value tax would also put the onerous cost on citizens nearby and make rents and property cost even more.

It would drag down property values because making owning something a liability strangely enough makes people want to own it less.

Rents would probably go down as land that was previously hoarded unproductively would hit the market.

Added to which city budgets would start overflowing with money which could be used to build additional housing for low income renters on land that has been yielded by hoarders.

Land owners - especially people with generations of wealth - would go nuts, since their license to tax people for using their land will have been revoked.

JumpCrisscross• 9 years ago

I live in New York City's Flatiron district [1], adjacent to Chelsea [2]. It's a wealthy neighbourhood with vibrant retail activity.

One day, over brunch with a friend in real estate, we did some back-of-the-envelope math on one of the neighbourhood's housing projects. If the city (or, in the case of Penn South, the coöperative) simply sold the ground floor of housing to retailers, they'd generate enough cash to build an entirely new structure somewhere uptown.

This never happens because nobody is politically incentivised to do it.

[1] https://en.m.wikipedia.org/wiki/Flatiron_District

[2] https://en.m.wikipedia.org/wiki/Chelsea,_Manhattan

bilbo0s• 9 years ago

To be fair... what you described is not what's being suggested by the "Urban Wealth Fund".

What the "Urban Wealth Fund" idea would do is essentially have that property put into a pool of property with ... for instance ... the State's property. And then give out shares based on the value of the property the city put in.

I can understand why someone holding real estate would not want to do that. Especially if the city is putting in something in Flatiron... that may not be very valuable in price, but can be leased for FAR more than any of the property that the state might put in. (Even though the state's property may be more valuable in price, as some of it includes Beaux Arts buildings, but can't be leased for as much.)

It's far smarter for the city to just go it alone in that instance. (Well, I guess "smarter" is too loaded of a word, so maybe I should just say that the city would derive far more profit from just leasing the space on its own.)

And that's just the single instance you mention. It gets even more complex when you talk about the city kicking in an asset like... say ... Central Park.

How about an “urban wealth fund”?

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