In a discussion over the past week stemming from a post about regional commuter rail between New Haven and Springfield, commenter "NoPolitician" pointed out what he called a "glaring error" in the Pioneer Valley Planning Commission‘s December briefing document (PDF) on the matter. From his comment:
The study says that the property values near the station in Springfield would go up by 6.7 to 7.5 percent, resulting in almost $1 million more in property tax revenue. Although that seems to make common sense, the Proposition 2.5 law governs the increase in property tax so that increases in value simply mandate a decrease in the overall tax rate.
Springfield’s Chief Development Officer David Panagore commented:
While Prop 2.5 would limit the ability for immediate tax revenue increases in value of existing properties, our plans would be to spur new development, which is counted as new growth under the rules of Prop 2.5. The full value of the new development would be added to the tax base in addition to the 2.5 percent increase, a good deal. This new construction will be key.
I brought the matter to Timothy Brennan, executive director of the PVPC, and Paul Foster, the senior planner at PVPC who compiled the briefing document in question, to ask if the figure is an error as "NoPolitician" indicates, or if there are shades to this math we might better understand.
Brennan called the comment thoughtful and wanted to look into it further, saying that he would consult with his colleagues. His initial reaction was that Proposition 2.5 "applies to what a city or town can legally realize in terms of annual property tax increase, as differentiated from increased property values spurred by an external factor such as the introduction of a commuter rail link."
"Moreover," Brennan continued, "as we try to suggest in our briefing report, we anticipate that the commuter link would spur new developments in the City from which the City would in turn be able to realize new property tax income."
Late yesterday, Foster weighed in as well. From his comment:
NoPolitician’s comment is well-taken. If the City of Springfield’s property tax revenue, apart from new growth, increases by the top amount of 2.5 percent every year in perpetuity (as a result of either higher values or higher rates), any increase in property values associated with the commuter rail service would simply be a component of the annual 2.5 percent increase.
This does not mean our calculations are inaccurate. The predicted $1 million in increased property taxes actually amounts to 1.1 percent of Springfield’s FY07 residential property tax levy, so it could be a component of an overall 2.5 percent increase.
Nevertheless, NoPolitician is correct that state law limits the possible impact of commuter rail on property tax revenues when it comes to existing value.
The really important information from that particular section of the report is that commuter rail service in other places has increased the value of property that is proximate to stations and there is little doubt that rising property values will be good for Springfield, whether or not we are able to fully realize the possible new tax revenue.
Just another note, the Rappaport Institute study (PDF) is interesting in suggesting that MBTA commuter rail service has not had an impact. One of the studies from which the 6.7 percent number was taken was of MBTA stations. This study suggested that entire communities with a commuter rail station experienced a 6.7 percent boost in residential property values when compared to communities without stations.
In one sense, our estimate was very conservative, because we applied the 6.7 percent only to housing within a 1/2 mile of the station rather than to the entire City of Springfield.
Personally, I’m weary of conservative estimates. Let’s go all out. Blow their socks off, planners! Radical change calls for radical, overheated estimates!
Speaking of planners, Foster, who lives in Springfield with his wife and two children, is leaving PVPC this month to start a job as a policy analyst at the Massachusetts Budget and Policy Center located in Boston. The MBPC "provides independent research and analysis of state budget and tax policies, as well as economic issues, that affect low- and moderate-income people in Massachusetts." Foster will surely be missed at the cutting edge of regional planning issues, but he says he’s excited to jump into the state-wide policy fray. He’ll be commuting a couple days a week, which will give him a certain vantage point on sustainble mass transit issues, in a job with perhaps a bit of leverage to influence change for the better, as well.
