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Mixed-Use Downtown Development Puts Standard Malls’ Tax Yield to Shame

Mary Newsom / Jul 09 2010

For Release Sunday, July 11, 2010

Mary NewsomAs local politicians across the country get scorched by voter anger over recession-induced budget cuts — laying off teachers, closing schools and libraries and slashing services — perhaps they’ll be more receptive than usual to some powerful and surprising tax revenue numbers.

So what follows is about fiscal prudence as much as it is about smart city planning.

Conventional wisdom, of course, says that to prop up the property tax base, a high-end shopping mall is just the ticket. But when Sarasota County, Fla., looked at where the county government gets the biggest bang for its property tax buck, it found some numbers that may surprise a lot of people.

Sarasota County Director of Smart Growth Peter Katz, speaking to a meeting of Citistates Associates in Minnesota late last month, described a recent analysis of the county’s property tax revenue per acre. He pointed first to residential areas. Not surprisingly, when you work the numbers on a per-acre basis, residential property inside the county’s municipalities offered the biggest revenue per acre — a little more than $8,200 per acre for single family houses within the city of Sarasota. This makes sense, as in-town land values tend to be higher.

Next, Katz showed the results from retail properties. Here comes surprise No. 1.: Big box stores such as WalMart and Sam’s Club, when analyzed for county property tax revenue per acre, produce barely more than a single family house; maybe $150 to $200 more a year, Katz said. (Think of all those acres of parking lots.) “That hardly seems worth all the heat that elected officials take when they approve such development,” he noted in a related, written presentation.

Among retail properties, the biggest per-acre property tax revenue in his county, almost $22,000 per acre, comes from Southgate Mall, the county’s highest-end commercial property with Macy’s, Dillards and Saks Fifth Avenue department stores. That’s not so surprising.

But here’s the shocker: On a horizontal bar chart Katz showed, you see that zooming to the far right side, outpacing all the retail offerings, even the regional shopping mall, is the revenue from a high-rise mixed-use project in downtown Sarasota. It sits on less than an acre and contributes a hefty $800,000 in tax per acre. (Add in city property taxes and it’s $1.2 million.) “It takes a lot of WalMarts to equal the contribution of that one mixed-use building,” Katz noted.

Indeed, that three-quarters of an acre of in-town urban-style (14- to 16-story) development is worth more property tax revenue than a combination of the 21-acre WalMart Supercenter and the 32-acre Southgate Mall.

Even a mid rise (up to about seven stories) mixed use building brings in $560,000, and the low rise (up to three stories with residential over retail) brings in over $70,000 per acre — more than three times the return of Southgate Mall.

Katz quipped, “From a fiscal standpoint, this really puts hair on your chest.”

But Katz and the group that worked with him on the tax analysis, Public Interest Projects, Inc., in Asheville (, N.C., went further than just the revenue analysis. It looked at the payback time, in tax revenue, for the infrastructure costs of various types of residential developments. The payback time for a mixed-use condominium building in the heart of downtown was three years. Want to guess the payback time for the residential portion of a multi-use development out at a highway interchange? It was a whopping 42 years.

Nothing involving tax revenues is simple, of course. For instance, what about sales taxes? Obviously that big WalMart and the shopping mall bring in more revenue than just property taxes. But Joe Minicozzi of Public Interest Projects notes, “Generally speaking, there isn’t a heck of a lot of return to the municipality with sales tax — at least compared to the return from property tax.”

And Katz noted that while sales tax revenue can be important to the specific city or town that snags a big retail development, “At the county level such ‘fiscal zoning’ makes little sense.”

Yes, Sarasota County could probably “steal” some commercial development from neighbor counties. “But we’d ultimately do far better to create value through property taxes in smart growth ‘districts,'” he said:

“With a receptive mindset among citizens and elected officials, such places should be infinitely replicable; doing so may actually be easier than trying to squeeze a little more spending out of our citizens’ mostly fixed disposable income.”

Potential tax revenue shouldn’t be the only factor in determining appropriate development for any community, of course — especially not flawed assumptions about which type of development brings in the healthiest tax revenue. And as Katz pointed out, there’s a limited market in most communities for intensive, mixed use development, even if NIMBY opposition were to evaporate, which isn’t likely.

Still, evidence is piling up of the benefits of compact, in-town development compared with auto-centric greenfield development. With a smaller carbon footprint, it’s kinder on the environment. It’s kinder on residents’ waistlines, too, as they’re likely to walk more and drive less. And now there’s evidence it’s kinder to government coffers, as well. And that’s an attribute worth some serious attention.

Peter Katz is Director, Smart Growth/Urban Planning for Sarasota County, Florida, amd was founding executive director of the Congress for the New Urbanism.  For visuals on the Sarasota County study cited in the article, click here.

Mary Newsom is an associate editor and opinion writer at the Charlotte Observer, where she writes a weekly column, writes The Naked City blog at, and Tweets @marynewsom. columns are not copyrighted and may be reproduced in print or electronically; please show authorship, credit and send an electronic copy of usage to


  1. Michael Koetting
    Posted July 10, 2010 at 8:09 am | Permalink

    This is a curious article: looking at revenue without looking at costs. To the extent that denser residential structures have more people, they also generate the demand for more services–schools, hospitals, parks, transportation, etc. Considering revenue on a per acre basis has some use, but it would seem one needs to match that with the corresponding expenditures. Most investments have a good return before costs….

  2. Posted July 10, 2010 at 3:41 pm | Permalink

    This article makes sense, as higher density results in higher land values and coreesponding property taxes. The flaw in the reasoning, however, is that if fails to take into account the net benefits per acre (revenues less cost of services). It is well known that residential development uses much more in the way of services than commercial development. Residential use requires schools, police, social services, etc. that put a greater annual cost burden on the municipality. So I think it is important to look at NET economic benefit and draw conclusions from that.

  3. Joseph Minicozzi
    Posted July 12, 2010 at 12:30 pm | Permalink

    Micahel, that is a great point, but there are other things to consider in that assumption, and we did consider costs as well. That is the basis of the original study.

    Regarding your assumption on cost, from a physical standpoint, the infrastructure (pipes, asphalt, concrete, wires) hit more people with less actual infrastructure when you consider density. As an extreme example, think of a mile of pipe in Manhattan vs. a mile of pipe in suburban Tysons Corners. The diameters may be different, but from a service aspect, you hit more people per mile with the same trench.

    “Demand” is just part of the issue, the bigger ticket item is the delivery system of that demand (ie: more land, area, lane miles, etc. to reach the same level of service) vs. the extra cost in burying a wider pipe. That’s a simple way of thinking about it, but a more detailed report was created by the Florida Dept. of Community Affairs back in the eighties. They ran the numbers for various rates of density and found that the difference between a ‘scattered’ suburban form and a ‘compact’ urban form was (inflation adjusted) $28k and $16k, respectively for “cost of public infrastructure per dwelling unit”. I hope this helps.
    Joe Minicozzi, AICP

  4. Alex B.
    Posted July 13, 2010 at 10:44 am | Permalink

    What does this article have to do with Red Wing, Minn.?

    Reply from Citiwire Management: There was a major presentation on the topic at a meeting of the Citistates Group in Red Wing. Otherwise no connection.

  5. John B.
    Posted July 13, 2010 at 5:50 pm | Permalink

    I was wondering the same thing…why the Red Wing, Minn. byline?

  6. Peter Katz
    Posted July 14, 2010 at 3:34 am | Permalink

    Places generate a lot of different municipal “costs.” Some are based primarily on area (mosquito spraying, for example), some are based on the number of people within a given area (toilet flushes), and some are based on both people and area, but conditioned by cultural and demographic factors (police, schools and social services to name a few).

    Each cost is paid for in different ways in different places. Typically mosquito spraying (a shared concern) is paid for through general fund taxation (since it’s important that it be dealt with at the community scale), whereas toilet flushes are paid with one’s individual water / sewer bill (the rest of us don’t care if your toilet doesn’t flush –to a point, that is). Policing is paid through general fund taxation, and schools through general fund taxation with some special funds often voted in on top of a base. There are so many local variables that it’s impossible to model the revenue side of this equation in any consistent way.

    That said, our sense is that with the huge disparity in the revenue numbers (you need to see these figures charted; the difference is not subtle, it’s huge), there are likely to be few factors other than schools that would likely overcome the difference. Indeed, schools will show far greater costs in suburban areas where there tends to be a lot more families with children, tipping the scales further in favor of mixed-use places in a “downtown” location.

    But don’t take these examples to the bank. Our purpose here is not to pursue one form of development at the expense of others, as many communities do in an attempt to balance their budgets

  7. Posted July 15, 2010 at 12:35 pm | Permalink

    i’d love to see a similar analysis for california where the tax structure (in the eyes of many planners) promotes the fiscalization of land use and serves as a drag on the regional planning policies enacted as part of SB375

  8. Matt
    Posted July 15, 2010 at 5:11 pm | Permalink

    I live in Rancho Cucmaonga California, a suburb of Los Angeles. Before the recession, my city was the 9th fastest growing city in the nation. A few years ago the city decided to finally build our mall / downtown. See the city is quite young, only 30 years old. It is a planned community of 175,000 people but it does not have a “downtown.” At first they wanted to build a traditional mall but instead went with a New York City firm’s idea to build an open air upscale regional mixed use center called Victoria Gardens. It is now one of the most successful malls in the nation with 20 million visitors per year and is one of the largest tourist attractions in all of California. The mall is so popular that other nations such as France and South Korea are copying the downtown design for their newer cities.

    The mall is surrounded by surface parking but not for long. Multiple office, condo, and hotel towers will replace the surrounding parking lots. Parking structures will replace the former lots. These will be some of the tallest buildings in the city at 12 stories and will house retail, housing, and office in one building.

    The city says it will only build up to 12 stories for now but the building heights are sure to change in the future surpassing 12 stories, going as high as 20. The city also said that our full build-out population would be 150, 000 and as of today it is 175,000. The city website says the city is nearing 200,000. I knew they were giving us the low ball number. I predict the city gets up to a quarter million souls.

    Anyways back to the mixed use buildings. These buildings will include mixed uses such as: large corporate headquarters, luxury condos, and even a five star hotel. The high end shops along both main streets will add five levels of luxury condos above. Though the mall already has three major department stores, another is also planned for the future phase. There is a cultural center, a library, a movie theater, three department stores, plazas, fountains, gardens, parkways, stunning vistas, lighting, benches everywhere, trashcans, ashtrays, and the only Bass Pro Shop in California. During Christmas there is a 100 ft Christmas Tree in the middle of Chaffey Square.

    Last time I shopped there I was waiting outside one of the shops having a smoke. I looked around at the beyond charming town square and realized that Rancho Cucamonga has a scaled down European style downtown. I was very proud. This is the kind of development that will be around in a hundred years with minimal updating.

  9. Posted July 16, 2010 at 6:17 pm | Permalink

    Further in response to Michael K’s comment, what’s curious about that comment is that it somehow assumes that if you don’t build the apartments, etc., in a dense environment, the people who need services will somehow disappear. They’re going to live somewhere, needing schools, police, etc. Given the data on paying back infrastructure it’s rather clear from the article that delivering those services in a dense, mixed-use environment is going to be more efficient than in separated-use sprawl.

  10. NRJMike
    Posted September 20, 2010 at 5:40 am | Permalink

    I suppose if you are looking for a reason to hate big box outlets measuring property tax revenue per acre would give you a faux metric. But it’s really a case of apples and oranges. Downtown mixed use is great if you are down town, which most big box units are not. A more objective measure would be to look at the total tax base contributions, property and sales, generated on a per square foot of retail space. Even then, the downtown locations will look inflated because of the increased property values downtown. It’s sort of like trying to compare the cost of living per acre for a neighborhood of single family homes versus a 12-story apartment building.

  11. Posted March 1, 2011 at 7:37 am | Permalink