Seven parting ideas for RVA’s next mayor

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June 22, 2016 by awunderground

I start a new job researching retirement policy for the Urban Institute in Washington, DC on Wednesday. Some of my happiest moments in Richmond over the past few years have been writing about city policy and I’m incredibly disappointed I won’t be able to participate in the mayoral election, so here are my parting (for now) policy thoughts. This is far from a comprehensive list of what the next mayor should do, but I think this list is a rich source of ideas that are absent from today’s discourse.

Place more blame with the state

Virginia is a Dillon Rule state which means the power of localities are more or less limited to those explicitly granted to them by the Virginia General Assembly. Proponents will call this a noble limitation and claim localities have the ability to request powers. But the Virginia General Assembly is rurally-biased, gerrymandered, and relies on low turnout election years. The bottom line: the state legislature is often unresponsive to the needs of Virginia’s cities.

Virginia is also different than other states because its cities and counties are entirely independent. Richmond, Henrico, and Chesterfield are undeniably one community. But that community is arbitrarily divided by borders that enable 80% of the population to free-ride in low tax districts on the perimeter.

The inversion of poverty from urban to suburban areas will minimize these political hurdles eventually, but Richmond’s leaders need to be more vocal about state inaction. Every City Council meeting should have a paper asking for state policy changes instead of a once-a-year wishlist. More mayoral speeches should put Richmond’s problems in the context of state inaction. And every discussion of finances should mention the state’s declining role in important services like education (see: my Op/Ed in the RTD). This will better inform voters, many of whom perceive all government through local government since it is closest to them, and the expected benefit of this approach in the long run greatly outweighs most small actions done by local government.

Data

“Enlightened government is impossible without the collection of data.” Angus Deaton, 2015 Nobel Laureate in Economics

City Hall isn’t living up to Deaton’s vision for enlightened government. For example, Councilwoman Graziano recently said that Council was not informed of how budget decisions would impact the city’s debt limit. Now the city is limited in the debt it can take on for critical investments over the next few years without hurting its credit rating. It’s a  failure that 1) this information was not provided to city council and 2) that this information was not demanded by city council, and it proves that RVA has a long way to go before fully embracing data-driven decision making.

It’s also true that enlightened citizenship is impossible without access to data. Local policymaking is going to be more interactive in the future. Problems and successes will be gathered and reported digitally by citizens and better reflect their needs. Accessible data mean crowdsourced ideas will lead to better policy.

Unfortunately, my experiences with City Hall were frustrating and opaque and suggest Richmond has a long way to go. My simple data requests were often ignored, and if they even earned a response it was usually somewhere between insecure and hostile. It makes sense. Some are out to embarrass local leaders and employees. Unnecessary transparency opens up City Hall to attack. But FOIA requests should not be the only way to get the people’s data.

Data should be abundant, open, and machine readable. As Larry Summers puts it, data collection is the “ultimate public good”.1 Richmond needs to fund more data collection and come up with a sensible data policy that harnesses the interest and ideation of its citizens.2

Economic Development 2.0

More transparent data should lead to data-driven decision making in economic development. Currently, the “economic development” paradigm in Richmond features throwing money at businesses, cutting ribbons, and then justifying it with crude or captured analyses.

There is a far more effective but unglamorous path Charles Marohn calls “Moneyhall”. The name comes from Michael Lewis’s book Moneyball about Billy Beane and the Oakland Athletics. Faced with a competitively disadvantaged payroll, Beane posited that the collective wisdom of baseball was flawed and teams overvalued dated statistics like batting average and RBIs. Instead, he embraced new metrics like on base percentage and slugging percentage, and figured he could get better value by finding under-appreciated players that excelled in these areas.

“You make what you measure.” Paul Graham

It’s time for ED in RVA to stop measuring ribbon cuttings and press releases or putting data into black boxes, and to start measuring and publishing metrics like improvement value per acre, tax generation per acre, and cost of services per acre. When change is measured, reasonable and transparent counterfactuals should be shared. Suddenly, subsidies for big shiny things will look less appealing. Big box retail under the current paradigm is the goal because it feels like wealth, but on a per acre basis places like The Camel or King of Pops are bigger creators of wealth and employment.

Instead the city should focus on the incremental. As Bob Geolas from the Research Triangle Park put it, “economic development is not an event.” For example, instead of spending $10+ million on an NFL practice facility that may have happened without the subsidy and has been a failure, the city could have made incremental investments in Scott’s Addition. Sidewalks and road diets aren’t sexy, but they are something only the government can do and the long run economic impact has a similar if not better expected value and much less variance.

Secondly, economic development in Richmond needs to put a ton more effort into deregulating and improving the ease of doing business. Housing zoning and permitting is archaic and drives up rents; opening businesses in RVA should be made easier, not tougher, by local government.

End Parking Paranoia

No good idea in Richmond goes unpunished because of a vocal minority of resident’s parking paranoia. This is probably rent-seeking behavior aimed at limiting development in order to protect housing prices and discourage commercial competition.

First, city hall should eliminate all off-street parking requirements in Richmond. The requirements reinforce driving which has massive externalities, raise prices for drivers and non-drivers alike, and make it tougher to create new businesses. For example, Jorge’s Cantina went out of business and the spot remained empty for years largely because of the loss of parking. Government should discourage not require bars to have parking!

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Second, parking scarcities exist from time to time in Richmond because there is no pricing mechanism. The Parking Paranoia Party wants parking anywhere, anytime, and for “free”. In reality, only two of these three are possible at any given time. Parking can be “free” and anywhere, but only at certain times. Parking can be “free” anytime, but maybe on the outskirts of a neighborhood. Finally, parking can be correctly priced and anywhere at anytime. These people see scarcity and think, “pave, pave, pave!” Any economist looks at this and thinks, “underpriced resource!” You can read more about this on RVANews.

In a perfect world, every block would have exactly one free parking spot. Fortunately, this is possible! Richmond should abandon underpriced neighborhood passes and parking enforcement as a revenue stream, and replace it with smart parking meters that fluctuate with demand. Not only will this efficiently allocate parking based on individuals’ preferences between anywhere, anytime, and price, but it will surely generate more revenue than Richmond’s current ticketing system.

Dedicated transportation funding

The proliferation of ride-hailing and car sharing, increasing demand for urbanity amongst younger generations and recent empty-nesters, and declining rates of licensure and driving amongst high schoolers make me think we’re close to peak car ownership and peak vehicle miles traveled (VMT)3. Despite this, our policies are treating the next fifty years as if they are the past fifty years.4

BRT and Jarrett Walker’s work on the frequency-coverage trade-off mean GRTC is headed in the right direction, but the system needs dedicated funding if it is going to be an integral part of the future, much less a reliable system for getting those who can’t afford cars from point A to point B today.

When something has massive externalities, it’s appropriate to tax those externalities and use the revenues to subsidize alternatives. Revenues from parking could be dedicated, but that likely won’t be enough.

According to USPIRG, “Nearly as much of the cost of building and maintaining highways now comes from general taxes such as income and sales taxes (plus additional federal debt) as comes from gasoline taxes or other “user fees” on drivers.” And this ignores the massive externalities of driving. U.S. households bear on average $1,100 per year in taxes and other costs because of drivers. Only a small portion of this money comes from local government, but the city should reduce its subsidies for drivers and further increase it direct spending on buses, bikes, and walking.

Impervious Surface Tax

A few times a month, Richmond dumps untreated sewage into the James River. That’s because Richmond is one of three communities in Virginia with a combined sewer overflow system. Basically, if it rains more than a spritz (see page 2), Richmond’s system overflows.

Federal, state, and local government have put a lot of money and effort into gradually fixing the CSO system, but they haven’t done much to reduce the amount of stormwater reaching the system. Taxing impervious surfaces and using the revenue to pay for system improvements or reduce Richmond’s high wastewater fees seems like a win-win.

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I’m fairly certain Richmond does not have the power to use this tax because of the Dillon Rule. One workaround (I’m not a legal scholar) would be to set the legal amount of impervious surface to at or near zero and then “fine” properties based on how much they exceed zero. A similar strategy is outlined on page 115 of the article “Toward a Pigouvian State” (a must read).

Semi-LVT

Unknown 19th-century economist Henry George had a big idea that is on the cusp of a renaissance. His land value tax (LVT) is an efficient tool that needs to be adopted in many cities in order to promote affordable housing and economic growth. His key insight is that the value of land and the value of what’s on the land are different.

…landlords don’t create land; a location will be there no matter who collects rent on it. By getting paid just for being in the right place at the right time, [George] reasoned, landlords suck value out of the productive economy. George suggested that the fair thing to do would be to tax the value of the land—not the structures built on top of it, but only the land itself—and distribute the proceeds to the poor, or use them for infrastructure and other public improvements. Noah Smith

That article outlines the tremendous benefits and efficiencies of this tax. The bottom line is, City Hall under-taxes land which promotes extractive speculation and over-taxes improvements, which discourages investment in new housing and businesses. All else equal, it is better to tax unproductive behaviors instead of taxing productive behaviors.

Currently the city taxes the fair market value of land at 1.2% per year and the fair market value of improvements on land at 1.2% per year. The city should gradually increase the tax on land while decreasing the tax on improvements a corresponding amount (weighted for each part’s share of real tax revenues). In addition to spurring a building boom which could reduce the cost of housing and promote density, this policy encourages the highest and best use of land which could significantly strengthen Richmond’s economy.

Fin

1. In economics, public goods are “non-rival” and “non-exclusive”. Non-rival means one person’s consumption of the good does not limit another person’s consumption of the good. Non-exclusive means non-paying customers can be prevented from access. Data are entirely non-rival. Data are somewhat excludable but less and less so with time and eliminating excludability should be seen as a feature and not a bug.

2. Richmond’s Open Data Portal is a start, but it needs fifty times more data to be useful.

3. National VMT was falling until gas prices plummeted.

4. The BRT, Floyd Avenue, and proposed bike share looks promising, but the transformation won’t begin until the city aggressively and universally slows down cars.

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5 thoughts on “Seven parting ideas for RVA’s next mayor

  1. Embo says:

    Some really great and thoughtful ideas here, Aaron.

    But I’m confused about your stormwater tax suggestion, since the city already collects stormwater fees, based on the amount of impervious surface per lot / building, from every property owner in the city. The money then goes to fund various stormwater mitigation projects around town.

    Or rather, the city TRIES to collect those fees, but apparently is continually plagued by non-payment, to the tune of millions of dollars over the years. So . . . Is your suggestion to turn this “fee” into a “tax” to somehow improve collections? (Not sure that would help.)

    • Embo,

      You are correct. The stormwater rates aren’t listed on bills so I made a mistake. The non-residential fee is according to impervious surfaces but it isn’t clear to me that the residential rates are calculated the same way. Do you know?

      Best,
      Aaron

      • Embo says:

        Basically, single family residences are categorized by 3 fairly broad ranges, based solely on the square footage of the home. [I guess the assumption is that the roof surface accounts for most of the property’s impervious surfaces, although that means driveways, outbuildings and the like “ride” for free.]

        Those below 1,000 square feet are charged an annual stormwater fee of $25; those between 1,000-2,399 sq. feet are charged $45; those above 2,400 pay $70.

        Info here: http://www.richmondgov.com/publicutilities/UtilityRates.aspx

        BTW, these fees ARE outlined on every DPU utility bill; the fee (divided by 12) shows up below the other water charges.

  2. Garet Prior says:

    LVT is a super interesting concept I haven’t hear of before. Are other VA localities doing this? Would it take a change in VA code to permit Richmond to try?

    You’re spot on with our backwards, stale mindset towards economic development. Not only is our incentive system extremely outdated, but key land is populated by non-tax entities (state, hospitals, and universities). We need to get creative with private land and begin to lessen things like 10-year local tax abatements for historic tax credit renovations to realize revenues and reinvest in aging infrastructure.

    • “The Weeds”, a podcast by VOX.com, has a pretty segment on land value taxes from about two months ago. This article from 2005 talks about Fairfax and Roanoke:

      “Although recent state legislation authorized
      two local governments in Virginia to implement
      a two-rate tax, neither has adopted it (Brunori,
      2004). The cities of Fairfax and Roanoke have
      the authority to tax property on land at a lower
      rate than the corresponding land; however, one
      stipulation of the legislation is that the tax on
      property may not be zero, thus precluding a pure
      land tax.” ~ https://research.stlouisfed.org/publications/review/05/05/CohenCoughlin.pdf

      LVTs are most prominent in Pennsylvania. This wikipedia article does a good job of talking through the two main legal hurdles for LVTs: https://en.wikipedia.org/wiki/Land_value_tax_in_the_United_States

      Non-tax entities are a huge issue, especially when people can sit on the other side of the border and free ride. No matter how well managed Richmond becomes, Henrico and Chesterfield will have a competitive advantage on rates because they don’t have >$6 billion in non-taxable property. “As each penny of our real estate tax rate represents about $2 million in revenue, it can be said that non-taxed real estate ads about 36 cents to our Richmond Real Estate Tax Rate.”
      http://www.richmondgov.com/CityCouncil/budget.aspx

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