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Tuesday, June 12, 2007

Revenue Sharing - Just Brainstorming

I've been looking into how revenue sharing can work. I was skeptical, but had no facts to go on. So here are a few sources:
Casino revenue sharing in Kansas
Statewide revenue sharing concepts in Massachusetts
Video on revenue sharing concepts in Michigan (state/local sharing)

Building on my earlier comment, here's my idea: Imagine Boulder County 20 years from now. All the municipalities have annexed, IGA'd and otherwise built to their borders. County open space and permanently unincorporated land makes up any buffer.

Somewhere along the way, say 2015, the County citizens vote to approve changes to the management plans of open space to allow commercial and retail development in specific areas. As the development occurred on parcels considered rural preservation or otherwise off-limits in 2007, no one community ever anticipated the area as available for its own comprehensive plan (hence budgetary) vision.

I like this concept - not simply approving a tax, but the creation of a source for the tax. Plus, as I understand it, Commissioners have the right to make "significant changes" to open space management plans following public hearings - but no public vote is technically necessary. See OS 8.02 at the bottom of this page.

Anyway, the sales and use tax collected by the commercial development goes towards some regional need (transit/education/health care/whatever - this is another brainstorm discussion). As the various communities didn't have plans to annex and monetize the parcels, a regional expense should be more easily accepted.

Over time, the guaranteed redevelopment of underperforming interior commercial/industrial parcels within each community will be shaped by the various affordable housing ordinances of each town. Density in construction is essentially mandated and actually is profitable. Large commercial construction is not as profitable in these areas as is mixed use office/retail/housing. See Countryside Village in Lafayette or StorageTek/Sun in Louisville.

In the long run my hallucinated evolution places larger manufacturers and larger employers/retail on the periphery of each town, in the areas slated for mutual revenue sharing. (Think something similar to the impending Lowe's and Target in Lafayette; the Superior Marketplace and the Hwy 7/I-25 corridor.)

My brainstorm isn't about paving wetlands and destroying sensitive habitat. To the extent that various parcels have fewer priority characteristics (in the face of figuring out how to pay for the quality of life services in our wonderful patch of earth called Boulder County) they can be considered as potential locations for revenue generating development that goes to our larger County-wide priorities. Boulder's northeast border parcel floated as a big box development is another example. 2004 was too soon; by 2020 it may look real practical.

The vote on the Lafayette Lowe's also shows somewhat how this could look: peripheral locale, non-sensitive habitat, large revenue generator. Difference: Lafayette gets it all in this case.

As I re-read this, I'm utterly unconvinced. Please comment on parts you think can work and parts that are non-starters.

As Alex has indicated, finding out now if there's even a snowball's chance is worth it to save years of fruitless wrangling.

7 comments:

Anonymous said...

Dan, are you getting enough sleep these days?

The basic premise is that municipal government can subsist on sales and use taxes. Yet there are now more and more examples were voters are being asked to approve property tax increases - Longmont, Louisville, Lafayette, Erie just in the last two years or so. Or raise fees (which in some cases is really a "tax".)

Sales tax growth is capped at growth in disposal income and inflation. Lafayette really benefits from growth in food and energy prices. Two of our top 10 revenue producers. (City hall celebrates when electric and natural gas prices go up and consumption increases. Oops, that's a secret.)

People can only spend so much and the pie will only grow so much.

Doktorbombay said...

Interesting hypothesis, Dan.

What factors would cause the County to entertain the idea of commercializing open space land?

What would entice the County to share any of the resulting sales tax with municipalities? Or, are you presuming the County would need a town/city to annex to provide certain services to the converted property?

Anonymous said...

The 3 revenue sharing links provided have little to do with revenue sharing between cities, except for the casino one. And that is a new business which is viewed as having no downside on the participants. The other two involve having the state give back to the cities.

Colorado does have "revenue sharing" with its lottery money, the Colorado Trust Fund. The use of the money is limited by law.

The County flier is to have revenue sharing done between the cities. So there the challenge is how to compensate those who lose with abutting "revenue sharing" zones as well as share the collected revenue. And does any one think the BC commissioners would sacrifice any open space for development?

Anonymous said...

There's some detailed thinking involved with the scenario here, and some concepts that may eventually be very relevant concerning open space as a "planning reserve" or other more intensive use of the land. Boulder, for example, has already started to struggle with its quasi-open space on the north side of that city.

That said, I don't think it's realistic that dedicated open space will be converted to commercial use. Maybe there is a slight chance that affordable housing will be put on some marginal open space, but overall there is nothing that would convince this voter to support taking land purchased with open space tax and allowing it to be used for anything but open space. Even though that is just my opinion, I have to guess that message is likely to be the resounding opinion in the county well beyond any time in the future we can foresee.

I am grateful for the succinct restatement of my opinion on revenue sharing. Getting a grip on the facts and possibilities now is going to be a lot better than allowing rivalries and misinformation to guide county governments off track, whatever the result of these deliberations.

So my proposal would be to look at the simplest scenario, to find the way to answer two things affirmatively (or to definitively fail to find a workable scenario): (1) Can revenue sharing reduce competition between jurisdictions that ultimately retards the collective tax base of the county (due to sales tax rebates, etc.)? In other words, would the overall "pie" be bigger if losses due to revenue competition were eliminated? (2) Will the reallocation of shared revenues produce enough benefit to each participating jurisdiction in "down" times to offset their contribution in "up" times?

Basic game theory leads me to believe that answer number one might be affirmative. The economic rationality of insurance leads me to believe that the second answer might be affirmative.

In the end, I don't expect that buying a $7,000 piece of a study will result in a sexy new land use vision. I'd rather not think that would or should be the result. Truly, the important questions and answers about revenue sharing have to do with dollars and cents.

Anonymous said...

There is an interesting article in the Business section of the Camera today that introduces another variable to the discussion. Seven local companies have applied for Boulder's flexible rebate incentive program.

Alex puts forth the suggestion that revenue sharing could reduce rebate incentives within the county. But a new variable is whether without incentives, businesses will relocate elsewhere. It is becoming exceedingly easier to locate just over the border east of Boulder County, in Broomfield or Weld. One has to witness the expansion of the Larkridge supermall in Thornton on Hwy 7 and I-25, 6 miles from Lafayette and just 3 miles from Vista Ridge and Anthem CO. So one question is while BC cities may play, abutting counties may have different rules.

The other issue Alex raises is the smoothing of down time with the benefits of up times. Yet cities get into trouble when they raise the cost structure in up times which then create problems in down times. Now is that a revenue problem or a cost problem. Lafayette committed future revenues back in 1990. It is considering doing it again in 2008. Forecasting future revenues is always a dangerous game. Especially when the fox is guarding the hen house.

Doktorbombay said...

Kerry, let’s not mix retail with light industrial when discussing why companies pick locations. Completely different reasoning used for both selection processes. And, unless we’re going to talk about revsharing property taxes, IBM and Ball don’t have much to do with the discussion on revsharing.

Retail popped out of the ground at Hwy7/I25 because Thornton got the jump on surrounding communities to offer this kind of product. Broomfield has its own plans for this intersection, but they’re moving much more slowly. If EastBoCo towns feel left out of this retail bonanza, one could argue these developments occurred at least partly because the towns in EastBoCo were not proactive enough in building retail into their own comp plans. There certainly is enough traffic on 287 to justify a regional retail center, but no one has one in their plans. And Erie should’ve known, with the number of rooftops planned on either side of Hwy 7, the potential existed in that corridor as well. But, as Erie’s Stakeholder’s Plan was being finalized, the mood was decidedly anti commercial.

With revsharing in place, Boulder County towns could plan for regional retail centers, work them into existing comp plans and not worry too much about losing business to outlying areas. Consumers will shop where it’s most convenient. If they have options close to home, that’s where they’ll shop. But, if we wring our hands over what’s going on over the county line, and do nothing to build viable retail options within the County, we deserve the outcome.

Anonymous said...

Yes, d-b, I know the difference between light industrial and retail.

So I suggest everyone take out a map, locate the 29th Street mall in Boulder, Flatirons Crossing, Larkridge Mall, and cross out Longmont. Where would a regional center be located with revenue sharing for all and no incentives?