Wednesday, February 18, 2009

Anna Griffin Needs a Lesson in Public Goods

Anna Griffin of The Oregonian may be right that the PGE park renovation idea is a bad one (though I disagree), but her strange fixation on the term 'blighted' is odd and I find her argument convoluted. From an economics point of view public goods will be underprovided by private markets. The government, then, may have a valuable role to play in providing them. So if a city wants to, say, provide a better, more well-lighted intersection and anticipates that the external benefit of this action will increase the value of surrounding properties, funding it with bonds that will be serviced by the future higher tax revenue from the district makes sense. It doesn't really matter if this is in a ritzy district or a run-down district. Either community will be unlikely to provide it privately and the rationale is no different.

As she says:
In urban renewal districts, communities borrow money to pay for improvements such as better roads or prettier storefronts. When property values rise, the additional tax revenue goes to retire the debt rather than into city, county or school budgets.

The insinuation is that you are taking away from school budgets. But this extra revenue would not exist without the investment in the public goods in the first place. So the real debate should be whether the increased revenues will actually materialize, not whether a district is 'blighted.' Whether this is true for the PGE Park case is an important question for the bean-counters to determine whether this particular source of funding is appropriate, but in my view this is an investment in Portland as a whole not in Goose Hollow...

1 comment:

sechrest said...

In addition, it is important to note that schools are explicitly held harmless in Urban renewal districts.

But more importantly, if the funds raised by the urban renewal district actually are invested in efforts that do increase the value of the surrounding properties, then you can see a specific ROI on that investment.

In the case of the Corvallis Urban Renewal district proposal, the payback period is calculated at 9 years. That is, the value of the taxes collected because of the increase in the property values, pays back the dollars invested in 9 years. And so after that point, there is actually more money available for all of the things that are on the list. More money for schools, more money for police, more money for transit...

This does pre-suppose that the money is being in efforts that make a positive difference in the community.