Lower Taxes, not Streetcars, Drive Development
In a piece last month from KCUR titled Planned Streetcar Extension Spurs Redevelopment Of Midtown Kansas City Hotel, the author asserts that the streetcar drives development. The facts do not support the title or the lede.
The piece begins with the following claim:
The 11-story former Netherlands Hotel is slated to be redeveloped into 110 apartments, part of a Main Street development surge linked to the planned streetcar extension.
Linked? What does that mean? The article repeatedly asserts a causal link to the streetcar, even quoting Tom Gerend of the Kansas City Streetcar Authority as saying “the streetcar is an attractive catalyst for continued investment along the corridor.” Are developers buying up buildings along the streetcar route, investing their own money and contributing to the city and county tax rolls all because of the taxpayer funded streetcar? If so, that would be news!
It would be newsworthy because economic literature in the United States and around the world shows that it cannot be concluded that streetcars drive economic development. What actually happens here and elsewhere is that cities provide all sorts of taxpayer-funded subsidies along the route. What appears to be new economic activity is just redirected tax money.
In fact, the KCUR piece makes this very point:
Buland says Exact Partners already have purchased the six-story Monarch and expect to complete the purchase of the Netherlands this week.
The developer is seeking a 10-year, 75 percent property tax abatement from the city, and already has lined up historic tax credits to help finance the Netherland renovation.
While the developers may like the streetcar, how likely is it that they would be working on these buildings if there was no city tax abatement or state tax credit? In another story about the project in The Kansas City Business Journal, Buland says, “We look for challenging properties in that area that no one else wants to redevelop.” So much for a streetcar alone creating a clamor among developers!
The streetcar did not spur any redevelopment. The development at hand is due to lowered taxes. In short, Kansas City raised taxes to pay for the streetcar and then lowered taxes to spur development along the route. Imagine what would happen if we scrapped the streetcar and lowered taxes for everyone!
