Economic Benefits of Incremental Intensification

 

The Charrette intensification plan adding 15,500 units, or 35,000 new residents to the Historic Quariters can be measured in terms of “new tax revenue”. The Charrette recommends a tiered neighbourhood mix of one-third non-market, one-third affordable, and one-third market. Thus, the tax revenues flowing to the city from residential intensification must be adjusted accordingly:

Market housing: 55,000 x 1/3 x 800/s.f. per unit = $14.5 million per year tax increment

Rate is reduced by half for affordable housing, or = $7.25 million per year tax increment

Non-market housing contributes no taxes.

Assume that 1/3 of the current population, or 5,000 are paying property tax = 5,000 x 800 = $4 million

Thus, the tax increment from residential intensification of the Historic Quartiers amounts to $17.75 million per yearn flowing to city coffers. [Note: for the purposes of this analysis an indexed tax rate of $1 per square foot was used].

Looked at in another way, the $17.75 million per year not collected can be seen as a measure of the cost of keeping the Historic Quartiers in their current dishevelled state. Construction of 16,000 housing units represents 12.8 million square feet of new construction, and building re-use. This is a significant result in terms of both capital investment, and employment.

For the purpose of illustration, we could apply the entire tax increment to service a 20-year municipal bond. In a strategy that is known as “Tax Increment Financing”, the annual  $17.75 million in new taxes from redevelopment would be used to pay for a bond issue in the order of $285 million.

If these moneys were put towards improvements in transportation infrastructure, for example, then they might get matching support from provincial and federal governments. That $285 million, receiving matching dollars from two levels of government, would then grow into an $855 million investment in the Historic Quartiers. However, as transportation infrastructure, this local injection of capital would end up benefiting the city, and the region as a whole.

© Lewis N. Villegas, Vancouver, February 2012.

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