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.