Paved Over: The Space We Waste
The most valuable asset a city has is land. Both the residents and government benefit from utilizing that land well. Similar to how a sugar cane farmer tries to maximize their total crop yield and revenue per acre, a city tries to maximize the land’s economic productivity, community vitality, and tax revenue per acre.
Land by itself has value and is taxed, but what’s build on top of that land matters even more. In Louisiana, 10% of the Fair Market Value (FMV) of land and 15% for commercial real estate can be taxed by a City. Things built on top of the land are called land improvements for tax purposes. Improvements are things like buildings, houses, apartments, and parking lots.
The actual taxes collected depends on the Parish and City. Mills determine what you actually owe in property taxes, and in Thibodaux the combined mileages, as a rate, is ~11.65% of your assessed value. Louisiana has very low property tax rates relative to the rest of the country. I don’t enjoy paying taxes just like everyone else but I also enjoy having pothole free roads and sidewalks to walk on.
Instead of comparing the total tax base of a city, it’s better to look at the taxes per acre. It wouldn’t make sense to compare one farmer’s crop revenue to another, when one farmer has 120 more acres of land than the other. They use metrics like yield per acre. Similar to farmers, cities should use a similar metric, and that metric is taxes per acre. A city with higher property taxes per acre can provide better roads, more fire trucks, cleaner parks, improved drainage infrastructure, housing, and all the other things a government provides than a city with lower property taxes per acre. The interesting things is that one city could theoretically have higher property taxes per acre than another even when it has a lower effective tax rate by making it more advantageous for people to better utilize the land. The thing is: each asset built on the land contributes differently to the city’s tax base, irrespective of how high or low the tax rate is. Everyone benefits when land is used to its highest economic benefit.
One of the least beneficial uses of land for a city, and its residents – even though they might not realize it – is asphalt parking lots. Every city needs parking, but having an oversupply of parking can hurt a city in a real way. A parcel that has a large portion of its land devoted to a parking lot has a high opportunity cost. Let’s see why.
Lafourche Parish Assessor’s Office assesses parcels every 4 years. When assessing a properties land improvement value each year, the depreciation of the asset (the asset’s lifespan) is also taken into account. A parking lot is usually assigned a 15-20 year lifespan, whereas a building would normally have a much longer lifespan, usually around 40 years. Let’s assume there’s two parcels in Thibodaux. Parcel A (the blue line) is a law office building downtown, which has no parking lot, since it’s downtown and its parking demand is satisfied by legal curb parking. Parcel B is a parking lot.
At year 0, both are valued by the Assessor’s Office and 100% of their taxable assessed value is taxed. The initial opportunity cost of parcel B just being a parking lot is the fact that a parking lot doesn’t generate sales tax revenue and is valued less than an office building or housing. Even though the newly built parking lot does generate more revenue than if nothing was there at all, the opportunity cost of parcel B being a large parking lot instead of a more productive asset increases over time because of the steeper depreciation curve. The chart below depicts how the opportunity cost grows over time.
24 years after construction, roughly 35% of the parking lots initial value is contributing to the tax base, whereas the building is still contributing roughly 60% of its initial value. This doesn’t even account for the loss sales tax revenue because parcel B is entirely a parking lot. And, even if a parking lot adds a few thousand dollars to the city’s immediate property tax roll, it creates a net-negative financial return when weighed against municipal maintenance caused by having an excess of asphalt parking lots. Below are some Thibodaux examples of how parking lots are a drain on property taxes per acre.
Even the newly built Capital One, at $23,360 per acre, has a lower property tax per acre than 3 downtown local businesses, which yield $23,360 per acre. The Rienzi Plaza parcel has the lowest at $2,178 per acre, and the parking lot takes up 43% of the parcel.
The strange thing is that places like Thibodaux mandate by law that every singe parcel contain a parking lot. The amount of parking is almost always determined by the square footage alone of the building and the land use. In practice, these laws create an oversupply of off-street parking. I’ve created an app that calculated almost all the off-street parking lots in Thibodaux, LA. The total acres of parking lots in Thibodaux is roughly 150 acres.
Thibodaux also has laws for Shared Parking Agreements, legal contracts that lets two or more property owners safely split and use the same parking area. Some of these laws prevent existing parking from being better utilized and likely prevent wider adoption. For example, for a shared lot to count toward a business’s legal parking minimum, the code dictates a strict radius of 300 feet of the building’s main entrance. This makes your 10-minute walk (~2,640 feet) legally useless for fulfilling mandates, forcing developers to build new pavement right next to their front doors even if a sidewalk connects both businesses.
The recent zoning struggles of the new owners of the Dansereau House is a recent example of how these laws prevent the historic building from being used as an event venue. These historic houses require revenue generating business like weddings to have any hope of expecting the owners to maintain the property, something every Thibodaux resident should be for.