Getting property taxation right

Why isn't the purchase price the permanent valuation for the length of time you own it?

Only in Dayton is the $10K house a reality

Are you your neighbors keeper?

Every week I look at the listings of homes sold in Montgomery County and marvel, because only in Dayton can you buy a home for less than the price of a nice used car.

This doesn’t happen in surrounding communities (other than the depressed ones- Jefferson, Trotwood) . Do you wonder why?

It’s all supply and demand would be the perfect capitalists answer. But, what drives demand?

In real estate 101 they say “location, location, location” – and people choose communities based on the schools. And to some extent this is also correct. Yet, my house, bought for $14,500 in 1986 is worth close to 10x that, and a slightly larger home 2 doors down, just went for the same amount 7 years ago. It shouldn’t have sold that low, but it was a foreclosure. And, my property value dropped- not just because the price was low, but because of the cancer that moved in.

Four doors down, a house sold for $95K 3 years ago. The new couple put at least $40K into it before splitting. It sold in a day- price unknown, but for well over $125K. And my property values are sure to go up.

Yet, I didn’t change locations, and my schools still suck. My investments in my house shouldn’t penalize me with higher taxes anymore than what my neighbors do. The value will come to me, and to the community, when I sell.

How and why do the actions of others affect my property values? If I own a share of stock in 3M, does my value go up just because Apple had a great year? No. Yes, if I go to sell my car, and someone else paid X for a similar car- that’s the price- but, I’m not selling my home, I just want to live here. Why should my value change until I do something?

Simple answer- it shouldn’t. And, this constant re-valuation of real estate based on the actions of others is causing gentrification, housing bubbles, foreclosures, and a mangled economy.

The purchase price of an owner occupied home shouldn’t change until the house is sold. The same should be said of rental property. When the government steps in and raises your property value for taxation purposes, they become an uncontrollable variable in a business equation. They distort markets. They screw existing businesses and property owners when they offer tax abatement to the new guy, while the long term investor gets shafted.

And, it’s almost counterproductive to do improvements to your property, if the tax man is just going to charge you more. But, what could be worse? Your neighbor doing improvements.

Case study: Dr. Michael Ervin, shadow mayor of Dayton before he left town for Scottsdale AZ, bought a dump of a bar in the Oregon District and poured $1.6M into it. This skewed the valuation tables for his neighbors, who were thankful the bar left, but were asked to pay more for Dr. Mike’s excess. Some, couldn’t pay the additional taxes and were forced to sell or move. Others might have spent more on a crappy house, because Dr. Mike did what he did. The market skewed. But, 10 years later, when it came time to sell, Dr. Mike got less than half his money back on his taj mahal. Yes, it’s still double the value of any of the other single family homes- and still skews things, but, the only person paying the tax on the new market rate evaluation- $725K , should be the new owner. Just as the neighbors who never left, shouldn’t have been forced to pay more when the $1.6 boondoggle went in.

The reason we pay property taxes is supposedly to support public infrastructure and government to keep our investments safe. Income taxes are supposedly a more progressive tax that are supposed to be based on ability to pay. When property taxes unfairly start to penalize people for making a long-term investment that they hoped to keep- it’s wildly unfair, un-American.

The fact that almost every office building downtown has been foreclosed on, while tenants have moved to fairer pastures funded in part by tax dollars- with more advantageous tax structures (both income and property tax) like Austin Landing is proof positive that our property taxation and income taxation hodge podge is causing more problems than it’s helping.

The value of the Kettering Tower, once the premier office space in Dayton, was decimated by Dayton’s high income tax (now 2.5%) and property taxes based on market forces beyond the owners control. Would Austin Landing have looked so good, without the huge investment in infrastructure by the county, or the income tax free zone for white collar workers (while the retail underclass pays 2%)? Probably not.

It’s time to realize that tax policy and abatement has serious consequences to the entire region, and we need to find a way to level the playing field and stop letting the choices others make, affect our tax rates.

Regional tax policy, from property to income tax, needs to be set and managed at the county level, and by fair market forces, for all of us to live within our means, and to stop changing the playing field in the middle of the game.

 

Corporate welfare will kill our economy.

The Business Journal scooped the Dayton Daily News with the news that NCR will be moving its C-Level suite to NYC. Dayton will lose maybe 100 employees- but all will be the 6 and 7 figure paychecks, taking a sizable bite out of Dayton’s income tax revenue.

However, the zinger is that the State of New York gave NCR a $1.5 million handout to suck our city dry. This kind of corporate welfare needs to stop. Why should Dayton suffe because NYC can afford to lure our highest dollar execs with their tax money.

Ohio should sue New York for this poaching. Of course, Mike Turner won’t step in to stop it- NCR is his largest contributor.

NCR to move executive offices into New York City facility – Dayton Business Journal:
NCR Corp. is moving its executive offices to the Big Apple after being wooed by New York officials with incentives.

For the past three years, New York State Assembly Speaker Sheldon Silver has pitched to Bill Nuti, New York resident and NCR’s chief executive officer, the merits of moving the company’s executive offices to Manhattan, which include $1.5 million in relocation assistance.

“Although NCR’s headquarters were located in Dayton, it was clear to me that Bill was and is a New Yorker at heart,” Silver said. “In the spring of this year, after little prodding — just a little — Bill informed me that NCR was ready to make the move. Now, this ‘New Yorker at heart’ will be a ‘New Yorker at work’ here in the ‘Business and Financial Capital of the World.”

New York officials held a press conference in October to announce the signing of NCR’s lease in the new 7 World Trade Center building, where the company will have 200 employees…

…The company maintains about 2,000 employees in Dayton.

New York Gov. Eliot Spitzer said the signing of this lease is significant because it demonstrates that Manhattan is the magnet for senior corporate decision makers.

“This lease signing is different because having a significant presence of corporate leadership here shows what we represent,” Spitzer said…

When Dayton is already suffering from drops in income tax, this is just another nail in the coffin, being driven by tax dollars from another state.

The annual lease payments in NYC for the 40,000 square feet will be $2.8 million- costing NCR shareholders even more money, just so the overpaid CEO can siphon off more cash, and live in NYC and not have to come to Dayton. How can this be a fiscally sound move for anyone involved? Shareholders, taxpayers, and the City of Dayton- all screwed in yet another instance of poor decision making based on our current lassiz faire attitude about CEO pay and corporate welfare.

Again- the only kind of corporate tax credit I believe should be allowed is one based on the number of employees that can walk to work.