Why do buildings and lots sit empty for years throughout downtown Sacramento and beyond? Because there is little consequence to the property owner of leaving them empty. They continue to pay property taxes while waiting for some development scheme that will make them so much money that the years of property tax are a drop in the bucket. Occasionally, a property is taken for non-payment of property taxes, but that is rare.
While the building or lot remains empty, the city (I’ll use “the city” for the cities and counties and utility providers) still has costs associated with the property. The cost of electrical, water, sewer, telephone, the street network, and transit in an area has more to do with the capacity of the system and the network passing by a property than the specific connection to the property, so the city still has costs even though they are receiving only a pittance of property tax. Fire and police services are actually higher for empty building and empty lots because they attract vandalism, crime, illegal occupancy. They drag down the property values of everything around them, and therefore the property tax income from everything around them. They are in large part the very definition of blight.
Ironically, many of the empty buildings and empty lots in downtown Sacramento are owned by the city itself. So the city is costing itself money by letting these sit, and of course that means that it is costing us taxpayers.
When the economy slowed, those big projects that would make a lot of money evaporated, and so more and more property sat unused. But it did not need to be unused. Smaller scale projects were always possible. I think one of the big differences between downtown and midtown in the downturn was that midtown had a large number of small properties owned by people with moderate dreams of development and redevelopment, while downtown had a few large properties owned by people with grandiose dreams. Those dreams crashed, and so did downtown. A number of successful businesses were dragged down by the failures around them. Midtown went through a slow time, but lost far fewer businesses, and is now picking up in a way that downtown has not.
So, what to do? As always, I have some outside-the-box (or off-the-wall, some would say) solutions to propose.
1. Assess property tax on all government entities. What purpose would this serve? Wouldn’t it just be moving money from one pocket to another? Yes, but it would make the cost of maintaining empty buildings and empty lots show up on the balance sheet as a direct expense. As with all things financial, we pay it no attention until it shows up on the balance sheet and affects the bottom line.
2. Assess empty lots at the value they would have if developed, based on typical properties surrounding it. Seems unfair? Not in my mind. The empty lot is costing the city, and all of us, directly in terms of services needed, and indirectly in creating blight that lowers property values and depresses economic activity. This higher level of property tax would encourage the owner to move forward with development. In a few instances, these empty lots could be converted to public purpose such as a park or farmers market location, but the number of those conversions would be small relative to the number of properties
3. Double property taxes every four years for both empty lots and empty buildings. This would give the owner a strong incentive to do something. While regular property taxes can largely be ignored, when it goes up 2X, then 4X, then 8X, then 16X, no property owner will leave the property unused.
I have no illusions that even these radical proposals would bring vibrancy back to downtown, but along with many other policies and actions, they would certainly help.
I think something needs to be done about surface parking lots, which are another unproductive use of land that costs us all money, but that is another topic for later.
I’ve uploaded a few photos to Flickr of abandoned downtown, along J and K streets. It would take days and thousands of photos to document it all.