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This is about the budget crisis in Philadelphia, PA, and an effort to show the city a revenue source right under its noses: land value. Although it is Philly-centric, fiscal crises are occurring across the nation, and innovative policies like land value taxation must be considered as an alternative to conventional approaches. This entry was originally posted on our official blog:

At the Mayor's third town hall meeting last week on the budget cuts, I was handing out our Philadelphia LVT brochure to people before the meeting as usual when I had a brief but interesting exchange. A man walking into the building took a quick look at my brochure and handed it back, shaking his head. He said that he works for the city, and that "there's no money in land" to solve the city's problems.

Like many times, there was no point in arguing with someone whose mind is made up (for whatever reason). But as I continued to pass material out to many more people who are looking for a solution, it got me thinking about how to address this interesting comment. Of course, our analysis proves there's plenty of money to preserve the city services and then some, but we need additional proof to help swing the other people at City Hall whose support we will need to win over.

After the meeting, I decided to test this person's belief while walking along Girard Ave. back to my car. Across the street were some vacant lots that looked like they'd been empty for years. It appeared to be about 3-5 lots in size, with huge weeds and junk all over the place. Rather than describing it in detail, have a look for yourself.


When I got back to the office the next day, I checked the public records to see how much tax these lots are providing the city. There seems to be 4 properties owned by the same person, and the total tax bill is less than $500. So in a sense, the gentleman was right; at this rate, there seems to be little we can squeeze from such low-value unimproved land.

But this is only true to the untrained eye. When we speak of land, and especially of its value, look past the lot itself--which in this case, looks like a junk yard no one would want. Instead, think of location--the key word in real estate. If you've been to West Philadelphia lately, you'll notice quite a few assets in this very spot. Take a look at the following map.


In the upper-left is, of course, the entrance to the School of the Future, one of the most high-tech schools in the nation. Additionally, there is the newly renovated trolley service along Girard Ave., with parking and stops directly across the street. The Philadelphia Zoo is right down the street, and access to 76 is a ramp away. Since the lot is zoned commercial, it's also a good spot for exposure along business Rt. 30.

Here at HGFA, we point out that a lots proximity to things like this are what gives it its value, not just the size of the land. But even with all this, the land is only assessed at a full value of about $17,000. Interestingly enough, however, this property is also for sale. One would imagine the owner would walk away happy with $25,000 for someone to get this junkyard off his hands.

Let's look up what the asking price is. A mere $1,949,000. You saw that correct: nearly two million dollars. From the listing:

Potential for up to 17 residential lots with variance. Or great retail pad site. Three Lots (25' X 113' zoned R-5) with frontage on busy Girard Ave (approx 75' of frontage). Also included in sale is 3901-3929 Cambridge Street Approx (81' X 300') zoned both G-2 and C-2 (approx 7,209SF zoned C-2). Outstanding commercial location. Over 31,000 cars pass daily! Excellent highway access and located minutes to center city, 2 blocks from Philadelphia Zoo.


This person has participated in one of Philadelphia's best and most heavily subsidized programs: real estate speculation. Apparently he's held these properties for years, perhaps even decades as the deed suggests, letting them become a real problem for the people in the neighborhood. All the while, the city's hard work and investments in the area, topped off with the new school and trolley, have poured money into these lots like no savings account could.

Not only that, it appears the program allows these "land bankers" to defer their property taxes in the meantime, as these lots owe thousands of dollars in taxes going back over 11 years. If he was able to sell this property for the asking price, he could pay off the liens as if they were a small bank fee. What a deal!

Under a land value tax, and with accurate annual assessments, this property would pay $338,000 in taxes, which alone might be enough to keep a West Philly library open. But in perspective, the fellow I talked to might be right after all; there's no money in land, because it's being drained away all the time! This is one lot of literally thousands across Philadelphia. If the city needs money, then it needs to plug the holes: tell Mayor Nutter to tax the land.

Originally posted to Eron Lloyd on Wed Dec 10, 2008 at 04:10 AM PST.

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