Kickstand

While my previous post focused on open questions concerning the business plan side of the C&D landfill, I left out what I consider the most disconcerting part of the entire proposal — the incentives and disincentives toward local policy on development and viability.

I’ve long been critical of those who view demolition as the answer to redevelopment of the city.  By far this is the most pernicious and misguided ideology advocated and propagandized in our city. Ignoring the devastation imposed on the city as a way to revive and revitalize through urban renewal, we now have advocates who still view the job as half-done; there is still so much more to raze. We can’t redevelop Chalmers; we can’t preserve the Walter Elwood museum building; and we most certainly can’t sustain the Sanford Mansion at City Hall. Why even restoring and preserving the home on Clinton and Guy Park was thought as hopeless.

Tear it down or defund it. That is the impetus.  What should be the key asset to be preserved and maintained here — a historic and significant fabric of architecture — is the nemesis. It is the obstacle to moving forward.  And rose gardens.

At the heart of this ideology lies a fundamentally flawed belief in the economics underlying the demolition policy. In their mind, the problem is not lack of growth or lack of demand creating a shortfall of revenue to fund the city but an excess of taxes as if taxes and tax rates are arbitrary constructs with no economic framework of supply and demand forces. Hence if anything can alleviate taxes then by definition it is valid and justified. Let’s see how this plays out with the C&D landfill.

As I posted previously, some of the key rationales justifying the economics of this project center on the need for the city to demolish buildings and hence have to pay for landfilling the debris. Of course there is a fee to landfill and if the city can avoid or reduce the fee, then the expense of the demolition effort will be reduced. What is interesting with the C&D landfill argument is that in order for the city to realize these ‘savings’ in landfill, the city has to pay hard dollars for the demolition. In other words, the city pays money to demolish above and beyond the expenses for the landfill. If you look at demolition expenses, it is very expensive to demolish buildings regardless of all the rubbish arguments made about shared services; in the end, there is a hard dollar cost to taxpayers to demolish a building. You can play three-card monte with the expenses but they are still there; they do not go away.

Now what the C&D landfill puts in motion is an incentive to the city to demolish; after all, the city will have built a facility for C&D debris and given the perception of savings from demolition, the city will be incentivized to demolish. At the same time, the C&D landfill will realize revenue from the C&D debris from the city assuming , and this I admit is not clear to me, that the existing transfer pricing mechanism remains in place with the facility. In other words, the city pays to demolish as an expense and then possibly shows the revenue once the debris is processed at the facility. While transfer pricing is a valid and sound principle, what matters to city taxpayers is the net outlay of cash. And if you look at the net outlay of demolition, it is and must be negative to city taxpayers. You cannot make money by demolition.

An interesting aspect of the city sending debris to the landfill is that the operating LLC by the private entity proposing the landfill makes fixed revenue for each ton shipped. A key question here: would debris sent by the city to the C&D landfill be subject to the operating fee? If so, that is interesting indeed.

What also should be noted is that demolition by definition takes property off the tax rolls so any property demolished sees its improvements drop to zero and you basically have a parking lot (woohoo!). Each and every property demolished hits tax payers twice: once for the expense of the demolition and once for the loss of future revenue from the loss of improvements to the property. Sure and without doubt, most properties demolished are not paying taxes and are not viable. I get that.

What I do not get is why broader efforts and policies do not get put in place to drive growth or encourage development instead advocating for policies via the landfill that will actually encourage more demolition with its attendant expenses and erosions to the asset base. When do you stop? At what point have you demolished and landfilled enough of the city before it all turns around? At what point do you look up and say: can we try something different to actually drive growth here? Sorry, I know that’s heresy… let me move on.

We are now 40, maybe 50 years, forward from the initial devastation through urban renewal and we are now putting in place a mechanism with a series of similar incentives to demolish and disincentives to restore or repurpose so we can embark on even more demolition.  Really?!

I’m not sure this is a cycle I want to ride on anymore.

 

 

 

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