Commercial development disparities show up in property tax contributions

Monday, August 18, 2008 at 4:01am
Metro officials are counting on infrastructure improvements to lead to more development along Dickerson Road in northeast Nashville. Matthew Williams/The City Paper

In April, Metro Council approved a new redevelopment district for the Dickerson Road area.

If there was ever a question as to why such action was needed or desired, all you have to do is look at a breakdown in the property tax revenues generated out of each council district.

District 5, which includes Dickerson Road, contributes the least amount of property tax revenue of the 35 council districts, according to an analysis conducted by the Metro Property Assessor’s office for The City Paper. Property in District 5 generates $7.1 million in property taxes — less than 1.1 percent of Metro’s total.

Neighboring Council District 7 is second-lowest with just under $8 million. Cross the Cumberland River from that council district and you are in the one that generates the most. Councilman Phil Clairborne’s District 15, which runs from Pennington Bend to Interstate 40 at the airport, delivers more than $43 million to city coffers.

The data shows the impact commercial development can have in terms of generating property tax revenue. This has become a main-stage issue as Mayor Karl Dean and his staff try to grow the tax base without hiking taxes. It also shows where development can be steered to generate bigger marginal gains.

The Metropolitan Development & Housing Agency created the Skyline district at the behest of local leaders, merchants and residents, who were looking to reduce crime and blight. But the net effect could also mean higher tax revenues as values rise.

Phil Ryan, MDHA’s executive director, said a few people are looking at redeveloping parts of the area. But right now, the agency is focused on improving streetscapes and other infrastructure first.

“That gets the juices going and leads to future development,” Ryan said.

In District 5, the residential taxes generated are roughly even with commercial and industrial taxes — a ratio government leaders don’t consider to be ideal. Commercial tax rates are higher than residential rates and carry more of the burden in paying for services residents use.

With District 5, a focus on commercial development could result in the “biggest bang for the buck,” Ryan said.

Increasing property tax revenue was one impetus for reviving a dead mall in Bellevue.

“We did enough research to know that the dead mall was holding down property taxes on surrounding properties,” said James Weaver, the Nashville attorney who helped developer Foursquare Properties obtain a development district around the mall.

Claiborne’s district ranks at the top chiefly because of the hotels, office and industrial sites there. Commercial and industrial property taxes exceed residential three to one. Fueled by the Gaylord Opryland Resort & Convention Center, Sheraton Music City, Nashville Marriott Airport and other hotels, the district also generates nearly half the hotel and motel tax revenue in the county.

“There’s no other single district that has that kind of impact on the hospitality industry,” said Walt Baker, president of the Greater Nashville Hotel & Lodging Association.

Across the county, the Green Hills area ranks second in terms of producing property taxes with $42.5 million — but runs counter to the notion that commercial property tax revenue lead the way.

There, residential tax revenue far exceeded commercial taxes, even with The Mall at Green Hills in the mix. The 2010 arrival of Nordstrom might bring a little more balance.

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By: JeffF on 12/31/69 at 6:00

I am shocked that downtown with all its public capital spending projects does not rank number 1. Come on we can't let the private sector make us look bad! Remember downtown is trying to get still yet another project for its own benefit, paid for partially with hotel/motel taxes on travelers who do not care about downtown. Thanks for this report.Perspective: property taxes come from outside of downtown, hotel/motel taxes come from somewhere other than downtown, and sales taxes come from somewhere other than downtown. I am sure someone will try to tell us that none of that would exist without downtown being a draw for the region. The only draw of downtown is that it draws in money it does not earn.

By: producer2 on 12/31/69 at 6:00

JeffF,Maybe you ere just waking up. Did you not read this part:"Claiborne’s district ranks at the top chiefly because of the hotels, office and industrial sites there. Commercial and industrial property taxes exceed residential three to one. Fueled by the Gaylord Opryland Resort & Convention Center, Sheraton Music City, Nashville Marriott Airport and other hotels, the district also generates nearly half the hotel and motel tax revenue in the county. “There’s no other single district that has that kind of impact on the hospitality industry,” said Walt Baker, president of the Greater Nashville Hotel & Lodging Association."Do you think that could be the reason the city is trying to expand that industry downtown? Do you think that maybe , just maybe the lack of a sufficient center and number of hotel rooms is causing this deficit? Now throw in the fact that the city is doing this while protecting the taxpayer and using someone else's money to pay for a large portion of these projects. What part of this bothers you?

By: JeffF on 12/31/69 at 6:00

lets see expand downtown hotels at the expense of people who do not need downtown. Yep, that sounds fair. I am betting that the owners of the hotels mentioned are just thrilled at the prospect of collecting taxes to help competitors in downtown (the less important area of town). Especially IF the CC gets built and the gameplan plays out to have these same taxes pay for a hotel (see St Louis). The hotels will line up at the chance to write checks so a competitor can get the breaks they did not get. St. Louis hotels saw occupancy and room rates fall dramatically once the government-financed hotels opened and had to discount in order to keep occupancy up. I am not seeing the hotel owners in all of Nashville step up to support downtown tourism. Could that be because they do not see the benefit?

By: RTungsten on 12/31/69 at 6:00

Go Donelson! Now, if we can get a Publix and some new buildings, we'll be moving up in the city. If nothing else, we are still better than Antioch.

By: Time for Truth on 12/31/69 at 6:00

Most of those hotels are in District 15 because of the airport and the now-defunct theme park, in many smaller cities the airport is a primary location and the downtown a secondary one for hotels. In Mouse Town all the hotels are centered around the big theme parks. Older major cities like New York and Chicago are the exception with multiple downtown hotels because the city is the attraction. Nashville is strictly minor league as a destination city. District 15 also has extensive residential development, which is a wash at best revenue vs expense wise, but those numbers look big before the cost comes out.The Skyline area mentioned here has lots of development potential with infrastructure largely in place and three major routes right there. And neighbors who would welcome development. For the 'campus' type office parks Jeff is known to favor, places like the Skyline area and County Hospital Rd at Briley make alot more sense than May Town.I agree with producer that the downtown should remain a focus but not just for tourism, as it is a two-day attraction at best. I agree with Jeff that a convention center is not the answer to a question many of us haven't even asked. We already have one, and in the long term a giant expensive new facility will actually serve to do more harm than good in downtown as the convention industry dies a slow death.

By: Time for Truth on 12/31/69 at 6:00

Drive anywhere within a five mile radius of Green Hills Mall (well, maybe two miles north) and you will see why residential property tax collections in that area are so high.

By: Time for Truth on 12/31/69 at 6:00

lmao Tungsten!

By: producer2 on 12/31/69 at 6:00

JeffF,All of the hotels in the area you have mentioned INCLUDING Gaylord are on board with the new facility. YOu have one, count them one example (St. Louis) that you keep showing. You suspicioulsy were absent from the conversation last week when I gave you a link to the large number of convention hotels and cities doing very well thank you.Here is the link again. http://www.dallasnews.com/sharedcontent/dws/news/localnews/stories/060108dnmethotel.3b20075.html What do all of these properties have in common? They are all in downtown areas.I am currently at an industry meeting in San Diego (where the center sits dwontown and is within walking distance of hotels, restaurants, and attractions) I have been talking with people from a variety of cities about their business and centers and for the most part it is all still going well. Whatever gloom and doom you are prediciting is not evident at this meeting where ther are literally hundreds of Association Executives planning their meetings for the next several years. Based upon what I am viewing I would say Nashville is going to be quite busy.

By: JeffF on 12/31/69 at 6:00

San Diego, one of the three successes? It is a shame Nashville CC will not be busy enough to use actual revenues to pay its own bills.Please note that the reporters in your article failed to address the effect of public ownership on the privatly owned hotels. Something you left out with your one and only "proof". I give you scientific conducted research from an unbiased source, you give me an article from the Dallas newspaper quoting convention and hotel executives. Tsk, tsk.

By: JeffF on 12/31/69 at 6:00

I should add you give me quotes that are being used to sell yet another project of tremendous size. You still do not think there are too many of the things huh?

By: JeffF on 12/31/69 at 6:00

Doesn't matter anyway because the voters will be killing the convention center part of the project next year.

By: producer2 on 12/31/69 at 6:00

What part of the article is unsubstanciated? Also what scientific proof did you provide? Actually what does any of this have to do with science? How do you know how busy Nashville will be, do you have a crystal ball or are you involved in any of the contract discussion? Your grabbing at straws.....

By: JeffF on 12/31/69 at 6:00

Mr Gaozalez said there had been no failures in convention center hotels a few paragraphs after mentioning the double failure in St Louis. Also please note that one shows fiscal success, the others simply showed "better than projections" in occupancy rate. Be careful, these hotels being publicly owned have to included in a CAFR, which makes it hard to hide losses. I will ull those off the various web sites.

By: nashbeck on 12/31/69 at 6:00

I agree with Producer2. JeffF, I think you more so have something against downtowns rather than the Music City Center. Maybe the surface parking lots will earn more $ for the city than the Convention Center haha.

By: producer2 on 12/31/69 at 6:00

Mr. Gonzalez is a city manager for Dallas not the author of the article. You need to read closer, his quote was not about St. Louis nor did he write about St. Louis. I would think "better than projections" would be positive wouldn't you . You are the one that always brings up the point that these centers don't meet projections. You can't have it both ways. I fully understand your analogies of Convention Centers and how you position yourself to win the argument because the centers themselves do not make money. The centers are the catalysts that drive people to the city. Much like retail puts things on sale at a price they could not possibly turn a profit on, but they know you will spend and buy other items while you are there. This is not a new sales strategy and your "they don't make money" analogy is completely transparent.

By: JeffF on 12/31/69 at 6:00

Before using a city as a shining beacon please look into to facts (this applies to the folks in Dallas trying to fleece their people.)Denver's illustrious convention center hotel had revenues of under $80 million in fy 2007 (the latest year numbers are available). Operating expenses (no including debt service)totaled over $86 million. This is a functioning loss of $6,094,00.00 (rounded). Now I may be just a simple accountant but someone needs to cue me in on how this operation is a succcess. It looks an awful lot like "other revenues" aka taxpayer money (internally and externally)are covering the rears of tourism folks. Woo hoo lets party with all that success. Further examination of the Denver symbol of hope shows the Convention and Visitors bureau spending $14.5 million while only taking in $2.7 million. Wow! Luckily they received $12.682 million dollars in property tax money.Real results cannot be hidden when it comes to government operations.

By: JeffF on 12/31/69 at 6:00

they do not meet the projections that matter. They meet projections that do not matter. And yes I know Gonzales worked for Dallas. He is busy trying to sell a center with flawed numbers. Luckily for most proponents most reporters have never heard of a CAFR or none of these stinkers would ever get built. He claimed that the hotels are a good investment becuase there have been no problem. Woops there was a problem a big one, St Louis. Woops there is another problem Denver which is still losing money on operations.Please take note while in San Diego that the Marriotts, the Hilton, the Omni are not city owned.More good news, looking at the CAFR of the City of Phoenix :Convention Center losses in FY 2007 (last reported year)$39,540,000.00 with total losses at $43,908,000.00. Transfers from other funds required $61,647,000 to meet debt and operating requirements. The Downtown Phoenix Hotel Corporation is in one of those reputable "interest only" debt arrangements until 2012, shielding it from losses on revenue shortfalls until that time. I will give the Phoenix folks kudos for only losing $39.540 million this year considering they lost $42.448 last year (party!). They did beat projections which had them losing even more. And they limited taxpayer transfers to $61 million.

By: JeffF on 12/31/69 at 6:00

beck that's a good one. Unfortunatly in terms of downtown redevelopment it isn't what a facility earns it is what it loses. Convention center lose money like there are no tomorrow. Parking lots probably gain some, especially if they are privately owned and not named LandPorts). I personally do not hate downtowns. But I think they have been given a pass on payig their own ways by mayors and tourism folks. IF a downtown is vibrant it will pay its own way, always. Unfortunatly most U.S. cities try to force feed "vibrancy" at the cost of sanity. There are a lot of people living in neighborhoods that are crying out for attention. Yet for the moment every debate in Nashville ends and begins with "what will this do to/for downtown". I aim to mock that thought process until someone actually backs up belief with fact regarding the importance of downtown. Right now downtown is a myth in terms of economic importance.

By: JeffF on 12/31/69 at 6:00

Vibrant Downtowns (USA) = Bigfoot = Loch Ness MonsterCreating a vibrant downtown usually makes living anywhere in the city prohibitively expensive, see San Francisco, San Diego, Portland, etc. A city has to be vibrant, not a downtown.

By: producer2 on 12/31/69 at 6:00

I would welcome the opportunity to look at whatever info you have seen regarding this property. And let me also say I am not making the statement that Nashville should follow this lead, I am merely supplying information that backs up the ability for the city to make tax revenue from this industry as stated in the article we are discssing. Also I would love for you to give me your link for the Denver CVB. Bureaus do not "take in money" They facilitate the sales of room nights for all hotels in their cities. They do not usually close the business, that is done by the hotel that will recieve the business. But if a CVB can facilitate 600,000 or so bookings a year, that would add up to a nice chunk o change in both city taxes and hotel/motel taxes. YOu can look up what Nashville did for this year, it is public knowledge, in fact the last newsletter shows that booking for the second quarter of 208 were a total of just over 300,000 room nights and hotel tax collections were up 5.3% over last year. Seems thigs are going pretty well here if you ask me!As to the state of the industry in Denver I would ask you to read this online article from the Denver Business Journal. http://denver.bizjournals.com/denver/stories/2007/01/29/daily12.html

By: producer2 on 12/31/69 at 6:00

CAFR, what a reputable financial ploy this is. For those of you who have not seen there ingenious and quite laughable website here it is:http://cafr1.com/Kind of a conspiracy thoery for Trekkies if you ask me....

By: RIchardLawson on 12/31/69 at 6:00

Wow ... I didn't think this one would generate such discussion. The reason downtown wasn't at top is because downtown has two of three council districts fingering into the area. Another reason is that most of downtown is in one redevelopment district or another. That means the increment in TIF loans goes directly into the redevelopment district once the loans are paid off and will do so until the districts expire. They are 20 and 30 year districts if I remember correctly.

By: JeffF on 12/31/69 at 6:00

http://phoenix.gov/menu/cityfinfinance.htmlhttp://www.denvergov.org/controller/ComprehensiveAnnualFinancialReportCAFR/tabid/430463/Default.aspxhttp://www.nashville.gov/finance/operations/CAFR2007.aspCAFR is the answer to the Budget shellgame. Governments wanting to hide something usually do so by publicizing the budget documents while hiding the CAFR. Phoenix oes this to a certain extent on their site bu continually trying to push you toward budget projections instead of operating results. The State of Tennessee did this in the income tax debate years. The budget was publicized to show revenue problems while the CAFR showed the actual results fromoperations.The CAFR or Consolidated Annual Financial Report is a mandated document that shows the true financial health of a governmental entitity. It is used by every bond rating agency to assess the risk of a governments debt operations. This is the report that actually gets audited by the state or independent auditor. All data has to be factually and accurately reported. Case in point, for month swe have been told by producer that the current center has not had any subsidies. Yet for FY2007 the center shows an operating loss of $1,983,188 with a transfer in from the rest of government of $1,406,000. Even with that transfer from the various taxpayers the center lost $545,636. That is the reason I like to point out discounting as a problem in the industry. Too much capacity with too much debt requires cutthroat discounting just to blunt the fixed costs. A bigger center will still yield losses. They will just be bigger losses. A paid for center (or a private center) will cost us nothing in capital costs. We can then agressively discount because costs will be lower. We can sell ourselves as the place to come on price and service. We can even crow that with a paid-for center the hotel and rental far taxes will have to drop. Imagine being number 50 instead of top 5 in taxation.

By: producer2 on 12/31/69 at 6:00

Inever said the current center did not have operating loses. What I did say is that it was built without taxpayer funding.As you well know 98 percent of all centers need operational subsidies. Would you (again) like to discuss the revenue generated to the city from having a faciltiy? Do you think the General Fund can pay back a very small percentage of the money it aquires as a direct result of bookings attributable to the center? That would not seem like piublic funding to me.

By: JeffF on 12/31/69 at 6:00

I'm sorry does the general fund have to pay anyone else back or is it just limited to tourism and conventions?

By: RTungsten on 12/31/69 at 6:00

Producer2 & Jeff: You guys are trying to steal Donelson's thunder. We are finally #1 at something besides old people and gas stations (we do have a lot of both). Let us bask in the glory for one day, please.Thanks, The Fighting Fifteenth!

By: JeffF on 12/31/69 at 6:00

sorry dude, props to Donerlson. You have a lot of old McDonalds too best I can tell.

By: producer2 on 12/31/69 at 6:00

Iagree we are off topic. There will be a time and place and groundbreaking.