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Thread: Downtown Property owners

  1. #1
    Member Wulf9's avatar
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    Downtown Property owners

    Has anyone had experience with downtown property owners who won't rent their properties. I have worked/lived in several cities where the owners won't rent storefronts. The rest of the downtown is full, but it looks like the downtown is weak because these spaces are empty.

    This is, in part, a unique California problem These people have owned the properties for years, and Proposition 13 controls property taxes so they are insignificant. I think a lot of these owners have enough money, so renting is actually more work and gives no desired return. In other cases, the owner is using the property for an income tax charge.

    Has anyone found a way to get these landlords to rent. Devious solutions are okay.

    (One well known downtown expert says you have to wait until they die. I was hoping for an alternate solution.)

  2. #2
    Cyburbian jordanb's avatar
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    Has anyone found a way to get these landlords to rent. Devious solutions are okay.
    It dosen't have to be devious at all. The problem is that they're being charged (through taxing) for the structure they have on the site, but the city is paying to provide services to that area no matter what kind of structure is on it, so the solution is to tax the land that the city is providing service to. For a downtown location, lots get a lot of services and are worth a great deal in terms of economic activity to the community and thus should be taxed accordingly. That also cuts down on unproductive uses like parking.

    Also, many people buy up downtown land to speculate on future development. In doing so, they drive up the price of the land which slows development. By taxing the land even when there's nothing there, you raise the holding cost of the land to where such speculation becomes unprofitable. That decreases the cost of development and can speed gentrification.

  3. #3
    Member Wulf9's avatar
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    Incrased land taxes would be nice. The problem in California is that property can't be taxed beyond the Proposition 13 limit, which is 1% of the value at tiime of purchase. So people who have owned land since Prop 13 passed are paying taxes at a 1967 level.

    You folks in the other 49 states can increase taxes and holding costs. California cities cannot increase property taxes on the land if it stays in the same ownership.

  4. #4
    Cyburbian SW MI Planner's avatar
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    For what it's worth, Proposal A in Michigan did essentially the same thing as your Prop 13. It limited the annual assessment increase for each parcel to 5% or inflation rate, whichever is less. When the property is sold or transferred, the assessment is adjusted to current value. So, it's a little better than 1%, but we too are operating under 1970 levels.

    Other than empathy, I can't help much, but I sent this to our DDA Director to see if she has any ideas for you.

  5. #5
    Cyburbian Cardinal's avatar
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    Taxing structures in many states limit what can be done through taxes to encourage leasing. The reality is that the legislation will not change, so let's look for realistic answers.

    Your suggestion of killing off the present owners has merit, but that only works if their heirs are of a different mind on leasing. In some states, it may be illegal.

    How about social pressure? Will the other downtown building owners and tenants put pressure on the others to get them to lease their buildings? I have even seen some cities that put stories, pictures, and the name of the owners in the paper.

    What about an icentive program? You might make it an incentive to people to lease vacant space, or one that is only available to people with leased buildings.

    I suppose a final thought might be eminent domain. In some states, cities or development authorities may have this power. I'd be hesitant to use it unless the building was not being maintained or posed some risk to the public.

  6. #6
    Cyburbian Emeritus Chet's avatar
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    Originally posted by Michael Stumpf
    Your suggestion of killing off the present owners has merit, but that only works if their heirs are of a different mind on leasing. In some states, it may be illegal.
    I hate to admit this, but a former boss of mine actually did this. The vacant building was deteriorating and the City wanted to buy it, tear it down, build parking and a riverfront plaza. He refused to sell, and the redevleopment authority was hesitant to comdemn the poor old mans building. So, "suddenly" the fire inspectors and building inspectors came through, wrote orders, and started court proceedings for "raze or repair". The story is told that poor Mr. Feller was found dead sitting on his toilet with razing orders clenched in his fist. On the bright side, that City now has a riverfront plaza that I like to call "Dead Feller Park"

  7. #7

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    Good Luck!

    Count yourself lucky in one respect: At least the propety in question is not a rotting firetrap that has sat vacant for years. With a property owner who mumbles darkly about government conspiracies.

  8. #8
    Member Wulf9's avatar
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    Okay, so we can't come up with a tax paradigm. Is there a fee structure anyone has used?

    For example, vacant building could be considered a class of use under business licenses. Fees for vacant buildings would be mucho high. That's probably stretching it a bit.

    How about an impact fee. Vacant land downtown has an opportunity cost and we could charge a fee for the lost city revenue. How would you like to be the consultant trying to establish the "cost" to the city?

    How about a police and fire fee for protecting vacant space. Or a reqirement that owners of vacant buildings hire private patrol because of the potential for mischief. Hmm. Could we do a "mischief" tax.

    Any other ideas? I have a good city attorney. He likes to do interesting things.

  9. #9
    Corn Burning Fool giff57's avatar
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    We are looking at the tax thing backwards. You cannot increase taxes on the vacant buildings, but how about DECREASING them on occupied buildings?

  10. #10
    Cyburbian Cardinal's avatar
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    I doubt that you could legally require the owner of a vacant building to obtain a business license, and in a majority of communities, businesses are not locally licensed. Likewise, as you allude to, impact fees must be substantiated. A vacant downtown building is likely to require fewer municipal services than an occupied one. Additional charges for police and fire protection, if even permitted, would likewise need to be substantiated.

    I would go back to my suggestions of:

    1. Social pressure. Get their neighbors and friends to pressure these owners into doing something with their building. I have seen newspapers get in on the act by publishing photos of local "eyesores."

    2. Create an incentive program. For positive encouragement, consider offering owners of property vacant for more than a year a property tax rebate (one time) as an incentive to lease. Consider loan and grant programs for building improvements. Several other approaches may work.

    3. Code enforcement. Ride the owners of perpetually-vacant properties hard. Cite every infraction and enforce repairs. With the costs of compliance, it might start to look more attractive to have a tenant paying rent, or to sell the building.

    4. Eminent domain. Just take it.

  11. #11
    Member Wulf9's avatar
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    Thanks for the suggestions. We don't have the ability to manipulate taxes, and we have tried all of the others except aggressive code enforcement (building is not deteriorated enough) and eminent domain (small town which has not done condemnation before).

    I'll let you know if we come up with something.

  12. #12
    Cyburbian Cardinal's avatar
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    Originally posted by Wulf9
    We don't have the ability to manipulate taxes.
    The same is true in Wisconsin. I have worked in states where local governments can offer property tax reductions, and I have to say that I prefer not having the ability. I am a believer in tax equity. Why reward somebody for doing something that they should have done already, like everyone else on the block?

    Good luck to you in your efforts.

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