Friday, December 10, 2010

142 McMicken: The economics of demolition vs restoration to our tax base

The historic loss to the street scape of McMicken will be serious. At a time  the city and CPS are both money hungry , The city is laying off  police and fireman, one might wonder  the 'logic' in allowing a four story building to be demolished at a time when OTR is enjoying a resurgence to put in a driveway.

This is a teachable moment however and provides an opportunity for us to explain the economics of restoration vs demolition and the loss to the tax base and how that affects even non preservation minded people.

So lets look at the numbers 142 McMicken  a "dangerous property according to city officials and CPS" was assessed by the  auditor for 118,720.00 and generated an annual tax bill of 4120.00 per year. Note that CPS was delinquent according to the auditors office in the amount of 1744.32. Why a demo permit would be pulled on a property with delinquent property tax is another matter and just one "loophole" that needs corrected. The current bill shows 2192.29 in school taxes for the 1/2 yr tax distribution including delinquent..

So if the value remained flat over 10 years the property  just as it is, would generate 41,200.00 in property taxes.

As an "improved vacant lot" worth 5000.00 the property would pay only 1745.00 over a 10 year period of which a minuscule  445.00 would be raised over that same 10 year period for schools. So at a vacant lot use it would take 40 YEARS to generate the school tax revenue just currently owed .

Now if the building were restored. Jobs are created or preserved, construction jobs, realtor commissions architectural firms etc., If we assume 6, 2 bdrm condo units are created at the "average OTR condo price of 150,000.00 That is 900,000.00 add in two commercial spaces that sell on average for 75,000 each. That is another 150,000.00 added to the value for grand  'appraised total' of 1,050.000.00 .

At that value the 'assessed value" would rise to 402,510.00 and the property would generate of 39,916.00 and of which CPS would receive 10,190.04 PER YEAR. Assuming no rise in value over that 10 yr period (more likely values would increase), the property would generate a whopping 399,160.00 in taxes of which 101,904.00 would be school taxes over 1 decade.

That does not include the fact the residents of those condos would have average family income of 100,000.00 and would be paying income taxes, buying things in the community paying sales taxes. Two businesses would be located there which in addition to corporate taxes would have employees who pay income tax , not to mention sales tax and this one property could easily generate over 750,000.00 in taxes over a ten year period.

So the next time the city 'whines' about the fiscal problem we have, the next time that CPS whines about needing more money. Print this out and give it to the councilman, city or school employee complaining. This is why EVERY ONE'S taxes go up because rather than create jobs and opportunity we demo buildings and LOSE revenue.

This is why Historic preservation makes sound economic sense.

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