Wednesday, September 15, 2010

Weaning From Over Reliance on Property Tax Revenue

Non-residents may be the fastest growing source of revenue to fund local services for Durham NC.   Analysis conducted by DCVB at the request of  Durham County documents evidence that non-residents (visitors for purposes other than school or work plus commuters) now fuel 25% of the retail sales tax alone.

Even more striking is that non-residents now drive 2 out of every 3 dollars of taxable revenue in many Durham businesses like restaurants - 1/3rd visitor, 1/3rd commuter, 1/3rd resident.  A very healthy mix for one of America’s “foodiest” towns.City of Durham Revenues

It isn’t hard to predict that if the pace of Durham’s emergence as a visitor destination continues as it has since marketing commenced just 21 years ago, this source of revenue and economic impact will become one of Durham’s primary means of sustaining its quality of life in a single city-county that has always had far less developable land than others.

Today, even though eroded by the downtown, the City of Durham expects to reaps 20% of its revenues from sources like retail sales tax, compared to the current national average of 15% and up from 14% in 1990 when marketing commenced to draw taxable visitor spending.

Of course, Durham visitors also fuel significant property taxes from businesses and residents fully or in part sustained by tourism.

Durham’s tourism future offers a way out of the dilemma inherent in over reliance on land development in a community with far less developable land than others.  I predict that the proportion of public services funded by sales tax and property tax respectively can flip flop in the next 20 years, lessening over-reliance on property development and property taxes.

By lessening the need to develop every square inch of Durham, increased visitor-related economic development lessens pressure on open space and natural recreation amenities.  Drawing visitors also helps make existing development much more sustainable through adaptive reuse of historic structures, revitalization of historic neighborhoods and locally-sourced foods to name just a few examples.

And visitors augment rather than compete with Durham’s other economic engines like biotech, hi-tech, education, social entrepreneurialism, research and development and pharma-related research and manufacturing.  The amenities upon which successful visitor marketing relies are the same amenities important to drawing and retaining the creative class workers upon which these enterprises rely.

At the same time, visitors also help offset the tax burden on residents and local businesses in part by requiring far less infrastructure than more traditional, land-intensive forms of economic development.

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