a race to the bottom

An opinion piece on MarketWatch talks about how Big Box development essentially leads to American municipalities becoming insolvent. In essence, the tax breaks meant to entice development away from other municipalities leads to a race to the bottom and eventually to ratables the returns of which do not cover the infrastructural costs that municipalities must bear for these developments. Essentially the property taxes from these stores do not cover the roads, sewers, etc. that cities must build and maintain in order to service these new developments. 


In a sense, if one were to be more fiscally conservative in the political sense, then a user fee – or user pays for what they use – would be more appropriate. Each store pays for the roads, sewer lines, etc. that have been built and maintained for them. The same would go for any development.  Georgism here would argue for a land tax, meaning property owners now have an incentive to intensify land use rather than sprawl out.


StrongTowns is a blog that I have followed for a long time that has argued that sprawl and revitalization of our cities are dependent on fiscally sound practices. Rather than going after these poor investments, towns must more properly evaluate what is a good investment. In a sense, if one were to account for all these costs, the market would push towards more compact development. If stores had to cover their infrastructural costs, they would want to lower this cost as much as possible, leading to less sprawl. I also believe regionalization is an important part solution. Essentially there are no longer multiple players fighting among each other in a race to the bottom.


Stadia and arenas are another prime example alongside Big Box stores. Cities do not recoup as much as they spend on these projects.