Minicozzi Tells Audience To Allow Their Biases To Melt Away with Regard to Land Use and Development

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Before a large crowd at the Veteran’s Memorial Theater, Joe Minicozzi came to Davis yesterday to do two talks in a program called “Dollars and Sense.” One of his central points was to show how land use policies generally create inefficient uses of land. One of the starker models he demonstrated is that, downtown, mixed-use land produces far more revenue per acre than the types of economic uses many communities promote, in particular big box and malls.

“We don’t measure our cars on a miles per tank basis do we?” Mr. Minicozzi asked. Among other things he is the principal of Urban3, LLC, a consulting company of downtown Asheville, North Carolina, real estate developer Public Interest Projects. Mr. Minicozzi showed how poor fiscal and land management practices harmed Asheville and how just modest reinvestment in existing buildings was able to help that community recover from decades of debt and under-utilized space.

He said it’s silly to think about miles per tank, and yet that is what we are doing for land efficiency. “If we’re doing this for gasoline, why aren’t we doing it for land?”

He showed the mix of uses on that acre of land that provides the wealth and tax for the local government. What he does is attempt to do what he calls “an economic MRI,” or mapping the impact of the land uses on municipal or county funds.

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Joe Minicozzi shows in his own county near Asheville a map where there is a huge estate that is worth $75 million, but it’s 8000 acres. That, he says, is miles per tank. If you look at value per acre, on the other hand, the map changes. The most valuable land in terms of value per acre is in downtown Asheville.

“Where are you getting the potency of your taxes?” he asks. It’s in the downtown of each city. And he illustrates that with maps that show the value per acre – all of which peak in the downtown and fall away on the periphery, even where there is peripheral retail. “The main street, the downtowns, that’s what’s creating the potency.”

He showed a map they had developed of Sonoma County, where each of the relatively self-contained cities had its own unique signature. He pointed out, “You can see the decisions of Rohnert Park where they decided to go with an economic model that was mostly based off of big box stuff off the highway and they have this very low level of development as opposed to those that actually cultivate their downtown.”

“These are all political choices that had an economic effect,” he explained.

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The tax system, he explained, works like this: “The cheaper the building, the bigger the site, the lower the taxes.” He said, “There’s a perverse incentive for me as a developer to build junk in your community, to build real cheap buildings and squander as much real estate as possible with your taxes.”

He added, “Surprise, that’s the American tax system.”

Joe Minicozzi graphically demonstrated that even 100-year-old buildings are often more efficient tax generators for the city than a mall.  “Allow your biases to just melt away to see the data that’s out there,” he said, as he showed that even affordable housing projects can be more efficient revenue generators than malls.

He looked at what new development is creating. As he said, there are incentives to chase that new building because it produces the tax value on the record today under Prop. 13 as opposed to older buildings that are trapped in time, frozen at their initial value under Prop. 13.

Mr. Minicozzi presented this data, showing the inefficiency of Walmart at a presentation, and he explained to a representative from Walmart, “I don’t have a problem with what you do, you’re actually showing us the failure of our own policies. I don’t hate the player, I hate the game.”

Mr. Minicozzi described the presentation from the Walmart representative who sat up there with PowerPoints and spreadsheets “about how cheap his building were.” He’s talking to an audience filled with assessors from all over the country. “Look at how cheap our buildings are.” He said, “We make the cheapest buildings possible.”

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He said, in one sense, this guy is brilliant – “he’s efficiently driving down his tax roll in every single building across the entire nation and world in one meeting. That’s efficient.”

On the other hand, he said, it broke his heart to hear the guy say “we’re going to pay as low taxes as possible in your community.”

Mr. Minicozzi asked him, “What’s the useful life of one of your buildings?” He responded, 15 years. They’ll be out of that building in 15 years. Maybe 20. But they want to start that appreciation cycle and be out of that building in 15 to 20 years. That is their business model.

“Again, I don’t hate the player, I hate the game,” he explained. “These are your policies in action and how people take advantage of them. You just have to be aware of it.”

He showed in Santa Rosa where the Walmart stands in terms of revenue versus a 100-year-old home. He pointed out, here’s a home that’s a 100 years old still producing value and here’s a building that will be gone in 15.

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“Realize what’s producing the wealth in your community,” he said. “And realize there’s a perverse incentive not to do that.”

As he pointed out again, “Let your biases go and just look at the data.” He compared this analysis to Moneyball. He said, “It’s a business book parading as a baseball book.”

Michael Lewis, a trained business writer, was fascinated by the fact that the Oakland A’s were the cheapest team in baseball and yet were very competitive. “In interviewing the manager, he realized that they were just using a different analytic.”

A key factor, Mr. Minicozzi explained, is that the A’s drafted “walkers.” “Has anyone seen the highlight reel on ESPN of someone taking a walk? That’s not a heroic thing in baseball,” he said. They let their biases go, “they weren’t looking for home runs. You’re statistically more likely to get to home plate from first base than home plate.”

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He showed a home district with no big name retail producing more than the mall that has Macy’s, Target and a Whole Foods Market.

“We see this all over the place,” he said.

Tomorrow we will have his brief discussion of Davis and coverage of the panel discussion.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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45 thoughts on “Minicozzi Tells Audience To Allow Their Biases To Melt Away with Regard to Land Use and Development”

  1. Anon

    Sorry I was just not able to make this forum.  It sounds, thus far, what Minicozzi is advocating for is tight infill and against big box retail and urban sprawl.  Do I have that right?

      1. Matt Williams

        I agree with Michelle.

        The key message I got from his presentation at 4:00 was “weigh your alternatives” and enrich your inventory of objective information in order to effectively do that weighing.

        More evidence-based decision-making . . . less political calculation

      2. C.Forkas

        What I got from his presentation is that he looks at things from a purely economic point of view and it’s objective because it’s data based.  It can inform a city what models of development produce better revenues from property taxes. (For instance, it’s surprising to see how much more revenue a three story mixed use building vs a Walmart produces in PT / acre.) Good info. He presentation did not take into consideration things like quality of life, esthetics or community cohesion when looking at the degree of densification, overall building heights, etc.

         

        1. David Greenwald Post author

          Talking to other people, I think he is not arguing that this should be the only consideration when we make our land use policies, but rather we should correctly measure the impact to allow us to correctly assess it.

          1. Matt Williams

            Agreed David. In effect he was arguing for more evidence-based decision making and less political calculation.

            I got the sense from his comments that he believes that political considerations should be part of the evidence that is considered, but that frequently political calculations throw the evidence out the window. As an example of that he spent considerable time illuminating Chattanooga’s recent decision alternatives for adding a Publix supermarket, as well as their ultimate decision process. He didn’t say these words, but I got the strong sense that he felt that by elevating political calculations to the high level of most jurisdictions,they are “putting the cart before the horse” or in some cases actually sending the horse to the slaughterhouse.

        2. Matt Williams

          While I agree with C.Forkas in principle, I don’t agree that the comment that the “presentation did not take into consideration things like quality of life, esthetics or community cohesion when looking at the degree of densification, overall building heights, etc.” When Minicozzi discussed his histogram maps, he was very clear that the value/revenue information was represented by the vertical histogram bars above the horizontal access (ground level) and that the costs of services and impact on quality of life was represented by the vertical histogram bars below the horizontal access. He did not delve deeply into the details of the below the horizontal access “costs” to the community, but he did point out that in addition to the normal budgetary dollars for the cost of services, they had incorporated other measurements such as “percentage of homes that had no automobile” to better understand the impacts on both a city’s infrastructure and the quality of life for its citizens. Given our past discussions about Nishi and possible market based strategies for decreasing the amount of land area devoted to automobile parking spaces by voluntary reduction of automobile numbers by the residents, Minicozzi’s awareness of “below the line” impacts resonated with me both as a citizen and as a member of the Finance and Budget Commission.

    1. Tia Will

      Anon

      I was at the talk and want to stress that this his is recommendation if what we are seeking is the largest amount of property tax attainable by the city. What he also stated clearly but did not elaborate on is the importance of the city having a clear concept of what it wants to look like in the future. I interpreted this to mean that he felt that a coherent future plan was also very important.

  2. Frankly

    Sorry I could not make this event.  Very interesting.  Common sense, but significantly lacking from my perspective.

    Did he talk about land use and business NEED?  Certainly office space, residential and much of retail can be stacked in multi-story buildings.  But there are many land-use needs that require single-story buildings.

    And it is fine to look at land-use from a tax-generating perspective, but not without understanding land costs and the impact of this on the business.

    My business makes commercial real estate loans to small business owner operators.  There is a low inventory of medium-sized light industrial and flex space properties in much of California.  This is causing business that needs space to pay more for it.  In some cases they cannot quality for the loan.  In other cases they move to space too large and too expensive because it is all they can find.  While the higher costs improve tax revenue to the city, it constrains the company from being able to pay higher wages and benefits to its employees.  It constrains R&D budgets.  It causes the company to have to increase prices; thereby causing it to lose market share to competition.  And eventually the high cost of land results in more of the good companies to locate to other areas and other states where land is less expensive.

    Also, there is no discussion of redevelopment here.  Many vibrant communities today have leveraged a supply of commercial property that is re-used.  For example, there are places in the state and country where small artisans and makers have taken over previous industrial spaces that had been abandoned as the economy changed.  That was the purpose of RDA that our governor raided and killed to give to the teachers union.  But there are other funding mechanisms that can be used to help with redevelopment.  And so the calculation of the value of land-use over a longer time-period needs to consider the opportunity for redevelopment.

    But overall, I am in agreement with the mindset that downtown, core-area densification is the way to go.  Building up is the only way to mitigate the problems with project feasibility resulting from land price inflation.  So build the Trackside development and more like it.  Yes, the direct sun will be blocked for some at some points of the day and year.  But then that is what happens when the population demands we encircle a city having a growing population with a farmland moat.

    1. Alan Miller

      That was the purpose of RDA that our governor raided and killed to give to the teachers union.

      RDA was a scam and a developer subsidy.  So is TOD, “affordable housing” and Section 8.  Market forces my arse. Now that you state the nature of your business, I understand why you support corporate welfare — it benefits you. “Conservative” my arss.

    2. Napoleon Pig IV

      Excellent points, Frankly. In addition to the negative impact on businesses that can’t find adequate, medium-sized light industrial and flex space properties in California, but continue operations in the state anyway, there are also the companies that leave California or invest in expansion outside the state – generally where prices are lower and governments are more friendly to business.

  3. Michelle Millet

    Did he talk about land use and business NEED?  Certainly office space, residential and much of retail can be stacked in multi-story buildings.  But there are many land-use needs that require single-story buildings.

    I think his point, and I may be wrong, is not whether single story buildings are needed instead he questions whether they generate as much revenue as multi-story buildings.

    1. Frankly

      I get that, but vacant land brings in zero tax revenue.  The use of the land has to match the need or else it will not be used.  For example, I don’t know of any Target store in a multi-story building.  So you can make the claim that Target generates less tax revenue per acre as a single-story, but the alternative would be zero Target and zero tax revenue.

      1. Michelle Millet

        https://en.wikipedia.org/wiki/Target_Corporation
        While many Target stores share a fairly common big-box store layout, the company has been flexible with its designs. Target operates unique stores across the country in urban locations or within malls, in which a standard one-story building would not be feasible. These stores encompass multiple floors with both sales floor area and offstage areas such as offices or storage rooms spanning a number of these floors. Vertical transportation is provided in the store by escalatorelevator, or shopping cart conveyor, a specialized escalator for carts.
         

      2. Davis Progressive

        one of the arguments he made was not zero anything, but rather changing the model for how we do it.  for instance, why have a huge parking lot of wasted space next to target when you can put it on top of target and utilized one-quarter of the footprint.

      3. Matt Williams

        Frankly, one of the vignettes that he delved into in detail was (what I will call) a Target-equivalent.  Specifically it was regarding the planning of a Publix grocery store for Chattanooga Tennessee.  He stepped through various scenarios that Publix has used in other localities, Miami and North Miami Beach being two such examples.  The graphics below show the initial concept and the second image shows the multi-story, mixed-use Publix in North Miami Beach and the third and fourth images show the multi-story, mixed-use Publix in Miami Beach.

      4. Tia Will

        Frankly

        I don’t know of any Target store in a multi-story building”

        I think that this was a small part of what he was addressing when he repeatedly stated to “let your biases melt away and look at what is out there.” I also do not know of any Target store in a multistory building, but I do not know that that is not possible, just that they do not seem to have adopted that model. That does not mean that it could not be done, just that they haven’t pursued it . Most McDonalds that I have seen in this part of the country are stand alone or in single story buildings, but in Europe and in some other parts of our country and Canada, they are located in multistory buildings. I think that businesses just like individuals an become too highly invested in how things have traditionally been done and unnecessarily exclude other potential models.

      5. odd man out

        From Wikipedia. I also believe the Albany, CA, Target is multi-story.

        “Target has used its urban store concept to open multiple-story stores in city centers, such as in Annapolis, New York City, Los Angeles, Chicago, Seattle, San Diego, Washington, D.C., Atlanta, Miami, New Orleans, Minneapolis (within the corporation’s headquarters complex), Glendale, California, Pasadena, California, Portland, Oregon, Stamford, Connecticut, and Homewood, Alabama.[16] In July 2010, a Target store opened in New York’s East Harlem.[17] The company also opened an urban store in Pittsburgh‘s East Liberty neighborhood in July 2011.[18]”

         

    2. David Greenwald Post author

      Also it’s not just density – it’s the quality and thus value of the building that matters. Cheap buildings like WalMart have lower property value and lower density than other buildings.

      1. Frankly

        That makes sense.  Although again, light industrial does not require expensive buildings.  So if the alternative is expensive buildings, the land would be vacant unless there was a demand for the use of expensive buildings.

        1. Frankly

          Innovation business requires both office and light industrial and flex space (basically shell buildings that can be reconfigured).  Natomas has some inventory, so does Roseville.  But it is being depleted.  And it is not close to the university.

        2. Davis Progressive

          industrial with machinery would add value to the site.  you wouldn’t need expensive buildings for that.  in addition, the other part is density – with a wal-mart you lose a lot when you have a huge parking lot.  he showed slides/ photos where they had parking on top of an eastern grocery store.

  4. CalAg

     

    “But overall, I am in agreement with the mindset that downtown, core-area densification is the way to go.”

    In principal I agree. However, the problem with this strategy in Davis is that we do not have the infrastructure in place to support significant densification of downtown. The three main problems are (1) the I-80/Richards bottleneck, (2) downtown parking, and (3) our inability to route through-traffic (e.g. to UCD) around our inefficient core area grid. Add to this our problems with (1) ossified downtown landowners, (2) politically active residents opposed to change, and (3) a low-performance City government, and I just don’t see the formula for going in this direction.

    Before we worship at the alter of densification, I would prefer that we start with modest peripheral growth. Ashville NC has a population density of <2,000/sq mi. Davis CA has a population density of >6,000/sq mi. The lessons of Ashville don’t translate well to Davis.

      1. Matt Williams

        Frankly and Anon, I don’t think Minicozzi’s message was an either/or proposition, but rather an approach to maximize value which was applicable across the spectrum that ranges from either/or to both/and.

        One takeaway I left the room with yesterday was a much greater appreciation of the potential of Alternative Two of the Mace Ranch Innovation Center Draft EIR (see http://documents.cityofdavis.org/Media/Default/Documents/PDF/CDD/ED/projects/Innovation-Centers/Mace-Ranch/Draft-EIR/7_Alternatives%20Analysis.pdf )

        1. CalAg

          Why reduce the size? Tomatoes grow just as well on land zoned Industrial as they do on land zoned Agriculture.

          The MRIC development is obviously going to be phased (possibly over several decades) – so the City can require phasing in a way that is friendly to tomato farming. If the City wants more density, then the Council can set the FAR at any number they want when they grant the entitlements.

          Having a large inventory of undeveloped innovation park land is a good thing. It shows tech businesses and investors that Davis has a future. Who wants to build a company in a stagnant ecosystem where the community has to fight over the next allocation of land every time the inventory runs low?

    1. Anon

      CalAg, I am more of your view.  The city can only densify so much, before it becomes a serious problem.  At what point does the city say high is too high?  Shall we allow 6 stories?  Well what they heck, why not 30 stories?  You cannot densify out of every problem.  CalAg names a lot of the issues with densification peculiar to Davis.

      1. Davis Progressive

        you’re missing something here.  we are not talking about densifying anything.  but in the downtown area you want more density and we have a lot of single-story, under utilized space that could become mixed use and multi-level without over-densifying.

        1. Davis Progressive

          “CalAg names a lot of the issues with densification peculiar to Davis.”

          but he showed a lot of ways that expanding the borders increases infrastructure costs tremendously.

        2. CalAg

          Actually, nothing I’ve posted says that expanding the borders increases infrastructure costs. On the contrary, expanding the borders actually lowers infrastructure costs if planned and executed correctly.

  5. Miwok

    None of the examples in this article mention the Sales Tax revenue? Only property taxes? What happens when this is factored into his slides?

    $77Mil in sales would generate something?

    1. CalAg

      If I recall, Minicozzi’s analyses show that sales tax revenues don’t qualitatively change his rank of land uses. In other words, the bump from sales tax revenue is not enough to overcome the influence of property tax. But this is a byproduct (AKA bias) of his methodology.

  6. Anon

    DP: “you’re missing something here.  we are not talking about densifying anything.  but in the downtown area you want more density and we have a lot of single-story, under utilized space that could become mixed use and multi-level without over-densifying.

    Huh?  “We are not talking about densifying anything… but in the downtown area you want more density…”  I am at a complete loss in regard to these two completely conflicting statements.

    We may have some underutilized single story space in the downtown, but does that mean we should raze it all and build 30 story buildings because it would bring in more tax revenue?  Is the Trackside project or the other one where Families First used to be too tall at 6 stories, or should we allow them to go higher?  There are often interests other than tax revenue generation that come into play – aesthetics being one, cost to have fire equipment on hand to deal with a 6 story (or more) fire on the other.

    1. Davis Progressive

      my bad, i meant to say, ‘we’re not talking about densying EVERYTHING’

      “We may have some underutilized single story space in the downtown, but does that mean we should raze it all and build 30 story buildings because it would bring in more tax revenue? ”

      how about three or four stories?

  7. Michael Harrington

    Oh, so let me try to get this straight:  Davis progressive political leaders who have promoted continued focus on commercial and mixed use in the downtown, and who opposed Measure K (the ballot measure that led to the Target Shopping Center), and who have opposed sprawling shopping centters and subdivisions on the city edges, were maybe just …. correct … to do that, from a city economic sense?

     

    The holidays are coming up, and we will be looking for our thank you bottles of wine?

     

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