The exemption has the ability to make a project financially feasible. If it is not financially feasible, it does not get built, so the City and other taxing jurisdictions never get the tax revenue. With the exemption, they get the tax revenue after 10 years. The exemption can make a housing financially feasible, and the City grows its tax base in the long term.
For example, the 50-unit Tate Condominium project used the MUPTE 9 years ago. When it comes onto tax rolls next year, it will generate approximately $262,000 in tax revenue. Without the new structure, the property would generate about $3,300 in tax revenue.
Because MUPTE encourages development is in the downtown core, the City is able to more efficiently provide services than in less dense parts of the community. Dense development requires less pavement, less sewer line, and less water line than in low density areas. The City generates more tax revenue per acre and spends less per acre.
Using the Tate Condominium as an example again, when it comes onto the tax rolls next year, it will generate approximately $300,000 per acre in annual property tax revenue. In comparison, an acre of single family housing generates about $20,000 per acre annually. Over a 20-year period, the Tate will generate more than 7.5 times the tax revenue per acre, when compared to single family development, even with a 10-year tax exemption.
There have been 28 residential projects that have received a MUPTE since 1978, creating 1,490 units. The private developers invested $283 million in those projects. The total combined tax revenue being generated on the 28 properties was approximately $133,000 per year before the projects were constructed. When all of these projects come onto the tax rolls, they will generate approximately $2.5 million per year in property tax revenue. The City did not have to invest any public resources (i.e., cash) to achieve this significant increase in tax revenue. In fact, the private sector was responsible for the entire investment and took all of the investment risk. The City’s primary role was to sit patiently for 10 years waiting for the added value to come onto the tax rolls.