Austin Contrarian

The City wants to get into the parking business

Condo builders are apparently reluctant to build or operate public parking downtown, so Councilmember McCracken wants the City to take up the slack.  He claims it will be "cheaper" for the City to build public parking:

McCracken believes they could be financially beneficial for the city because it could lower construction costs by issuing low-interest debt and wouldn't have to pay property taxes on the finished product. The city also would be willing to accept lower profit margins than private developers.

This is pretty shaky accounting.  The City's loss of property taxes is part of the cost of operating a City-owned garage, regardless of whether it has its own budget entry.  This also ignores the opportunity cost:  if the City could sell a lot for a gazillion dollars, but instead builds a public garage on it, the lost loss of that gazillion dollars is a cost, too.

I'm also skeptical that these will generate enough revenue to cover the construction and operating costs.  Developers' land costs and property taxes are more or less fixed costs.  The cost to them of adding public parking is just the marginal construction cost.  That they don't think public parking will provide a profitable return on this capital investment is a reliable indicator that it is not.  This shouldn't really be a surprise, since much of the return from parking is captured by merchants, who benefit from the traffic.

Parking is a problem downtown, and I'm not trying to suggest that the City sit on its hands.  But we shouldn't go into this thinking that this will be anything other than a subsidy for downtown property owners and merchants, possibly a deep one.  We also need to recognize that this subsidy will fall most heavily on those without cars.

You can think of downtown as a complex ecosystem, with the different inhabitants in a mutually dependent relationship.  The condo builders need plenty of street-level retail to make their condos attractive to buyers.  The retailers need plenty of condo dwellers.  But they also need traffic from outside downtown, because the condo residents alone won't keep them in business.  It is a fantasy to think that buses will bring enough traffic downtown, at least anytime soon, so the downtown retailers need parking.  The problem is that the condo builders who could build the parking don't want to take the hit for the benefit of everyone else.  It's a classic free-rider problem.

The City can do some things fairly easily.  It can start by charging what the market will bear for existing parking, particularly street parking.  (The price should be set high enough so there is always some free curb space.)  This will maximize revenue and encourage those traveling downtown to consider alternative transportation.

Ideally, it would figure out some way of shifting the cost of new parking to downtown property owners.  Spending some of the density bonuses on parking would be a better use of the money than some of the others uses that have been proposed.  Developers would probably be more receptive to that use, since ultimately it will enhance the value of their property. 

Could the City create a public improvement district to fund parking?  The district would build the off-street parking and assess the owners. That would eliminate the free-riding problem, and eliminate the subsidy.  And if the City put the decision-making in the hands of the downtown merchants and property owners, it could reduce the risk of oversupplying parking -- presumably, downtown owners won't pay to build more parking than they need. 

I'm not a local government finance expert.  McCracken may have already considered and rejected this possibility.  But I'd like to hear that all options have been considered before the City launches into a risky, property-subsidizing enterprise.

P.S.  Shilli at Austinist has a similar take (although he appears to be more skeptical of the need for new parking).

Law school chum

My law school roommate has been sued by convicted terror plotter Jose Padilla:

Jose Padilla, the American citizen who was held in military detention for more than three years as an enemy combatant, filed a lawsuit Friday against a former Justice Department lawyer who helped provide the legal justifications for what the suit says was Mr. Padilla’s unconstitutional confinement and “gross physical and psychological abuse.”

The lawyer, John C. Yoo, now a law professor at the University of California, Berkeley, wrote or helped prepare a series of legal memorandums on interrogations and the treatment of detainees after the Sept. 11 attacks.

A lawyer for Mr. Yoo, Eric M. George, called Mr. Padilla’s suit “a political diatribe” that “belongs, at best, in a journal, not before a federal court.”

Mr. Padilla, 37, was transferred from military custody to the criminal justice system in 2006, and in August he was convicted of terrorism-related charges in Miami. He awaits sentencing.

The new lawsuit, filed in federal court in San Francisco, seeks only one dollar in damages. “That’s what Padilla directed us to ask for,” said Jonathan M. Freiman, one of Mr. Padilla’s lawyers. “At bottom, this isn’t about money. It’s about right and wrong.”

John was well to the right of me in law school, at least on stuff like this.  We did not talk about politics or even law much, though.  Our interests didn't mesh.  He was interested in esoteric issues of federal jurisdiction and executive powers and I was interested in property law and land-use controls.  The one significant exception occurred when he got assigned a regulatory-takings case for moot court.  I got stuck with some Establishment Clause case about prayer at a high-school graduation that I couldn't have cared less about.  I spent more time working through the fine points of the takings issues with John than I spent thinking about my own case.

We were a real odd couple -- an urbane Philadelphian and a snuff-dipping redneck from Mississippi.  We rented a house on the shore of the Long Island Sound in a New Haven suburb.  It was a long way from the law school, too far really for me to justify going to class, so I spent my time skipping Bankruptcy and watching the Movie Channel.  John spent his time editing articles for the Law Journal, hobnobbing with professors, and doing the other things that overachievers do. 

John is a very smart guy (he was tenured at Berkeley by 30 or some such ridiculous age) and a thoughtful guy, media portrayals notwithstanding.  He knows his stuff, and has a calm, reasonable style that can be very persuasive.  (After all, he convinced a slew of seasoned government lawyers to sign on to his legal analyses.) 

I always thought John was wildly off the mark with Padilla, though.  How can a US citizen apprehended on US soil be held without trial merely because the executive has classified him as an "enemy combatant"?  John has some precedent involving saboteurs apprehended on a beach during World War II, but it never seemed that persuasive to me.

Still, I can't believe this case is worth the filing fee:

The suit is based in part on a recent book by Jack Goldsmith, a Harvard law professor who, while serving in the Justice Department in 2003 and 2004, disavowed some of Mr. Yoo’s work. In the book, “The Terror Presidency” (W.W. Norton), Mr. Goldsmith wrote that two of Mr. Yoo’s memorandums were “legally flawed” and “tendentious in substance and tone.”

I freely confess my bias in favor of my friend and my lack of familiarity with the case law governing this type of civil-rights claim.  But I am skeptical that a court will allow a government lawyer to be exposed to civil-rights liability for a legal analysis he prepared for his client.  That would, quite predictably, chill candid legal advice. (I'm sure one of the ulterior motives of this suit is to do just that).  In any event, mere evidence of "tendentiousness" won't be enough -- they hand out tendentiousness with the law degree.   Even if the court allows the claim to proceed, I imagine it will require proof the analysis was prepared in bad faith or without a colorable basis or something similar.  Padilla won't be able to prove that.

Anyway, I hope this thing gets thrown out for my friend's sake.

Now back to our regularly scheduled programming . . .      

Sales taxes vs. property taxes

From Todd Hill at Burnt Orange Report:

Yesterday at a fundraiser in Weatherford, Republican Phil King let it be known that the Texas House has formed a committee to figure out how to abolish the use of personal property taxes to support public education and instead transition to a regressive sales tax.   

. . .

King had this to say to the Weatherford Democrat:

"I am absolutely convinced that my constituents, and frankly, the voters across Texas would rather pay a sales tax when they purchase something than a property tax for the rest of their life," King said speaking by phone Wednesday.

I agree that this is a horrible idea, but not necessarily with Todd's reasons:

A sales tax is a tax on the poor and middle class, plain and simple.  The majority of middle class and poor Texans spend the majority of their taxable income on goods and services.  Considering the heavy tax burdens, and current economic burdens already on this class of Texans, a sales tax would certainly crush what remains of this core block of constituents.  You can't lay the future of Texas public education on the unpredictable peaks and valley's of an economy.  This move would cripple the foundation of Texas public education, which the majority of Texas children attend. 

Is a sales tax necessarily more regressive than a property tax?  Depending on the homeowner's equity and interest rate, property taxes may account for 25% or more of annual housing costs.  Someone who pays 30% of gross income on housing thus may pay 7.5% of his gross income in property tax.  Lower-income households, who often spend much more than 30% of their gross income on housing, are hit even harder.  (Renters pay the property tax, too -- it's just folded into their rent.)

Someone spending 30% of gross income on housing would be lucky to have 50% of gross income left to spend on taxable goods.  Even if the sales tax were jacked up to 10%, such a person would pay just 5% of gross income in sales tax.  Also, sales taxes are more easily avoided than property taxes.

On the other hands, cutting property taxes probably would cause property values to rise.  Current homeowners would benefit at the expense of renters/future homeowners. 

Still, It's not clear to me that sales taxes are more regressive than property taxes.   

This is still a horrible idea for two other reasons.

First, sales taxes mean state funding.  State funding means state control.  Schools have an incentive to be more responsive to students and parents when they are subject to local control.  (They're already subject to too much state and federal control.)

Second, slashing property taxes and raising sales taxes creates perverse incentives for cities and towns.  New residential development becomes a financial burden because it does not pay its own way through property taxes.  Cities become overly dependent on retail, causing them to fight each other for shopping centers while shutting out new homes.  That's arguably what Proposition 13 did to California.  In fact, there's a good argument that Proposition 13 accounts for much of the anti-growth sentiment in that state, which in turn has caused the crippling home prices out there.  I doubt those spending 40% of their gross income on interest-only mortgages are reveling in their low property taxes.