
How about an “urban wealth fund”? - jseliger
http://marginalrevolution.com/marginalrevolution/2017/07/urban-wealth-fund.html
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huac
> Leasing space in subway stations to shops might detract from the “historic”
> character of the US’s barbarous public transit systems, but the revenues
> could fund needed improvements, such as ventilation, without the need for
> debt or higher passenger fares.

All the public transit systems I've rode in Europe and Asia have lots of
infrastructure (especially stores) built into their train stations. I found
them to be a welcome convenience rather than a distraction - and the many
travelers in the stores indicates that others did too.

If private shops in the subway is the price we pay for efficient public
transit, then please, may I have some more?

~~~
kasey_junk
Are they rare in the US? Every stop I use regularly (in Chicago) has shops in
it. The only ones I can think of off the top of my head that don't are ones
where there isn't space or where businesses have left on their own volition.

~~~
wenc
The majority of the L stops I use in Chicago don't have shops (mostly blue
line, some red line and brown line).

Which ones do you use that has shops?

~~~
kasey_junk
The 5 stops I use most are (in order of use):

\- 53rd Street Metra (bicycle/coffee shop)

\- Randolph Street Metra Station (~8 or 9 shops of various kinds)

\- Merchandise Mart Brown Line (attached to a mall)

\- Clark & Lake CTA in the Loop (entered via 2 different shopping centers or
the street)

\- Randolph/Wabash CTA in the Loop. No shopping at this one as it is an old,
small elevated stop. That said, in the little space it does have available
there is vending so it _has_ been commercialized.

The red/blue lines are good examples of what I mean by not having space. Where
would you put shops that would generate enough revenue for the work of putting
them in to be valuable? The 95th street station used to have a newstand in it
but doesn't anymore, I assume because they couldn't find tenants.

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JumpCrisscross
I live in New York City's Flatiron district [1], adjacent to Chelsea [2]. It's
a wealthy neighbourhood with vibrant retail activity.

One day, over brunch with a friend in real estate, we did some back-of-the-
envelope math on one of the neighbourhood's housing projects. If the city (or,
in the case of Penn South, the coöperative) simply sold the ground floor of
housing to retailers, they'd generate enough cash to build an entirely new
structure somewhere uptown.

This never happens because nobody is politically incentivised to do it.

[1]
[https://en.m.wikipedia.org/wiki/Flatiron_District](https://en.m.wikipedia.org/wiki/Flatiron_District)

[2]
[https://en.m.wikipedia.org/wiki/Chelsea,_Manhattan](https://en.m.wikipedia.org/wiki/Chelsea,_Manhattan)

~~~
bilbo0s
To be fair... what you described is not what's being suggested by the "Urban
Wealth Fund".

What the "Urban Wealth Fund" idea would do is essentially have that property
put into a pool of property with ... for instance ... the State's property.
And then give out shares based on the value of the property the city put in.

I can understand why someone holding real estate would not want to do that.
Especially if the city is putting in something in Flatiron... that may not be
very valuable in price, but can be leased for FAR more than any of the
property that the state might put in. (Even though the state's property may be
more valuable in price, as some of it includes Beaux Arts buildings, but can't
be leased for as much.)

It's far smarter for the city to just go it alone in that instance. (Well, I
guess "smarter" is too loaded of a word, so maybe I should just say that the
city would derive far more profit from just leasing the space on its own.)

And that's just the single instance you mention. It gets even more complex
when you talk about the city kicking in an asset like... say ... Central Park.

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jaggederest
This seems like a really bad idea for all sorts of perverse incentive reasons.

Primarily I'd guess related to the fact that the costs of running a city of a
given size are basically entirely fixed costs, rather than being marginal.
Especially when you add that most of the essential services a metro-area
government provides are revenue negative.

Trying to make (for example) the health department "pay fair market rents"
means you either have no health department or a drastically less effective
one.

~~~
fwn
If the health department is not paying the actual price, someone else is
paying the difference.

The department therefore does not get cheaper, it just looks cheaper on paper
since the real costs are hidden. The reduced transparency is what stands in
the way of creating democratic or market based decisions on the departments
funding.

~~~
nostrademons
"Democratic" and "market-based" decisions are two different things. You get a
democratic decision when a majority of people believe that a good should be
available to everyone at a price less than their share of the additional taxes
needed. You get a market-based decision when an individual person believes
that a good should be available to them, at a price less than the offering
price.

Most public goods are public goods precisely because a majority of people will
purchase them under the former conditions but not under the latter. There are
a wide variety of public services which _you personally_ would not be willing
or able to purchase for the total cost of providing the good, but would
happily go in on if the rest of a large population could be made to pay their
fair share.

A number of die-hard libertarians believe this is theft, which it is in a way,
but relatively few of them are willing to move to a remote location and live
off the grid to avoid this. Perhaps this is because they know that the
alternative is _also_ theft (or worse), because the common defense and the
legal system are _also_ public goods, and so you have no way of enforcing your
property rights without relying on taxpayer-funded systems.

~~~
brightball
People often confuse libertarian with anarchist for some reason. Libertarians
aren't against public service because of taxes.

They're against public services because once created they never go away,
become entrenched, have no incentive to shrink their budgets or run more
efficiently and every new one tends to become an immovable leach on society.

Just as an example...think about garbage pickup for a minute. It's a public
service that a lot of people would probably pay for (and many do in areas
outside of city limits)...but what has it enabled?

If everybody didn't have trash pickup would people be less inclined to throw
things out and buy replacements? Would society in general be more inclined to
learn to make repairs?If recycling pickup was free because it generated money,
but trash pickup was not because it didn't...would society be more sustainable
by default?

If a business made investments into equipment to offer trash pickup as a paid
service and then a recycling pickup as a free service came along...the trash
company would go under. If a city makes investments in trash pickup as a taxed
service, would it ever be a big enough line item to even have the
conversation?

Just one of many well intentioned public goods.

------
lmm
The part that's missing is that much of the market value of property in the
city comes from having these public buildings in place. Libraries, hospitals,
transit stations and so on could be funded entirely out of the value they add
to nearby homes and business land - it's just that value can't be captured so
easily, because ownership is diversified.

A land/property value tax that was applied equally to public and private land
would achieve the article's goals but also ensure that government was properly
incentivised to produce value for those in the city, by rewarding them for
property value increases with increased tax revenue.

~~~
jnordwick
More likely they would just reward themselves by making a hand wavy argument
about how value isn't flowing to them like it should be in their idea of a
rational market and increase the tax.

A land value tax would also put the onerous cost on citizens nearby and make
rents and property cost even more. Then you would probably see a stream of
subsides come in to support low income renters.

It seems like it is a much more intrusive government solution with a lot of
downside.

~~~
lmm
> More likely they would just reward themselves by making a hand wavy argument
> about how value isn't flowing to them like it should be in their idea of a
> rational market and increase the tax.

Well, no tax system is immune to people arbitrarily raising the tax rate.

> A land value tax would also put the onerous cost on citizens nearby

It means the costs are shared in proportion to the benefits rather than
everyone in the city paying for improvements that only benefit one area. (And
if the city builds a prison or incinerator in your backyard that harms your
property value, then at least it lowers your taxes).

> make rents and property cost even more

It should lower the cost of property (since property now comes with a tax
liability) and encourage putting land to productive use (i.e. building houses
rather than "land-banking") or selling it to people who can use it, which
would lower rents. What it penalizes is using property as an investment.

(Land value tax is not just some random idea I came up with; it was advocated
by Adam Smith, Ricardo and others. Look at the writings of Henry George, and
look at SF property prices today and tell me he was wrong: gains in economic
productivity are captured by the rentiers who own land rather than going to
those who produced them).

------
dsl
> ...and have the option to borrow against or sell their shares if desperate
> for cash.

Do you want to fast track privatization of all public infrastructure for
pennies on the dollar? Because that is how you get it.

------
josefwasinski
In London, Transport For London (TFL) is the largest land holder, and operates
all public transport (trains, underground, buses, taxis) and only 23% of its
funding comes from Government, the rest are from things like tickets,
licenses, fees, rents etc. The government is pushing for them to become self-
funded by 2018.

So there is an example of how something like this could work - if you have the
assets to leverage. I think the obvious risks can be easily mitigated with
safe-guards around selling assets and debt limits.

~~~
TheCoelacanth
I think public transportation agencies owning land is a model that actually
makes a lot of sense if you think about it.

A large portion of the land's value comes from its proximity to public
transportation service, so it makes sense that the public transportation
service would be directly funded by collecting rent on the land value that it
created.

~~~
pm215
This is somewhat similar to what the Metropolitan line did in the first third
of the 20th century -- [https://en.wikipedia.org/wiki/Metro-
land](https://en.wikipedia.org/wiki/Metro-land) \-- though in that case I
think they mostly sold off houses and building plots on the estates to gain an
immediate capital return on the increased land value, rather than retaining
the land and collecting rents.

------
ThrustVectoring
Better, IMO, is a relatively simple accounting change. Start charging rents
for the real estate used by departments, and use the proceeds to fund those
departments. It's a win-win: departments can more efficiently use their
funding, and constituents get a better sense of the true costs of the services
involved.

------
mathattack
Could this be used to fund Universal Basic Income? A starter is looking at the
wealth fund in Norway or citizen dividends in Alaska.

~~~
ThrustVectoring
Not really. Unless you get efficiency gains, all the income from the
government charging itself rent gets eaten up as expenses for paying itself
rent. Basically what it's doing is making imputed rent an explicit budget
item, and then allowing financial ~stuff~ to be done with those budget items
explicitly (say, letting a department save money by using real estate more
efficiently).

~~~
mathattack
My interpretation was they charge other people rent for the services, no?

~~~
ThrustVectoring
Not at first. It's fixing an accounting rule that draws distinctions between
equivalent cash-flow situations.

A: City owns an office building with a $1MM/yr fair-market rent, which it uses
for administration.

B: City collects $1MM/yr rent from their office building, and pays $1MM/yr to
rent out a different building for their administration to use.

If you net out the imputed rent in situation A, then it looks like the
administration is $1MM/yr cheaper than it actually is.

~~~
mathattack
Ahh - got it. Thanks!

