Is IKEA Pulling Its Weight?
I haven’t heard back from you since we talked about how you’ve been participating in a Ponzi scheme since the 1950s. I know I was a little abrupt, and it probably came as a complete surprise to you. I probably even freaked you out a tiny bit. Or maybe it’s that you still don’t believe it. As they say, denial isn’t just a river in Egypt! [Hmm… that one doesn’t work so well in writing.]
But because I care about you so much, I think it’s important for you to understand there is a better way.
First, what is it about these suburban-style developments that makes them money losers? Well, as we’ve seen, it comes down to the sheer amount of infrastructure required to support them. Even when someone else is building the roads for you for free, the maintenance costs alone are enough to kill you. There just isn’t enough property value in those developments to support all the infrastructure that comes with it.
But why is that? We somehow managed to get along fine before the 1950s, so what changed?
In a word: cars.
If you’ve never heard of them, cars are amazing inventions that have absolutely revolutionized the way we get around, nay, the way we live! They’re comfortable, convenient and quick. Plus, some of them look really cool. So naturally, as is human nature, we decided that it would be great if everyone could travel by car, everywhere, all the time. More of a good thing must be a better thing!
And so, ever since the end of World War II, we’ve been developing our city with the goal of making sure that EVERYONE can drive for every trip. But the upshot is that cars take up a lot more room than humans do (not only for driving them, but also for storing them, ie. parking). And that not only requires a LOT of infrastructure, it also gobbles up an obscene amount of land (and land is what you can tax, so it’s your main source of revenue). So it’s a double whammy — it costs more, while also reducing your ability to raise income.
Now, none of that may have been a huge problem for a rinky-dink city of 350,000 residents in 1950, but you’re all grown up now, heading into 1,000,000 residents before too long, and looking to play with the big kids. All that infrastructure on such a small tax base is going to leave you broke and penniless. [That means you have no pennies. It’s not the other thing you are thinking about, gutter-brain!]
I can tell you’re still skeptical… Well, let’s take a look at a few examples of car-scaled development vs human-scaled development. [I know what you’re thinking: Yay! More numbers! But, please, try to contain your excitement.]
Let’s start with my neck of the woods, Elmwood, not only because I know it well, but also because a lot of it was built out before cars were a thing. We were Winnipeg’s very first suburb when we joined in 1906!
There is a little strip of shops from 249 to 255 Henderson Hwy.
The stores are small and close together, and are fronted by a large sidewalk. There are no curb cuts for driveways, and there is no visible parking (other than the street in front of them). This was built to a human scale, when it was assumed most (or all) customers were arriving on foot, bike or bus (or trolley). These properties together take up 13,290 sq ft of land and front on about 380 feet of road or lane. Their total assessed value is $1,014,000, which means they generate $76.30 of tax base value per square foot of land (even with two of these shops being currently vacant).
Just up the street is this restaurant at 679 Henderson Hwy, which is built in the style of new development we are accustomed to seeing, that is to say, built on the scale of cars.
There is a drive-thru window, ample parking on site, and two curb cuts for driveways to allow access to the restaurant to customers arriving by car, which is probably most (or all) of them. This property alone gobbles up more than twice the land as my neighbourhood shops, at 27,272 sq ft, and requires the maintenance of 510 feet of road (that’s 34% more road). And despite requiring that much more land, and that much more road, its assessed value is about the same, at $1,053,000. It works out to only $38.61 of tax base per square foot of land used.
That means that, per square foot of land, the human-scaled shops in my ‘hood are contributing more property tax dollars than the car-scaled one in EK by a ratio of almost 2 to 1! [Go Giants!]
But that’s only one small example. What happens when we zoom out to see what an entire neighbourhood built to the human scale can do for our tax base? For that, we go to the Exchange District!
The Exchange District is a human-scaled, walkable neighbourhood. It covers 2,027,042 sq ft of land, and is assessed at a total value of $513,300,729, for an impressive tax base contribution of $253.23 per sq ft!! And that’s including all the tax exempt land as well, like churches and parks. If we just look at the land we actually collect property taxes on, we’re getting a value of $427,509,661 for 1,259,654 sq ft, or $339.39/sq ft!!
Looking at a car-scaled commercial district of about the same size, say Kildonan Place Shopping Centre (2,225,895 sq ft assessed at $150,892,000), yields a measly $67.79/sq ft. Drive-up strip malls fare even worse: Crossroads Station Shopping Centre contributes $60.41/sq ft to the tax base. And don’t even get me started on individual big box stores… behemoths like the Home Depot there only generate $43.45/sq ft.
Yes, even our beloved IKEA, which we threw over $22 million in subsidies at, while paying to widen the Kenaston-Sterling Lyon intersection to 12 lanes (12!!), contributes a paltry $38.27/sq ft to our property tax base. Doesn’t seem like the strongest of investment choices now, does it?
And what about our newest “smart growth” car-oriented suburbs like Sage Creek? Yeah, a whopping $31.75/sq ft.
Elmwood’s starting to look pretty good now, eh?
The bottom line is this: cars are indeed awesome, but they are wildly inefficient from a public purse and property planning perspective. [Peculiar Purple Pieman of Porcupine Peak, a-rata-tata-tata-a-rata-ta-ta-yeah! Hehe.]
Seriously though, you can build a city where ANYONE can drive ANY time, but it’s impossible to build a city where EVERYONE can drive EVERY time. You’ll go bankrupt trying. And you are.
So stop making bad public investments by building more roads and more “smart” suburbs (that come with more roads). You need to start making better use of what you’ve already built. And you need to start today.
Love you muchly,