gentrification

Cities that have lost substantial population look at a variety of ways to enhance their taxrevenues, and attracting higher income residents is one way to do this. Based on our case studies,city support for these policies appears quite strong. An influx of higher income residents generallybrings both higher property tax assessments and higher overall revenues to city coffers. Higher taxrevenues can help pay for services and investments that city residents need and can spur furtherneighborhood revitalization.The impact of gentrification on the local tax base varies dramatically depending on the localand state tax structure in place.• In Cleveland, for example, 60 percent of city revenues come from an earnings tax oncommuters who live outside the city. Thus, if gentrification were to occur, the new higherincome residents, particularly if attracted from neighboring suburbs, would not have dramaticimpacts on tax revenues for the city.• Congressional opposition from neighboring legislators has made it impossible for theWashington, D.C. to enact a commuter tax. Washington also has the lowest proportion ofhouseholds with incomes over $50,000 in 1996 – 30 percent—in the D.C. area. MayorAnthony Williams has made attracting higher income residents into the city a priority.• In Atlanta, city officials are trying to create a “virtuous cycle,” where more middle classresidents will promote both a stronger tax base and stronger services. The city’s civicleadership, represented by the Renaissance Program Policy Board is determined to add60,000 additional middle-income residents for the city, derived both by attracting familiesfrom the suburbs, and by affirmatively “growing” the low incomes of current residents.Without this influx (and the tax base and neighborhood change they will bring), the Boardfears the city will continue its decline.• Unlike the other case study cities, San Francisco’s budget is flourishing, with or without newhigher income residents. California’s fiscal system has two distinct features that createincentives for gentrification. On the one hand, property tax assessment increases arecapped at one percent per year under Proposition 13, and only rise to market levels at thetime the property is sold, so local governments have a financial interest in residentialturnover. On the other hand, the state tax system provides incentives for local governmentsto favor retail development (which is not constrained by Prop. 13) over new housingdevelopment, further limiting housing supply and adding to gentrification pressures. 38It is not clear whether cities use new revenues to maintain and enhance the servicesprovided to lower income residents, either in gentrifying neighborhoods or in other low-incomeareas of these cities. Lang found “that gentrification produces increased revenues for municipalities38 Yee and Quiroz-Martinez, p. 17. In California, this is called the “fiscalization of land use.”18