How do the bills get paid, employees get their paychecks, the schools stay open and the city’s infrastructure maintained? Now Professor Tontar could explain it to us all, but we simply don’t have the space on this post to fit in twenty plus weeks of lectures. So, I am going to try to simplify the discussion by breaking it down into two parts. I’ll start off in this section by defining what I mean by ‘make money’.
In other words, where does the city get the funds to pave the roads, pay teachers and provide services to the citizens? There are two ways, and only two ways: fees and taxes. Fees like parking fees, mooring fees and permit fees. Taxes such as excise, income and sales.
Now when Newburyport was broke, they also had fees and taxes. So, and this will make your head hurt thinking about this; how is it that the old Newburyport had them but was struggling and the present-day Newburyport is doing so well?
It begs a simple conclusion: something else is in play that is outside fees and taxes.
You can put away the aspirin and Tylenol now.
It’s because our economy is different than when we as a community were struggling.
I am belaboring this point because I have heard citizens echo a common myth, one that I heard a councilor echo just recently; that we must maximize the amount of property being taxed so that the city will be financially secured.
Years ago, Mayor Moak chased out an educational institution that wanted to move into the empty part of the Mersen Complex because he didn’t want to take that property off the tax rolls. The main argument of those who want to build on every available space in the city is to generate more ‘taxes’. They want to build on farm lands, forests, gravel lots, wetlands. They are seeking residential empty lots and going so far as trying to seize park land.
The end goal as reasoned is that we will be financially secure by taxing all this land.
Unfortunately, this is a commonly conceived lie. Once something is ‘believed’ by a person or a society; it is very difficult to convince them that what they hold true, isn’t true. There are so many deep-rooted myths or preconceived ideas concerning economics. As Mark Twain asserts, “A lie can travel half way around the world while the truth is putting on its shoes.”
By practicing this lie, the only person or organization that will benefit in Newburyort is a select group of contractors, construction companies and developers and some happy realtors who broker the deals. The community itself will suffer, and suffer for a very long time.
The truer principle is simple. Every time you tax a residential unit, you must produce three to four times that tax to provide infrastructure, schools and increased services to cover it. In contrast, every time you put in a commercial unit, you generate three to four times the income tax levied.
This is why Seabrook, the retail Disneyland, is doing well – they’re focusing on commercial. This is why Newbury has just rezoned the Route One corridor; they don’t have enough businesses to balance out the terrible pressure from excessive residential expansion in their town. Towns that have focused on residential sprawl all across New England are close to receivership because the tax money is counterbalanced with a desperately needed increase in their infrastructure. (Of course, 40B developments make it even worse!)
But what about Newburyport? Shouldn’t this principle work here too?
No, it doesn’t! Take a look at this chart and you will see that most of the activity when it comes to fees and taxes comes from our residential neighborhoods. Our industrial and commercial base barely make a dent and we have quite an expansive business park and a thriving downtown. With this principle in effect: our infrastructure should be deteriorated, we should have dilapidated schools with bare bone curriculum, and waves of homeless or poverty-stricken people all over town. Police with rusted guns in their holsters, fireman with malfunctioning engines; and the DPS driving around in rickety trucks. There should be no free cash available and the city should be deep in debt just trying to keep its head above the financial waters.
Again, it begs a simple conclusion: something else is in play here that is outside the simple application of fees and taxes.
In Part II, I will reveal the actual economic situation in Newburyport. Why we’re an affluent city. Why we are doing well financially. And sadly, why all this will eventually, if the city planners are not stopped; will be coming to a fast end.
This is not the current but it hasn’t changed much since last year: