Fairhaven Finance Moneyball

Why We Should Be Investing in Our Downtown Areas

Headed Downtown

Remember our discussion of thickening?

Adding more households per lot makes us thicker. A thicker Fairhaven is a stronger Fairhaven. A greater number of households per property means increased revenue for the town. At the same time, adding households to our existing residential areas is more financially sustainable than building new developments further out from the heart of town. That’s in part because additional dwellings in established neighborhoods require few if any infrastructure investments on the part of the town. Infrastructure like roads and pipes are not only expensive to build out, the maintenance costs of any new infrastructure will burden the town far beyond your or my lifetime.

When we thicken up our existing residential areas, it grows the town in a way that’s financially sustainable. But thanks to the Morrisville Miracle, I’ve got downtown on my mind. Today I’m here to talk about why revitalizing and thickening our downtowns¹ is so critical. First and foremost, downtown businesses are the true heroes when it comes to our town’s financial sustainability.

Doing the Math

In order to understand why our downtown businesses are so vital to Fairhaven’s financial sustainability for the long term, we need to engage in a little of what Chuck Marohn at Strong Towns calls “doing the math.” The gist is to think about our town’s commercial land use as akin to farming: how much revenue is the land we set aside for commercial use yielding for the town? The key insight that Marohn brings to this analysis is that it’s important to look not only at the overall value (or tax yield) of a particular commercial property but also at how much land that property takes up. The more land a business uses, the more diluted its value and the more cost it inflicts on the town, which bears the long-term burden of maintaining the infrastructure on which our businesses rely.

To do the math, we need to look at two key metrics:

• value per acre is the assessed value of a commercial property divided by the land it takes up

• taxes per acre is the annual revenue, in the form of taxes, that a commercial property yields for the town

Get Ready to Rumble!

With these two metrics in mind, let’s do a matchup of two comparable F’haven businesses, one of which is located out on Stroad 6 and one of which is in the town Center, on Main St.

In this corner, featuring square burgers, tasty frosty’s and a feisty twitter presence, we have… Wendy’s!

And in this corner, a decades-long staple on the Fairhaven takeout scene… Wah May Restaurant!

I’ll let Rosa C. From Berkeley introduce Way May:

Round 1: Value per Acre

OK, so the first round in our steel cage death match between these two culinary behemoths is their value per acre— how much is this commercial land worth?

Let’s start by calculating Wendy’s value per acre:

The total assessed value of the Wendy’s property is a whopping (sorry BK!)  $836,900. Wow— we’ve come a long way since Dave Thomas opened his first restaurant in Columbus, Ohio. Now let’s look at we’re looking at that value per acre. The Wendy’s property sits on .77 acres. So its value per acre is:

$836,900 / .77 = $1,086,883/acre

OK, Wah May, the redhead (who is apparently named Red and not Wendy?!) has flexed her financial muscle. Do you have what it takes to match her economic prowess?

Wah May’s total assessed value is $399,800. Oh no! That’s so puny compared to Red’s muscle! But wait— we need to calculate what that value is per acre. Wah May sits on two tenths of an acre— small but mighty. So here’s Wah May’s value per acre:

$399,800 / .2 = $1,999,000/acre

Wha?? Wah May takes this round with over $900K more value per acre. But that’s just value— what about the actual revenues that the town earns from taxes? Where’s the beef?

Round 2: Taxes per Acre

F’haven’s current commercial property tax rate is 19.78%. Applying this to Wendy’s assessed value we get:

$836,900 * .1978 = $165,538.82 in taxes

Dividing by the size of the property, we get:

$165,538.82 / .77 acres = 214,985/ acre

Looks like a decent yield, especially given that we get Frosties in the deal. They’re so good. What you got, Wah May?

Wah Mah’s taxes =

$399,800 * .1978 = $79,080.44

That’s a lot less than Wendy’s in absolute terms. Now let’s look at that in terms of how much land Wah May occupies:

$79,080.44 / .2 acres = $395,402 / acre

It’s a blowout!! That’s right— on the metric of tax yield per acre, the humble Wah May absolutely blows the heavyweight Wendy’s out of the water, with 84% higher taxes per acre!

Here’s a recap of our matchup:

Do the math on comparable businesses in our town and you’ll find see this result every time— on a per-acre basis, the downtown business wins.

Yeah, but

To address an obvious critique of this type of analysis— why should we care about value per acre when our town’s actual revenue is dependent on the absolute tax assessments? In other words— who cares that Wah May packs more punch per acre when Wendy’s pays more taxes to the town overall?

Our town is 12.4 square miles. Unless our Town Administrator Angie has secret plans to invade Acushnet and annex its territory (go Blue Devils!), that 12.4 square miles are a fixed resource. From a long-term financial perspective, then, the financial sustainability of the town depends on how much revenue it can squeeze from that limited space, taking into account the expenses the town incurs in the form of services, infrastructure maintenance, etc. The more “yield” we can produce from our limited acreage without adding to our expenses, the more “profitable” our town. Profit in this case means that we have more money to spend on town services like schools, police, and firefighters. In other words, the more Fairhaven increases the value per acre of its taxpaying properties, the better the financial position of the town long term.

Our downtown commercial spaces are higher yield properties than the fast-food and big box chains on Stroad 6 and Alden Stroad. Our downtown properties have retained and in many cases increased in value even as the town cleared the way for big box development. Remember the old Dunkin’ on the corner of Route 6 and Alden? This beauty?

While this property generated tax revenue for the town for a while, its overall value has undoubtedly not increased over time at the same rate that a downtown business would. Given that it was built to a finished state, the building itself will likely lose value over time, until it is demolished. For now it provides some free parking and a nice view of the new Dunky’s across the stroad!

What about the Meals Tax?

Another critique I’ve heard of doing the math on a per-acre basis is that it doesn’t take into account the sales revenues generated by the businesses in question. Wendy’s sells a lot of baked potatoes— isn’t that good for the town? The answer is that the revenue the town does receive from sales at Wendy’s is insignificant compared to property tax yields. As a town that participates in the Meals Tax option (an added .75% tax on meals), Fairhaven received $415K total last year from this tax. Not chump change, for sure, but small potatoes compared to the real revenue coming from taxes. That said, adding some more restaurants to our downtowns would add to this revenue stream!

There’s green in them thar mountains

Up in Vermont, the Morrisville Miracle laid the foundation for long-term financial sustainability because the Other Thomas, Town Planner Todd Thomas, focused on cultivating his town’s most valuable land. In Fairhaven, as in Morrisville, this land is located downtown. As downtown businesses grow, they increase in value and increase the value of the properties around them. That leads to the positive economic flywheel of urban development that has driven the growth of all prosperous cities and towns.

In addition, by adding housing to our downtown, we further increase its value while increasing the viability of our downtown businesses. That’s why what The Other Thomas notes is a traditional New England development pattern— 2-3 story buildings with dwellings over storefronts— is such a potent recipe for Fairhaven’s prosperity. Note how— similar to adding ADU’s— developing our downtown in this way will not negatively impact its historic character. A thick and thriving downtown is far more befitting the historic character of the town than empty Dunkins surrounded by a sea of free parking.

But doesn’t Fairhaven run on Dunkin?

One refrain I’ve heard in response to this kind of argument is that, weirdos like me aside, what the good people of the Haven actually want is big box stores and drive-thru’s. Even if that were empirically true (I have my doubts), I’m not making an argument about peoples’ preferences. I’m making the financial case for a tried and true development strategy. To the extent that Fairhaven thrives, this gives everyone more of what we all want and need— including well-funded municipal services. Who am I to deny another’s date night at Applebees? Besides, even if we made the best use of all of our land such that no strip malls remained, it’s just a very short drive over to Stroad 6 in Dartmouth, which rumor has it is getting some sweet lights and some extra turning lanes in a couple of years.

Linger on the sidewalk where the neon signs are pretty

Fairhaven’s surest path to financial sustainability is to invest in our downtowns, building on the value and tax yield of these areas through careful cultivation and incremental development. We’re fortunate that, unlike in similar towns, our downtowns weren’t completely razed and forsaken in previous decades. It’s time to give these hardworking blocks the love and attention they deserve!

1. I use the plural “downtowns” to refer to both Fairhaven Center and Benoit Square, which serves as a downtown for North Fairhaven.