Can Residential Development "Save" Gary?
A recent article in the Chicago Tribune identifies a potential source of redevelopment for downtown Gary--redevelopment of existing buildings, and construction of new buildings, as condominiums. This may not be such a crazy idea. Downtown Gary is right next to the Indiana Toll Road, which is a relatively lightly traveled interstate highway (I90) to downtown Chicago and to the South Shore commuter rail line into Chicago. The city has recently built a $40 million minor league baseball stadium (such facilities generally don't stimulate a lot of nearby development, but it's unclear how this could actually hurt). There's a substantial stock of underused (or unused) buildings available for redevelopment, and a lot of vacant land as well. This redevelopment could be done essentially without displacing current residents.
Are there potential barriers? Well, yes. Property taxes. The article says "...Compared with Chicago, the property taxes are relatively low." Property tax rates, as a percentage of assessed value, are not low relative to Chicago. According to a City of Gary analysis, property tax rates in Gary are about 2.3% of assessed value for properties assessed at $35,000 or less, rising to 4.5% for properties assessed at $200,000 or more. A different study suggests that the net average property tax rate in Gary in 2004 was about 6.8% of assessed value. (Incidentally, I suspect the second study is more accurate.) In Indiana, assessed value and market value are supposed to be equal.
Let's say, then, that one owns a $200,000 residence in Gary. The property tax would be somewhere between about $9,000 and $13,600. And in downtown Chicago? About $2,400. Between $6,600 and $11,200 more per year. This would, I think, render condo developments in Gary prohibitive, at least in the short-run. (If enough of them actually got build--and sold--, assessed value would rise and the property tax rate would naturally decline.)
How does one deal with this? Gary can't cut its property tax rate enough to solve this problem. It could do creative tax deals for rehabs and new construction, but that would likely cause a firestorm of criticism from current residents. Right now, owners of $50,000 homes in Gary pay (apparently) something between $1200 and $3400 in property taxes. Providing tax breaks to new construction would mean that people with homes twice to four times as valuable would pay less in property taxes than this.
What seems almost certainly required is a solution involving the Lake County (Indiana) government, or the state. Or a corrupt and inequitable property tax system in Gary.