Economics

4.1 Effect of increasing population density on revenues and taxes

Property tax increases.

Albion’s report touts the increased tax revenue that will accrue from its development. This is a common pitch by developers, but one that does not hold up to scrutiny. To talk about increased revenues is to “book” only half the numbers, because additional residents and businesses cost the Village and the School District in the extra services required. To book only prospective revenues and not costs is akin to the kind of accounting that got Enron and other companies in grave trouble. The May 30 Appropriate Development report cites multiple studies by economists, urban planners, and others, published in professional journals, that unanimously conclude that increased population density does not lead to lower property taxes because, as a Federal Reserve Bank study put it, “people ‘simply don't pay for themselves.’"

Specifically, Albion estimates that property taxes from their development will be $815,000. This figure cannot be taken at face value—it is based on many unproven assumptions about occupancy, housing prices, tax rates, etc. It also greatly exceeds the property tax revenues obtained from the Vantage Building, with no apparent justification (see page 4 of Appendix 1 for data).

School District losses.

This calculation is particularly salient with regard to schools. Albion estimates that Districts 97 and 200 together would receive $498,000 in tax revenue from their building. According to comparisons with other recent developments, included on page 6 of the Project Review Team Report, we can expect about 30 additional school-aged children. (Albion’s lower estimate is not credible, and is not mentioned in the Project Review. The Project Review instead lists data from similar, existing properties—a much more reliable method, especially considering that many residents choose Oak Park because of its high quality public schools).

What is the cost of educating 30 additional children? According to the Illinois Board of Education Report Card, we spend $14,000 per D97 student, and $22,000 per D200 student (2015). Assuming 2% inflation, in 2018 those 30 students will therefore cost $446,000 to $700,000, against a projected $498,000 additional revenue. That represents anywhere from a trivial gain to a significant net loss to the Districts.

Alternative plans ignored.

Another trick in the Albion analysis is that that projected $900,000 in tax revenue represents a comparison to an imagined vacant lot. If the Village decided to honor the Downtown Master Plans for the site, and create Founders’ Square, then perhaps that is appropriate. The Village would still be better off in many ways—including economically. In the case that the Village decides that some other, appropriately scaled building be put there, how much tax revenue will then be generated? Perhaps half of the amount Albion puts forth? District House, a much more appropriately-sized development on Lake Street, cited an estimated tax bill of $720,000. Thus, the increment in taxes for a massive Albion high-rise vs. a site-appropriate building might well be less than one tenth of one percent, with a much greater additional demand on Village services.

In sum, in terms of revenues, the Albion proposal may be very lucrative for Texas companies Sammons Enterprises and OP Partners, but it is a bad deal for the Village. There is no net benefit to Oak Park taxpayers from a development of this scale and type, and indeed a likely long-term monetary cost.

4.2 Market analysis and projected revenues

Here, we point to research conducted by Sarah Grimsley, who holds a Master’s degree in Public Policy and Administration, with specializations in Urban Policy and Planning and Data Science, and who has worked in government budgeting and financial management for over 10 years. Her analyses are presented in full in Appendix 1 and Appendix 2, which were presented to the Plan Commission in August. Ms. Grimsley’s analyses are eye-opening—decision makers are urged to read them in the appendices. Briefly, she points out that Albion is a luxury apartment building, with rents starting at about $1700 for a studio. Albion used the median household income of $80,196 for households in Oak Park for their analysis. However, U.S. Census data says that the median income of non-family households is $43,547, and, given that the vast majority of the apartments are studios and one bedrooms, it’s more likely that single people would rent them. (The Census defines families as households with at least two individuals related by marriage, birth, or adoption. Individuals and unmarried couples would count as non-family households.) At that income level, the rents are unaffordable. Those who stretch to pay this rent would then have less disposable income to support the downtown businesses.

In public comments, citizens also pointed out that many new apartment buildings surround the new Morgan el stop where the McDonald’s and Google headquarters are located, and that the West Loop and Randolph Street are arguably the hottest areas in Chicago for restaurant, living and entertainment options. This calls into question Albion’s assumption that single people would want to come to Oak Park and pay luxury rents when they could live downtown and walk to that scene. In addition, at the time of the hearings, there were 46 apartments available of the 270 in the Vantage building, so it is only 84% rented, contradicting the applicants’ claims of 95% occupancy. The Albion building will add another 265 units to the 241 from Emerson, 263 from Lincoln (at Harlem & South) and 28 from the District House. This increase in units is 20% above the population goals set by the Village. With 562 units coming up for sale or rent without the Albion building, plus a saturation in apartment buildings in Chicago, does it make sense to build this now?