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In Community Planning, It’s All About the Tax Base

At the heart of the power to govern is the power to tax. A speed limit in front of the kids’ school isn’t worth much without a police department to pull over speeders and write them a ticket. And that ticket doesn’t mean anything if there aren’t judges at a courthouse to hear and decide the dispute. That, and so many other things, means we have to have – and to fund – some level of government.

And that, of course, means taxes. And community planning is all about the tax base. But to get our heads wrapped around this, we have to dive a little deeper into both the economics and even the philosophy of government. I’ll try to do that here without getting us lost in the weeds of politics.

Economic Production is all about Land

This should be fairly simple: In order to produce in the economy, you need to have place. If you are raising corn to sell it at the market, you have to have a place — land — to raise the corn. If you are making a better mousetrap and selling them on Amazon, you have to have a place — land for a factory, maybe — to make the mousetrap.

The problem is you can’t just make more land when you run out. The obvious reality of nature is there is and always will be only so much land. Thus the importance of community planning and the related idea of zoning.

If we are going to grow our food, sell that food, make things and otherwise have a functioning economy, there have to be places for these things — and for homes and apartments for the people in that economy. Then we have to have schools and parks for those people.

And the administration of all of this, and providing for the basics of civic life, requires money.

Land Use is all about the Tax Base

So to provide for the basics of civic life, we divide the land into certain categories. We might have some land set aside as agricultural land, although we do not encounter that so much in a metropolitan area like the city of San Diego. We will need some industrial land. Because industrial materials can be dangerous, we divide that further into prime/heavy industrial and light industrial.

To accommodate shopping we will have land designated for commercial use. And then, of course, we have to live somewhere so that land will be designated as residential. Each of these land uses will generate tax revenue. In all cases, the property will generate property taxes. Industrial and commercial land will generate employment and therefore income tax revenue. Commercial land will generate sales tax revenue.

Local government budget analysts will use statistical models to calculate how much revenue can be expected from each kind of land, and slice those estimates up even further by zones which allow more or less density. And it is here where the meat of community planning is found. Here is why average citizens should pay close attention and participate in the community planning process.

Density is all about Maximizing Tax Receipts & Profit

In any community planning process there are three basic stakeholders: the land owners (or developers), the city and the community (i.e. you and me). It is important for the community to understand how the interests of the city and the developer overlap.

Imagine a square plot of land, 100 feet by 100 feet. That is 10,000 square feet. Let’s look at that from the developer’s point of view. If prime office space goes for $5 a square foot each month, then a single floor building can be rented out for $50,000 per month. A two-story building generates $100,000; three stories $150,000, and so on. If the developer is a publicly traded company, they have an obligation to return value to their shareholders, so they will want to build a multi-story building to generate as much profit as possible.

Now let’s look at it from the city’s point of view. The first and most important thing a city does (from their point of view) is create a budget — everything follows from that. And to do this, you simply have to know how much revenue will come in. So imagine a one-floor building goes up on that 1,000-square-foot parcel. That improvement to the land makes it worth more, so more property tax revenue is generated. But if a ten-story building is built, to oversimplify a bit, the improved property is worth ten times more — meaning ten times more property tax revenue.

I do not say any of this to demonize either developers or government. Many of us probably have Real Estate Investment Trusts (REITs) somewhere in our retirement accounts, so as they return value to their shareholders, we benefit. And government is needed to provide for the basics of civic life. But we do have to remember that we are the third stakeholder, and we have to be vigilant that our interests are not overwhelmed by the profit motive of the developer and the tax revenue motive of government.

Who Has the Right to Tax?

Bear with me for a little philosophical aside. Government is, again, the power to tax. But where does the right to tax reside? Imagine for a moment you are growing corn. For your labor in husbanding the crop, you have a natural right to the proceeds of its exchange for other things. You have this right regardless of whether any government exists or not, so it is not a right which was awarded to you by legislation; it is yours by nature.

But if there is a government, it will need some form of revenue, so the government might claim part of the proceeds from that exchange of corn. It is important to note that a tax is a price attached to an exchange. Where you will set a price for your corn, the government might set a price for the exchange (or the transaction) of your corn for something else. But since your right to those proceeds is a natural right, you also have the right to determine the price of the transaction — the tax.

In other words, the power to govern — to set and collect taxes — flows up from the governed. We invest that power in elected representatives. And our representatives then administer the zoning of lands so that a stable tax base might be created and the basics of civic life provided for. We can participate in the creation of that tax base by participating in community planning. And then it falls on us to ensure that developers and the city — who, again, have overlapping profit and tax revenue interests — do not ignore those plans when they find them inconvenient.

At the heart of this is realizing: 1) we are a stakeholder distinct from government; and 2) the right to create the tax base — to plan out areas for different kinds of uses and zones within those areas — resides with us. Collaborative progress can be made when we are vigilant to remind our representatives of these things.

It’s Time to Opt Out of Standardized Tests

It’s an annual ritual I usually do not look forward to. I cannot necessarily say I looked forward to turning in my letter exempting my high school junior from standardized tests, but at least I had the sense this year that I had an ally in San Diego Unified School District Superintendent Cindy Marten.

She recently sent home a letter explaining her position on these tests, their relationship to Common Core, and the procedures for opting out.  This was met with controversy, mainly from groups concerned that the school district is held accountable for the progress of minority and lower-income students. They look to test scores to indicate this progress and equality.

Teacher performance, of course, is the other side to the testing debate, with conservatives generally calling for teachers to be evaluated in part on the basis of student scores. Conservative agreement, however, seems a bit muted due to larger concerns with Common Core.

As a parent, I’ll articulate here why I support the superintendent and believe San Diego parents should uniformly opt out of these tests.

The Statistical Norm vs. the Cultural Norm

Back when my high school junior was in third grade we took him to the public library. He loved reading and was eager to see what they had to offer. We asked for the third-grade reading list.

We were shocked.

To the last one, the books on that list were books our son had read in first grade. We had to go up to the fifth-grade list before we started seeing books we felt were appropriate. Our son is not an academic prodigy. Like most kids, he does well in some classes and struggles in others. We would expect his reading skills to be slightly above average. But if that reading list was any indication, he would have been somewhere in the 95th percentile or higher.

A ‘standardized’ test is a test which has been designed to produce a “score spread.” If you were to map the scores as points on a grid and roughly draw a line through those points the lines would form a bell curve — or the “standard deviation.” If you draw a vertical line through the very top of the curve you have the statistical “norm.” Then each point, or score, is in a certain percentile compared to that norm. The problem starts when that statistical norm does not correspond to what we might call our cultural norm.

My reading list story above is an example. If that list reflected a statistical norm for third-grade reading skills then it bears no resemblance to what our family might otherwise feel to be the cultural norm for reading skills. So at that point, if you were to show me test scores for my son back then which showed him to be the 95th percentile I would just shrug and say “So what?” He would have been a third grader in the 95th percentile against a norm more appropriate for a first grader.

Or to quote Hillary Clinton: “At this point, what difference does it make?”

Evaluating Quality of Education

The tyranny of the statistical norm also affects what we believe about quality in education. Here it is important to understand why these tests were designed, to begin with. In World War I the Army was taking in recruits for the war effort by the thousands. They needed to decide which recruits would go off to Officer Candidate School (OCS). So they commissioned a test — Army Alpha — to establish a statistically valid norm so they could rank each recruit against the norm and send the highest scoring recruits to OCS. The rest would fill out the enlisted corps.

Colleges and universities realized immediately that they had an identical problem: Say the school had 100 seats for incoming freshmen but had 1,000 applicants. They would need an objective way to identify the top 10 percent — or the 90th percentile in test-speak — for admission. Standardized testing was born.

It is crucial to recognize that identifying a percentile against a statistical norm is not the same (indeed, it is not even close) as evaluating how effective a teacher, school or district is in teaching to state standards. The former is called “norm-referenced” testing, the latter “criterion-referenced” testing. Or to put this another way — to point at where our kids are scoring against a statistical norm and then to make claims about how well our schools are doing on that basis is a logical square peg in a round hole.

Test Scores vs. ‘Thought Leadership’

In 2006 Newsweek’s Fareed Zakariah wrote a compelling article which noted that the same students (in this case from Singapore) who score the highest on international standardized tests are nowhere to be found later on in life when you look for “thought leadership” in vaunted fields like science, technology, engineering, and math. Singapore’s Minister of Education Tharman Shanmugaratnam explained:

“We both have meritocracies. Yours is a talent meritocracy, ours is an exam meritocracy. There are some parts of the intellect that we are not able to test well — like creativity, curiosity, a sense of adventure, ambition. Most of all, America has a culture of learning that challenges conventional wisdom, even if it means challenging authority. These are the areas where Singapore must learn from America.”

This should force us to ask some tough questions. Ultimately, when pressed to justify Common Core, its advocates will point to the need to remain competitive in the world economy and will point to test scores as the indication that we have a problem. The question, though, is why Common Core advocates more broadly — and testing advocates in particular — believe these tests tell us anything useful about being competitive. If they do, why is it that the highest scoring students are noticeably absent later on among thought leaders?

I have some personal experience that helps me understand this. I received both my bachelors and masters degrees in the Philippines. The schools were both great schools, but the culture of the Asian classroom is not one that fosters open debate. To disagree with the professor is especially thought to be a sign of boastfulness. Shanmugaratnam rightly sees this as fundamental — we have an educational culture that rewards challenging the conventional wisdom and even disagreeing with the “authorities.”  Asian education (and I realize this is a broad brush) is driven more toward scores on high-stakes tests (which have a huge impact on future opportunities) rather than developing a love for learning and a willingness to try things everyone else says cannot be done.

Standardized tests — and Common Core more broadly because it is all driven by test scores — will only push us away from this educational culture which produces thought leaders in favor of a culture which produces — well — test scores.

Ms Marten is right about our schools: Their product is not a test score.  Let’s keep it that way by opting out of standardized testing.

John Horst | Republican Candidate for Congress
District 52

Senate confirms judicial nominees

The Senate unanimously confirmed four of 38 pending judicial nominations Thursday evening, the first of President Barack Obama’s judicial nominees to be approved since September.

The nominees—Catherine Eagles, Kimberly Mueller, John Gibney, and James Bredar—are the longest delayed district court nominees, who were each reported out of the Judiciary Committee unanimously. The nominations for Eagles, Mueller and Gibney were sent to the full Senate in May and Bredar was reported out of the committee in June.

The White House hailed the confirmations but said the Senate must continue to act.

“We’re pleased that these four nominees have been confirmed, but urge the Senate to take action on the 34 nominees who remain on the calendar – particularly the 19 who would fill judicial emergencies,” said spokesman Josh Earnest.

Regan Lachapelle, a spokesperson for Senate Majority Leader Harry Reid said that the four confirmations Thursday are “just a start” to clearing the backlog during this session.

“We are still working through the list and are committed to confirming as many judges as we can,” said Lachapelle. “We’ll take them when we can get them.”

This week, Reid and Minority Leader Mitch McConnell have negotiated a deal that could potentially break the bottleneck of Obama’s “uncontroversial” federal court nominees during the dwindling lame duck legislative session. These included most of the nominees who had been reported out of the Judiciary Committee by unanimous votes before November elections.

Still, there are a handful of circuit court nominees — whose nominations are rarer and typically receive greater scrutiny — still waiting for votes on the Senate floor, though they had been nominated as far back as November 2009.

Senate Judiciary Committee Chairman Patrick Leahy praised the confirmations and called on more to be confirmed to address districts facing judicial emergencies, including vacancies and backlogged dockets, across the country.

“These confirmations are long overdue,” Leahy said. “For months, these nominations have languished before the Senate, without explanation and for no reason. I hope these are the first of many confirmations by the Senate before we adjourn.”

GOP lawmakers have flagged three other nominees, including California law professor Goodwin Liu, as too liberal and inexperienced to be parceled with the rest of the non-controversial judicial candidates set for Senate confirmation.

“We’re pleased that these four nominees have been confirmed, but urge the Senate to take action on the 34 nominees who remain on the calendar – particularly the 19 who would fill judicial emergencies.”

Cutting Risk by Disclosing Political Donations

In politics, it often pays to be ahead of the curve. That holds true for corporate governance too, even more so when politics enter the equation.

That is why a small number of the nation’s largest corporations have voluntarily agreed to report their share of trade association outlays that go to fund political activities. Together, these firms encompass a virtual who’s who in the microcosm of corporate America. In doing so, this corporate vanguard has yielded to pressure from shareholder activist groups that targeted them as prime candidates for greater accountability and transparency.

But this trend also reflects the altered political climate in Washington — a climate personified by Rep. Barney Frank, D-Mass., the liberal chairman of the House Financial Services Committee and an advocate of what he calls “shareholder democracy.”

“Some companies get it, some don’t,” said Bruce Freed, co-director of the Washington-based Center for Political Accountability, a nonprofit and non-partisan shareholder advocacy group that is playing a key behind-the-scenes role in orchestrating the recent run of voluntary disclosures. “The ones that don’t get it,” he added, “are headed for a (shareholder) proxy vote.”