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Companies ‘moving on up’

When a large company makes it known to the local community that it is considering relocating to another state or closing its facility the local public officials go into action. They figure out ways to offer incentives of every kind to keep the company in town. But what happens when a family decides to move out of town? Often, local officials do not realize the economic impact that the local of individuals can have on the community.

To set the stage, let us look at the national picture. In 2010, 69.3 percent of all movers stayed within the same county, 16.7 percent moved to a different county in the same state, 11.5 percent moved to a different state, and 2.5 percent moved from abroad to the U.S., according to the U.S. Census Bureau. By region, people in the Northeast were the least likely to move, with a mover rate of 8.3 percent in 2010. The Northeast was followed by the Midwest (11.8 percent), the South (13.6 percent) and the West (14.7 percent). The mover rate for each region was not significantly different between 2009 and 2010.

Where are people moving to, and why are they moving? The answer to the first part of the question is that people are moving to the suburbs from rural areas and from the central cities. New Jersey is the state with the highest percentage of people who lived in the same house in 2008 as they did in 2007 (89.4), while Alaska had 76 percent of people living in the same house during that period.

Housing is the primary reason that people move from one place to another, according to the U.S. Census Bureau’s 2009 Annual Social and Economic Supplement, “Geographical Mobility: 2008 to 2009.” Housing-related moves accounted for 45.9 percent of the moves during the period. Of those moves, 14.5 percent were for a new/better house/apartment, 11.1 percent for cheaper housing, 5.5 percent were to own a home/not rent and 5.0 percent wanted a better neighborhood and less crime. Another Census Bureau report that reported mobility patterns during the period 1981 – 2009 revealed that in 2009 approximately 12 percent of the population moved to another dwelling, of which eight percent of the movers moved to another dwelling in the same county. In 1981 the percentage of movers was 17 percent. In other words, fewer people are moving. Almost all analysts attribute this to economic conditions.

That leads us to economic impact. In order to illustrate the economic impact on a city losing 1,000 residents this writer took a look at Jackson, and used numbers from the 2000 census when the city had 184,256 residents. That equates to 67,841 households. Of those households 52 percent were owner-occupied dwellings, the median household income was $30,414 and the median home value was $64,400. Given those assumptions, let us consider the impact on ad valorem tax collections, personal property taxes, sales tax collections and the overall economic impact.

Ad valorem taxes are taxes on real property. In this case the annual tax for an owner-occupied house valued at $64,400 was $432 and for a renter-occupied house was $522. The city would lose a weighted average tax collected on 219 homes, or a total tax loss of $208,926.

Personal property taxes are collected on automobile tags in the city. Assuming that each household has two vehicles, one valued at $25,000 and one valued at $10,000, the taxes on those two vehicles would be $591 and $293, respectively, or a total of $894. Multiply that times the 291 households, and the loss of personal property taxes would be $195,786.

Sales tax collections in the city equate to one percent of retail sales. In this example, assume $20,000 in taxable sales times a one percent tax diversion to the city times 219 households would equal $43,800 in lost sales tax collections.

Economic multipliers are used to estimate the impact on a local economy. In this case, if we use a conservative 1.66 multiplier we see an economic impact of 1,000 residents of $8,845,364.

Many cities, especially core cities that are older, are dealing with the emergence of suburban and nearby cities that offer cheaper housing, lower crime and so-called better neighborhoods. As mentioned above, these are the reasons that people are moving out of certain cities. The challenge for then is to offer a quality of life that can compete with their neighboring cities. This takes constant analysis and understanding of why people move from one place to another. It also why public officials and community leaders must pay attention to residents as well as employers.

Phil Hardwick is coordinator of capacity development at the John C. Stennis Institute of Government. Contact Hardwick at phil@philhardwick.com.


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