A Cost / Benefit Analysis of Historic Districting in Tucson, Arizona

Abstract

The process of historic districting is often credited with stabilizing neighborhoods and thus increasing property values. For over twenty-five years city officials and academics have been conducting studies to determine if such a relationship actually exists. While early studies used a difference-on-difference methodology, recent studies have adopted hedonic modeling as a preferred method of determining the relationship between historic districts and property values. This study uses hedonic modeling together with a cost/benefit analysis to 1) determine if and to what extent historic districting impacts property values in Tucson, Arizona and 2) if the increase in the tax base outweighs the value of tax incentives granted within these districts. This research assesses the fiscal impact of both historic districting and the Arizona State Historic Property Tax Reclassification Program (SPT) in Tucson. This report consists of four sections. The first is a literature review of the brief history of preservation in the United States, a look at the economics of historic districting, and an overview of similar studies by other authors. The methodology of this study is contained in the second section and the hedonic model results and cost/benefit analysis follows in section three. The final section contains two policy recommendations to both the City of Tucson and the State of Arizona preservation officials: 1) Decrease the current SPT tax deduction rate 2) Implement a tax incentive for local districts.