Cities Should Sell Land to the Highest Bidder

One of the last undeveloped parcels in the D.C. central business district is the Franklin School, a historic school building in an area where there’s no longer demand for a school. Yesterday, city officials announced they’d accepted a plan to turn the building into a temporary arts exhibit space that will also feature a restaurant by local celebrity chef José Andrés.

David Alpert questions the wisdom of this, as alternate plans (a hotel, an office) would have generated more tax revenue for the city, something that seems particularly egregious in light of the fact that elsewhere the city rejected a community-friendly supermarket plan in a residential neighborhood specifically on the grounds that an alternative plan would do better for tax revenue.

Here is an issue where I think political economy considerations should strongly bias you toward a more right-wing view and say that cities should just sell parcels to the highest bidder and let the private sector sort it out.

In theory, economic development officials could improve on market outcomes by considering a wider array of relevant externalities and so forth. But the real-world outcomes look capricious at best and corrupt at worst. Without objective criteria by which to judge proposals, you get a mess of politicking and an awful lot of costly delays in exchange for not much. There is an interesting question around what officials in an economically depressed city whose land is possibly worthless should do, but a city like D.C. where land is valuable should look to simplify. Sell the land to the highest bidder, and cut a dividend check to residents.