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How to Fund City Growth? Value Capture

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Resurgent phoenix
Resurgent phoenix  
3/24/2014 5:39:03 PM
User Rank City Slicker
Re: Value Capture
Joshua, I really appreciate your explanation. An article in the Governing magazine March-2014 stated "over the last century, city revenue streams have gone from being based almost entirely in property taxes to being more weighted in charges and fees". The title of the article is , " distress signals". Living in a City that has many abandoned properties I can see the benefits of both sides. Infrastructure has to be maintained. City charters should allow some flexibility or have the ability to change in times of high or low resident or land owners who pay taxes.

geonomist
geonomist  
3/13/2014 4:00:38 PM
User Rank Village Voice
Take or Share?
If you're going to tax people, it's makes good sense to put location values into your tax base and boot other values out. Ethically, nobody made land and everybody (the presence of the populace) makes land valuable. Economically, the levy drives efficient land use and raises wages. What's not to like? Plenty. People just are not interested. How to interest them? Probably downplay the tax. Instead, convert the recovered ground rent revenue into a resident's dividend and up-play that — money in the pocket -- the policy of geonomics. Happening at progress.org.

ScottBaker
ScottBaker  
3/10/2014 10:31:10 AM
User Rank Village Voice
Re: land tax
Right now, most major cities have the opposite problem: too many under-utilized or even vacant sites, jacking up the prices of the remaining sites for everyone. 

Truly over-developed areas are rare.  What looks like over-development is really speculation leading to over-pricing, followed by a bust that doesn't reduce prices fast enough to meet declining demand.  BTW, if we had proper value capture, there would be no real estate booms and busts, and these are the biggest kind, as we are still discovering, some 6 years after the last land-based crash.

The market will determine the fair price for a site, but only if the true locational value is priced in first, in the form of a Value Tax.  Otherwise, that value is privately captured.  See my presentation (video and slideshow) to see how this is done:

http://www.opednews.com/articles/Fairness-Sustainability--by-Scott-Baker-Community_Fairness_GROWTH-DEVELOPMENT_Georgism-140210-926.html

ScottBaker
ScottBaker  
3/10/2014 10:24:44 AM
User Rank Village Voice
Re: Billions left in the Ground
Value capture will work anywhere EXCEPT Robinson Crusoe's island.  I'm not being fascitious. This is actually the counter-example used by Henry George himself and later Goergists.  If there is only one person using resources, there is no real economy.  It takes at least two people to create locational value, and whoever has it can charge rent to the one who doesn't.

So, you mention the cities of what used to be called the Third World.  This is perhaps a misnomer now, since they've come up to first world standards in many ways now, but still, there is a clear class of rent-seekers who don't pay for their locational and other resource advantages.  These products of nature which are also part of the commons, are in demand by everyone, and those who use them ought to pay rent for the privilege.  Otherwise, the productive classes are taxed, decreasing production.

I would do the same thing in every city - look for the most lucrative sections of town, and see if the owners of the buildings there are paying their fair share of rent ot the community.  You'll need honest assessments (this may take some stirring up of the entrenched establishment), vigorous tax collectors though it is easier to collect taxes on land since land can't be offshored, and commited politicians.  It's not easy!  But the money is so enourmous, and the stabilizing effects of dampening land speculation so positive, that it is not only worth the fight, it is essential for economic, social and even ecological sustainability.

Walter Fieuw
Walter Fieuw  
3/10/2014 7:56:58 AM
User Rank Blogger
Re: land tax
My impression from the cases reviewed is that most value capture taxation districts have quite defined land use plans, usually linked to Transit Orientated Development. I wrote a blog about this two weeks ago, and the links are quite important to make. 

So to answer your question, the tax raised is paired with the infrastructure development that the state implements. All development in the tax district, as expounded on in the previous comments by Joshua Vincent and Scott Baker, is aimed at maximising the developable land and achieving the right densities that will enable further growth and generate e.g. person trips making public transport viable. 

Are you thinking about specific examples where "white elephants" were created? Post-olympic cities perhaps?

CitySolver
CitySolver  
3/10/2014 7:44:28 AM
User Rank Blogger
land tax
I am quite new to this area but I would like to ask a question:- If unimproved land is taxed does that not mean there will be a pressure on developers to develop sites even if they are not suitable, and develop them at the wrong time economically due to the tax pressure to do so, thereby creating white elephants that the developer sells off but that the city doesn't need and so we have whole areas that become ghost towns because unsuitable development was created through this tax pressure?

Walter Fieuw
Walter Fieuw  
3/10/2014 5:18:29 AM
User Rank Blogger
Re: Billions left in the Ground
Hi Scott. Thanks for joining the chat. I downloaded the presentation on property development case studies from New York at Slideshare. Really interesting observations being made here, especially on possiblilities to densify under-utilised parcels in Manhattan.

I want to ask you a similar question I asked Joshua. What would your advice be to progressive mayors and planners in African, Asian and Latin American cities. Value capture is most developed in the States, and obviously we can't export cookie-pressed solutions to other world cities, but perhaps you can reference some over arching values and implementation dynamics required?

Walter Fieuw
Walter Fieuw  
3/10/2014 5:13:17 AM
User Rank Blogger
Re: Value Capture
Thank you for your contribution to the topic, Joshua. You are pointing to some very interesting examples, especially to the effect a few years after the value tax was introduced and phased out as sites become more "distant from the benefit". 

Your examples of post-industrial cities are also interesting. 

I wrap up the article by considering some of the cases where cities of the Global South are experimenting with value capture.

What would your advice be to aspiring city mayors and planners where the bulk of infrastructure investment in the next few decades will most likely be absorbed? Are there some examples that you could reference? What are the conditions needed to take full advantage of this progressive taxation regime?

Looking forward to continuing the discussion if you have time to allocate. 

ScottBaker
ScottBaker  
3/6/2014 7:07:24 PM
User Rank Village Voice
Billions left in the Ground
I can't improve on what my colleague, Josh Vincent, said in this space, but I will add that in NY City, we are losing billions in potential Land Value Taxes to subsidized speculators from McDonald's to Extell Development.  We have under-assessments and a 4-class tax system that guarantees under-collection of true value.  We have 6% vacant land - according to the Dept. of Finance - and far more under-utilized properties.  All of this, and more, contributes to the difficulty in finding housing and suitable retail properties.

Meanwhile, the "rent" is privatized, allowing wealthy developers and even wealthier buyers - many of them foreign so they don't pay income or much in sales taxes either - to get rich without paying their fair share.

I explained all of this, and more, in my recent seminar for the Henry George School.  The video of the event, and links to the slideshow, can be found here:

http://www.opednews.com/articles/Fairness-Sustainability--by-Scott-Baker-Community_Fairness_GROWTH-DEVELOPMENT_Georgism-140210-926.html

 

Joshua_Vincent
Joshua_Vincent  
3/6/2014 4:08:37 PM
User Rank Village Voice
Re: Value Capture
Perhaps I can help fill in some of the details on land value tax/capture. I am the executive director of a nonprofit that dates back to 1926, and has been researching and helping municipalities to implement land value taxation.

Value capture in the sense of recouping or recycling public investment in a project would take place in the context of proximate land values to the project itself. A good example is the Kansas City parks and boulevards system established in the early part of the 20th century. To pay for the benefits received (i.e. well-kept parks) the most proximate property owners pay a land value tax. That value capture tax reduces as parcels become more distant from the benefit.

Because land value tax is part of the political history of Pennsylvania, the widest variety of examples exist there. Generally, the value capture is used in postindustrial cities that have much in the way of vacant land usually owned by absentee property owners. The effect of the land value tax when coupled with a reduction in the tax on buildings (or wages, business, or commerce) is to provide tax relief for those that have buildings and keep them in good shape, and penalizes those that would sit on vacant land for speculative gain.

All land is taxed at the same rate whether it is built up, blighted or vacant. This references Prof. Romer's theory of removing the inherent privilege that comes from land holding. Certainly in the United States, almost every political scandal ends up being about land.

There is no average tax rate: the city of Altoona Pennsylvania has no tax on buildings and the effective property tax rate is about 2.2%. The other Pennsylvania cities and school districts have effective land tax rates of anywhere from .5% to about 3%.  

Going farther afield, Australian cities and states and New Zealand towns have varying degrees of land value tax with no tax on buildings. indeed, Walter Burley Griffin the visionary architect of the city of Canberra insisted that the funding of that city be based upon land values only. There have been push backs and advances, but the Australian Capital Territory seems to have finally decided in favor of land tax: http://www.smh.com.au/business/shock-canberra-delivers-genuine-tax-reform-20120607-1zxro.html

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