(May-June 2009 GroundSwell)
MINNESOTA REPORT LISTS LVT FOR VALUE CAPTURE
The report's Executive Summary
acknowledges: "Funding for streets, highways and transit is provided
by joint efforts of federal, state, and local government. ... To ensure adequate
and sustainable transportation investment for current and future needs,
policymakers need to reassess the current mechanisms of transportation
finance in the United States and explore alternative revenue sources. ...
One possible alternative is known as 'value capture'. Large public
investment in transportation infrastructure can substantially increase the value
of adjacent land. Capturing the value of this benefit through various
tools is gaining interest as a finance mechanism for infrastructure investments.
... Accessibility to desired destinations by customers and employees tends to
play a major role in location decisions and, therefore, drives up the value of
land in highly accessible locations. ... Transportation improvements create
benefits for three groups of beneficiaries: the general public,
transportation users, and property owners and developers ..."
The report discusses "value capture
techniques, examining each in relation to economic efficiency, equity,
sustainability, feasibility and, where required, implementation
considerations."
The value capture techniques discussed
include land value tax, tax increment financing, -special assessment
districts, transportation utility fees, development impact fees, negotiated
exactions, joint development, and air rights.
Quoted here is the Value Capture Evaluation
and Implementation Considerations section on Land Value Tax (LVT).
"Rather than being assigned to a specific
project, land value taxes more generally capture the value created by the
provision of public goods, including the accessibility afforded by
transportation networks. A tax on land would be preferred to a tax on
buildings, as the former would result in less economic distortion due the fixed
supply of land. A pure tax on land is possible, though rarely used.
While land value taxes are desirable from the standpoint of economic efficiency
and sustainability, they would most likely be slightly regressive in terms of
ability-to-pay. Further, land value taxes may prove politically infeasible
due to high visibility and potential unpopularity."
In the Evaluation section, it is reported of the
Land Value Tax, as follows.
"Land value taxes (LVTs) are the most general type
of value capture policy we will describe. Rather than being designed to
apply to a specific project, land value taxes are designed to capture the value
that is created by the provision of public goods more generally, including the
accessibility that transportation networks provide. Conventional methods
of local public finance rely heavily on the property tax, which serves as a tax
on both land and any improvements, including buildings, that are made to the
property. In principal, a tax on land rather than buildings would be
desirable, as it would be less distortionary. Where part of the tax burden
falls on buildings rather than land, the higher price for buildings discourages
additional investment in the supply of buildings. On the other hand, the
supply of land is fixed, implying that while an additional tax might raise the
price of the tax good (land), it will not affect its supply.
"In principle, a pure tax on land is possible,
though there are few documented examples of its application. Variations on
the LVT principle have been experimented with, however. The most common is
a form of split-rate property tax, in which the land and improvements that
constitute a property are valued separately and taxed at different rates, most
often with a heavier emphasis on land. While variations on the land tax
mechanism have been adopted abroad in countries like Canada, Australia, and New
Zealand, their application in the United States has been limited to a handful of
experiments with split-rate property taxes. Along with isolated instances
in the towns of Fairhope, Alabana, and Arden, Delaware, both of which were
initially established as development corporations, most of the applications of
split-rate property taxes in this country have been in various cities in
Pennsylvania."
(For a related article, see the Jan.-Feb.
2000 GroundSwell about the Dec. 1999 Minnesota Planning Environmental Quality
Board's report, "Smart Signals: Economics for Lasting Progress.")
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