1. Using Land Value Tax to Revitalize
Markets and Achieve Smart Growth
SNEAPA Conference Panelists
Thursday, September 20, 2012
Rick Rybeck Mark Speirs Joshua Vincent
Toward Sustainable Infrastructure & Land Value Tax (LVT) in Connecticut Taxing Land Values in a Municipal
Smarter Growth: User Fees for the context: How, Why and Where
Invisible User Center for the Study of Economics
Bridgeport, CT Center for the Study of Economics
Just Economics, LLC 413 South 10th Street
1669 Columbia Rd, NW, STE 116 Philadelphia, PA 19147
Cell: 203-928-7053
Washington, D.C. 20009-3625
Office: 215-923-7800 ext. 2
Email: Mark@urbantools.org Office: 215-923-7800 ext. 1
Office: 202-439-4176 Email: Joshua@urbantools.org
Email: r.rybeck@justeconomicsllc.com
Website: www.urbantoolsconsult.org
Website:www.urbantoolsconsult.org
Website: www.justeconomicsllc.com

2. 1669 Columbia Rd, NW, Suite 116
Washington, DC 20009
(202) 439-4176
www.justeconomicsllc.com

3. Toward Sustainable Infrastructure
& Smarter Growth:
User Fees for the Invisible User
Rick Rybeck
SNEAPA Conference
September 2012

4. Perversity of Infrastructure
Economic Incentives for Sprawl

5. PERVERSITY OF INFRASTRUCTURE

6. PERVERSITY OF INFRASTRUCTURE

7. PERVERSITY OF INFRASTRUCTURE

8. PERVERSITY OF INFRASTRUCTURE

9. PERVERSITY OF INFRASTRUCTURE
• Infrastructure is created to facilitate
development
• Infrastructure inflates the value of well-served
land.
• Higher land prices chase development to
cheaper, more remote sites
• Infrastructure extended to remote sites
• Development chased even further away.

10. Remedy
• Can we fund infrastructure in such a way so
that:
– The beneficiaries pay a fair share
– Development is encouraged adjacent to the
infrastructure rather than at more remote
locations

11. USER FEES FOR TRANSIT
• Equitable & Comprehensible
– Beneficiaries pay in proportion to the benefit they
receive
• Price Incentives Can Foster Efficiencies
– Encourage Shorter Trips or Trip Avoidance
– Encourage Off-Peak Trips
– Locate Homes & Businesses Closer Together

12. Full Cost Recovery?
• Charging transit users full costs would
– Reduce transit ridership
– Increase congestion & pollution

13. Are There Other Beneficiaries?
• General public benefits from Transit:
– Better Access to employment, shopping, schools
& recreation
– Cleaner Air
– Lower costs of goods
• But general benefits not suited to user fees
– General Taxes Used Instead

14. Traditional Transit Budget
Equation
Fares + General Taxes = Transit Costs

15. Traditional Transit Budget
Reality
Fares + General Taxes < Transit Costs

16. Fares
Ridership
Traffic
Smog
Business Opportunities Arising Out of
Concentrating People at Transit Stops &
Stations

17. General Taxes
Disposable Income & Business Opportunities
Quality of Life
Resentment
• Public v. Politicians
• Drivers v. Transit Riders

18. Service
Ridership
Traffic
Smog
Business Opportunities

19. Traditional View
Is There an Alternative View
That Can

20. For New Ideas, Look Back
• In the 1800s, the streets of Washington, DC
were mostly unpaved.
• In wet weather, mud made travel very difficult
and unpleasant.
• Paving streets and sidewalks was a
tremendous advance. It made properties
more accessible and the air cleaner.
• Everyone would benefit.

21. INVISIBLE USERS IDENTIFIED
• Yet, people whose property fronted a paved
street would benefit more.
– No longer would folks track dust, mud and
manure into their homes & businesses!
• Thus, even if they never walked on the new
streets, adjacent landowners would benefit
financially from them.

22. INVISIBLE USERS CHARGED
• In 1894, Congress enacted law requiring
adjacent property owners to contribute 50%
of the cost of first-time paving of streets,
gutters, curbs and sidewalks through a special
assessment.

23. What is the Potential for Private Sector
Participation?
• In the 1800s, Congress required private landowners
to pay for 50% of the cost of new transportation
infrastructure.
• In the 1990s, Congress and the District Government
were able to obtain a 30% contribution from nearby
landowners for a new Metrorail transit station at
New York Avenue.
• Can we do better?

24. Potomac Yards
• In the mid 1990s, there was an old railroad yard just
south of National Airport, across the river from
Washington, DC.
• The pension fund that owned it wanted to develop it.
• Government officials said that development was not
possible because the access road, Route 1, was
already over capacity during rush hour

25. HOWEVER . . .
• Officials noted that a rail transit line runs
through the middle of this property.
• IF a transit station was created there, then
dense mixed-use development could be
allowed without relying solely on Route 1.
• Landowner did the math: It was cost-effective
to pay the entire cost of a new transit station
to get development rights!

27. UNFORTUNATELY . . .
• Nearby residents thought that the
development was too dense & would bring
too much new traffic.
• They pleaded for Down-Zoning
• Politicians Listened to Constituents
• Down-zoned parcel no longer supported
enough development to justify a new station.

28. Matter-of-Right Development:
Dumb Growth
• Unable to get zoning permission for mixed-use
TOD, landowner sought “matter-of-right”
development.
• Big Box retail was the answer.
• Low-density, auto-oriented development
generates much more traffic than the TOD
would have.

29. • If downzoning had not occurred, could this
private funding of infrastructure be replicated
or was it unique?
• At Potomac Yards, a single landowner
internalized most of the externalities
associated with a new transit station.
• Most of the time, there are many owners.
• But this does not negate the fact that the
value created by public transit can exceed the
cost of construction. It only makes it more
difficult to collect.

30. Invisible Users
• Landowners might never drive on a road, or
ride a transit vehicle, but they use this
infrastructure to extract windfall profits from
public investments.
• Thus, landowners are the invisible users of
transportation facilities and services.
• Value Capture is like a user fee that recaptures
publicly-created land values in proportion to
the benefit received.

31. Can Infrastructure Be Financially
Self-Sustaining?
• Successful infrastructure generates higher
land rents that are windfalls to landowners
who did not create the infrastructure.
• Landowners simply appropriate the value that
the infrastructure created.
• Capturing infrastructure-created value for the
entity that created it, can help make
infrastructure financially self-sustaining.

32. NEW Transit
Budget Equation
Value Capture
+ Traditional User Fees
+ General Taxes
= Facilities & Services

33. Benefits of Value Capture
• Financial Viability
– An often overlooked revenue stream
• Equitable & Comprehensible
– Beneficiaries pay in proportion to the benefit they
receive
• BUT WAIT – THERE’S MORE!!!

34. Value Capture Incentives
• User Fees, if properly structured, create
incentives for efficiency.
• Value Capture Can Promote Efficient Land Use
– Recapturing Land Value Motivates Development
Near Infrastructure

35. Development Fees v Value Capture
• Development Fee = Tax on Building Value
Tax = Cost of Production
Cost of Production Quantity Produced
&
Prices
• Do we want to reduce development near
transit and increase its price?
• Taxing buildings appropriates private value. It
burdens builders & the public.

36. Development Fees v Value Capture
• Value Capture = Tax on Land Value
Land is NOT Produced
Land Tax ≠ Cost of ProducƟon
What’s the Impact of Land Tax on Land Price?
• Price of Land Not Based on Cost
• Price of Land Based on Expected Benefits

37. Development Fees v Value Capture
• Land Tax = Cost of Ownership
Cost of Ownership Benefits Price
• Taxing land does not diminish its quantity and
tends to lower its price.
• Taxing land captures Publicly-Created Values.
No burden on private production.

38. Development Fees v Value Capture
• Landowner Responses:
– Avoid the Development Fee
Number / size / quality of new buildings
Maintenance / improvement of existing buildings
Investment in buildings at a lower-tax locations
– Fund Value Capture
• Land Tax Cannot be Avoided
– Location-value of parcel not determined by owner
– Owner can’t move land to a lower-tax location
• Land will be developed – or sold to someone who will

39. Value Capture =
User Fee For Invisible Users
• Invisible users (landowners) receive a substantial
benefit.
• Through value capture, landowners pay in
proportion to benefit received.
• Value Capture encourages development of high-
value land. Instead of chasing development
away, value capture draws development to
infrastructure -- which is where we want
development to occur.

40. HOW TO PROCEED
• What kind of Project?
– Are the benefits general or localized?
• Project might create both types of benefits.
• If localized and traditional user fees are subsidized, the
surplus benefits will probably be capitalized into higher
land values.
• Do local assessors determine separate values
for buildings and land?

41. HOW TO PROCEED
• Can assessors use regression analysis to
determine the proportion of land value
created by various public goods & services?
• Are landowners willing to pay for the benefit
they will receive or can they be compelled to
do so?
• Can the public and public officials be educated
to understand & support this approach?

42. Making Economics Work for People
1669 Columbia Rd, NW, Suite 116
Washington, DC 20009
(202) 439-4176
www.justeconomicsllc.com

43. Land Value Tax (LVT) in Connecticut
SNEAPA Conference
September 20, 2012
Mark Speirs
Regional Director
Center for the Study of Economics
413 South 10th Street
Philadelphia, PA 19147
Office: 215-923-7800 ext 2
Website: www.urbantoolsconsult.org

44. What is LVT
• Not a new tax. It replaces the traditional property
tax.
• It is optional. It gives towns and residents the chance
to choose what property tax works best for them.
Municipalities can determine if LVT would be
beneficial to them and then decide if they want it or
not.
• It uses current property tax assessments so it is simple
to implement and there is no growing of government.
• It is revenue neutral so it does not increase or
decrease tax revenue for the municipality.

45. How it works
• A lower (or no) mill rate is placed on buildings,
improvements, and maintenance to incentivize
construction, investment, and upkeep.
• A higher mill rate is placed on land to capture lost
revenue. Since land is not man made, there is no
effect on jobs nor is there an increase in the cost of
land.
• It is phased in over a period of years.

46. Why is this of interest to New
England planners?
1. Increase investment and owner upkeep
in neighborhoods and downtowns.
2. Support Smart Growth objectives.
3. Protect historic districts. Preserve the
identity and character of small towns.

47. 1. How does LVT increase investment and owner
upkeep in neighborhoods and downtowns
Assessed Value
$64,100
25.3 mill tax rate
$1135 a year
$95 a month
Center for the Study of Economics • 413 South 10th Street, Philadelphia, PA 19147 • 215-923-7800

48. How LVT Creates a fiscal environment for
investment
Yearly
Yearly
Tax Bill
Tax
Property with $300,000 building
Bill
Rise in holding cost $6448
7500
incentivizes land
6000
owner to build or sell
Decrease in tax bill
4500
allows
builder/developer
$2917 $2917
3000
to capitalize
savings into selling
1500 price allowing for
$1135 higher profit per
0
40000 80000 120000 160000 200000 240000 280000 320000 unit or ability to sell
360000
Building Value
Building Value
units for less
resulting in more
Traditional @ 25.3 mill tax rate
units sold
LVT @ 65 mill tax rate land
Center for the Study of Economics • 413 South 10th Street, Philadelphia, PA 19147 • 215-923-7800

49. 2. How does LVT encourage Smart Growth?
Norwalk,
CT
Business
Area

50. Norwalk Connecticut Ave

51. Norwalk Main St

52. LVT Creates Compactness &
Yearly
Density, Reduces Sprawl
Yearly
Tax Bill
Tax
Bill
7500
6000
4500
3000
1500
0
40000 80000 120000 160000 200000 240000 280000 320000 360000
Building Value Value
Building
Traditional @ 21 mil tax rate
LVT @ 34 mil tax rate land – 2.6 building
Center for the Study of Economics • 413 South 10th Street, Philadelphia, PA 19147 • 215-923-7800

53. Norwalk tax shift with LVT from Main
St. to Connecticut Ave
Total
Tax YEAR 1
Collected
Year 0 YEAR 2
$6,399,220 Connecticut Ave.
YEAR 3
Main St.
YEAR 4
YEAR 5
Total
Tax YEAR 6
Collected Percent Change in Property
Year 6 Tax
$6,399,220
- +124
91.6% %

54. 3. Stimulate investment and preserve historic districts
Upper Albany
Historic
District

55. 3. Stimulate investment and preserve historic districts

56. Upper Albany historic district tax shift
YEAR 0
YEAR 1
Average
Decrease YEAR 2
= 9.0%
YEAR 3
Average
Increase YEAR 4
= 9.7%
YEAR 5
YEAR 6

57. Stimulate investment. Preserve
historic districts
• Hartford – 280 Edgewood St. Value = $124,500

58. 280 EDGEWOOD ST
Land Value = $10,500
Building Value = $114,000
Invest $50,000
Tax before Tax after $50,000
investment investment Increase
Standard tax
71 mill $6,256 $8,769 $2,513
LVT tax
435 mill land
11 mill bldg $6,256 $6,641 $385

59. LVT preserves historic districts, downtowns,
and small town identity and character
Additional $50,000 Improvement
Tax Bill
per Year
5000
4000
3000
$2513/year tax increase
2000
1000
$385/year tax increase
0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000
Increase in tax bill after improvement Improvement
with traditional property tax
Increase in tax bill after
improvement with LVT

60. To Summarize
1. Increase investment and owner upkeep in
neighborhoods and downtowns.
.

61. How LVT Creates a fiscal environment for
investment
Yearly
Yearly
Tax Bill
Tax
Property with $300,000 building
Bill
Rise in holding cost $6448
7500
incentivizes land
6000
owner to build or sell
Decrease in tax bill
4500
allows
builder/developer
$2917 $2917
3000
to capitalize
savings into selling
1500 price allowing for
$1135 higher profit per
0
40000 80000 120000 160000 200000 240000 280000 320000 unit or ability to sell
360000
Building Value
Building Value
units for less
resulting in more
Traditional @ 25.3 mill tax rate
units sold
LVT @ 65 mill tax rate land
Center for the Study of Economics • 413 South 10th Street, Philadelphia, PA 19147 • 215-923-7800

62. To Summarize
1. Increase investment and owner upkeep in
neighborhoods and downtowns.
2. Support Smart Growth
objectives.

63. Norwalk tax shift with LVT from Main
St. to Connecticut Ave
Total
Tax YEAR 1
Collected
Year 0 YEAR 2
$6,399,220 Connecticut Ave.
YEAR 3
Main St.
YEAR 4
YEAR 5
Total
Tax YEAR 6
Collected Percent Change in Property
Year 6 Tax
$6,399,220
- +124
91.6% %

64. To Summarize
1. Increase investment and owner upkeep in
neighborhoods and downtowns.
2. Support Smart Growth objectives.
3. Protect historic districts. Preserve
the identity and character of small
towns.

65. Mark Speirs
Regional Director
Mark@urbantools.org
215-923-7800 ext. 2

66. Taxing Land Values in a Municipal
context: How, Why and Where
SNEAPA Conference
September 20, 2012
R. Joshua Vincent
Executive Director
Center for the Study of Economics
413 South 10th Street
Philadelphia, PA 19147
Office: 215-923-7800
Website: www.urbantoolsconsult.org

67. How Can the Property Tax Be Used as a
Policy Tool for Growth and a Revenue
Enhancer for strapped Cities?
Property Tax has 2 Components

68. Most Parcels have 2 Components
Building
Value •$130K
Land
Value •$70K
Total
Value •$200K

69. These 2 Components Added
Give us the Property Tax
Building • $130K x .017 = $2,210
Tax
Land • $70K x .17 = $1,190
Tax
Total • $200K x .17 = $3,400
Tax

70. Which brings in the City Real Estate Tax
Building • $3 B x .017 = $51M
Tax
Land Tax • $2 B x .017 = $34M
Total City • $5 B x .017 = $85M
Tax

71. Exempt Buildings or Other Things
We Want from Tax
Building • $0.00
Tax
• $2 B x .0425 = $85 M
Land Tax
Total City • $2 B x .0425 = $ 85 M
• (Revenue-Neutral)
Tax

72. 1 Component - Land Value - Gives Us
Property Tax 2.0
Building Tax • $100K x .0 = $0
Land • $70K x .0425 = $2,975
Tax
• $2,975
Total • Reduction of $425
Tax • 12.5% Reduction

73. Current Tax Systems Repel Labor & Capital
Adding Drag to the Urban Economy
“Fair
Current Land
Share”
Tax Tax Difference
$65K x .017 $65 K x .0425 $2,763-$1,105
$1,100 $2,763 $1,658K

74. What Other Methods of LVT?
The need for a BID is often caused by vacant or blighted lots.
LVT in a BID puts burden on owners that cause the problem.
Business • Pittsburgh Downtown
Improvement Partnership
District
• $1.4 M
Primary
• 39% of Budget
Revenue Source:
Land Value
• Street & Walk Cleaning
Operational • Lot Maintenance
Purpose

75. What Other Methods of LVT?
Parks and Greenways provide public benefit to proximate landowners.
Kansas City, MO Parks, and Boulevards Levy collects from those beneficiaries.
Benefit has a cost.
• Parks and Boulevards
System, planned and built
Kansas City,
MO 1890s - 1940s
• Boulevard Tax that is
Revenue: currently $1.00/ft, and
Land Value generates $600,000
• Parkway Maintenance Tax
Purpose:
Maintenance
levied on Land-Only,
of the City Plan generates $6.6 million a
year

76. What other uses for LVT?
• Berkshire County MA:
Regional Stark Division of
Tax Base Poverty and Wealth
Sharing
• A regional LVT shares
Revenue: benefits created by
Land state and local
Value investment
Purpose:
• Wealthier towns assist
Broad- but are not dragged
based down economically.
economic
benefit

77. Harrisburg, PA
Early LVT Late LVT

78. Harrisburg, PA
Early LVT Late LVT

79. What happened with LVT?
Per Capita Residential Building Permits
Harrisburg, PA and Albany, NY
147
151
Albany
115 115
Harrisburg
91
80
70 72
64
55
50
34 33
24
Harrisburg
Expands LVT
2001 2002 2003 2004 2005 2006 2007

80. Do Development Patterns Change to Assist Planning?
Classic
LVT
Study:
Oates
and
Schwab,
1997

81. Joshua Vincent
Executive Director
Joshua@urbantools.org
215-923-7800 ext. 2

82. Funding for this program was provided in part by the Henry George School of Social Science, New York, NY
10016