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Una versión más actualizada de este artículo está disponible como parte del capítulo 4 del libro Perspectivas urbanas: Temas críticos en políticas de suelo de América Latina.
En muchas ciudades brasileñas, los impuestos a la tierra y las edificaciones son muy poco utilizados. Según datos del Instituto Brasileño de Administración Municipal (IBAM), por ejemplo, en la mitad de los municipios de más de 50.000 habitantes el impuesto a la propiedad representa menos del 30% del total de los recursos tributarios. Considerando que para la mayoría de estos municipios los ingresos a cuenta de impuestos locales representan menos del 30% de los recursos totales, los impuestos a la propiedad no sobrepasan al 10% de los recursos financieros de los municipios (incluyendo transferencias intergubernamentales). Tales porcentajes resultan incluso menores en los municipios más pequeños. Otros impuestos basados en la tierra, tales como el impuesto a la transferencia de bienes raíces y el impuesto a las mejoras a la propiedad presentan un patrón de resultados igualmente desalentadores.
Especialmente a partir de la nueva Constitución brasileña de 1998, cuando la responsabilidad principal de planificación del uso de la tierra fue transferida al nivel local, los municipios se han vuelto cada vez más conscientes de que la regulación del uso de la tierra y las inversiones públicas en infraestructura introducen cambios en el valor de la tierra. Muchos empleados oficiales públicos están actualmente tratando de desarrollar estrategias de planificación para capturar parte de los beneficios “gratuitos” resultantes. A la vez, los gobiernos locales están encontrando problemas en la aplicación de instrumentos tradicionales de planificación tales como el Plano Diretor, una medida constitucional que requiere que las ciudades con poblaciones mayores de 20.000 habitantes desarrollen un plan maestro. Estas ciudades se encuentran cada vez más involucradas en el debate sobre la flexibilidad del marco regulativo del uso de la tierra. Consecuentemente, la idea de una zonificación flexible a cambio de contribuciones de los promotores se ha vuelto también popular.
Para investigar los aspectos económicos, financieros y de planificación urbana de estos cambios negociados en el uso de la tierra, el Instituto Lincoln y la Municipalidad de Santo André (Estado de São Paulo) organizaron un programa de tres días sobre “Instrumentos y Técnicas de Financiamiento del Desarrollo Urbano en base a la Tierra” en mayo de 1998. Durante los dos primeros días, empleados municipales de Santo André se reunieron con conferencistas invitados para compartir sus experiencias en instrumentos de zonificación, captura del valor y desarrollo económico local en lugares tan diversos como Nueva York, Ciudad de México y Colombia. Las discusiones abarcaron tres temas generales: la captura del valor y el financiamiento urbano; la planificación urbana y el mercado de la tierra; y las negociaciones y asociaciones público-privadas.
El programa finalizó con un debate público que incluyó a una audiencia regional de aproximadamente 200 planificadores, promotores y representantes de organizaciones no gubernamentales, del sector privado y de las comunidades locales dentro de la región del Gran ABC (siete municipios alrededor de São Paulo, incluyendo a Santo André, que en conjunto constituyen el área industrial más densa de Latinoamérica). Un grupo de discusión sobre la efectividad de las negociaciones en base a la tierra y las asociaciones público-privadas en el contexto brasileño contó con la participación de conferencistas de la Universidad de São Paulo, del sector de bienes raíces y de los gobiernos locales.
Numerosas conclusiones se derivaron del programa. Primero, los cambios negociados del uso de la tierra típicamente se producen en ambientes donde los impuestos a la propiedad no funcionan bien. En Santo André, por ejemplo, las restricciones operativas y legales existentes dificultan el reacondicionamiento del sistema de impuestos a la propiedad (ver Figura 1).
Segundo, los cambios negociados del uso de la tierra en Santo André parecen acompañar un cambio continuo de usos industriales a usos asociados con el moderno sector terciario de servicios. A través del proceso de negociación, se introduce una mayor flexibilidad dentro del existente marco legal, como se ha observado en las recientes negociaciones entre el centro comercial Plaza ABC y Pirelli, la empresa multinacional de fabricación de neumáticos. Tercero, aun cuando las negociaciones del uso de la tierra aparentemente satisfacen expectativas en lo que se refiere a complementar la dinámica de la economía local, no hay una metodología ni un marco bien establecidos que permitan definir reglas claras y estables basadas en un análisis sólido de costo y beneficios. En comparación con experiencias internacionales como la de Nueva York, resulta difícil prever las compensaciones monetarias que se pueden esperar en las ciudades brasileñas y si dichas compensaciones son realmente eficientes (en términos de Pareto) vis-a-vis situaciones en las que el permiso de desarrollo se hubiese negado.
Finalmente, los cambios negociados del uso de la tierra deben ser vistos como un elemento esencial de la estrategia general de desarrollo económico local. En la región del Gran ABC, las asociaciones estratégicas entre inversionistas de los sectores público y privado son cada vez más importantes en vista del proceso constante de reestructuración local y regional que ha tenido dramáticos efectos negativos en los niveles de ingreso y de empleo.
Entre las lecciones que nos ofrece el programa de Santo André está la necesidad de desarrollar mejores medidas para calcular los aumentos del valor de la tierra causados por los cambios de zonificación, a fin de poder desarrollar medios para capturar esos valores a través de sistemas más eficaces de tasación. Además, la experiencia de Nueva York muestra que es mejor recolectar impuestos a tasas más bajas por medio de un sistema universal y estable, que en base a una negociación arbitraria caso por caso, la cual puede prestarse al abuso y a la corrupción.
Jeroen Klink, economista urbano, es consejero del alcalde de Santo André. Anteriormente fue Dissertation Fellow del Instituto Lincoln, y se encuentra completando su tesis de doctorado sobre “Fuentes de Financiamiento Urbano: la Aplicabilidad del Modelo Estándar Económico al Caso Brasileño” en la Escuela de Arquitectura y Urbanismo de la Universidad de São Paulo, Brasil. Luis Carlos Afonso, economista, es Secretario de Finanzas de Santo André. Irineu Bagnariolli Jr., sociólogo urbano, es Secretario de Vivienda y Desarrollo Urbano de Santo André.
Figura 1: Limitaciones a la Revisión del Impuesto a la Propiedad
En 1993, la administración de la ciudad de Santo André aprobó una ley otorgando un descuento del 40% en el impuesto a la propiedad. Dicho descuento iba a ser válido solamente durante ese año. Sin embargo, la reducción ha sido mantenida como resultado de varias cláusulas legales que determinan que el valor del impuesto en el año en curso no puede exceder el valor del año anterior, estableciendo así un límite al impuesto.
Otra restricción al uso más agresivo del impuesto, especialmente a fin de promover una tasación más equitativa, es la interpretación dada por la Corte Suprema de que el impuesto no puede ser progresivo. La única excepción permitida es la aplicación penal por desuso o falta de uso de la propiedad, cláusula que en sí misma depende de la emisión de nuevas leyes federales y que ni siquiera ha sido discutida por el Congreso. (Claudia M. De Cesare, “Usando el Impuesto a la Propiedad para la Captura del Valor: el Caso de Brasil”, Land Lines, enero de 1998).
Durante 1990 y 1991, una administración previa en Santo André trató de otorgar descuentos al impuesto a la propiedad basados en las características físicas, el uso actual y el tamaño de la propiedad, pero la iniciativa fue rechazada posteriormente por dictamen de la Corte a causa de su supuesto carácter progresivo oculto. Así, el límite a los impuestos a la propiedad, a pesar de ser revocado formalmente por una ley posterior, permanece básicamente inalterado, ya que si los impuestos fueran aumentados los sectores más pobres de la población serían los más afectados en forma negativa.
Finalmente, en Santo André y en todas las ciudades brasileñas, el valor del metro cuadrado de tierra está fijado por ley, lo cual impide la capacidad de la administración urbana de aplicar impuestos a la propiedad de bienes raíces de acuerdo con su valor en el mercado.
How will local government finances be affected by the large and increasing burden to pay for previously obligated pension costs? How, in particular, will these pension legacy costs change residents’ perceptions of the local property tax and their willingness to pay? As a first step in a larger Lincoln Institute of Land Policy research agenda on these questions, we ask: What is known–and just as importantly, what is not known–about the magnitude of unfunded local government pension liabilities in the United States? (see Gordon, Rose, and Fischer 2012)
It is a first principle of public finance that current services should be paid with current revenues and that debt finance should be reserved for capital projects that provide services to future taxpayers. This principle is violated when pension liabilities associated with current labor services are not funded by current purchases of financial assets and instead have to be paid for by future taxpayers.
Alas, principles of prudence in public finance are not always observed, and local governments in the United States have accumulated substantial unfunded pension liabilities in recent years. This situation breaks an important link in the relationship between taxpayers and the services they receive–the rough correspondence between the overall value of public services and the resources taken from the private sector. There is considerable debate about the strength of this correspondence and how price-like the relationship is between value paid and value received for individual taxpayers, but there can be little question that using current revenues to pay for past services weakens the link.
Growing Public Awareness
State and local government employee pensions are in the headlines almost daily (box 1). Only a few years ago, they were the nearly exclusive province of a few elected officials, appointed boards, investment advisors, actuaries, and credit rating agencies. What changed? The most immediate answer is the Great Recession, which sapped not only state tax revenue but also the value of pension plan assets. In particular, state and local pension fund equity holdings lost nearly half of their value, dropping from a peak of $2.3 trillion in September 2007 to a low of $1.2 trillion in March 2009 (Board of Governors of the Federal Reserve System 2012).
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Box 1: Where Are Local Pensions in Trouble?
To understand where local pensions were experiencing particular difficulties, Gordon, Rose, and Fischer (2012) used media monitoring software to conduct a search of all U.S. domestic news outlets for the first three months of 2012. To satisfy the query, articles had to include the word “pension” in conjunction with terms that identify local governments (e.g., municipality, city, or county) and descriptions of funding problems (e.g., liability, deficit, underfunded, cut, default, reform, or problem). The search yielded over 2,000 separate articles from places all over the country.
Their analysis suggests several types of places are experiencing pension troubles. One group consists of jurisdictions that have been losing people and jobs over time. A prominent example is Detroit, Michigan, which has twice as many retirees as active workers. Also in this category is Prichard, Alabama, which has lost more than 45 percent of its population since 1970 and by 2010 had fewer than 23,000 residents. It simply stopped sending pension checks to its former employees in September 2009 and declared bankruptcy one month later. For such communities, pension problems may also be a symptom of larger fiscal distress or political dysfunction.
Another group of jurisdictions rode the housing boom and bust. Examples include fast-growing California cities like Stockton, which just entered bankruptcy proceedings this year, the largest city ever to do so. More puzzling are relatively affluent places, such as New York’s Suffolk or Nassau Counties, which appear unable to make tough spending cuts or raise taxes because of political gridlock. Instead, many of these jurisdictions have turned to borrowing to meet their pension obligations.
Only two recent municipal bankruptcies (Vallejo, California, and Central Falls, Rhode Island) stemmed from public pensions and employee compensation pressures together with falling revenues. Other places such as Harrisburg, Pennsylvania, and Jefferson County, Alabama, are struggling with poor investment decisions. Also, major cities such as Atlanta, San Francisco, and New York have taken steps to limit pension growth, often with cooperation from local public employee unions. Central Falls managed to extract concessions from active police officers and fire fighters as well as current retirees, but even this was insufficient to stop the slide toward bankruptcy.
Although stock markets have largely recovered and state and local plan equity holdings have climbed back over $2 trillion, public pensions remain under scrutiny. Credit rating agencies increasingly are taking unfunded pension liabilities into account when developing their assessments of state and local government borrower risk. In addition, analysts are growing more vocal in their criticisms of methods commonly used to evaluate pension funding levels.
The federal government is also paying attention. Alarmed by the prospect of defaults, Congress held a series of hearings into state and local government finances in early 2011. More recently, the Republican staff of the Joint Economic Committee (JEC) has issued reports raising the specter of a Eurozone-like crisis due to unfunded state pension liabilities (JEC 2011; JEC 2012).
In light of these criticisms and concerns about growing pension costs, 43 states enacted significant reforms to their pension systems between 2009 and 2011 (Snell 2012). The most common changes were: increased employee contribution requirements (30 states); raised age and service for eligibility (32); adjusted formulas for calculating benefits (17); and reduced cost of living increases (21). In some states the changes applied to new employees only, but in others they affected active workers and current retirees. The latter actions have proven especially controversial, prompting lawsuits in Colorado, Minnesota, New Jersey, and South Dakota.
Most of the heightened attention to government employee pensions has concentrated on state government plans, while local public employee pensions remain relatively unexplored. Although local plans represent a modest share of total public pension membership (10 percent) and assets (18 percent), their failures could be devastating. Mobile residents and businesses could flee communities that levy higher taxes to rebuild pension assets rather than to provide basic services. A shrinking tax base would leave the fund even worse off and potentially less able to pay promised benefits. The result could be more cities like Prichard, Alabama.
Looking at State and Local Pension Plans Together
State and local pensions are an important part of the nation’s retirement system. Figure 1 shows the distribution of the total of $15.3 trillion in retirement assets at the end of 2011 by type of plan. State and local public employee retirement funds held a combined $2.8 trillion in assets, or almost one-fifth of the total.
Every state has at least one public employee pension plan and some have many. There are more than 220 state plans—some of which are state-administered plans that cover local government workers—and almost 3,200 local government plans (table 1). Together these plans cover 14.7 million current workers, 8.2 million current beneficiaries, and 4.8 million people eligible for future benefits but not yet receiving them.
State and local pensions are all the more important because 27.5 percent of government employees do not participate in Social Security (Nuschler, Shelton, and Topoleski 2011). These uncovered public employees are highly concentrated in a handful of states. Figure 2 ranks the 16 states with the highest concentrations of government workers not covered by Social Security. Almost all state and local government employees in Ohio and Massachusetts and more than half in Nevada, Louisiana, Colorado, California, and Texas are not covered.
Another key feature of state and local pensions is that they are mostly defined benefit (DB) plans. Benefits are calculated by a formula, typically something like:
(Average salary in final 3 years) x
(Years of service) x
(2% for each year of service) =
Benefits
Most state and local government pensions also include a cost of living adjustment. A minority of public sector workers are enrolled in defined contribution (DC) plans where a specified amount is put in a retirement fund for each year of work. Compared to DC plans, DB pensions protect employees from investment, inflation, and longevity risks. As of 2009, nearly 80 percent of state and local workers were enrolled in DB plans and just over 20 percent were in DC plans. Private sector workers had the opposite mix: 20 percent in DB plans and 80 percent in DC plans (U.S. Bureau of Labor Statistics 2011).
DB plans used to be more prevalent in the private sector but have been disappearing partly because the Employee Retirement Income Security Act of 1974 (ERISA) imposed minimum funding standards, required insurance contributions, and other administrative burdens on them.
The weaker funding and reporting requirements that apply to public pensions allow governments to shift labor costs into the future. This is an implicit form of borrowing that can evade balanced budget rules and avoid the voter approval usually required for issuing bonds.
Funding and Reporting Requirements for State and Local Pensions
For most of their history, state and local pensions were financed out of general revenues on a pay-as-you-go basis. The current practice of prefunding state and local pension plans began in the 1970s and 1980s. While public sector plans were not covered by ERISA, the act did mandate a report on their practices. The 1978 report found a “high degree of pension cost blindness . . . due to the lack of actuarial valuations, the use of unrealistic actuarial assumptions, and the general absence of actuarial standards” (Munnell et al. 2008, 2).
This wake-up call led to voluntary increases in funding levels by many plans and increased attention to actuarial and accounting standards. The Government Accounting Standards Board (GASB) was formed in 1984, issued its first rules for pension plans in 1986, and extensively revised its actuarial valuation standards in 1994. Compliance with these rules is voluntary, but is rewarded by credit rating agencies, auditors, and other data consumers. Unlike ERISA rules that require specific valuation methods for all private plans, GASB sets out criteria that allow some latitude as to which specific methods are used by public plans. As a consequence there are serious transparency and comparability concerns with the self-reported data on state and local pension plan liabilities.
Employer Contribution
The calculation of a plan’s Actuarial Accrued Liability (AAL) requires the following information: ages and salary histories of members; assumptions for salary growth, retirement ages, asset earnings, and inflation; longevity probability tables; and a discount rate to translate estimated future values into present values. Unfunded Actuarial Accrued Liability (UAA L) equals AAL minus plan assets.
The “Normal Cost” of a pension plan is the increase in AAL due to the current year of service by existing employees. ERISA requires that normal cost be covered by employee and employer contributions. GASB specifies an “Annual Required Contribution” (ARC) of normal cost plus a 30-year amortization of UAA L. The problem is that, contrary to its name, payment of ARC is not strictly required in most jurisdictions.
Choice of Discount Rate
The issue that has received the most recent attention is the choice of discount rate. Current GASB rules allow discounting future liabilities based on projected investment returns, which averaged 8 percent per year prior to the recession. But most economists and financial theorists would agree with Brown and Wilcox (2009, 538) that “the discount rate used to value future pension liabilities should reflect the riskiness of the liabilities,” not the assets. Constitutional and other legal guarantees make government pensions of low risk, while historical investment returns include a risk premium.
State and local governments cannot avoid longterm risks such as a protracted productivity slump or a decade-long down market. Therefore, the historical long-term rate of return on an equity-heavy portfolio–before risk adjustment–is too high a discount rate. Higher discount rates can make pensions appear better funded than they truly are. This reduces contribution requirements and imposes unwarranted obligations on future taxpayers if the high rates of return are not achieved. Worse, there is an incentive for plan managers to seek high-risk portfolios in order to get a higher discount rate and lower ARC.
There are strong arguments that the 8 percent discount rate used by many public pension plans is too high, but there is less agreement on just how much lower the appropriate rate should be. Rather than review the arguments, we report one estimate of just how much of an impact a lower rate would have. Munnell et al. (2012) calculate the would-be change in reported liabilities if all plans used a 5 percent rather than an 8 percent discount rate. They estimate that state and local liabilities would increase from $3.6 trillion to $5.4 trillion and aggregate funding ratios (Assets/AAL) would fall from 75 to only 50 percent. This is a huge change, and represents a doubling of unfunded liabilities (UAA L = AAL – Assets).
Recent Changes in GASB Standards
GASB (2012) has released new accounting standards to take effect in 2013 and 2014. The key change requires state and local governments to apply different discount rates to the funded and unfunded portions of liabilities. An earnings-based rate will still be applied to the funded portion, but a lower, riskless rate will be applied to UAA Ls. The impact of this change on reported liabilities depends on how well funded a plan is: no change for fully funded plans; a small change for well funded plans; and large increases in reported liabilities and decreases in funding ratios for poorly funded plans. The new standards also require that the UAA L be shown on the government’s balance sheet, which will increase the visibility of unfunded liabilities to voters.
What Do We Know About Local Pensions?
Despite mounting concerns about the fiscal health of local pension plans, systematic knowledge about them is rare. The best available information comes from the U.S. Census Bureau’s (2012) Annual Survey of State and Local Public Employee Retirement Systems. Detailed data for each government entity is reported every five years. Plan-level data for a sample that includes roughly half of the 3,200 local plans is reported each year and is used to create estimates of totals for each state by type of government. Tables 1 and 2 exemplify the types of information in the survey.
The main virtues of the Census Bureau’s employee retirement survey are its quality and comprehensiveness. A key disadvantage is lack of timeliness, since the most recent local data available is for fiscal year 2010. Another problem is that the Bureau only recently began reporting plan liabilities, and it does so only for state plans. Like other pension data sources, the Census Bureau does not collect information on DC plans or other post-employment benefits (OPEBs).
Nevertheless, the employee retirement survey provides some insights into local pensions. For example, the number of local plans per state varies greatly: 7 states have no local plans; 20 states have fewer than 10; Florida and Illinois have over 300 each; and Pennsylvania has over 1,400. The number of active members per beneficiary is a crude measure of how well employee contributions can fund the plan. Table 1 indicates the national average for local plans is 1.4 workers per retiree, but there is considerable variation across states. This support ratio is less than 1 in 12 states; between 1 and 2 in 31 states; and over 2 in 7 states, with Utah having the highest ratio at 6.8.
Neither of these pieces of information tell us how well funded local pensions are. For this information, we must turn to independent surveys. Most have good coverage of state plans, but they generally survey only a few of the larger local plans: e.g., the National Association of State Retirement Administrators’ (NASRA ) annual survey of member plans. A small number of national studies have focused on local, as opposed to state, pension liabilities. For example, Novy-Marx and Rauh (2011) analyze local pension finances using data from Consolidated Annual Financial Reports (CAFRs) for city and county plans holding more than $1 billion in assets as of 2006.
The Boston College Center for Retirement Research (CRR) maintains a Public Plans Database (PPD) for the largest state and local plans with data from individual plan actuarial reports and local government CAFRs. Using the PPD plus information on some additional local plans, CRR recently issued a report with data for 2010 from a sample of 97 plans in 40 states (Munnell et al. 2011). This is a modest sample relative to the total of 3,200 local plans, but by concentrating on large plans it covers 59 percent of local pension assets and 55 percent of participants.
An important finding is the wide dispersion around the average funding ratio of 77 percent in 2010 (figure 3). Of 95 large plans in the CRR sample with usable information, only 16 had assets covering more than 90 percent of liabilities. At the other tail are 9 plans with below 50 percent funding (Munnell et al. 2011). This study also shows the ARC as a percent of local government payroll. The overall average for 2010 is 22 percent, and again there is wide dispersion (figure 4). Of 91 large plans in the CRR sample with usable information, more than half (49) have ARC below 20 percent of payroll, but 16 have shares in the less manageable 30 to 80 percent range. Five plans have such large pension obligations that if paid in full they would cost more than 100 percent of payroll.
Keep in mind that local governments in most states are not required to pay the full amount of the ARC. We do not have data at the local level, but a state-level study reported wide variation in the percent of ARC actually paid across plans, across years, and across states (State Budget Crisis Task Force 2012). Munnell et al. (2011) calculate pension payments actually made as a share of local budgets and again find considerable variation, with 14 percent of the sample governments devoting more than 12 percent of their budgets to pay for pensions.
Conclusions
Local government pensions are on average significantly underfunded. The key reason is that, absent a legal compulsion to do so, many governments have not set aside enough funds each year to cover the extra pension liabilities incurred in that year, much less to amortize unfunded liabilities from earlier years. In effect, they are borrowing to pay for current labor services and shifting the burden to future taxpayers.
We know much less about the 3,200 locally administered plans that we do about the 220 state plans. The best information on local plans comes from researchers who review the detailed financial reports of the plans and local governments. Of necessity, these studies concentrate on the larger plans. We do know that there is wide variation across plans on key measures: the share of liabilities that are covered by assets; the would-be full contribution to cover both current year pension costs and amortization of unfunded liabilities (ARC) relative to payroll or annual revenues; the share of ARC that is actually paid; and the share of the current budget that goes to pension costs. A significant fraction of local governments are in trouble by one or more of these measures.
Worse, what we know about liabilities comes from municipalities’ self-reported data and their own choice of discount rate. In almost all cases this discount rate is inappropriately high, and the use of a lower discount could more than double unfunded liabilities. The result is a big problem with local pension liabilities that threatens local government finances, but we do not know how big, and we do not know how unequally it is distributed.
About the Authors
Richard F. Dye is a visiting fellow of the Lincoln Institute of Land Policy. He is also a professor at the Institute of Government and Public Affairs, University of Illinois at Chicago, and professor of economics emeritus at Lake Forest College.
Tracy Gordon is a fellow in Economic Studies at the Brookings Institution, Washington, DC. Her research focuses on state and local public finance, political economy, and urban economics.
References
Board of Governors of the Federal Reserve System. 2012. Flow of funds accounts of the United States, June 7. http://www.federalreserve.gov/releases/z1/current/data.htm
Brown, Jeffrey R., and David W. Wilcox. 2009. Discounting state and local pension liabilities. American Economic Review 99(2): 538–542.
Gordon, Tracy M., Heather M. Rose, and Ilana Fischer. 2012. The state of local government pensions: A preliminary inquiry. Working Paper. Cambridge MA: Lincoln Institute of Land Policy.
Governmental Accounting Standards Board (GASB). 2012. GASB Improves Pension Accounting and Reporting Standards. Press Release. June 25. http://www.gasb.org/cs/ContentServer?c=GASBContent_C&pagename=GASB/GASBContent_C/GASBNewsPage&cid=1176160126951
Joint Economic Committee (JEC). 2011. States of bankruptcy, part I: The coming state pensions crisis. Republican Staff Commentary, Washington, DC, December 8.
Joint Economic Committee (JEC). 2012. States of bankruptcy, part II: Eurozone, USA? Republican Staff Commentary, Washington, DC, May 15.
Munnell, Alicia H., Jean-Pierre Aubry, Josh Hurwitz, and Laura Quimby. 2011. An update on locally administered pension plans. Center for Retirement Research at Boston College Policy Brief, July.
Munnell, Alicia H., Jean-Pierre Aubry, Josh Hurwitz, and Laura Quimby. 2012. The funding of state and local pensions: 2011–2015. Center for Retirement Research at Boston College Policy Brief, May.
Munnell, Alicia H., Kelly Haverstick, Steven A. Sass, and Jean-Pierre Aubry. 2008. The miracle of funding by state and local pension plans. Center for Retirement Research at Boston College Policy Brief, April.
Novy-Marx, Robert, and Joshua Rauh. 2011. The crisis in local government pensions in the United States. In Growing old: Paying for retirement and institutional money management after the financial crisis, Robert Litan and Richard Herring, eds., 47–74. Washington, DC: Brookings Institution.
Nuschler, Dawn, Alison M. Shelton, and John J. Topoleski. 2011. Social Security: Mandatory coverage of new state and local government employees. Congressional Research Service, July. http://www.nasra.org/resources/CRS%202011%20Report.pdf
Snell, Ronald K. 2012. State pension reform, 2009–2011. Washington, DC: National Council of State Legislatures, March.
State Budget Crisis Task Force. 2012. Report of the State Budget Crisis Task Force. http://www.statebudgetcrisis.org/wpcms/wp-content/images/Report-of-the-State-Budget-Crisis-Task-Force-Full.pdf
U.S. Bureau of Labor Statistics. 2011. Employee benefits survey, retirement benefits: access, participation, and take-up rates. March.
U.S. Census Bureau. 2012. 2010 annual survey of state and local public employee retirement systems. http://www.census.gov/govs/retire
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In Santo Andre and all Brazilian cities, the value per square meter of land is fixed by law, thus hindering the capacity of the city administration to tax real estate property according to its market value. In 1993 the Santo Andre city administration passed a law to grant a 40 percent discount on the property tax, which was to be valid only for that year. However, this reduction has been maintained as a result of several legal clauses that determined that the value of the tax in the current year could not exceed its value in the previous year, thus establishing a tax cap.
Value capture in Santo Andre
The Lincoln Institute of Land Policy and the Municipality of Santo Andre in Sao Paulo State organized a three-day program on “Instruments and Techniques for Land-based Finance for Urban Development” in May 1998 where organizers and participants shared their expertise on zoning instruments, value capture, and local economic development in such diverse settings as New York City, Mexico City and Colombia. Their discussions addressed three broad topics: value capture and urban finance; urban planning and the land market; and negotiations and public/private partnerships.
This article explores the lessons learned from the Santo Andre program and the need to develop better measurements of land value increments resulting from zoning changes to promote value capture through more efficient taxation systems.
In many Brazilian cities, land and building taxes are significantly underutilized. According to data from the Brazilian Institute of Municipal Administration (IBAM), for example, in half of the municipalities with more than 50,000 inhabitants the property tax represents less than 30 percent of total tax resources. Considering that for most of these municipalities, local tax revenues represent less than 30 percent of total resources, the property tax does not amount to more than 10 percent of financial resources (including intergovernmental transfers). These percentages are even less in smaller municipalities. Other land-based taxes, such as the real estate transfer tax and betterment tax, show a similarly disappointing pattern.
Especially since Brazil’s new constitution of 1988, when the major responsibility for land use planning was transferred to the local level, municipalities have become increasingly aware that land use regulation and public investments in infrastructure create changes in land values. Many public officials are now looking for planning strategies aimed at capturing part of the “unearned” benefits that may result. In addition, local governments are facing problems with traditional planning instruments such as the Plano Diretor, a constitutional provision that requires cities with a population of 20,000 or more to develop a master plan. These cities have become increasingly involved in the debate about the flexibility of the regulatory framework on land use. Consequently, the idea of flexible zoning in exchange for developers’ contributions has also become popular.
To investigate the economic, financial and urban planning aspects of these negotiated land use changes, the Lincoln Institute and the Municipality of Santo Andre in Sao Paulo State organized a three-day program on “Instruments and Techniques for Land-based Finance for Urban Development” in May 1998. During the first two days, municipal officials from Santo Andre met with invited guest speakers who shared their expertise on zoning instruments, value capture and local economic development in such diverse settings as New York City, Mexico City and Colombia. Their discussions addressed three broad topics: value capture and urban finance; urban planning and the land market; and negotiations and public/private partnerships.
The program ended with a public debate involving a regional audience of some 200 planners, developers, and representatives from non-governmental organizations, the private sector and local communities within the Greater ABC region-(seven municipalities around Sao Paulo, including Santo Andre, which constitute the densest industrial core area in Latin America). A panel discussion on the effectiveness of land-based negotiations and public/private partnerships in the Brazilian context included the participation of guest speakers from the University of Sao Paulo, the real estate sector and the local governments.
A number of conclusions were drawn from this program. First, negotiated land use changes typically proliferate in an environment where property taxes do not work well. In Santo Andre, for example, existing legal and operational restrictions make it difficult to overhaul the property tax system. (See Figure 1.)
Second, negotiated land use changes in Santo Andre seem to accompany the ongoing shift from industrial land uses toward uses associated with the tertiary and modern service sector. Through the negotiation process more flexibility is brought to the existing legal framework, as is seen in recently completed negotiations between the Plaza ABC shopping center and Pirelli, the multinational tire company.
Third, although land use negotiations apparently fulfill expectations in terms of complementing the dynamics of the local economy, there is no well-established methodology and framework to allow transparent and stable rules based on solid cost-benefit analysis. Compared with international experiences, for example in New York, it remains difficult to predict what monetary compensations can be expected in Brazilian cities and whether these compensations are really Pareto efficient compared to situations where the development permit would have been denied.
Finally, negotiated land use changes should be seen as an essential element of the overall local economic development strategy. In the Greater ABC region, various strategic partnerships among key stakeholders from the private and public sectors are increasingly important in light of the ongoing process of local and regional economic restructuring that has had dramatic negative effects on employment and income levels.
Among the lessons to be learned from the Santo Andre program is the need to develop better measurements of land value increments resulting from zoning changes in order to then develop the means to capture those values through more efficient taxation systems. The New York experience further shows that it is better to collect taxes at a lower rate through a universal and stable system rather than on an arbitrary, case-by-case negotiated basis that can be susceptible to abuse and corruption.
Jeroen Klink, an urban economist, is the adviser to the mayor of Santo Andre. He is a former Lincoln Institute Dissertation Fellow who is completing his Ph.D. thesis on “Sources of Urban Finance: The Applicability of the Standard Economic Model to the Brazilian Case” at the School of Architecture and Urbanism, University of Sao Paulo, Brazil. Luis Carlos Afonso, an economist, is the secretary for finance in Santo Andre. Irineu Bagnariolli Jr., an urban sociologist, is the secretary for housing and urban development in Santo Andre.
Figure 1: Restraints on Revising the Property Tax
In 1993 the Santo Andre city administration passed a law to grant a 40 percent discount on the property tax, which was to be valid only for that year. However, this reduction has been maintained as a result of several legal clauses that determined that the value of the tax in the current year could not exceed its value in the previous year, thus establishing a tax cap.
Another restriction on a more aggressive use of the tax, especially as a way to promote more equity, is the interpretation given by the Supreme Court that the tax cannot be progressive. The only exception is its application as punishment for unused or underutilized property, a clause that itself depends on additional federal lawmaking and has not even been discussed by Congress. (See Claudia M. De Cesare, “Using the Property Tax for Value Capture: A Case Study from Brazil,” Land Lines, January 1998.)
During 1990 and 1991, a previous Santo Andre administration had tried to give discounts on the property tax based on the physical characteristics, current use and size of the property, but that effort was subsequently rejected by Court rulings because of its supposed hidden progressive character. Thus, the cap on the property tax, despite being formally revoked by a subsequent law, remains basically unchanged because if taxes were increased the poorer segments of the population would be most negatively affected.
Finally, in Santo Andre and all Brazilian cities, the value per square meter of land is fixed by law, thus hindering the capacity of the city administration to tax real estate property according to its market value.
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Carlos Morales-Schechinger joined IHS, the Institute for Housing and Urban Development Studies at Erasmus University in Rotterdam, The Netherlands, in 2008. This international institute attracts students from all over the world, mostly from developing countries. Some IHS programs are sponsored jointly with the Lincoln Institute.
Previously Morales was a part-time lecturer at UNAM, the National Autonomous University of Mexico. He has been collaborating on a regular basis in seminars and courses organized by the Lincoln Institute throughout Latin America for the past 12 years. He lectures primarily on land value capture instruments, land and property taxation, and land-based preventive policies as alternatives to informal settlements.
He has held various government posts, including director of land policies and instruments in Mexico’s ministry for urban development, where he designed and implemented an ambitious program on land banking; and as director of cadastral policy for Mexico City’s government, where he managed an extensive fiscal reform of property taxes. He also held posts in both public and private banks in Mexico, dealing with property valuation, mortgages, property administration, and loans for large urban developments and for local governments.
He holds a bachelor’s degree in architecture from UNAM, a diploma in local government finance from the University of Birmingham, UK, and a Master of Philosophy in urban studies from the University of Edinburgh, UK.
Land Lines: How did you become involved with the Lincoln Institute?
Carlos Morales: My first introduction was in the early 1980s when I attended an Institute-sponsored international conference in Cambridge that related to my work for the government on urban land policy. The ideas I learned about were put to direct use two years later when I worked on a reform to increase the supply of serviced land in medium-sized cities and to subsidize sites and services for low-income households in Mexico. In the early 1990s, when I was working for the government of Mexico City on an ambitious property tax reform, I attended another Institute conference on property taxation.
From 2000 onward, I participated in many education activities organized by Martim Smolka through the Program on Latin America and the Caribbean. Around 2004 the Institute started a joint venture with IHS and I was one of the visiting lecturers hired by the Institute to teach in those programs. I was later invited to join the IHS staff full-time as the manager of this joint venture.
Land Lines: How do you compare the effectiveness of institutions such as IHS and the Lincoln Institute?
Carlos Morales: I believe they are complementary. The Institute is a leader in research and education on land policies, with an international focus on Latin America and China. IHS is recognized for its education and capacity building on urban management and development for a worldwide audience, focusing on developing and transition countries. IHS courses are open to students from all regions, but most come from countries in Africa, Asia, and Central and Eastern Europe. Through its joint venture with IHS, the Lincoln Institute is able to reach out to those from many more countries in an efficient way.
Land Lines: Conveying fundamental knowledge about land policy and urban management to practitioners is not an easy task. What have you found is the most effective approach?
Carlos Morales: Using a combination of two things is important: the profile of the lecturer and the appropriate pedagogy. Lecturers should have experience both as practitioners and as academics to be able to answer questions that are relevant to practitioners, especially when the answers imply moving away from their comfort zone and facing some kind of change.
The ultimate purpose of social science is precisely to change reality, not only to understand it. Consultancy brings academics close to practice, but it does not confront them with the moral commitment of implementing policy or the ethical responsibility for making policy work on the ground. Experience in direct practice is crucial. The Institute’s programs in Latin America employ lecturers with this profile, and they have proven effective in addressing issues such as the impacts of taxation and regulations on land markets and in choosing instruments for capturing incremental land value, both of which are hot topics in the region.
Regarding pedagogy, practitioners tend to be skeptical about theory. They regard it as impractical, and they want to test it to be convinced. Using examples of policies implemented in other cities is very useful. Some students from developing countries do not accept cases from more developed countries, arguing that their governance structure is too different. Others prefer cases from diverse situations because in spite of contextual differences they aspire to better development opportunities for their own countries. A lecturer should have an arsenal of many different cases to examine when questions rise.
Doing simulation games is also a very effective technique. Games involving role playing where participants compete against each other are the most useful for understanding land markets and helping solve problems. Role playing is revealing even when participants fail to solve problems since it prompts them to question what happened. I have seen how participants who experience failure in a game begin to cooperate and design clever regulations on their own. Another strategy is to assign participants roles contrary to their beliefs or experience. For example, government officials playing the role of pirate land developers learn about the substantial amounts of money the poor must spend just to access land.
Playing the devil’s advocate works well when discussing controversial concepts, as if the participants are in a land court. This is not a new technique except when played with a couple of twists. An example is determining the criteria for compensating eminent domain. In this game one team argues in favor of current use values and the other future use values. Background literature and practical information are provided for arguments on both sides. Practitioners from many places can relate to examples of regulatory takings, whether as expropriations in China, land restitutions in Eastern Europe, or the sale of building rights in Brazil.
Since participants have to defend a position with which they do not agree, they have to study and work harder. In many cases they end up changing their minds, or at least identifying new arguments to use later in debating their opponents in real life. At the end of a land court game the group acting as jury secretly votes twice, first on the team’s performance as advocates and second on the conceptual arguments. When a team gets more votes than the position they defended, it is clear that more research on the issue is needed. What I like best is that the game does not impose a position on the participants, but it raises the level of debate.
Land Lines: What are the main types of resistance to concepts and ideas on land policy?
Carlos Morales: Perhaps the concept most frequently resisted is how taxes and regulations are capitalized into the price of land. Resistance can come from an ideological standpoint (either left or right, both have arguments), self-interest (landowners do not readily accept sacrificing profit), or ignorance of how the capitalization concept works. As an educator I have a role to play in addressing the last challenge.
Even if theory is explained to practitioners, they remain skeptical if their experience contradicts the theory. Misunderstanding can come from referring to a tax on a commodity that is not as scarce as land, but it can also come from experience with land markets themselves. This happens when two policies with opposite effects are introduced together, for example, increasing densities and increasing taxes. The combined effect of these measures makes it difficult to understand the impact of each one. A simulation game can help isolate each impact. Practitioners need to experiment with each policy measure to better understand them both. I have noticed that they may nod with skepticism when you lecture them, but they give you a “eureka” smile when they reach understanding by playing a game.
Land Lines: How do you overcome resistance to topics such as value capture?
Carlos Morales: A charge linked to the increase in densities is a way of capturing the incremental value of land and a source of funds to finance infrastructure, as São Paulo is doing when it charges for extra building rights. The discussion about how this policy impacts market price is controversial. Landowners oppose it because it reduces their price expectations, but developers favor it because it reduces land prices and the payments are returned in the form of public works. A similar situation happened in Bogotá when a tax on the increment in the value of land was introduced.
Both cases are useful references to explain land value capture in developing countries, yet more city cases need to be documented and disseminated, and some practitioners want examples from developed countries. This is not easy, because land value capture is a buzzword in Latin American circles, but not in most developed countries. This is not because value capture is not used in the United States or other places, but rather because it is assumed as part of the operation of the land market. It is the role of lecturers to point this out and open opportunities for sharing experiences among practitioners from both developed and developing countries.
Land Lines: Please comment on the difficulties of conveying taxation concepts to planners.
Carlos Morales: Planners learn about property taxes if they are high enough to have an impact on decisions by landowners, developers, and land users, as in the United States. In developing countries these taxes generally are so low that they do not impact market decisions, so planners are not interested. When I play games that illustrate land markets to architects—who are often also planners—and they realize that the city is not going the way they expect, their most frequent reaction is to suggest more taxes and more efficient land markets. Seldom do they propose a traditional land use plan.
Land Lines: What in your opinion are the central concepts or ideas that could make the difference in the international debate on urban land markets?
Carlos Morales: Pointing out that land value capture is a significant source for financing infrastructure and preventing slums can bring more stakeholders into a serious discussion. Ideas related to security of tenure, land registration, and titling in order to increase access to loans have been dominating policy, but results have not been as positive as predicted. Slums continue to develop and service provision is still lagging behind.
Policies that have to do with land taxation and property obligations—not just property rights—have more potential to improve the functioning of urban land markets. UN-Habitat and the World Bank adopted the earlier notions of security of tenure as a solution, but are now beginning to show interest in land-based urban development instruments. Land value capture policies will have an effect tomorrow, but with a political cost today because giving titles is cheap and appeals to short-term politicians. This is the challenge that should be faced in the international debate to ensure more effective and long-term land market reform.
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The recent fiscal crisis in Asia has affected systems of taxation and land use regulation throughout the region. The situation in Korea is typical. A series of collapses of large conglomerates led to a severe economic crisis, with 5.5 percent of total loans in default by the end of 1997. Currency and stock indexes fell to one-half their value within a year. Major measures to control the crisis, undertaken in cooperation with the International Monetary Fund (IMF), include cutting government expenses by 10 percent and initiating a series of tax reforms to raise revenues.
In this context, a recent seminar on the taxation of real property in Asia provided a valuable and timely forum for the exchange of ideas. The seminar was hosted by the Organization for Economic Cooperation and Development (OECD) and the Government of Korea at the Korea-OECD Multilateral Tax Center in Chonon in early March. Tax administrators from China, Korea, Singapore and Vietnam attended the two-part program, which included a four-day seminar on property taxation and a one-day workshop hosted by the Korea Ministry of Finance. My fellow instructors in the seminar were Michael Engelschalk of OECD’s Fiscal Division in Paris and Anders Muller of Denmark’s Ministry of Taxation.
Seminar Themes
The seminar addressed three major issues concerning local government systems for property taxation:
Local Revenues and Fiscal Decentralization:
Anticipating increased political and fiscal decentralization in many Asian countries, the seminar explored the role of local government within the national tax structure. These fundamental issues are particularly of interest to China, which is just beginning to develop a property tax system, and Korea, which is beginning to exercise stronger local autonomy.
Market Economy and Property Valuation:
For Vietnam and China, which are moving toward a market-based economy, establishing reliable sales information on property markets and developing effective valuation techniques are major challenges. Korea and Singapore, with their more advanced property tax systems, must be able to respond to a dynamic property market. Singapore’s annual value rating method and Korea’s market capitalization approach are very different systems, and the issue of improving valuation models remained a hotly debated subject during the seminar.
Taxation Administration and Enforcement:
Computerization, a collection process and legal procedures need to be developed and implemented in all governments to improve the efficiency and effectiveness of management and enforcement procedures. Political issues such as assignment of local and central government functions, determining ability to pay and the role of wealth taxation were also discussed extensively by the participants.
Tax Policy Issues in Asian Countries
Although China at present does not permit private ownership of land, three categories of taxes are applied to use rights:
taxes on land use (land use tax, land occupation tax and agricultural tax):
taxes on ownership of buildings (house tax and real estate tax); and
taxes on transactions (land appreciation tax, business tax, stamp duty and deed tax.)
Property tax reform in China is needed for two reasons: redundancy and out-of-date regulations. Even after the economic reforms of the 1980s, foreign investment in real property has been regulated and taxed according to a 1951 law. The central government has decided to reform and simplify property taxes by consolidating the domestic house tax with the land use tax for local people, consolidating domestic and foreign house taxes for foreigners, and possibly eliminating the deed tax.
Korea proposed a land value increment tax several years ago to capture the capital gains from land transactions, but the proposal was defeated. To capture land value increments and avoid speculation, Korea instead implemented a capital gains tax system that covers both real property and other asset transactions. To discourage land speculation, the tax rate will be fixed at 50 percent for property sales within two years of purchase, but owners who hold properties for more than two years will have a lower capital gains tax rate.
Korea’s GNP is expected to grow less than one percent in 1998 and tax revenues are projected to decline by US$4.4 billion. In response, the government designed a package to raise tax revenues by US$2.4 billion and to cut government expenditures by US$5.6 billion. In the tax reform package, minimum tax levels will generally be raised but capital gains taxes on land sales and value-added tax exemptions will be reduced.
Vietnam began reforming its tax system in 1990 with the introduction of uniform tax laws and ordinances across the country. Some examples are the 1994 Law on Agricultural Land Use Taxes, the 1992 Ordinance on Land and Housing Taxes, and the 1994 Law on Taxes on Land Use Right Transfer. Although Vietnam endorses a market economy, these central government regulations set the standard for all taxation administration. Property valuation (use value) is also defined by national law, although the taxable price is determined by the People’s Committee of the province or city, which is directly under central government power. In other words, the valuation is based on market value but must be approved by the People’s Committee.
In Singapore property owners pay an annual tax of 12 percent on the annual value of the property. The annual value for buildings is based on the estimated market rent per annum. The value for vacant land or land under development is derived from five percent of its estimated market value. The total annual tax in 1996-97 constituted six percent of the government’s operating revenue. Other property-related taxes include transfer taxes, inheritance taxes and development charges. Given the dynamic urban real property market and high land prices, the Inland Revenue Authority of Singapore (IRAS), which oversees the taxation system, is continuously developing new valuation and collection methodologies.
In summary, the demand for research on tax policies is critical in Asia. This seminar offered an educational environment where instructors and participants could share basic principles on the taxation of real property and learn from each others’ experiences.
Alven Lam is a fellow of the Lincoln Institute and academic dean of the Land Reform Training Institute in Taiwan.
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En la mayoría de los países, las propiedades del gobierno no se encuentran sujetas al impuesto sobre la propiedad; de hecho, la sola idea podría considerarse como un intercambio circular de dinero (Bird y Slack 2004; Youngman y Malme 1994). En el último tiempo, el Reino Unido ha adoptado un punto de vista muy diferente. Considerando que es muy importante que tanto el gobierno como los ocupantes del gobierno municipal estén al tanto del verdadero costo que implica tener propiedades, el Reino Unido insiste en un sistema de alquileres teóricos y garantiza la sujeción a los impuestos sobre la propiedad de ámbito municipal.
Desde la promulgación de la Ley de Asistencia a la Pobreza en 1601 (la fecha generalmente aceptada en que comenzó la tributación de inmuebles municipales en el Reino Unido) hasta el año 2000 (cuando se aprobaron los cambios a esta ley), los inmuebles ocupados por el gobierno o la Corona no se encontraban sujetos al impuesto o a las “tasas” sobre la propiedad. No obstante, la Corona, de hecho, aceptó que era apropiado realizar algún tipo de aporte con el fin de cubrir los costos de los servicios municipales, por lo que pagaba voluntariamente aportes en lugar de tasas (CILOR, por sus siglas en inglés). Este proceso conllevaba varios problemas: los aportes eran voluntarios; los inmuebles de la Corona no figuraban en los listados de valuaciones; y la base sobre la cual se realizaban los aportes carecía del rigor y la transparencia de valuación que se aplicaban al resto de las propiedades.
La Ley Municipal de Gobierno y Valuación se promulgó en 1997 para su aplicación en Inglaterra, Escocia y Gales (más tarde, en 1998, se introdujo una modificación para Irlanda del Norte) con el fin de que todos los inmuebles de la Corona estuvieran en pie de igualdad con respecto al resto de las propiedades sujetas a impuesto y pudieran ser pasibles de ser valuadas para determinar sus tasas. Estas disposiciones entraron en vigor el 1 de abril de 2000. Como resultado, edificios emblemáticos tales como el Palacio de Westminster y la Torre de Londres son valuados por primera vez en la actualidad de la misma manera que el resto de las propiedades.
Valuación de inmuebles comerciales
Los tasadores de la Agencia de Valuaciones (VOA, por sus siglas en inglés), perteneciente al Departamento de Impuestos y Aduanas de Su Majestad (HMRC, por sus siglas en inglés), son los responsables de compilar y mantener los listados de valuaciones de inmuebles comerciales (no residenciales) para Inglaterra y Gales. En Escocia, los responsables son los tasadores municipales, y en Irlanda del Norte, la responsabilidad recae sobre el Servicio de Suelos e Inmuebles. En general, el valor catastral de un inmueble no residencial está basado en el alquiler anual por el cual podría haberse alquilado en el mercado abierto a una fecha estándar (la fecha de valuación precedente). En el caso de Inglaterra y Gales, la fecha precedente para los listados de 2000 fue el 1 de abril de 1998; para los listados de 2005, el 1 de abril de 2003; y para los listados de 2010, que entraron en vigor el 1 de abril de 2010, la fecha precedente fue el 1 de abril de 2008.
La Tabla 1 muestra la cantidad de inmuebles sujetos a impuesto en Inglaterra y Gales y su valor catastral (imponible) total. Resulta un tanto difícil realizar comparaciones con los impuestos sobre la propiedad basados en el valor capital, ya que para ello es necesario conocer los rendimientos respectivos; aún así, es evidente que el nivel de tributación es extraordinariamente alto para un impuesto sobre la propiedad. El nivel del impuesto en Inglaterra y Gales es de aproximadamente el 45 por ciento, aunque esta cifra corresponde a los valores de alquiler, no de capital.
El gobierno del Reino Unido establece una tasa uniforme del impuesto en forma separada (peso por libra esterlina) para Inglaterra, conocida como el multiplicador de valuación para inmuebles no residenciales. En Escocia y Gales, esta tasa es determinada por sus respectivas asambleas y, en el caso de Irlanda del Norte, cada consejo distrital establece su propia tasa. Así se determina el monto a pagar sobre cada libra esterlina de valor catastral, a fin de obtener la factura completa de tasas del impuesto. Las autoridades municipales son las responsables de calcular el monto de las facturas y recaudar las tasas del impuesto sobre inmuebles no residenciales correspondientes a las propiedades que se encuentran dentro de sus áreas de influencia. No obstante, las autoridades no conservan los montos que cobran, sino que los depositan en un fondo nacional (uno para Inglaterra y otro para Gales). El dinero que conforma dicho fondo se redistribuye luego entre las autoridades municipales, con ciertos acuerdos especiales para la ciudad de Londres.
Antecedentes de la exención a la Corona
Antes de que se emitieran los listados de valuaciones en el año 2000, ciertas propiedades ocupadas por la Corona, tales como las instalaciones donde funcionan las oficinas del gobierno central y el Ministerio de Defensa, se encontraban exentas de la valuación y no figuraban en ningún listado de valuaciones. No obstante, la Corona realizaba un CILOR en forma voluntaria en base a un valor catastral teórico.
La Corona no figuraba expresamente ni en la Ley de Asistencia a la Pobreza de 1601 (la ley original de valuaciones se conocía también como la Ley de Isabel) ni en la Ley de Tasas Generales de 1967 que la reemplazó. Debido a que uno de los principios del derecho del Reino Unido consistía en que la Corona no se encontraba sujeta a ningún acto parlamentario a menos que se la mencionara específicamente, no era susceptible a las tasas. Además, no podía imponerse tasa alguna sobre aquellos inmuebles ocupados por sus funcionarios cuando dicha ocupación se entendía como ocupación por la Corona. Este fue el punto de vista mantenido en la causa Jones contra Mersey Docks 11 HL Cas. 443 (1865).
Sin embargo, ya en 1860 el gobierno aceptó el principio de que la Corona pagara alguna suma en forma de CILOR voluntario respecto de los inmuebles ocupados a los fines públicos. Dicha práctica se volvió uniforme en 1874. El Tesoro del Reino Unido adoptó, mediante acta formal, el principio de que los inmuebles ocupados para las funciones públicas debían pagar tasas municipales de la misma manera que otros inmuebles de los condados en los que estaban ubicados, teniendo en cuenta las características de cada caso. El acta del Tesoro estableció el Departamento de Valuaciones de Propiedades del Gobierno (RGPD, por sus siglas en inglés) para evaluar todos los inmuebles del gobierno con el fin de adoptar, en cada caso y hasta donde fuera posible, los mismos principios que se aplicaban a la valuación de inmuebles particulares.
El derecho consuetudinario del siglo XIX establecía que la exención sólo se aplicaba a las propiedades ocupadas por la Corona misma o sus funcionarios, y no al resto de los inmuebles ocupados con fines públicos. Por lo tanto, la exención se aplicaba generalmente a los inmuebles ocupados para usos del gobierno central y a los palacios y parques reales, así como también a otros inmuebles ocupados por funcionarios de la Corona (por ejemplo, la ocupación por parte de los ministros de gobierno o el personal militar de la base naval real, del ejército y de la fuerza aérea real).
En 1896, mediante otra acta del Tesoro se reafirmó el principio de aporte equitativo y se establecieron ciertas concesiones a fin de que entrara en plena vigencia. Estas concesiones consistían en una revaluación periódica, el pago dentro de los plazos establecidos y una contribución con respecto a las cámaras del Parlamento.
A continuación se detallan las principales características del CILOR en los últimos años de su existencia:
Los acuerdos del CILOR se diferenciaban del resto de los procedimientos de valuación estándar en los siguientes aspectos principales:
Fundamentos para eliminar la exención a la Corona
El gobierno ha estado debatiendo la eliminación de la exención a la Corona ya desde la Segunda Guerra Mundial. El Comité Central de Valuaciones, en una carta fechada el 21 de enero de 1947 y dirigida al Ministro de Salud, de hecho sugería dicha eliminación, a la vez que declaraba que su punto de vista, desde hacía mucho tiempo, era que los acuerdos de valuación de inmuebles ocupados por la Corona vigentes hasta ese momento eran en muchos aspectos injustos e insatisfactorios para las autoridades municipales, quienes, en ese entonces, establecían sus propios niveles de tasas. En la década de 1950, las asociaciones de autoridades municipales inglesas expresaron su descontento con la exención aplicable a la Corona y llegaron hasta el punto de declarar que la forma de calcular los CILOR era completamente arbitraria y que con frecuencia representaba un perjuicio para las autoridades municipales. En 1952 calcularon el valor catastral de los inmuebles de la Corona en Inglaterra y Gales en aproximadamente £14 millones, de un valor catastral total de cerca de £341 millones, lo que equivaldría a £2.200 millones según los niveles de valores en la revaluación del año 2010.
A mediados de la década de 1990, el gobierno consideró varios aspectos impulsores para un cambio:
La Ley Municipal de Gobierno y Valuación de 1997 estableció la eliminación de la exención que gozaba la Corona de tasas por inmuebles no residenciales en Inglaterra, Gales y Escocia con vigencia a partir del 1 de abril de 2000. Las autoridades responsables de la valuación cobrarían las tasas correspondientes a los inmuebles de la Corona directamente a los respectivos departamentos, en lugar de cobrarlos a la CPU. Dichas autoridades también podrían iniciar procedimientos de ejecución en contra de la Corona, tal como lo harían con otros contribuyentes. Aunque esto ocurriría solamente en raras ocasiones, las autoridades responsables de las valuaciones podrían, en principio, tomar medidas contra un departamento del gobierno con el fin de obtener una orden de apremio por falta de pago de tasas, en el caso de que fuera necesario.
Los profesionales de la valuación en el Reino Unido han sugerido que, debido a que la valuación es un impuesto, tasar y sujetar a impuesto los inmuebles ocupados por entes públicos representa un derroche de recursos públicos. Las propiedades que podrían incluirse en esta categoría incluyen aquellas ocupadas por el Ministerio de Defensa, el Servicio Nacional de Salud y las autoridades municipales. Superficialmente, el hecho de valuar y sujetar a impuesto estas propiedades puede parecer injustificado. La dificultad reside en que muchas de las actividades que tradicionalmente son llevadas a cabo por el gobierno central o los gobiernos municipales ahora son también realizadas por el sector privado. Un ejemplo de ello son los centros de recreación. Aplicar la exención de tasas a las propiedades de las autoridades municipales cuando estas compiten directamente con el sector privado podría considerarse injusto, ya que le brindaría una ventaja fiscal al sector público.
Aunque el sector público ocupa otros edificios cuya utilización actual evidentemente no compite con el sector privado, resulta difícil justificar la exención de ciertos inmuebles ocupados por el sector público, mientras incluye otros. La justificación original para valuar edificios ocupados por los entes públicos (incluyendo la eliminación de la exención a la Corona en 2000) fue establecer una base en condiciones de igualdad, garantizar que los costos de ocupación se reconocieran en su totalidad y brindar transparencia en cuanto a la contribución de los entes del sector público para cubrir los costos relacionados con los servicios públicos brindados.
Valuación de edificios emblemáticos
La eliminación de la exención a la Corona precipitó la necesidad de valuar una amplia gama de inmuebles fuera de lo común. La valuación en el Reino Unido es un impuesto que se aplica al ocupante y no al propietario, y está basado en la utilización real amplia en lugar de la mayor y mejor utilización del inmueble. Los edificios muy antiguos con frecuencia deben ser valuados, aunque muchos de ellos se han modernizado y se utilizan para diferentes fines, tales como oficinas, usos comerciales mixtos o, al menos en parte, atracciones turísticas.
El tradicional enfoque de comparación de valuaciones pudo aplicarse en inmuebles que tenían un uso similar, con el fin de permitir la determinación de un valor de alquiler indicativo para algunas estructuras, aunque, en el caso de otras, la tarea resultó mucho más difícil. Por ejemplo, la Casa Somerset, sobre el río Támesis, es un bloque de oficinas construido a tal fin, pero es además el primer bloque de oficinas del gobierno que fue construido a tal fin, data de 1776 y ha sido utilizado en filmaciones comerciales, por lo que resulta difícil compararlo con otros edificios.
La valuación de inmuebles fuera de lo común no se limita a las propiedades de la Corona o a aquellas en las que el método de comparación de alquileres no puede usarse porque no existen comparaciones de interés. En tales casos, la aplicación del método de ingresos y gastos o el método de las ganancias puede resultar mucho más confiable a la hora de determinar el valor de mercado en cuanto al alquiler de una propiedad. Este método es apropiado si el inmueble sujeto a valuación es comercial por naturaleza o posee cierto grado de monopolio, y si la principal motivación del ocupante para utilizar el inmueble fuera obtener ganancias y, de hecho, estuviera obteniéndolas (Bond y Brown 2006).
En el caso de no poder utilizar ni el método de la comparación ni el método de ingresos y gastos, se aplica entonces el método de base de contratistas o método de costos cuando el inmueble sirve principalmente para fines públicos y no se encuentra ocupado para beneficio comercial, o cuando el inmueble en cuestión es comercial pero no constituye un centro de ganancias con sus propias cuentas. En ambos casos, el ocupante (o propietario) debería soportar el costo de un inmueble de reemplazo para poder continuar con la utilización del inmueble.
Además del problema de la valuación, nos enfrentamos a la complejidad que existe en el Reino Unido en cuanto a tener un impuesto separado sobre propiedades residenciales. En Inglaterra, Escocia y Gales, este tributo se denomina impuesto municipal, mientras que en Irlanda del Norte, el sistema tiene que ver con tasas residenciales. Si alguna parte del inmueble se utiliza para fines residenciales, según se define en la legislación, entonces se determina el impuesto residencial sobre dicha porción del inmueble. De esta manera, en cuanto al Palacio de Buckingham y al Castillo de Windsor, ambos palacios reales, se aplica una valuación sobre la porción no residencial y comercial, y un impuesto municipal sobre las secciones residenciales de dichos edificios.
Palacio de Westminster
El Palacio de Westminster, también denominado Parlamento, es un palacio real y el lugar donde las dos cámaras del Parlamento del Reino Unido celebran sus sesiones, es decir, la Cámara de los Lores y la Cámara de los Comunes. El Palacio es el centro de la vida política y “Westminster” se ha convertido en una metonimia que refiere al Parlamento del Reino Unido y al sistema de gobierno de Westminster, del cual se origina su nombre. La Torre de Isabel, a la cual generalmente se la llama por el nombre de su campana principal, Big Ben, es un hito emblemático de Londres. La arquitectura del Renacimiento Gótico, obra de Sir Charles Barry, data de 1840, pero el extraordinario Salón de Westminster con su techo de cerchas se remonta al año 1097.
El Palacio de Westminster ha sido parte del patrimonio de la humanidad desde 1987. Este Palacio tenía un valor catastral de £14.700.000 en el listado municipal de valuaciones de 2010 (£5.500.000 en el listado de valuaciones de 2000). Si se aplica la tasa estándar del impuesto del 45,8 por ciento, la deuda impositiva ascendería, sin tener en cuenta ninguna exención, a aproximadamente £6.730.000 por año. La tasación en realidad combina cuatro edificios: el Palacio, la Casa Portcullis, la Puerta Derby 1 y los edificios Norman Shaw. Todas estas secciones se valúan según el método comparativo respecto de las oficinas, y se aplican descuentos por diseño y tamaño, de corresponder. En el caso del Palacio, ambas Cámaras se encuentran valuadas al 65 por ciento de la tasa principal por metro cuadrado. Existe también otro descuento con el fin de reflejar la superficie cubierta total en la propiedad.
Palacio de Buckingham
El Palacio de Buckingham es la residencia oficial y principal lugar de trabajo de Su Majestad la Reina Isabel II en Londres, tanto respecto de su posición como monarca británica y jefe de estado de varios países en todo el mundo, como de cabeza de la Mancomunidad Británica. Este Palacio, ubicado en la ciudad de Westminster, es la sede donde se desarrollan los eventos de estado y donde se brinda hospedaje real. El edificio que hoy en día forma el centro del palacio, y que anteriormente se denominaba Casa Buckingham, era una gran residencia urbana que se construyó para el Duque de Buckingham en 1705. El Palacio de Buckingham se convirtió en el palacio real oficial de los monarcas británicos cuando la Reina Victoria ascendió al trono en 1837.
El Palacio de Buckingham se utiliza en parte como una de las residencias del monarca, aunque principalmente consiste de oficinas. Hace poco se ha permitido cierto uso comercial limitado, ya que algunos sectores del edificio se encuentran abiertos a los visitantes. La parte comercial posee un valor catastral de £1.300.000 según el listado de valuación municipal de 2010. El Palacio se valúa utilizando dos métodos. En primer lugar, se aplica el método de ingresos y gastos o de ganancias a fin de reflejar el componente comercial (aproximadamente 400.000 personas lo visitaron en el año 2011). La propiedad está abierta durante 63 días al año en horarios limitados, por lo que los ingresos respectivos se consideran anualizados y luego se agrega el 5 por ciento a fin de reflejar el hecho de que, si estuviera abierto al público durante más horas, se generarían más ingresos por entradas. Las cuentas comerciales, según los informes publicados, muestran que el valor catastral fue equivalente al 6,3 por ciento de los ingresos corrientes de mantenimiento. En segundo lugar, el método de contratistas o de costos se aplica a la Galería de la Reina. El componente residencial del Palacio posee 775 habitaciones, entre las que se cuentan 52 dormitorios reales y para huéspedes, 188 dormitorios para el personal, 19 salas de estado y 78 baños. En el período 2011-2012, la factura del impuesto municipal ascendió a £1.369.
Torre de Londres
El Palacio Real y Fortaleza de Su Majestad, comúnmente conocida como la Torre de Londres, es un castillo histórico que descansa sobre la ribera norte del río Támesis en la zona central de Londres y data de la conquista de Inglaterra por parte de los Normandos en el año 1066. La Torre Blanca, que le otorga su nombre a todo el castillo, fue construida por Guillermo el Conquistador en 1078. La Torre ha tenido diferentes funciones: arsenal, oficina del tesoro, prisión, zoológico, sede de la Casa de la Moneda Real y oficina de registros públicos. En la actualidad, la Torre alberga las joyas de la Corona y es una de las atracciones turísticas más conocidas del país: en el año 2011 recibió aproximadamente 2,55 millones de visitantes.
La Torre se encuentra protegida ya que ha sido declarada patrimonio de la humanidad por la UNESCO (además de estar protegida por muros muy altos y sistemas de alarma muy elaborados). El inmueble se valúa según el método de ingresos y gastos, debido a su valor particular en calidad de atracción turística. El valor catastral equivale aproximadamente al 4,7 por ciento de los ingresos corrientes de mantenimiento. En el listado municipal de valuaciones del año 2010, la propiedad tenía un valor catastral de £1.790.000 (en el listado de valuaciones del año 2000 el valor fue de £1.180.000).
Stonehenge
Stonehenge es un círculo de piedras prehistórico que se encuentra en la llanura de Salisbury. Está integrado por un monumento de rocas megalítico formado por 150 piedras enormes colocadas siguiendo un diseño circular, que data del año 3.000 A.C. Aunque existen otros círculos de piedras mucho más grandes en otros lugares del mundo (inclusive uno cercano en Averbury), Stonehenge es único debido a que las piedras de arenisca se encuentran coronadas por dinteles que se empalman unos con otros y que, alguna vez, formaron un círculo completo y conectado. Stonehenge fue construido a lo largo de un período de 1.500 años. Se lo ha declarado patrimonio de la humanidad y atrae aproximadamente un millón de visitantes al año. Debido al funcionamiento comercial de esta propiedad, se la valúa aplicando el método de ingresos y gastos, a un valor catastral de £700.000.
Resumen
Los inmuebles que son propiedad de la Corona y ocupados por esta se valúan actualmente de acuerdo con los métodos y principios normales de valuación. La eliminación de la exención a la Corona ha dado como resultado la valuación “correcta” de ciertos edificios históricos únicos y, muchas veces, emblemáticos. Los métodos de valuación aplicados deben reflejar la utilización que se hace de cada edificio y, donde las comparaciones de alquileres sean limitadas, es posible que deba aplicarse el enfoque basado en los costos. Este último enfoque implica importantes dificultades cuando se aplica a edificios con una antigüedad de varios centenares de años. En tales casos, los tasadores deben ser creativos, artísticos y científicos en sus valuaciones.
Sobre los autores
William McCluskey es investigador del Instituto de Investigaciones sobre el Entorno Construido de la Universidad de Ulster, Irlanda del Norte, Reino Unido. Contacto: wj.mccluskey@ulster.ac.uk.
David Tretton FRICS FIRRV es profesor invitado en la Facultad de Entorno Construido de la Universidad de Ulster, Irlanda del Norte, Reino Unido. Anteriormente fue jefe de departamento y director de Tasación en la Agencia de Valuaciones de Londres. En la actualidad es el editor técnico de RICS Valuation – Professional Standards (libro rojo). Contacto: dtretton@rics.org o djtretton@btinternet.com.
Los autores desean agradecer a Patrick Bond, BSc FRICS Dip. Rating IRRV (Hons), jefe de la Unidad de Especialistas Nacionales en Asuntos Comerciales, Cívicos y de Ocio de la Agencia de Valuaciones de Londres.
Referencias
Bird, R. M. y E. Slack. 2004. International handbook of land and property taxation. Northampton, MA: Edward Elgar Publishing.
Bond, P. y P. Brown. 2006. Rating valuation: Principles and practice. Londres: Estates Gazette.
Informe Oficial de la Carta de Ciudadanos. 1991. Citizens Charter Open Government, Cm 2290, HMSO, Londres.
Youngman, J. M. y J. H. Malme. 1994. An international survey of taxes on land and buildings. Boston, MA: Kluwer Law and Taxation Publishers.
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Conservation easements have become an important new tool for protecting environmentally significant open space. In the past, permanent restrictions against development often required outright purchase of the property by a governmental entity, land trust or other conservation organization. If the land remained in private ownership there was no assurance that a future heir or purchaser might not undertake construction on the site or sell it for development.
Conservation easements, which may be donated by landowners or purchased by conservation organizations or governmental agencies, provide permanent protection against development, but allow land to remain in private hands. This combination of open space protection and private ownership is a significant innovation that can address the conservation, planning and fiscal goals of landowners, conservation organizations and communities simultaneously.
Often those with the strongest appreciation for open space and commitment to its preservation are the families who have preserved their own land for generations and have no interest in selling it to a local government or environmental organization. Such organizations, in turn, rarely have the funds necessary for the outright purchase of all the land they seek to protect, and may not have the resources even to maintain land received by gift. Finally, ownership by governmental entities or charitable organizations generally results in an outright exemption of the land from property taxation. Continued private ownership coupled with a transfer of development rights leaves at least some portion of the property value on the tax rolls, thus benefiting the community at large.
What portion of the unrestricted land value remains taxable is a contentious and in many instances unanswered question, however. Some states that have adopted legislation permitting the establishment of conservation easements have determined that assessment of the land for property tax purposes must take this diminished development potential into account. Idaho statutes on the other hand assert that imposition of a conservation easement is not to affect property tax value. Many state laws are silent on the point, as is the Uniform Conservation Easements Act, a model law that serves as the pattern for a number of state enactments.
In many cases valuation of conservation land with restrictions is essential not only for property tax purposes but for calculation of a federal income tax deduction as well. Stephen Small is a Boston attorney who drafted the U.S. Treasury regulations on treatment of conservation easements as charitable donations of development rights. At a Lincoln Institute conference in Phoenix, Arizona, in February, he explained the detailed requirements that owners must meet in claiming this deduction.
Small also described the conservation implications of the demographic distribution of land ownership in this country. A large amount of property is now held by an older generation that has experienced enormous appreciation in the value of this asset. Estate tax planning will be crucial to the future use of this land. Small explained that in many cases conservation easements could reduce or eliminate pressure to sell family land for development in order to meet estate tax obligations.
The Phoenix conference brought together more than 120 specialists in land use, property taxation, appraisal and environmental issues to discuss valuation and legal aspects of conservation easements. Cosponsored with the Arizona chapter of the Nature Conservancy and the Sonoran Institute, this meeting was one in a series of similar conferences held by the Lincoln Institute over the past five years. The Institute welcomes inquiries from potential participants and cosponsors of future courses on this topic.
Joan Youngman is a senior fellow of the Lincoln Institute and director of the program on the taxation of land and buildings.
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In most countries, government property is not liable for property taxes; indeed, the whole idea may be seen as a circular shifting of money (Bird and Slack 2004; Youngman and Malme 1994). The United Kingdom has taken a very different perspective recently. Regarding it as important that both government and local government occupiers are aware of the true cost of holding property, the UK insists on a system of notional rents and ensures liability for local property taxes.
From the enactment of the Poor Relief Act in 1601, the generally accepted starting date for the taxing of local property in the UK, until 2000 when changes were enacted, property occupied by the government or Crown was not subject to property tax or “rates.” However, the Crown did accept that it was appropriate to make some contribution to meet the costs of local services and paid ex gratia contributions in lieu of rates (CILORs). This process suffered from a number of problems: the contributions were voluntary; Crown property did not appear in the valuation lists; and the basis upon which the contributions were made lacked the rigor and transparency of valuation that applied to all other property.
The Local Government and Rating Act was introduced in 1997 for England, Scotland, and Wales (with an amendment in 1998 for Northern Ireland) to effectively place all Crown property on the same footing as all other taxable property, liable to be assessed for rates. These provisions came into effect from April 1, 2000. As a result, such iconic buildings as the Palace of Westminster and the Tower of London are now being valued in the same way as all other property for the first time.
Valuing Commercial Property
Valuation officers of the Valuation Office Agency (VOA), a part of Her Majesty’s Revenue and Customs (HMRC), are responsible for compiling and maintaining commercial (nondomestic) property rating lists for England and Wales. The local assessors are responsible in Scotland, and the Land and Property Services have responsibility for Northern Ireland. Broadly speaking, the rateable value of a nondomestic property is based on the annual rent that it could have been let for on the open market at a standard date (the antecedent valuation date). For England and Wales, the antecedent date of the 2000 lists was April 1, 1998; for the 2005 lists it was April 1, 2003; and for the 2010 lists, which came into effect on April 1, 2010, it was April 1, 2008.
Table 1 shows the number of taxable properties in England and Wales and their total rateable (taxable) value. Comparisons with capital value-based property taxes are a little difficult because it is necessary to know the relevant yields to make the comparison, but even so it is clear the level of taxation is unusually high for a property tax. The tax level for England and Wales is approximately 45 percent, but this is on rental, not capital, values.
The UK government sets a separate uniform tax rate (poundage) for England known as the nondomestic rating multiplier. For Scotland and Wales, it is set by their respective assemblies, and for Northern Ireland each district council sets its own rate. This determines the sum payable on every pound sterling of rateable value to arrive at the full rates bill. Local authorities remain responsible for calculating the bills and collecting nondomestic rates payable on properties within the authority’s area. They do not, however, retain the rates they collect but pay them into a national pool (one each for England and Wales). The money in the pool is then redistributed to local authorities with special arrangements for the City of London.
Background on the Crown Exemption
Prior to the 2000 rating lists, certain properties occupied by the Crown, e.g., central government offices and Ministry of Defence establishments, were exempt from rating and did not appear in any rating list. The Crown did, however, make an ex gratia CILOR based on a notional rateable value.
The Crown was neither expressly mentioned in the Poor Relief Act of 1601, the original rating act sometimes referred to as The Statute of Elizabeth, nor in the General Rate Act 1967 that replaced it. As it was a principle of UK law that the Crown was not bound by an act of Parliament unless specifically mentioned, there was no liability for rates. Further, no rates could be imposed with respect to property occupied by its servants whose occupation amounted to occupation by the Crown. This position was upheld by Jones v. Mersey Docks 11 HL Cas. 443 (1865).
However, as far back as 1860, the government accepted the principle of the Crown paying something by way of ex gratia CILORs with respect to property occupied for public purposes. This practice was made uniform in 1874. The Treasury of the UK, by formal Minute, adopted the principle that property occupied for the public service should contribute to the local rates equally with the other property in the parishes in which it was situated, having regard to its character in each case. The Treasury Minute established the Rating of Government Property Department (RGPD) to undertake the assessment of all government property with the intention of adopting in each case as far as possible the same principles as were applicable to the valuation of private property. Nineteenth-century case law established that the exemption applied only to property occupied by the Crown itself or its servants, but not to other property occupied for public purposes. Generally, therefore, the exemption applied to property occupied for the purposes of the central government and the Royal palaces and parks, and to other property occupied by servants of the Crown (for example, occupation by government ministers or by military personnel of Royal Naval, army, and Royal Air Force bases).
In 1896, a further Treasury Minute reaffirmed the principle of equal contribution and made certain concessions in order to carry it fully into effect. The concessions included periodical revaluation, punctual payment, and a contribution with respect to the Houses of Parliament.
The following were the main characteristics of the CILOR in the last few years of its existence:
The CILOR arrangements differed from standard rating procedures in the following main respects:
Rationale for Removal of the Crown Exemption
The government debated the removal of the Crown exemption as far back as World War II. The Central Valuation Committee, in a letter of January 21, 1947, to the Minister of Health, while in effect suggesting such a removal also stated that it had long been its view that the then-arrangements for the rating of property occupied by the Crown were in many respects unfair and unsatisfactory to local authorities, who at the time set their own rate levels. In the 1950s, the English local authority associations expressed their dissatisfaction with the Crown exemption and went so far as to say that the manner of assessing CILORs was completely arbitrary and frequently worked to the detriment of local authorities. They estimated the rateable value of Crown property in England and Wales in 1952 to be around £14 million out of a total rateable value of about £341 million, which would equate to £2.2 billion based on levels of value at the 2010 revaluation.
In the mid-1990s the government considered several drivers for change:
The Local Government and Rating Act 1997 made provision to end the Crown exemption from nondomestic rates in England, Wales, and Scotland, effective April 1, 2000. Rating authorities would collect rates on Crown properties directly from the departments concerned, rather than from the CPU. These authorities also would be able to proceed with enforcement proceedings against the Crown, as they would with other ratepayers. Although this would happen in only the rarest of cases, rating authorities would in principle be able to take steps against a government department to obtain a liability order for unpaid rates if the need arose.
It has been suggested by the rating profession in the UK that, since rating is a tax, valuing and taxing properties occupied by public bodies is a waste of public resources. Properties that might fall in this category include those occupied by the Ministry of Defence, National Health Service, and local authorities. Superficially, valuing and taxing these properties may appear unjustified. The difficulty is that many activities traditionally carried out by central or local governments are now also performed in the private sector. Leisure centers are just one example. Exempting local authority properties from rates when they compete directly with the private sector could be argued to be unfair as it would give the public sector a fiscal advantage.
While the public sector occupies other buildings whose current use clearly does not compete with private business, it is difficult to justify exempting some publicly occupied properties and including others. The original justification for rating buildings occupied by public sector bodies (including the removal of Crown exemption in 2000) was to establish a level playing field, ensure that the costs of occupation were fully recognized, and make transparent the contribution of public sector bodies to the cost of providing local services.
The Valuation of Iconic Buildings
The removal of the Crown exemption precipitated the need to value a wide variety of unusual properties. Rating in the UK is an occupier’s not an owner’s tax and is based on broad actual use rather than highest and best use. Very old buildings often have to be valued, though many of them have been modernized and used for diverse purposes, such as offices, commercial mixed uses, or, at least in part, tourist attractions.
The traditional comparison valuation approach could be made with similarly used properties to enable determination of an indicative rental value for some structures, but for others the task was much more difficult. For example, Somerset House on the River Thames is a purpose-built office block, but it is the world’s first purpose-built government office block, dating back to 1776, and it has been used in commercial filmmaking, and so is difficult to compare to other buildings.
Valuing unusual properties is not confined to Crown properties or those for which the rental comparison method cannot be used because there are no relevant comparisons. In such cases, the use of the Receipts and Expenditure (R&E) or income method may be a more reliable guide to assessing the market rental value of a property. This method is appropriate if the property to be valued is commercial in nature or has a degree of monopoly, and an occupier would be motivated primarily by the prospect of profit in its use of the property and, indeed, makes a profit (Bond and Brown 2006).
If neither the comparison nor R&E methods can be used, then the Contractors Basis or cost method is applied where the property is provided primarily for public purposes and is not occupied for commercial profit, or where the property concerned is commercial but it is not a profit center with its own accounts. In both cases the occupier (or owner) would be prepared to incur the cost of a replacement property to carry on the use of the property.
In addition to the problem of valuation is the UK complexity of having a separate tax on domestic property. In England, Scotland, and Wales this is the Council Tax, but in Northern Ireland the system is one of Domestic Rates. If any part of a property is used for domestic purposes, as defined in the legislation, then that use is assessed for the domestic tax. Thus, Buckingham Palace and Windsor Castle, both royal palaces, have a rating assessment on the non-domestic, commercial element and a council tax on the domestic sections of the buildings.
Palace of Westminster
The Palace of Westminster, also known as the Houses of Parliament, is a royal palace and the meeting place of the two chambers of the Parliament of the United Kingdom—the House of Lords and the House of Commons. The Palace is the center of political life, and Westminster has become a metonym for the UK Parliament and the Westminster system of government for which it is named. The Elizabeth Tower, often referred to by the name of its main bell, Big Ben, is an iconic landmark of London. The Gothic Revival architecture by Sir Charles Barry dates from only 1840, but the remarkable Westminster Hall with its hammer beam roof dates from 1097.
The Palace of Westminster has been part of a World Heritage Site since 1987. The Palace had a rateable value of £14,700,000 in the local 2010 rating list (£5,500,000 in the 2000 rating list). If the standard tax rate of 45.8 percent is applied, then the tax liability ignoring any reliefs would be around £6,730,000 per year. The assessment actually combines four buildings: the Palace, Portcullis House, 1 Derby Gate, and the Norman Shaw buildings. All parts are valued on the comparative method with respect to offices, with allowances for layout and size if appropriate. In the case of the Palace the two chambers are valued at 65 percent of the main rate per square meter. There is a further end allowance to reflect the overall amount of floor space in the property.
Buckingham Palace
Buckingham Palace is the official London residence and principal workplace of HM Queen Elizabeth II, both with respect to her position as British monarch and head of state of many countries around the world, and as head of the Commonwealth. Located in the City of Westminster, the palace is a setting for state occasions and royal hospitality. Originally known as Buckingham House, the building that forms the core of today’s palace was a large townhouse built for the Duke of Buckingham in 1705. Buckingham Palace became the official royal palace of the British monarch on the accession of Queen Victoria in 1837.
Buckingham Palace is used in part as one of the monarch’s residences but consists mainly of offices. Recently limited commercial use has been introduced, as part of the building is open to visitors. The commercial portion has a rateable value of £1,300,000 in the local 2010 rating list. It is valued using two methods. First, the R&E or income method is used to reflect the commercial component (approximately 400,000 people visited during 2011). The property is open for 63 days per year with limited opening hours, so the relevant receipts are annualized, and 5 percent is added to reflect the fact that longer opening hours would generate more ticket sales. The trading accounts as published show that the rateable value equated to 6.3 percent of Fair Maintainable Receipts. Second, the Contractors or cost method is used for the Queen’s Gallery. The residential component of the palace has 775 rooms, including 52 Royal and guest bedrooms, 188 staff bedrooms, 19 state rooms, and 78 bathrooms. In 2011–2012 it had a council tax bill of £1,369.
Tower of London
Her Majesty’s Royal Palace and Fortress, commonly known as the Tower of London, is a historic castle on the north bank of the River Thames in central London. It dates to the Norman Conquest of England in 1066, and the White Tower, which gives the entire castle its name, was built by William the Conqueror in 1078. The Tower has served variously as an armory, a treasury, a prison, a menagerie, the home of the Royal Mint, and a public records office. Now it is home to the Crown Jewels and is one of the country’s most popular tourist attractions, having some 2.55 million visitors in 2011.
It is protected as a UNESCO World Heritage Site (and by some very high walls and elaborate alarm systems). It is valued by the R&E method, due to its particular value as a tourist attraction, and the rateable value equates to approximately 4.7 percent of fair maintainable receipts. For the local 2010 rating list the property had a rateable value of £1,790,000 (for the 2000 rating list the value was £1,180,000).
Stonehenge
Stonehenge is a prehistoric stone circle on Salisbury Plain comprising a megalithic rock monument of 150 enormous stones set in a circular pattern dating back to 3000 BC. While there are larger stone circles in the world, including one nearby at Avebury, Stonehenge is unique because the Sarsen stones are surmounted by lintels connecting to one another and once formed a complete, connected ring. Stonehenge was built over a period of 1,500 years. It is a World Heritage Site attracting some one million visitors per year. Given the commercial operation of the property, it has been valued using the R&E method at a rateable value of £700,000.
Summary
Crown-owned and occupied property is currently valued in accordance with normal valuation methods and principles. The removal of the Crown exemption has resulted in the “correct” valuation of unique and often iconic historic buildings. The valuation methods applied have to reflect the use of the buildings and, where rental evidence is limited, the cost-based approach may be required. This latter approach brings with it significant difficulties when applied to buildings that are several hundred years old. In such circumstances valuers have to be creative, artistic, and scientific in their valuations.
About the Authors
William McCluskey is a researcher in the Built Environment Research Institute, University of Ulster, Northern Ireland, UK.
David Tretton FRICS FIRRV is a visiting professor in the School of the Built Environment, University of Ulster, Northern Ireland, UK. He was formerly Head of Profession and Director of Rating at the Valuation Office Agency, London, and is currently the technical editor of the RICS Valuation–Professional Standards (Red Book).
The authors thank Patrick Bond, BSc FRICS Dip. Rating IRRV (Hons), head of Commercial, Leisure and Civics National Specialists Unit, Valuation Office Agency, London.
References
Bird, R. M., and E. Slack. 2004. International handbook of land and property taxation. Northampton, MA: Edward Elgar Publishing.
Bond, P., and P. Brown. 2006. Rating valuation: Principles and practice. London: Estates Gazette.
Citizens Charter White Paper. 1991. Citizens Charter Open Government, Cm 2290, HMSO, London.
Youngman, J. M., and J. H. Malme. 1994. An international survey of taxes on land and buildings. Boston, MA: Kluwer Law and Taxation Publishers.
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Decades before Henry George made a passionate case for the “single tax” in Progress and Poverty, the classical economists had recognized that, in theory, the land value tax was almost the perfect tax. There was a strong moral basis for the land value tax—land value increased over time because of growth in population and improvements made by the community, either as utility infrastructure or transportation investments by government and the private sector.
Today, many scholars and practitioners question whether land value tax is a serious contender as a revenue source. But, whatever its political potential may be, economists continue to find the theoretical case for land value tax compelling. This article examines the efficiency of the land value tax as well as land value tax as a substitute for other taxes;
Edwin Mills examines the issue of land value tax in the context of an urban economy, showing that the land value tax is indeed efficient in its effects on land use, as claimed.
Thomas Nechyba explores the land value tax in the context of a general model of the entire economy. He develops what is known as a “computable general equilibrium model” that quantitatively describes the changes in the macro-economy that will occur with the substitution of the land value tax for income taxation.
Author of this article, Dick Netzer, argues that, although the empirical evidence on land values is poor, some reasonable estimates suggest that, at least in the United States, the land value tax could replace the conventional local property tax at reasonable tax rates.
Andrew Reschovsky points out that the current balmy climate for state and local finance in the United States is likely to change radically, for the worse. State governments may be looking for substantial additional revenues. Is the land value tax the right, or the likely, choice for hard-pressed state governments?
Roy Bahl reviews the many difficulties and deficiencies in the use of property taxes by local governments in both developing countries and former Communist countries.
Edward Wolff suggests that substitution of the land value tax for the federal individual income tax would make the U.S. tax system less rather than more progressive with respect to income.
Decades before Henry George made a passionate case for the “single tax” in Progress and Poverty (published in 1879), the classical economists had recognized that, in theory, the land value tax was almost the perfect tax. Unlike other taxes, it causes no distortions in economic decision making and therefore does not lower the efficiency of a market economy in allocating resources. Also, it was obvious in the nineteenth century that a tax on the value of land would be highly progressive.
There was a strong moral basis for the land value tax, as well. Land value increased over time because of growth in population and improvements made by the community, either in the form of utility infrastructure or transportation investments by government and the private sector. Individual landowners did nothing to increase the value of their own land but rather realized “unearned increments” over time, unlike those who contributed labor and capital to production and thus earned their compensation.
In George’s day there was little question that the tax could provide adequate revenue, at least in the United States where the role of government was small-no more than a tenth as important relative to gross domestic product as it today. Virtually all government services were supplied by local governments, which relied entirely on property taxes. Today, many scholars and practitioners question whether land value taxation is a serious contender as an important revenue source. But, whatever its political potential may be, economists continue to find the theoretical case for land value taxation compelling.
In January, the Lincoln Institute sponsored a conference to address these issues: “Land Value Taxation in Contemporary Societies: Can It and Will It Work?” In the opening paper, William Fischel focuses on the special nature of local government in this country, stressing its importance as an instrument of enhancing property values within communities. He argues that, in pursuing that role, local land use controls actually achieve substantial efficiency advantages by more closely matching consumer preferences to local government services and taxes. This is what economists refer to as the Tiebout-Hamilton model.
Fischel maintains that there is substantial justice in this outcome, which might be improved only marginally by land value taxation. That is, land use controls permit local governments to appropriate much of the value generated by community growth. Moreover, this system is widely used, which argues that it is more workable than land value taxation, although the latter is, in principle, more fair.
Efficiency of the Land Value Tax
Two papers treated the efficiency characteristics of the land value tax. Edwin Mills examines the issue in the context of an urban economy, showing that the tax is indeed efficient in its effects on land use, as claimed. But he believes that this is immaterial because the land value tax cannot yield more than trivial revenues, even at rates that are so high that the courts would find them to be an unconstitutional “taking” of property. Moreover, it is so difficult to value land properly that the efficiency advantages cannot be realized.
Thomas Nechyba explores the land value tax in the context of a general model of the entire economy. He develops what is known as a “computable general equilibrium model” that quantitatively describes the changes in the macro-economy that will occur with the substitution of the land value tax for income taxation. Given his assumptions, the model predicts that the reduction in taxation of capital will so increase the aggregate amount of capital that the demand for land on which to use the capital will generate substantial increases in land values. That in turn will permit the land value tax to generate considerable revenues at a rate that is not confiscatory. Most economists would consider the significant increases in total national output predicted by the model to be real gains in economic efficiency.
Land Value Taxation as a Substitute for Other Taxes
Another pair of papers examines the land value tax as a substitute for other taxes used by sub-national governments in rich countries. In my own paper I argue that, although the empirical evidence on land values is poor, some reasonable estimates suggest that, at least in the United States, the land value tax could replace the conventional local property tax at reasonable tax rates. But the main thrust of my argument is that those rich countries in which substantial government spending is done by local governments are the most plausible candidates for the use of the land value tax (see Table 1). Furthermore, its use is probably most feasible in those countries familiar with the idea of valuing real property for tax purposes. The combined administrative, compliance and evasion costs of most other taxes are so large that, even if the administrative costs of land value taxation are high, land value taxation is still promising.
Andrew Reschovsky points out that the current balmy climate for state and local finance in the United States is likely to change radically, for the worse, in the not too distant future. For a variety of reasons, state governments in particular may be looking for substantial additional revenues. Is the land value tax the right, or the likely, choice for hard-pressed state governments? He concludes, first, that the economic gains from the adoption of a new land value tax would be modest, compared to increasing the rates of existing state taxes. Second, a land value tax should help improve the equity of the state tax system. Third, he believes that it would add an element of cyclical stability to state revenue systems.
Nevertheless, Reschovsky remains skeptical about the tax on administrative grounds and is not convinced that it can generate enough revenues to replace any important existing state tax source. In the case of large central cities, however, he rates the land value tax somewhat higher as a replacement for existing tax sources, largely because of the probable lack of adverse locational effects. He views it as especially appropriate for those cities like Philadelphia that now receive relatively small percentages of tax revenue from the property tax.
Roy Bahl reviews the many difficulties and deficiencies in the use of property taxes by local governments in both developing countries and former Communist countries. There is widespread agreement that the property tax is the appropriate major local government tax, and in some countries this agreement extends to site value taxation as well. But, Bahl notes, the property tax usually provides negligible revenues, because of low nominal rates, low and inaccurate valuations, and poor collection experience. Almost everywhere, the basic requisites of good administration are lacking. Moreover, the political unpopularity of the tax generally is far greater than in the United States. Nonetheless, the property tax, especially the site value tax variant, is considered the best local revenue source in these countries.
Perhaps the most surprising research finding reported at the conference was the conclusion of Edward Wolff, who has written extensively on the distribution of income and wealth in the United States. He suggests that substitution of the land value tax for the federal individual income tax would make the U.S. tax system less rather than more progressive with respect to income (see Table 2). This result may be explained by the fact that the ratio of the value of land owned to household income rises steeply with the age of the householder. That is, mean household income declines sharply with age after age 54, while the mean value of land owned declines only slowly. On the other hand, a land value tax would be much more progressive with respect to wealth than is the income tax.
Broader Principles and Questions
Nicolaus Tideman, a convinced follower of Henry George, argues that the basic principles of and justifications for land value taxation apply to much more than the problems of land use in cities and suburbs-the usual focus for discussion of this form of taxation. He offers applications to environmental, congestion and population problems and to questions of efficient resource use and economic growth on a worldwide scale. He bases his views on the general principle that “all persons have equal rights to natural opportunities and should therefore pay for their above-average appropriations of natural opportunities.”
Throughout the conference, there was lively disagreement about whether the land value tax could really produce substantial revenues. Some, like Mills, held that it could not even replace the conventional American property tax on land and buildings, much less a substantial portion of other state and local taxes as well. Others, including Tideman, Nechyba and I, presented data that suggested the possibility that land value taxation indeed could be an important factor in the American fiscal system. Participants also discussed the problems of administering a land tax so that tax liabilities actually and accurately reflect the value of individual parcels of land as bare sites, which is essential if the tax is to be a truly efficient one.
The conferees did not produce an agreed answer to the basic conference question, Can and will land value taxation work today? But they made it clear that the question remains a relevant one that deserves serious and continuing attention.
Dick Netzer is professor of economics and public administration in the Robert F. Wagner Graduate School of Public Service at New York University. He was the conference coordinator and is the editor of a book containing the eight conference papers and the remarks of the formal discussants, which will be published by the Lincoln Institute later this year.
Land Value Taxation in Contemporary Societies: Can It and Will It Work?
Authors of Conference Papers
Roy Bahl, Professor of Economics and Dean, School of Policy Studies, Georgia State University
William A. Fischel, Professor of Economics, Dartmouth College
Edwin Mills, Professor of Real Estate and Finance, Kellogg Graduate School of Management, Northwestern University
Thomas Nechyba, Professor of Economics, Stanford University
Dick Netzer, Professor of Economics and Public Administration Robert F. Wagner Graduate School of Public Service New York University
Andrew Reschovsky, Professor of Agricultural and Applied Economics, University of Wisconsin-Madison
Nicolaus Tideman, Professor of Economics, Virginia Polytechnic University
Edward Wolff, Professor of Economics, New York University
Discussants
Alexander Anas, Professor of Economics, State University of New York at Buffalo
Daniel Bromley, Professor of Agricultural and Applied Economics, University of Wisconsin-Madison Karl Case, Professor of Economics, Wellesley College
Riel Franzsen, Professor of Mercantile Law, University of South Africa
Yolanda Kodrzycki, Economist, Federal Reserve Bank of Boston
Daphne Kenyon, Professor of Economics, Simmons College
Therese McGuire, Professor of Economics, Institute of Government and Public Affairs, University of Illinois-Chicago
Amy Ellen Schwartz, Professor of Economics, Robert F. Wagner Graduate School of Public Service New York University
Robert Schwab, Professor of Economics, University of Maryland
Robert Solow, Professor of Economics, Emeritus, Massachusetts Institute of Technology
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Como consecuencia del colapso en el mercado inmobiliario y la Gran Recesión –que provocaron un aumento sustancial de ejecuciones hipotecarias residenciales y a menudo abruptas caídas de los precios de las viviendas, lo cual probablemente dio lugar a ejecuciones hipotecarias adicionales– muchos observadores especularon sobre si los gobiernos locales iban a sufrir consecuentemente pérdidas significativas en la recaudación del impuesto sobre la propiedad. Si bien las pruebas anecdóticas sugieren que las ejecuciones hipotecarias, en especial en los lugares donde estaban espacialmente concentradas, redujeron los precios de las viviendas y los ingresos del impuesto sobre la propiedad, las investigaciones existentes no proporcionan ninguna prueba empírica que justifique esta conclusión (recuadro 1). Con datos de ejecuciones hipotecarias de la empresa RealtyTrac, que proporciona información sobre las ejecuciones hipotecarias anualespor código postal para el período de 2006 a 2011 (período que tanto precede como sucede a la Gran Recesión), este informe es el primero en examinar el impacto de las ejecuciones hipotecarias sobre los valores y la recaudación del impuesto sobre la propiedad por parte de los gobiernos locales. Después de presentar información sobre la correlación entre ejecuciones hipotecarias y los precios de viviendas en todo el país, nos concentramos en Georgia, para explorar cómo las ejecuciones hipotecarias afectaron a los valores de la propiedad y la recaudación del impuesto sobre la propiedad en los distritos escolares a lo largo del estado. Nuestro análisis empírico indica que, en efecto, las ejecuciones hipotecarias probablemente redujeron los valores de la propiedad y la recaudación del impuesto sobre la propiedad. Si bien aún preliminares, estas conclusiones sugieren que las ejecuciones hipotecarias han tenido una serie de efectos sobre los sistemas fiscales de los gobiernos locales.
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Recuadro 1: Investigaciones existentes sobre el impacto de factores económicos en la recaudación del impuesto sobre la propiedad
Si bien existen investigaciones que examinan los diversos impactos de factores económicos sobre la recaudación del impuesto sobre la propiedad, dichos estudios usan datos que reflejan sólo una recesión previa (por ejemplo, la recesión de 2001) o cubren solamente el inicio de la crisis inmobiliaria de la Gran Recesión. Doerner e Ihlanfeldt (2010), por ejemplo, han estudiado directamente los efectos de los precios de las casas sobre los ingresos de los gobiernos locales usando datos del panel de precios detallados de las viviendas en Florida durante la década del año 2000. Concluyen que los cambios en el precio real de las viviendas unifamiliares de Florida tuvieron un efecto asimétrico sobre los ingresos gubernamentales. Los aumentos de precio no aumentan la recaudación real per cápita, pero los descensos de precio tienden a reducirla. Doerner e Ihlanfeldt también concluyen que las respuestas asimétricas se deben en gran parte a los límites impuestos sobre los aumentos y el monto del gravamen, las demoras positivas o negativas entre los cambios en los precios de mercado y la valuación tributaria, y la reducción de las tasas tributarias en respuesta a un aumento de los precios de las viviendas. Alm, Buschman y Sjoquist (2011) documentan las tendencias generales en la recaudación del impuesto sobre la propiedad en los Estados Unidos entre 1998 y 2009 inclusive, cuando los gobiernos locales, en promedio, pudieron evitar en gran medida los impactos significativos y negativos sobre el presupuesto sufridos por el gobierno federal y los gobiernos estatales, por lo menos hasta 2009, si bien se produjeron variaciones regionales sustanciales en dichos efectos. Alm, Buschman y Sjoquist (2009) también examinan la relación entre los gastos en educación y la recaudación del impuesto sobre la propiedad para el período entre 1990 y 2006. En un estudio relacionado, Alm y Sjoquist (2009) examinan el impacto de otros factores económicos sobre las finanzas de los distritos escolares de Georgia, como las respuestas estatales a las condiciones de los distritos escolares locales. Finalmente, Jaconetty (2011) examinó temas legales relacionados con las ejecuciones hipotecarias, y la Fundación MacArthur ha financiado un proyecto sobre ejecuciones hipotecarias en el condado de Cook, Illinois.
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Vínculos potenciales entre los precios de las viviendas, las ejecuciones hipotecarias y los valores inmobiliarios
Los gobiernos locales en los Estados Unidos dependen de varias fuentes de ingresos propios, tales como impuestos locales sobre los ingresos, sobre la propiedad y generales sobre las ventas, e impuestos específicos sobre el consumo, aranceles y cargos sobre el usuario. De éstos, la fuente de ingresos dominante es, con mucho, el impuesto sobre la propiedad. En 2011, los impuestos locales sobre la propiedad generaron aproximadamente tres cuartos de los ingresos tributarios totales de los gobiernos locales y casi la mitad de los ingresos locales totales propios (incluyendo aranceles y cargos).
Algunos impuestos locales, como los impuestos sobre el ingreso y las ventas, tienen bases tributarias que varían de acuerdo a los niveles de actividad económica, y la Gran Recesión deprimió seriamente los ingresos derivados de dichos impuestos. La base tributaria del impuesto sobre la propiedad es el valor de tasación, que no cambia automáticamente en respuesta a las condiciones económicas; a falta de un cambio formal y deliberado en la tasación, una reducción en el valor de mercado no se traduce necesariamente en una reducción del valor de tasación. Los límites de tasación, las demoras en las revaluaciones y la posibilidad de efectuar cambios deliberados en el tributo unitario o la tasa del impuesto sobre la propiedad se combinan para que las fluctuaciones económicas que influyen en los valores de las viviendas no afecten a la base tributaria del impuesto sobre la propiedad o los ingresos debido a este impuesto de manera inmediata u obvia. Con el tiempo, sin embargo, los valores de tasación tienden a reflejar los valores de mercado, y la recaudación del impuesto sobre la propiedad puede verse afectada.
Un mercado inmobiliario debilitado –con valores de la vivienda más bajos y mayor cantidad de ejecuciones hipotecarias– puede reducir los ingresos tributarios de los gobiernos locales procedentes de distintas fuentes (Anderson, 2010; Boyd, 2010; Lutz, Molloy y Shan, 2010), como los impuestos a la transferencia inmobiliaria, los impuestos sobre las ventas de materiales de construcción de viviendas, y los impuestos sobre la renta de los trabajadores de las industrias de la construcción de viviendas y de mobiliario para el hogar. Los ingresos del impuesto sobre la propiedad suponen una proporción importante de la recaudación tributaria local, sin embargo, los cambios en la recaudación del impuesto sobre la propiedad frecuentemente son mayores que los cambios debidos a dichos otros impuestos relacionados con las viviendas.
Actividad de ejecución hipotecaria en todo el país durante y después de la Gran Recesión
La figura 1 (pág. 26) presenta la cantidad total de ejecuciones hipotecarias a nivel de código postal de 5 dígitos como porcentaje de la cantidad de viviendas ocupadas por sus dueños en 2010. Esta figura demuestra la clara concentración geográfica de las ejecuciones hipotecarias. Arizona, California y Florida fueron afectadas especialmente por el colapso de la burbuja inmobiliaria. No obstante, otras áreas también experimentaron una actividad significativa de ejecuciones hipotecarias.
La Agencia Federal de Financiamiento de Viviendas (FHFA) produce un índice de precios de viviendas para cada área estadística metropolitana (MSA). Cotejamos los datos de ejecuciones hipotecarias de RealtyTrac con el índice de precios de viviendas de la FHFA en 352 áreas estadísticas metropolitanas. La figura 2 (pág. 26) presenta un simple diagrama de dispersión que relaciona las ejecuciones hipotecarias totales entre 2006 y 2011 como porcentaje de la cantidad de unidades de vivienda ocupadas por sus dueños en 2010, con el cambio del índice de precios de las viviendas en el período de 2007 a 2012 en las 352 áreas metropolitanas. El simple coeficiente de correlación entre las ejecuciones hipotecarias por unidades de viviendas ocupadas por sus dueños y el cambio del índice de precios de viviendas es de -0,556; si consideramos solamente aquellas MSA con ejecuciones hipotecarias no nulas a lo largo del período, el coeficiente de correlación es de -0,739. Este simple análisis sugiere que las ejecuciones hipotecarias tienen una correlación negativa significativa con los valores de la vivienda. El próximo paso es explorar el efecto de las ejecuciones hipotecarias sobre la base tributaria del impuesto sobre la propiedad y sobre la recaudación del impuesto sobre la propiedad propiamente dicho. En la próxima sección examinaremos este tema para el estado de Georgia.
Análisis más detallado: Ejecuciones hipotecarias, valores de la propiedad e ingresos del impuesto sobre la propiedad en Georgia
Al examinar el efecto de las ejecuciones hipotecarias sobre los valores de la propiedad y la recaudación del impuesto sobre la propiedad en un solo estado, eliminamos la necesidad de controlar las muchas maneras en que los factores institucionales pueden diferir entre estados. Georgia es un lugar adecuado para concentrarse porque de alguna manera es un estado “promedio”. Por ejemplo, los gobiernos locales de Georgia dependen del impuesto sobre la propiedad sólo un poco menos que el promedio nacional; en 2008, los ingresos del impuesto sobre la propiedad como porcentaje de los impuestos totales de los gobiernos locales fue del 65,1 por ciento en Georgia, en comparación con el 72,3 por ciento en los Estados Unidos en general. (Bourdeaux y Jun 2011).
Medimos la actividad de ejecución hipotecaria con datos de RealtyTrac, agregando las observaciones por código postal en los condados correspondientes. El Departamento de Ingresos de Georgia suministró la base tributaria anual del impuesto sobre la propiedad (que en Georgia se denomina “resumen neto”) y las tasas del impuesto sobre la propiedad. Los ingresos del impuesto sobre la propiedad y los ingresos locales totales de los distritos escolares fueron suministrados por el Departamento de Educación de Georgia. La base tributaria corresponde al 1 de enero del año respectivo. La tasa del impuesto sobre la propiedad se determina en la primavera, las facturas del impuesto se pagan en el otoño, y su recaudación se reporta en el siguiente año fiscal. Los distritos escolares tienen un año fiscal que va del 1 de julio al 30 de junio, de manera que la base tributaria y las tasas unitarias de 2009, por ejemplo, aparecerían en los ingresos del año fiscal 2010. También usamos varios datos demográficos y económicos (ingresos, empleo y población) medidos a nivel de condado para ayudar a explicar los cambios en la base tributaria. Debido a que estas variables se reportan a nivel de condado, para el análisis siguiente agregamos las variables de base tributaria del impuesto sobre la propiedad y su recaudación en los distritos escolares urbanos a los sistemas escolares de condado correspondientes a dichas ciudades para obtener los totales para los 159 condados. Para condados que incluyen todo o parte de un sistema escolar urbano, la tasa tributaria es el promedio de las tasas tributarias escolares del condado y la ciudad, ponderadas por sus bases tributarias respectivas.
En Georgia, las tasaciones de las propiedades con fines tributarios son responsabilidad exclusiva de los gobiernos de condado, pero el estado evalúa todas las bases tributarias del impuesto sobre la propiedad anualmente, comparando ventas reales de parcelas mejoradas durante el año con los valores de tasación, y determina si el nivel de tasación es apropiado con relación al valor justo de mercado, que se fija legalmente en el 40 por ciento. Los “estudios de razón de ventas” resultantes reportan una cifra de base tributaria del impuesto sobre la propiedad ajustada al 100 por cien para cada distrito escolar del estado, junto con una razón calculada. Podemos usar estas bases tributarias ajustadas del impuesto sobre la propiedad, cubriendo los períodos de 2000 a 2011 inclusive, para medir el valor de mercado de la propiedad residencial.
Georgia tiene muy pocas limitaciones institucionales al impuesto sobre la propiedad. Las juntas de distritos escolares pueden fijar generalmente sus tasas del impuesto sobre la propiedad sin aprobación de los votantes, la cual solamente es necesaria si la tasa del impuesto sobre la propiedad en un distrito escolar de condado excede de 20 milésimas del valor de tasación. En la actualidad, solamente cinco sistemas escolares han alcanzado este límite. Además, no hay un límite general en el valor de tasación, si bien un condado ha congelado las tasaciones sobre bienes de familia. En 2009, el estado de Georgia impuso una congelación temporal sobre las tasaciones en todo el estado, que potencialmente afectaba a los ingresos del impuesto sobre la propiedad sólo en el año académico/año fiscal 2010; sin embargo, al disminuir las bases netas y ajustadas del impuesto sobre la propiedad per cápita en la mayoría de los condados de 2009 a 2011 inclusive, es poco probable que esta congelación haya recortado las tasaciones.
Ejecuciones hipotecarias
La tabla 1 muestra la media y mediana de ejecuciones hipotecarias en todo el estado por código postal entre 2006 y 2011 inclusive. La cantidad total de ejecuciones hipotecarias casi se duplicó de 2006 a 2010, disminuyendo en 2011. La media de ejecuciones hipotecarias es mucho mayor que la mediana, lo cual es señal de que la distribución es extremadamente asimétrica.
La tabla 2 muestra la distribución de los códigos postales de Georgia por la cantidad de años que el código postal tuvo alguna ejecución hipotecaria. Más del 65 por ciento de los códigos postales tuvieron ejecuciones hipotecarias en cada uno de los seis años, mientras que sólo el 7 por ciento no tuvo ninguna ejecución hipotecaria en ninguno de los seis años. Esta distribución sugiere que sólo una porción muy pequeña del estado quedó inmune a la crisis de ejecuciones hipotecarias.
La figura 3 (pág. 27) muestra la distribución de ejecuciones hipotecarias en el estado durante el período de 2006 a 2011 inclusive. Como los códigos postales difieren en tamaño y densidad de viviendas, también se muestra un mapa de las ejecuciones hipotecarias por unidades de vivienda ocupadas por sus dueños en 2010 en la figura 4 (pág. 28). Nótese que los códigos postales marcados en blanco no tienen ninguna ejecución hipotecaria o no se tienen datos de ejecuciones hipotecarias. Como era de esperar, los condados urbanos y suburbanos (particularmente en el área metropolitana de Atlanta) sufrieron la mayor cantidad de ejecuciones hipotecarias. No obstante, hay también una gran cantidad de ejecuciones hipotecarias en muchos de los códigos postales menos urbanos.
La figura 5 muestra la distribución anual de ejecuciones hipotecarias por cada cien unidades de vivienda en cada uno de los 159 condados de Georgia. Nótese que la barra del recuadro representa el valor medio, el recuadro captura las observaciones en el segundo y tercer cuartil, los “bigotes” representan 1,5 veces la diferencia entre los porcentiles veinticinco y setenta y cinco, y los puntos son los valores extremos. La mediana de ejecuciones hipotecarias por condado aumentó de 0,17 por 100 unidades de vivienda en 2006 a 1,18 por 100 unidades en 2010, un aumento en la mediana de más de seis veces. Hay una alta correlación positiva entre la actividad de ejecuciones hipotecarias en 2006 y 2011 en todos los condados. Esta correlación es de 0,78 cuando se mide en relación a las unidades de vivienda y 0,74 cuando se mide per cápita, lo que indica que los condados con actividad de ejecución hipotecaria mayor (menor) que el promedio antes de la crisis inmobiliaria siguiron estando por arriba (abajo) del promedio en su pico.
Valores de la propiedad,/b>
En cuanto a los cambios en los valores de la propiedad, las figuras 6 y 7 muestran la distribución de cambios anuales, respectivamente, en la base tributaria neta del impuesto sobre la propiedad per cápita y en la base tributaria 100 por ciento ajustada del impuesto sobre la propiedad per cápita en los 159 condados entre 2001 y 2011 inclusive. Los estudios sugieren que las ejecuciones hipotecarias pueden tener un efecto de contagio sobre los valores de mercado de otras propiedades en la jurisdicción (Frame, 2010). Intentamos estimar el efecto de las ejecuciones hipotecarias sobre los valores de mercado en función de la base tributaria 100 por ciento ajustada del impuesto sobre la propiedad.
Nuestros resultados son preliminares, porque el análisis solamente incluye datos de Georgia. Aun así, sugieren significativos efectos negativos de las ejecuciones hipotecarias sobre los valores de la propiedad, controlando por los cambios porcentuales de año a año en ingresos, empleo y población. Las estimaciones de coeficientes de la variable ‘ejecuciones hipotecarias’ sugieren que un aumento marginal de una ejecución hipotecaria por cada 100 viviendas (o aproximadamente el aumento en la mediana de ejecuciones hipotecarias de 2006 a 2011) está asociado con aproximadamente una disminución del 3 por ciento en la base tributaria 100 por ciento ajustada del impuesto sobre la propiedad en cada uno de los dos años subsiguientes. De igual manera, un aumento de una ejecución hipotecaria por cada 1.000 habitantes está asociado con casi el 1 por ciento de disminución en la base tributaria 100 por ciento ajustada del impuesto sobre la propiedad después de un año, y una disminución porcentual ligeramente menor en el año subsiguiente.
Ingresos del impuesto sobre la propiedad
También exploramos el efecto de las ejecuciones hipotecarias sobre la recaudación del impuesto sobre la propiedad. La figura 8 representa la distribución de cambios nominales por condado de los ingresos totales de mantenimiento y operaciones del impuesto sobre la propiedad desde 2001, que muestra una variación considerable de un sistema escolar a otro en los cambios anuales de recaudación del impuesto sobre la propiedad. Aun en los últimos tres años de disminución de los valores de la propiedad, por lo menos la mitad de los condados tuvo un crecimiento nominal positivo anual en la recaudación del impuesto sobre la propiedad. Para comprender el efecto de la actividad de ejecución hipotecaria sobre los ingresos del gobierno local por impuestos sobre la propiedad, estimamos las regresiones que relacionan las ejecuciones hipotecarias con los gravámenes del impuesto sobre la propiedad y la recaudación de dicho impuesto.
Encontramos que un aumento en las ejecuciones hipotecarias está asociado a una reducción en el monto del gravamen, después de controlar por los cambios en la base tributaria del impuesto sobre la propiedad como también en las fluctuaciones de ingresos, empleo y población. Un aumento de una ejecución hipotecaria por cada 100 unidades de vivienda se asocia con alrededor del 1,5 por ciento de disminución subsiguiente en el gravamen, manteniendo constante el resto de las variables. También encontramos que las ejecuciones hipotecarias tienen un impacto negativo sobre la recaudación, manteniendo constante el resto de las variables. Como en nuestras estimaciones anteriores, estos resultados son para Georgia solamente, pero identifican una relación negativa significativa entre las ejecuciones hipotecarias y los gravámenes y la recaudación del impuesto sobre la propiedad por parte de los gobiernos locales. Puede ser que una mayor actividad de ejecución hipotecaria haga vacilar a las autoridades locales sobre la posibilidad de aumentar las tasas tributarias para compensar el efecto de las ejecuciones hipotecarias sobre la base tributaria.
Conclusiones
¿Las ejecuciones hipotecarias causadas por la Gran Recesión afectaron a los valores de la propiedad y la recaudación del impuesto sobre la propiedad por parte de los gobiernos locales? Nuestros resultados sugieren que las ejecuciones hipotecarias han tenido un impacto negativo significativo sobre los valores de la propiedad y, por esta vía, un efecto similar sobre la recaudación del impuesto sobre la propiedad, por lo menos en el estado de Georgia. Nuestros resultados también sugieren la presencia de efectos adicionales sobre los gravámenes y la recaudación de dicho impuesto, después de controlar por los cambios en la base tributaria. Hacen falta más investigaciones para saber si estos resultados se extienden a otros estados.
Sobre los autores
James Alm es profesor y director del Departamento de Economía de Tulane University.
Robert D. Buschman es asociado de investigación senior en el Centro de Investigaciones Fiscales de la Escuela Andrew Young de Estudios Políticos de la Universidad Estatal de Georgia.
David L. Sjoquist es profesor y titular de la cátedra Dan E. Sweat en Política Educativa y Comunitaria en la Escuela Andrew Young de Estudios Políticos.
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