The betterment levy or special assessment (as it is known in the United States) is a “compulsory charge imposed by a government on the owners of a selected group of properties to defray, in whole or in part, the cost of a specific improvement or services that is presumed to be of general benefit to the public and of special benefit to the owners of such properties” (IAAO 1997, 10–11). In Colombia this levy, called Contribución de Valorización (CV), has been collected since 1921.

The betterment levy is addressed in the legislation of most Latin American countries, although its implementation often meets resistance. The main arguments against it claim it is impractical, technically cumbersome, beyond local capacity to implement, and unpopular. Colombia’s experience, however, seems to contradict these allegations, suggesting that the resistance is grounded more on prejudice, ideology, or lack of information. This instrument not only has a long history of continued (albeit irregular) application, but also a record of raising substantive revenues to fund public works.

Bogotá currently has about $1 billion worth of investment in public works from this levy, and eight other smaller cities combined have another $1 billion. More importantly, based on recent levies on 1.5 million properties in Bogotá, its collection has been generally accepted by taxpayers with relatively low default rates—in fact lower than for the property tax. Although its legitimacy is not questioned, even among the business community, controversies continue over how the charge is assessed and distributed among properties. This raises an interesting question: Why, in spite of its technical shortcomings, is the betterment levy well-accepted by society at large?

In spite of its relevance, there is very little literature available about this instrument in Colombia and in the rest of Latin America (Fernandes 1981; Bustamante 1996; Manon and Macon 1977). To fill this gap, my colleagues and I carried out a study of the methods used to assess the levy in Bogotá and Manizales—two cities that exemplify different assessment models used in Colombia (Borrero et al. 2011). This article summarizes the main findings of the study and, we hope, may be useful to other cities interested in applying betterment levies to finance urban development.

In Colombia the betterment levy has played a significant role in financing public works and has been a major contributor to municipal revenues, although collections have fluctuated over time. In the late 1960s, they accounted for 16 percent of total revenues in Bogotá and 45 percent of revenues in Medellín. In the beginning of the 1980s, the levy accounted for 30 percent of revenues in Cali, and in 1993 it represented 24 percent of revenues in Bogotá. Since 2000, the levy has been used more intensively in Bogotá, Medellín, Cali, Manizales, Bucaramanga, Barranquilla, and most other cities with a population of 300,000 or more.

We chose to study Bogotá and Manizales because these cities have used this instrument during the past 20 years to finance many roads and urban services. Each city developed its own distinct methodology, and has had ample experience advising other cities. For instance, Cali and Barranquilla have started collecting the levy for road construction using the Bogotá model, while Bucaramanga and Pereira have followed the Manizales model (also known as the Medellín model). Both approaches are legal in Colombia, but the methodology and focus used to allocate the levy are very different.

Colombian law stipulates three parameters used to calculate the betterment levy: (1) the cost of the construction project; (2) the value added to properties that can be attributed to the project; and (3) the affordability of the levy (i.e., the capacity of the property owners to pay). Law Decree 1604 of 1966 states that the upper bound of the levy is the lowest value among these parameters. For example, in Manizales one of the projects had small values added that were considerably less than the project cost; yet the levy was assessed based on the value added. The only city that does not comply with this norm is Bogotá, where the levy equals the cost of the project.

The Bogotá model uses a series of factors to represent the local benefit of the project in order to assess the levy, taking into account the payment capacity of the property owners and the different benefit levels. These factors include considerations such as improved mobility and welfare, but do not quantify the specific value added to the property by the project.

On the other hand, the Medellín model applied in Manizales calculates the value added to the property by the project using a dual appraisal method, and then distributes the levy among the property owners by taking into account their capacity to pay. Thus, the Bogotá model is similar to a general tax to finance public works, while the Medellin model is closer to the concept of value capture contribution to fund public works (Act 388 of 1997, Article 87; Doebele 1998).

The Experience of Bogotá

Bogotá, the capital of Colombia, is a city of 7.5 million people with an area of 1,587 square kilometers (613 square miles) on a flat savannah of the Andes mountain range. The administration of the betterment levy is the responsibility of the Urban Development Institute (Instituto de Desarrollo Urbano, or IDU), which is also in charge of identifying the main road construction projects to be financed by the levy. The levy is assessed on all properties affected by a given project (or set of projects) and is calculated by multiplying different benefit factors. Examples of recent projects with revenues from the levy are shown in table 1.

Area of Influence

In order to collect a betterment levy, the IDU defines the area of influence, that is, the area where the road construction project will provide benefits. The criteria used to establish the areas of influence and the level of benefit include proximity and accessibility to the project—which affords greater use of the road and thus increases property values—as measured by the project impact on the assessed value and the economic conditions of the real estate properties in the area.

To reduce the average amount of the levy, an effort is made to include the largest possible number of lots within the area of influence. When the levy finances multiple projects, the boundaries of the entire area of influence are defined by superimposing the individual areas of each project and adjusting them to account for the complementary effects of the benefits from the combined set of projects (Borrero et al. 2011, 22).

Measuring Project Benefits

The benefits resulting from the project or set of projects are calculated by city zone, taking into account benefit factors defined for each project. Using the example of a recent road project, the benefit factors are: (1) greater mobility, which translates into greater transit speeds, lower transit time, lower operating costs, and higher quality of life; (2) general urban planning benefits as the project normalizes the road network and rationalizes the use of public space; (3) changes generated in land use and stimulation of productive and commercial activities; (4) greater market value of nearby real estate properties; (5) integration of the project into the urban structure of the city; (6) optimization of circulation and mobility; and (7) recovery of deteriorated or depressed areas (Borrero et al. 2011, 84).

Once the benefits of the project are defined and its cost estimated, the distribution of the levy takes into account additional factors: the type of land use, density, degree of benefit allocated to each lot, and the payment capacity of the property owners as measured by household quality of life surveys. The Bogotá model is criticized primarily because the calculation of the project benefit does not measure the value added to the properties directly, but instead relies mostly on these indirect indicators.

The Experience of Manizales

Manizales is a city of 400,000 people located west of Bogotá, at the center of the coffee producing region. Its topography is mountainous, which implies high engineering costs. The city has extensive experience with road development and urban renewal financed with betterment levies, but it uses a different methodology from that in Bogotá and it requires a more detailed description. The institution that administers the levy with full authority delegated by the city legislature is the Instituto de Valorización de Manizales (INVAMA).

Over the past three years, Manizales has financed four major road and urban development projects with the levy: renewal of the Alfonso López Plaza; paving of Alférez Real road; renovation of Paseo de los Estudiantes; and development of the Eastern Area road network. All of the projects were funded by a single levy assessed on 80 percent of these properties, and collections amounted to US$24.6 million (table 2).

Measuring Project Benefits

Manizales applies the dual appraisal method to measure benefits—a methodology used for many years in Medellín, Bucaramanga, and other cities. This method identifies cadastre valuations for real estate properties in a second area comparable in its characteristics to the area affected by the designated projects. The assumption is that land values will behave similarly in both areas. Experts make an initial appraisal of a sample of properties in the area of influence of the proposed project to determine the present market values. To estimate the land values after the project is finished, they appraise the market values in the comparison area.

This method is based on information about the increase in value or benefit generated by previous infrastructure projects, referred to as ex-post evaluation. The City of Manizales initiated an ex-post analysis of the projects executed in past years to examine the value added to the land, but few other cities that collect betterment levies have done so.

The initial appraisal is intended to create a map of land prices (isoprices map) before construction, and the second appraisal determines the added value hypothetically generated by the new infrastructure project in the area. The lot or area where the “maximum added value” occurs (known as the “focal point”) is analyzed in detail to calculate the maximum percentage increase in value.

Critical Steps in the Dual Appraisal Method

1. Define the area of influence.This area is based on the improved mobility enabled by the road or infrastructure project, and its definition is similar to that used in Bogotá.

2. Calculate the benefit and generate an isoprices map based on a sample of properties. The criteria to measure distances and road networks are established within an initial zone defined as broadly as possible. A sample of lots is taken, representing the predominant, nonspecific features of the properties in the zone. Information collected on this sample is used to generate a map of land values before the project is constructed. The sample size is calculated statistically. For medium-size cities experts appraise between 100 and 200 properties, depending on the size of the area of influence and its heterogeneity. A second map of isoprices is then developed with the new expected property values, and a third map plots the differences in isoprices between the first and second map. This third map is used to distribute the betterment levy.

3. Estimate the benefit. To determine the added value or benefit accruing to a lot, an interdisciplinary team of experienced professionals carries out several studies: an economic study to define the mathematical formulas that qualify the parameters for the value-added criteria; a road network study to qualify and quantify the benefit, measured as a reduction in travel distance for the population in the affected neighborhoods; an urban study to measure the potential for different land uses in the area; and a real estate study to compare and quantify the level of benefit in specific areas.

4. Allocate the benefit. Each of the following factors is given a weight (shown in parenthesis): potential change of use, which generates the most added value even though it affects a small number of lots (40 percent); improved access to higher value areas or commercial areas (20 percent); (savings in commuting time is measured by reduction of travel time in the city, clearly determining times and distances (20 percent); and reduction in pollution or traffic congestion at specific areas where these problems occur (20 percent).

5. Establish the level of benefit (focal point). As mentioned above, the area of highest betterment in the entire area of influence, known as the focal point, is the lot or area that benefits most from the project, because of the confluence of the most important value-added factors. The expected added value is then calculated for this lot and the corresponding percentage is multiplied by the initial market value of lot. With these values, one builds the added value or isopricing map for the entire area expected to benefit from the project once it is finished. Ex-post studies performed in several cities found that road projects generate on average an actual added land value of 10 to 15 percent within three years following project completion. Assuming 15 percent incremental value for the lot with the highest benefit, it follows that a lot with 70 percent benefit has an expected added value of 10.5 percent.

6. Distribute the levy. Once the cost of the project has been defined and its value-added impact has been calculated, INVAMA proceeds to distribute the levy within the area of influence using models appropriate to the project. Manizales uses benefit factors to distribute the levy, as do most cities in Colombia. The method is based on defining a “virtual area” obtained by multiplying weighted factors given to property characteristics by the level of benefit and the physical area of the lot. Criteria to define benefit factors for distribution purposes may vary, but the point of reference is the total value of the property based on area of the lot plus construction (Borrero et al. 2011, annex 2).

7. Determine affordability. The levy is assessed by taking into account the capacity to pay of the contributors, and therefore it may be allocated differently depending on their socioeconomic level. Affordability is based on data from household income and expenditure surveys. Sometimes a comparative analysis is made between the betterment levy and other charges, e.g. the relationship between the levy and the utilities paid by the property owner, or the relation between the levy and the property tax.

8. Set the collection period. In Manizales, Medellín and Bucaramanga, the collection period generally coincides with project execution. Other cities have tried different approaches. In Cali, the most recent betterment levy collection started before construction, but will extend for a long time following project completion. Cities normally collect one betterment levy in each mayoral term (4 years), but recent projects in Bogotá and Cali have longer collection periods, extending over several terms.

9. The legal maximum collection term is five years following project completion, but the most successful experiences are completed in two years. Longer-term collections are more difficult and pose the risk of the municipality running into cash flow problems to finish the project. The betterment levy can be collected as early as two years before the initiation of construction, but that requires very efficient cost estimates and expedient project execution. In Bogotá, a recent experience in collecting the levy two years in advance of the construction start date generated controversy because the project started late and has progressed slowly. To avoid this problem, the proposed new Bogotá Betterment Statute stipulates that the levy shall be collected concomitantly with project execution.

Perceived Legitimacy

The betterment levy has a lot of support among city residents and property owners in Manizales, as shown by high levels of satisfaction in a recent survey (table 3). The levy was collected before the projects began and 80 percent of the payments were made in the first year of collections. This survey, taken after project completion, captures the perceptions of citizens regarding the way INVAMA managed two recent projects. Specifically, the results demonstrate a clear link between the benefit and the willingness to pay the levy—a higher compliance level than that of the property tax, even though the levy is higher than the tax. This finding contradicts the common believe that Latin American taxpayers have a culture of nonpayment. It also attests to the high level of legitimacy among the citizens and the good governance of the municipality’s management of the betterment levy

Concluding Remarks

Colombia’s experience with the betterment levy during the past 70 years demonstrates that it is a viable instrument to finance urban development and is capable of raising substantial revenues, even though the methodology to assess and distribute the levy is complex and can be perfected. Among the lessons to draw from that experience, the most important is the clear link between the provision of public benefits and the property owners’ willingness to pay the levy. Success depends on the legitimacy of the project and the institutional capacity and ethical standards of the agency administering the levy. To generate trust among citizens, success is also predicated on ensuring affordability, applying a fair distribution model, publicizing the social value of the project, and promoting participation during implementation.

About the Author

Oscar Borrero Ochoa is an economist, a certified appraiser, and a private consultant on property markets, real estate development projects, and management. He has been president of Camacol, the Colombian organization of the building industry, and Fedelonjas, the Colombian organization of property appraisers. He isa lecturer on urban economics at the University of Los Andes and the National University of Colombia, Bogotá, and is a frequent speaker in Lincoln Institute courses.

Acknowledgments

The author thanks his colleagues Esperanza Durán, Jorge Hernández, and Magda Montaña who were key contributors to the Lincoln Institute working paper and related research on which this article is based.

References

Borrero Ochoa, Oscar, Esperanza Durán, Jorge Hernández, and Magda Montaña. 2011. Evaluating the practice of betterment levies in Colombia: The experience of Bogotá and Manizales. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.

Bustamante Ledesma, Francisco Dario. 1996. Manual de contribución de valorización. Medellín: Ed. Teoría del Color Litografía.

Doebele, William A. 1998. The recovery of ‘socially created’ land values in Colombia. Land Lines 10(4).

Fernández Cadavid, Alberto. 1981. La contribución de valorización en Colombia, 2nd edition. Bogotá: Editorial Temis.

IAAO (International Association of Assessing Officers). 1997. Glossary for property appraisal and assessment. Chicago, IL: IAAO.

Manon, Jorge, and Jose Merino Macon. 1977. Financing urban and rural development through betterment levies: The Latin America experience. Westport, CT: Praeger Publishers, Inc.

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 los últimos cinco años el Instituto Lincoln ha respaldado el estudio de las políticas e instrumentos de recuperación de plusvalías en muchos países latinoamericanos. Pese a la diversidad de enfoques y la variedad de casos específicos, hemos podido identificar siete lecciones preponderantes que pueden ayudar a aclarar parte de la confusión y los conceptos errados que se asocian con la implementación de los principios de recuperación de plusvalías. Cada lección resumida más adelante presenta uno o dos ejemplos tomados de libro Recuperación de Plusvalías en América Latina: Alternativas para el Desarrollo Urbano.

La recuperación de plusvalías se refiere al proceso por el cual el sector público recupera la totalidad o una porción de los incrementos en el valor del suelo atribuibles a los “esfuerzos comunitarios” más que a las acciones de los propietarios. La recuperación de estos “incrementos inmerecidos” puede hacerse indirectamente mediante su conversión en ingresos públicos en forma de impuestos, contribuciones, exacciones y otros mecanismos fiscales, o directamente mediante mejoras locales para beneficio de la comunidad por entero.

1. El concepto de recuperación de plusvalías no es nuevo en América Latina. La experiencia latinoamericana en este campo tiene largos años de precedentes históricos. En varios países los debates públicos sobre el uso de la recuperación de plusvalías e instrumentos asociados comenzaron a principios del siglo XX. En los años de 1920, el debate surgió por acontecimientos concretos, como el problema de la pavimentación de las calles en São Paulo, Brasil y la falta de financiamiento externo para obras públicas necesarias en Colombia. En otros casos, los factores políticos e ideológicos han motivado discusiones de alcance nacional. Los representantes del Partido Radical en Chile intentaron introducir la idea en varias ocasiones y en los años 1930 el Presidente Aguirre Cerda propuso una ley para crear un impuesto nacional sobre las plusvalías (incrementos en el valor del suelo) con fundamento en las ideas de Henry George.

2. No obstante, sigue siendo limitada su aplicación en los planes de política urbana. A pesar de los numerosos informes sobre experiencias pertinentes que integran los principios de la recuperación de plusvalías, el tema no están bien representado ni ha ganado suficiente reconocimiento dentro de la esfera de las políticas urbanas. En algunos casos, han surgido valiosas iniciativas para la recuperación de plusvalías que han cobrado notoriedad en su momento, sólo para quedar olvidadas más tarde. Un ejemplo destacado es el conocido Informe Lander en Venezuela durante los años 1960, en el cual se proponía que el suelo y los incrementos de su valor debían ser la fuente principal de financiamiento para los proyectos de desarrollo urbano. Sentaba las bases para recomendaciones sobre las finanzas del desarrollo urbano incluidas en las deliberaciones de la cumbre Habitat I (1976).

En otros casos, se están perdiendo o desestimando oportunidades interesantes para usar la recuperación de plusvalías como una herramienta de las políticas urbanas. Actualmente algunos países de América Latina no están aprovechando los posibles incrementos del valor del suelo generados por grandes proyectos de renovación en los cascos urbanos. Aunque está generalmente aceptada la noción de recuperación de plusvalías, en realidad es poco lo que efectivamente se ha recuperado y redistribuido de los incrementos del valor del suelo derivados de las acciones urbanísticas.

3. A menudo existe la legislación, sólo que no se aplica. Como en muchos otros países de la región, la variedad de los instrumentos de recuperación de plusvalías existentes en México –desde la contribución por mejoras (una tasación especial o gravamen por mejora dirigido a recuperar los costos de las obras públicas), hasta los impuestos sobre las plusvalías– ilustra la discrepancia entre lo que es legalmente posible y lo que verdaderamente se implementa. Contrario a lo que suele aducirse, el problema general no radica en que los planificadores o funcionarios públicos carezcan de acceso legal o práctico a estos instrumentos, sino que tienden a prevalecer las siguientes condiciones:

• Con frecuencia se concibe y diseña la legislación y los instrumentos –algunas veces adrede– de una manera tan confusa y contradictoria que prácticamente paralizan toda iniciativa de política operativa. Por ejemplo, la ley nacional de expropiaciones de 1947 estipula un impuesto del 75% de los incrementos del valor del suelo resultantes de obras públicas, mientras que la constitución municipal general (Ley Orgánica de Régimen Municipal) limita el impuesto al 5% del valor total de la propiedad en cuestión. En realidad, ni siquiera se recauda este pequeño gravamen.
• Incluso cuando la ley hace posible la recuperación de plusvalías, puede ser difícil de interpretar. Por ejemplo, el debate entre juristas eminentes en los años 1970 en Brasil con respecto a la constitucionalidad de la legislación de “Solo Criado” (un instrumento basado en la separación del suelo y los derechos de construcción) reflejó una falta fundamental de comprensión de los antecedentes legales de la recuperación de plusvalías y sus correspondientes instrumentos.
• No siempre se conocen bien las posibilidades que ofrece la ley, ni siquiera en sus respectivos países. Este parece ser el caso en México, donde el impuesto tradicional a la propiedad en la ciudad de Mexicali, basado en el valor combinado del suelo y las construcciones, fue reemplazado con éxito por un impuesto basado exclusivamente en el valor del suelo (Perló 1999). Otras ciudades mexicanas no parecen estar enteradas de disposiciones similares en la legislación de sus estados o no las han aprovechado.

4. La resistencia obedece más a la ideología que a la lógica. Incluso cuando se entienden la legislación y los instrumentos para la recuperación de plusvalías –o en algunos casos justamente porque se entienden–, es posible que no puedan implementarse a cabalidad debido a la manifiesta “falta de voluntad política”. Esta resistencia puede tomar la forma de interpretaciones engañosas, racionalizaciones estereotipadas y hasta “prédicas” puramente ideológicas.

Resulta sencillo encontrar justificación pública de que la aplicación de tales instrumentos es inoportuna o inapropiada, especialmente si la justificación se basa en interpretaciones engañosas. Algunos de estos argumentos sostienen que las imposiciones sobre el valor del suelo son inflacionarias y alteran el buen funcionamiento de los mercados, o que provocan una doble tributación inaceptable de la misma base. Estos conceptos erróneos parecen hallarse detrás de la renuencia que muestra el Ministerio de Vivienda y Urbanismo de Chile para promover la revisión y reintroducción ante el Congreso de algunas disposiciones sobre la recuperación de plusvalías en el nuevo marco legal de urbanismo del país.

Las objeciones basadas en racionalizaciones estereotipadas pueden recurrir a los siguientes argumentos:

• los ingresos correspondientes no son significativos o no están justificados al compararlos con los costos administrativos causados;
• las administraciones públicas no serían competentes en términos de recursos técnicos y humanos; o
• la aplicación de los instrumentos de recuperación de plusvalías sería antisocial y regresiva, ya que la población pobre, que tiene la mayor necesidad de nuevas obras de infraestructura urbana, posee la menor capacidad de pago.

No obstante, en oposición a estos argumentos, están los programas participativos de mejoras que se han llevado a cabo con éxito en áreas pobres de muchas ciudades (por ejemplo, en Chile, Brasil y Perú). Estos programas han sido eficaces técnica y económicamente y por lo general han contado con un apoyo sólido de la población de bajos ingresos afectada.

Finalmente, algunas objeciones son de índole netamente ideológica. Por ejemplo, la resistencia a la implementación de la participación en plusvalías en Colombia se basa en la aseveración de que este mecanismo, si bien se reconoce que tiene una buena formulación técnica, representa una forma más de “interferencia” pública indeseable en el negocio inmobiliario urbano, como lo son una mayor carga fiscal, limitaciones de los derechos de propiedad o más regulación (Barco de Botero y Smolka, 2000). Esta posición ha quedado sustituida recientemente por un amplio consenso entre los políticos, líderes empresariales y el público general de que la aceptación de este instrumento es una mejor opción que la exigencia de otros impuestos a la propiedad.

5. La recuperación de plusvalías se va haciendo cada vez más popular. A pesar de los obstáculos y la resistencia política, la experiencia reciente en América Latina con la recuperación de plusvalías muestra un creciente interés en el tema y en las condiciones que justificarían su utilización. Atrae la atención de planificadores municipales en toda la región y comienza a percibirse como una iniciativa importante de las políticas urbanas. Esta popularidad creciente está vinculada a varios factores que se presentan en la región.

En primer lugar, una mayor descentralización administrativa y fiscal exige más autonomía para redefinir y obtener fuentes alternativas de fondos públicos para financiar el proceso de urbanización. La necesidad de más recursos locales se ha visto acentuada por las demandas sociales y las presiones políticas asociadas con los actuales procesos de redemocratización y el mayor grado de participación popular. La generación de fondos no presupuestados requeridos para financiar programas sociales especiales está vinculada a casi todas las nuevas iniciativas de recuperación de plusvalías y ha sido una de las razones más poderosas para implementar dichas políticas.

En segundo lugar, la redefinición de las funciones del estado (incluida la privatización), en conjunto con la disminución de la planificación integral, ha dado pie a la materialización de intervenciones públicas más flexibles y negociaciones directas sobre la regulación del uso del suelo y las alianzas entre los sectores público y privado. También cobra significación la apertura de áreas públicas al mercado inmobiliario privado, así como una mejor coordinación entre los intereses de los propietarios privados y el sector público con miras a fomentar nuevas áreas en las ciudades. Cabe destacar que incluso en Cuba encontramos un programa pujante mediante el cual la Oficina del Historiador de la Ciudad de La Habana, que funciona como una suerte de compañía inmobiliaria, refinancia las operaciones del estado con los incrementos del valor del suelo provenientes de proyectos de rehabilitación urbana en forma de impuestos cobrados a los “socios” privados en las obras de desarrollo (Núñez, Brown y Smolka, 2000).

Otros factores favorables incluyen las condiciones estipuladas por los planes de los organismos multilaterales, que claramente promueven la universalización de los gravámenes al usuario y la recuperación de los costos de las inversiones públicas. La creciente popularidad de los nuevos instrumentos de recuperación de plusvalías también puede atribuirse a cierta frustración causada por los resultados mediocres que se obtuvieron en décadas anteriores con la aplicación de impuestos y otras contribuciones tradicionales relacionadas con el suelo urbano, en cuanto a los ingresos y los objetivos de las políticas urbanas.

6. El pragmatismo prevalece sobre las justificaciones éticas o teóricas. Como corolario al punto anterior tenemos que la creciente popularidad de la recuperación de plusvalías parece inspirarse más en razones fundamentalmente pragmáticas que en criterios éticos, nociones de igualdad o justificaciones teóricas o políticas. Algunas reformas tal vez se han introducido sin plena conciencia política del proceso, o de su importancia teórica, como se ilustró anteriormente en el caso de Mexicali. Los indicios históricos muestran que en su mayoría las iniciativas de recuperación de plusvalías han respondido más que todo a la necesidad de enfrentar las crisis fiscales y otros problemas locales en el financiamiento del desarrollo urbano. Es el mismo caso que ocurre en Argentina, donde la necesidad de ingresos predominó sobre los principios establecidos que se oponían a nuevos impuestos cuando se recurrió a un aumento provisional del 5% en el impuesto a la propiedad como una de las iniciativas para financiar las inversiones en el nuevo sistema de subterráneo de Buenos Aires.

No obstante, no debería darse por sentado a partir de los ejemplos anteriores que la acumulación de experiencia no es importante para el perfeccionamiento de instrumentos y la evolución de las políticas de recuperación de plusvalías. Un caso pertinente es la experiencia colombiana con la contribución de valorización desde los años 1920 y los innumerables intentos para resolver algunas de sus limitaciones, especialmente en los últimos 40 años. La participación en plusvalías promulgada recientemente es una versión de mayor logro técnico y políticamente aceptable de un instrumento dirigido a recuperar los incrementos –en ocasiones enormes– del valor del suelo asociados con las decisiones administrativas con respecto a la zonificación, niveles de densidad y otras normas y regulaciones urbanísticas.

7. La recuperación de plusvalías no es necesariamente progresiva o redistributiva. Es necesario señalar que de ninguna manera la referencia a las plusvalías es un monopolio de la izquierda política. Las experiencias recientes de Argentina y Chile indican claramente la disposición hacia el tema en contextos neoliberales. Además, las operacões interligadas (operaciones interligadas), desarrolladas en São Paulo y aplicadas con efectividad por administradores con tendencias políticas e ideológicas opuestas, fungieron como argumento convincente de la imposibilidad de etiquetar estos instrumentos a priori.

Los gobiernos locales progresistas, por otra parte, a veces son renuentes a utilizar estos instrumentos, y hasta pueden rechazar de un todo la noción, por tres razones: Primero, es posible que crean que tales contribuciones serían un mero mecanismo para imponer nuevos gravámenes fiscales sin ningún efecto redistributivo. Segundo, incluso cuando los ingresos generados se destinen a la población de bajos ingresos, pueden resultar insuficientes para reducir las diferencias entre ricos y pobres en lo concerniente al acceso al suelo urbanizado (Furtado 2000). Tercero, el argumento intergeneracional de que tales gravámenes se imponen a los residentes más nuevos –generalmente pobres– que necesitan servicios, mientras que las generaciones anteriores no pagaron por servicios de infraestructura o instalaciones recreativas.

De tal modo, la naturaleza progresista de dichas políticas no se resuelve “creando impuestos” sobre los incrementos del valor del suelo ni tampoco apuntando hacia los contribuyentes de altos ingresos. La imagen de Robin Hood de tales políticas se diluye en cuanto queda claro que la parte del valor realmente recuperada de esta manera tiende a ser sólo una fracción –a menudo pequeña– de lo que el propietario recibe en realidad en beneficios. Este punto parece haber sido bien entendido por muchas poblaciones de bajos ingresos, como las de Lima, donde un programa exitoso que comprendía unos 30 proyectos se valió de la contribución de mejoras para financiar obras públicas a principios de la década de 1990.

Este ejemplo y otros indicios fuertes confirman la necesidad de reconsiderar las nociones convencionales sobre la tensión que existe entre los principios de beneficio y la capacidad de pago. En la práctica, la estrategia de atraer cierta intervención pública hacia nuestro vecindario (incluso si ello implica pagar su costo) es más ventajosa que la alternativa de quedar relegado. Sin embargo, este punto debería tratarse con cautela, a la luz de ciertas experiencias en las que se ha aplicado la contribución de mejoras en áreas de bajos ingresos con fines distintos al beneficio de los ocupantes; por ejemplo, para justificar el desalojo o provocar la partida de aquellos residentes que no pueden pagar las mejoras (Everett 1999).

Consideraciones finales

A pesar de las dificultades de interpretación y resistencia a la implementación descrita más arriba, las políticas de recuperación de plusvalías sin duda están despertando nuevo interés y logrando mayor aceptación. Los esfuerzos para utilizar la recuperación de plusvalías se han multiplicado en número y creatividad y sus virtudes, aparte de ser una fuente alternativa de financiamiento público, se entienden cada vez más. Los funcionarios de la administración pública se están dando cuenta del “valor de mercado” de su competencia privativa para controlar los derechos de uso del suelo, así como para definir la ubicación y fecha adecuada de las obras públicas. Asimismo ven que la negociación transparente del uso del suelo y las relaciones de densidad reducen el margen de transacciones que solían realizarse “por debajo de la mesa”. Como el vínculo entre la intervención pública y el incremento del valor del suelo se hace cada vez más notorio, las actitudes están cambiando para hacerse más favorables a la creación de una cultura fiscal que fortalezca los impuestos a la propiedad y los ingresos locales en general.

Sin embargo, todavía queda mucho por hacer en ambas esferas: investigar la naturaleza compleja de las políticas de recuperación de plusvalías y promover un mayor entendimiento por parte de los funcionarios públicos de la manera en que pueden usarse para beneficiar a sus respectivas comunidades. Es indispensable conocer mejor ciertas idiosincrasias latinoamericanas, como cuando los incrementos significativos del valor del suelo se generan bajo regímenes alternativos de tenencia de la tierra que no gozan de la protección del estado, y en casos en que el suelo representa un importante mecanismo de capitalización para los pobres.

Más allá de las limitaciones tradicionales estructurales de patrimonialismo, corrupción, intereses velados, insensibilidad ideológica y demás, una parte considerable de la “variación inexplicable” en las diferentes experiencias con la recuperación de plusvalías en América Latina puede atribuirse a la falta de información. Con el fin de mejorar la comprensión de los principios e implementación de la recuperación de plusvalías, quedan muchas oportunidades para documentar y analizar las experiencias actuales con valoración alternativa del suelo y los instrumentos impositivos.

Martim Smolka es miembro principal y director del Programa para América Latina y el Caribe del Instituto Lincoln, y Fernanda Furtado es miembro del Instituto y profesora del Programa de Posgrado en Urbanismo de la Universidad Federal de Río de Janeiro.

La recuperación de la plusvalía del suelo es ahora un tema popular entre los profesionales de finanzas públicas a nivel local, en parte debido a que la disminución en los ingresos de los gobiernos locales causada por la recesión ha despertado el interés en nuevas fuentes de ingresos, y en parte debido a la necesidad de encontrar nuevas maneras de financiar la infraestructura local, que se ha deteriorado a causa de la falta de inversión. La sexta Conferencia Anual sobre Políticas de Suelos del Instituto Lincoln, celebrada en mayo de 2011, analizó varios aspectos de la recuperación de plusvalías, utilizando experiencias a nivel nacional e internacional.

Principios básicos de la recuperación de plusvalías

Los cambios en el valor del suelo se deben con frecuencia a factores que no están relacionados con el esfuerzo del propietario: acciones tomadas por la comunidad relativas a las inversiones en infraestructura; crecimiento cercano de actividades industriales, comerciales, residenciales o recreativas; normas de edificación que permiten al dueño desarrollar el suelo; o el crecimiento gradual de la comunidad. La recuperación de plusvalías consiste en aplicar un impuesto o arancel diseñado para devolver a la comunidad algo o todo el valor agregado al suelo por las acciones de la comunidad. Su aplicación es particularmente atractiva cuando las inversiones públicas —en caminos, suministro de agua, saneamiento o servicios locales, como el alumbrado público— aumentan los valores de la propiedad.

Experiencia internacional

Arriendo de suelos. Quizás la aplicación más amplia y comprensiva del principio de recuperación de plusvalías tiene lugar en China, donde las municipalidades compran suelos agrícolas a los granjeros a precios de uso agrícola, les agregan servicios públicos de infraestructura, y se los venden a los emprendedores como suelos urbanos, con permisos para realizar emprendimientos urbanos. La municipalidad se queda con la diferencia de precio entre el valor urbano y agrícola del suelo, generando una proporción importante de sus ingresos locales con los cuales paga, entre otras cosas, la instalación de la infraestructura.

Co-desarrollo. Las compañías de transporte público de Hong Kong y Tokio han usado los ingresos de co-desarrollo de comunidades residenciales y áreas comerciales cercanas a las nuevas estaciones de transporte público para ayudar a financiar sus costosos proyectos. En Tokio, los ingresos de las líneas de transporte que no se deben a la venta de pasajes suman del 30 al 50 por ciento del total. En ambas ciudades, los ingresos operativos por la gestión de propiedades están cobrando más importancia que las ganancias obtenidas de los emprendimientos en sí, y proporcionan una fuente de ingresos sustentable.

Tributación del desarrollo inmobiliario. Los intentos de tributar la valorización de las propiedades en el Reino Unido comenzaron en 1909, pero su implementación se vio obstruida por problemas de valuación y otros desafíos. Las contribuciones directas de valorización fueron reemplazadas por contratos con las autoridades locales, donde los emprendedores contribuyen al suministro de infraestructura y servicios, viviendas de interés social y otras obligaciones de planeamiento. Estos contratos se están convirtiendo poco a poco en contribuciones de infraestructura comunitaria, que es una contribución de valorización obtenida por otros medios. Siguiendo una trayectoria histórica distinta, Francia también ha establecido un impuesto de infraestructura local a los nuevos emprendimientos.

Consorcios de suelos. India ha experimentado con los consorcios de suelos para implementar sus nuevos planes de urbanización que reemplazan a los viejos planes de ordenamiento territorial. Esta práctica alienta a los dueños de suelos sin desarrollar, o desarrollados en forma precaria, a que agrupen sus predios y luego reciban una parcela con servicios de infraestructura o un espacio construido cuando el emprendimiento se haya completado. La estrategia adoptada en Ahmedabad usa el 15 por ciento de los suelos para caminos, el 10 por ciento para parques, el 15 por ciento para subastar a terceras partes y el 60 por ciento para los miembros del consorcio.

La experiencia de los Estados Unidos

Algunas de las políticas específicas de recuperación de plusvalías en los Estados Unidos incluyen áreas de tributación especial con cargos por valorización. Por ejemplo, los Distritos de Establecimientos Comunitarios (Community Facilities Districts, o distritos Mello-Roos) destinan aranceles pagados por los residentes al pago de bonos vendidos para financiar el desarrollo de infraestructura. Los Distritos de Mejoras Comerciales (Business Improvement Districts) y el Financiamiento por Incremento de Impuestos (Tax Increment Finance) usan ingresos tributarios o arancelarios separados para financiar mejoras urbanas en áreas designadas al efecto. Los Acuerdos de Beneficios Comunitarios (Community Benefit Agreements), que se negocian en forma privada, obligan a los emprendedores a proporcionar instalaciones comunitarias o beneficios económicos a los residentes locales. Los aranceles municipales de desarrollo e impacto inmobiliario, que se utilizan para financiar obras de infraestructura y otras inversiones relacionadas con los emprendimientos, se basan en general en los costos de dichas inversiones, pero sólo generan ingresos cuando la plusvalía excede el costo.

Lo más notable de la experiencia norteamericana es que los términos en sí —contribuciones de valorización o recuperación de plusvalías— raramente se mencionan, si bien los principios se aplican con regularidad. Sin embargo, este país puede aprender lecciones de las nuevas estrategias de recuperación de plusvalías adoptadas internacionalmente.

Las actas de la conferencia, con artículos y comentarios de más de 25 contribuyentes, serán publicadas en mayo de 2012.

Over the past five years, the Lincoln Institute has supported the study of value capture policies and instruments in many Latin American countries. Notwithstanding the diversity of approaches and the variety of specific cases, we have identified seven substantive lessons that can help to clarify some of the confusion and misunderstandings associated with the implementation of value capture principles. Each lesson summarized below presents one or two examples drawn from the book, Recuperación de Plusvalías en América Latina: Alternativas para el Desarrollo Urbano.

Value capture refers to the process by which all or a portion of increments in land value attributed to “community efforts” rather than landowner actions are recovered by the public sector. These “unearned increments” may be captured indirectly through their conversion into public revenues as taxes, fees, exactions or other fiscal means, or directly through on-site improvements to benefit the community at large.

1. Value capture is not a new concept in Latin America. The Latin American experience with value capture has long-standing historical precedents. Public debates on the use of value capture and related instruments have been held since the beginning of the twentieth century in several countries. In the 1920s, the debate was triggered by concrete events, such as the problem of paving streets in São Paulo, Brazil, and the lack of external financing for needed public works in Colombia. In other cases, political and ideological factors have motivated national discussions. Representatives of the Partido Radical in Chile made several attempts to introduce the idea, and in the 1930s President Aguirre Cerda proposed legislation to create a national tax on plusvalías (land value increments) based on the ideas of Henry George.

2. However, its application in the urban policy agenda is still limited. Despite many reports of relevant experiences that integrate the principles of value capture, the issue is not well represented or even sufficiently acknowledged within the sphere of urban policy. In some instances, promising value capture initiatives have gained prominence in their own times, only to be forgotten later. An important example is the well-known Lander Report from Venezuela, which proposed in the 1960s that land and its increments in value should be the main source of financing for urban development projects. That report formed the basis for recommendations on urban development finance included in the proceedings of Habitat I (1976).

In other cases, interesting opportunities to use value capture as a tool for urban policy are being lost or ignored. Currently some Latin American countries are not taking advantage of potential unearned land value increments generated by major inner-city revitalization projects. While there is general acceptance of the notion of capturing increases in land values, in reality little of that increased value derived from public action has actually been recovered and redistributed.

3. Legislation often exists but is not implemented. As in many other countries in the region, the variety of value capture instruments available in Mexico, ranging from the contribución por mejoras (a special assessment or betterment levy aimed at recovering the costs of public works) to taxes on plusvalías, illustrates the discrepancy between what is legally possible and what is actually implemented. Contrary to what is often alleged, the general problem is not that the planners or local officials lack legal or practical access to these instruments but that the following conditions tend to prevail.

• The legislation and instruments are often conceived and designed (sometimes intentionally) in such confusing and contradictory ways that they virtually paralyze any operational policy initiatives. For example, the Venezuelan national expropriation law of 1947 prescribes the taxation of 75 percent of land value increments related to public works, whereas the general municipal constitution (Ley Orgánica de Régimen Municipal) limits taxation to 5 percent of the total value of the affected property. In reality, even this limited charge is not collected.
• Even when the law makes value capture feasible, it may be difficult to interpret. For example, the debate between eminent jurists in the l970s in Brazil with respect to the constitutionality of the legislation on solo criado (an instrument based on the separation of land and building rights) reflected a basic lack of understanding of legal precedents regarding value capture and its associated instruments.
• The possibilities of the law are not always widely known, even in their respective countries. This seems to be the case in Mexico, where the traditional property tax in the city of Mexicali, based on the combined value of land and buildings, was successfully replaced by a tax based exclusively on land value (Perlo 1999). Other cities in Mexico do not seem to be aware of or have not taken advantage of similar provisions in their state’s legislation.

4. Resistance is more ideological than logical. Even when value capture legislation and instruments are understood (or in some cases because they are understood), they may not be implemented fully due to the proverbial “lack of political will.” This resistance may take the form of misleading interpretations, stereotyped rationalizations and even pure ideological “preaching.”

It is not hard to find public justification that the application of such instruments is neither timely nor appropriate, especially if the justification is based on misleading interpretations. Some such arguments are that impositions on land values are inflationary and disruptive of well-functioning markets, or that they incur unacceptable taxation of the same base twice. Such misconceptions seem to lie behind the reluctance of the Ministry of Housing and Urbanism of Chile to promote the review and resubmission to the Congress of some value capture provisions in the country’s new legal framework on urbanism.

Objections based on stereotyped rationalizations may use the following arguments:

• the corresponding revenues are not significant or are not justified when compared with the administrative costs incurred;
• the public administrations would not be competent in terms of technical and human resources; or
• the application of value capture instruments would be antisocial and regressive, since the poor population, which has the greatest need for more urban infrastructure, has the least capacity to pay.

Contradicting these arguments, however, are the development of successful participatory improvement programs in poor areas of many cities (for instance in Chile, Brazil and Peru). These programs have been technically and economically efficient and usually have strong support from the low-income population affected.

Finally, some objections are of a purely ideological nature. The resistance to the implementation of participación en plusvalías in Colombia, for example, is based on the allegation that this device, although recognized as technically well-formulated, represents one more unwanted public “interference” on urban real estate business, such as a higher fiscal burden, limitations on property rights or more regulation (Barco de Botero and Smolka 2000). This position has been replaced recently by a broad consensus among politicians, business leaders and the general public that acceptance of this instrument is a better option than the imposition of additional property taxes.

5. Value capture is gradually becoming more popular. In spite of the obstacles and political resistance, recent Latin American experience with value capture shows a growing interest in the subject and in the conditions that would justify its utilization. Value capture is attracting the attention of municipal planners throughout the region, and it is beginning to be perceived as an important urban policy initiative. This growing popularity is related to several factors occurring in the region.

First, greater administrative and fiscal decentralization requires more autonomy in redefining and obtaining alternative sources of public funds to finance the urbanization process. The need for more local resources has been reinforced by the social demands and political pressures associated with current redemocratization processes and growing levels of popular participation. Formation of extra-budget funds to finance special social programs is linked to almost all new value capture initiatives and has been one of the most attractive reasons for implementing those policies.

Second, the redefinition of the functions of the state (including privatization), together with the decline of comprehensive planning, have set the stage for the development of more flexible public interventions and direct negotiations in land use regulation and public-private partnerships. The release of public areas to the private land market, as well as better coordination between real estate and public sector interests to promote new areas in the cities, are also significant. It is worth noting that even in Cuba one finds a vigorous program through which the Office of the Historian in Havana, operating as a kind of property holding company, refinances its state-owned operations with land value increments resulting from urban renovation projects in the form of rents charged to private development “partners” (Nuñez, Brown and Smolka 2000).

Other favorable factors include the conditions imposed by the agendas of the multilateral agencies, which clearly promote the universalization of user charges and the recovery of the costs of public investments. The growing popularity of new value capture instruments can also be attributed to some frustration with the poor results obtained from the application of taxes and other traditional charges related to urban land in past decades, in terms of both revenues and urban policy objectives.

6. Pragmatism overrides ethical or theoretical justifications. A corollary to the preceding point is that the growing popularity of value capture seems to be inspired more by eminently pragmatic reasons than by ethical criteria, notions of equality, or theoretical and political justifications. Some reforms may even have been introduced without full political awareness of the process, or of its theoretical importance, as previously illustrated in the Mexicali case. The historical evidence shows that most value capture initiatives have responded above all to the need to face fiscal crises and other local problems in the financing of urban development. This is the case even in Argentina, where the need for revenues prevailed over established principles opposed to new taxes when a temporary five-percent increase in the property tax was used as one of the initiatives to finance investments in the new Buenos Aires subway system.

Nevertheless, one should not assume from the above examples that accumulation of experience is not important for the refinement of instruments and the evolution of value capture policies. A case in point is the Colombian experience with the contribución de valorización since the 1920s and the many attempts to overcome some of its limitations, especially in the past 40 years. The recently enacted participación en plusvalías is a more technically developed and politically acceptable version of an instrument targeted to capture the sometimes huge land value increments associated with administrative decisions concerning zoning, density levels and other urbanistic norms and regulations.

7. Value capture is not necessarily progressive or redistributive. It must be noted that the reference to plusvalías is in no way a monopoly of the political left. Both Argentina’s and Chile’s recent experiences show clearly the disposition toward the subject in neo-liberal contexts. In addition, the operacões interligadas (linkage operations) developed in São Paulo, and effectively applied by administrations of opposing political and ideological tendencies, put forward a convincing argument about the impossibility of labeling these instruments in advance.

Progressive local governments, on the other hand, are sometimes reluctant to apply these instruments, and may even reject the notion altogether, for three reasons. First, they may believe that such contributions would be simply a mechanism to impose additional fiscal charges with no redistributive impact whatsoever. Second, even when the resulting revenues are earmarked for the low-income population, they may be insufficient to reduce the absolute differences between rich and poor in the access to the serviced land (Furtado 2000). And third is the intergenerational argument that such charges are being imposed on newer, generally poor, residents who need services, whereas earlier generations were not charged for infrastructure services or amenities.

Thus, the progressive nature of such policies is not resolved by “taxing” land value increments or by focusing on high-income taxpayers. The “Robin Hood” image of such policies fades once it becomes clear that the part of the value actually captured in this way tends to be only a fraction, and often a small one, of what the owner actually receives in benefits. This point seems to have been well understood by many lower-income populations, like those in Lima where a successful program featuring some 30 projects used the contribución de mejoras to finance public works in the early 1990s.

This example and other strong evidence support the need to revisit the conventional wisdom regarding the tension between the principles of benefit and capacity of payment. In practice, the strategy of attracting some public intervention to one’s neighborhood (even if it means paying for its costs) is more advantageous than the alternative of being neglected. This point should, nevertheless, be taken with caution, in light of certain experiences where the contribución de mejoras has been applied in low-income areas with purposes other than benefiting the occupants-for example, to justify the eviction or force the departure of those who cannot pay for the improvements (Everett 1999).

Final Considerations

In spite of the difficulties in interpretation and resistance to implementation outlined above, value capture policies are undeniably arousing new interest and growing acceptance. Efforts to utilize value capture have grown in both number and creativity, and its virtues beyond being an alternative source of public financing are becoming better understood. Public administrations are realizing the “market value” of their prerogative to control land use rights, as well as to define the location and timing of public works. They also see that the transparent negotiation of land use and density ratios reduces the margin of transactions that used to be carried out “under the table.” As the link between public intervention and land value increment is becoming more visible, attitudes are changing to be more conducive to building a fiscal culture that will strengthen property taxes and local revenues in general.

However, there is still much to be done in two spheres: researching the complex nature of value capture policies and promoting greater understanding among public officials with regard to how it can be used to benefit their communities. More knowledge is required on certain Latin American idiosyncrasies, such as when significant land value increments are generated under alternative land tenure regimes that are outside the protection of the state, and in cases where the land represents an important mechanism of capitalization for the poor.

Beyond the traditional, structural constraints of patrimonialism, corruption, hidden interests, ideological insensitivity and the like, a considerable part of the “unexplained variance” in different experiences with value capture in Latin America can be attributed to lack of information. Toward that end of improving understanding of the principles and implementation of value capture, there remain many opportunities to document and analyze current experiences with alternative land valuation and taxation instruments.

Martim Smolka is a senior fellow and the director of the Lincoln Institute’s Latin American Program, and Fernanda Furtado is a fellow of the Institute and a professor in the Postgraduate Program in Urbanism at the Federal University of Rio de Janeiro.

References

Barco de Botero, Carolina, and Martim Smolka. 2000.Challenges in Implementing Colombia’s Participación en Plusvalías. Land Lines 12 (March):4-7.

Everett, Margaret. 1999. Human Rights and Evictions of the Urban Poor in Colombia. Land Lines 11 (November):6-8.

Furtado, Fernanda. 2000. Rethinking Value Capture Policies for Latin America. Land Lines 12 (May):8-10.

Nuñez, Ricardo, H. James Brown, and Martim Smolka. 2000. Using Land Value to Promote Development in Cuba. Land Lines 12 (March):1-4.

Perlo Cohen, Manuel. 1999. Mexicali: A Success Story of Property Tax Reform. Land Lines 11 (September):6-7.

Land value capture is now a popular topic among practitioners of local public finance—in part because the recession-related decline in local government revenues has piqued interest in new revenue sources, and in part because of the need for new ways to finance local infrastructure that has been degraded by underinvestment. The Lincoln Institute’s sixth annual land policy conference in May 2011 addressed many aspects of value capture, drawing on both international and domestic experience.

Basics of Value Capture

Changes in the value of land often result from factors unrelated to the efforts of the landowner: actions by the community in the form of infrastructure investments; nearby growth in industrial, commercial, residential, or recreational activity; zoning that permits the owner to develop the land; or the incremental growth of the community. Value capture applies a tax or fee designed to return to the community some or all of the value added to land by community actions. Its application is particularly attractive when public investment—for roads, water supply, sanitation, or even local amenities such as street lights—increases property values.

International Experience

Land leasing. Perhaps the broadest and most comprehen-sive application of value capture is in China, where municipalities buy agricultural land from farmers at agricultural use prices, service it with infrastructure, and sell it to developers as urban land with permits for urbanization projects. The difference in price between the land’s urban and agricultural values accrues to the municipality, provides a large share of local revenue, and pays for the installed infrastructure.

Co-development. Transit companies in Hong Kong and Tokyo have used revenues from the co-development of residential communities and commercial areas around new transit stations to help finance their costly projects. In Tokyo nonfare revenue is 30 to 50 percent of total revenue for some transit lines. In both cities ongoing revenue from property management is becoming more important than profits from development projects and provides a sustainable income stream.

Development taxation. Attempts to tax betterment values in the United Kingdom began in 1909, but implementation was impeded by valuation and other challenges. Direct betterment levies were replaced by contracts with local authorities under which developers contribute to infrastructure and service provision, affordable housing, and other planning obligations. These contracts are evolving into community infrastructure levies, a betterment levy by alternative means. Following a different historic path, France also has a local infrastructure tax on new development.

Land pooling. India has experimented with land pooling in its implementation of new town planning schemes that replace the old master plans. The practice encourages owners of undeveloped or haphazardly developed land to pool their plots together and then receive a serviced parcel or constructed space when the development is completed. Ahmedabad’s approach uses 15 percent of the land for roads, 10 percent for parks, 15 percent for auction to others, and 60 percent for the pool members.

United States Experience

Among the specific U.S. policies that embody value capture are special assessment areas that often include betterment charges. For example, Community Facilities (or Mello-Roos) Districts apply fees paid by residents to retire bonds sold to finance developmental infrastructure. Business Improvement Districts and Tax Increment Finance schemes use earmarked tax or fee revenue from a designated area to fund improvements. Privately negotiated Community Benefit Agreements obligate developers to provide community facilities or economic benefits for local residents. Citywide development and impact fees used to finance infrastructure and related development investments are normally cost-based, but succeed only when the betterment value exceeds the cost.

Most notable about the U.S. experience is that the terms—betterment levies or value capture—are used rarely, even though their principles are practiced widely. Moreover, this country can learn some new value capture approaches from international experience.

The conference volume with papers and commentaries by more than 25 contributors will be published in May 2012.