Value capture instruments are widely considered to be beneficial fiscal planning mechanisms, even though they are difficult to implement. Colombia is notable in Latin America for its unique and long-standing experience with institutionalizing value capture through collecting the Contribución de Valorización, a kind of special assessment, and the Contribución de Desarrollo Municipal (Law 9 of 1989), which preceded the current instrument, Participación en Plusvalías.

Since 1921 when the first such legislation was introduced, Colombia has developed a fiscal culture in which people are aware of and accept value capture instruments as a legitimate revenue-raising mechanism. For example, in 1968, at the height of its use, the Contribución de Valorización accounted for 16 percent of local revenues in Bogotá and about 45 percent in Medellín; in the early 1980s it raised about 30 percent of total revenues in Cali. Nevertheless, because land still plays an important role as a hedge against inflation in places like Colombia, where capital markets are not highly developed, the implementation of such devices still meets with strong political resistance from many constituencies, ranging from powerful landowners and developers to low- and moderate-income families for whom land is an important source of personal savings.

Building on this experience, Law 388 of 1997 creating Participación en Plusvalías decrees that all municipalities must design and approve a ten-year master plan (Plan de Ordenamiento Territorial-POT) and adopt plusvalías as one of the plan’s main sources of income. The revenues raised through plusvalías are to be used primarily for the provision of social housing and infrastructure in under-served neighborhoods, as well as for public works of general interest. The law establishes three administrative conditions for applying the plusvalías instrument as part of the POT:

1. when land changes from one category to another, especially when rural land with low development potential is included within the master plan’s growth boundary and therefore becomes designated as land for urban expansion or as suburban land;

2. when additional development (density) rights are authorized in an area; or

3. when an area changes use, especially from residential to commercial use.

The Participación en Plusvalías is grounded in the legitimate public right to participate in capturing land value increments resulting from administrative actions such as changes in zoning or density that may generate substantial windfalls for the landowner. It is important to note that this instrument is not a tax, a contribution or a fee, but rather a mandated right of the public to ‘participate’ in the value generated by government functions aimed at enhancing urban development. Law 388 and its accompanying decrees define the general parameters for using plusvalías, but the municipalities are required to determine its specific procedures. However, many mayors and other public officials are concerned about the law’s ambiguities and are struggling with the process of applying both the law and the plusvalías instrument.

To address the need for a forum in which public officials and other experts could discuss this problem, the Lincoln Institute and the Bogotá Planning Department held a seminar in December 1999, before the deadline for approval of the legal master plan (POT) on December 31. The seminar convened practitioners actively involved in the implementation process, including planning directors from major cities, representatives of national public agencies and ministries, representatives of institutions in charge of property assessments, lawyers, and scholars involved in the design of the instrument. One immediate outcome of the seminar was a successful lobbying effort to change the deadline to June 30, 2000, to allow more time to review and revise the problematic POT provisions.

Key Implementation Issues

Application of plusvalías to different situations. Most municipal representatives at the seminar agreed that plusvalías should be used only in those situations that result in a clear and substantial windfall, in order to generate greater citizen approval and a simpler administrative process during the first phase of implementation. The general consensus is that Contribución de Valorización has been accepted because the increase in the value of land that benefited from public investment was clearly understood by the owners, so they have been willing to pay the fee. In Bogotá, for example, Contribución de Valorización has been one of the major means for building new streets since 1969.

By comparison, plusvalías are applied only to situations in which a higher land value is specifically associated with a public land use decision defined in the POT, such as changing the land category, its density or its use. Extending the growth boundary to include rural land that can be developed in subsequent years is an explicit situation in which the change in land price is evident. Most representatives of municipalities felt this was the most obvious scenario for application and should be the main focus of the instrument in its first phase.

Accuracy of land value assessments.

Law 388 suggests that the date for the base land price against which the gain is measured is to be July 1997, the date when Congress approved the law. However, it is not clear whether and how the municipalities can determine that land price in subsequent years. The problem is that the initial base value to be compared to the current value may already be influenced by ‘rumors’ circulating about land designations in the master plans. Should the value be calculated before the rumors of urbanistic changes begin to circulate, or just before the actual decision is made? How should cities treat land value increments generated by actions occurring between that base date and the approval of the POT? For how long is the assessment valid? What happens after, say, 15 or 20 years?

These questions are all the more relevant considering that land use norms established recently in some cities have already been capitalized in land prices, thus reducing substantially the current margins for the application of Participación en Plusvalías.

Furthermore, there are different legal implications about which relevant values should be considered (i.e., current use vs. highest and best use). Should the land value increment be based on the potential or the actual value? Should the legally defined formula for assessments apply to the potential buildable area even if the builder is not requesting a license to develop the site to its full allowable density? What happens when a property that has been assessed on a certain date is not completed? Although the law defines the concept of zones with similar geo-economic characteristics, it is not clear whether the landowner may legally request the assessment to be done on a property-by-property basis or on the basis of homogeneous zones.

The short deadlines established by the law for calculating both commercial prices before the master plan and new reference prices after adoption of the plan also cause serious concerns. For example, the law states that the mayor has only five days after the new POT is approved to determine new prices in the affected areas, and that all calculations must be accomplished within the next 60 days. The legal structure for adopting simplified cost procedures to allow assessments for homogeneous areas of the city rather than for individual plots is not clear on this point.

Definition of land categories.

Differences in land categories between Law 9 of 1989 and Law 388 of 1997 have led to questions of applicability. Law 9 included a suburban land category that could be developed at moderate densities on the outskirts of cities. For example, all of the developable land to the north of Bogotá is now in that suburban category, which permits residential densities of 160 inhabitants per hectare. The zoning proposed by the new master plan permits an increase to between 180 and 220 inhabitants per hectare. Law 388 states that the change from rural to urban use may be taxed, but does not address the suburban category, even though suburban land already has strong development rights. Because of these difficulties, many cities prefer to treat suburban land as similar to urban land in order to avoid further implementation problems.

Exemptions and special cases.

Land for low-income housing is exempted from plusvalías, but the law states that the land value increments must be calculated anyway. This may constitute an unnecessary additional cost, considering that 80 percent of all housing to be built in Bogotá within the next ten years will be low-income housing. How does this affect the fairness of this instrument on the remaining 20 percent of housing? How effective will plusvalías be as a planning instrument seeking to decrease speculation on land designated for social housing?

Another issue deals with wipeouts resulting from master plan designation of conservation zones or areas set aside for environmental protection through transfer of development rights (TDRs). Complaints from private agents of ‘takings’ against their full rights of ownership raise important questions of compensation. Areas that already have been designated for high-density development but are not yet fully built also raise questions about the expectation component of land values.

Political and operational obstacles.

A continuing source of confusion and misunderstanding concerns the technical issues associated with the effective calculation of the land value increment. Can it or should it be implemented in cases when, due to general economic recession, all land values are allegedly declining? If landowners are either selling land at a loss or not initiating development on their properties at all, then, quite simply, no plusvalías would be available to the local administration. Theoretically, all that is needed is to distinguish generating effects (administrative actions) from trends in land markets. In practice, however, it is easy to understand that instruments of value capture are more robust, and more palatable politically, during the upswing of land price cycles than the downswing, as is currently the case in Colombia.

The political overtones of this issue become clearer when considering the substantial land portfolios that developers normally hold for strategic planning motives, including for speculation. In effect, urban planners are hard pressed to be more flexible, if not magnanimous, in relaxing urbanistic norms and regulations in order to motivate developers during times of recession. However, this kind of pressure from developers may be simply an attempt to gain compensation for poor investment decisions in the past.

Sometimes developers complain that the municipality is setting the plusvalías fee too high in times of declining prices when recession may create disincentives for future investments in building improvements. However, a counter-argument based on the experience with Contribución de Valorización suggests that if the amount of plusvalías on the changing land use is considered to be overvalued, it follows that the change is probably not cost-effective and should not be proposed. It is also possible that a mistake was made in the feasibility study or the calculations.

Over and above these practical difficulties are certain implementation requirements in the law that affect its operation, such as the need to directly notify the landowner that the property is ‘liable’ for plusvalías. Should the burden reside with the public administration or with the owner? Similarly, there are legal difficulties surrounding the moment when plusvalías should be charged to the property owner, as in the liquidation of properties or in the request for a license to change the use of land. Some grounds for complaints of double taxation could also be raised if an area to be densified (or receive any change in zoning) has received additional infrastructure on which the Contribuición de Valorización provision was charged. The independence of this instrument from plusvalías, as stated by the new law, is important because of the existing option of calculating and charging the plusvalías for public works designated by the POT.

Adjustments Proposed by Municipal Officials

Public officials at the December seminar in Bogotá suggested a few ways to simplify the implementation of Law 388 by sacrificing precision in the calculation of the plusvalías in favor of expediency, transparency and compliance. This perspective is based on the belief that political will may be more important than technical consistency, at least in the early, transitional stages of implementation, in order to improve the chances of long-term success. A very telling and useful example was given by officials from the city of Cartagena (500,000 inhabitants), which has been applying the Contribución de Desarrollo Municipal effectively since 1992. Their experience shows that the effect of density changes to a new lot should be similar with regard to the generation of plusvalías to the rate generated by the same kind of density change already observed in a different but comparable area of the city.

Participants also proposed restricting the application of plusvalías to the more strategic and dynamic areas of the city where the windfall potential is most apparent and expressive, rather than in areas where the land value increments are small. Furthermore, assessment of plusvalías should be based on homogeneous zones, not on individual plots. The plusvalías instrument also needs to be developed and phased in over time as the municipalities gain greater knowledge and sophistication in valuation and assessment techniques. The established nine-year period for the validation of the assessments of land value increments, therefore, should be subject to more frequent periodic review. Some practical transition rules, absent in the original formulation of the law, also will help facilitate the introduction of a new fiscal system.

Other suggestions were made regarding the adoption of master plans (POTs). Municipalities should use these plans, rather than some other valuation mechanism external to the POT, to identify areas where there will be a change in land use in order to determine whether, in fact, it is a higher use and thus subject to an increase in plusvalías. Before adopting the POT, the municipalities should identify such areas so the valuation and assessment techniques could be worked out ahead of time and the sense of uncertainty could be mitigated. Some participants even suggested using the POT to define the relevant ex-ante situation (or prior value) to determine the net land value increment.

In general, the participants agreed that the concept and aims of the master plan and plusvalías instruments are both acceptable and desirable. Many of the problems and issues discussed at the seminar and throughout the country pertain to the implementation of any value capture scheme, or any new fiscal or normative legislation for that matter. In this case there is certainly substantial room for improving the design of the implementation procedures, since changes to operational aspects are always easier to achieve than changes to the law itself. But, over and above the remaining formal difficulties, it has been clearly demonstrated that political will, accumulated technical expertise and the ethical commitment of the participants are all critical to perfecting this land policy instrument and implementing the highly commendable principles that inspire it.

Carolina Barco de Botero is the planning director for the city of Bogotá. She is also a managing consultant with Ciudades, Ltda. in Bogotá and a member of the Lincoln Institute Board of Directors. Martim Smolka is senior fellow and director of the Institute’s Latin America and Caribbean Program.

Fernanda Furtado, a fellow of the Lincoln Institute, also contributed to this article. She recently completed her Ph.D. thesis (in Portuguese) on value capture in Latin America, at the Faculty of Architecture and Urbanism of the University of São Paulo, Brazil. One of her thesis chapters describes the situation in Colombia.

Pros and Cons of Participación en Plusvalías

Pros

• reduces corruption insofar as it exposes benefits that used to be negotiated under the table;
• reduces speculation;
• generates public revenues that are designated for redistributive purposes;
• reduces distortions in the distribution of urban land value increments;
• contributes to a better understanding of fiscal culture, thereby improving the collection of other assessments and taxes.

Cons

• introduces more red tape into the implementation of master plans and the process of licensing development of the built environment;
• legitimizes private appropriation of land value increments, since it leaves 50 to 70 percent of the plusvalías with the owner;
• incurs high administrative costs compared to the revenues it generates.

After spending more than a decade on restructuring central-provincial fiscal relations, the Chinese government is advancing its efforts to reform local public finance. In 2003 the central government issued a directive to ameliorate the real property tax system in China. To fulfill this mandate, tax authorities are reviewing international property taxation experiences, sending officials overseas to study pertinent models and inviting foreign experts to China for consultation. Yet comparable cases from which the government can draw relevant lessons for tailor-making a Chinese property tax system are few. The danger is that when public officials are under pressure to move the reform forward, they may be tempted to adopt concepts that do not match the country’s conditions.

One recent proposal that may develop into such a scenario is to establish an ad valorem property tax system in which leasehold land would be taxed as if it were freehold. This article explains what the Chinese government’s current proposal entails, why it may not be consistent with existing land tenure arrangements and, more tentatively, how the establishment of a land rent system could mediate potential contradictions of taxing land that is not private property.

China’s Property Tax Reform Proposal

The Chinese property tax system currently has as many as nine property taxes, depending on the definitions (see Hong 2003; 2004). The central government has proposed to consolidate three of these taxes into a single levy to simplify the existing tax structure. One of them is the Township and Urban Land Use Tax (LUT), which all land users (except foreign entities, government and nonprofit agencies, and agricultural industries) are required to pay. To collect this tax, local governments divide their jurisdictions into different taxing zones according to population size or land use. Land in different zones is taxed at an array of tax rates preset by the central government, ranging from 0.2 to 10 yuan per square meter (1 yuan = US$0.122). Some Chinese officials have admitted that the tax rates for the LUT have been set too low; hence its collections have little impact on local revenue. The government plans to eradicate this tax.

The other two taxes, the Building (or House) Tax and Urban Real Estate Tax (URET), will also be subject to reform. While the Building Tax is imposed on income-generating properties held by Chinese nationals, the URET is levied on all real estate owned by foreign entities and overseas Chinese. Both are ad valorem taxes whose bases can be the discount original purchasing cost, assessed capital value or gross annual rental value of the property.

When the assessed capital value (or the purchasing cost for the Building Tax) is used as the basis for tax assessment, the tax rate is 1.2 percent for the Building Tax and 1.5 percent for the URET. If an estimated rental value is used instead, the tax rates for the Building Tax and URET will be 12 and 15 percent, respectively. In some locales, like Beijing, if actual rental value is available because individual property owners rent their dwellings to another party at the market rate, the Building Tax rate will be 4 percent of gross rental income of the property. In view of this discrepancy in taxing local- and foreign-owned real estate, the government would replace these two levies with a single property tax as part of the upcoming reform.

The proposed new property tax would be imposed on both land and buildings at a uniform rate. The tax base would encompass all properties, domestic and foreign, located in rural as well as urban areas. As some public officials argue, a standardized property tax could have at least three advantages. First, the new property tax system may ease tax administration. Instead of administering the collection of the LUT, Building Tax and URET separately, local tax bureaus will be able to concentrate their effort on just one tax.

Second, the new property tax would be a value-based tax, which allows the government to capture future land value increments if property reappraisal can be done regularly. Third, one key purpose for creating the new property tax is to convert selected real estate development charges into a unified tax. Many scholars argue that some local governments might have abused the current system of user charges, thereby making payments for public services unduly cumbersome.

Collecting these charges through the new property tax may lower the transaction costs of doing business. As well-intentioned as the proposal may sound, policy designers might have underestimated the importance of one fundamental matter: the integration of the new property tax system with the current land tenure arrangements.

Property Taxation and Public Leaseholds

As specified in the Chinese Constitution, urban land is owned by the state and rural land is owned by collectives. Local governments, empowered by the state, can assign land use rights to users through a set of leasing arrangements. Lease terms are 40 years for commercial land, 50 years for industrial land and 70 years for residential land. If a local government wants to lease an urban land site to a private entity, it must be assigned through a bidding process. The winning bidder must pay the total set of leasing fees (including a “conveyance fee,” expropriation costs if land is acquired from the collective, and various land allocation charges) in a lump sum and immediately to obtain the land use rights.

The payment of the market-determined conveyance fee allows the lessee to transfer or rent the land use rights to another party and to use them as collateral. In the past, land rights were allocated mainly to private entities through negotiation, but this method failed to collect proper fees due to personal connections or corruption and it was suspended by the central government in 2002.

Users of land assigned administratively to public agencies or state-owned enterprises are not required to pay the conveyance fee, but must compensate the state for any allocation costs. The assignment of the land rights has no term limit. According to the law, if a state-owned enterprise wants to transfer its land rights to a private entity for commercial purposes, it must pay the conveyance fee to the state before doing so. For the transfer of rural land into urban uses or to nonmembers of the collective, the state will first expropriate the land from the collective with compensation and then lease the use rights to interested users for the payment of the conveyance fee and other leasing charges.

Owing to a long bureaucratic process and high transaction fees, many users have transferred their land rights to other parties without going through the proper procedure and registration. As such informal exchanges have gained in popularity, the official land leasing record is no longer reliable. Hence, any future attempt to identify the actual landholders, delineate their land rights, and estimate the leasehold value for tax purposes would no doubt be a difficult task.

The design of the new property tax system must take these unique land tenure arrangements into consideration. Aside from the extensive informality involved in land transaction and possession—a topic that is beyond the scope of this article—the most basic question is: How can the government convince lessees to pay property tax on lands that they do not own?

Certainly not all property tax systems are based on the premise that property owners should be taxpayers; occupiers are sometimes liable for tax payment. In some countries, such as Australia, the Netherlands and United Kingdom, taxes paid by occupiers are referred to as rates, a council tax or a user tax to avoid any confusion. Despite the different names, the calculation of these levies is still based on either the capital or rental value of the property, which is the same approach as for the property tax.

More fundamentally, since the supply of land is fixed, the landowner (the state government in the case of China) would bear the ultimate tax burden even if land users paid the property tax directly to the government. This is because the new tax would dampen the demand for land use rights and in turn reduce the fees that local governments could receive from leasing public land.

Because the Chinese government is both the landowner and property tax collector, lessees who leased land in the past and paid the entire leasehold value without anticipating the additional property tax burden would wonder why they should pay more land tax to the government. Thus it is essential to have a rationale for taxing leasehold land, so as to convince lessees to comply with their property tax obligation.

One way to analyze the matter is to treat property rights as a bundle of rights, which includes the right to own, use, develop, transfer, bequest and benefit from land. This bundle also comprises the right to exclude others from enjoying these privileges.

Viewing the Chinese land tenure arrangements through this lens, the government holds the ownership of land and leases other attributes of the bundle of land rights to private entities. So long as the privileges and obligations of holding the leased land rights are fully delineated and recognized, both legally and by the society, there is no reason why leasehold rights cannot be regarded as private property of the lessees for a specific period of time as stipulated in the lease.

In 1988 the Chinese National People’s Congress amended the Constitution to acknowledge the transferability of the right to use land. Further amendments are needed to explicitly recognize leaseholds as private property and empower the state to establish special legislation for the enforcement and protection of leasehold rights. In this way, the implicit contradiction in imposing property tax on leased public land would be clarified and resolved.

One technical issue remains, however: valuation of leasehold rights for tax purposes. Since the new property tax will be value-based, assessors will face the challenges of estimating the leasehold value of land independently, based on market data that normally reflect a combined value of land and all improvements. Most property valuation methods presume that land is freehold, and that developed real estate markets are present. Neither of these assumptions can be applied to China. Although there are practices that separate land and building values for tax purposes, the divisions are generally based on crude assumptions. How can assessors modify the existing (or invent new) valuation techniques to accommodate these special Chinese conditions?

More important, leasehold value is highly sensitive to the lease term and conditions, both of which can vary significantly from one case to another. At this moment, time-tested mass appraisal techniques for assessing large numbers of leasehold sites do not exist. Do these issues imply that property assessment for tax purposes under the Chinese leasehold system requires a case-by-case approach? If so, do local governments have the capability to carry out such detailed property appraisals for the collection of the new property tax? The Chinese government must find ways to deal with these practical matters if it decides to tax leasehold rights as private property.

It is also extremely important to educate would-be taxpayers and public officials about the distinctions between freehold and leasehold systems. Lessees must recognize that they possess only the leased land rights that are not designed to last in perpetuity. If the rights and obligations of both the state and lessees are not clearly delineated, taxing leasehold rights as if they were freehold could complicate the implementation of future land and tax policy. For example, in Canberra, Australia, and Israel, lessees are requested to pay the entire leasehold value up front, and thereafter they pay an annual property tax (or rates in Australia) for leasing public land. Lease terms in both cases are long and renewable—99 years in Canberra and 49 years in Israel with four automatically renewable terms totaling 196 years.

This method of collecting leasehold charges and taxes is tantamount to the payment system for land in countries where land is freehold. Due to this similarity, lessees have developed the perception that land is privately owned (Hong and Bourassa 2003). This view, albeit legally a fiction, has engendered the expectation that any government’s attempt to exercise its rights as the landowner to retake land for public uses or to demand additional payments from lessees for enlarging or extending land use rights would constitute an infringement on private property.

This expectation has added conflict to government efforts to redistribute land and land value between private landholders and the state on behalf of the public. As Neutze (2003) argued, had the Canberra government provided enough public education about its leasehold system, it would have spared the Australian capital from many intractable disputes over land ownership.

The Chinese government has no immediate plan to give fee simple deeds to private landholders. Thus, if local governments continue to collect all leasehold charges up front and then levy the new property tax on both land and buildings, they may be at risk of creating the same mistaken expectations, that is, that land is privately owned. This may put the government and lessees at odds with each other when there is a later need to reallocate land from private to public uses. Designing a real property tax that will not add more complications to the already unsettling land tenure system is a critical task that policy makers should not overlook.

Land tenure reform is a long, controversial process, however, and the Chinese government would be ill-advised to delay the implementation of the new property tax system until land reform is completed. What the government needs is a transition system in which property tax reform can proceed as planned without interfering with its endeavors to restructure land ownership. Establishing a land rent system seems to be an option.

Land Rent System

Under a land rent system, leasehold charges would be paid in the form of an annual land rent, not a one-time leasing fee. Local land bureaus could continue to assign land use rights by public auction, but the bidding would be to determine the amount of annual land rent. Similarly for lands that were assigned to state agencies administratively, users would pay their conveyance fee for transferring land rights to other private parties in annual installments, which would be equivalent to the yearly rental payments. The land rent system has pros and cons (see Hong 2004 for a detailed discussion); four important advantages are discussed here.

First, collecting a land rent is the most straightforward way to characterize the landowner-tenant relationships between the state and lessees. More important, requesting lessees to make their rental payments annually would serve as a constant reminder of their leasehold relationships with the state.

Second, if leasehold charges were paid in annual installments, local officials would no longer be able to generate a large amount of cash instantly to cover short-term fiscal shortfalls. This in turn may lower their incentive to lease land rapidly—a major malady of the current land leasing system.

Third, research using the input-output (I/O) technique and the 1997 I/O Table of China found that collecting land rent could facilitate the transition to the new property tax system (Hong 2004). Had the central government required all land users to pay an annual land rent in 1997, rental income would have added 29.8 billion yuan (US$3.6 billion) to the government treasury, representing a 2.9 percent increase in total tax revenue (see Table 1). This revenue increase would represent a net gain over estimated tax revenue losses under the proposed property tax reform.

The land rent system, however, may generate a cash flow problem for local governments. When leasing fees are deferred and paid by lessees in annual installments, fewer funds would be immediately available for local governments to cover public expenditures. To resolve this problem, local jurisdictions may borrow money from the central government or other financial intermediaries, using perhaps the future land rent collections as collateral. Loans would then be repaid in annual installments by funds gathered from yearly rental payments made by lessees.

Had the government decided to keep the total tax revenue approximately the same, it could have set the new property tax rate at 4 percent, which is the same as the Building Tax rate for personal dwellings rented at market prices, and then discounted the land rent by as much as 47 percent (see Table 1). With a reasonable tax rate and a substantial reduction on rental payment, taxpayers would be less resistant to the reform.

Table 1 also shows several possible combinations of rent level and property tax rate to produce a revenue-neutral shift. If the government were to increase the new property tax rate to deepen the tax reform, it could lower the rent level to avoid antagonizing taxpayers. This approach would provide local governments with an array of options to adopt the new property tax system in stages and at a pace that suits their economies.

Fourth, the proposed land rent system could keep future tenure choices open. If the sociopolitical sentiment of the country favors public leaseholds, local governments could continue to levy the land rent and property tax at the ratio that matches local needs. Subsequent adjustments to the rent-tax ratio could also be made when new circumstances arise.

If central authorities, in response to popular demand, were to grant fee simple deeds to all lessees, it could order local governments to phase out the collection of land rent and raise the new property tax rate accordingly. As shown in Table 1, directing the reform toward either path would not create adverse effects on local government budgets.

This analysis shows that choices available to the Chinese government are not limited to privatizing land ownership and relying solely on real property taxation to recoup land value. Undeniably, the Chinese government may eventually choose to do just that because it is indeed an option, but there are many other possibilities as well. Why, then, should the government make such a decision now, when there may be other viable alternatives that can keep all options open? Recognizing that there are many choices could unleash the creative powers of policy makers and scholars to imagine a unique Chinese system to capture land value.

References

Director General of State Statistics Bureau. 1999. Input-output table of China, 1997. Beijing: China Statistical Press.

Hong, Yu-Hung. 2003. The last straw: reforming local property tax in the People’s Republic of China. Working paper. Cambridge, MA: Lincoln Institute of Land Policy.

_____. 2004. Assessing property tax reform in China. Report for the David C. Lincoln Fellowship Program. Cambridge, MA: Lincoln Institute of Land Policy.

_____ and Steven C. Bourassa. 2003. Why public leasehold? Issues and concepts. In Leasing public land: Policy debates and international experiences, Steven C. Bourassa and Yu-Hung Hong, eds., Cambridge, MA: Lincoln Institute of Land Policy.

Neutze, Max. 2003. Leasing of publicly owned land in Canberra, Australia. In Leasing public land: Policy debates and international experiences, Steven C. Bourassa and Yu-Hung Hong, eds. Cambridge, MA: Lincoln Institute of Land Policy.

Yu-Hung Hong is a fellow of the Lincoln Institute of Land Policy. This article reports on selected preliminary results of his research funded by the David C. Lincoln Fellowship in Land Value Taxation.

We suggest that a better approach is to link IH to the ongoing process of rezoning—either by the developer or by local government initiative—thus treating it explicitly as a vehicle for recapturing for public benefit some part of the gain in land value resulting from public action.

Para que los procesos de planificación puedan resolver los temas candentes de la actualidad, tales como el cambio climático, la congestión de tráfico y la justicia social, los planes tienen que realizarse a la escala apropiada, tienen que promulgar herramientas de implementación apropiadas y tienen que hacerse cumplir por medio de una autoridad legítima. En otras palabras, nuestra capacidad para resolver los desafíos críticos depende de las bases legales e institucionales de la planificación.

En los Estados Unidos, la responsabilidad de sentar estas bases de planificación recae en los estados, los cuales a su vez han delegado la mayor parte de la autoridad sobre el uso del suelo en los gobiernos locales. En Europa, las bases de planificación se establecen en cada país, cuyos sistemas de planificación frecuentemente cuentan con planes nacionales y regionales, como también un mosaico de planes locales. Para mejor o peor, estas bases institucionales han enmarcado el proceso de planificación a ambos lados del océano Atlántico en la mayor parte del período de posguerra. Pero a medida que el tamaño de los desafíos de planificación sigue en aumento, y el descontento con el status quo sigue creciendo, varios estados y naciones europeas han comenzado a experimentar con metodologías de planificación nuevas e innovadoras.

La oportunidad para explorar y debatir estos temas congregó a académicos, profesionales, estudiantes y otros en Dublín, Irlanda, en octubre de 2012, en un seminario de dos días de duración patrocinado por el Lincoln Institute of Land Policy y organizado por la Escuela de Geografía, Planificación y Política Medioambiental de University College, Dublín y el Centro Nacional para el Crecimiento Inteligente de la Universidad de Maryland. Llevado a cabo en la histórica Newman House ubicada en St. Stephen’s Green, se presentaron ponencias sobre planificación en los Estados Unidos y Europa, y casos de estudio de cinco estados de los EE. UU. y cinco naciones europeas. Cada presentación fue seguida de un comentario por parte de un funcionario de alto nivel del estado o nación correspondiente (ver el recuadro 1).

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Recuadro 1: Presentaciones efectuadas en el Seminario sobre planificación por parte de estados y naciones/estados realizado en Dublín en octubre de 2012

Bierbaum, Marty
Plan de desarrollo del estado de Nueva Jersey

Faludi, Andreas
La europeización de la planificación y el papel de PEOT

Fulton, Bill
Planificación para el cambio climático en California

Galland, Daniel
El marco nacional de planificación espacial de Dinamarca

Geppert, Anna
Planificación espacial en Francia

Grist, Berna
La estrategia nacional espacial de Irlanda

Knaap, Gerrit
PlanMaryland: Un trabajo que está en vías de realizarse

Lewis, Rebecca
Plan de desarrollo del estado de Delaware

Needham, Barrie
La estrategia espacial nacional de los Países Bajos

Salkin, Patricia
Marcos de planificación en los Estados Unidos y el papel del gobierno federal

Seltzer, Ethan
Planificación del uso del suelo en Oregón: El mosaico institucional y la lucha por llegar a escala

Tewdwer-Jones, Mark
Planificación nacional en el Reino Unido

Para obtener más información sobre el seminario, visite el sitio web del programa: http://www.ucd.ie/gpep/events/seminarsworkshopsconferences/natplansymp2012

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Un marco de planificación espacial en Europa

En Europa, la planificación está regida por una serie de tradiciones y estructuras de gobierno (Faludi 2012). Algunas naciones europeas tienen estructuras de gobierno «unitarias», en las que la autoridad sobre el uso del suelo recae en última instancia en el gobierno nacional. Italia y España tienen estructuras «regionales» de gobierno, en las que la autoridad sobre el uso del suelo es compartida constitucionalmente entre el gobierno nacional y los gobiernos regionales. Austria, Bélgica y Alemania tienen estructuras de gobierno «federalistas», en las que las funciones particulares sobre el uso del suelo se distribuyen entre el gobierno nacional y los gobiernos regionales y locales. Dentro de estos marcos operativos ha surgido una variedad de culturas y tradiciones de planificación: “amenagement du territoire” en Francia; “town and country planning” en el Reino Unido; “Raumordnung” en Alemania; y “ruimtelijke ordening” en los Países Bajos. Si bien estos términos generalmente tienen la misma connotación que la «planificación urbana» en los Estados Unidos, existen diferencias importantes, sutiles y defendidas con vehemencia.

La expresión utilizada para la planificación urbana en la Unión Europea es «planificación espacial» (Comisión Europea 1997, 24).

“La planificación espacial se refiere a los métodos utilizados en general por el sector público para influir sobre la distribución futura de actividades en el espacio. Se adopta con el fin de crear una organización territorial más racional de los usos del suelo y vincularlos para equilibrar las demandas de desarrollo inmobiliario con la necesidad de proteger el medio ambiente y alcanzar objetivos sociales y económicos.

“La planificación espacial adopta medidas para coordinar el impacto espacial de otras políticas sectoriales, alcanzar una distribución más pareja de desarrollo económico entre regiones que lo que crearían de otra manera las fuerzas del mercado, y regular la conversión de suelos y el uso de las propiedades.”

La Unión Europea no tiene autoridad para elaborar planes espaciales, pero influye de manera directa en sus resultados por medio de iniciativas de desarrollo regional, directivas medioambientales y financiamiento estructural y de cohesión. Este objetivo está articulado en la Perspectiva Europea de Ordenación Territorial (PEOT) firmada en 1988 por los ministros responsables de la planificación espacial en los estados miembros, y por los miembros de la Comisión Europea responsables de las políticas regionales (Faludi 2002).

En general se acepta que la planificación espacial moderna en el contexto europeo incluye la planificación nacional, regional y local, donde los planes nacionales proporcionan estrategias amplias de desarrollo y pautas para los planes realizados en los niveles de gobierno menores; los planes regionales integran el desarrollo físico con las políticas sociales, económicas y medioambientales, pero sin especificar sitios individuales; los planes locales son específicos para ciertos lugares y definen los elementos físicos y de diseño urbano de la construcción. Aunque ninguno de los marcos de planificación de las naciones miembros se ajusta perfectamente a este ideal jerárquico, la PEOT ha influido en la actividad de planificación de cada una de las naciones.

La PEOT se basa a su vez en tradiciones europeas de planificación muy arraigadas que se remontan a la Segunda Guerra Mundial, cuando el desarrollo nacional o los planes de reconstrucción sin duda fueron necesarios para llevar a cabo las restauraciones de posguerra. Muchas naciones europeas siguen teniendo planes nacionales de desarrollo y estrategias nacionales espaciales complementarias. Pero la influencia e importancia de estos planes ha disminuido paulatinamente desde la reconstrucción. En la última década en particular, las naciones que antes se caracterizaban por un compromiso ambicioso y amplio con la planificación, como Francia, Dinamarca y el Reino Unido, no han adoptado planes nacionales nuevos y han puesto mayor énfasis en planes regionales y locales.

Estrategias y marcos espaciales nacionales europeos

Francia

Si bien Francia es una nación-estado unitaria y centralizada, el gobierno nacional nunca ha desempeñado un papel de liderazgo en la planificación estatal. Por el contrario, la responsabilidad de la planificación espacial se transfirió oficialmente a los gobiernos regionales y locales por medio de reformas descentralizadoras adoptadas en 1982 y 2003 (Geppert 2012). Aun cuando sigue habiendo coordinación entre los gobiernos de distintos niveles, este proceso genera con mayor frecuencia estrategias de inversión conjunta más que visiones espaciales compartidas u objetivos comunes. Antes que la mayoría de las naciones restantes, el gobierno nacional francés comenzó a centrarse menos en la planificación espacial y más en políticas sectoriales, dejando los temas espaciales para los niveles más bajos de gobierno.

Dinamarca

La planificación en Dinamarca comenzó históricamente con un marco de planificación nacional integral (Galland 2012). En las últimas dos décadas, sin embargo, como consecuencia de factores políticos y económicos interrelacionados, el papel del gobierno nacional y de los gobiernos locales y regionales con respecto al uso del suelo en el territorio nacional ha transformado significativamente el alcance, estructura y comprensión de la planificación espacial danesa (figura 1).

Como consecuencia de esta reforma, varias responsabilidades de planificación espacial han sido descentralizadas al nivel local, mientras que la planificación regional para el Gran Copenhague y otras funciones sectoriales han sido transferidas al nivel nacional. Además, la reciente abolición de los gobiernos de condado ha aumentado el riesgo de una planificación espacial descoordinada y ha disminuido coherencia entre las diversas instituciones e instrumentos de la política de suelo.

Países Bajos

Los Países Bajos tienen quizás la tradición más larga y conocida de planificación espacial nacional, y sus planes incluyen tanto políticas industriales como políticas espaciales detalladas (Needham 2012). Por varias décadas, los planes nacionales holandeses influyeron sobre la distribución de la población y las actividades del país. En las primeras décadas después de la Segunda Guerra Mundial, todos los niveles de gobierno —tanto nacional como provincial y municipal— tendieron a trabajar conjuntamente en la planificación espacial. En la década de 1990, sin embargo, comenzaron a distanciarse. En respuesta, el gobierno nacional aumentó su poder sobre los gobiernos locales (una forma de centralización) y al mismo tiempo redujo sus propias ambiciones de formular una estrategia espacial nacional (una forma de descentralización). La estrategia espacial nacional más reciente deja de lado expresamente algunas tareas de planificación llevadas a cabo anteriormente por el gobierno nacional.

Reino Unido

A comienzos del siglo XX, el Parlamento del Reino Unido renunció a su autoridad de planificación; en su lugar, los poderes de intervención, el desarrollo de nuevas viviendas estatales y la regulación del desarrollo de viviendas privadas se transfirieron a los gobiernos locales (Tewdwr-Jones 2012). En las décadas siguientes, el gobierno central volvió a adquirir nuevos poderes de planificación como consecuencia de la Segunda Guerra Mundial y el interés nacional por reconstruir las ciudades, la infraestructura y la economía. Desde 1945, el gobierno central ha retenido estos poderes, pero a su vez ha permitido que las autoridades locales vigilen la implementación del sistema de planificación.

Estos poderes han cambiado en forma drástica en los últimos 70 años. Después de 1999, la autonomía de Gales, Escocia e Irlanda del Norte fragmentó aún más el significado del término «nacional» en términos políticos y de planificación. En la década del 2000, el impulso hacia la planificación espacial regional en Inglaterra también volvió a equilibrar los temas de planificación nacionales hacia los intereses subnacionales. Como resultado de esta tendencia a la transferencia de poderes, descentralizadora, regionalista y localista de los últimos 20 años, es cada vez más cuestionable que el Reino Unido posea algo que se parezca a un sistema nacional de planificación, puesto que tanto ha cambiado espacialmente y en el ámbito de las instituciones y procesos políticos en distintas partes del país.

Irlanda

Irlanda es una de las pocas naciones europeas que no sigue la tendencia hacia la descentralización de la autoridad de planificación, en parte debido a que su sistema de planificación se ha descentralizado completamente (Grist 2012). Siguiendo en gran medida las pautas de la Unión Europea, Irlanda ha adoptado una serie de planes de desarrollo nacionales, de los cuales el más reciente es el Plan de Desarrollo Nacional 2007-2013. Basándose en las recomendaciones del plan nacional anterior, el Departamento de Medio Ambiente, Comunidad y Gobierno Local desarrolló en 2002 la Estrategia Espacial Nacional de Irlanda. Esta estrategia identificó cruces y centros geográficos críticos, y articuló planes para descentralizar la actividad económica desde Dublín al resto de la isla.

Luego de un período turbulento que vio el surgimiento y caída del Tigre Celta, al que se culpó en parte de las políticas laxas de planificación local relacionadas con un incentivo excesivo del desarrollo inmobiliario junto con corrupción política, el país está reconsiderando ahora dicha estrategia, fortaleciendo las pautas de desarrollo regional e imponiendo nuevos requisitos de coherencia sobre los gobiernos locales.

Bajo el nuevo régimen de planificación basado en la evidencia, los planes locales tienen que ajustarse mucho más a las pautas de planificación regional, y los planes locales tendrán límites en cuanto a la cantidad de desarrollo inmobiliario que puedan permitir. En la actualidad se está revisando el papel futuro de la Estrategia Espacial Nacional, mientras que el nuevo gobierno electo después del crash inmobiliario en Irlanda examina las políticas de planificación y desarrollo que predominaron durante la reciente burbuja inmobiliaria.

El gobierno federal y el uso del suelo en los Estados Unidos

El gobierno federal de los Estados Unidos, como la Unión Europea, no tiene la autoridad para planificar y administrar el uso del suelo, pero tiene una gran influencia sobre la ubicación y naturaleza de los patrones de desarrollo (Salkin 2012). Además de los miles de millones de dólares que asigna para infraestructura de transporte, servicios sociales, desarrollo y revitalización, el gobierno federal es dueño de más de 275 millones de hectáreas en todo el país. Las regulaciones federales también tienen una gran influencia. Las leyes de aire limpio y agua limpia, por ejemplo, no imponen por sí mismas restricciones al uso del suelo, pero al establecer metas para la calidad del aire ambiente y la carga de nutrientes en ríos, lagos y arroyos, influyen profundamente en los planes y regulaciones del uso del suelo y en los patrones de desarrollo inmobiliario de los gobiernos locales.

Más recientemente, la administración del presidente Barack Obama ha establecido un nuevo canal de influencia federal sobre la planificación y regulación del uso del suelo. Si bien el gobierno federal continúa absteniéndose de intervenir en forma directa en el uso del suelo local, el Secretario de Transporte, el Secretario de Vivienda y Desarrollo Urbano y la Agencia de Protección Ambiental han firmado un memorando de entendimiento que estableció la Sociedad de Comunidades Sostenibles. Para promover seis principios de las comunidades sostenibles, estas secretarías y agencias han lanzado una serie de programas nuevos de subvenciones, como las Subvenciones para la Planificación de Comunidades Sostenibles Regionales. Para poder acceder a esta subvención, los gobiernos locales tienen que formar consorcios interorganizacionales que incluyan a la Organización de Planificación Metropolitana (MPO por su siglas en inglés), la ciudad central, la mayoría de los gobiernos locales y representación de grupos cívicos y de defensa de los intereses medioambientales.

Si bien los propósitos explícitos de estas subvenciones novedosas incluyen la revitalización urbana, la protección ambiental, la justicia social y el desarrollo sostenible, un propósito igualmente importante es establecer nuevas relaciones interinstitucionales al promover una mayor inclusión y participación. La Planificación de Comunidades Sostenibles Regionales ha avanzado ahora en 74 áreas metropolitanas del país. Queda por ver, sin embargo, si los incentivos ofrecidos a los gobiernos locales para que se involucren en la planificación regional son suficientes para que participen en la implementación de planes regionales sin intervención adicional a nivel estatal.

Planes estatales y marcos de planificación estatal

Todos los estados habían establecido un marco para la planificación y regulación local en la década de 1920 y 1930, basándose en las leyes de planificación normalizada y zonificación preparadas por el Departamento de Comercio de los Estados Unidos. A pesar de las expectativas de un amplio cambio institucional, caracterizado por la «Revolución silenciosa» de hace más de 40 años, la mayoría de los estados se limitan a autorizar a los gobiernos locales a que planifiquen (Salkin 2012).

Otros, como Oregón, ordenan, revisan y aprueban planes locales (Seltzer 2012). Si los gobiernos locales no presentan planes que cumplen con las metas y pautas de uso del suelo del estado, el estado puede retener fondos de financiamiento o negar autorización para emitir permisos de edificación. Varias instituciones especializadas en el uso del suelo respaldan el sistema de planificación de Oregón, como son una comisión de planificación estatal, una corte de apelaciones de uso del suelo y un gobierno regional electo en forma directa. Aunque su estructura es simple, y es cuestionado frecuentemente en los tribunales y en las urnas, el sistema de Oregón tiene la reputación de ser uno de los más efectivos, si no el más efectivo sistema de uso del suelo en los Estados Unidos (Ingram et al. 2009).

California es uno de los estados que ha delegado una cantidad importante de autoridad para regular el uso del suelo a los gobiernos locales. Aun cuando los proyectos de desarrollo inmobiliario importantes tienen que pasar por un proceso complejo de mini Ley Nacional de Política Ambiental, y la Comisión Costera de California fuera una institución estatal innovadora en su época, la planificación local sigue siendo predominante. Pero en 2008 el estado adoptó una nueva y ambiciosa iniciativa para enfrentar el cambio climático: el proyecto de ley 375 del Senado, que exige a las organizaciones de planificación metropolitanas que desarrollen planes de transporte y de uso del suelo que cumplan con metas de emisión de gases de invernadero. La dificultad estriba en que son los gobiernos locales, no las organizaciones de planificación metropolitanas, los que tienen la autoridad sobre el uso del suelo en California. Las organizaciones de planificación metropolitanas y los gobiernos estatales están brindando incentivos a los gobiernos locales para adoptar planes compatibles con los planes metropolitanos, pero no está claro si la combinación de incentivos financieros y de otro tipo es suficiente para animar a los gobiernos locales a que sigan los planes de las organizaciones de planificación metropolitanas (Fulton 2012).

En el otro extremo, no son comunes en los Estados Unidos los planes que abarcan todo el estado. En respuesta a los requisitos federales, la mayoría de los estados tienen planes de transporte, y algunos tienen planes de desarrollo económico, planes para desarrollar la fuerza laboral o planes de acción climática, pero sólo cinco estados tienen planes estatales de desarrollo inmobiliario: Connecticut, Delaware, Maryland, Nueva Jersey y Rhode Island.

Nueva Jersey y Delaware tienen quizá los planes estatales más y menos conocidos, respectivamente. Nueva Jersey adoptó su Ley de Planificación Estatal en 1985, que exige que la comisión de planificación estatal desarrolle, adopte e implemente el Plan de Desarrollo y Revitalización del Estado de Nueva Jersey (Bierbaum 2012). El proceso de planificación incluyó un complejo procedimiento de aceptación conjunta para identificar y resolver las diferencias entre el gobierno estatal y los gobiernos locales. Desde su adopción, la influencia y atención recibida por el plan ha tenido altibajos a lo largo de las sucesivas administraciones estatales. Recientemente, la administración del Gobernador Chris Christie ha elaborado un plan estatal completamente nuevo, enfocado principalmente al desarrollo económico, pero sin el proceso de aceptación conjunta. La comisión de planificación estatal, sin embargo, no ha adoptado todavía dicho plan.

El plan de Delaware es mucho menos conocido y mucho menos controvertido que el plan de Nueva Jersey, y tanto el contenido como el proceso son menos complejos (Lewis 2012). El plan de Delaware comprende cinco designaciones de suelo generales (figura 2). El incentivo de cumplimiento por parte de los gobiernos locales recae en la coordinación estatal-local y se apoya en la amenaza de retener el financiamiento de infraestructura (sobre el cual el estado tiene una participación significativa). Como el estado no comenzó a recabar datos de seguimiento sobre los patrones del desarrollo inmobiliario hasta 2008, y no mantiene datos espaciales sobre los gastos estatales, es difícil discernir el impacto de esta estrategia sobre el desarrollo y la coherencia entre los gastos estatales y el mapa estatal de planificación.

Maryland es el único estado que está a la altura de California y Oregón en su adopción de estrategias nuevas y ambiciosas de planificación, que se asientan en su larga tradición de liderazgo en el uso del suelo y políticas medioambientales (Knaap 2012). Maryland estableció su primera comisión de planificación estatal en 1933 y apareció en la escena nacional en 1997, cuando adoptó su revolucionaria Ley de Crecimiento Inteligente y Conservación de Barrios. Desde 1997, el factor más importante de la estrategia de Maryland ha sido el uso de inversiones estatales para brindar incentivos al crecimiento inteligente. Mucho antes de que alguien pronunciara las palabras «crecimiento inteligente» en Maryland, sin embargo, el estado ya había adoptado en 1959 legislación que requería al Departamento de Planificación de Maryland que elaborara y adoptara un plan de desarrollo estatal. Más de 50 años después, la administración del Gobernador Martin O’Malley cumplió finalmente con dicho requisito.

El 19 de diciembre de 2011, el Gobernador O’Malley firmó el PlanMaryland, el primer plan de desarrollo estatal nuevo en muchos años en los Estados Unidos (figura 3). Pero a diferencia de los planes estatales de Nueva Jersey o Delaware, el plan de Maryland es más procedimental que sustantivo. Específicamente, establece seis categorías de designación de planes y, siguiendo una larga tradición en Maryland, permite a los gobiernos locales asignar suelo para cualquiera de estos usos designados. Las agencias estatales destinarían entonces fondos del programa para cada una de estas áreas. Desde que el plan fue firmado, las agencias estatales han estado desarrollando y perfeccionando los planes de implementación, y los gobiernos locales han comenzado sólo recientemente a presentar planes para su certificación estatal.

Conclusión

Los marcos de uso del suelo y planificación espacial varían mucho a lo largo de Europa y los Estados Unidos. A ambos lados del Atlántico, los gobiernos locales cargan con la mayor parte de las responsabilidades, sobre todo en lo que se refiere a la comunidad, los barrios y los detalles específicos de cada sitio. Pero el papel de las regiones, los estados y las naciones sigue siendo importante.

En contraposición con su reputación en los Estados Unidos, la planificación en muchas naciones europeas se ha descentralizado en gran medida. Pocas naciones europeas cuentan con planes nacionales integrales que guían las inversiones nacionales y las regulaciones sobre el uso del suelo. De hecho, la planificación en Europa, si bien mucho más integradora de detalles sectoriales que en los Estados Unidos, comparte muchas características en su política con su contraparte en los Estados Unidos. Una excepción interesante es Irlanda, que continúa expandiendo el papel del gobierno nacional y los gobiernos regionales, parcialmente como respuesta al período reciente de extrema descentralización de planificación que no tuvo en cuenta ni implementó la estrategia nacional. Irlanda es también uno de los pocos países que se adhiere a los principios amplios de planificación espacial formalmente adoptados por la Unión Europea.

En los Estados Unidos, ni la planificación estatal del desarrollo inmobiliario ni la aprobación estatal de planes locales son prácticas que estén creciendo con rapidez. En efecto, a pesar del éxito demostrado por el programa de Oregón y del creciente reconocimiento de la necesidad de integración horizontal y vertical de políticas, la planificación del uso del suelo en los Estados Unidos sigue siendo un asunto marcadamente local. Si bien tanto el estado de California como el gobierno federal están proporcionando incentivos financieros para la coordinación intergubernamental y la planificación a escala metropolitana, no está nada claro si únicamente con incentivos se podrán lograr los cambios necesarios en los planes y regulaciones locales para generar ajustes significativos en el consumo de suelo, el comportamiento del tráfico y el acceso a oportunidades.

Hacen falta nuevos enfoques para que las ciudades y áreas metropolitanas sean más productivas, equitativas y ecológicamente sostenibles a la luz de los desafíos que se nos presentan en el futuro. Si estos problemas no se pueden resolver adecuadamente, es posible que otros tipos de experimentos de reforma de planificación institucional se hagan más comunes en muchos países.

Sobre los autores

Gerrit Knaap es profesor de Estudios urbanos y planificación, director del Centro Nacional de Crecimiento Inteligente y vicedecano de la Escuela de Arquitectura, Planificación y Preservación de la Universidad de Maryland.

Zorica Nedovic-Budic es profesora de Planificación espacial y sistemas de información geográfica (SIG) en la Escuela de Geografía, Planificación y Política Medioambiental de University College, Dublín.

Referencias

Ministerio del Medio Ambiente de Dinamarca. 2006. The 2006 national planning report–In brief. Copenhagen. http://www.sns.dk/udgivelser/2006/87-7279-728-2/html/default_eng.htm

Comisión Europea. 1997. The EU compendium of spatial planning systems and policies. Luxemburgo: Office for Official Publications of the European Communities.

Faludi, Andreas. 2002. European spatial planning. Cambridge, MA: Lincoln Institute of Land Policy.

Ingram, Gregory K., Armando Carbonell, Yu-Hung Hong y Anthony Flint. 2009. Smart growth policies: An evaluation of programs and outcomes. Cambridge, MA: Lincoln Institute of Land Policy.

The urban landscape typical of many small and medium-sized Italian cities is filled with historical richness but also with more recent incoherent and contradictory development patterns. As a result, planners are actively adopting new ideas and theories about urban planning and are studying policies and practices about open space from colleagues in other countries.

The concept of quality of life is a common theme in European planning programs seeking to improve the image and functionality of neighborhoods. This idea normally represents a complex set of values to describe socio-economic conditions, but it can also be a useful instrument to set policies, implement strategies, improve landscapes and preserve open spaces. As the quality of life in many Italian cities has improved over the past ten years, attention to the needs of urban settlements has shifted from the central historical districts to the peripheries. Smaller suburban and rural communities now are demanding better living conditions and enhanced local identity through broad-based citizen participation in urban planning and design projects.

England, France and the United States, in particular, provide inspiration to Italian planners and public officials concerned about how to better integrate urban planning and the natural landscape. The loss of what had been an important cultural tradition in Italy has resulted in a more simplified and standardized urban architectural language and a lack of consideration for open space as either a valuable natural resource or an opportunity for economic and cultural growth.

The European Union (EU) is also influencing important reforms in many aspects of governance and public administration. For example, Italy’s regions, which have long been the dominant level of local government, are managing their territories with more sophisticated planning techniques based on the principles of sustainable development. At the same time, recently passed national fiscal and land taxation reforms are helping the municipalities create new resources and policies for housing rehabilitation and for public services and infrastructure, such as schools, parks and sports facilities. For example, the Regional Government of Tuscany, through its 1995 Urban Planning and Development Act, has begun a number of institutional and administrative changes, including new planning tools and public grants that have encouraged urban regeneration projects and private-public partnerships to support their costs.

The Center for Urban Research (CRU) of the Department of Architecture at the University of Ferrara has been involved in many projects promoted by both the regional and the national governments. Most address both training programs for public officials and private professionals and initiatives to disseminate “best practices” in urban planning and land use. In the last few years, the Center has consulted with many municipalities, including Ferrara in the Emilia-Romagna region and Massa Marittima in Tuscany. While recognizing the different histories and needs of these two cities, the Center is helping their municipal authorities find new opportunities for economic and social development and for enhancing their quality of life.

Ferrara

Located between Venice and Bologna in the Po Valley close to the river delta, Ferrara currently has about 120,000 inhabitants. The city’s main development can be dated to the medieval period, but important transformations were introduced during the Renaissance by the Duke d’Este. Ferrara’s distinctive network of streets, squares, gardens and buildings owe their design to the Duke, who in 1492 implemented the so-called “Addizione Erculea,” which can be considered the first modern urban plan in Europe.

The basic traits of the urban fabric have not changed much since then. The historical center, enclosed inside a system of walls, is still well preserved, and bicycles and pedestrians still outnumber cars. During the winter the fog often softens the buildings, giving the city a magical appearance, and the pace of life slows down as in ancient times. Ferrara also has strong traditions with agriculture and water, including the Po River, the delta and lagoons along the coast, and the extensive network of drainage and irrigation canals.

The city’s beauty and sense of magic have influenced artists since the Renaissance, and Ferrara is home to one of the oldest and finest Italian universities, which is small but exerts an influential role in city life. At present, most jobs in the district are connected with government functions, education, research and design, medical services, agriculture-related industries and tourism. Ferrara’s relative isolation with respect to the Italian “grand tour” has enabled the city to develop balanced cultural tourism policies over the years.

The Barco, a public park designed for the Duke d’Este as a private hunting area, offers the city an interesting opportunity to link urban planning and open space development. This semi-rural landscape is enclosed by the town walls, the Po River and a large industrial petrol-chemical factory. Supported by a special regional grant for urban rehabilitation, CRU is beginning research and planning for this project, which will also involve private sector contributions to help realize this recreational and open space resource for the city.

Another important local government goal is to use the urban environment and surrounding landscape as elements to improve economic growth. The project involves extending the traditional idea of cultural tourism beyond the historic city to include a network of small rural communities. Visitors to Ferrara and the Po River Delta Park will thus have the opportunity to discover ancient villas, marvelous natural landscapes and archeological settlements, as well as inns, restaurants and other amenities throughout the region. At the same time, young people who do not want traditional jobs in farming and fishing will be able to find different employment opportunities and more reasons to stay in their towns. To accomplish this goal, the project is using a variety of planning strategies, including some EU measures that support economic regeneration through training courses and start-up enterprises.

Foreseeable constraints on the success of this project may come from some local residents who consider agriculture their only possible economic resource, a mentality strongly rooted in history. From the Renaissance until World War Two, people from other, poorer regions of Italy were brought to the Po valley to transform the wetlands into agricultural fields. Many of the original workers have become owners of small and mid-sized farms, and they fear the loss of their rights and traditions, even though the farm produce is of poor quality and it is very expensive to maintain flood controls over the fields. Winning the trust of both urban and rural residents is a challenge that will require collaboration to increase the quality of life of residents throughout the region.

Massa Marittima

Massa Marittima is a small city in Tuscany with a population of about 10,000, sixty percent of whom live in small outlying towns. It also is the capital of the Colline Metallifere (Metal Hills) district, where for almost four thousand years silver, copper, and iron mines have operated continuously. Mining started in the Bronze Age and continued throughout the Etruscan, Roman, and medieval eras, through the Siena domination and the Medici and Lorraine eras, until the present generation of large industrial corporations. Populonia, one of the most important Etruscan industrial centers, is twenty miles from Massa Marittima, and archeological remains are found near the steel center of Piombino.

The free commune of Massa Marittima passed the oldest known mining laws in the Western world at the beginning of the fourteenth century. The natural environment surrounding the city still bears the signs of this economic history. There are large forests, which once produced timber for the mines and fuel for the furnaces, and the countryside is only partially cultivated. A less attractive sign of this heritage are the highly polluting mine waste sites.

Massa Marittima experienced a severe economic and identity crisis when the last operating mine closed ten years ago. The local community was forced to make two major decisions. First, it had to change from being a specialized economy based on difficult but secure jobs and dependence on the mining company, along with a very protective welfare system, to becoming a diversified, dynamic and flexible economy where individual enterprise is central. Second, the residents had to accept tourism as the new main source of employment to take advantage of the most important local resources: the region’s cultural heritage and its natural environment.

As in the case of Ferrara, the relative isolation and the late emergence of a tourism-based economy helped Massa Marittima work out more balanced strategies and policies for its future. In this case the opportunity was offered by the national ministries of Heritage and Environmental Policies to develop a national park for the Colline Metallifere district. The Massa Marittima city government asked the CRU to research this program using national and EU plans and grants. The core concept is an open-air museum of local history, which could help preserve the natural environment and also create new jobs for the young people, who have few employment alternatives.

One of the most important tasks in managing the new national park is to create a regional network of economic activities, facilities and public services related to both cultural tourism and the concept of environmentally sustainable development, based on EU economic measures. By sharing these resources, the towns can reduce local competition and maximize the benefits to all residents. The core of the CRU’s proposal is to create new opportunities for cooperation among different levels of public administration and public-private partnerships to promote and finance projects of public interest, such as infrastructure, sports facilities, urban and rural parks, and other resources. A final decision on a national grant to fund the Massa Marittima project is expected in March from the Ministry of Public Works.

These two case studies represent the kinds of complex planning problems that are on the agendas of many local governments throughout Italy. Learning from the best practices and examples of other countries is one of the methods that Italian planners and researchers are using to implement innovative approaches to planning the future of Italy’s historic landscape.

____________ Francesca Leder is professor of urban theories in the Department of Architecture at the University of Ferrara. She was a visiting fellow of the Lincoln Institute during the fall of 1999 to study American planning practices regarding urban parks and open space.

Property taxes based on market value have many features that recommend them as a source of local government revenue. They promote visibility and accountability in public spending by providing property owners with a means of evaluating the costs and benefits of local government services. They can provide stable, independent local revenue that is not at the mercy of state budget surpluses or deficits. They are now considered to be proportional or even mildly progressive, in contrast to earlier economic views that presumed the tax to be regressive.

Against these strengths, the greatest challenge to a value-based property tax is political: taxpayers’ strong and completely understandable resistance to sharp increases in tax payments that reflect rising markets but not necessarily rising incomes with which to pay the tax increases. The best known and most dramatic response to this situation was rejection of the value-based tax system in California in 1978. When voters approved Proposition 13, they changed the tax base to the value of the property at the time of purchase or construction, with a maximum 2 percent annual inflation adjustment. For property held by the same owner since 1978, the inflation adjustment is applied to its value on the 1975–1976 tax roll.

This change has greatly altered California’s fiscal landscape. It has restricted the role of local governments, centralized service provision and decision making, and redistributed the tax burden from long-time residents to new property owners. Local governments now have an incentive to seek sales tax revenue by encouraging large retail establishments, such as auto malls, in what has been termed the “fiscalization of land use.” Can the property tax achieve greater stability and predictability without such drastic social and governmental costs? Table 1 illustrates the wide range of residential property tax levies in large metropolitan areas, a factor that presents additional challenges to formulating uniform policies or practical recommendations.

A Lincoln Institute seminar in April 2005 brought together public finance and assessment officials, policy analysts and scholars to consider alternate approaches to the recurrent problems that volatile real estate markets pose for value-based property taxes.

Problems Related to Market-Value Assessment

Discussion began with the incontrovertible observation, “Taxpayers do not like unpredictability.” In theory, reductions in tax rates could balance increases in property prices to maintain stability in actual tax payments under market-value assessments. This approach faces two obstacles. The first and most straightforward is governmental reluctance to reduce tax rates and forego increased revenues when rising values provide a cover for greater tax collection. The second is nonuniform price appreciation in different locations and for different types of property. When one segment of the tax base experiences a disproportionate value change, a corresponding change in the tax rate applied to the entire property class will not maintain level tax collections. California faced both difficulties in the years preceding adoption of Proposition 13. There, rapid residential appreciation was not matched by the lagging commercial sector, and a $7.1 billion state surplus fueled taxpayer cynicism as to the actual need for increased government revenues.

While rapid market shifts are the most challenging source of unpredictable tax changes, taxpayer “shocks” can also be caused simply by long delays in reassessment. Maintaining outdated values on the tax rolls achieves short-term predictability in tax bills, but at the expense of uniformity, accuracy and even legality. Long-postponed reassessments have been followed by tax revolts in many jurisdictions, both in this country and overseas.

Options for Addressing Value Shifts

Seminar participants reviewed the benefits and drawbacks of various measures to address these problems.

Circuit breakers, as their name implies, attempt to reduce a property tax “overload” by providing a refund or credit for taxes that exceed a set percentage of the property owner’s income. When funded by the state and administered as part of the state tax system, they have the dual benefit of protecting local revenue and targeting aid to the most needy taxpayers. At the same time, they require state funding and administration, and taxpayers must file tax returns to order to obtain these benefits. Like all programs that require income information, they sometimes encounter taxpayer resistance and consequent underutilization.

Homestead exemptions, available in most states, reduce assessments on the taxpayer’s primary residence. These exemptions are often granted without regard to taxpayer income, and so are not targeted to the most needy. In predominantly residential communities, this results in a significant loss of municipal revenues unless the tax rate is increased or the tax burden is shifted to other taxpayers. Like all preferential programs for homeowners, these exemptions fail to benefit renters, who bear a portion of the property tax burden and generally are less affluent than homeowners.

Tax deferral measures, often available to low-income elderly homeowners, permit unpaid taxes to accumulate as a lien against the property, to be paid after the residence changes hands. However, the desire to retain property clear of encumbrances has traditionally led homeowners to avoid making use of this option.

“Truth in taxation” legislation requires local governments to take various measures, such as publishing voter information and requesting ballot approval, to treat increases in tax collections in the same manner whether they are the result of growth in the tax base or increases in the tax rate. These enactments seek to counter the temptation to allow rates to remain constant while market values rise, thus increasing taxes and spending without budgetary accountability.

Limitations on annual total property tax collection increases, such as Proposition 2½ in Massachusetts, restrict overall levy growth but do not address unpredictable tax bill changes for specific taxpayers. For example, after several decades of tax stability, Boston taxpayers are now facing assessment shifts that reflect a downturn in the commercial property market with simultaneous explosive growth in certain residential values.

Limitations on annual tax increases for individual properties have enormous political appeal, but face three hazards. First, there is often pressure to make the phase-in period as long as possible, or even longer than possible. Montana provided for an extended 50-year phase-in of new assessments. Second, initial success at limiting increases to a certain percentage may lead to efforts to reduce that limit again. Oklahoma instituted a 5 percent limit and now faces pressure to reduce it to 3 percent. Finally, the “catch-up” of tax assessments when values stabilize or even drop elicits opposition of its own as taxpayers face increasing assessments while property values are flat or falling.

Assessment “freezes” take limitations on increases to their ultimate conclusion, prohibiting any increases despite changes in market values. They often are restricted to specific groups of taxpayers, such as elderly homeowners. Proposition 13 is a type of assessment freeze for all property, with only a 2 percent annual inflation adjustment in the tax base. These measures are in many respects equivalent to the long delays in reassessments that lead to nonuniformity and resistance to new valuations. After values are frozen taxpayers may seek to transfer that value to other family members, as they do in California, or to new residences, as in Texas.

Possible New Approaches

Seminar participants discussed methods for utilizing these and other measures to address the problems of unpredictability while minimizing the problems of inequitable distribution of the tax burden and maintenance of collections. A major distinction was drawn between approaches that moderate tax bill shifts but maintain a market-value base and those that alter assessments themselves. Altering assessments by limiting increases in value can result in situations where owners of similar properties pay very different tax bills. Furthermore, over time properties with average or lesser value appreciation can experience an increasingly greater share of taxes compared with properties that have had larger market increases. As a result wealthier taxpayers are more likely than those of moderate or low incomes to benefit from assessment limits.

To maintain a market-value tax base, with its benefits of uniformity, understandability and administrative efficiency, participants offered suggestions to stabilize rapid increases in tax payments due to significant shifts in the assessment base.

• Eliminating stringent income limitations on eligibility for senior citizen deferral programs, expanding eligibility for circuit breakers and tax deferral, and including such measures in state rather than local tax relief programs would allow more taxpayers to participate. A state could establish a property tax deferral fund to reimburse local jurisdictions for delayed collections.
• Classification and taxation of property according to use is a common means of taxing commercial and industrial properties at a higher rate than residential properties. Changing the class rates to accommodate a shift in the value base can be an appropriate short-term remedy, but may have harmful economic consequences in the long term. In Massachusetts the permitted shift of the share of the total tax levy from residential to commercial property in a municipality is subject to statutory limits. The recent combined acceleration of residential values and downturn of commercial values would have resulted in a substantial shift of taxes to homeowners in the City of Boston and a few other urban centers. Thus the legislature permitted a temporary increase of the share to be borne by the commercial class, at local option, but required a return to an even more limited class share difference within a five-year period.
• Alternative methods of tax collection, such as credit card, direct debit or more frequent payment schedules, may offer greater financial convenience than the more common annual and semiannual billings.
• Shorter periods between revaluations avoid the “sticker shock” that accompanies dramatic shifts and increases in value when reassessment occurs infrequently. Annual reassessments using computer-assisted mass appraisals offer greater stability and uniformity. Tax bills that reflect current values, rather than fractional assessments or outdated figures, are easier for taxpayers to understand.

Even significant increases in assessed value, if relatively uniform across the jurisdiction, do not result in increased taxes for most property owners if the municipal budget requires no additional property tax revenues and the tax rate is reduced proportionately. Better information about the relationship between assessed value and the tax rate will make it less likely that taxpayers will place the blame for their higher taxes on the assessors and their assessments. They may consider instead the adequacy of funding sources available to local governments, the effect of exemptions that reduce the property tax base, and unfunded mandates that require additional local expenditures.

The property tax, as the most important source of autonomous local revenue, often bears the brunt of criticism for the social, economic and fiscal pressures on local communities. Among these pressures are increased costs of new educational, environmental and security requirements, reductions in state and federal assistance, changing demographics and economic conditions, and increasing numbers of exemptions. Attention to these issues can clarify the debate over the role and burden of property taxes and the effectiveness of various tax relief measures.

Improving Educational Resources

There is an urgent need to provide government officials, lawmakers and the public with better information on property tax policy choices. Tax revolts and anti-tax initiatives make compelling news stories, but they should be balanced by concise and accessible information that sheds light on the problem and its solution. There is also a need for periodic research on such topics as:

• The effects over time of assessment and tax limits on the distribution of the property tax burden and on revenue growth, and the full costs to residents of additional fees and charges imposed to offset decreases in local property tax revenues.
• The effectiveness of property tax relief measures, and the distribution of their benefits across taxpayer classes.
• “Tax expenditure” studies to quantify the cost of exemptions, and exploration of the use of payments in lieu of taxes (PILOTS) for tax-exempt nonprofit property owners to pay for municipal services received.
• Assessment quality studies to evaluate both individual assessment equity and the distribution of the tax burden.

The Institute will be collaborating with the seminar participants and others in continuing these discussions and will undertake further research and the preparation of publications on these property tax issues in the coming year.

Joan Youngman is senior fellow at the Lincoln Institute of Land Policy, where she chairs the Department of Valuation and Taxation. Her writings include Legal Issues in Property Valuation and Taxation (1994), and two books co-edited with Jane Malme, An International Survey of Taxes on Land and Buildings (1994) and The Development of Property Taxation in Economies in Transition (2001). She is a contributing author on the property taxation chapter of Jerome R. Hellerstein and Walter Hellerstein’s State and Local Taxation (7th ed. 2001), and writes on property taxation for State Tax Notes.

Jane Malme, fellow of the Lincoln Institute, is an attorney, author and consultant on property tax policy, law and administration in the U.S. and internationally. She directed the Massachusetts Department of Revenue’s Bureau of Local Assessment as it implemented major property tax reforms from 1978 to 1990.

The Lincoln Institute seminar on Property Taxes and Market Values—Responding to Post-Proposition 13 Challenges in April 2005 included participants from many states, including California, Illinois, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New York and Oklahoma. The discussion leader was Alan Dornfest, property tax policy supervisor in the Idaho State Tax Commission.

The Institute will continue this discussion at the International Association of Assessing Officers (IAAO) Annual Conference in Anchorage, Alaska, in September. Jane Malme will moderate a policy seminar on Property Tax Viability in Volatile Markets with speakers Alan Dornfest; Mark Haveman, director of development for the Minnesota Taxpayers Association and project director for its Center for Public Finance Research; and Andrew Reschovsky, professor of public affairs at the University of Wisconsin’s LaFollette School of Public Affairs.

For many years, researchers have puzzled over the causes and consequences of voter-approved tax and expenditure limits (TELs), a fiscal rule that weakens the ability of elected officials to raise revenues or make expenditures.

For planning processes to resolve the pressing issues of our day—such as climate change, traffic congestion, and social justice—plans must be made at the appropriate scale, must promulgate appropriate implementation tools, and must be enforced with legitimate authority. That is, our ability to meet critical challenges depends on the legal and institutional foundations of planning.

In the United States, responsibility for establishing these foundations for planning rests with the states, which in turn have delegated most land use authority to local governments. In Europe, the foundations of planning are established by each country, whose planning systems often feature national and regional plans as well as a mosaic of local plans. For better and for worse, these institutional foundations have framed the planning process on both sides of the Atlantic Ocean for most of the post-war period. But as the scope of our planning challenges continues to broaden, and discontent with the status quo continues to spread, several states and European nations have begun to experiment with new and innovative approaches to planning.

The opportunity to explore and discuss these issues brought scholars, practitioners, students, and others to Dublin, Ireland, in October 2012 for a two-day seminar sponsored by the Lincoln Institute of Land Policy and organized by the School of Geography, Planning, and Environmental Policy at University College Dublin and the National Center for Smart Growth at the University of Maryland. Held in the historic Newman House on St. Stephen’s Green, the meetings featured overview papers on planning in the United States and Europe and case studies of five U.S. states and five European nations. Each presentation was followed by commentary from a high-level official from the corresponding state or nation (see box 1).

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Box 1: Papers Presented at the Dublin Seminar on Planning for States and Nation/States, October 2012

Bierbaum, Marty
The New Jersey State Development Plan

Faludi, Andreas
The Europeanisation of Planning and the Role of ESPON

Fulton, Bill
Planning for Climate Change in California

Galland, Daniel
The Danish National Spatial Planning Framework

Geppert, Anna
Spatial Planning in France

Grist, Berna
The Irish National Spatial Strategy

Knaap, Gerrit
PlanMaryland: A Work in Progress

Lewis, Rebecca
The Delaware State Development Plan

Needham, Barrie
The National Spatial Strategy for The Netherlands

Salkin, Patricia
Planning Frameworks in the United States and the Role of the Federal Government

Seltzer, Ethan
Land Use Planning in Oregon: The Quilt and the Struggle for Scale

Tewdwer-Jones, Mark
National Planning for the United Kingdom

For more information about the seminar, see the program website: http://www.ucd.ie/gpep/events/seminarsworkshopsconferences/natplansymp2012

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A Framework for Spatial Planning in Europe

Planning in Europe is governed by a variety of traditions and governance structures (Faludi 2012). Some European nations have “unitary” governance structures, in which all land use authority ultimately rests with the national government. Italy and Spain have “regional” governance structures, in which land use authority is constitutionally shared between the national government and regional governments. Austria, Belgium, and Germany have “federalist” governance structures, in which particular land use functions are distributed among the national, regional, and local governments. Within these frameworks a variety of planning cultures and traditions have evolved: “amenagement duterritoire” in France; “town and country planning” in the UK; “Raumordnung” in Germany; and “ruimtelijke ordening” in The Netherlands. While these terms generally connote what “urban planning” means in the United States, there are important, nuanced, and fiercely defended differences.

The expression for urban planning used by the European Union is “spatial planning” (European Commission 1997, 24).

“Spatial planning refers to the methods used largely by the public sector to influence the future distribution of activities in space. It is undertaken with the aims of creating a more rational territorial organization of land uses and the linkages between them, to balance demands for development with the need to protect the environment, and to achieve social and economic objectives.

“Spatial planning embraces measures to co-ordinate the spatial impact of other sectoral policies, to achieve a more even distribution of economic development between regions than would otherwise be created by market forces, and to regulate the conversion of land and property uses.”

The European Union has no authority to engage in spatial planning, but directly influences spatial planning outcomes through regional development initiatives, environmental directives, and structural and cohesion funding. This goal is articulated in the European Spatial Development Perspective (ESDP) signed in 1998 by the ministers responsible for spatial planning in the member states and the members of the European Commission responsible for regional policy (Faludi 2002).

Modern spatial planning in the European context is broadly understood to include national, regional, and local planning, where national plans provide broad national development strategies and guidelines for plans at lower levels of government; regional plans integrate physical development with social, economic, and environmental policies but without site-level specificity; and local plans are site-specific and address the physical and urban design elements of the built environment. While none of the planning frameworks for the member nations matches this neat hierarchical ideal exactly, the ESDP has influenced planning activity in every nation.

The ESDP itself is based on longstanding European planning traditions dating to World War II, when national development or reconstruction plans were indisputably necessary for post-war reparations. Many European nations still have national development plans and complementary national spatial strategies. But the influence and importance of those plans has diminished steadily since reconstruction. In the last decade in particular, nations once known for their ambitious and extensive commitment to planning—France, Denmark, and the United Kingdom among them—have failed to adopt new national plans and expressly placed greater emphasis on regional and local plans.

National European Spatial Strategies and Frameworks

France

Although France is a unitary, centralized nationstate, the national government has never played a leading role in spatial planning. Rather, responsibility for spatial planning was officially transferred to regional and local governments in devolutionary reforms adopted in 1982 and 2003 (Geppert 2012). Although coordination between governments at different levels continues, this process results more often in joint investment strategies rather than in shared spatial visions or common objectives. Before most other nations, the French national government began focusing less on spatial planning and more on sectoral policies, leaving spatial issues for lower levels of government.

Denmark

Planning in Denmark historically began with a comprehensive national planning framework (Galland 2012). Over the last two decades, however, as a result of interrelated political and economic factors, the land use roles of national, local, and regional governments within the national territory have significantly transformed the scope, structure, and understanding of Danish spatial planning (figure 1).

Among the implications of this reform, several spatial planning responsibilities have been decentralized to the local level while regional planning for Greater Copenhagen and other sectoral functions have been transferred to the national level. Moreover, the recent abolition of the county level of government has increased the risk of uncoordinated spatial planning and decreased coherence across diverse policy institutions and instruments.

The Netherlands

The Netherlands has perhaps the longest and best-known tradition of national spatial planning, and its plans include industrial as well as detailed spatial policies (Needham 2012). For several decades, Dutch national plans influenced the distribution of people and activities throughout the country. In the first decades after World War II, all levels of government—national, provincial, and municipal—tended to work together in their spatial planning. In the 1990s, however, they started to move apart. In response, the national government strengthened its own powers over the local governments (a form of centralization), and at the same time reduced its own ambitions to pursue a national spatial strategy (a form of decentralization). The latest national spatial strategy expressly withdraws from some planning tasks previously carried out by the national government.

United Kingdom

In the early 1900s, the UK Parliament divested its direct powers to plan; instead, the powers of intervention, new state housing development, and regulation of private housing development were handed over to local governments (Tewdwr-Jones 2012). In the following decades, the central government did acquire new planning powers of its own as a consequence of World War II and the need to rebuild cities, infrastructure, and the economy in the national interest. Since 1945, central government has retained these powers, while also permitting the monitoring of local authorities in their operation of the planning system.

These powers have changed dramatically over the last 70 years. After 1999, devolution in Wales, Scotland, and Northern Ireland further fragmented the meaning of “national” in policy and planning terms. During the 2000s, the push toward regional spatial planning in England also rebalanced national planning matters toward sub-national interests. As a result of this trend in devolution, decentralization, regionalism, and localism over the last 20 years, it is increasingly questionable whether the UK now possesses anything that could be regarded as a national planning system, since so much has changed spatially and within policy-making institutions and processes across different parts of the country.

Ireland

Ireland is one of few European nations not following the trend toward decentralization of planning authority, partly due to the fact that its planning system has been fully decentralized (Grist 2012). Largely following EU guidelines, Ireland adopted a series of national development plans, the latest one being the National Development Plan 2007–2013. Based on recommendations in the previous national plan, the Department of Environment, Community and Local Government in 2002 developed the Ireland National Spatial Strategy. This strategy identified critical gateways and hubs and articulated plans to decentralize economic activity from Dublin and throughout the island.

Following a turbulent period that saw the rise and fall of the Celtic Tiger, blamed in part on lax local planning policies allied with extensive incentivizing of property development and political corruption, the country is now revisiting that strategy, strengthening regional development guidelines, and imposing new consistency requirements on local governments.

Under the new evidence-based planning regime, local plans must conform more closely with regional planning guidelines, and local plans will have quantitative limits on how much development can be allowed. The future role of the National Spatial Strategy is currently in the review process as the new government, elected following the property crash in Ireland, examines the planning and development issues that prevailed during the property bubble.

The Federal Government and Land Use in the United States

The U.S. federal government, like the European Union, has no authority to plan and manage land use, but probably has a greater influence on the location and nature of development patterns (Salkin 2012). Besides the billions of dollars it allocates for transportation infrastructure, social services, development, and redevelopment, the federal government is a major landowner of more than 630 million acres across the country. Federal regulations are also highly influential. The Clean Air and Water Acts, for example, impose no restrictions on land use per se, but in establishing targets for ambient air quality and nutrient loadings to rivers, lakes, and streams, both acts profoundly influence local land use plans, regulations, and development patterns.

More recently, President Barack Obama’s administration has established a new channel of federal influence on land use planning and regulation. While the federal government continues to refrain from direct intervention in local land use governance, the secretaries of the Departments of Transportation and Housing and Urban Development and of the Environmental Protection Agency signed a memorandum of understanding establishing the Sustainable Communities Partnership. To promote six principles of sustainable communities, these agencies launched a number of new grants programs, including the Regional Sustainable Communities Planning Grants. To be eligible for such a grant, local governments must form inter-organizational consortia that include the metropolitan planning organization (MPO), the central city, the majority of local governments, and a representation of civic and advocacy groups.

While the stated purposes of these path-breaking grants include urban revitalization, environmental protection, social justice, and sustainable development, an equally important purpose is to establish new inter-institutional relationships by promoting greater inclusion and participation. Regional Sustainable Communities Planning is now underway in 74 metropolitan areas across the country. It remains to be seen, however, whether the incentives offered to local governments to engage in regional planning are sufficient to get them to participate in regional plan implementation without additional state-level intervention.

State Plans and State Planning Frameworks

Every state established a framework for local planning and regulation in the 1920s and 1930s based on the standard planning and zoning enabling acts prepared by the U.S. Department of Commerce. Despite expectations of extensive institutional change, characterized in the “Quiet Revolution” more than 40 years ago, most states merely authorize local governments to plan (Salkin 2012).

Others, like Oregon, mandate, review, and approve local plans (Seltzer 2012). If local governments do not submit plans that meet the state’s land use goals and guidelines, the state can withhold funds or the authority to issue building permits. Several unique land use institutions also support the Oregon planning system, including a state planning commission, a land use court of appeals, and a directly elected regional government. Though simple in structure, and frequently challenged in the courts and at the ballot box, the Oregon system has a reputation as one of the most, if not the most, effective land use systems in the United States (Ingram et al. 2009).

California is among the states that delegated substantial land use authority to local governments. Although major development projects have to pass a complex mini-National Environment Policy Act process, and the California Coastal Commission was an innovative new statewide institution in its day, local planning remains dominant. But in 2008, the state adopted a bold new initiative to address climate change—Senate Bill 375, which required MPOs to develop transportation and land use plans that meet state greenhouse gas targets. The difficulty is that local governments, not MPOs, retain land use authority in California. MPOs and the state governments are providing incentives for local governments to adopt plans that conform with metropolitan plans, but it remains uncertain whether the combination of financial and other incentives are sufficient to nudge local governments to follow the MPO plans (Fulton 2012).

At the other extreme, plans for entire states are not common in the United States. In response to federal requirements, most states do have transportation plans, and some have economic development plans, workforce development plans, or climate action plans, but only five have state development plans—Connecticut, Delaware, Maryland, New Jersey, and Rhode Island.

New Jersey and Delaware have perhaps the best- and least-known state plans, respectively. New Jersey adopted its State Planning Act in 1985, requiring the state planning commission to develop, adopt, and implement the New Jersey State Development and Redevelopment Plan (Bierbaum 2012). The planning process included a complex cross-acceptance procedure for identifying and resolving differences between the state and local governments. Since its adoption, the influence of and attention received by the plan has ebbed and flowed over successive gubernatorial administrations. Most recently, Governor Chris Christie’s administration developed an entirely new state plan, focused primarily on economic development without the cross-acceptance process. The state plan commission, however, has not yet adopted the plan.

The Delaware plan is much less well-known and far less controversial than the New Jersey plan, and both the content and process are less complex (Lewis 2012). The Delaware plan includes five general land designations (figure 2). It depends on state-local coordination and relies on the threat of withholding infrastructure funding (of which the state pays a significant share) to incentivize compliance by local governments. Because the state did not begin tracking data on development patterns until 2008, and does not maintain spatial data on state expenditures, it is difficult to discern the impact of the approach on development and the consistency of state spending with the state plan map.

Maryland is the only state that rivals California and Oregon in its adoption of bold new approaches to planning, based on its long tradition of leadership in land use and environmental policy (Knaap 2012). Maryland established the first state plan commission in 1933, and broke into the national spotlight in 1997, when it adopted the path-breaking Smart Growth and Neighborhood Conservation Act. Since 1997 the use of state expenditures to provide incentives for smart growth has been the signature feature of the Maryland approach. Long before anyone in Maryland spoke the words “smart growth,” however, the state had passed legislation in 1959 that required the Maryland Department of Planning to develop and adopt a state development plan. More than 50 years later, the administration of Governor Martin O’Malley finally met that requirement.

On December 19, 2011, Governor O’Malley signed PlanMaryland, establishing the first new state development plan in the United States in many years (figure 3). But unlike state plans in New Jersey or Delaware, the Maryland plan is more procedural than substantive. Specifically, it established six plan designation categories and, following a longstanding Maryland tradition, enabled local governments to allocate land for any or all designated uses. State agencies would then target programmatic funds to each of these areas. Since the plan was signed, state agencies have been developing and refining implementation plans, and local governments have just recently begun submitting plans for state certification.

Concluding Comments

The frameworks for land use and spatial planning vary extensively across Europe and the United States. On both sides of the Atlantic, local governments carry much of the load, especially with respect to community, neighborhood, and site-specific details. But the role of regions, states, and nations remains important.

Contrary to its reputation in the United States, planning in many European nations has decentralized extensively. Few European nations are engaged in full-scale national plans that guide national investments and land use regulations. In fact, planning in Europe, while still far more comprehensive in sectoral details than in the United States, shares many policy features with its North American counterpart. An interesting exception is Ireland, which continues to expand the role of national and regional governments partly as a response to the recent period of extremely decentralized planning that failed to take into account and implement the national strategy. Ireland is also one of the few countries adhering to the broad principles of spatial planning formally adopted by the European Union.

In the United States, neither state development planning nor state approval of local plans is a rapidly growing practice. Indeed, despite the demonstrated success of the Oregon program and the growing recognition of the need for horizontal and vertical policy integration, land use planning in the United States remains a fiercely local affair. Although both the state of California and the federal government are providing financial incentives for intergovernmental coordination and planning at the metropolitan scale, it remains far from certain that incentives alone will secure the changes in local plans and regulations required to institute meaningful adjustments in land consumption, travel behavior, and access to opportunities.

New approaches are needed to make cites and metropolitan areas more productive, equitable, and environmentally sustainable in light of anticipated challenges in the future. If these issues cannot be addressed adequately, other kinds of experiments in institutional planning reforms may become more common in many countries.

About the Authors

Gerrit Knaap is professor of urban studies and planning, director of the National Center for Smart Growth, and associate dean of the School of Architecture, Planning, and Preservation at the University of Maryland.

Zorica Nedovic-Budic is professor of spatial planning and geographic information systems (GIS) in the School of Geography, Planning and Environmental Policy at University College Dublin.

References

Denmark Ministry of the Environment. 2006. The 2006 national planning report–In brief. Copenhagen. http://www.sns.dk/udgivelser/2006/87-7279-728-2/html/default_eng.htm

European Commission. 1997. The EU compendium of spatial planning systems and policies. Luxembourg: Office for Official Publications of the European Communities.

Faludi, Andreas. 2002. European spatial planning. Cambridge, MA: Lincoln Institute of Land Policy.

Ingram, Gregory K., Armando Carbonell, Yu-Hung Hong, and Anthony Flint. 2009. Smart growth policies: An evaluation of programs and outcomes. Cambridge, MA: Lincoln Institute of Land Policy.

Conventional wisdom and basic economic principles would suggest that an area subject to higher commercial and industrial property taxes than its nearby neighbors will suffer reduced economic development in comparison to those neighbors. On the other hand, any effort to reduce such unequal or “classified” property tax rates will produce a revenue shortfall. Raising taxes on homeowners to equalize rates and recover this lost revenue will encounter enormous and obvious political resistance.

This is the situation currently facing Cook County and the city of Chicago, and was the subject of a conference led by Therese McGuire of the Institute of Government and Public Affairs (IGPA) at the University of Illinois at Chicago. Held last September and cosponsored by the Lincoln Institute, the IGPA, and the Civic Federation of Chicago, the program brought together more than a hundred business and civic leaders, academics and practitioners to consider alternative methods of addressing the problems presented by the Cook County classification system.

In Illinois, the use of a property tax classification system by Cook County has been blamed for the economic decline of Chicago and the inner suburbs. The classification system is also seen as a barrier to reforming school funding and the state’s tax system. Are these charges valid? Does the classification system put Cook County at an economic disadvantage compared to its rapidly growing adjacent “collar counties”? If classification has so many shortcomings, why was it instituted in the first place? If we are only now recognizing those shortcomings, what steps can be taken that are both economically and politically feasible to overcome the problems?

Overview of Tax Classification

Illinois has long operated under the twin principles of uniformity and universality for both real and personal property, and both principles were incorporated into the Illinois Constitution of 1870. However, de facto or administrative classification of real property developed in Cook County as a response to the difficulty in taxing personal property in the same manner as real property. By the 1920s, the Cook County assessor publicly acknowledged assessing residential property at 25 percent of real value and business property at 60 percent.

A 1966 Illinois Department of Revenue report noted that Cook County was using 15 different classification groups. Despite the fact that classification was clearly in violation of the 1870 Constitution, the Illinois Supreme Court had refused to confront the issue. By the late 1960s, however, the court was prepared to overturn the existing system, and the 1970 constitutional convention faced the potential threat of court intervention.

The convention was the product of numerous reform efforts in Illinois during the previous decade. The state had failed to find a compromise redistricting plan after the 1960 census, causing the entire Illinois House to be elected as at-large members in 1964. That election brought many reformers to office, and a House-created commission charged with recommending constitutional reforms subsequently called for the 1970 convention.

Several delegates on the convention’s revenue committee were passionately in favor of uniformity, and they had considerable support from experts who opposed classification as a matter of economic policy. On the other hand, the Chicago delegation was adamant in demanding that the new constitution legalize classification. It was generally believed that without legalization, the new constitution would not have the support of Chicago Mayor Richard J. Daley and his delegation, in which case it would fail to pass.

As a result, the 1970 Illinois Constitution allowed counties with a population greater than 200,000 to classify property for taxation. The extension of classification to these large counties was also allowed for the collar counties because many taxing districts crossed those county boundaries. Cook County’s system was thus guaranteed, but the Constitution gave the General Assembly the power to apply limitations because of concerns there would be a crazy quilt of classifications should the collar counties adopt that system. Nevertheless, no collar county has done so.

Today, Cook County’s classification system is considered by many to be an impediment to Illinois’ attempts to deal with a variety of social and economic issues. Politically, classification is believed to be partly to blame for the failure to reform education funding in Illinois. In 1997, then Governor James Edgar led an unsuccessful attempt to convince the General Assembly to gradually shift the burden of education funding from property taxes to income taxes. One of the strongest arguments against the effort was that it would be a windfall for businesses and corporations, whose property taxes would be shifted to individual taxpayers. That shift would have even been greater in Cook County, which has more than 47 percent of the state’s entire assessed value and where businesses pay property taxes at a rate double that of homeowners.

Impacts on Economic Development

In terms of economic development, some observers believe that classification puts Cook County at a disadvantage in the eyes of business people who might consider locating in Illinois or expanding their operations in the state. While there are obviously other factors involved, the concern is that classification would cause these companies to look more favorably at locations in the collar counties or other states.

Recent research has shown that high property taxes do have a negative effect on the market value of property and do deter businesses from locating in the affected areas. Studies of property tax differences in the Boston, Phoenix and Chicago areas have shown that, because higher property taxes mean higher rents and lower market values, real estate development shifts from the high-tax area to the low-tax area over time. Other studies have shown that manufacturers seeking to relocate are very sensitive to local property tax rates. New construction and retail trade are also affected negatively, although the service sector is not as influenced by high property taxes.

Is this the case in Cook County? A recent study by Richard Dye, Therese McGuire and David Merriman, all affiliated with the IGPA, found that the effective tax rate of Cook County (5.52 percent for commercial and 5.78 percent for industrial property) is higher than in the collar counties, which have an average rate of 2.54 percent on all property. Furthermore, they found that four measures of economic activity-growth in the value of commercial property, the value of industrial property, the number of establishments and the employment rate-were measurably lower in Cook County than in the collar counties. But is that the end of the story?

No, according to the study’s authors. A multifaceted national trend is dispersing population, employment and business activity away from metropolitan centers to outlying counties. To determine if it is this national trend or specific property tax differences that is causing slower economic growth in Cook County, the study examined the characteristics of 260 municipalities in the Chicago metropolitan area. The researchers used two samples of municipalities-one metro-wide and the other limited to those near the Cook County border, where the effects of higher tax rates should be most potent.

The researchers presented their results, at the conference finding, “weak evidence at best that taxes matter.” Once other influences on business activity were factored out, the researchers determined that, for the entire six-county region, employment was the only economic activity that seemed to be adversely affected by property taxes, although in the border region the market value of industrial property was also affected. “The bottom line is that the evidence is mixed and inconclusive,” said McGuire. “There is no smoking gun.”

Another participant in the conference challenged this interpretation of the results. Michael Wasylenko of Syracuse University, who had been asked to review the study in advance and discuss it at the conference, said he was convinced that the researchers did find significant effects because the employment measure is a better measure of economic activity than the others. “I think the weight of the evidence suggests that these results are consistent with previous findings that property tax differentials will have a substantial effect on employment growth within a metropolitan area.”

If the employment factor, then, is the one to be given the most weight and Cook County’s property tax classification system is economically disadvantageous, in addition to being a political roadblock to reform, what is to be done? “It comes down to whether the economic gains that might be realized if you went to a non-classified tax are worth the political battles. Are the economic development advantages enough to want to do this,” said Wasylenko.

The economic and political stakes in this decision are high, since Cook County currently levies more than 50 percent of all property taxes in the state. The county cannot rapidly shift a large part of the tax burden among classes of property, but neither can it ignore concerns that the tax burden on businesses located there place it at an economic disadvantage with regard to its nearby neighbors. Any solution must be approached as a component of the overall tax system, be grounded in verifiable data, and have significant support from the public, the media and business interests. The September conference sought to contribute to that process of informed public debate on a crucial fiscal topic.

In early December, the Cook County assessor proposed reducing the assessment ratio (the ratio of assessed value to market value) for certain types of business property: from 36 to 33 percent for industrial properties such as factories and distribution facilities; from 33 to 26 percent for large investor-owned residential property; and from 33 to 16 percent for multiuse storefront businesses with apartments on upper floors. The assessor’s hope is that more favorable treatment of business will lead to even more rapid growth of the tax base over time. While these recommendations came out of several different tax studies, any changes in assessment rates must by approved by the Cook County Board before they can be implemented.

Scott Koeneman is communications manager at the Institute of Government and Public Affairs (IGPA) of the University of Illinois in Urbana, Illinois.

References

Dye, R., T. McGuire and D. Merriam. 1999. “The Impact of Property Taxes and the Property Tax Classification on Business Activity in the Chicago Metropolitan Area.” Lincoln Institute of Land Policy Working Paper.

Giertz, J.F., and T. McGuire, “Cook County, Ill., Assessor Proposese Changes in Assessment Levels,” State Tax Today. Dec. 7, 1999.

Man, J. 1995. “The Incidence of Differential Commercial Property Taxes: Empirical Evidence,” National Tax Journal, 48: 479-496.

McDonald, J. 1993. “Incidence of the Property Tax on Commercial Real Estate: The Case of Downtown Chicago,” National Tax Journal, 46: 109-120.

Wheaton, W. 1984. “The Incidence of Inter-jurisdictional Differences in Commercial Property Taxes,” National Tax Journal, 37: 515-527.

Source: Illinois Department of Revenue

The Lincoln Institute’s China Program was established several years ago, in part to develop training programs on property taxation policy and local government finance with officials from the State Administration of Taxation (SAT). The Institute and SAT held a joint forum on international property taxation in Shenzhen in December 2003, and more than 100 participants attended another course held in China in May 2004. In January 2005, 24 Chinese tax officials from 15 provinces visited the United States for additional programs; many of them are developing property tax systems in six pilot cities. The Institute also supports the Development Research Center (DRC) of the State Council to research property tax assessment in China, and they jointly organized a forum in February 2005.

Economic growth and institutional reforms in China over the past two decades have created profound changes within the society. The central authorities now need to set forth new policies and procedures for modern governance to address devolution of certain authority to local governments, rapid urban and rural development, and changes in land uses and land and fiscal policies. The national government’s commitment to further modernization is most evident in the effort to develop and implement a new property taxation system.

This article describes the current system and discusses issues and challenges that must be overcome to implement a successful property tax policy in China. Given the complexity of this endeavor and the huge variation in economic development across the country, a gradualist approach, which has proved effective in China’s modernization process, may be the best way to initiate property tax reform and development.

Current Taxation System

China collects 24 types of taxes. The central and local governments share the value added tax (VAT) and business tax revenues; the former tax is the primary revenue source for the central government, whereas the latter is the most important tax for local governments. Two other important tax sources for the central government are the consumption (excise) tax and the personal income tax. Twelve taxes are related to land and property, but most do not generate significant revenues. The business tax accounted for 14.41 percent of total central and local government revenues in 2002, but only a small portion of that amount was generated from property-related sources. The reason is that business and income taxes are collected only when land or property is rented or sold, and thus do not provide a steady stream of revenue. It is hard to imagine that any of the 12 property-related taxes could play a key role in resource allocation and local government finance over the long term.

An evaluation of the current tax system reveals additional concerns.

• The tax structure is out of date. The urban real estate tax was developed in 1951 and several other taxes, including the farmland occupation tax, the urban land use tax and the housing tax, were institutionalized in the late 1980s. Given the tremendous advances in economic and institutional reform since then, China’s tax system needs to be updated to function effectively within this new context.
• Domestic and foreign entities operate under differing tax bases and rates. The Chinese government offers tax incentives to foreign entities to attract foreign direct investment that domestic investors do not receive. In addition, domestic land users pay the urban land use tax and housing tax, whereas foreign land users pay the urban real estate tax. Furthermore, structures used for commercial or industrial purposes in rural areas do not pay any land- or property-related taxes. As a result of these differing tax policies, the overall tax rate for foreign enterprises is generally 10 percent lower than that for domestic enterprises.
• Several of the taxes are redundant. For example, the business tax and housing tax are both based on housing rental income; the land value incremental tax, enterprise (corporate) income tax and personal income tax are all based on the net rental or transaction income from property.
• Land and property taxes are levied on transactions rather than asset holdings. This arrangement produces a market-dependent revenue stream and is vulnerable to fluctuations over time.
• The tax base is narrowly defined. Properties used for commercial purposes are subject to certain taxes, but residential properties are exempt.
• The tax system is not well equipped to address the complexities of emerging market development. For instance, current land and property taxes impede the development of real estate markets for mortgaging, re-renting and subleasing transactions.

The shortcomings in the current taxation system have resulted in major fiscal problems for the central government, such as declining revenue mobilization and ineffective use of tax policy to leverage macroeconomic policy (Bahl 1997). When the government conducted tax reform in 1993 to overcome some of the problems, one of the largest initiatives shifted responsibility for urban and public services to local governments.

This measure was successful in improving the central government’s fiscal condition; however, the revenue share for local governments was not increased at a level commensurate with their increased responsibility. Consequently, many local governments face increasing budgetary deficits. Figure 1 illustrates the financial deficit for local governments after the 1993 tax reform. More than one-third of county-level governments have serious budget problems and over half of the local governments directly below the provincial level have budgets that merely cover the basic operations of public entities.

Public Land Leasing

One of the means by which local governments increase revenues in the absence of an effective taxation system is through public land leasing. In the late 1980s and early 1990s, the state introduced market principles into the decision-making process regarding land use and allocation by separating land use rights from ownership. This separation promotes the development of land markets, which in turn have created tremendous impacts on real estate and housing development, urban land use and land allocation. Except for a short yet dramatic drop in the early 1990s due to a macroeconomic policy designed to prevent the national economy from overheating, the prices for access to land use rights and public land leasing rates have been increasing steadily.

Despite the significant number of land leasing transactions, the government closely regulates and controls the amount of land being leased by maintaining a monopoly on land supply (Ding 2003). Most land in rural areas still belongs to the collectives, and urban construction is prohibited on rural land unless it is first acquired by the state. Land developments that occur on collectively owned rural land are considered illegal, and administrative efforts such as monitoring and inspecting have been implemented to eliminate these violations.

General land use plans and regulations to preserve cultivated land further control the amount of land available for urban development. The land use plans determine the total amount of land that can be added to existing urbanized areas through an annual land supply quota. At the same time, China’s preservation policy for cultivated land influences both land supply and the location of land available for urban development. The Land Administration Law specifies that at least 80 percent of cultivated land should be designated as basic farmland and prohibited from land development. Land productivity is the dominant factor used to delineate the boundaries of basic farmland. Since most cities are located in areas with rich soil resources, farmland protection designations commonly exist in urbanizing areas. Thus farmland protection inevitably results in urban sprawl and leapfrog development patterns requiring costly infrastructure investments and land consumption.

Financing Local Government. As a result of the government’s regulations and monopoly on selling land use rights, local authorities use the public land leasing system to increase their revenues through land use conveyance fees. For instance, Hangzhou City, the capital of Zhejiang Province with a population of almost four million, is among the top five in per capita national income and GDP. The city generated land conveyance fees of more than six billion YMB in 2002, more than 20 percent of the total municipal government revenues.

Interestingly, these fees were generated largely from selling to commercial users the right to access the state-owned land, yet commercial land development represented only 15 percent of total land uses in newly developed areas. The rest of the land was allocated to users through negotiation in which the sale price either barely covered the costs of acquiring and improving the land, or land was offered free to generate competition for businesses and investments.

Local governments can raise enormous revenues from limited-market transactions of land use rights, in part because land conveyance fees represent lump-sum, up-front land rent payments for a leasing period and in part because local governments exercise their strong administrative powers to require farmers to sell their land at below-market rates. When the government later resells the land at market rates, the price could be more than 100 times the purchase price. After considering the costs of land improvement, however, net revenues may be only ten times the total cost of the land.

Rising land prices resulting from the government monopoly allow local governments to use the land as collateral to borrow money from banks. These loans plus the revenue generated from conveyance fees accounted for 40 to 50 percent of the Hangzhou municipal government budget in 2002. In turn these revenues were used to fund more than two-thirds of the city’s investments in infrastructure and urban services.

Hangzhou City specializes in textiles, tourism, construction and transportation, and generates substantial revenue from business and value-added taxes, although the city’s share of income generated through the public land leasing system is also large. Many smaller cities and towns with fewer commercial and business resources use land leasing directly through land conveyance fees or indirectly as collateral to support up to 80 or 85 percent of their total investments in urban initiatives. These smaller cities must turn to land to generate revenues to fuel economic growth, launch urban renewal projects, and provide infrastructure and urban services that were neglected for a long time prior to the reform era. Land-generated revenue is also used to improve the overall financial environment, attract businesses and investments, and support the reform and reallocation of state-owned enterprises.

Negative Consequences. Despite the importance of public land leasing for income generation, the practice of using this tool to finance local governments may have serious consequences in the long run. The fiscal incentives that compel local governments to control and monopolize the land markets will negatively impact real estate and housing development, industrialization and land use. Furthermore, land is a fixed resource and ultimately there will be no more land left to lease for revenue.

Increasing pressure to protect the rights of farmers also makes it more difficult and costly to acquire land from farmers. As a result, local governments must increase land prices or face reduced revenues from land leasing. Finally, not only does land scarcity and farmer compensation pose a challenge to income generation, but recent policy reform now permits land owned by a collective to enter the land market directly. This change will prevent local governments from acquiring collective lands and exacting conveyance fees for these transfers.

Taxation Reform: Principles and Challenges

The fiscal deficits experienced by local governments and the problems with the resulting public land leasing system provided the impetus for the central government to restructure the entire taxation system. That reform is based on four guiding principles: (1) simplify the tax system; (2) broaden the tax base; (3) lower tax rates; and (4) strictly administer tax collection and management. The central authorities in charge of tax policy and administration offer several specific goals with respect to property-related taxes.

• Unify the tax system so that domestic, foreign, urban and rural entities are treated similarly.
• Terminate taxes at odds with efforts to foster the emergence of healthy land and real estate markets, such as the farmland occupation tax.
• Merge the housing tax, urban real estate tax, and urban land use tax into a single property tax, and treat domestic and foreign entities equally in levying this tax.
• Adopt a value-based property tax.

Considerable debate exists over the merits of the proposed property-related tax reform. Despite the lack of consensus as to the best option, the costs and benefits must be assessed to effectively guide the development and implementation of a new property tax system. In addition, several outstanding issues need to be resolved in order to implement the proposed land and property tax reform.

• What are the existing laws and statutes relevant to property rights and taxation, how will they be amended and how will new laws be developed to legislate the new system?
• What role will property taxation play in intergovernmental fiscal relations and local government financing?
• What will the objectives of property taxation be as a fiscal and land use tool?
• How should land and property taxation be tied to the concept of achieving value capture and financing urban infrastructure and services?
• How will the land and property tax system relate to and be consistent with land policy reforms such as public land leasing, land acquisition, and the development of land markets in urban and rural areas such as agricultural farming?

The implementation of a value-based tax also will require the assembly and cataloguing of massive quantities of data, which historically have not been collected systematically. Furthermore, the data that have been collected are stored in different locations and in paper format. The Ministry of Land and Resources records and handles land-related data and information, whereas the Ministry of Construction is in charge of structure-related information. Matching related records from different ministries and digitizing this data will take years if not decades and will require a huge investment of resources.

The Chinese public has limited understanding of property taxation systems, so education will be required to avoid potentially significant political resistance. Capacity building within the Chinese government also will require professional training in appraisal, evaluation, appeals and collection to achieve effectiveness and efficiency in the new tax system.

Conclusions

Despite these unanswered issues and challenges, the Chinese government appears committed to implementing property taxation reform. The application of the widely used and successful gradualist approach for implementing policy and institutional reforms will ensure that the development and institutionalization of the property tax system proceeds on course. For example, data for industrial and commercial structures is more complete and of higher quality than data for residential structures. Furthermore, newer structures tend to have better records than older structures, and records are more complete for structures in urban areas than in rural areas. Thus, applying the property taxation system first to commercial and industrial structures, newly developed land with residential structures, and urban areas will allow the system to take hold before attempts are made to implement change in the areas with greater obstacles to overcome.

References

Bahl, Roy. 1997. Fiscal policy in China: Taxation and intergovernmental fiscal relations. Burlingame, CA: The 1990 Institute.

Development Research Center. 2005: Issues and challenges of China’s urban real estate administration and taxation. Report submitted to the Lincoln Institute of Land Policy.

Ding, Chengri. 2003. Land policy reform in China: Assessment and prospects. Land Use Policy 20(2): 109-120.

Liu, Z. 2004. Zhongguo Suizi Gailan. Beijing: Jinji Chuban She. (China’s taxation system. Beijing: Economic Science Publisher).

Lu, S. 2003. YanJiu ZhengDi WenTi TaoShuo GaiKe ZhiLu (II). Beijing: Zhongguo Dadi Chuban She. (Examination of land acquisition issues: Search for reforms (II). Beijing: China Land Publisher.)

Chengri Ding is associate professor in the Department of Urban Studies and Planning at the University of Maryland, in College Park. He specializes in urban economics, housing and land studies, GIS and spatial analysis. He is also special assistant to the president of the Lincoln Institute for the Program on the People’s Republic of China.