In many cities, much of the best land is off the tax rolls. Colleges, universities,
hospitals, municipal and other government buildings tend to be centrally
located. The presence of their employees and customers helps to make the
surrounding properties particularly
valuable places to conduct business. When a signficant share of the downtown
is occupied by entrenched tax-exempts, those who need a central location
to conduct their business must pay higher rents to landlords who own the
scarce remaining sites. Churches and their affiliates also occupy prime downtown
including services to the low-income portion of the population, who are severely
burdened by the high rents they must pay in most cities; sometimes all they
provide are worship opportunities and social events for their members — and
Downtown parks also tend to make the surrounding properties far more
than they would otherwise be, with the most extreme effects on selling
prices falling off within a few hundred feet.
When a church or a college or other tax-exempt entity decides it no longer
needs a piece of land, should the tax-exempty entity get the full proceeds
of the sale of that land, or should some portion of that huge gain be returned
commons? Is paying 5 years' worth of back property taxes sufficient
compensation to the commons? 10 years' worth? More? Should the
entire gain go to the community?
Tax-exempt properties receive a lot of services from the taxpayer: police
and fire protection and other emergency services, not to mention the schools
which provide the employees who carry out their missions.
I would advocate not placing any property taxes on the buildings owned by
those properties that are currently tax exempt, but it doesn't seem unreasonable
to ask them to pay the commons for the use of their site, just as we ask
others to pay as a function of the value of their sites. Might this cause
some of them to sell off a portion of their underused holdings, or even relocate
outside the central business district? Possibly. They might find that if
they needed to make a business decision about their land, they would be led
to use less-choice sites, freeing the centrally located property for the
use of the private sector.
Mason Gaffney: Land as a
Distinctive Factor of Production
Land is traditionally subject to
a host of legal and customary limits on use and ownership.
Covenants are found in land titles: seldom in titles to cars or canned
goods. Divided ownership is common, there is so much about land
to be owned. There are easements through, air rights over,
mineral rights under, and neighbors and zoning all around any parcel of
land. Changing lot lines is unavoidably a social process, there
is no other way.
A large share of the more valuable land in cities is held by
estates. Public and eleemosynary [non-profit] holders are
preferentially tax exempt and often without any visible motive to
economize. Water licenses are held subject to "use it or lose it"
traditions leading to appalling waste. Broadcasting/telecasting
licenses are highly political. And so on. Only a resource
with the characteristics of land could be subject to such a wide range
of non-economic pressures. ... read the whole article
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urban land values relative
to rural, assessment,
different from capital, parks,
hole in the ground,
and best use,
location, location, location,
from land appreciation,
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