Socially Created Value

Bill Batt: Stemming Sprawl: The Fiscal Approach

Stemming Sprawl: Pricing Measures for Transportation

From the foregoing, it is clear that insofar as the causes of sprawl development are economic, the solution needs to be economic as well. The equilibrium of forces can be restored in two ways:

1) by charging the true marginal costs of motor vehicle transportation to users and
2) by recovering the economic rent from urban site owners that is really the socially created value.

It is easy to distinguish five elements of transportation service cost: capital investment, maintenance costs, regulation costs, environmental externalities, and congestion costs. Each of these calls for a different treatment with respect to revenue design. Capital costs are best recovered by recapturing the land rent proximate to the highway corridors. This is socially created value, which is better used to honor debt service of infrastructure investment than allowing it to be retained as windfall gains by titleholders to property close by. User fees, most aptly linked to the purchase of motor fuel and tire wear, serve as a proxy for the use of the roads and can be designed to be commensurate with use. As the wear and tear of roads as well as police patrol, snow and ice control, and signaling all involve operating and maintenance costs, such charges are easily linked with benefits received. In the future, still more accurate systems of service charges are likely to appear: Singapore, Hong Kong, and New Zealand are already reliant on electronic devices that record road use by time, place, and vehicle weight.

Ensuring the safety of drivers and vehicles through licenses, registrations, and inspections is most appropriately financed by fees commensurate with the costs of their administration. This way, if a vehicle is used but seldom, it is charged on the basis of its identification rather than assuming any projected level of use. Environmental externalities such as pollution costs can be linked to the polluting source, such as diesel fuel and gasoline consumption, to the full extent necessary to equilibrate air quality and other environmental ambiences. Congestion costs, the last of the major components of a pricing design for highway use, are partially paid for by the time loss of those caught in traffic. The costs of time lost due to highway congestion are enormous: In 2000, the average driver spent 62 hours sitting in traffic at a nationwide cost of $68 billion in gas and time lost In Los Angeles, the average driver spent 136 hours stalled in traffic at an average cost of $2,510.[33] Commuting times were also 20 percent longer than they were a decade ago, about 22 minutes one way nationally on average but as high as 32 minutes on average in New York.[34] But not all people's time is valued equally, and people themselves value their time differently at different times, and it is unfair to require people to impose their congestion on others. Therefore, congestion pricing, being explored in several urban regions, provides a rationing of limited highway space. In a sense, that payment for space usage, in time or money, is a form of land rent. ... read the whole article

Bill Batt: Who Says Cities are Poor? They Just Don't Know How to Tax Their Wealth!

The Rent in Cities

The land values are highest in urban cores, one is reminded, because the economic rent passes as a surplus through all market transactions and comes to settle on land sites. Rent happens, so to speak, and it raises the market price of sites accordingly. Were cities to recover the socially produced ground rent in the form of tax revenue, it would not be left to collect on sites but could be used to provide the financial wherewithal for the services that cities are bound to perform. As will be evident below, the amount of economic rent available for recovery is thought sufficient to pay for all services and then some. Today it simply collects on sites of greatest activity with typical and visible negative consequences. ... read the whole article