PAYING FOR BENEFITS

Sun (Auckland), Volume III, Issue 782, 1 October 1929, Page 11

PAYING FOR BENEFITS

“BETTERMENT" PRINCIPLE IN TOWN-PLANNING DIRECTOR’S EXPLANATION The need of finding a more effective and equitable method of financing improvements in city areas is stressed again in a statement by the Director of Town-Planning, Mr. J. W. Mawson. “Nobody, apparently, challenges the justice of the ‘betterment’ principle; that is, the contribution by propertyowners to the cost of public improvements in proportion to the benefits received,” says the statement, “but there is a considerable conflict of opinion as to the proper method of applying this principle.” When some public work, say, the widening of a street, is carried out, property-owners in the immediate vicinity benefit infinitely more than those in other parts of the city. In the past the increase in rates on this particular area through the higher valuation has been held sufficient to pay the governing authority for the expenditure, but this has proved not to be the case. The system is also open to grave abuse by speculators. Mr. Mawson mentions four methods of collecting “betterment” as used in other countries. These are excess condemnation, special or benefit assessment, increment taxation and pooling. Excess condemnation, for which the City of Wellington alone in New Zealand has unrestricted statutory powers, means the taking by public authority of more land than is actually required for the improvement and selling or leasing the surplus in order to secure to the community any increment in lard values directly due to the expenditure and the control of land in the immediate vicinity. The scheme has proved a great success in England and America, but needs a large amount of capital. It generally results in good gains by the city. Under the special assessment scheme each property owner pays a capital levy according to the amount by which his property is calculated to have increased in value. The total amount raised is approximately equal to that expended. This system is also widely used in America. Increment taxation is a tax upon the increa.se in land values directly due to tho improvement. It is more practicable than might be supposed as land values are almost invariably calculated on anticipated future rather than present benefits. The pooling of properties by the owners for the purpose of improvements is by no means the least practicable method. Tho largest and most successful example of this scheme was in the case of the city of Salonika, when 4.500 properties were destroyed by fire in 1917. The owners formed an association, each member receiving bonds to the market value of his original holding. The sites were then sold by public auction, realising a handsome profit for all, even after all charges for public services had been met. “The test which ought to be applied when considering the particular method of financing an improvement, is to ask whether it could be carried out as a commercial proposition by private enterprise,” concludes the statement. “That is to say, would it be likely to yield a profit on tho capital employed commensurate with the risk. If the answer is in the affirmative, a strong case can be made out for the employment of either excess condemnation or pooling, because, in addition to the benefits resulting from the increment in property values, these two methods which, in effect, bring the whole of the land Into single ownership for the time being, enable a complete resubdivision of the building sites, without which, in many cases, the full value of the improvement could not be realised.