TOWN PLANNING

Dominion, Volume 23, Issue 5, 1 October 1929, Page 12

TOWN PLANNING

BETTERMENT PROBLEM

MR. MAWSON REPLIES TO CRITICISM

"Nobody, apparently, challenges the justice of the betterment principle, or In other words, the contribution by property owners to the cost of public improvements in proportion to the benefits received, but there is a considerable conflict of opinion as to the proper method of applying this principle,” said the Government Town Planner (Mr. J. W. Mawson) in reply yesterday to criticism of remarks made by him recently on the necessity of finding a more effective and equitable method of applying the principle of betterment as an alternative, to the present method of financing public improvements out of borrowed money. “I am told, for instance,” said Mr. Mawson, “that it is impossible to assess the benefit which may accrue from any particular improvement, but that inasmuch as these benefits are reflected in the appreciation of the value of the property affected and consequently in the valuation of rating purposes, the betterment principle is automatically and scientifically applied by assessing the rates on these higher valuations. Overlooking the very obvious inconsistency in this argument, the fallacy of the theory on which it is based can be readily demonstrated by a simple practical test. An Example. “We will suppose that the City of Wellington carries out a comprehensive scheme of street improvements in the central business area at a total cost of £1,000,000. These improvements are, shall we say, in the nature of street widenings for the relief of traffic congestion, and are paid for out of a loan secured upon a special rate levied over the whole of the rateable property in the city. Now, I will exaggerate the case by assuming that these improvements, so far as they are reflected in the appreciation of property values, are of purely local benefit, or at least that the properties in the immediate vicinity of the improvements have appreciated in value at a higher ratio than the average appreciation over the city as a whole, for it is on this margin of benefit that the case for special assessment and increment taxation rests. We will assume, then, that there is a margin of benefit in the form of an increment in property values to the owners of property in the immediate locality of the improvements, to the full amount of the £1,000,000 expended on those improvements.

“The valuation for rating purposes of the city as a whole before the improvements were carried out was, say, £20,000,000 and of the property in the specially benefited areas £4,000,000. Eliminating any general benefit or increment, which applies equally to properties outside the specially Jenefited areas, and adding the margin of benefit of £1,000,000 only, we should -then have a total valuation of £21,000,000 for the city, and £5,000,000 for the specially benefited areas. Now, accordin’g to my critics, it is sufficient to lev(r a uniform city rate on this margin of benefit in order to secure the. application of the betterment principle. Very well, let us examine the matter in a little more detail. Gains Against Losses. “There are two ways in which the ratepayers outside of the specially benefited areas are affected: (1) By the relief in rates due to the increased valuation, excluding the additional loan charges necessitated by the improvements ; (2) the incidence of the rates levied to meet the new , loan charges. In tho first case the immediate effect of the £1,000,000 increase in the rateable value would, theoretically, be a reduction in the rates of .286 pence in the £l. In the second case the loan charges on the £1,000,000, representing the cost of the improvements at, say, 6j per cent, per annum, would amount to £65,000 per year, and to raise this sum would require a special rate of .743 pence in the £1 on the £21,000,000 valuation. • i “Balancing gains against losses, the result would be a net increase in the city rates of .457 pence in the £l. In round figures this means that the ratepayers outside of the specially benefited areas would have to find on balance a sum of £30,480 per year towards the cost of improvements, the direct effect of which has been to put a cool million pounds into the pockets of a comparatively small number of property owners. That is certainly not my idea of the best method of applying the betterment principle. On the contrary, it is a system open to grave abuse by speculators. “In any case, the above argument does not meet the point I was trying tq make, namely, that a method should and could be found of financing a substantial percentage of the cost of our public improvements without adding to the municipal debt or the rates burden. My critics are merely proposing to perpetuate a system which has definitely failed in other countries. “In most countries, including England and America, there is a statutory limit to the borrowing powers of local authorities, and when this limit has been reached, further improvements have to be abandoned or some other method devised of finding the necessary capital. Methods which-have been employed with success 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 improvements, and selling or leasing the surplus in order to secure one or all of the following Objects:— * “(1) To secure to the community any increment in land values directly due to the improvement. “(2) To minimise claims for compensation through severance and unsaleable remnants.

‘(3) To protect the usefulness and value of the improvements by the readjustment of the boundaries of the building plots and by controlling the utilisation of the land abutting on or in the vicinity of the improvements.”. Mr. Mawson proceeded to explain systems in practice in other countries, and maintains that higher values are due to improvements. He concluded by stating that perhaps the largest and most successful pooling scheme ever carried out was the restoration of Saloniko, conducted under his direction nft.r the disastrous fire in 1917. ‘I agree with Professor Belshaw. concluded Mr. Mawson. ’that a very wide field of investigation in the realm of municipal finance is open to us, ,and we have everything to gnin and nothing to lose by undertaking such nn investigation.”