Pages I refer to often

  • Income Distribution in the US
    How is our income distributed? Well, it is pretty concentrated. How concentrated? Take a look.
  • Progress and Poverty, by Henry George
    Here are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!
  • Wealth Concentration Tables from 2004 SCF: Bottom 90%, Next 9% and Top 1%
    Aggregated data by net worth quantile, for various kinds of wealth. With calculations you won't find anywhere else!
  • Wealth Concentration Tables from 2004 SCF: 50-40-5-4-1
    These tables show how concentrated the ownership of various kinds of assets are. With calculations you won't find anywhere else! This version is less aggregated: Bottom 50%, Next 40%, Next 5%, Next 4% and Top 1%.

Categories

Books I Value

  • Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy
    This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
  • Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It!
    This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm

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January 23, 2010

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Chuck Kollars

Q1- Doesn't the sale price of a house include not only the house and the lot, but also access to the "shared" facilities?

Q2- How did you obtain separate assessor figures for he houses and for the lots? I'd like to do a bit of research of my own too, and it's obvious you've already found the sources. (I'm used to the tax assessor combining the house and the lot into a single number; separate numbers for house and lot isn't something I'm used to.)

LVTfan

Chuck,

I'm not sure that it is the sale of the house that provides that access. Rather, it is payment of the required land rent to the Feoffees. (I'm making a slightly finer distinction here, but am basically agreeing with you.) Does that mean that the assessor's valuation of the common spaces is correct? I don't know -- and I'm not sure how I'd go about trying to figure that out.

I'm guessing that at least some of the already-subdivided lots could be rented out without reducing the value of the other properties, particularly since the septic issue was remedied by investment in a new plant a couple of years ago. (And properties now limited to seasonal use might be granted year-round rights, raising their value hugely; my impression is that the seasonal requirement was necessary to let individual septic fields rest.)

But I'd have to agree with the point I think you're driving at in Q1: that the commons has huge value, and that "individualizing" a large share of the commons would reduce the rental value of the existing lots. The Feoffees would need to make some guess about where the rent of the total would be maximized.

To your second question, the Ipswich Assessor's database is online, and it does value land and buildings and some other improvements separately. This is good practice. The best practice is to value the land first, and then treat the existing buildings as the difference between the value of the land and the value of the total property. (See http://www.wealthandwant.com/themes/Building_Residual_Method.html and http://www.wealthandwant.com/themes/Land_Residual_Method.html for more about this.)

I've looked at assessments in a number of towns and cities, and they vary widely in quality. California's, for example, are nearly useless, since property values are frozen at 1976 levels by Proposition 13 for those who have owned their property since 1978, subject only to a 2% annual increase in assessment, even if market value rose 10% or more per year! In Sussex County, Delaware ("lower slower Delaware"), they're working with values from the 1970s, with a valiant attempt to value new construction at what it might have been worth then, which results in horrendous inequities between those who have improved and those who retain 1950s cottages on fabulously valuable sites. Greenwich, Connecticut, values its land first, recognizing that even homes that would be considered mansions elsewhere stand a significant chance of being replaced after the sale of the land on which they sit. NYC's property valuations appear to me to bear no consistent relation to reality. Philadelphia's assessments have been the subject of a lot of articles, with poor people's homes being valued at a much higher percent of their market value than rich people's homes are, resulting in taxes being shifted off the wealthy and onto the poor.

Within any particular community, getting the assessments right -- that is, to within about 5% of market value -- is doable and is vitally important to justice, as well as to having an efficiently-functioning local economy.

Chuck Kollars

Thank you for replying to my questions about your blog posting! In the assessor's database (thanks for the pointer), lots 24C_001 through 24C_173 are on Little Neck. Lots 24C_174 through 24C_191 however are on Great Neck (not Little Neck). And to confuse things even further, most of "Little Neck Road" is the road _to_ Little Neck (rather than _on_ Little Neck), so a "Little Neck Road" address usually does not mean the lot is on Little Neck.

Let me now say a few further things (these unfortunately are all mixed up; some of them should go with other blog posts rather than this one; muy apologies in advance):


I'm less sure who exactly actually conveys the checks for paying the local property taxes on the non-common lots; I suspect it's not the same for every lot. In any possible cases where the Feoffees pay the town, it's effectively a "pass through", so from the right vantage point the tenant is really paying even though their name may not be on the check. The Feoffees are not paying any of the property taxes on any of the lots out of their "profit", and I apologize if I seemed to suggest otherwise.

The distinction of whether it's the "purchase price" or the "rents" that provide access to the shared facilities seems to me a bit of hair splitting. Another way of looking at it is they _both_ play a part in providing access to the shared facilities. Yet another way of looking at it is the purchase price buys the "privilege" of paying the rents that in turn provides access to the shared facilities. I think it's true that in any case current "purchase prices" are significantly higher than they'd be without the shared facilities.

Whether the Feoffees "own" the land or are "just trustees" is legally murky. Even a historian who's spent a lot of time looking at three-century-old documents can't figure it out plainly. A "Letter to the Editor" (of which there have been quite a few, most quite obvious about which "axe to grind" they're behind) is often a poor source of accurate information.

Likewise whether the land can be sold isn't as clear as it seems at first. To follow the spirit of the bequest, there must be _some_ sort of capital generating _some_ sort of income at least yearly. But whether the trust continues to own real estate and collect rents, or is converted to a "money trust" that invests the proceeds and collects the interest, does not seem very important. Neither mortgages nor interest bearing accounts existed in 1640 New England, so the easiest way to express the meaning "don't liquidate the trust" was to simply say "don't sell the land". Nowadays the Massachusetts Probate Court likely won't be a stickler for an over-literal interpretation of those words. (Media reports of an attempt to "break the trust" are sensationalist, not accurate.)

"A 'sewage plant' was installed" might seem to mean something more than the reality. The new facility is only a huge common holding tank, which is emptied by a stream of tanker trucks. In high summer that stream of tanker trucks is almost continuous. The system satisfies state requirements, and it allows every house to be hooked up to "the sewer" ...but not much more.

Calling the single large lot simply "untenanted", while strictly accurate, may miss the larger point. Currently Little Neck is a "Summer Colony" with lots and lots of "shared" facilities. As noted in our previous comments, the cost of the use of all that shared land is reflected in the prices of all the other lots. So long as Little Neck remains a functioning "Summer Colony", that large lot is not really open to be "tenanted".

Knowing Little Neck is a "Summer Colony" may help explain the strange valuations. Most of those "houses" are nothing more than vacation bungalows; comparing them to "real houses" is apples and oranges. They're quite small, they're mostly not even heated; they're de-facto limited to small size and one story; and they sit on tiny lots.

Changing the use of Little Neck from "Summer Colony" to "ocean view residences" would of course change all the valuations (including assessments) *drastically*. There'd no longer be any "shared" facilities. On the other hand just the thought of unrestricted building of permanent residences would immediately raise the question of the current lots being too small and needing to be re-platted. Building traditional year-round houses would also raise questions about parking (probably insufficient), fire access (probably inadequate), and electrical service (likely also insufficient). And valuations might be less than one would expect because there's so little soil there; Little Neck is basically one huge rock where you can't build much of anything without blasting (just ask the contractor that installed the sewer pipes).

Is _maximing_ the collected rents worth killing off the Summer Colony? The answer isn't obvious ...at least not to me. (Killing off the Summer Colony is what many proposals for Little Neck's future really imply, even though they don't present that reality straight on. There are probably hidden agendas here; for example comments about "social snobs" seem only dimly related to property values.) Is there some sort of "halfway" resolution that will significantly increase the rents and the number of tenants, yet not kill off the Summer Colony? Probably not. Is there some sort of resolution that will generate "more reasonable" income while preserving the Summer Colony? I think so.

lvtfan

Chuck, thank you for the thoughtful reply. I have in mind that when I looked at the assessments, I paid attention to who was listed as the owner for each site. There were a few that looked, based on their addresses, as if they should be Feoffee-owned, but didn't appear to be based on the Assessor's database.

These may be vacation bungalows, but the asking prices the last time I looked clearly reflected a lot of locational value. As someone pointed out, a photo of Little Neck from the water does not begin to describe what Little Neck offers in terms of views.

And since 24 of the sites are granted year-round occupancy rights (I know a few of them, based on real estate ads I've seen, but not very many -- I'm sure they don't hit the public market very often, changing hands privately if they do change hands at all.)

I see current listings for $599,000 (1779 sf), $585,000 (1318 sf); $579,900 (no sf listed); a couple at $449,900 which I suspect are LN; $425,000 (1018 sf - specifies summer only "at the moment"); $399,000 (1408 sf); $399,000 (824 sf - 1BR); $375,000 (1160 sf); $134,900 (764 sf). I've probably missed a few.

I'm puzzled about your statement about who is paying the property taxes on the Little Neck land. Seems to me that if it is being billed to the Feoffees, they are paying it, out of the rent the tenants pay for the use of the lots. It doesn't get tacked on to the land rent; it is a deduction from it, in terms of what is left to the Feoffees for covering other costs and sending rent on to the Ipswich Public Schools.

My spreadsheet (a year or so old, and probably 90% to 95% complete) shows a bunch of rented lots properties for which the annual land tax runs $1700 to $1800; another group in the $2100 range, and then a bunch in the $2600-2800 range. So if the Feoffees are collecting $9,700 in land rent and paying to the town $1750 or $2700 in taxes on the land, there is only $7,000 or $8,000 left for other things -- frequent emptying of the septic tank, likely into the town's sewer system, lifeguards (?), maintenance of the common amenities, other services provided to tenants, plus whatever reserves are appropriate for maintaining other services the town doesn't provide -- and, of course, the point of the whole thing, providing INCOME to the public schools.

I tend to agree with you that the large common lot contributes greatly to the value of the individual lots as rentals. However, the assessor's map also shows a number of other lots which have been subdivided, and I suspect some number of those could be rented without reducing the value of the other lots. (I would bet that if the tenants somehow manage to overturn the trust and buy Little Neck, some of those lots will be sold off PDQ for their benefit. Just a guess.)

The mandate of the trust, as I understand it, was to provide maximum income to the public schools of Ipswich. I'd be puzzled if someone tried to argue that there was a higher goal, particularly if it somehow was to make the tenants' interests a higher priority than the beneficiaries.

I can't imagine that the tenants are being billed for the taxes on land they don't own, and I can't see how the Feoffees would be set up to bill the tenants for taxes on their land or on their buildings. The tax on the buildings and other improvements is between the tenants, who own the buildings, and the town of Ipswich; I'm sure the taxes on the land -- tenanted and untenanted -- are billed to the Feoffees and not passed along to the tenants in the form of bills over and above the land rent.

Chuck Kollars

To try to answer one of your questions, and ask for more details about another:

Yes there has been a steady public drumbeat (repeated by the media without doing hardly any independent research) for many years that the mandate of the trust is to provide the maximum income for Ipswich schools. (This interpretation comes especially from the "private opinions" of former and even current School Committee members.) But although currently that's by far the most common and most publicized interpretation, the legal history of the trust does not give it unqualified support. After researching trust history, the Ipswich Town Counsel in 1991 presented the opinion that proceeds from the sale of Little Neck could be donated not to the School Budget but rather to the General Government Budget. That sounds to me like the trust should benefit "the town" (whatever that means:-), not just "the schools". It feels to me like the issue of just who should benefit and how is really much murkier than is usually stated.

What's a specific example of a lot that's been subdivided? In looking at the assessors' map (http://www.town.ipswich.ma.us/Assessor/maps_sm/24C.pdf), I see a few odd-shaped lots and a few lot numbers with an 'A' on the end. But the only lot I see that's significantly different in size is lot 073 (which does not appear to have been subdivided anyway), and I don't see any other evidence of subdivision. Can you help me see better?

lvtfan

I assume that when the trust was created, the town existed and the schools existed. If so, and they were separate entities then, I have difficulty understanding how one could interpret the trust that way. But I'm not a lawyer, and I've only read the extract of the trust document I found online.

But I doubt that the trust was created with the tenants in mind as beneficiaries -- be they farmers from within the town borders or beyond, or summer cottage residents from within town or beyond! Specifying "market rent" pretty well says that the Grantor didn't intend the trustees to offer any bargains on the rent.

According to my (fairly trusty) spreadsheet (created between 1 and 2 years ago, so it may not reflect the newest valuation -- sorry!), there are about 42 individual lots owned by the Feoffees with no buildings on them, a number of which are 0.69 acres and some a bit larger. They're on Middle, Gala Way, Hilltop, River. and one on Baycrest. Each has a number, so they are apparently real addresses. They total 2.875 acres. The other Feoffee land is the 11.00 acre common land (my characterization).

The assessor values them at 10% of what a comparably sized occupied lot is valued at, from $18,000 (Hilltop, Cove, Gala, Plum Sound, Kings, Baycrest) to $29,800 (River, Baycrest). Occupied lots are valued at from $161,600 to $343,500.

It has been a while since I looked at the map, but my sense is that these unoccupied lots wouldn't look any different from the occupied ones. Ah -- maybe comparing the assessor's map with a satellite view on google maps might help, too. You'd need to look at the assessor's database and notice which ones have no buildings on them.

Chuck Kollars

Just to clarify: the wording of the "trust document" you quote is from a proposal for trust clarification/revision, drafted around 2005 by lawyers at Casner & Edwards LLP, and intended for presentation to the Massachusetts Probate Court. (Although intended for that purpose, neither it nor anything else has ever actually presented to the Massachusetts Probate Court to date.)

If only the original trust was that clear... the actual original trust documents include i) portions of the will of William Paine, ii) a vote of Ipswich Town Meeting and accompanying records, and iii) three legislative acts by the Massachusetts General Court. The lack of any clear legal trust document -especially from the early days- continues to bedevil this issue.

(If you locate any of the original trust documents online, please let everybody know where they are - so far I've never been able to find any of the trust documents online.)

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