A friend passed along this excellent piece, from the City Club of New York just over 100 years ago. It is long, but highly instructive, and quite relevant in the 21st century.
Do you want to know the mechanisms by which we concentrate wealth into the portfolios of a narrow slice of our population? Read this. Read Fred Harrison's Wheels of Fortune. Watch Fred's brief video, Ricardo's Law: The Great Tax Clawback Scam:
And consider a town or city you know. Is your experience any different?
Why on earth would we finance infrastructure any other way? Well, California's Proposition 13 is designed to make sure California can't. No wonder the state is in such trouble.
Remember what Leona Helmsley told us: "WE don't pay taxes. The little people pay taxes." She wasn't talking about tax evasion; she was describing tax structure. THIS is how wealth concentrates.
The reference to Spuyten Duyvil is to the point where today the Henry Hudson Bridge, on the parkway of the same name, crosses from upper Manhattan into Riverdale, in The Bronx. (It refers to devilish currents in the rivers, which menace unsuspecting rowers.)
A Memorandum Addressed to the Board of Estimate and Apportionment
And The Public Service Commission of New York City.
55 West 44th Street
October 2, 1908
The Board of Estimate and Apportionment and the Public Service Commission:
Dear Sirs:
The City Club respectfully submits for your consideration the results of inquiries made through its Transit Bureau with relation to the feasibility of meeting the cost of future subway extensions by means of assessments on the property benefited.
The city urgently needs more rapid transit roads. Private capital seems disinclined, at present at least, to finance the work of building. The city's borrowing power is utterly inadequate to cover the need, and will be until relief may be secured through the slow process of constitutional amendment. If the necessary lines are to be built, it seems self-evident that other methods must be considered.
The Club's investigations show that in the outlying districts reached by the present subway, and to some degree the nearer sections, the value of the property served has increased to an extraordinary degree. This added value would have paid for the cost of the work several times over. While the city as a whole has benefited greatly, the scale of local benefit is naturally much greater. In our judgment, it would not only be helpful as a solution of the problem, but far more equitable to charge a proportion of the cost of constructing a rapid transit line to the property most benefited by such construction.
The argument is elaborated, and the exact results of the Club's investigation given, in the accompanying memorandum. We trust that this may have your examination, and that if the plan commends itself to your judgment, the future policy of the city may be shaped accordingly.
Homer Folks, Chairman, Transit Committee.
Henry C. Wright, Bureau Director.
BY ASSESSMENT UPON PROPERTY BENEFITED
For many years the city has deemed it just to assess upon abutting property the cost of opening streets and building sewers. The theory of such a tax upon property is that it receives almost the exclusive benefit from the construction of a street or sewer adjacent to it. The question naturally arises, does not a transit line, by the benefit that it confers, fall in the same class as new streets and sewers? If a street railroad or rapid transit line be extended into an undeveloped territory, is it not built primarily for the purpose of furnishing transit facilities to future residents in that section? People will buy this property primarily because it has good transit facilities and the value placed upon it is largely based upon its accessibility. This being true and universally admitted, why should not the property thus enhanced in value by the extension to it of a transit line pay for the construction of such line, to the extent that the increased value warrants it, instead of receiving such increased value as a present from the city. This principle, in a modified and unofficial form, is operated in Berlin. The assessment is not collected by the city, but the street car company when extending a line to outlying territory requires the owners of the property benefited to guarantee to the company a certain return upon the cost of such extension.
To throw light upon the above question, the City Club has been making some painstaking investigations extending over several months, of the rise in value of land along the present subway. The method of arriving at these value was as follows: Assessment values, as given by the Department of Taxes and Assessments, were taken for the year of 1900 on vacant lots on a basis of 60 percent of full value for the district from 79th to the Spuyten Duyvil; 65 percent between Central Park and Harlem River, and 60 percent in the Bronx. These were compared with the assessment values of 1907 on a 90 percent basis for all these districts, and in each case the full value was obtained by raising the assessment figures to 100 percent. In the districts which were largely built up all vacant lots were listed. Where there were few buildings, as in the extreme northern portion of Manhattan, a sufficient number of such lots were taken to show the general land values, and from these was figured the total value for this district. To ascertain the proportion of the increase in land value attributable to the building of the subway, it was necessary to deduct from the total rise what might be termed a normal rise, or the increase that would have taken place through the natural growth of the city without the added stimulus of a new transit line. The only basis of arriving at a judgment of what such a normal rise probably was is to ascertain the rise for a period of equal length under normal conditions. Accordingly the increase in value of the same land during the preceding seven years from 1893 to 1900 was determined. It was found that values rose during this period of seven years on an average of about 50 percent in the district on the west side below 135th Street, and on an average of about 43 percent from this point northward to the Spuyten Duyvil. These percentages, then, may be taken in these districts as the best basis ascertainable for a judgment as to the normal rise for a period of this length, and if subtracted from the rise which took place along the subway from 1900 to 1907, should indicate the effect of the subway on land values during the latter period.
By applying this method it was discovered that the land from 79th up to 110 Street and between Central Park and North River had increased on an average of 45 percent, which is about the expected normal rise. In the district along the Lenox Avenue line south of the Harlem River the average increase was about 43 percent, which would indicate that land had not increased in value due to the building of the subway. The explanation of this unexpected condition is no doubt that an elevated road already existed which gave fair service to these districts, so that the additional facilities had little effect on land value, except in the immediate
vicinity of subway stations.
The rise in land value along the Broadway branch from 110th to 129th Street was much more noticeable, averaging about 70 percent, but the locating of Columbia University at this point affected values to an extent that makes it quite impossible to arrive at any reliable conclusions as to the proportion of rise that should be attributed to the subway.
The situation from 135th Street northward, however, is entirely different. Between 135th Street, 155th Street, Convent Avenue and North River the land increased in value between 1900 and 1907 about $17,825,000. Although the elevated road paralleled this district, yet owing to the topography the road was of little service, so the subway added very materially to the transit facilities in the locality.
The district between the Harlem and North Rivers from 155th to 178th Street increased in value about $22,450,000; from 178th Street to Dyckman Street the increase was about $15,925,000; from Dyckman Street to the Spuyten Duyvil the increase was about $13,100,000. The aggregate rise in this land from 135th Street to Spuyten Duyvil was about $69,300,000. If an estimated normal rise of $20,100,000, based upon the rise of the previous seven years, be subtracted from this, it leaves a rise of about $49,200,000, apparently due to the building of the subway, which is 104 percent increase on the value of 1900.
The rise in land values of The Bronx is likewise very noticeable. Taking a district along the subway extending in width about a half mile on either side, the increase in land values was somewhat as follows: From the Harlem River to Willis and Third Avenues the rise was about $9,200,000; from that point to Prospect Avenue, about $22,100,000; from the latter point to Bronx Park, about $13,500,000. The aggregate rise in land values for this district from the Harlem River to the Bronx Park was about $44,800,000. Subtracting from this an aggregate normal rise of $13,500,000, it leaves an increase of $311,300,000, due to the building of the subway.
Since this property has been so enhance in value by the building of the subway by the city, could it not have contributed largely toward the expense of constructing the line and yet have reaped a good increase in addition to such assessment? As previously stated, the aggregate rise in land value above 135th Street in Manhattan caused by the subway was $49,200,000. The cost of building the subway from this point to 230th Street was $7,375,000, or but 15 percent of the actual rise caused by the new line. The property owners could have paid the entire cost of this portion of the line and yet have had a net profit on their land of 89 percent, or an aggregate of $41,825,000 for the district.
In The Bronx the situation was in most respects similar. The aggregate increase in land value (of a district extending about a half mile either side of the subway), due to the building of the subway, and in excess of a normal rise of $13,500,000, was about $31,300,000. The cost of the line from 143rd Street to Bronx Park was about $5,700,000. Had the property which was benefited borne this expense through the form of an assessment, after paying such assessment, there would have remained an aggregate profit of $25,000,000 in excess of the normal rise in value since 1900. This would be a profit of 77 percent on that property caused by the increased transit facilities of the subway.
It will be noted that the aggregate rise in land value in Manhattan from 135th Street to the Spuyten Duyvil, and in The Bronx, due to the building of the subway, was $80,500,000. The cost of the entire subway from the Battery to the Spuyten Duyvil and the West Farms branch to Bronx Park was but $43,000,000. The property benefited, in the districts above noted, could have paid this entire cost, and yet have had a net profit, due solely to its construction and operation of over $37,500,000. Had it paid only for the portion running through its own territory, there would have remained a profit of over $676,425,000. In view of this fact, would it not be reasonable to require property benefited in outlying districts to pay for the cost of a rapid transit line built to serve it?
The data gathered from the influence on land values of the existing subway may be applied to provisional rapid transit lines. Its application to the Fourth Avenue line in Brooklyn, contracts for which are under construction, would indicate that the land along this proposed line might not greatly rise in value, owing to the fact that it parallels, at a distance of one block, an existing rapid transit line. This assumption is based upon the fact that the building of the subway affected but very little the value of land west and north of Central Park, owing to the proximity of an elevated road which gave reasonably good service. The possibilities of an assessment plan may be best brought out by projecting a provisional line through territory largely unoccupied, having at present no raid transit facilities. The proposed extension of a rapid transit line through Jerome Avenue in The Bronx, if built as a reinforced concrete elevated structure, in order to make it noiseless, could be constructed for about $2,550,000, and, judging by the effect on land values caused by the existing subway in The Bronx, where the conditions were very similar, neither territory being within easy reach of a rapid transit line, such a new line would increase land values in the Jerome Avenue district fully $41,550,000. If the property holders were to pay for the cost of this new line, after having paid such assessment, they would still have a profit of 90 percent on their land as valued in 1907.
If, on the completion of the Blackwell's Island Bridge, an elevated road were to be constructed of reinforced concrete, to connect with it and to extend out Jackson Avenue to Flushing, with a branch leaving this main line at DeBevoise Avenue and following that avenue to the vicinity of Berrians Island, such a line would be about 9 miles long and would cost about $4,500,000. It would serve approximately 9 square miles of largely unoccupied territory, the aggregate value of which at present is not less than $57,480,000. On the basis of the rise in value caused by the subway line in The Bronx, the aggregate rise of this land in Queens would be $54,600,000. In other words, the landholders in this district could afford to pay for such new rapid transit line and yet enjoy an aggregate profit of $50,100,000, or a profit of 87 percent upon the present value of their land.
This plan would largely solve the problem that confronts the Public Service Commission in attempting to decide between factions, each contending for a line in its particular section. The sincerity of speculators and real estate venturers would quickly be tested by the requirement that their petitions be accompanied by an assurance of a willingness to be assessed for the cost of the desired line.
Since territory now served by a rapid transit line does not greatly rise in value due to an additional rapid transit line, it would probably be unjust to assess property adjacent to a new line in such districts. That is, a subway extending from the lower part of Manhattan to the Harlem River, or extending eastward under the East River and through the congested portions of Brooklyn could not just be assessed wholly upon adjacent property. Such portions of new subways, if built by the city, would probably have to be paid for wholly or in part at least by general taxation. It is very evident that property in the vicinity of a rapid transit line does not benefit equally; unsettled outlying territories would benefit most; territory in the vicinity of express stations would rise in value more than that adjacent to local stations. There are many conditioning factors to be considered in any attempt to lay an assessment upon property for the building of rapid transit lines. These factors, however, are approximately ascertainable, and any judicious commission would be in a position to secure the facts as connected with the present subway, and, through them, would be able to lay an equitable assessment upon land according to the prospective benefit that it would secure. The legislative action conferring on the city the power needed to carry out this plan and providing for a better system of assessment and land condemnation could, no doubt, easily be passed.
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