Land value capture

This research is about assessment for public land leasing and property taxation in financing roads infrastructure. The area of study was Mbeya city in Tanzania, within which researcher identified three locations of concern namely Forest area, Iwambi area and an area of 500 metres in each side along Ilomba-Machinjioni road. In Forest area the study was about assessment for property taxation and property market, whereas in Iwambi area it was about public land leasing and land market and in Ilomba-Machinjioni road it was about studying the impact of the road infrastructure to land values in the neighbourhood. The main objective of this study is to make assessment of the set up and performance of two financial instruments namely public land leasing and property taxation on how they can capture land values to finance roads infrastructure. The assessment is geared to find out (a) whether the instruments capture the value of land (b) how far revenue generated by these instruments can contribute to the roads infrastructure investments and (c) the impact of roads infrastructure to land value increments. Methodology used in this study is explanatory case study approach with single embedded case. However the researcher applied quasi-experiment technique when studying the impact of Ilomba-Machinjioni road to land value increments. Data collection method was interview. During this study it was revealed that taxable values used by Mbeya city council in revenue collection from land rents, premiums and property taxation are lower than open market values prevailing in the land and properties. It was revealed that premium is generating more revenue than land rents and property taxation. In comparison between revenue and costs of roads investment it was revealed that premium is able to afford costs of establishing new roads if at all production of plots is made at least once a year. In roads maintenance it was revealed that revenue from land rents and property taxation are lower than costs. Finally it was revealed that roads infrastructure contribute a lot to the increments in land values. It should be noted that researcher decided to compare revenue from premiums with costs of establishing new roads because new roads are established occasionally and premium revenues are collected occasionally when there is production of plots. Costs of road maintenance were compared with revenue from land rents and property taxation because maintenance is done annually and some times during a contingence whereas revenue from land rents and property taxation are collected annually. Mbeya city council is advised to increase more revenue in premiums by producing plots and putting them in the market at least once a year because it generates more revenue from this source. Ministry of land (MLHHSD) is collecting land rents in all local governments (Mbeya city council inclusive) and retain only 30% of revenue to meet collection costs and enhance more collections. It is advised this revenue source to be decentralised to local governments in order to boost their financial capabilities in public expenditures. Since roads infrastructure increases land values, more investments is advised in roads infrastructure to increase revenue in land value capture. In property taxation it is advised taxable values to include market value of land and not only buildings. Mbeya city council is advised to update taxable values in the database to reflect market values of land and properties. Finally Mbeya city is advised to increase commitment and enforcement in collection of land rents and property taxes in order to increase revenue for roads maintenance.