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Charges on Homes, Offices, Shops to Fund Rapid Transit

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London Mayor Plans Charges on Homes, Offices, Shops to Fund Crossrail Link


Jan 17, 2011

By Peter Woodifield

Read More: http://www.bloomberg.com/news/2011-...-property-developments-to-fund-crossrail.html


London Mayor Boris Johnson today proposed charges on new homes, offices and shops to raise 300 million pounds ($477 million) to help fund the Crossrail link between Heathrow Airport and the city’s financial districts. Developers in seven central London boroughs, including Kensington and Chelsea, Westminster and Camden will pay a levy of 50 pounds a square meter on all developments with a gross internal floor space of more than 100 square meters (1,076 square feet), the Mayor’s office said in an e-mailed statement. The levy will also apply in the City of London, the main financial district, which Johnson doesn’t control.

“Every corner of London will benefit once construction is complete,†Johnson said in the statement. “It is right that the sector that will benefit so much should make its contribution and I am confident that this will not hinder development in the capital.†Crossrail, which will cost 15.9 billion pounds, is Europe’s largest construction project. It will link Heathrow, the world’s biggest international airport, with the West End entertainment district and offices in the City of London and Canary Wharf starting in 2018, relieving pressure on the aging London Underground railway. The journey time between Heathrow and Canary Wharf will be cut to 43 minutes from around 70 minutes today. The line will be 118 kilometers (73 miles) long and carry about 200 million passengers in its first year of operation, the statement said.

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It would be an example of PPP done right, to tax already existing properties in the serviced areas and especially the new developments.
 
A tax to directly pay for a major infrastructure project? Maybe if we did this rather than generic taxes which go into general revenue while at the same time beg the province and feds for cash, things would get done in this city!

the Fordinites will cry bloody murder and will make the TTC have be like the 407 if any major project is to be done other than tc since its partially covered, and then they can stay happy for another 9 years until they notice that the price of gas hikes massively
 
A tax to those who would benefit by having their property values increase as a direct result of rapid transit service to them and businesses that would gain more. And of course the development that would take place directly because of that transit, why not tax them before they get in as also a negotiating tactic.
 
Will this tax just have the unintended effect of discouraging development along the Crossrail line?
 
They use a Community Infrastructure Levy.

http://www.communities.gov.uk/documents/planningandbuilding/pdf/1772940.pdf

- It allows local authorities in England and Wales to raise funds from developers undertaking new building projects in their area. The money can be used to fund a wide range of infrastructure that is needed as a result of development. This includes transport schemes, flood defences, schools, hospitals and other health and social care facilities, parks, green spaces and leisure centres.

- The Community Infrastructure Levy charging authorities in England will be district and metropolitan district councils, London borough councils, unitary authorities, national park authorities.

- The Government has decided that this tariff-based approach provides the best framework to fund new infrastructure to unlock land for growth. The Community Infrastructure Levy is fairer, faster and more certain and transparent than the system of planning obligations which causes delay as a result of lengthy negotiations. Levy rates will be set in consultation with local communities and developers and will provide developers with much more certainty ‘up front’ about how much money they will be expected to contribute.

- The Community Infrastructure Levy also has far greater legal certainty. It provides the basis for a charge in a manner that the planning obligations system alone could not easily achieve; enabling, for example, the mitigation of cumulative impacts from development.

- Almost all development has some impact on the need for infrastructure, services and amenities - or benefits from it - so it is only fair that such development pays a share of the cost. It is also right that those who benefit financially when planning permission is given should share some of that gain with the community which granted it to help fund the infrastructure that is needed to make development acceptable and sustainable.

- However, developers should have more certainty as to what they will be expected to contribute, thus speeding up the development process, and that the money raised from developer contributions should be spent in a way that developers will feel worthwhile; namely, on infrastructure to support development and the creation of sustainable communities set out in the Local Development Framework. This is what the levy will do.

- The introduction of the levy has the potential to raise an estimated additional £700 million pounds a year of funding for local infrastructure by 2016.

- Local authorities are required to spend the levy’s revenue on the infrastructure needed to support the development of their area and they will decide what infrastructure is needed. The levy is intended to focus on the provision of new infrastructure and should not be used to remedy pre-existing deficiencies in infrastructure provision unless those deficiencies will be made more severe by new development.

- Charging authorities will be able to use revenue from the levy to recover the costs of administering the levy, with the regulations permitting them to use up to 5 per cent of their total revenue on administrative expenses to ensure that the overwhelming majority of revenue from the levy is directed towards infrastructure provision.

- The Planning Act 2008 provides a wide definition of the infrastructure which can be funded by the levy, including transport, flood defences, schools, hospitals, and other health and social care facilities. This definition allows the levy to be used to fund a very broad range of facilities such as play areas, parks and green spaces, cultural and sports facilities, district heating schemes and police stations and other community safety facilities. This gives local communities flexibility to choose what infrastructure they need to deliver their development plan.
 
Interesting idea. They use the term 'levy' in the article, but they do not state whether this is a recurring tax, or a one-time payment to help pay for construction. The definition of 'levy' is somewhat vague, as it can mean either a one-time payment, or a recurring payment.

For a city like Toronto, I think a one-time payment would work best, coupled with an increased land transfer tax for anything within 500m of a rapid transit station. That way, the money is collected at first to help finance the construction, and then is collected again when the property is sold for densification. Also, in order to avoid a 'defined line', where House A pays the full levy, and House B, right next door, pays nothing, maybe the levy should be a function of distance (for example: ($25 per sq metre) - $10x, where x is the distance away from the rapid transit line). This would help ensure that the people who are closest to the line pay the most, and it decreases as you get further away from the line, until the levy is $0. Just a thought.
 
This would help ensure that the people who are closest to the line pay the most, and it decreases as you get further away from the line, until the levy is $0. Just a thought.

Wouldn't this have the effect of depressing property values along the route? How about user pay instead of a tax on non users who happen to live close to a station but never use it. Raise the fare.
 
Wouldn't this have the effect of depressing property values along the route? How about user pay instead of a tax on non users who happen to live close to a station but never use it. Raise the fare.

How would it depress property values? Studies have shown that proximity to rapid transit raises property values. The idea would be that a one-time fee for those who would benefit most from the line would be levied in order to help pay for the line. Even if you don't use the line, the amount you'd get for increased property values would probably be more than the amount that was levied from them.

The idea is that if you can raise $100 million or so (depending on the length of the line, possibly more), that that would help reduce the amount of money the government has to spend to build the line.

As I said before, I think a one-time levy would work best, because any rapid transit line built in the city should be profitable, and therefore shouldn't require on-going subsidy. The capital is the hurdle that needs to be overcome.
 
And particularly new developments that don't exist yet along the routes, particularly if their incentive to build there is because of the new route.
 
And particularly new developments that don't exist yet along the routes, particularly if their incentive to build there is because of the new route.

Exactly. That's where the increased land transfer and/or development permit levy comes in. The levy would be based on a combination of amount of sq footage, and distance away from the nearest station. Those two factors would determine what kind of additional fee is placed on either the sale of the land, or the development permit application.

EDIT: Theoretically, this type of levy could be done against every new development in the city, because every development is x number of metres away from a rapid transit station. Just in some cases, it's just so far away that the 'x' value renders the fee to be $0. But say if a developer wants to put up a new condo near Bloor-Yonge, the levy would be applied as well. It doesn't necessarily have to be for just new lines.
 
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To make a long story short also since new rapid transit lines spurs development around the lines then why not charge them something, but treat it more like a co-operation to compliment each other particularly with station building and what's integrated into it. This particular method may very well have merit, especially since there's a chance to see how it'll work out with this London line.
 

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