Land Leasing and Land Sale as an Infrastructure-Financing Option
Municipal land sales provide one option for financing urban infrastructure investment. In countries where land is owned by the public sector, land is by far the most valuable asset on the municipal balance sheet. Selling land or long-term leasing rights to land use while investing the proceeds in in...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2006/11/7154705/land-leasing-land-sale-infrastructure-financing-option http://hdl.handle.net/10986/9020 |
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okr-10986-90202021-04-23T14:02:41Z Land Leasing and Land Sale as an Infrastructure-Financing Option Peterson, George E. ACCESS TO LAND ASSET SALES ASSETS AUCTIONS BETTERMENT TAXES BONDS CAPITAL BUDGETS CAPITAL COSTS CAPITAL PROJECTS CITIES COLLATERAL DEBT DEBT SERVICE DEVELOPMENT AUTHORITIES DEVELOPMENT BANKS ECONOMIC GROWTH ECONOMIC PERFORMANCE FISCAL CAPACITY FISCAL DECENTRALIZATION FISCAL DEFICITS FISCAL MANAGEMENT FISCAL REFORMS FISCAL RESPONSIBILITY HOUSING INCOME INFRASTRUCTURE LOANS INSTITUTIONAL ARRANGEMENTS LAND DEVELOPMENT LAND PRICES LAND PRICING LAND SUPPLY LAND USE LAND VALUE LARGE CITIES LAWS LEGISLATION LOCAL BUDGETS LOCAL GOVERNMENT LOCAL GOVERNMENT REVENUES LOCAL GOVERNMENTS LOCAL LEVEL LOCAL OFFICIALS LOCAL SPENDING LOCAL TAXES MUNICIPAL MUNICIPAL ACCOUNTING MUNICIPAL ADMINISTRATION MUNICIPAL BUDGETS MUNICIPAL CORPORATION MUNICIPAL FINANCE MUNICIPAL GOVERNMENT MUNICIPAL GOVERNMENTS MUNICIPAL INFRASTRUCTURE MUNICIPAL MANAGEMENT MUNICIPAL REVENUE MUNICIPALITIES MUNICIPALITY OPERATING EXPENSES PER CAPITA INCOME POLITICAL POWER PRIVATE SECTOR PRIVATIZATION PROPERTY TAX ASSESSMENTS PROPERTY TAXES PROVINCIAL GOVERNMENT PROVINCIAL GOVERNMENTS PUBLIC PUBLIC BORROWING PUBLIC EXPENDITURE PUBLIC HOUSING PUBLIC INVESTMENT PUBLIC OWNERSHIP PUBLIC POLICY PUBLIC SECTOR PUBLIC WORKS REGIONAL GOVERNMENT REGULATORY FRAMEWORK REVENUE COLLECTION REVENUE GROWTH REVENUE MOBILIZATION ROADS STATE BUDGETS STATE GOVERNMENT STATE GOVERNMENTS TAX TAX RATES TAX REVENUES TAXATION URBAN AREAS URBAN DEVELOPMENT URBAN INFRASTRUCTURE URBANIZATION USER CHARGES VACANT LAND WATER SUPPLY Municipal land sales provide one option for financing urban infrastructure investment. In countries where land is owned by the public sector, land is by far the most valuable asset on the municipal balance sheet. Selling land or long-term leasing rights to land use while investing the proceeds in infrastructure facilities can be viewed as a type of portfolio asset adjustment. This paper shows that in China many municipalities have financed more than half of their high rates of infrastructure investment from land sales, for periods of 10 to 15 years. Much of the remaining investment has been financed by municipal borrowing against the collateral of land values. Other countries also have turned to land sales and leasing for infrastructure finance. From a local perspective, land sales have the advantage that they typically are free from the intergovernmental restrictions that require higher-level approval for increases in local tax rates or user fees and that restrict local government borrowing. However, financing municipal infrastructure investment through land sales creates special risks that are not recognized in most intergovernmental fiscal frameworks. One danger involves the use of proceeds to finance operating budgets. Risk exposure is exaggerated by the highly volatile nature of urban land markets and evidence that in some countries urban land values in 2006 reflected a real estate bubble. In the past, Hong Kong, a jurisdiction that has relied heavily on land-leasing to finance its infrastructure budget, has seen land sales fall to zero at the bottom of the real estate cycle. The greatest financial sector risk stems from municipal borrowing based on inflated land values offered as collateral to banks. Sound intergovernmental fiscal management will require tighter regulation of municipalities' financial leveraging of land assets to avoid excessive risk taking by local governments. 2012-06-26T14:38:37Z 2012-06-26T14:38:37Z 2006-11 http://documents.worldbank.org/curated/en/2006/11/7154705/land-leasing-land-sale-infrastructure-financing-option http://hdl.handle.net/10986/9020 English en_US Policy Research Working Paper; No. 4043 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCESS TO LAND ASSET SALES ASSETS AUCTIONS BETTERMENT TAXES BONDS CAPITAL BUDGETS CAPITAL COSTS CAPITAL PROJECTS CITIES COLLATERAL DEBT DEBT SERVICE DEVELOPMENT AUTHORITIES DEVELOPMENT BANKS ECONOMIC GROWTH ECONOMIC PERFORMANCE FISCAL CAPACITY FISCAL DECENTRALIZATION FISCAL DEFICITS FISCAL MANAGEMENT FISCAL REFORMS FISCAL RESPONSIBILITY HOUSING INCOME INFRASTRUCTURE LOANS INSTITUTIONAL ARRANGEMENTS LAND DEVELOPMENT LAND PRICES LAND PRICING LAND SUPPLY LAND USE LAND VALUE LARGE CITIES LAWS LEGISLATION LOCAL BUDGETS LOCAL GOVERNMENT LOCAL GOVERNMENT REVENUES LOCAL GOVERNMENTS LOCAL LEVEL LOCAL OFFICIALS LOCAL SPENDING LOCAL TAXES MUNICIPAL MUNICIPAL ACCOUNTING MUNICIPAL ADMINISTRATION MUNICIPAL BUDGETS MUNICIPAL CORPORATION MUNICIPAL FINANCE MUNICIPAL GOVERNMENT MUNICIPAL GOVERNMENTS MUNICIPAL INFRASTRUCTURE MUNICIPAL MANAGEMENT MUNICIPAL REVENUE MUNICIPALITIES MUNICIPALITY OPERATING EXPENSES PER CAPITA INCOME POLITICAL POWER PRIVATE SECTOR PRIVATIZATION PROPERTY TAX ASSESSMENTS PROPERTY TAXES PROVINCIAL GOVERNMENT PROVINCIAL GOVERNMENTS PUBLIC PUBLIC BORROWING PUBLIC EXPENDITURE PUBLIC HOUSING PUBLIC INVESTMENT PUBLIC OWNERSHIP PUBLIC POLICY PUBLIC SECTOR PUBLIC WORKS REGIONAL GOVERNMENT REGULATORY FRAMEWORK REVENUE COLLECTION REVENUE GROWTH REVENUE MOBILIZATION ROADS STATE BUDGETS STATE GOVERNMENT STATE GOVERNMENTS TAX TAX RATES TAX REVENUES TAXATION URBAN AREAS URBAN DEVELOPMENT URBAN INFRASTRUCTURE URBANIZATION USER CHARGES VACANT LAND WATER SUPPLY |
| spellingShingle |
ACCESS TO LAND ASSET SALES ASSETS AUCTIONS BETTERMENT TAXES BONDS CAPITAL BUDGETS CAPITAL COSTS CAPITAL PROJECTS CITIES COLLATERAL DEBT DEBT SERVICE DEVELOPMENT AUTHORITIES DEVELOPMENT BANKS ECONOMIC GROWTH ECONOMIC PERFORMANCE FISCAL CAPACITY FISCAL DECENTRALIZATION FISCAL DEFICITS FISCAL MANAGEMENT FISCAL REFORMS FISCAL RESPONSIBILITY HOUSING INCOME INFRASTRUCTURE LOANS INSTITUTIONAL ARRANGEMENTS LAND DEVELOPMENT LAND PRICES LAND PRICING LAND SUPPLY LAND USE LAND VALUE LARGE CITIES LAWS LEGISLATION LOCAL BUDGETS LOCAL GOVERNMENT LOCAL GOVERNMENT REVENUES LOCAL GOVERNMENTS LOCAL LEVEL LOCAL OFFICIALS LOCAL SPENDING LOCAL TAXES MUNICIPAL MUNICIPAL ACCOUNTING MUNICIPAL ADMINISTRATION MUNICIPAL BUDGETS MUNICIPAL CORPORATION MUNICIPAL FINANCE MUNICIPAL GOVERNMENT MUNICIPAL GOVERNMENTS MUNICIPAL INFRASTRUCTURE MUNICIPAL MANAGEMENT MUNICIPAL REVENUE MUNICIPALITIES MUNICIPALITY OPERATING EXPENSES PER CAPITA INCOME POLITICAL POWER PRIVATE SECTOR PRIVATIZATION PROPERTY TAX ASSESSMENTS PROPERTY TAXES PROVINCIAL GOVERNMENT PROVINCIAL GOVERNMENTS PUBLIC PUBLIC BORROWING PUBLIC EXPENDITURE PUBLIC HOUSING PUBLIC INVESTMENT PUBLIC OWNERSHIP PUBLIC POLICY PUBLIC SECTOR PUBLIC WORKS REGIONAL GOVERNMENT REGULATORY FRAMEWORK REVENUE COLLECTION REVENUE GROWTH REVENUE MOBILIZATION ROADS STATE BUDGETS STATE GOVERNMENT STATE GOVERNMENTS TAX TAX RATES TAX REVENUES TAXATION URBAN AREAS URBAN DEVELOPMENT URBAN INFRASTRUCTURE URBANIZATION USER CHARGES VACANT LAND WATER SUPPLY Peterson, George E. Land Leasing and Land Sale as an Infrastructure-Financing Option |
| geographic_facet |
East Asia and Pacific |
| relation |
Policy Research Working Paper; No. 4043 |
| description |
Municipal land sales provide one option for financing urban infrastructure investment. In countries where land is owned by the public sector, land is by far the most valuable asset on the municipal balance sheet. Selling land or long-term leasing rights to land use while investing the proceeds in infrastructure facilities can be viewed as a type of portfolio asset adjustment. This paper shows that in China many municipalities have financed more than half of their high rates of infrastructure investment from land sales, for periods of 10 to 15 years. Much of the remaining investment has been financed by municipal borrowing against the collateral of land values. Other countries also have turned to land sales and leasing for infrastructure finance. From a local perspective, land sales have the advantage that they typically are free from the intergovernmental restrictions that require higher-level approval for increases in local tax rates or user fees and that restrict local government borrowing. However, financing municipal infrastructure investment through land sales creates special risks that are not recognized in most intergovernmental fiscal frameworks. One danger involves the use of proceeds to finance operating budgets. Risk exposure is exaggerated by the highly volatile nature of urban land markets and evidence that in some countries urban land values in 2006 reflected a real estate bubble. In the past, Hong Kong, a jurisdiction that has relied heavily on land-leasing to finance its infrastructure budget, has seen land sales fall to zero at the bottom of the real estate cycle. The greatest financial sector risk stems from municipal borrowing based on inflated land values offered as collateral to banks. Sound intergovernmental fiscal management will require tighter regulation of municipalities' financial leveraging of land assets to avoid excessive risk taking by local governments. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Peterson, George E. |
| author_facet |
Peterson, George E. |
| author_sort |
Peterson, George E. |
| title |
Land Leasing and Land Sale as an Infrastructure-Financing Option |
| title_short |
Land Leasing and Land Sale as an Infrastructure-Financing Option |
| title_full |
Land Leasing and Land Sale as an Infrastructure-Financing Option |
| title_fullStr |
Land Leasing and Land Sale as an Infrastructure-Financing Option |
| title_full_unstemmed |
Land Leasing and Land Sale as an Infrastructure-Financing Option |
| title_sort |
land leasing and land sale as an infrastructure-financing option |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2006/11/7154705/land-leasing-land-sale-infrastructure-financing-option http://hdl.handle.net/10986/9020 |
| _version_ |
1764406737672077312 |