Value Capture as a Policy Tool in Transportation Economics: An Exploration in Public Finance in the Tradition of Henry George

American Journal of Economics and Sociology, The, Jan, 2001 by H. William Batt

Records of the purchase prices of the land parcels acquired by the State of New York for development of the Northway were acquired from old Department of Transportation files, noting particularly the parcel area in acres and whether or not the parcels had improvements. Since the State paid fair market value for each parcel, this provided a baseline for calculating what the land value was of all parcels--essentially farmland--in the area. New York State Real Property Tax Law requires assessment of all properties according to land value and total value, [25] but until recently assessments have not had a reputation for accuracy, so the sale price records of the State of New York provide a far more reliable indicator of land value. Therefore, only the total acreage and total purchase price of parcels that were unimproved (Figure 5) were used as an indicator of average value of market price per acre for 1958, the year they were acquired. Instead of computing land value differences for the whole distance of the No rthway, a total of 178 miles to the Canadian border, the area close by its southern terminus (Route 20 at Western Avenue) to the Mohawk River was used as the basis of study, a distance of nine miles. It is the most commercially developed of any stretch along the road.

Establishing the values of parcels at various distances from the Northway was even easier, as the two major towns involved--Guilderland and Colonie--elected in 1995 to assess real property at full value. This data is available from both the towns and from the New York State Office of Real Property Services. The sliver of land running between the two parcels, less than a mile belonging to the City of Albany, has not had a comprehensive reassessment for over four decades, however. It is also probable that some of its transactions were not arm's length exchanges, and for both these reasons the few Albany parcels were excluded from the numbers used to establish current value per acre, although they are used later in the total calculation extrapolating from the data from the contiguous municipalities. Enough sample parcels from adjacent lands are available as data points that a reasonably accurate identification of their market value is possible.

The next step was to average the current land values for all parcels at various distances from the present Northway. Reliance upon new geographic information system (GIS) computer technology makes such tasks simple, and averages were computed (Figure 6) for distances of up to 1/2 mile on either side, then from 1/2 mile to 1 mile away, and lastly for distances from 1 mile to 2 miles away. To be sure, the presence of the Northway and other components of the Interstate arterial system has influenced the value of land parcels at distances far greater than two miles--but the actual reach of this impact is ultimately a matter of speculation. [26] The principle of value capture is easily illustrated, however, by identifying values at distances within the two-mile margin.