Toronto To Collect Billboard Rent
Central banks woo sovereign funds over debt
| One big player makes a play for one immense stream of wealth for itself while one small player corrals a minor stream but for all society. We trim, blend, and append two 2010 articles from (1) the Financial Times, Mar 22, on bankers by Patrick Jenkins and (2) the mailing list of Frank de Jong, Canadian Green Party candidate for the City Council of Toronto, on billboards. |
by Patrick Jenkins and by Frank de Jong
- Central banks woo sovereign funds over debt
Central banks and debt management offices are on a charm offensive with sovereign wealth funds in an effort to secure a ready market for the large amount of government debt that will have to be raised in the next few years.
Officials from across the world have begun informal meetings about investment and asset allocation, according to people familiar with the process.
At a recent gathering in Frankfurt -- arranged by the Official Monetary and Financial Institutions Forum (Omfif), an organisation set up to bring SWFs and central banks together -- more than 50 central banks, sovereign funds and asset managers were represented.
“A lot of government bonds being issued at the moment are being bought by sovereign wealth funds. It makes sense for these people to get together,” said one person at the meeting, which was hosted by the Bundesbank.
Talks are planned in Kuala Lumpur and then elsewhere in Asia, the Middle East and Africa. Omfif’s advisory board is chaired by Lord Desai, emeritus professor at the London School of Economics.
The world’s top 10 SWFs -- led by the likes of the Abu Dhabi Investment Authority (Adia) -- have more than $3,000bn (£2,000bn, €2,200bn) in assets, according to the SWF Institute, with oil and other trading wealth swelling those coffers by hundreds of billions of dollars a year.
Early in the financial crisis, many SWFs, including funds from Abu Dhabi, Qatar and Singapore, invested heavily in bank stocks, in some cases getting badly burned. Adia is in dispute with Citigroup over its 2007 investment in the then desperate US bank.
As risk appetites waned during 2008 and 2009, large SWFs increased their holdings in government bonds, in line with expanding issuance volumes.
It is impossible to pin down how much sovereign wealth money is going into such bonds, although Adia said last week, in its first annual review, that its benchmark asset allocation for government bonds was 10-20 per cent. It is understood to have erred towards the higher end of that range for the past couple of years. Adia’s total assets are estimated at up to $450bn.
The SWF community has been cautiously opening up to the world in recent months, recognizing that the funds must be more transparent if they are to be accepted as mainstream investors.
The International Monetary Fund has pushed the development of “best practices” for SWFs to improve their transparency and governance. Funds began adopting the guidelines -- known as the Santiago Principles -- 18 months ago.
Informal gatherings of central bankers, debt management officials and sovereign wealth funds, such as those organised by Omfif, also aim to act as a way of exchanging ideas on investment strategy.
Many of the central banks represented are running budgetary surpluses and feel they can learn from the best SWFs.
JJS: While big bankers make a grab for oil rent for themselves, one smart city council gathers up some billboard rent for public betterment. In the big picture, actually, we should all understand that the value of goods created by none of us -- all that spending everybody does for minerals and locations -- that’s a source of wealth that all of us should be sharing equally. OTOH, it’s the wealth we bring into existence with our labor and capital that government should keep its taxes off of. Right?
- Toronto To Collect Billboard Rent
The City of Toronto plan to levy billboard space is a creative way to help finance city services without negatively impacting the city's economy.
The fees, which will range from $850 to $24,000 a year depending on the size and type of billboard, will return to the city the unearned income that accrues to billboards (and other desirable finite assets), known to economists as "economic rent".
Economic rent is the windfall profit -- above a healthy business profit -- that results from monopoly control of assets like billboards, locations (especially land near water, parks, transit stops, hospitals, schools), parking spaces, taxi licenses, oil, the EM spectrum, some generic internet domain names ...
By this astute action, Toronto City Council will return $10.4 million a year of the publicly-generated wealth that flows to billboards, back to its citizens to whom it rightfully belongs, instead of allowing it to be pocketed by billboard owners.
Repeating this example, cities and towns everywhere could untax businesses and buildings, reduce transit and recreation fees, and instead finance transit, culture, recreation, police and fire by collecting the unearned economic rent that accrues to land, public infrastructure, billboards, taxi medallions, attractive locations, access to roads, parking ...
Unlike job-killing taxes on productive businesses and user fees on quality of life activities, economic rent is an ideal source of city revenue. Since rent is unearned income, those asked to pay it cannot pass it on to other citizens. Additionally, rent recovery is a politically attractive, free market mechanism that improves land use and housing stock, creates jobs, and provides an incentive to new business start-ups.
(Many people, myself included, feel that billboards should be banned as in Vermont, Alaska, Hawaii and Maine.)
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Editor Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Earn Like Goldman Sachs, a ProPublica How-To
10 Pricey Cities That Pay Off
A realtor realizes site rent can replace taxes |
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