Colleges buy land without knowing how they'll use it
Infrastructure -- Another Obaman Gift to Bankers?
They say “investment” but you should hear “land speculation”. They say infrastructure but you should hear “windfall land rents”. We trim, blend, and append two 2010 articles from (1) The Associated Press, Sept 6, on colleges by Marc Beja and (2) Counterpunch, Sept 13, the lead article on infrastructure by Dr. Michael Hudson of the University of Missouri at Kansas City.
by Marc Beja and by Dr. Michael Hudson
Colleges buy land without knowing how they'll use it
Universities are buying up chunks of land at bargain prices, sometimes without a clear idea how they'll be used.
Some are taking advantage of good sales during a sluggish economy, while others, like Columbia University, are continuing a practice they've done for decades, buying even if the price isn't discounted.
The University of Dayton last year acquired the 115-acre world headquarters of technology company NCR Corp for the fire sale price of $18 million after buying 50 acres from the company for three times the per-acre price in 2005. And the University of Delaware last year bought a 272-acre former Chrysler auto plant for $24 million.
JJS: Is there a link? Universities speculate in land which they don’t have to pay taxes on. And academic economists play down the role of land in driving the business cycle, its lack causing poverty, and its value luring individuals to exploit sites and resources. “Geonomists”, the economists who do pay attention to all the money that society spends for the land it uses, did predict the current recession caused by the “real estate” (actually, land price) bubble bursting. They do show how keeping prime sites fallow keeps marginal people impoverished. And their “green tax shift” is starting to catch on. And they make clear the deals underlying political proposals.
That $50 Billion "Infrastructure" Plan
Land deals have inspired enough Hollywood movies. The banker of a Western town manages to grab property along the railroad tracks coming through, to make a killing. The local mobster pays off a state legislator to build a highway by his property, making his land much more valuable.
Obama’s infrastructure plan is for Wall Street investors to get the windfall -- as property owners or as mortgage lenders making much larger loans against the enhanced site value.
Every transportation economist is taught that transport investment normally can pay for itself, simply by a windfall-gains tax enabling cities or other jurisdictions to recapture the higher rent-of-location and site value along the right-of-way.
London’s extension of the Jubilee Tube Line to the city’s financial district in Canary Wharf recently demonstrated this principle. The line’s extension cost £3.5 billion but increased property values by an estimated £13 billion along the route. That gave landlords a windfall. A political protest movement arose over London’s failure to recover the site values it created. It could have issued bonds secured by a windfall property-rent tax.
Paying for capital investment out of such tax levies could provide transportation at a subsidized price, minimizing the cost getting to and from work. That would have made its labor force more competitive by alleviating cost-of-living pressure on wages, freeing more income for spending on goods and services and thus helping the economy.
But what’s proposed is another giveaway. The Wall Street bailout was the watershed in making our government look like those of Britain and France in medieval times, with their special interests, insider dealings and giveaways to court favorites. Governments were hated when they were controlled by landed aristocracies and foreign bankers funding each new war debt by an excise tax borne by the population at large, not by the wealthy.
Balzac said that behind every family fortune is a great theft, and I would add that behind every great fortune is a public-sector giveaway. The largest asset in most families, billionaires as well as small homeowners, is land. The key to its site value (“location, location and location”) is transportation and other public infrastructure.
The land grants to railroad barons after America’s Civil War, for example created the largest American fortunes for the ensuing century.
The Obama plan calls for borrowing $50 billion at interest from banks. These financial and other privatization costs will need user fees for the transport services. These will cost another $2 billion a year.
This is like a tollbooth program that the World Bank and IMF have been foisting on hapless Third World populations for the past half-century. But if the projects do not raise enough money, the Treasury gets stuck paying back the investors, just as Fannie Mae needed a bailout.
The giveaway money to Wall Street has not been lent out as promised to “get America back to work.” It has been paid out as bonuses to the bailed-out campaign contributors on Wall Street. No wonder Americans are listening to populist rants against “big government.”
But if there was so much money for bailouts, why is there any need to finance the fairly modest $50 billion transport initiative by borrowing instead of funding it out of the general budget?
JJS: Want to bring attention to the public recovery of site values? It’s a policy that not only could fund infrastructure. Giving the idea greater publicity might also embarrass academics at land-grabbing institutions enough that they could no longer ignore what works.
Reader Wyn Achenbaum: Following a recent piece by Orzag in the New York Times, on the first page of comments is #7 from Frederick Singer, of Huntington Beach, California. You could add a "recommend". click here
Editor Jeffery J. Smith runs the Forum on Geonomics.
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