The monthly fee based on "appraised value".

This quote (actually, this is a paraphrase) was in an email thread which some of us have been carrying on, trying to pull together the trillion details needed to get Neualtenburg Phase Two going. Ulrika has been urgently pushing to get as much of these conversations onto the forum as possible. I completely agree, but it's much harder for me than her to overcome the obstacle of talking in public.

This idea was such a good one, I felt it was a good excuse for me to move it here, for everyone to participate.



I was skeptical at first that this idea would work, because in SL there is really a complete dis-connect between the price one pays for land and the monthly tier one must pay to keep it. This idea assumes that people, already confused by the land "ownership" system being proposed for the new Neualtenburg, will be able to understand yet another variation on land ownership from the way its done by the Lindens.

But, it's a great idea. Neualtenburg is being organized as a private, not-for-profit cooperative composed of and "owned" by the "citizens" of Neualtenburg. I put these "owner" words in quotes because, in fact, residents will not "own" land in the manner understood in the rest of SL. Here, they own a share of the cooperative, and, by owning a share of the cooperative, they gain the right to some fairly exclusive use of that cooperative's land.

"Fairly exclusive" because the usage rights will be more restrictive than the rights one has if you own normal SL land. In Neualtenburg, the "directors" (the elected representatives, etc) have decided that in order to maintain a high quality of environment, there will be buidling rules and other rules. If you'd like to participate in Neualtenburg, and "own" land there, you need to "buy into" the rules. Once you're a citizen, you gain the right to participate in the making and changing of those rules.

Now, all this participation and group activity sets the style of environment and life in general in Neualtenburg. People who see this, and want to buy into it, can offer to buy land owned by another resident. As the price of that land (really, the price of membership in the coop) rises, Ulrika is suggesting that the monthly payment from the owner to the coop for its expenses rises also.

This is really a great idea, since the intrinsic value of the property will be demonstrated to have risen. The coop MUST collect monthly fees, or its basic expenses cannot be met, and the whole sim goes back to the Lindens. This procedure simply provides that land which the world at large determines is worth more contributes more to the coop expenses.

Thoughts about this are enthusiastically welcome.

Sudane

The more I think about this, the more I like it. In addition to linking land value and city revenue, it could also act as an incentive for the government to invest in the infrastructure to keep the value of land high. Because a "reappraisal" only occurs when the deed to a plot of land is transferred, there's no disincentive to existing citizens to invest in their city to keep costs low.

We should implement a minimum monthly tier fee, though. We don't want monthly land-use fees to dip below cost.

~Ulrika~

I can see the possibility of fraud.

If the monthly fee paid by the land "owner" were a percentage of the most recent sale price, it would be very much in the interest of a purchaser to keep the price low. Neualtenburg would have no way of determining, that I can see, if the buyer and the seller made an agreement to transfer the property with two transactions, a public one and a private one.

It would violate the deed of land which the citizen would hold with Neualtenburg, and subject that land to being Reclaimed, if that were done. But, it might, almost certainly, be impossible to detect.

Sudane

Yes, I thought about that a bit, too, and there seems to be no easy way out. I was even proposing a complex system where the citizens resell their share back to Neualtenburg, and the City then sells it to the new owner, to the agreed price. But this also does not exclude the possibility of "hidden transactions" between both parties - of which the City will have no knowledge.

I'm afraid that this resembles precisely what happens in my own country. Here, the Government also charges "land usage fees" based on the registered value of property - based on the last sale, which have to be registered at official places, to be "valid". You also get taxed if you sell land for a profit (and the new landowner will be subject to "lang usage fees" based on the new value). So, this means that everybody sells land at the lowest possible price (without making a profit), and keep the rest of the transaction private.

This wouldn't be much of a problem - except that for about 20 years there was galloping inflation: from 1970 to 1990, prices rose about 40 times! So this means that land property values (and also rents) are "officially" at the 1970 prices and are terribly undervaluated.

Now imagine what happens. You want to do a mortgage on your house. Of course the banks know what it's going on - they cannot simply base the estimates on the 1970 prices, but they want to know the "real" value. Thus, they go over to your house, and make an "estimate", based on the real value, and not the registered one. However, if banks are able to make an estimate which is 40 times higher than the registered value, this also means that the State is able to get those figures. This means it's a political question - should the State look up private citizens' money transactions (and some of them are next to impossible to trace) in order to know the real prices of homes, and charge the appropriate taxes, or, as a "welfare" sort of thing, should they let it be, and have an economy where land property is incredibly low-priced? Depending on the party in power, land value has been "reevaluated" slowly to "real prices" or not.

How does this relate to Neualtenburg? Similar to RL, the City needs a minimum income on "land usage fees" to pay for the sim and the City budget. So, the "starting price" that we're going to sell the deeds is a minimum value which can never been artificially lowered by citizens "underselling" the deeds in order to get lower "land usage fees" from the City. Thus, citizens are still free to do private transactions we cannot control.

On the other hand, we're going to set up a banking system, as Ulrika proposed. Die Neualtenburger Bank will evaluate land's value at the "official", registered values, and use that as a base for mortgages. A citizen claiming that the land price is much higher these days for his/her plot is free to re-register it for a higher price - and thus get a re-evaluation on the land by the Bank automatically. As a side effect, of course, they will pay higher "land usage fees" every month

The next buyer, however, will have the option of lowering the value of land - if the mortgage is paid back in full. The Government may prevent a lowering of the price above a certain threshold - say, not more than 5 or 10%, to prevent wild market fluctuations (you could certainly make successive sales among a group of citizens to get the "land usage fees" to a lower value in degrees). The lowest limit will, of course, be the original values, as shown on the site rigth now. Since there is an interest in raising land value, the City Government could forfeit any taxes on the sale for a higher price than before (which is sort of weird in term of RL economics!) and charge a "tax of land devaluation" if the price is going to be reduced. The net result would probably be that the land value will remain constant over a period or slightly rise if someone needs a mortgage quickly - although citizens would still be able to do private transactions between themselves, without the City's knowledge.

I don't see that as a "fraud" - we are unable to control transactions between citizens (since the L$ is controlled by LL and not Neualtenburg). The only thing that we can control is an acceptable level of income for the City, based on the "registered" land value.

So, this is also an encouragement for setting up the banking system