Monday, May 21, 2007

TX Dome - What is so bad about applying market valuation? (+)

What is so bad about the "apply market valuation" clause in SB 792?
Q. Does this clause give landowners a better price for land confiscated by eminent domain?
A. No, in this bill, they are referring to market valuation for the ENTIRE INFRASTRUCTURE PROJECT rather than for getting an appraisal on the real estate before they pay the land owner. There are rules that apply to acquisition of land by eminent domain which will not be changed by this phrase in this bill.
Q. What is Market Valuation as used in HB 792?A. What they are referring to is HOW THEY VALUE the land years after it is acquired, how they VALUE the entire infrastructure throughout the life of the contract.
Q. Is it a common practice?
A. Applying Market Valuation to state highway projects is a new concept. Market Valuation is a private sector practice where an owner of an asset values that asset over time as the value of the real estate escalates. As demand for adjacent property rises, rental and usage fees rise to reflect what the private company would have to pay for that house or business or real estate on the day they lease it to a user. For example, a friend of mine rents a house she purchased for $20, 000.00 but which appraises on today's market for $45,000.00. Years ago she charged $150.00 a month for rent but today she charges $750.00 a month for a tenant to rent the house.
This is a common practice in the public sector because she used her personal funds or credit to acquire the property. She is not a public housing authority which uses public funds.
Q. Why is it a such "big deal" in this particular bill?
A. Until a few years ago, only public toll authorities were legally allowed to build toll roads in Texas. With changes in the law, we now allow private companies to partner with the state to build toll roads. We also have public toll authorities which build toll roads in Texas. Public and private toll companies are in competition for bids on lucrative projects. Public toll companies (like NTTA) have an advantage in the bidding process because they operate on different rules than private companies like Cintra. A private company is supposed to invest private investor capital into the project and the private investors, wherever they live in the world, get a return on their investment and they can spend or invest that money anywhere in the world in any kind of project they choose. A public authority uses taxpayers money as an agent of the people and the return or user fees goes back into the public coffers, not to private investors. The return must remain in the region for use on public works projects for the public good. READ MORE

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