RE 310 Principles of Real Estate Public Restrictions on Ownership 1 Governmental land use controls a Recall that spillover effects are common in real estate and can distort private land use decisions Two potential problems include Covenants and private law suits are examples of private contracts designed to resolve land use externalities Nuisance Nobel laureate Ronald Coase suggested that spillover effects were a consequence of failing to clearly define property rights Example Suppose Joe wants to open a new nightclub on his property but his neighbors don t want it nearby Situation 1 Joe will make 200 000 if he opens the nightclub but doing so will cost each of his five neighbors 20 000 The total cost of the nightclub to Joe s neighbors is In a social welfare sense the nightclub because If Joe s neighbors have the right to stop the nightclub If Joe has the right to open the nightclub even if the neighbors don t want it Situation 2 Joe will make 200 000 if he opens the nightclub but doing so will cost each of his five neighbors 50 000 The total cost of the nightclub to Joe s neighbors is In a social welfare sense the nightclub 2 because If Joe s neighbors have the right to stop the nightclub If Joe has the right to open the nightclub even if the neighbors don t want it In practice private contracts can t always resolve spillover effects because of The Coase Theorem provides an economic justification for public landuse controls The legal right of governments to regulate land use comes from police power the common law right of governments to regulate private actions in order to protect the public health safety morals and general welfare 3 2 Urban Planning and The Comprehensive General Plan a Urban planning is necessary to ensure that required public services are available for urban growth as it occurs In Sedgwick County this task falls to the Metropolitan Area Planning Department MAPD and Commission b The comprehensive plan is used as a guide when making specific land use and other urban policy decisions http www wichita gov Government Departments Planning Pages Comprehensive aspx At the broadest level the comprehensive plan presents a vision for what the community will look like in coming decades The comprehensive plan should be used to anticipate and prepare for growth and the infrastructure needs that will come with that growth The comprehensive plan should project 4 3 Zoning Codes a Zoning ordinances are local laws that divide land in the jurisdiction into zones each with its own restrictions on the type of permitted use and the maximum intensity of that use Wichita and Sedgwick County have adopted a unified zoning code that applies to all properties in the city and in unincorporated parts of the county http www wichita gov Government Departments Planning Pages Zoning aspx Small cities in the county have their own zoning codes b A listing and brief description of the Wichita Sedgwick County zoning districts can be found in the Zoning Chart on the MAPD zoning website 5 c Zoning restrictions example Limited Commercial LC District Purpose Permitted uses Conditional uses Development standards Minimum and maximum lot sizes Setbacks Height regulations Bulk regulations 6 Special district regulations d Other site development standards Parking requirements Screening lighting Other standards e Both the City of Wichita and Sedgwick County provide online Geographic Information Systems tools for finding zoning and other information related to real estate in the county Wichita http gis wichita gov outsidegeneral Sedgwick County https gismaps sedgwickcounty org portal 7 4 Subdivision Regulations a Subdivision regulations are local laws regulating the division of land into lots blocks tracts and or parcels b Subdivision regulations are intended to provide for Efficient and orderly location of streets Reduction of vehicular congestion Reservation and or dedication of land for open spaces Necessary off site and on site public improvements The provision of recreational facilities which may include but not be limited to the dedication of land area for park purposes Flood protection and storm water pollution prevention Designation of building lines where necessary Assurances of compatibility of design and Other services facilities and improvements deemed necessary 8 c Community Unit Plans d Planned Unit Developments 5 Other Governmental Powers a Building Codes b Escheat c Eminent Domain 9 6 Property Taxes Specials a Property tax assessment Property taxes are levied on the owners of real estate based on the assessed value of the property owned ad valorem tax Most states exempt certain real estate from taxation and local jurisdictions often provide tax abatements for certain industries Property taxes are based on the assessed value of the property not its true market value In many states assessed value is virtually unrelated to market value In Kansas a parcel s assessed value is a fixed fraction of its market value Residential 11 5 Commercial 25 0 Non profit 12 0 Vacant land 12 0 Farm land is assessed based on its use value Sedgwick County property tax assessments can be found at http www sedgwickcounty org appraiser 10 b Levying property taxes The taxation process begins with the adoption of a budget After the budget is approved an appropriation is passed to authorize the expenditure The tax levy is the formal action taken to impose the tax The tax rate is calculated by dividing the total funds needed by the taxing authority by the total assessed value of taxable properties in the district A mill is 1 1 000 of a dollar or 0 001 c Example In the 2011 12 Budget the City of Wichita estimated it would require 101 996 852 in property tax revenues What is the resulting mill levy The estimated assessed value of property in the City of Wichita was 3 160 537 060 The resulting tax rate is The resulting mill rate is 11 Suppose you owned a 125 000 house in Wichita What would your 2011 tax bill be Your assessed value is Your tax bill is Taxing District Assessed Value Mill Rate City of Wichita 32 272 Sedgwick County 27 857 USD 259 56 928 State of Kansas 1 500 WSU 1 502 Total 120 059 Taxes Due Suppose you owned a commercial office building worth 2 35 million What would your 2011 tax bill be Assessed value Tax bill 12 d Special Assessments Infrastructure improvements streets sewers sidewalks etc in new developments and existing neighborhoods are financed using special assessments The city pays for the improvements