REE-3043 Lecture Notes - Lecture 11: Ad Valorem Tax, Profit Motive, Public Auction
Document Summary
The development team: suppliers of financial capital: The development process: stage 1: the idea, stage 2: the site, stage 3: project feasibility, stage 4: the contracts and permits, stage 5: the improvements, stage 6: project completion. Economic feasibility: a value perspective: consistent with the manufacturing and service industries, the profit motive underlies real estate development. In equilibrium, the market compensates the developer with normal returns on their investments of money and time. In disequilibrium, developers stand to make either extraordinary returns or suffer extraordinary losses. The tax on real property: the largest single source of revenue for most local governments, taxes are levied ad valorem (i. e. , according to value, unlike many countries, the u. s. constitution prohibits a federal property tax. Basic formula for determining the tax rate: rt= (eb-io)/(vt-vx, rt= tax rate, eb= budgeted expenditures, vt= total assessed value of all properties, vx= value of exempt properties. Tax-exempt properties: government-owned properties, schools, hospitals, places of worship.