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## **Box 1: Public Land Ownership**

The World Bank’s Urban Growth Management Initiative reports that publicly owned land accounts for more than half of total city territory in 19 percent of the cities in its sample, including Algiers, Moscow, and Singapore, and more than one-quarter of city territory in an additional 19 percent of cities, including Ho Chi Minh City, Istanbul, and Pusan. A partial inventory of publicly owned land in Chennai, India, conducted some years ago, found that 30 percent of all land was owned by government institutions. At the metropolitan scale, the public share of land ownership is often greater. There is a regional pattern to public ownership of urban land in developing countries. The percentage is highest in Asia, Eastern and Central Europe, the Middle East, and Africa. It is lower in Latin America and North America.

Sources: Rajack (2007); Bertaud (2002).

# **_How Should Publicly Owned Land Be Valued?_**

For financial management, the economic or market value of property is fundamental to many decisions about land use, including the decision of whether or not to sell a land parcel, how to evaluate the public’s contribution of land to a joint venture or public enterprise, or how much land collateral should be pledged as security for a subnational government’s borrowing. All these activities have implications for fiscal risks and contingent liabilities.

Despite the manifest advantages of knowing the value of publicly held land before making decisions about how it should be used, it is a practical challenge to systematically value public land. One issue is the cost of land-value appraisal. Another issue is the volatility of urban land prices, which can lead to steep fluctuations in reported subnational land values from one year to the next. A system that requires annual market valuation of all land assets would be difficult and expensive to implement, with relatively modest practical payoff, since few of these parcels will be sold or transferred in a given year, and many of the land parcels are dedicated to public service provision and therefore cannot be sold.<sup>3</sup> Economic distortions resulting from the lack of information about land values can be compounded by deliberate national policies that assign zero or artificially low values to land owned by subnational governmental units as an incentive to certain types of economic development.

A policy priority is to establish fair market prices for those land parcels that government has under consideration for disposition—through sale, contribution to public-private partnerships, transfer to subsidiary enterprises, or designation as surplus property. Countries have adopted alternative instruments for this kind of price discovery. On municipal governments’ contribution of public land to private infrastructure partnerships, Kuwait’s new land regulations require that any public land parcel considered for contribution to a PPP must be appraised by two independent specialized appraisal firms, whose valuation estimates are to be made public before any decision is made about a land transaction (Kuwait 2008). Alternatively, some countries now require that public land be sold only through competitive auctions.

> 3 In Roman law, applicable to most of continental Europe, Mexico, South Africa, and a number of other countries, government-owned properties are divided into two major groups:  (1) those belonging to the “public domain,” which cannot be alienated (i.e., sold or mortgaged) without special prior legal approval; and also may have restrictions limiting them to public use, and (2) those belonging to the “private domain,” where publicly owned property is regulated similarly to privately owned property. In most other countries, specified legal steps are required to declare that property used for public service delivery “surplus” property, is no longer required for that purpose, and hence available for sale or alternative use.