property prices is in many cases non-existent. Further, TIF collection is based on an existing property tax system. If a country does not have a working tax system in place, the advantages of TIFs in terms of enforcement may not materialize For a TIF program to be successful it is important to have a well-developed property tax regime and have the ability to assess the property tax base and calculate the increment resulting from the project. Complications in calculating the increment will arise if the appropriate institutions are not in place. Further, there must be a structured set of public financing tools that allow the use of TIFs (e.g. bonds, intergovernmental loans, etc.) and strong municipal accounting capabilities to support this. Finally, as it has been stressed throughout the document, just as is the case for other financing instruments, institutions are a prerequisite for success. In this case, institutions that guarantee the objective valuation of property are of especial importance. Maintaining up to date records of property values becomes increasingly important with instruments such as TIF, where values are required to extract the price increases related to specific improvements.

# **Box 3: MAIN LESSONS FROM INTERNATIONAL EXPERIENCE ON LEVERAGING LAND TO FINANCE INFRASTRUCTURE**

-Strong institutions are a pre-requisite for implementing land-based financing instruments. Institutions are essential to clearly define property rights, guarantee standardized and objective methods of land valuation, support and oversee the process of land management, land sales, and tax collection.

-Land sales can be used as an initial revenue source for infrastructure investments. However, since they are not a long term financing source as a tax revenue system will be, they are most successful when coupled with other financing sources such as a system of property taxes.

-Betterment levies and special assessment taxes provide revenue to municipalities based on the increase in land value from public improvements. The main challenge countries have faced in implementing these is the calculation of the increased value due to an infrastructure project. For their implementation to be viable these instruments require institutions for valuation and price data collection and public dissemination. A simplified version of these has successfully been implemented in Bogotá, Colombia, where levies are not estimated parcel by parcel but rather linked to a citywide fee. Its success can be partly attributed to large efforts to update and maintain a comprehensive cadastral database and increased participation of the citizens as overseers of the process.

-Development and impact fees and TIFs have been mostly used in developed countries. Their successful implementation requires strong institutions that are non-existent in many developing counties. These instruments need a strong regulatory authority to enforce the collection of the fees and guarantee that they are used only for the purpose for which they are defined. Clear definition of property rights is essential. Further, up to date information on property values and a clearly defined methodology for the estimation of the impact of projects on land and property values is also a pre-requisite for their successful implementation. TIFs also require a welldeveloped property tax regime. If a strong property tax system is not in place, their im <mark>p</mark> lementation ma <mark>y p</mark> rove to be difficult.

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