- <u>Financing: betterment levies and special assessments play an important role in</u> financing specific infrastructure provision or improvements

- <u>Benefit: property owners are charged levies based on the benefit they receive from</u> the improvement, determined by increases in monetary value or factors such as convenience

- <u>Proportionality: property owners pay levies based both on their capacity to pay and</u> the benefits received

The most well-known system of betterment levy collection is practiced in Colombia where the country has been using this municipal financing tool since 1921. Betterment levies, or _contribución de valorización_ , in Colombia were established by Act 25 in 1921 and are now under regulatory decree passed in 1970. Betterment levy collection has been a significant source of financing local projects, thus earning its reputation as a successful tool. Betterment levies comprised 16 percent of the Bogotá’s total income and 45 of Medellín’s in the 1960s. In Bogotá this jumped to 24 percent in 1993 (Uribe 2009 and Borrero et al. 2011).<sup>25</sup> To illustrate the extent of this investment in Bogotá, up to 50 percent of the city’s arterial road network has been funded by these levies (Uribe 2009: 2).

# _Methodology_

Colombia’s betterment levies follow two methodologies, one based on Bogotá’s model and one on Medellín’s. The Bogotá model relies on calculating the benefit and charging commensurate levies. The Medellín model, which has also been used in cities like Manizales and Bucaramanga, uses a dual appraisal approach, which relies on pre-assessment and post-assessment values to determine the value capture increment (Borrero et al. 2011). In this model, first the betterment plan is enacted. This involves defining the financial and construction plan, identifying the properties that will benefit from the betterment and will be subject to levy, and finally, assessing these properties. To identify the properties that benefit from the infrastructure project, authorities look at proximity and accessibility to the project. Properties in a comparable area are also assessed, to provide the hypothetical increase in values. These estimated changes in value are then used to create a map of changes in prices in the area of influence that is then used to distribute the betterment levy. To estimate the benefits of the project, a multidisciplinary team works together. Economic studies, road network studies, urban studies and real estate studies are developed jointly to determine the benefits in specific areas. Finally, the method of dividing the amount of levy to be paid by each party is determined. Different jurisdictions have used alternative methods.

The most commonly used are the frontage method, the simple area method, and the dual appraisal. In the first method, levies are calculated based on the amount a property abuts a street where improvements such as sidewalks or street lights have been installed (measured in linear meters). In the simple area method levies are calculated based on improvements that uniformly benefit the entire property such as water or sewerage lines (square meters). Finally, when the dual appraisal method is used, levies are calculated based on assessed values before and after the improvement is completed (Borrero et al. 2011). Affordability considerations are also taken into account, and therefore the levy may be allocated differently depending on income levels.

> 25 Medellín discontinued the use of betterment levies in 2001 because of administrative challenges.

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