5: Appendix

Module Five

Appendix

(City
Name) Land Value Capture Endorsement Form


I/We support shifting taxes OFF of
wages, business, homes and other buildings and ONTO the accurately
assessed value of land sites in order to discourage land speculation
and property deterioration and to encourage quality affordable
housing and the renewal and revitalization of the City of (City
Name).

Circle One: Yes / No / Undecided


I/We recommend that the members of our organization
study possible effects of a shift to land value capture in (City
Name). Circle One: Yes / No / Undecided

I/We urge the
Mayor and City Council to fully study land value capture’s
potential impact on the economy of (City Name). Circle One: Yes
/ No / Undecided

Individual Endorsement


Name (print)
____________________________________________________________

Signature
_______________________________________________________________

Address
_____________________________________________ Zip
_______

Phone_____________________ Fax _________________ Email
__________________

City Council District Number or City
Council Member Name: _____________________

Organization /
Affiliation (for identification only)
________________________________

Organizational Endorsement


Authorizing Individual Name (print)
__________________________________________

Authorizing
Individual Signature
______________________________________

Authorizing Individual
Title ________________________________________________

Organization
___________________________________________________

Address_______________________________________________________
street
_____________________________________________________________
city
state
zip

Phone
__________________Fax ______________ E-mail ________________

City
Council District Number or City Council Member Name:
_____________________

Optional Contribution


Enclosed is $ ___________ to assist
in educational activities associated with this effort. Please
make checks payable to _________ and send to ___________. For any
questions call _____or _______ at

Phone:

www.
Thank you for your support!

Community
Land Trust (CLT) Lease Agreement Based on Land Rent

School of Living (SoL) has been leasing
land as a Community Land Trust for about 30 years. SoL has been
leasing land primarily but not exclusively to intentional
communities. The leases usually provided a discount to younger
intentional communities by a formula that increases the fee as more
members join with the goal of the CLT collecting 100% of the full
lease fee when the community has grown to its full complement of
members. The lessees own the improvements they make on
the land and the rent to the CLT does not increase when the lessees
make improvements. Lease fees do change as land values in the
surrounding area change.

A SoL CLT lease includes requirements
that the land be used for some public educational purposes as well as
ecological use restrictions. The educational use requirements
are not inherent to CLT philosophy in general but is included because
SOL is an educational organization. The ecological restrictions
are in recognition that future generations have a right to land that
has not been damaged by present generation and is common to most
CLTs. Another restriction commonly found in a SOL CLT lease is
that the land may not be used as collateral; philosophically we don’t
want to relate to the land as a commodity and practically it puts the
land in jeopardy.

In determining a proper lease fee
we take into account the restrictions in the lease and discount what
would be a fair market value for a long term lease without these
restrictions. We determined that 5% of market value is an
appropriate annual lease fee for a standard SoL lease. We
applied the principal that as land market value changed the lease fee
would also change.

Here is an example of such a lease fee
formula:

The annual rent for this land shall be
calculated according to the following formula and paid quarterly . .
. to the Lessor by the Lessee:

ANNUAL LAND RENT = T + (X)I or T + (V - Z)(5%)
whichever is greater

hereinafter known as the Rent Formula.

T equals the taxes assessed against The Land by any government or
government agency.

X is the annual Administrative Fee due to School of Living.
The beginning Administrative Fee is four hundred fifty dollars
($450.00). This amount shall be adjusted at the end of each
calendar year for inflation or deflation according to the current
Consumer Price Index for All Urban Areas "I" published by
the United States Department of Labor, using the calendar year 1999
as the base year.

"V" is the value of the land and shall be adjusted annually
to reflect changing land values as stated below. The parties
agree that the initial value of the land is $55,200.00. "V"
shall be composed of the initial cost of the Land multiplied by the
change (either + or -) in the Farm Real Estate Values (FREV) for
Amherst, Virginia. To calculate the average annual change in
the land value, the FREV increment shall be calculated by using the
FREV from the most recent 5-Year Census Reports that are ten years
apart, as compiled by the United States Department of Commerce,
Bureau of Census, Census of Agriculture, Geographic Area Series
Reports. This annual change in "V" is then used each
year until a new 5-Year Census Report is published. At no time
will "V" be less than zero.

Z is Land Principal Payments. Lessee may make payments to
Lessor over and above the minimum lease payments which lessee may
designate as Land Principal Payments, [Z]. "Z" shall
be the accumulated total of all such payments. Should such
payments be made, Lessee shall retain equity in the land in the
amount of Z and the right to transfer this lease for the value of Z
adjusted for inflation in the event this lease is terminated.

First note: The inclusion of the
"Z" factor was at the request of the lessee. There are
variations in each of the SoL leases because each lease is
negotiated. In this lease fee the lessee pays taxes plus 5% of
the current value of the land, no modifications for fewer residents
or more residents.

In each of the leases there is an
administrative fee component so that SoL will always have funds
generated from lease fees with which to fulfill its minimum
administrative requirements as lessor. The lease fee formula
just cited has the administrative fee increasing by the CPIU so the
"x factor" will be in constant dollars. The leases are
intended to continue in perpetuity and who knows what the purchasing
power of $500 this year will be worth in 100 or 200 years thus the
inflation index. But in this formula we do not use the CPI
inflation index to determine the change in the land value component
of the lease fee: rather it is based just on 5% of whatever the
current fair market value of the land is, regardless of changes in
the CPI. That’s why I suggest this formula is better
reflection of our principals.

Also this formula allows for the lessee
to reduce the annual lease fee by making voluntary "principal
payments". So if the land had a fair market value of
$60,000.00 this year and the lessee had paid SOL $60,000.00 in
"principal payments" there would be no annual lease fee due
except the "x-factor" adjusted for inflation, until the land
value rose above $60,000.00 at which point the lessee pays 5% of that
additional value per year once that amount exceeds the x-factor.
SOL then has $60,000 with which to buy additional land and lease that
out.

Here is our latest update on the basic
lease fee formula where SoL owns all the equity in the land. This
lease fee formulas assigns each individual member of the intentional
community his or her own "y-factor" which is based on a fixed
percentage of the value of the land at the time that person becomes a
resident and that component of the lease fee will not change during
that persons residency. And like a 30-year fixed mortgage it
gets eliminated from the lease fee after that person has been a
resident for 30 years. Taking a long view look at this lease
formula SOL still receives 100% of the increased land value over a
period of time since there will be successive 100% turnover of
residents.

Here is an example of this new formula
used at Heathcote Center:

The annual rent shall be calculated
according to the following formula and shall be paid quarterly by the
Lessee to the Lessor:

[(X)(K)+Yт] (U)

is hereinafter referred to and known as
"the Rent Formula." In the above formula:

X equals Six Hundred Seventy-Five
Dollars ($675.00).

Yт equals the sum total of the Y
factors.

(2) Definition
of Y factor: Each person of majority age living on the Land during
the preceding year for a period of ninety (90) days or longer shall
be assigned an individual Y factor, the amount of which shall be
fixed for that individual’s term of residency and shall be one
six-hundredths (1/600) of the Value of the Land for the year in which
he or she first became a resident.

The Value of the Land … shall be the
tax assessment value determined by the State Department of
Assessments and Taxation of Maryland for the year in which the
individual first became a resident of the Land…

(3) It is
agreed that the Y amount for each of the 12 residents of the Land at
the signing of this Lease shall be Two Hundred Seventy-Five Dollars
($275.00). It is further agreed that, if any individual resides
on the Land for 30 years, then that individual’s Y factor shall be
reduced to zero dollars ($0.00). … The 30 years of residency need
not be continuous, but only years of actual residency shall be
counted, not years of absence. If an individual returns after
being absent from the Land for 5 years or more, that individual’s Y
amount shall be recalculated for the value of a Y as if the
individual were new to the Land, for the remaining portion of the 30
years.

The parties agree that the sole purpose
of assigning individuals a specific Y factor is for the purpose of
determining the total amount of annual rent that the Lessee,
Heathcote Center, Inc., shall pay to the Lessor, School of Living,
and does not in any way create a contract between that individual and
either School of Living or Heathcote Center, Inc.

(4) U equals
the use factor applied to the Land for alternative uses of the Land.
It is agreed that the use factor for this Land with the uses as
enumerated in paragraph 6 below, shall be one (1). If the
Lessee ever desires to use the Land for purposes other than those
enumerated in paragraph 6 below, a new use factor shall be negotiated
between the Lessee and the Lessor.

(5) K equals the
inflationary or deflationary factor and shall be the change (either +
or -) in the Consumer Price Index for All Urban Areas (CPI-U),
non-seasonally adjusted, 12 month percent change December to December
published by the United States Department of Labor. The
percentage is used to increase or decrease the previous year’s K
factor by multiplying the previous year’s K factor by 1 + the
percentage change. The K factor until April 1, 2005 shall
be 1.000.

In the above model, the y-factor of
1/600ths was determined by the anticipated number of adult residents
being 20. Essentially, SoL would be collecting 3 1/3% of the value of
the land each year plus the administrative fee. Also, in the
above lease fee formula we use the County tax assessment to determine
land value. Maryland bases its tax assessments on 100% of FMV
and has periodic re-assessments every 3 years. We looked very
closely at their re-assessment process and believe its adequate for
our lease fee purposes. BTW, Heathcote benefits from a
preferential tax assessment for land enrolled in an agricultural use
program, and that lower value is passed through the lease.

EQUITY LEASES

In these lease models what usually
happens is that the intentional community (or individual or family)
already owns land and wants to put it in the SoL CLT and get a lease
back for the land. Since there are individuals
living on the land that have already paid for the land once (or in
some circumstances paying a mortgage that pre-existed the title
transfer to the CLT) the SoL philosophy is that those individuals
should not have to pay a second time by also paying a lease fee to
SOL, but as new people come onto the land then a lease fee would be
due SoL. In a full equity lease the lessee retains the value of
the land when it was put into the CLT and if that lessee wishes to
transfer their leasehold interest to another person they would be
entitled to get only their equity adjusted for inflation and SoL
would get any increase in land value. As in all leases the
improvements are owned by the lessee and is entitled to whatever
price they negotiate with the new lessee. SoL has had equity
leases both with individual families and intentional communities.
With intentional communities the same principals apply even though a
lease is not transferred by a pro-rata lease fee being due SoL when a
new member joins the group.

Here’s an example:

The rent for this land for the
period beginning with the signing of this lease shall be calculated
according to the following formula, and paid to the Lessor by the
Lessee:

ANNUAL RENT = T + X(K) + M

hereinafter known as the rent formula.
In the above formula:

T equals the taxes assessed against The
Land by any government or government agency. Such taxes may be
paid directly to the assessing agency by the Lessee and receipt
therefor promptly forwarded to the Lessor.

If the Lessee
does not make any tax payment when due, the Lessor may do so and add
that amount to future rent, including any penalties not the fault of
the Lessor.

M equals the mortgages currently
outstanding against The Land or any future mortgage on The Land
entered into under the provisions of section 9 ENCUMBRANCE.
Mortgage payments will be made by the Lessee directly to the
Mortgagee on a timely basis.

If the Lessee
does not make any mortgage payment when due, the Lessor may do so and
add that amount to future rent, including any penalties not the fault
of the Lessor.

X equals six hundred seventy-five
hundred dollars ($675.00) per annum and shall be paid quarterly on
the 1st day of November, February, May and August. The first
payment due on November 1, 2006 shall be one hundred sixty eight
dollars and seventy-five cents ($168.75).

K equals the inflationary or
deflationary factor and shall be calculated the first day of November
of each year. K shall be composed of the change (either + or -)
in the Consumer Price Index for All Urban Areas (CPII-U), Not
Seasonally Adjusted, 12 month percent change December to December,
published by the United States Department of Labor using 2006 as the
base year. The percentage is used to increase or decrease the
previous year’s K factor by multiplying the previous year’s K
factor by 1 + the percentage change. The K factor until
November 01, 2008 shall be 1.000.

EQUITY.

A. The Lessee shall have an equity in The Land of
Ninety-Seven Thousand Five Hundred dollars ($97,500.00) adjusted for
inflation or deflation by the Consumer Price Index (CPI-U), Not
Seasonally Adjusted, using November, 2006, as the base, minus any
amounts outstanding on taxes, mortgage(s), or delinquent payments to
Lessor.

The Lessee shall have the exclusive right to transfer equity and/or
use rights, subject to the terms of this Lease and more specifically
the following conditions:

Any transfer of The Land shall be done at a price as near as possible
to Fair Market Value as agreed to at the time by Lessee and Lessor.
Any sums obtained from the granting of the rights under this lease by
any manner whatsoever, in excess of the equity as above defined,
shall belong to the Lessor. In the event that Lessee should
decide to transfer equity at a price less than Fair Market Value the
difference between Fair Market Value and the price obtained shall be
deducted from Lessees equity and not from Lessor.

The Lessor shall be under no obligation to pay equity to the Lessee
from its own funds. Equity of the Lessee may be recovered by
the Lessee only through the assignment, transfer or sublease of this
lease.

B. When a new person becomes a member of the Lessee
[Community] … the Lessor shall be entitled to any increase value of
The Land above the equity value held by the Lessee, in proportion [to
the ownership percentage acquired]. ….

C. Should this lease cease to exist as a result of termination,
the Lessor shall use best efforts to re-lease The Land. In such
event, the new Lessee(s) shall pay to the Lessor the Fair Market
Value of The Land and the Lessor shall pay to the previous Lessee(s)
or their assigns, their equity value as defined in the first
paragraph of this section, minus any costs incurred.