Integrating Land Financing into Subnational Fiscal Management

Land assets have become an important source of financing capital investments by subnational governments in developing countries. Land assets, often with billions of dollars per transaction, rival and sometimes surpass subnational borrowing or fisca...

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Bibliographic Details
Main Authors:	Peterson, George E., Kaganova, Olga
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTABILITY ACCOUNTING ACCOUNTING STANDARDS ACCOUNTING SYSTEMS AMOUNT OF DEBT ASSET BASE ASSET MANAGEMENT ASSET SALE PROCEEDS ASSET SALES ASSET VALUE AUCTION BAILOUTS BALANCE SHEET BALANCE SHEETS BANK LENDING BANK LOANS BANKING REGULATIONS BIDS BOND BOND ISSUANCE BORROWING BOURSE CAPITAL BUDGETS CAPITAL FLOWS CAPITAL FORMATION CAPITAL INVESTMENT CAPITAL INVESTMENTS CASH ACCOUNTING CASH FLOW CENTRAL BANK COLLATERAL COMMERCIAL BANKS COMPETITIVE AUCTIONS CONTINGENT LIABILITIES COST OF CAPITAL CREDIT DEFAULTS CREDIT MARKETS CREDIT POLICIES CREDIT RATING CREDIT RATING AGENCIES CREDIT RISK CREDITWORTHINESS DEBT DEBT CAPACITY DEBT CRISES DEBT ISSUANCE DEBT MANAGEMENT DEBT MARKETS DEBT OBLIGATIONS DEBT REPAYMENT DEBT SERVICE DEBT SERVICING DECENTRALIZATION DEFAULT RATES DEFAULTS DEREGULATION DEVELOPING COUNTRIES DEVELOPMENT AUTHORITIES DEVELOPMENT BANK ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC PERFORMANCE EXPENDITURE EXPROPRIATION FINANCIAL ACCOUNTING FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL MANAGEMENT FINANCIAL REPORTING FINANCIAL RISK FINANCIAL RISKS FINANCIAL STABILITY FINANCIAL STATEMENTS FINANCING SOURCES FISCAL DEFICITS FISCAL MANAGEMENT FISCAL REFORMS FISCAL TRANSPARENCY FOREIGN CURRENCY FOREIGN CURRENCY DEBT FOREIGN EXCHANGE FOREIGN INVESTMENT GOVERNMENT BONDS GOVERNMENT BORROWING GOVERNMENT DEBT GOVERNMENT GUARANTEE GOVERNMENT GUARANTEES GOVERNMENT REFORM GOVERNMENT REVENUE HOLDING HOUSING INFLATION INFORMATION SYSTEM INFRASTRUCTURE FINANCE INFRASTRUCTURE FINANCING INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INSTRUMENT INTEREST RATES INTERGOVERNMENTAL RELATIONS INTERNATIONAL BANK INTERNATIONAL CAPITAL INVENTORIES INVENTORY INVESTMENT ACTIVITY INVESTMENT PURPOSES LAND AS COLLATERAL LAND DEVELOPMENT LAND HOLDINGS LAND MANAGEMENT LAND OWNERSHIP LAND PARCEL LAND PARCELS LAND POLICY LAND PRICES LAND PRICING LAND SUPPLY LAND USE LAND VALUE LAND VALUES LANDOWNER LANDOWNERS LAWS LEGISLATION LIABILITY LIABILITY SIDE LOAN LOAN GUARANTEES LOAN REPAYMENTS LOCAL DEBT LOCAL FINANCE LOCAL GOVERNMENT LOCAL GOVERNMENTS LOCAL INFRASTRUCTURE LOCAL REVENUE LOSS OF REVENUES MACROECONOMIC RISKS MARKET PRICES MARKET RISK MARKET VALUE METROPOLITAN AREAS MONETARY MANAGEMENT MUNICIPAL BONDS MUNICIPAL GOVERNMENT MUNICIPAL GOVERNMENTS MUNICIPALITIES NATIONAL BUDGET NATIONAL CREDIT NATIONAL CREDIT MARKET OPERATING EXPENDITURES OPERATING EXPENSES OPPORTUNITY COSTS OUTSTANDING DEBT PENSION POLITICAL ECONOMY PORTS POTENTIAL EXPOSURE PRESENT VALUE PRICE DISCOVERY PRICE VOLATILITY PRIVATE LENDERS PRIVATE PARTIES PRIVATE PROPERTY PRIVATE SECTOR PROPERTY TAX ASSESSMENTS PROPERTY TAXES PROVINCIAL GOVERNMENTS PROVISIONS PUBLIC PUBLIC AGENCIES PUBLIC ASSETS PUBLIC ENTERPRISES PUBLIC FINANCE PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC OWNERSHIP PUBLIC POLICY PUBLIC PROPERTY PUBLIC SECTOR PUBLIC SECTOR ACCOUNTING PUBLIC SERVICE PUBLIC SERVICE DELIVERY PUBLIC SERVICE PROVISION PUBLIC USE PUBLIC WORKS RATING AGENCIES REGULATORY FRAMEWORK REGULATORY FRAMEWORKS REPAYMENT CAPACITY RETURN REVENUE SHARING REVENUE SOURCES RISK EXPOSURE RISK MANAGEMENT RISKY ASSET ROADS SAVINGS SUBNATIONAL BUDGETING SUBNATIONAL BUDGETS SUBNATIONAL FINANCE SUBNATIONAL FINANCES SUBNATIONAL GOVERNMENT FINANCE SUBNATIONAL GOVERNMENTS SUBSIDIARIES SUBSIDIARY SYSTEMIC RISK TAX TAX COLLECTIONS TAX RATES TAX SYSTEM TERMS OF CREDITS TRANSACTION TRANSPARENCY URBAN DEVELOPMENT URBAN GROWTH URBAN INFRASTRUCTURE URBAN LAND MANAGEMENT URBAN PLANNING UTILITIES VALUABLE ASSET VALUATION VALUATION TECHNIQUES VALUATIONS
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100831151725 http://hdl.handle.net/10986/3894

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Summary:	Land assets have become an important source of financing capital investments by subnational governments in developing countries. Land assets, often with billions of dollars per transaction, rival and sometimes surpass subnational borrowing or fiscal transfers for capital spending. While reducing the uncertainty surrounding future debt repayment capacity, the use of land-based revenues for financing infrastructure can entail substantial fiscal risks. Land sales often involve less transparency than borrowing. Many sales are conducted off-budget, which makes it easier to divert proceeds into operating budgets. Capital revenues from sales of land assets exert a much more volatile trend and could create an incentive to appropriate auction proceeds for financing the operating budget, particularly in times of budget shortfalls during economic downturns. Furthermore, land collateral and expected future land-value appreciation for bank loans can be linked with macroeconomic risks. It is critical to develop ex ante prudential rules comparable to those governing borrowing, to reduce fiscal risks and the contingent liabilities associated with the land-based revenues for financing infrastructure.

Integrating Land Financing into Subnational Fiscal Management

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