The estimation of compensative costs for public standard services in the Turin City

Stefania Sabatino and Luisa Ingaramo

ERES from European Real Estate Society (ERES)

Abstract: Nowadays municipalities manifest an increasing difficulty in finding out free areas available for the introduction of public standard services along with private real estate developments. To overcome this difficulty and when private developers canít comply the rule, the City Hall of Turin requests a levy to compensate the missing allocation of public standard services. This solution implies for the City an assessment of the payable quantum. Time after time, as rules changed, the Municipality introduced consecutive proceedings and appraisal tools useful to define the compensative cost. In particular, the Turin City Plan foresees an equivalence between the value of areas bound to public standard services and the expropriation ones. Nevertheless, in 2007, a national act introduced the full market assessment for the expropriation value, causing an excessive charge for private developers, already hit by the economic and financial recession. As a consequence, during the last few years, the City Hall attempted more reasonable solutions, in order to expedite the urban transformation processes, otherwise blocked. This necessity has led to the definition of a ìcase by caseî approach under the supportive activity of the Polytechnic of Turin, by means of a multi annual convention. A first solution chosen by the Turin City was to assess the compensative cost value by means of a DCF-Discounted Cash Flow. The DCF used to considerate all the overcharging cost inputs, specific of each intervention (drainage, demolitions, outside works, other public works, etc). Obviously, this assessment activity revealed trough time its own limits, in terms of time, cost, and process governance. This paper presents the early results of the forthcoming evolution in the compensative costsí evaluation process, aimed at the definition of a range of homogeneous values, depending on the different urban locations. Finally, this standardization activity, useful to guarantee a more transparent criterion as well as a simplification in the valuation process, could help to reach an agreement between the private and public subjects involved in the urban transformations processes. From an operative and methodological point of view the research activity of the Polytechnic of Turin has brought to the analysis of 3.861 census cells of the City. The analysis has attributed, by means of ArchGis software, punctual values to each cell. The distribution of the cell values has been studied to define the perimeter of homogeneous urban zones (nearly 90 sub-areas in total). For each sub-area the study has developed a dynamic Cash-Flow simulation of an hypothetic real estate intervention to calculate the relative value of the buildable area, considered as the compensative cost to be paid by private operators. The results emerged, beyond the operative implications, show, in a methodological perspective, the usefulness of the chosen method, in the mid-long term, to monitor the urban transformation impacts on the real estate values.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2011-01-01
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