I. Radio Spectrum.

This is the age of communication. Old locational factors are made obsolete, they say, as signals bounce off satellites and video conquers all. Allowing for the hype there is a nub of truth there. But all these signals travel through a limited natural resource that has the essential characteristics of real estate: natural origin; permanence; fixed location; appropriability; policeability; and now salability, and at prices commensurate with the hype of the age of communication.

But little or none of those values appear on assessment rolls, except indirectly by adding something to otherwise ordinary land and capital used to utilize the spectrum. Spectrum is a major omission from any full accounting of national assets.

J. Rights of Way.

Rights of way are traditionally valued with the rail or utility possessing them. Whether one uses historical cost or opportunity cost one likely undervalues them in their highest and best use, which is what they are, rights of way, created by delegation of the sovereign's priceless power of eminent domain. There is a large element of a peculiarly valuable form of plottage in the completion of a right of way.

To the extent that the undervaluation is shifted forward to consumers in lower rates it is a self-fulfilling valuation. The lost value is shifted to the consumers' real estate and does not escape the assessment rolls. But misvaluations of inputs do bad things to resource allocation and the incentives of utility executives. The whole tortured question of utility rate structuring and supply planning and system extensions may never be resolved until it is brought to focus on the neglected issue of proper valuation of rights of way. Meantime let us just enter a bold question mark over whether rights of way are being accorded the values they warrant. Those who have them seem loathe to relinquish them, and only grudgingly share their use with municipal utilities such as that of which I am a Commissioner, and whose primary obstacle to acquiring cheap power is getting access to transmission over the long, wide Rights of Way used by high-voltage power lines.

K. Severed Property.

Sometimes valuable portions of the real estate bundle of rights are severed, become intangible or invisible, and escape valuation. Here are a few examples.

A Milwaukee department store sold a block of land adjoining itself, encumbered with a covenant not to compete. The assessor accordingly down-valued the encumbered block, but did not assess the beneficiary a corresponding premium.

Some jurisdictions are down-zoning land and compensating the holders with TDRS,(Transferable Development Rights). The down-zoning will cause or sustain low assessments, but will the TDRs be assessed as real property, or will they be called 'intangibles", tax-exempt? (North Carolina is about the only state that tries to tax intangibles.) Even if they were assessed and taxed, how long would it be before a decent market developed for this novel form of property? Judging from Montgomery County, Maryland, it could be a long time.

In some regions, notably the long-suffering Los Angeles Basin airshed, pollution rights are being recognized. Really, I am serious, it is Coase's dream come true. Ancient and honorable polluters are deemed to have established the right to continue, or to sell that right to another. Thus they have established a de facto easement over the lands of their victims, or, excuse me, in Chicago we say "receptors". The receptors' lands lose value, obviously. But the polluter (or emitter in polite society) now possesses an intangible asset that does not appear on the assessment rolls. The same is true of airport landing rights, of course, vis-a-vis the afflicted householders underthe end of the runway.

Leaseholds are an effective way to split up the bundle of rights. A mineral lease removes the major value inherent in certain lands from the local jurisdiction to White Plains, Bartlesville, Houston, or other headquarters. Of course a record remains locally, and it is piously to be hoped that appropriate valuations and levies are applied, but are they? How about overrides? Deals can be made as complex as someone wants, and it would be a good guess that something is lost in the shuffle. It is an area involving prodigious values, so the expenditure of some effort might identify large unrecorded sticks in the bundle of rights.

Some leaseholds on public land seem to be "sweetheart" deals, some of long standing. School section lands in certain states have achieved great notoriety. Boat moorings in big cities seldom seem to go to the highest bidder. Are these de facto possessory interests ever assessed and taxed?

The more one observes the more one realizes such examples could be extended indefinitely -- a rich field for researchers in land data who want to go beyond the assessment rolls.

This article is an excerpt from an invited paper presented at the Assessment Workshop cosponsored by USDA-ERS-NRED and the International Association of Assessing Officers, Chicago, IL, June 25-26, 1985. The paper was published in Almy, Richard R., and T.A. Majchrowitz (eds.), Property Tax Assessment (Chicago: U.S. Department of Agriculture, International Association of Assessing Officers, and The Farm Foundation, 1985), pp. 91-109. The whole paper will be published daily in increments over this week and part of next week. This is excerpt 7 of 9.