Urban Construction  

 

Archive: The Capital City of Berlin - Documentation

The Financial Framework – Costs and Revenue


2007 - Property values, map extract
2007 - Property values, map extract

Exceptional planning and construction projects also present a financial planning challenge. A careful estimation of the overall budget was carried out in 1992/93 in the course of the preparatory studies. Its intention was not just the legal fixation of the development area, but also to determine the measures required for the relocation. In estimating the financial budget, it was important to be aware that funds for a development measure could only be used for planning, purchase of land, the provision of utilities, legal matters and construction of public improvements. Works carried out by third parties, for example the Federation or private builders, are not eligible for funding.

The financing volume

The first calculated estimates indicated a financial requirement of 1.32 Mrd. DM. This sum comprises the following parts: preparation: 50 mill. DM - purchase of land: 210 mill. DM - legal matters: 110 mill. DM - provision of utilities: 440 mill. DM - public improvements: 390 mill. DM - various building measures: 120 mill. DM. The total budget for the development measure was ultimately set at 1.134 Mrd. DM (approx. 580 mill. euros) - for the year 1999 then with this sum the figure is covered.

The total cost of some 580 mill. euros are offset with an estimated income around 250 mill. euros, which in particular results from the increase in land values. In May 1994 the Federation and Berlin concluded an administrative agreement about the urban development measure, which, in particular, regulated the financing. The Federation carries 64 percent and Berlin 36 percent. The State of Berlin is responsible for the development measure. The Federation is grantor - as with conventional consolidation measures. Therefore Berlin must adjust its budget each year by the expected costs minus income. This amount will then be refinanced by the Federation and the financing of the development measure secure.

Income

Financing rests on three poles: the budget of the State of Berlin, grants from the Federation and the income from the development-related increase in land values. In order to limit the speculative increases in land prices, the land values of all properties in the development area were "frozen". The valuation date was the 1 November 1991, as the date on which the preparatory investigations were publicly announced. The land use at this cut-off date then be comes relevant for all further estimations of land values. Increases in land values resulting from the overall economic developments - which were for a long time negative - will, however, be considered.

Changes in land values will be monitored, in that each land transaction and each investment by the local authority - in this case, the State of Berlin - must be approved.