eral public improvements would be correspondingly
more than the amount determined according to the
above preceding three paragraphs; but for conveni-
ence and for other practical reasons, the value of
raw land and of special and general public improve-
ments, as determined under their three respective
captions, will be employed in the discussion which
follows.
Private Improvements.
To ascertain the maximum legal selling price to
be paid by the public for private improvements on
these farms, the so-called "present worth" or "re-
production cost" must be determined through care-
ful appraisement of all preparation for growing
things, such as land leveling and cultivation and
enrichment of the soil ; of all plant life, as fruit and
shade trees and crops; of all structural improve-
ments, as dykes, ditches, drains, fences, buildings,
and any other things of value appurtenant to the
farm that have cost labor or forethought to create
or conserve. Proper amounts for depreciation and
obsolescence must also be taken fairly into account
THE COMING LAND POLICY 13
in determining the net value of all structural im-
provements.
The usual official auditors and assessors
equipped with modern training can co-operate in
devising plans to keep the records of private im-
provements in such manner as to reduce to a mini-
mum the labor and cost necessary to make these
calculations and appraisals. Indeed, this can be
done not only in connection with private improve-
ments, but with raw land and public improvements
as well.
Initial Overhead Cost.
The officially estimated average of the so-called
"overhead cost" of putting a Settlement Farm of
any classification or type into operating or business
condition, as of the time appraisement is made, will
probably be expressed principally in terms of per-
centages based on the total fair net worth of the
private improvements on the farm, i. e., those
which are necessary or desirable for the operation
of the farm. These percentages for the different
classes of farms would have to be determined by
methods similar to those already standardized by
public authorities in making inventories of assets
of private-owned public utilities when condemning
them for public ownership or when fixing rates to
be charged the public for their services. However,
the ascertainment of these rates of per cent will be
difficult until reliable data on which to base such
figures have been accumulated and analyzed. Pend-
ing sufficient experience in this line, the appraise-
ments of this item of "initial overhead cost" should
be liberal towards the owner whose property is
being condemned.
14 THE COMING LAND POLICY
"Initial overhead" in the development of farms
is a real item of cost and can readily be accounted
for as it accrues in each individual case; but, be-
cause of the extreme variableness of farm opera-
tions from one time to another and the great dif-
ferences in cost of development on this account, fair
averages must be employed in the appraisement of
this item when fixing the value of a settlement farm
for purposes of condemnation or sale.
Since average "initial overhead" for any given
class of farm is, practically speaking, a certain
percentage of the value of existing private improve-
ments (that is, those that are necessary or desirable
for the operation of the farm), and, as it is a neces-
sary and unavoidable expense pending the con-
struction of these improvements and pending the
opportunity to use them adequately, such "initial
overhead" might fairly be regarded as a legitimate
part of their cost. However, for practical reasons
Initial Overhead Cost should be treated as a distinct
item.
Special Features.
Scenery, social surroundings or other special
features possessed by any Settlement Farm, some
or all of which might in certain cases be suffi-
ciently prized by purchasers to yield a considerable
bonus, should not be given any value in case of re-
purchase of the farm by the public. As a general
rule the original settler is not supposed to pay
much, if anything, on account of such features when
he purchases a Settlement Farm from the State,
and whatever he may thus pay is, as already shown,
included and disposed of in the raw land item of
the farm. As soon as the law providing for a maxi-
mum legal selling price is passed, the Public should
THE COMING LAND POLICY 15
be generally informed that Special Features will
not bring a price when condemnation proceedings
are instituted against property. This would be a
notice to any successor of original purchasers from
the State that whatever he may pay for or on ac-
count of special features will be at his own risk.
Site Value.
Prices paid by the Settlement Board for tracts
of land for subdivision will probably never include
more than a moderate amount for sheer site value
and for special features. Therefore, to simplify the
subject these amounts thus paid by the Board are
included in the value fixed in this book for the raw
land. The money value covering all such economic
and social advantages that accrue to the farm (on
account of its location) after the purchase of the
land for subdivision purposes by the State, meaning
site value in its exact sense, would include the
value of most "special features"; but the latter are
not included here, the purpose being to keep a
separate account of the cost of each of these fea-
tures, so far as any may bring a price in cases of
sale between private interests. Except so far as
the Land Settlement Board may have paid extra
amounts for undeveloped settlement land on ac-
count of location, or special features, which
amounts, as already shown, I include in the item
"Raw Land", nothing should be allowed for site
value or special features when the public repur-
chases any of its former Settlement Lands. That
is to say, as here treated the site value and the
special features value that may have developed up
to the time when the State acquired this land is
covered by the item Raw Land, while site value and
16 THE COMING LAND POLICY
special features value which may have evolved later
are separately treated under their respective titles.
Simplifying the Task.
The State Land Settlement Board will probably
be equipped with a department to assume general
supervision over the price-fixing of farms. In or-
der to meet contingencies that might arise in vexa-
tious cases of condemnation, it might be desirable
to provide that the award payable by the State shall
in no case of this kind exceed an amount deter-
mined as follows: Let a qualified body of men ob-
tain options on three nearby available farms se-
lected and appraised by them as individually worth
several percent more to the owner of the farm than
the property being condemned. Then let the Court
take the highest of the three options as the
maximum figure over which the condemnation
award may not go. These three farms should be thus
held under option by this selected body of men, in
order that the farmer may have an opportunity to
exercise his choice between them and purchase the
one that satisfiies him best, if the award has been
sufficient, provided he prefers to do this rather
than retain the cash awarded him through con-
demnation proceedings. This arrangement would
often simplify such condemnation proceedings.
THE COMING LAND POLICY 17
1921
SECOND STEP.
PART B.
(Maximum Legal Selling Price of Farms in Trans-
actions between Private Interests.)
Part B of this step should be introduced about
the same time as Part A. The object is to determine
and put into effect as nearly as practicable a maxi-
mum legal selling price for any State Settlement
Farm in cases of sale between private persons or
interests. This price would have to equal the
money value of:
a. Raw land (including appurtenant public im-
provements paid prior to purchase of the
land by the State).
b. Appurtenant general public improvements
(paid subsequent to the original purchase
of the raw land by the State) .
c. Appurtenant special public improvements
(paid subsequent to the original purchase
of the raw land by the State) .
d. Private improvements (including growing
crops) .
e. Excess payment on private improvements.
f. Initial overhead cost.
g. Excess payments on initial overhead cost,
h. Special features, such as give but little, if
any, economic advantage.
The maximum legal selling price, however, must
not include anything for site value (the supposed
money value of any appreciable economic advan-
tage due to location or other causes).
18 THE COMING LAND POLICY
Explanation Regarding Above Values.
The value of raw land, general public improve-
ments, special public improvements, private im-
provements and initial overhead cost must be the
same in amount as in cases of condemnation of the
farm by the Public. These amounts will be ascer-
tainable mostly from public records.
Pending a period of practical experience in the
matter, excess payments on private improvements
might be considered permissible when the pur-
chaser believes that this item in a particular in-
stance has such excess in value for him, and is
ready to accept the risk of loss involved in case
of condemnation suit by the Public. The same re-
marks apply to excess payments on initial over-
head cost. Similarly the special features defined
above, which may be possessed by any Settlement
Farm, could be allowed to bring a price in case of
sale between private parties. But, later on, if it
seems necessary to neutralize partially any profits
derived from these excess payments and payments
for special features, these profits can be given spe-
cial treatment through a branch of the Income Tax
employed as a "limited remedial tax". But this
method of remedying an economic fault is defective
and should be used only until a more logical
method becomes available.
No part of the price paid for a Settlement Farm
should represent so-called site value or other form
of economic advantage possessed by some farms
over others. As explained later, these advantages
should be approximately equalized by other means
than by an extra sum paid to the owner for the
land, or by rent paid to him for the use of the
land, or by taxes thereon paid to the Public. Those
THE COMING LAND POLICY 19
methods should be superseded by better ones in
Settlement Districts as soon as possible and should
be elsewhere eliminated persistently and gradually.
Special Cases.
Sales of Settlement Farms between private par-
ties at less than maximum legal selling price, or of
such farms sold in trade for other property, present
problems but slightly different from those already
treated and need no special discussion here.
Laws to Enforce Maximum Legal
Prices of Settlement Farms.
The second step of the land policy must include
the development and application of the necessary
laws to prevent as far as possible prices on Settle-
ment Land that exceed the maximum legal figure,
thus practically excluding compensation for loca-
tion or site-value. Mere suppression of the selling
price of site-value would still leave the question
of economic rent for the future to solve. The farm
owner who operates his own property has the
benefit of any and all economic rents that may ac-
crue to his farm. Of course, in this case he does
not receive rent from a tenant for the use of the
land, but he gets the benefit of this rent through
the products that he sells. To finally eliminate
such economic rent the law governing the selling
price of Settlement Farms must be accompanied by
radical laws for economic rural planning and cer-
tain economic laws especially those governing
prices of commodities. (See Footnote). No so-
cial system can ever be wholly just until economic
FOOTNOTE: By economic rural planning I mean
such arrangement and development of rural districts as
tend toward equalizing the economic value of all farm
units, i. e., of each maximum tax-free parcel of land,
referred to more fully under the Sixth Step of the "Com-
ing Land Policy".
20 THE COMING LAND POLICY
rent is entirely eliminated, i. e., made non-existent.
This must not be done by eliminating the special
benefits that cause this rent, but through making
these benefits general or universal as far as pos-
sible. It is doubtless true that the enforcement of
an act fixing the price of Settlement Farms will
evoke subterfuges to block its application for a
considerable time, as is the case with most restric-
tive economic laws. For instance, a well-to-do
farmer, in order to purchase a tract of land, might
offer more, ostensibly because of its scenic en-
virons, than he would ordinarily pay for a benefit
of this kind, while his hidden purpose might be
the acquisition of certain present or possible future
economic advantages in location. It is this specu-
lating in the special economic benefit of location
within the limits of Farm Settlement areas that the
legal price-fixing of farm land, with certain sup-
porting measures, is meant to check. On the other
hand, a farmer may be willing to pay for a farm
more than it is really worth, not for speculative rea-
sons at all, but solely for its scenery or its proxim-
ity to the home of certain relatives or friends, etc.
It does seem that a lover of nature's beauties or a
man fond of the proximity of friends or other such
pleasures ought not to be barred from purchasing a
site possessing such features if he is financially able
and willing to do so, even if he be required to pay
an extra price on account of them. The problem is
how to prevent the use of subterfuges as an aid in
speculating in location or site-value.
FIVE CHECKS TO SPECULATION
However, for apparent reasons, in dealing with
private owners nearly all prospective purchasers
of Settlement Farms will be deterred from offering
THE COMING LAND POLICY 21
more for the bare land item of such farms than its
legally figured selling price. Likewise a prospec-
tive tenant will find little, if any, incentive to pay
rent that will allow more than a fair interest on
the recorded maximum legal selling value of the
raw land item and other recorded or ascertainable
legal values constituting in the aggregate the full
maximum legal selling price of the entire farm.
The most potent reasons for this would be :
1. A constant supply. The State has for sale
on easy terms equally good farms favorably lo-
cated in the same or other Land Settlement dis-
tricts at the cost of the bare land item, improve-
ments and initial overhead cost. This fact alone
would in most instances and without legal enact-
ment prevent better offers being made to private
owners by prospective purchasers.
2. Equalization of intrinsic worth. A public
policy is quietly and surely developing to make
our farms, especially Settlement Farms, more equal
in agricultural productiveness, in availability to
markets, in social conditions and in other respects.
This is more fully explained in Appendix Two. It
is beginning to be felt, if not clearly foreseen, that
this policy will in time tend to equalize greatly so-
called site values, and, to the degree in which this
equalization is gradually effected, speculation in the
economic values of location will be eliminated au-
tomatically, regardless of other influences.
3. Steadying of prices through right to con-
demn. Whenever it is clearly in the public inter-
est to do so, the Public will doubtless reserve the
right to condemn for private purposes other than
the one for which the farms are at the time being
used, any of the farms it has sold to settlers, as well
22 THE COMING LAND POLICY
as the right to condemn them for its own use. The
reservation of these rights will hold back a pros-
pective purchaser from offering an amount so large
for any farm as to be later discounted if the farm
became involved in a condemnation suit.
True, it is a relatively rare occurrence for a farm
to be condemned for public purposes; but it does
happen and, when it becomes a matter of common
knowledge that the Public, when acquiring private
land in Settlement Districts, will pay nothing di-
rectly or indirectly for true site value, then a pros-
pective buyer will be greatly influenced in the offers
he makes a private owner for a farm in such dis-
tricts. However, since the public will reserve the
right to condemn Settlement Farms for the pur-
pose of changing their use not only from private to
public purposes, but from one kind of private use
to another as, for instance, changing a portion of
a farming district into an urban center or industrial
district it will happen more frequently that farm
lands will be condemned by the Public. Under
these circumstances the greater the chance or like-
lihood of condemnation the more certain will be
the individual, who purchases Settlement Land
from any owner other than the State, to arrive at
the amount of his offer by the method established
for condemnation by the Public, which would be
the maximum legal selling price. On account of
this alone the opportunity for speculation would be
greatly reduced.
4. Keeping public records to give assistance.
The assessor will keep a public record revised from
year to year, as he now does, showing individual
properties and their respective owners. Annually
he will also determine and record the maximum
legal selling price of raw land, of private improve-
THE COMING LAND POLICY 23
ments on each Settlement Farm, of the propor-
tional part of the general and special public im-
provements appertaining to it, and of initial over-
head costs. The assessor, after every sale of a Set-
tlement Farm, should also make a record of any
amounts that may have been paid for: a, excess
payments on private improvements; b, excess pay-
ments for initial overhead cost; c, special features.
The amounts of these three latter items he would
naturally obtain without delay from copies of deeds
in the County Records. All this would be of value
for income and other tax purposes.
Such a public record will have a compelling in-
fluence in checking speculation in site values. And,
if the assessor will keep a yearly record of the
actual cost of the private improvements on farms,
as he probably will be required to do, instead of
the inaccurate records now maintained, and if im-
mediately in connection with every sale he deter-
mines and records the actual present value of such
improvements, the chance for any appreciable
amount being paid for site value, through pur-
posely overpaying for private improvements, would
be still further lessened; for, in the face of such
records, the purchaser will realize that he may have
difficulty in obtaining an excess price for the im-
provements in case of resale. The same thing might
be said of excess payments for initial overhead ex-
pense, and also of special features.
Something akin to the work involved in prepar-
ing these records has now to be done by the indi-
vidual farmer for income tax purposes and might
as well be done through the county assessors in be-
half of the Federal Government (under its general
supervision) as soon as they as a class are equipped
and qualified for starting such records for Settle-
24 THE COMING LAND POLICY
ment Farm Districts. Thus the necessary informa-
tion would he available and uniform for all kinds
of tax purposes.
5. New requirements in farm deeds. Once the
public mind is bent on checking speculation in
Farm Settlement land, the State authorities will re-
quire publicity in all deeds, and in all valid grants
of real estate from private owners to private pur-
chasers the exact amounts paid for the following
items will have to be stated and sworn to :
a. Raw land,
b. General public improvements,
c. Special public improvements,
d. Private improvements,
e. Excess payment on private improvements,
f. Initial overhead cost.
g. Excess payment on initial overhead cost,
h. Such special features (separately listed) as
give little economic advantage to the
farm.
Out of the total price paid for the farm the
proper amounts will have to be apportioned to each
of the above enumerated items and thus written into
the deed; but none of the apportionments for raw
land, general and special public improvements,
private improvements and initial overhead cost
should be in excess of the amount recorded on the
books of the assessor as the respective values of
these several items, or parts, of the maximum legal
selling price of any Settlement Farm.
If, after entering the proper amounts paid for
raw land, public and private improvements, and
initial overhead cost, there still remain a balance in
the total selling price of the farm, it should be di-
vided between (I) excess payment for private im-
provements, if any amount is paid in addition to
THE COMING LAND POLICY 25
ihe value recorded for private improvements by the
assessor; (2) excess payment, if any, on initial
overhead cost; (3) special features, if any were
paid for. The apportionment between these three
items should show the amounts for each respect-
ively which have been mutually agreed upon be-
tween purchaser and seller and which have passed
between them by way of compensation.
Reconciling records with the deeds. At the time
of sale of any farm the recorded values on the as-
sessor's books will be as of the last passed annual
assessment date, and subsequent changes, if any, in
the values of raw land and public improvements
will have to be estimated to date by the assessor.
Like subsequent changes in value of private im-
provements and initial overhead cost would have
to be prepared by the owner and adjusted by the
assessor. These changes thus determined would
have to be entered on the public records as of the
date of transfer of the property, in order that they
may be the same on the assessor's books as in the
deed. At the next annual assessment the full legal
machinery, including the usual right to appeal to a
Board of Equalization, would re-establish the
values to date in the regular way.
If animals, implements, supplies, stocks of ma-
terials, are sold with the farm, a separate state-
ment covering these items should be filed with the
assessor.
The five checks on speculation enumerated above
would probably suffice for several years. In the
meantime a more extended law providing adequate
penalties may be devised to stop virtually all spec-
ulation that may then still exist along these lines.
Lightening work in income tax report. All of
the records required by the plan would be of value
26 THE COMING LAND POLICY
in connection with the Income Tax, and manipulat-
ing the figures to avoid or decrease the amount of
the tax, or indirectly to pay the seller something
for site-value, would involve unprofitable risk in
most cases. Furthermore, keeping up these rec-
ords would tend toward putting farms on a busi-
ness basis.
Recording made easy by small beginning. At
first this method of keeping account of sales of Set-
tlement Farms may seem rather complicated, but in
the course of three or four years it would be car-
ried out quickly and with comparative ease. Since
it would be used only in connection with a rela-
tively small number of Settlement Farms, the au-
thorities would have ample time to develop an eas-
ily workable, detailed plan, before the increase in
the number of these farms is very great. In fact,
experience with Income Tax blanks for farm opera-
tions, as issued by the Federal Government in 1919,
makes the plan here suggested for assessing and
deeding Settlement Farms seem by comparison very
simple indeed.
Good farmers and occupied farms. One effect
of establishing a maximum legal selling price for
the resale of Settlement Farms is that it will become
unprofitable to hold them idle, there being prac-
tically no possibility of advance in price of the raw
land, while public and private improvements ap-
plying to the farms will deteriorate and lower in
value. Another advantage lies in the fact that only
those individuals will buy settlement lands who
mean to make agriculture, uncombined with pos-
sible speculative gains from the resale of their land,
a source of livelihood. A farming community de-
veloped under the conditions here outlined is bound
to be well settled by earnest men and women; pro-
THE COMING LAND POLICY 27
duction is sure to be liberal, and the business end
of farming will prosper better than if the com-
munity were built up under the present haphazard
plan.
1921
THIRD STEP
(Unlimited Right to Condemn Private Land)