Property valuation principles - how policy changes can be detrimental for urban development

Local government units’ own revenues are the most significant sources of financing their activities, from the point of view of their financial self-reliance. The sources include several groups of income characterized by different fiscal efficiency and performed functions. One of the groups is formed by so called local fees, that being a source of revenue, are also urban development factors that influence entities operating in the municipality. Among the fees that are the main income of municipalities in most developed economies are ad valorem property taxes. In countries that have not implemented this solution, where the basis for determining the tax is, for example property area, it was necessary to develop alternative solutions that enable the collection of fees on various changes in the real estate structure (e.g. the adjacent fee). Property valuation principles defining the scope, assumptions and methodological procedures are substantial in that case. The principles are subject of continuous changes, which can have either positive or detrimental impact on urban development. This article attempts to assess the potential impact of legal changes, in terms of determining the value of real estate for the purpose of the adjacent fee collection on the municipal revenues and consequently urban development policy implementation.