Government-initiated urban development and land financing

Land readjustment has been widely employed in Taiwan to facilitate an orderly urban development with little financial burdens to the city. Although landowners participating in land readjustment are required to contribute part of their land holdings to the city, this project area will normally be up-zoned. In consequence, the smaller parcels that remain with landowners are typically valued substantially higher than the original larger parcels. Contributed portions of land are used as sites of public infrastructures and also sold by auction to pay for the constructions of infrastructures. In contrast, in a similar development area where land readjustment is not used, both sites of infrastructure and construction will be paid for by public budget. Land readjustment therefore acts not only as a development instrument but also a fiscal one. In practice, in a booming housing market, the government is often left with a substantial amount of financial surplus when land readjustment projects are completed. The financial surplus will be deposited in a special fund which can be paid to a wide variety of public uses. The operation of this fund is overseen by a special committee and city councilors. The scrutiny of fund operation is however not as tight as regular city budgeting. In consequence, this fund is often criticized to have become a mayor’s private coffer. This research looks into the official budgeting and spending records of Taipei city, the capital of Taiwan, with the attempt to understanding how the fund has been spent over time. It is hoped through this analysis to explore whether the above observation has lured the city to exploit land readjustment as a supplementary financial source and even to deliberately over-develop the city with this scheme.