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Who pays the price for progress?

"The controversy surrounding the Hsinchu Science-based Industrial Park is indeed worthy of examination. Is it now time to establish a judicious and transparent financial collection system to prevent the emergence of community development problems in the future?"

The Hsinchu Science-based Industrial Park (新竹科學園區) has caused major problems with the local environment, traffic conditions, and educational system. The local public infrastructure, as a result, is becoming inadequate to meet local demands. The local government, in dire financial difficulties, is unable to deal with the problems.

The Hsinchu City mayor held a press conference at the Legislative Yuan calling for public attention to the problem. He has additionally proposed three solutions, one of them being the establishment of a system under which the businesses in the park would repay the local community. Another proposed solution is to have the central government directly deal with the problem or appropriate more funds to the local government to do so.

Putting aside the issue of whether it is fair to charge "community development funds by construction projects (工程受益費)" or the so-called "Township Chief Tax (鎮長稅)" in Shihchih (汐止) and whether their application is fair and practical, their existence reflects the local government's severe financial shortage for maintaining the local infrastructure resulting from community development.

The controversy surrounding the Hsinchu Science-based Industrial Park is indeed worthy of examination. Is it now time to establish a judicious and transparent financial collection system to prevent the emergence of community development problems in the future? Let us first take into consideration some measures adopted by local governments in the US.

Developers of a new communities in the US (either a residential or industrial community) must first pay so-called development fees or "clash" fees to the local government. The local government applies the income collected this way to the construction of infrastructure related to the development of this new community, such as widening or increasing the number of roads and underground sewers as well as increasing street lights, tap water systems, and possibly parks. The income may also be use to deal with the resulting problems with the environment and traffic.

Actually, the US government has an even more important source of income -- property tax. Why don't local governments simply raise the property tax to pay for the additional expenses? The main reason is that the community in question is simply part of the greater area under its jurisdiction. Any increase in the property tax would have to be applicable to the entire jurisdiction. It is illogical and impractical to force residents outside the community to bear the additional costs for infrastructure incurred as a result of the development within the new community.

Every area has an optimal population size. The area will become crowed if the population is greater than this optimal size. As a result, many environmental and transportation problems will be created. Undeniably, the establishment of the Hsinchu Science-based Industrial Park has contributed to local education and the overall prosperity of the Hsinchu area. However, as pointed out by the Hsinchu City government, the existence of the park has expanded the size of the local population, and caused a financial shortage for the local government. For one, the increase in population has led to the need to establish more primary schools which, in turn, has led to an increase in salaries for the teaching staff. Before the local tax regulation is passed, community development funds from businesses or the "clash" fees may indeed be a viable option under the circumstances.

The existence of the Hsinchu Science-based Industrial Park creates two impacts, one positive and one negative. The positive impacts may be further divided in two. The first positive impact is the technological advancement and economic prosperity for the entire nation. The second positive impact is localized, economic prosperity and a booming real estate market for the Hsinchu area. The negative impacts include those described above. In considering ways to ease or eliminate these clashes, we need to take into consideration the positive impacts.

For the central government, the positive impact is the increase in revenue brought on by the overall economic growth. For Hsinchu's local government, the negative impact is the increased financial burden. However, the accompanying industrial and commercial growth bring an increase in the real estate appreciation and property taxes. Since the central government has enjoyed many benefits from the park, it should subsidize the local government's efforts to deal with the negative clashes. Community development funds from the park's businesses and an increase in local taxes should simultaneously be adopted.

Theoretically, if the businesses in the park creates more good than evil, then they would have no need to pay for the clashes. If, as pointed out by Hsinchu City officials, the local government is short NT$3 or NT$4 billion as a result of the Hsinchu Science-based Industrial Park, then the increase in local tax revenues is necessarily smaller than the shortage created. Therefore, besides subsidies from the central government, the charge of a "clash" fee is indeed a plausible approach for the local government.

Finally, in collecting any of the above-described fees, the manner must be official and transparent. The local government must evaluate in detail the extent of problems brought on by the new community. How much in fees is needed to cover such problems? Also, determine the amount of acceptable fees by way of public inquiry. In addition, the fee charged must of course be diverted to the public treasury and be applied for its intended purpose to avoid controversies. such as those caused by the "Township Chief Tax."

Fu Chuan-hsun is the deputy executive-secretary of the Taxation and Tariff Commission at the Ministry of Finance.
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