100 years in the making

At the turn of the century, there was a plan put together to build a tram system in my city, but the plan kept being put on hold due to disagreements between political parties. That was the turn of the last century by the way - in the 1900s.

The conversation has continued in the time I have been here and finally, the first phase of the project was started a couple years ago. As I pulled toward work today, I saw it for the first time up and running for a test drive and after all this time and disruption to traffic, it is kind of cool. Having said that, it will likely be superseded by self-driving, un-railed buses pretty soon, which will be far cheaper and versatile, considering they don't require the track infrastructure and can go on normal roads.

Phase One runs from the city center put to the technical university and It hub of the city where I work. Phase Two will start next year and run in the other direction, which is where I live - which will be handy either if I am still working at the same place, or for trips home after a drunken night out... As if I get to have those.

It is still a few years away of course, but the area I live is growing rapidly and thousands of apartments are being built around the area where the tram will run. My house is about a kilometre from the line and in a far quieter and established area, but it should still appreciate on value a little due to the access.

Because so many people are coming into the area, new schools and daycares will have to seen be built, as well as the continued upgrade to local shopping and services, that had been ongoing for the last decade already. It won't be long until this area will be considered some kind of satellite city, by Finnish standards and I suspect that this will also increase the value of the real estate in the area, especially if it is close, but still in a quiet residential area such as ours.

The cost of the tram system is quite high and runs into several hundred million euros, which is part of the reason it has been such a sticking point - but, the money will be "returned", as housing prices increase and new residential areas are built along the track in places there wouldn't have been housing before. These apartments (nearly all are apartment building) are highly priced and there are many thousands of them along the line. The inflated prices "due to the tram" and the fact that they are new raises a huge amount of additional tax revenue through various paths, including land tax, stamp duties at sale, sales taxes, capital gains on rental properties and all of the additional workers in the city, the customers of shops and bars and all kinds of services.

If you think that just the average land tax is around 1000€ per year, 5000 apartments will raise 5 million a year, meaning just from that, the ROI is 40 years - factor in all the other taxes during that time, and the payoff period is far, far less. ´Then, there is the easing of traffic in the city center, which will mean upgrades to road infrastructure can be stretched out further which saves costs again. If looking at it from a rent-seeking position of a government through tax, the cost of building the tram system is a bargain - and of course, taxpayers funded it anyway.

While people can talk about being green, nothing really gets done unless there is a dollar to be made from it and for a government, the best kind of gain is an indirect one, where the return isn't made through something like ticket price, it is made through the inflation of taxable product and service values. Tax makes the world go round.