The details entering into the operation of a building and composing its cost are not always accessible, on account of the natural hesitancy of owners to afford information as to their expenditures.

It would seem, however, that the publication of statistics, comparing costs of operation in percentages of the rentals, such as those recently compiled by C. T. Coley, M.E., would be of general advantage, creating, as they would, a greater interest in the subject, and directing attention to certain elements upon which relief or improvement might be especially desirable.

If, for instance, it should develop that in certain classes of buildings some practice was common which was productive of undue expense, or some burden was unfairly or unevenly laid upon them, the comparison of details would doubtless tend to bring about an economic modification to the advantage of owners of such properties.

The best method of comparison seems to be that of the relation of each item to the gross rental, which brings out very clearly the burden laid upon the ownership for each element of outlay and gives its direct bearing upon the returns, and through the returns, upon the capitalized value of the investment. A comparison and study of a number of actual instances affords the following approximate averages as classified in Table H.

In examining the outgoing expenses upon any class of improved property, the largest item, and that which, therefore, naturally first attracts attention, is taxation.

Any system by which taxes are raised in this country must, to meet popular views, be such as will conceal the contributions of the general public, among whom there appears to exist a general and deep-seated objection to a direct form of taxation. Consequently, the main burden of city taxation is laid upon real property, and becomes a first charge thereon, taking a prior position to any lien or mortgage, either of land or building thereon.

Cost Of Operating Buildings

Cost Of Operating Buildings

"In certain cases the relation of the building to the land, as regards height and expense of construction, has not been happily proportioned"

Table II. Averaged Operating Expenditures

Classified in percentages of rentals

Item

Business or office

Lofts and warehouses

Elevator apartments

Flats

FIXED CHARGES

Taxation . . .

15.5

17

12.2

13

Insurances

. 0.7

1.6

1.6

1.7

Water tax

. 0.6

0.75

1.5

2.0

Total ....

16.8

19.35

15.3

16.7

MAINTENANCE

Management .. . .

5.3

4

3

2.75

Upkeep and decoration .....

2.4

3.5

11

12

Cleaning and janitor

7.3

0.25

4.7

4.25

Total.....

15.0

775

18.7

19

CONVENIENCES

Elevator ....

9

8.5

6.5

• • • •

Heat and hot water.

2.8

3.3

8.5

10

Public lights . . .

2.2

1.1

2.8

1.6

Total.....

14

12.9

17.8

11.6

EXTRAS

Light .....

4.2

3.5

4.8

• • • •

Refrigeration or iced water....................

06

■ • • •

7.0

• • • •

Vacuum cleaning

0.9

....

1.8

....

Total.....

5.7

3.5

13.6

a • •

Gross totals . . .

51.5

43.5

65.4

47.3

All the items included in operating expenditures have increased, so that the proportion which the present expenditures bear to the present increased rentals has not substantially changed from those previously existing, as shown above.

Unequal results of present taxation seem to be due largely to the old practice of assessing values inclusive of the improvement, but in New York City the commendable work of the assessing authorities is now in the direction of establishing a separate value for the land and a separate value for the building. It will perhaps be thought that such valuation would settle the question, but it will not do so fully unless it takes into account the depreciation of the structure, which is continuously reducing in permanency if not in earning capacity.

If the assessments, so far as the building is concerned, should be based on valuation at its full earning capacities, they would have to follow the course of the earnings of the building, which would present a shifting and deteriorating basis, so that a very moderate assessable value on the building would naturally be established, which would provide in advance for its deterioration, while the land might safely be taxed nearer to its full value.

It may be observed that at present no other class of investment makes contributions to municipal purposes similar to those of real estate. The budget of 1910 for the city of New York amounted to $163,130,270. Of this amount, $131,099,280 is raised by taxation, of which real estate contributes $124,540,-732, or 95%, while personal property furnishes only $6,558,548, or 5%.

The increase of the tax rate is ten points, added to the increase of assessed valuation, which is five points, so that the taxpayers' bills have increased since last year at the rate of fifteen points. While taxes are thus increasing, the income produced by real estate does not grow, at least not at the same rate. Within a year or two the entire revenue of the city will depend on real estate, as the tendency of the present administration to abolish taxes on personalty will probably be successful. The irresistible tendency to increase public expenses, at the same time disregarding the revenue of the municipality, places a growing burden on property-owners.

Unfortunately it must be added that no other contribution is at present exacted with like degree of uncertainty and inequality.

That this is the case is generally understood, but the extent of the variation may be worth illustrating, as is done in the accompanying tabulations of taxation in typical buildings in Manhattan.

Relation Of Taxation To Rentals And Values New York City

Building

Case

Per cent, of book value

Percent, of gross rental

Per cent, of net income

Offices

I

1.88

17. 20

39.6

Offices

2

1.58

I5.02

3I.0

Offices

3

1.23

l8. 10

35.2

Offices

4

1.07

11.80

23.8

Mean.....

....

15.50

....

Lofts......

1

1.43

20.15

39.3

Lofts......

2

1.40

14.10

31.3

Lofts......

3

1.33

19.00

38.0

Lofts......

4

1.30

15.10

24.7

Mean.....

....

17.00

....

Apartments

1

2.10

16. 70

18.7

Apartments ....

2

1.95

13.00

16.8

Apartments ....

3

1.26

9.70

14.7

Apartments ....

4

0.73

9.48

20.5

Mean.....

....

12. 22

....

General average . .

.

1.43

15.00

27.8

Much of the irregularity in taxation is due to the failure of both owners and assessors to take into account variations in earning capacity and consequent effect on economic value. If assessed values be utilized as a basis for computing fair rentals, it would become the interest of the owner as well as of the assessing authorities to determine and uphold a fair value of land and building. Or inversely, if assessments took into consideration the earning capacity upon which value really depends, the assessment might fluctuate but would be nearer actual market value. Under such circumstances, owners, assessors, tenants, and investors would be unitedly interested in the subject.

This comparison of contributions by improved real estate to public expenditures shows how much the maintenance or increase of taxation upon the gradually reducing value of buildings may affect their capital value or even accelerate their demise.