to the public. The left column shows the value of the property rights at a site, such as agricultural or industrial land. That value is determined by the revenue that can be made from exclusively using that site, minus the costs involved in using it. The site value is the residual. If the market value of the output being produced increases, such as the value of crops, or the value of industrial outputs, but all input costs remain the same, then the site value rises to reflect the higher residual value of production on that site. This is shown in the second column. For example, if the rent of a residential dwelling rises, but the costs of operating that dwelling remain constant, the value of the home site increases. This change can be considered a windfall gain, and some of that gain is shared with the public where there is a land value, or property, tax system. The third column shows what happens if there is a change in the nature or extent of the property rights through rezoning. For example, if the previous highest and best use of a site was industrial only because zoning laws prevented other higher residual uses such as residential or commercial at that location, then rezoning will change the highest and best use of the site and hence its value. The difference between the “before” site value (V1) and the new “after” site value (V2) is betterment. The effect of a tax on betterment arising from rezoning is illustrated in the fourth column. A share of the betterment value is transferred from the private property owner to the public, reducing the private payoff from rezoning decisions, and increasing the public share of benefits. Public capture of betterment There are three common ways to capture betterment from rezoning for the public. A betterment levy or tax can divert from the owner of the property the betterment due to planning and zoning changes. Using a public agency to purchase unzoned and undeveloped land, then rezoning and investing in local infrastructure can ensure that all betterment from the rezoning and infrastructure investment is captured by the public. Auctioning or selling rights to develop to higher-value uses. Australia Australian Capital Territory (ACT) The ACT has had a betterment tax in some form since 1971. Its incarnation is the Lease Variation Charge (LVC), which is payable upon an approved