Untitled Document

The founders of Fairhope were single taxers who came to Baldwin County in November 1894. In February of that year, prior to coming south, they had incorporated in Des Moines. Iowa as the Fairhope Industrial Association. Ten years later, after favorable legislation had been adopted by the Alabama legislature, they were reincorporated as the Fairhope Single Tax Corporation.

The constitution of both corporations contained the following article: "Purpose. Its purpose shall be to establish and conduct a model community or colony, free from all forms of private monopoly, and to secure to its members therein equality of opportunity, the full reward of individual efforts, and the benefits of co-operation in matters of general concern."

To accomplish this purpose, they adopted the principles of the single tax as stated and explained by Henry George in his great book, "Progress and Poverty". The single tax is not a complex plan that can be understood only by advanced students of economics and governmental controls.

The single tax is based upon the obvious conclusion that all men are common heirs to the earth upon which they must live, and from which, by their labor, they must extract everything that ministers to their continued existence and the satisfaction of their ever-expanding ambitions and desires. It recognizes the natural right of every man to be the sole owner of that which his labor has brought forth, subject only to his individual desire. our existing tax laws to the contrary notwithstanding.

Since much of that which results from man's labor on the land cannot be separated from the land upon which it is produced, it follows that to have for himself the full ownership of that which he has produced, he must have exclusive title to the land involved in the production. To prevent such exclusive title from constituting a denial of the equal rights of all others, the single tax requires the holder of such title to pay into a common fund, for the equal benefit of all. an annual rental (single tax) equal to the value of the special privilege of exclusive title to the land.

This value is not measured by such use or misuse as the holder may make of the land he holds. Rather it is measured by the market value set by those who want land to use at its fullest productive capacity. This makes it unprofitable to hold land out of use or for inferior uses. Consequently, if the principle of single tax were applied by government as its public revenue policy, poorly or wastefully used land would have to be put to its most productive use to make its holding profitable. Since the holding of land put to no productive use would be a total loss to the holder, all such land would become freely available to provide employment to labor and capital with which to meet the ever-expanding needs of a progressive and ambitious people.

The greatest common need of men living in a social organization is government. Since the rental value of land reflects, in large part, the value of the services performed by government, the amount derived from that source should be sufficient to pay the full cost of an honest and efficient governmental administration. With the expense of government paid from the common fund resulting

from its collection of the community-created rental value of land, no other tax would be needed.

Almost all of the revenue upon which government now relies is derived from taxes that increase the cost of production and the price at which goods can be profitably sold. The demand for goods and services is limited by the volume of purchasing power available to consumers. Purchasing power derives from three sources. The first is wages paid to labor, without which nothing of value can be produced. The second is interest paid to capital, the use of which is essential to maximum production. The third is rent paid for the use of land, without which there can be no employment of labor or capital. The drain on natural purchasing power resulting from tax-inflated prices of all goods and direct excise taxes on many, and its further reduction as a result of income taxes, leaves the consumer with insufficient funds to purchase the goods with which the market has been supplied.

There must follow a curtailment in the volume of production. Opportunities for employment decrease, further diminishing purchasing power, and the whole economic structure is crippled. Manufacturers cannot adequately maintain their productive equipment and pay interest on invested capital out of the returns from the reduced production. Distributors cannot dispose of stocks that are constantly diminishing in value. Tax income of government, dependent in large part on production and distribution, is decreased; and the country finds itself in the grips of a recession or a full-fledged depression.

While government may not be considered to be a direct and active force in the production of goods, it is a most

valuable aid. The volume of production resulting from the functions of labor and capital is greatly increased by the functions of government. Without government to provide fire and police protection for property, public highways essential to the transportation of goods and the maintenance of communication, and sanitation to guard and protect the health of the people, both the efficiency and the incentive of labor and capital would be greatly reduced.

Few will question the rights of labor and capital to receive proportionate shares of their joint product. Under the single tax. the government, not the land holder, is entitled to that portion that is now paid to the so-called "owners" of land as rent. Ownership is a term that can be properly applied only to those things that come into existence as a result of man's labor applied to land. Land, by its nature and by reason of man's necessity to use it, must be treated as common property so far as rent is concerned if justice is to prevail.

With land, in all its essential aspects, becoming common property by the institution of the single tax. the primary cause of unemployment and of employment at less than full wages would be removed. Were government to levy upon the title holders of land and demand payment of the full rental value of the land so held, the demand for labor and capital to bring the land to its highest productive capacity would ensure continuous full employment.

Many of the social ills suffered today may be traced to the lack of full employment. It is the lack of opportunity for gainful employment that results in much of the minor and major crime in which school- and college-age youth become involved. The same lack may reasonably be

assumed to be responsible for much of the adult crime. There is, we believe, good reason to expect that the increase in wages resulting from the demand for full employment would have the effect of returning many presently-employed mothers to the care of their children and management of the home, restoring it to full effectiveness as a highly valued social institution.

Unfortunately, the financial means of Fairhope's founders did not permit them to secure for their demonstration land that ensured the highest return to labor. Also unfortunate is the fact that they could not purchase a solid block of sufficient area to embrace the entire community that has come to exist as a result of their initiative. While it would be impossible, on a limited scale, to secure all the benefits to be reasonably expected from a general application of the principles of the single tax, these defects must be conceded to make the Fairhope demonstration less effective than it otherwise might have been. However, few will argue that Fairhope has not been benefited and is not now benefiting from the application of single tax principles to the land the Fairhope Single Tax Corporation owns.

FSTC ORIENTATION

The Fairhope Single Tax Corporation was formed in 1894 to demonstrate the single tax concepts in the hope that single tax would be adopted by the governments as the sole source of raising revenue. Obviously we have failed on that. The government, goes the other way. Every tax that is created is usually a tax on something other than land value. It also had the purpose of providing a community wherein the founders could enjoy the benefits of such a procedure and in that we succeeded: we have Fairhope today.

When they first arrived, the founders found a place that was not settled. There was maybe a house or two every 40 acres, but there wasn't any community here. They acquired some land using their own money, broke the land up into leaseholds, rented the land out at its rental value, collected the rent and paid all the taxes of the lessee. They thus simulated a single tax. This worked very well. After paying the taxes, they look a little bit of money to operate the business and then reinvested all of the surplus back into the community. They laid out the streets, put extra money in the school systems so they could run for a full year and helped a couple of citizens who had large libraries to have a public library with their books. (It is said that we had the first public library in the area—even before Mobile.) They set aside the parklands for the benefit of everybody in the community and maintained those for many years. They had the first public waterworks in Baldwin County - I say they had a pretty good demonstration that the single tax was a pretty good idea; they just weren't able to "sell" that idea.

Now we will talk about the lease. The lease is issued for 99 years, except that it really is a perpetual lease that can be renewed by you at anytime you wish for another 99 years. It's not a practical thing to do but it's just a way of indicating that it is a perpetual lease in reality. The lease can be transferred like the operation we're going through today. If there's enough land involved, the lease can be subdivided into two or more parts. You don't have to keep the lease, (this is the converse of the 99 years plus). This is a case where, if you don't want to keep the lease, you can turn it in upon paying 6 month's rent. Now, if there is a mortgage on the improvements, you can't do that. We agree with the mortgage company that as long as there is a lien on the property, then you cannot turn in the lease. This procedure was used during the big depression in cases where people had more land than they could afford. They could turn in usable parts and keep what they could pay for. There's a provision in the lease that says that if the Corporation were to be dissolved (we have NO PLANS TO DISSOLVE) but if it were to be dissolved, you may purchase the title to the land. In other words, it cannot be jerked out from underneath you. I'll say again, we have NO plans to dissolve.

The lease can be inherited and we use the standard rules that are used with deeded properly. If there's a probated will, we obey the terms of the will. If there's a will and it's not probated, or if there is no will, then as long as the heirs, ALL of the heirs, can be identified to us, then we will do what the heirs want. If we ever had a situation, and I don't think this has ever occurred, that there were no heirs to be found, then the State of Alabama would pick up the leasehold and become our lessee until they sold the property to someone else.

Now let's talk about rent. There are many aspects of this rent subject. The Corporation determines the rent. You don't enter into that process: we set the rents, you pay them. If ever the rents are such an amount that

you think there is something wrong, you bring it to our attention. We'll double check. We have been known to make a mistake or two, and if we have, we wilt fix it. If I tell you, though, that there is nothing wrong with the calculation of the rent, you don't have to stop there. You have the right to go to a Review Board that we have established that will give you a hearing. It's made up of 2 or 3 members of the Corporation. You can take to that hearing any kind of expertise you think would be helpful. If the Board agrees with you, they will come up with a new rent. They have to recommend this to the Executive Council, but I can tell you, if the Executive Council agrees with you, or with the Review Board, then they will accept it—and they always have. The moral of that story is, you don't participate in the setting of the rents, but if there is something wrong you can get them fixed. You may also go see the Revenue Commissioner because of the fact that you have a perpetual lease. In effect, the Attorney General of Alabama has deemed that you are a property owner for ad valorem tax purposes. This means you can go see the Revenue Commissioner, the Board of Equalization or you can take your complaint, to the Circuit Court of Baldwin County. You have the same rights as a deeded property owner has.

The rent statements go out in January and July. The January statement covers the first half year's rent and is due upon receipt, but you have a 90-day grace period in which to pay It. If it's paid by the 90 days, fine. If not, then we tack on 0% to 12% simple interest per annum, depending on what the State allows us to do (back to 1 January), until the rent is paid. The second half is handled the same way. You have 90 days. If it's paid by the 90 days, fine, if not, then again we'll tack on the percentage penalty allowed by the State until the rent is paid. If the rents are current, then we will keep the taxes paid currently. What we mean by that is, that OUT OF THE RENT THAT YOU PAY US, we will pay your ad valorem taxes that relate to your leasehold. Now we'll pay out until we use up the rent —we won't go beyond the level of the rent, but we'll pay the tax on the house, we'll pay the ad valorem tax on your vehicles and we'll also pay the tax on your personal property if there is any. The limitation is the rent charge for the year.

If you fail to pay the rent in a timely manner, we may fail to pay your taxes to the county. And if we do fail to pay the taxes, you may pay them yourself. Then you bring us the paid tax receipt, we'll give you rent credit minus any penalty. You don't lose that rent credit aspect. We just don't like to pay out in advance of collecting the rent. If you go long enough without paying the rent, we have a right to make you sell the house on the Courthouse steps. We'll take our rent that is due,and penalties, and you lose the lease. The amount of rent on this leasehold will be discussed and revealed to you before you leave (or before this orientation is over).

F. S. T. C. keeps the mineral rights. No minerals have ever been produced from Single Tax land, but we've had mineral leases for decades, so there are minerals there. When we have a mineral lease, we issue to (he mineral company the right to the mineral, but we cannot issue them a right to GET to the mineral. We have given you the surface rights, so you can control who comes on your leasehold. They have to deal with you if they just insist on putting a drilling rig in your front yard, and you do not have to allow it. What do we do with the mineral money? We do with the mineral money like we do with the rent money. We operate the business, we pay the taxes, any expenses, lawyers' fees, and special billings that might come to us. We can also make improvements in the community for your benefit.

We recommend to every new lessee that a survey be made. If you have had a mortgage, or are going to get a mortgage, then there will be a survey because it's required by the mortgage company. If there is not a mortgage, we still recommend the survey, so that everybody is clear on where their property lines are.

We also tell you to not pollute the land. It is against the law. True, ADEEM (Alabama Department of Environmental Management) has not yet begun following up on residential property, but someday they might.

When we lease this land to you, we don't, stipulate what use you make of it. You have to obey the rules of the community. Generally speaking though, you can do what you want as long as you don't violate those rules. Also, if there is a potential for erosion on your leasehold, it is primarily your problem. If we do anything to cause erosion, we will fix it, but usually it is the leaseholder that causes any erosion. Lessees do not have theauthority to grant an easement of any kind to any entity.

You will be what is known as a non-member lessee. We are a membership-type corporation and we have the right to select members as we see fit. It is not hard to become a member. We have 180 as of January 1, 1999. We have over 1800 leaseholds, so you can see that most of the people involved with us are not members. People generally feel that they don't mind leasing land from us and obeying the terms of the lease, and getting the advantages of being a leaseholder but they don't want to be a member of this crazy, radical outfit. To become a member requires 3 or 4 steps. First you attend a class in Single Tax Economics. We're not trying to make an economist out of you, but we want to expose you to the single tax economic concept. This class is run once a year, one night a week for about 11 weeks and usually is taught by a land economist. At the end of that school term if you feel like you would like to join us and help us in our efforts, then you make application to become a member, which is the second step in the process. Thirdly, we have classes in the details of the operation of the Corporation. Lastly, you would be interviewed by a Membership Committee, who wants to find out why you would be a good member. If you convince them that you would be a good member, then they will recommend you to the Executive Council, which usually takes the recommendation of the Membership Committee, and pronounces you a member. However, there is a 30-day wailing period and during that period, if a certain number of members wish to call for a vote on the decision, they may. In that case we hold an election. This is a majority election. That is, if 99 out of our 180 members came in to vote on your application and 49 voted NO but 50 voted YES, then you are accepted as a member. Then you put $100.00 in the Land Fund, (which is a laugh because $100.00 doesn't buy much land) but that is the standard amount decided on in 1894. It will get you a certificate which is good for life, enables you to vote, or can be redeemed for a refund should you tire of being a member. It can also be used by an heir (in the case of your demise), in lieu of their $100.00, if they want to become a member. They do have to go through all the same steps (classes, etc.) that you did. Using your certificate saves them the money and gets them a certificate in their own name. The main advantage of being a member is being able to vote on Corporation issues, election of officers, and to hold office in the Corporation.

At this point, a member of the office staff will explain the rents and accompanying paperwork. If this is a telephone orientation, the paperwork will be sent to you by mail or Federal Express.

(This is an edited transcript, from a recording of the presentations previously done by Mr. Gale Rowe (deceased) who was F.S.T.C. Secretary from 1980 - 1998).