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Punitive Land Rates Penalties
Rank: New-farer Joined: 1/4/2016 Posts: 67
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The gist of this article is about the fairness of the penalty and not paying or abstaining paying land rates.
Most saccos charge 1% monthly compound interest on remaining balance. Why not apply the same to land rates?
As Kenyans we should also desist from being too politically correct all the time. One shouldn't walk on egg-shells while hypothetically using kenyan names.
Dilemma
Trump has defaulted for 10 yrs and his arrears is currently Sh135,467. Come 2017, arrears will shoot to Sh194,854. This is an increase of Sh59,387. Does he wait for the 'election year' waiver and hope to pay only accrued principal Sh13,200 or risk being charged Sh194,854 arrears for 11 yrs defaulted if the waiver does not happen?
Apply 'game theory ' and help him make a decision.
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Rank: New-farer Joined: 1/4/2016 Posts: 67
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Wishful Thinking! Friendly Land Rates Penalties.
Positive reinforcement is more effective than negative reinforcement.
Upon making payment for the current year's rate due, the previous years' line items of arrears should be frozen at the last calculated value.
This would encourage the land owner to always be current and slowly clear the arrears at his/her own pace without fear of subsequent astronomical arrears growth or land auction.
Should the owner default again , the arrears should be calculated from when it was last frozen, awarding or giving a grace period for the 'good years' of being current.
Example
Obi has defaulted for 10 yrs straight. Zuma had defaulted for 5 yrs then paid current rates for 3 yrs lastly defaulting for 2 yrs. Calculate their arrears.
From previous calculations, Obi owes Sh135,467.
Zuma has technically defaulted for 7 yrs which yields Sh44,108 Arrears using the friendly method.
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Rank: New-farer Joined: 1/4/2016 Posts: 67
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Each year defaulted is a line item called a default stream. Each stream acquires its own life. A land owner should be allowed to pay off or kill any desired stream. Obviously, starting with the oldest since it generates the highest penalty.
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Rank: New-farer Joined: 1/4/2016 Posts: 67
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Example
Land defaulted for 7yrs 9months has 8 default streams, the oldest being 93months and the shortest 9months.
93months stream yields 1200*1.03**93 = Sh18,751 Arrears.
81months stream yields 1200*1.03**81 = Sh13,152 Arrears.
69months stream yields 1200*1.03**69 = Sh9,224 Arrears.
57months stream yields 1200*1.03**57 = Sh6,469 Arrears.
45months stream yields 1200*1.03**45 = Sh4,537 Arrears.
33months stream yields 1200*1.03**33 = Sh3,182 Arrears.
21months stream yields 1200*1.03**21 = Sh2,232 Arrears.
9months stream yields 1200*1.03**9 = Sh1,565 Arrears.
Total Default Arrears = Sh 59,112. This is the same figure the counties would charge today.
Using the 'Friendly Method', paying off or killing the oldest stream, in essence, reduces the land default duration by one year. This greatly reduces the future arrears growth momentum and acceleration.
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Rank: New-farer Joined: 1/4/2016 Posts: 67
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Summary: Land Rates Debt-Free Strategy
Upon paying off or killing both the current year's stream and the highest default stream, the rate payer be rewarded by freezing the remaining streams at their last calculated values. No interest accrues.
Come next year, if owner pays both that year's current stream and the highest default stream no interest accrues on remaining streams.
The above steps can be repeated till the land owner is debt-free.
Additionally,
Owner can pay off both the current year's stream and highest default stream, plus as many default streams as they desire. No interest accrue on remaining streams.
If the highest default plus any other stream(s) are paid off, all remaining streams are frozen and accrue no interest.
If owner pays current year's stream only and no other default stream, he is rewarded by freezing only the oldest default stream. All other streams accrue interest.
Note: After several iterations of this step, oldest stream is not necessarily the highest!
If he pays off current year's stream plus 2nd highest default stream, all but 2nd shortest are frozen. If he pays off current year's plus 3rd highest streams, all but 3rd shortest are frozen. e.t.c.
If only the highest default stream is paid off, all but the shortest stream are frozen. If only 2nd highest is paid off, all but shortest and 2nd shortest are frozen. If only the 3rd highest is paid off, all but the shortest, 2nd shortest and 3rd shortest are frozen. e.t.c.
Current year is the shortest default stream. Also called 1st default stream.
If no current year payments are made, all streams accrue interest.
Waivers be allowed to pay off or kill individual default streams, all or some depending on owner's financial might. But must include both the highest default and current year streams. No interest on remaining default streams accrue.
In all the above scenarios, the interest freeze is only valid and effective for only one year. If the following year no payments are made, interest starts accruing from the last calculated values. The frozen year is a grace period or reward.
This is my original brain-job and intellectual property.
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Rank: New-farer Joined: 1/4/2016 Posts: 67
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Structured Land Rates Debt-Free Proposal
Consider a land lease which has 8 default streams as at march 2016 and nov 2016 whose arrears are:
Stream#____mar 2016____nov 2016
1_____________1,200________1,520
2_____________1,710________2,166
3_____________2,439________3,089
4_____________3,477________4,404
5_____________4,958________6,280
6_____________7,069________8,954
7____________10,080_______12,769
8____________14,371_______18,204
Total________45,304_______57,386
In the Simplified Land Rates System, upon paying off a higher default stream, all streams below it are frozen until the next financial year. All unaffected streams accrue interest.
Examples: Here are nov 2016 arrears and savings if on March 2016 the leasee paid off or killed;
Stream #8, all other streams would be frozen. Arrears = 1200+1710+2439+3477+4958+7069+10080 = Sh30,933.
Savings = 57386-14371-30933 = Sh12,082.
Stream#7; all but stream#8 frozen. Arrears = 1200+1710+2439+3477+4958+7069+0+18204 = Sh39,057.
Savings = 57386-10080- 39057 = Sh8,249.
Stream#6; All but #7 and #8 frozen. Arrears = 1200+1710+2439+3477+4958+0+12769+18204 = Sh44,757.
Savings = 57386-44757-7069 = Sh5,560.
Stream#5; All but #6,#7,#8 frozen. Arrears = 1200+1710+2439+3477+0+8954+12769+18204 = Sh48,753.
Savings = 57386-48753- 4958 = Sh3,675.
Stream#4; All but #5,#6,#7,#8 frozen. Arrears = 1200+1710+2439+0+6280+8954+12769+18204 = Sh51,556.
Savings = 57386-51556-3477 = Sh2,353.
Stream#3; All but #4,#5,#6,#7,#8 frozen. Arrears = 1200+1710+0+4404+6280+8954+12769+18204 = Sh53,521.
Savings = 57386-53521- 2439 = Sh1,426.
Stream#2; All but #3,4,5,6,7,8 frozen. Arrears = 1200+0+3089+4404+6280+8954+12769+18204 = Sh54,900.
Savings = 57386-54900- 1710 = Sh776.
Stream#1; No stream frozen. Arrears = 0+2166+3089+4404+6280+8954+12769+18204 = Sh55,866.
Savings = 57386-55866-1200 = Sh320.
A higher default stream pay off or kill, saves more on future arrears.
Waivers can be applied piecemeal on individual default streams thus increasing the leasee's catch-net.
@creativekaggs intellectual property.
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Rank: Elder Joined: 12/7/2012 Posts: 11,937
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 In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: New-farer Joined: 1/4/2016 Posts: 67
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Proposed Land Rates Instant Savings Incentives
Consider a land lease which has 8 default streams as at Nov 2016 and March 2017 whose arrears are:
Stream#_____ nov 2016____mar 2017
1____________1,520_______1710
2____________2,166_______2439
3____________3,089_______3477
4____________4,404_______4958
5____________6,280_______7069
6____________8,954______10080
7___________12,769______14371
8___________18,204______20490
Total________57,386______64594
In this 'Simplified Land Rates System', upon paying off a higher default stream, all streams below it are frozen until the next Financial Year. All unaffected streams accrue interest.
Incentives: Here are Instant Savings and Arrears if leasee on Nov 2016 paid off or killed;
Stream #8, all other streams would be frozen. Arrears = 1520+2166+3089+4404+6280+8954+12769+0 = Sh39,182.
Instant Savings = 64594-18204-39182 = Sh7,208.
Stream#7; all but stream#8 frozen. Arrears = 1520+2166+3089+4404+6280+8954+0+20490 = Sh46,903.
Instant Savings = 64594-12769-46903 = Sh4,922.
Stream#6; All but #7 and #8 frozen. Arrears = 1520+2166+3089+4404+6280+0+14371+20490 = Sh52,320.
Instant Savings = 64594-8954-52320 = Sh3,320.
Stream#5; All but #6,#7,#8 frozen. Arrears = Sh56,120.
Instant Savings = Sh2,194.
Stream#4; All but #5,#6,#7,#8 frozen. Arrears = Sh58,785.
Instant Savings = Sh1,405.
Stream#3; All but #4,#5,#6,#7,#8 frozen. Arrears = Sh60,654.
Instant Savings = Sh851.
Stream#2; All but #3,#4,#5,#6,#7,#8 frozen. Arrears = Sh61,965.
Instant Savings = Sh463.
Stream#1; No stream frozen. Arrears = Sh62,884.
Instant Savings = Sh190.
If no payments are made, arrears due as at Nov 2016 is Sh57,386 and will grow to Sh64,594 come March 2017. An increase of Sh7,208.
A higher default stream pay off or kill, saves more on future arrears.
Waivers can be applied piecemeal on individual default streams thus increasing the leasee's catch-net.
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Lastly,
Consider Financial Year March 2016 to March 2017. Here is a Table of the Instant Savings and Arrears the Leasee would have got had they paid off on March 2016 the following default streams.
Stream#_________Arrears______Savings
#8(Sh14,371)______30,933________19,290
#7(Sh10,080)______41,343________13,171
#6(Sh7,069)_______48,645_________8,880
#5(Sh4,958)_______53,767_________5,869
#4(Sh3,477)_______57,359_________3,758
#3(Sh2,439)_______59,878_________2,277
#2(Sh1,710)_______61,645_________1,239
#1(Sh1,200)_______62,884___________510
If no pay off made, Arrears increase by Sh19,290 in that Financial Year.
Despite an earlier pay off having been made, a leasee can buy or pay off any other available default stream(s). The highest stream in his shopping basket determines the freezing point. The incentives are not back-dated.
@creativekaggs intellectual property.
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