Strategies for agencies to recover a portion of public transportation investments that result in increased land values.
Public investment in transportation assets that improve access and increase opportunity benefit adjacent property owners through greater land value and other economic impacts. Many techniques are available to the public sector to share in a portion of this increased land value to build, maintain, or reinvest in the transportation system.
Value capture begins with the value created by the access transportation provides. Value is then enhanced through private sector investment and economic development enabled by the public investment. A portion of that value created by the infrastructure can be “captured” by the public sector to reinvest in, operate, or maintain transportation infrastructure. Value capture principles can be applied to most development scenarios, whether new infrastructure for new land development or rebuilt infrastructure in dense urban areas.
Both the planning and implementation for value capture rely primarily on local government initiatives. For these local public agencies, value capture provides the opportunity to raise funds to match Federal grants, which increasingly emphasize the importance of private and public non-Federal participation.
- Continuous Improvement. Value capture strategies can provide a sustained revenue source that can support operations and maintenance or, in some cases, the financing of the original transportation improvement.
- Financial Equity. Value capture promotes equity by reinforcing the “beneficiary pays” principle of economics. When private landowners benefit from a public investment, value capture provides a way for a portion of the gain to directly support the public investment that enabled their benefit.
- Environmental Sustainability. In certain cases, value capture can help prevent sprawl by providing a disincentive for speculative land holding.
State of the Practice
States such as California, Colorado, Florida, Georgia, Massachusetts, Missouri, Ohio, Oregon, Pennsylvania, Texas, and Virginia, as well as the District of Columbia, are using value capture options successfully. The following are examples of different value capture applications supporting highway improvements across the United States:
- Several small towns in Oregon have instituted transportation utility fees through monthly utility bills that fund programs paying for local road maintenance and safety projects.
- The Cap at Union Station project over I-670 in Columbus, Ohio, is an example of joint development and right-of-way use agreements to improve traffic operations and transform the void caused by I-670 into an urban streetscape with retail shops and restaurants.
- California’s Orange County Transportation Corridor Agencies (TCA) are using development impact fees to generate funds that have provided seed capital for transportation facilities and continue to be an integral feature of TCA’s debt management strategy.
- In Texas, the Fort Worth City Council established transportation impact fees in July 2008 on new development projects to help fund transportation improvements. In April 2013, the council approved a transportation impact fee increase from $2,000 to $3,000 on new single-family homes.
- The City of Chicago used tax increment financing districts to fund a variety of projects, including street improvements, transit stations, and neighborhood redevelopment.