EDC-5 Resources

Value Capture: Capitalizing on the Value Created by Transportation - Participant Workbook

October 24, 2018

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Value Capture:
Capitalizing on the Value Created
by Transportation

Participant Workbook

Every Day Counts | Innovation Initiative | EDC-5 Summits | 2018

Baltimore, MD | October 18-19 Albany, NY | October 24-25 St. Louis, MO | October 29-30 Portland, OR | November 8-9 Orlando, FL | November 27-28

Table of Contents

For more information, contact

Thay Bishop, FHWA Stefan Natzke, FHWA
Center for Innovative Finance
Office of Innovative Program Delivery
(404) 562-3695
Thay.Bishop@dot.gov
Office of Planning, Environment,
& Realty
(202)-366-5010
Stefan.Natzke@dot.gov

Regional Summit Participant Workbook | 1

Value Capture Breakout Session Agenda

Topic Presenter/Facilitator
Welcome and Introductions Sasha Page (Baltimore, Portland, Orlando)
Daniel D'Angelo (Baltimore, Albany, St. Louis)
Introduction to Value Capture:
What is it and why is it needed?
Stefan Natzke, FHWA (Baltimore, Portland)
Lindsey Svendsen (Albany)
Jill Stark (St. Louis)
Katie Hulbert (Orlando)
Value Capture Overview and Benefits Ben Hawkinson, FHWA (Baltimore)
Jim Thorne (Albany)
Chip Mallard (St. Louis)
Kevin Moody (Portland)
Janine Ashe (Orlando)
FHWA Role in Value Capture Stefan Natzke, FHWA (Baltimore, Portland)
Lindsey Svendsen (Albany)
Jill Stark (St. Louis)
Katie Hulbert (Orlando)
Value Capture Case Study 1:
Atlanta Beltline Redevelopment
Osceola County, FL
Value Capture in Texas
Value Capture in Florida
Catherine M. Owens (Baltimore)
Ken Atkins (Albany)
Rafael Aldrete (St. Louis, Orlando)
Leon Corbett (Portland)
Value Capture Case Study 2:
Capitol Crossing ROW Use Agreements
Assembly Square, Somerville MA
Value Capture in Hillsboro OR
John Duel, DC DOT (Baltimore)
Eric Bourassa (Albany)
tbd (Portland)
Value Capture Techniques - Do you Know? Sasha Page (Baltimore, Portland, Orlando)
Daniel D'Angelo (Baltimore, Albany, St. Louis)

How to Use this Workbook

  1. Scan through the entire workbook prior to session start.
  2. Take notes in the open space during the presentations by answering the thought questions posed (page 12). Relate your answers to the presentation information given.
  3. Review the maturity matrix (page 14) for topics to focus on during the presentations. What areas most interest you? What will help your agency the most?
  4. Review the "Value Capture Mechanisms - Do you know?" (page 34) for a description of the session activity.
  5. Scan this QR code from your mobile device to access the EDC-5 Value Capture website. Or, go directly to the website: https://www.fhwa.dot.gov/innovation/everydaycounts/edc_5/ value_capture.cfm
  6. Scan this QR code from your mobile device for additional EDC- 5 resources. Or, go directly to the FHWA Every Day Counts website at: https://www.fhwa.dot.gov/innovation/everydaycounts/
  7. Scan this QR code from your mobile device to download the Summit presentations and speaker biographies. Or, go directly to the website: https://www.fhwa.dot.gov/ipd/value_capture/resources/value_ capture_resources/edc-5_resources.aspx

Value Capture Process

Background on Value Capture
Capitalizing on the Value Created by Transportation.

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.

Benefits

  • 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 tools successfully. The following examples demonstrate different Value Capture applications supporting highway improvements across the United States:

  • Several cities in Oregon have instituted transportation utility fees through monthly 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 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.

There is a variety of mechanisms that may be used to derive monetary value from transportation improvements to help defray the cost of implementation.

Value Capture strategies can be used to help pay for roadway and transit improvements by leveraging localized benefits. While more common with transit projects, Value Capture techniques may also be used with highway improvements, as is the case with the San Joaquin Toll Road in southern California and E-470 outside Denver, Colorado. Most Value Capture revenue is generated at the State or local level. The FHWA Center for Innovative Finance Support encourages State and local jurisdictions to look for new revenue sources to address funding shortfalls and is available to provide technical assistance in these areas.

In addition to Value Capture mechanisms, the Center for Innovative Finance Support also provides information on other important sources of Federal. State and local revenue to support transportation investment needs, including motor fuel taxes, vehicle-related fees, and local option taxes.

Value Capture Techniques

Transportation networks and land values and other location-based economic activities are closely linked. Transportation improvements increase accessibility and thereby make surrounding locations more desirable. Transportation improvements often increase the value of nearby land, benefitting land owners and developers. Value Capture techniques harness a portion of increased property values in order to pay for the improvement or for future transportation investment. There are several different forms of Value Capture used in the United States. The most common include: air rights, impact fees, joint development, land value tax, negotiated exactions, sales tax districts, special assessments, tax increment finance, and transportation utility fees (see Table 1).

Table 1: Types and descriptions of Value Capture Approaches
Note: These techniques may vary in their application and may also be known by additional terms.
TYPE DESCRIPTION
Impact Fees Impact fees are one-time charges levied by local governments on new development. They are charged to developers to help municipalities recover growth- related infrastructure and public service costs. They differ from other forms of Value Capture including special assessments and negotiated exactions, in that impact fees can be used to pay for off-site services such as local roads, schools, or parks. Development impact fees are typically determined through a formulaic process, rather than through negotiations, as in developer contributions. Development impact fees are used by local governments throughout the United States to fund transportation improvements.
Special Assessments - Property Tax Involve assessing incremental property taxes on land and buildings deriving direct benefits due to a transportation improvement. The tax levied typically represents a portion of the estimated benefit to the properties located with a designated zone in close proximity to the improvement. Special assessments - also known as benefit assessments or special taxes - are one of the most prominent forms of Value Capture in the United States. Legally, special assessments are a form of remuneration that a public agency may require from property owners to provide revenue to fund a public project which creates benefits for properties within a designated assessment district. In addition to transportation improvements, special assessments may also be used in other sectors, including water and waste water.
Sales Tax Districts Sales tax districts are similar to special assessments in that they levy an incremental sales tax on goods sold within a designated area. The additional tax revenue is then used to support the development of infrastructure improvements. The sales tax service area can be expected to derive benefits from the infrastructure improvements it helps to fund. Sales tax districts may also be implemented on a larger scale, such as a municipality or county. The incremental sales tax rate is established by statute. Sales tax district statutes also identify which types of investments the resulting funds may be used to support.
Negotiated Extractions Involve payments made by a developer as a condition for receiving municipal approvals. Negotiated extractions are determined on an ad hoc basis for individual projects, usually as part of the development approval process. They often take the form of one-time land transfers or cash payments, but may also involve construction activities, or the provision of public services. Exactions have been used to contribute to the financing of transit stations, local roads, sidewalks, streetlights, and local water and sewer lines.
Air Rights
(also known as air space)
A form of Value Capture that involves the sale or lease of development rights in urban centers. Air rights are often transferred from historic properties to nearby development parcels but may also involve development above (or in some cases below) highway rights-of-way or transit facilities. Development in these locations is often built on platforms erected above the highway or transit facility or in caverns excavated below them. While there is added cost in making these preparations, air rights projects associated with transit or highway facilities is often attractive to investors because they enable the construction of new development in prime, center city locations without demolishing other properties or displacing current residents. These opportunities create new development sites in urban cores in locations that would not otherwise be able to support new construction.
Joint Development Involves the development of a transportation project and adjacent complementary private real estate development where a private developer either implements the real estate improvement directly or gives money to a public sector sponsor to offset the costs. Joint development may involve public participation in market-oriented developments as a means to subsidize the cost of public transportation.
Land Value Tax A levy on the value of unimproved land. It disregards the value of buildings and shifts the basis of property taxes to the assessed value of land and away from that of the improvements on it. The land value tax has also been referred to as an annual charge on the rental value of land. It may be thought of as a payment for the benefits received from municipal improvements such as the street and sewer systems, parks and schools.
Tax Increment Finance (TIF) A tool that uses taxes on future gains in real estate values to pay for new infrastructure improvements. TIFs are authorized by State law in nearly all 50 States and begin with the designation of a geographic area as a TIF district. Plans for specific improvements within the TIF district are developed. The TIF creates funding for public or private projects by borrowing against the future increase in these property-tax revenues. The intent is for the improvement to enhance the value of existing properties and encourage new development in the district. TIF districts are usually established for a period of 20 to 25 years, during which time all incremental real estate tax revenues above the base rate at the time the district is established flow into the
Transportation Utility Fees A financing mechanism that treats the transportation system like a utility where residents and businesses pay fees based on their use of the transportation system rather than taxes based on the value of property they occupy. The fees are not subject to voter approval and are based on the number of trips generated by different land uses. Utility fee rates may be determined by the number of parking spaces, square footage, or gross floor area. This approach links the costs of maintaining transportation infrastructure with the benefits derived from the mobility transportation system provides.
Parking Districts Parking fees may be established within a district, or region-wide to fund investment. In addition, capturing land value increases resulting from smart parking, a parking management tool that helps drivers efficiently find and pay for available parking by knowing where they will park before reaching their destination.
Naming Rights Naming Rights generate revenue by selling the right to name transportation assets to the private sector. Naming rights are an alternative means to generate revenue for transportation agencies that are looking for new sources of funding other than taxes and fees.

Value Capture Implementation Manual

FHWA is preparing an Implementation Manual for transportation asset owners. The manual will convey the business case for State Departments of Transportation, Metropolitan Planning Organizations and Local Planning Agencies to consider Value Capture, provide a review of Value Capture techniques - including the legal context for each using non-legalistic language, feature appropriate case studies illustrating both successes and challenges, and include a "how to" primer for implementing Value Capture. The Value Capture Implementation Manual is expected to be available the summer of 2019.

State-of-Practice

As this is a new initiative introduced in EDC-5, the first effort to track progress is to establish a baseline for implementation.

For each EDC-5 initiative FHWA will use the following guidelines for evaluating Innovation Implementation Stages:

Not Implementing This innovation has not been used anywhere in the state* but the state is still considering or the state* is not interested in pursuing the innovation.
Development The state* is developing an implementation process, collecting guidance and best practices, and building support.
Demonstration The state* is testing and piloting the innovation.
Assessment The state* is assessing the performance of the innovation and adjusting any processes for full deployment.
Institutionalized The state* has adopted the innovation as a standard process or practice and uses it regularly on projects.

* State is all-inclusive (e.g. state agency, local municipalities, contractors, consultants).

Additional Resources
In order to assist States with implementation of Value Capture, FHWA sponsored this Regional Summit to share information about benefits, lessons learned, and how to find additional information and resources.

Additionally, FHWA is serving as a Value Capture information clearinghouse for DOTs, LPAs, and other transportation asset owners interested in Value Capture by sharing case studies and other information, providing technical assistance, and developing training materials. Additional information on Value Capture can be found on the EDC-5 website and on the FHWA Office of Innovative Program Delivery's Center for Innovative Finance Support website:
https://www.fhwa.dot.gov/innovation/everydaycounts/edc_5/value_capture.cfm https://www.fhwa.dot.gov/ipd/value_capture/

Presentation Thought Questions

Consider the following questions as you document key points during the presentations.

  • Why should transportation agencies take advantage of value capture?
  • Does your State, municipality, or other jurisdiction use any of the Value Capture techniques described?
  • How does your State, municipality, or other jurisdiction compare with the case studies presented?
  • Does your organization have buy-in from its leadership in moving forward with Value Capture to capitalize on the value created by your transportation assets?
  • What types of projects might you consider as a result of hearing the presentations?
  • Is your State, municipality, or other jurisdiction planning on piloting a Value Capture project or program in the next 12 months?
  • How can Value Capture techniques be combined with other initiatives, such as Project Bundling or ACMs, to maximize benefits?
  • How could your State, municipality, or other jurisdiction benefit from a Value Capture Peer Exchange or Regional workshop?
  • Where can you go to find resources for Value Capture?
  • What content would you like to see in a Value Capture Implementation Manual?

Value Capture Maturity Matrix Tool

This maturity matrix tool is designed to allow users to assign ratings to an organization's current practices. The tool will help assess activities, identify actions, priority areas for improvement, establish a baseline, allow for monitoring of changes over time, and facilitate sharing of practices among transportation professionals.

Consider the elements of the assessment tool during the session and complete the handout worksheet; revisit your responses annually to monitor implementation of Value Capture. This tool can be shared with others within your organization or completed in a facilitated team meeting.

Scoring

Using the following guidelines, score each of the ten questions in the Value Capture Maturity Matrix (page 15) on a scale of 1 to 10.

Phase Rating and Characteristics
Initiation Agency has acknowledged the need for this item (scoring range: 1-2)
  • Does agency management acknowledge the need for a particular item?
  • Has exploratory research taken place to assess the benefits of this item?
  • Does management support further development of this item's requirements?
Development Agency has developed a plan or approach to address this item (scoring range: 3-4)
  • Has the agency developed a plan or approach to address the item's requirements? Has the agency started to investigate the feasibility of implementation?
  • Does the agency have standards and guidance to enable the item's implementation?
  • Does the agency have the approvals necessary for implementation?
  • Are resources in place to support the adoption of this item?
Plan Execution / Demonstration Agency is executing or has executed a plan or approach to address this item (scoring range: 5-6)
  • Is the agency implementing/carrying out the requirements of this item?
  • Has the agency allocated financial or staff resources necessary for the item's execution?
  • Have appropriate personnel been trained to execute the item's requirements?
  • Has a process owner been established?
Assessment Agency has assessed this item's performance and its success in achieving agency goals and objectives (scoring range: 7-8)
  • Has the agency assessed how well this item performs in advancing projects, reducing costs, time, and improving quality?
  • Has the agency assessed the process for carrying out this item?
  • Has the agency implemented appropriate changes to the requirements of this item based on performance assessments?
Adoption / Institutionalization Agency has institutionalized this item into its project execution process and culture (scoring range: 9-10)
  • Has the agency integrated the requirements of this item into quality improvement processes?
  • Are the requirements of this item integrated into agency culture?
  • Are the requirements of this item included as part of the employee performance rating system?

Using the following table, score each statement based on the above rating guidelines and record the score in the box to the right of each question. For example, if the agency has implemented a Value Capture project but is not yet evaluating the process to generate ideas for improvement, consider assigning a rating of 5. A rating of 6 or above means that the agency has implemented the item in the statement.

Value Capture Maturity Matrix

Organization:

Name/Title/email:

Please complete the loose page version of this maturity matrix and turn it in to the session facilitator, and keep the workbook version for future use.

Value Capture Statements: My Agency… Rating (1-10)
1. Has implemented Value Capture on a project.  
2. Has used multiple mechanisms to capture value on projects.  
3. Has a formal decision making process to determine when it is appropriate to use Value Capture.  
4. Has executive (and political) support for Value Capture initiatives.  
5. Has partnered with other agencies (e.g. with LPAs) on a Value Capture project.  
6. Has analyzed agency data on the benefits of Value Capture.  
7. Has utilized Value Capture to achieve agency goals.  
8. Has recognized value capture as an effective strategy to address agency risks (e.g. to overcome funding shortfalls).  
9. Has partnered with stakeholder groups to develop a Value Capture program (e.g. legislature, local public agencies, MPOs).  
10. Has reviewed Value Capture case studies from other agencies to better understand the breadth of Value Capture.  

FHWA Presentation

Presentation (PDF)

Value Capture Techniques - Do you know?

After the presentations, the facilitator will conduct a "game" to reinforce several of the techniques available to capture value based on actual case studies.

In this game:

  • The attendees will be separated into groups of six to eight people; attendees will be asked to sit with people they do not work with or do not know;
  • The facilitator will briefly describe the three cases and the purpose of the exercise;
  • Based on a real project, the name of which is disguised, the case descriptions will describe the following:
    • Nature of transportation improvement sought;
    • Key players, usually the transportation agency, the local government, and the developer/development community;
    • A description of the funding plan and the funding "gap" that value capture could address;
    • Any challenges to realizing the project and/or the financing, including opposition from certain groups, short political election cycle, requirements to provide additional amenities, such as affordable housing;
  • Each table will be required to figure out which value capture technique(s) are appropriate to fill the funding gap;
  • On a poster paper, teach team will write down:
    • Value capture mechanisms to be used;
    • How this fits into the overall funding plan, including schedule, support from other agencies, legal issues (i.e. need to pass legislation); and
    • Any other issues they felt had to be resolved to successfully to integrate value capture mechanism;
  • Each table will elect a speaker who will briefly come to the front of the room and present their plan; this plan will be compared with the other plan from the other group that had the same case;
  • Following this, the facilitator will tell the assembled group the real name of the case and what actually happened and compare that with the suggested approaches.

Value Capture Implementation Team Members

Thay Bishop (co-lead)
FHWA
Stefan Natzke (co-lead)
FHWA
Janine Ashe, FHWA, District of Columbia
Ben Orsbon
South Dakota DOT
Benjamin Hawkinson
FHWA
Carl "Chip" Millard
FHWA
Kathleen Hulbert
FHWA
Jennifer Ahlin
Virginia DOT
John Duel
District of Columbia DOT
Kevin Moody FHWA Jill Stark FHWA Diane Mobley FHWA
Jim Thorne
FHWA
Marshall Wainright
FHWA
Lindsey Svendsen
FHWA

Technical Working Group Members

We would like to acknowledge the input and participation from the following Technical Working Group members and subject matter experts in Value Capture:

Jennifer Ahlin
Virginia DOT
Rafael
Texas Transportation Institute
William Ankner
Transportation Solutions
Rabinder Bains
FTA
Barry Benton
Greenmen-Pedersen, Inc.
Jason Bittner
Applied Research Associates
Andrée Blais Nossman LLP Eric Bourassa, Metropolitan Area Planning Council (Boston) Ken Buckeye Minnesota DOT
Daniel D'Angelo
Applied Research Associates
Steve DeWitt
ACS Infrastructure
Lisa Dickson
Arup
Michael Garvin
Virginia Tech
Herb Ladley
IMG Rebel
Sasha Page
IMG Rebel
Tom Pelnik
Ernst & Young
Victoria Peters
FHWA
Kishia Powell
City of Atlanta
Mark Sullivan
FHWA
Jim Thorne
FHWA
Sharada Vadali
Economic Insights & Research
Marshall Wainrigjht
FHWA
Michael Weaver
Prime Strategies, Inc.
Gregory Wilkens
Butler County, Ohio
Waiching Wong IMG Rebel Catherine Owens Atlanta Beltway  

Appendix: Value Capture Mechanisms - Fact Sheets