November 8, 2018
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
For more information, contact
Thay Bishop, FHWA | Stefan Natzke, FHWA |
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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
Topic | Presenter/Facilitator |
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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 (Baltimore, Portland) Lindsey Svendsen (Albany) Jill Stark (St. Louis) Katie Hulbert (Orlando) |
Value Capture Overview and Benefits | Ben Hawkinson (Baltimore) Jim Thorne (Albany) Chip Millard (St. Louis) Kevin Moody (Portland) Janine Ashe (Orlando) |
FHWA Role in Value Capture | Stefan Natzke (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 Texas |
John Duel (Baltimore) Eric Bourassa, (Albany) |
Value Capture Techniques - Do you Know? | Sasha Page (Baltimore, Portland, Orlando) Daniel D'Angelo (Baltimore, Albany, St. Louis) |
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
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:
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).
TYPE | DESCRIPTION |
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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/
Consider the following questions as you document key points during the presentations.
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 |
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Initiation | Agency has acknowledged the need for this item (scoring range: 1-2)
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Development | Agency has developed a plan or approach to address this item (scoring range: 3-4)
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Plan Execution / Demonstration | Agency is executing or has executed a plan or approach to address this item (scoring range: 5-6)
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Assessment | Agency has assessed this item's performance and its success in achieving agency goals and objectives (scoring range: 7-8)
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Adoption / Institutionalization | Agency has institutionalized this item into its project execution process and culture (scoring range: 9-10)
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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 techniques 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. |
*Presentation available separately
PDF | HTML
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:
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 |
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 Aldrete 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 |