Katie Hulbert, Transportation Specialist, Office of Infrastructure, FHWA Janine Ashe, Civil Rights Policy & Regulations Specialist, FHWA Ken Atkins, Contract Administration Engineer, FHWA Technical Services Team (former Osceola County) Rafael Aldrete, Senior Research Scientist, Texas A&M Transportation Institute Sasha Page(facilitator), Principal, IMG Rebel
Agenda
What is the EDC-5 Value Capture initiative?
Why is Value Capture needed?
Value Capture Overview and Benefits
FHWA Role in Value Capture Initiative
Case Studies
Q&A/Do you know?
What is the EDC-5 Value Capture Initiative?
EDC 5 Value Capture Initiative
Promotes the use of value capture mechanisms as part of a mixed funding and innovative finance strategy to accelerate project delivery and provide equitable funding for sustainable transportation investments
Government invests in » transportation infrastructure and services » which increase nearby property values. » This increase in value goes to... » property owners as a profit. » A fraction is paid in taxes and Property value return fees are paid. » This money goes back to the government, which invests in...
Example: Value Capture Funds Corridor Improvement
Virginia Route 28 Transportation Improvement District
District formed in 1987 jointly by Loudon and Fairfax Counties
Maximum tax rate of $0.20 per $100 of assessed value
Raises ~ $23 million in revenue
$138 million, 14 - mile widening from two to six lanes completed in 1991
Other benefits from proximity to transport project
Tolls
Use-based Fees
Use-Based Taxes (Gas)
INDIRECT
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DIRECT
Potential Benefits of Value Capture
Provide gap funding sources for highway improvements & infrastructure life cycle costs
Facilitate access to ongoing revenue stream to Local Public Agencies
Accelerate project delivery & safety Improvements
Induce private investment
Value Capture Techniques
How is the Value Captured?
Developer Contributions
Impact fees
Negotiate Exaction and Ongoing developer contributions
Transportation Utility Fees (TUFs)
Special Tax and Fee Approaches
Special assessment district
Sales tax district
Business improvement district
Land value tax
Incremental Growth Approaches
Tax increment financing (TIF)
Transportation reinvestment zones (TRZ)
Joint Development
ROW Use Agreements
Concessions, leasing
Airspace (above or below)
Parking
Fiber-optic leasing
Pipelines or other utilities not addressed by Utility Accommodation Policies or State Law
Advertising Rights and Sales
Naming rights
Other
Transportation Corporation (TC)
Section 63-20 Corporation
Challenges
Every jurisdiction is different
Must target projects with economic benefits for leveraging
Stakeholder involvement process can be lengthy, due to:
Coordination between multiple jurisdictions
Discussions with private developers and property owners
Establishing project location and design
Considering legal issues
Securing political support
Perceived as another tax
Requires accuracy of activity and real estate projections:
If I build it, will they come?
If I build it, will developers build on nearby property?
Identify the magnitude benefits & boundary of value capture mechanism
Ingredients of a Successful Value Capture Project
Identified in long-term planning/capital improvement program - primarily local
Incorporated early in the project development process
Right technique selected for the right project
Integrated funding and finance strategy
Community support generated through effective outreach
Value Capture Summary
Value Capture is…
A set of powerful funding tools that can help address funding gaps. (USDOT supports Value Capture)
Can be part of the mix of funding sources for transportation improvement solutions
Can accelerate project delivery, save time and money when done properly
Federal Roles
FHWA Roles in Value Capture
Build capacity among partners
Assemble VC Implementation Team
Interact with key stakeholders
Develop VC Implementation manual
Develop clearinghouse for VC resources
Conduct various peer exchanges, training, and technical assistance activities
Funding
Value Capture Implementation Team
Co-Leads
Thay Bishop, FHWA Office of Innovative Program Delivery
Stefan Natzke, FHWA Office of Planning, Environment, and Realty
Members
Jennifer Ahlin, Virginia Department of Transportation
Janine Ashe, FHWA District of Columbia Division
John Duel, FHWA Office of Planning, Environment, and Realty
Ben Hawkinson, FHWA Transportation Policy Studies
Kathleen Hulbert, FHWA Infrastructure Office
Chip Millard, FHWA Freight Management & Operation
Diane Mobley, FHWA Chief Counsel Office
Kevin Moody, FHWA Resource Center
Ben Orsbon, South Dakota Department of Transportation
Jill Stark, FHWA Office of Planning, Environment, and Realty
Lindsey Svendsen, FHWA Office of Planning, Environment, and Realty
Jim Thorne, FHWA Office of Planning, Environment, and Realty
Marshall Wainright, FHWA Resource Center
VCIT Focus Areas
Communication - Developing the tools to help FHWA staff and others promote Value Capture to local public agencies (Value Capture Implementation Manual)
Technical assistance - Providing technical assistance to local public agencies interested in pursuing Value Capture (Peer Program)
Clearing House (website) - Identification of best practices and lessons learned and promoting further discussion on innovative funding options for local public agencies, lessons learned from past and current efforts, etc.
Key Stakeholders
State Department of Transportations
Federal Agencies (HUD, USDA, FTA)
Metropolitan Planning Organizations (MPOs, RTPOs)
Local & Tribal Governments
Transportation Providers (Transit Operators)
Business Communities
Developers
Community residents
Value Capture Activities
Webinars
Workshops
Peer Exchanges
Case Studies
Sponsorships (local, regional, & national events)
Technical Assistance
Website (Clearinghouse)
Value Capture Clearinghouse
Currently under development
Value Capture Manual "How to" implement value capture under development
Case Study - Osceola County Florida
Transportation Impact Fees & Funding
Kenneth E. Atkins, P.E., FHWA
Minimize The Frustration
Periods of Dynamic Growth Are Frustrating
Crowded Roads
Developers were frustrated w/ County
Poor Levels of Service
Locals were frustrated w/ changing culture
Strategic Planning Minimizes The Problems
Vision of The End Product Helps
Transportation Impact Fee Background
Approved in 1989
Implemented in 1990
Last update in 2007
Suspension/ moratorium in 2011 & Repealed 2012
Replace with Mobility Fee, effective date June 22, 2015
Value Capture Advances Roadway & Bridge Program
Osceola County impact fees are assessed on new development to provide funding for the County to create improvements needed to serve that development's users
Impact fees are assessed at the time a building permit is issued and are paid prior to the issuance of a Certificate of Occupancy
Projects bundled using Alternative Contracting Methods (ACMs)
Countywide 11 projects with 13 bridges
Bridges were part of roadway projects
1 billion dollar program - started w/ bundling $350- million
100% locally funded by Value Capture -impact fees
Transportation Mobility Fee
Transportation system charge on development that allows local governments to assess the proportionate cost of transportation improvements needed to serve the demand generated by development projects.
MOBILITY FEE =
Additional transportation demand from development
X
Identified cost for transportation improvements to mitigate associated development impact
The Results
Most accelerated program in Nation
11 Major Roadways in 1-year
Returned $80 million to local economy in first 4 months of construction
11 times previous production
Returned 36 million dollars in savings to the County's budget
Start of design to ground breaking as fast as 15 months
Saved numerous local contractors from going out of business
Case Study - Texas Transportation
Reinvestment Zones - Concepts & Implementation
Rafael Aldrete, Texas A&M Transportation Institute
Texas Transportation Reinvestment Zones - Concepts and Implementation
Federal Highway Administration Every Day Counts Regional Summit
St. Louis, Missouri
Types of Value Capture Mechanisms used in Transportation #1 of 2
Mechanism
Definition
Applicable Purpose
Examples (State)
Impact Fees (IF)
One-time charge
Local governments collect from developers to finance new infrastructure and services for new development.
Cost recovery
Transportation System Development Charges
In OR used to fund existing and new capacity
Also used in WA and NJ
Special Assessment District (SAD)
Additional fee on properties benefiting from proximity to a new facility
District vote is needed
Projects require district vote
Capture of project expansion benefits
VA and OH (Downtown Improvement Districts),
IL Special Service Areas
Sales Tax District (STD)
Type of SAD requiring project beneficiaries to pay limited sales tax instead of property tax
Capture of project expansion benefits
IL Special Service Areas;
MO and KS Transportation DD
Negotiated Exaction (NE)
One-time charge similar to IFs but not requiring a formal process
Example: in-kind contributions to local infrastructure (roads, parks, etc.) for development approval
Capturing opportunity for value creation and cost recovery
VA proffer
Source: Vadali, S. NCHRP Synthesis 459. 2014
Types of Value Capture Mechanisms used in Transportation #2 of 2
Mechanism
Definition
Applicable Purpose
Examples (State)
Joint Development (JD or P3)
Development of a transit facility and adjacent private real estate
Private partner provides facility or makes financial contribution to offset construction costs
Capturing opportunity for value creation and cost sharing and revenue sharing with private sector
Massachusetts Turnpike (MA) and Washington Metropolitan Transit Authority (VA)
Air Rights (AR)
Form of JD
Dev. rights above or below infrastructure facility used to generate / capture incremental increase in land value
Capturing opportunity for value creation and cost sharing and revenue sharing with private sector
Massachusetts Turnpike (MA) Interstate 5 (WA)
Land Value Tax (LVT)
Tax imposed on land value benefiting from infrastructure
Capture of project expansion benefits
Pennsylvania counties (PA)
Transportation utility fees (TUFs)
Utility fees assessed on characteristics more closely related to transportation demand than property taxes
Cost recovery: operating and maintenance costs
Oregon TUF for pavement maintenance (OR)
Tax increment financing (TIF)
Mechanism to allocate any increase in total property tax revenues toward public investment within a designated district
Capture of project expansion benefits
TRZs (TX)
Source: Vadali, S. NCHRP Synthesis 459. 2014
The Texas TRZ - Definition (#1 of 2)
Texas TRZs
Designated contiguous zone around a planned transportation improvement where properties are expected to benefit from the project through land development, value increases
Legal arrangement to facilitate value capture via the property and sales tax mechanism and allow the local government to use incremental tax revenue as collateral
Texas TRZs are not a new tax
Tax rates do not change
Revenue realized only if real property develops / increases in value
The Texas TRZ - Definition (#2 of 2)
TRZs Expedite Transportation Projects
Local match contributions
Multiple funding sources leveraged
TRZ Legal Framework Has Evolved
Process / requirements clarified
Uses / types modified or expanded
Three TRZ Types
Municipal
County
Port Authority
The Texas TRZ - How it Works
The Texas TRZ - Financing Options
Three Financing Options Available for TRZ Revenue Funds
Type
Form
Advantage
Disadvantage
Pay-as-you-go
Expenditure within the budget limit
No financial cost
Slow/late delivery due to capital constraints
Municipal bond financing
Public financing from capital markets
Earlier availability of capital
Flexibility to finance different project types
Higher transaction, interest costs
Faster than pay-as-you- go
State Infrastructure Bank (SIB)
Long-term debt from the state
Earlier availability of capital
Lower transaction, interest costs
Competition with other jurisdictions
Federalization: added time and cost
Restrictions on financing of projects off the state system
The Texas TRZ - How Funds Flow
Bond and SIB Loan Financing
Start: Public entity borrows money with TRZ revenue as collateral.
Construction: Government starts construction
Operation: Government repays debt using tax increment