Administrative processes and procedures for value capture are important for long-term operations. These processes can ensure collections are proceeding and revenues are consistent with projections and can provide warnings for shifts in economic activity that may require mitigation. Often, existing municipal, regional, and state government services can be leveraged to support and monitor the performance of a value capture implementation. This brief describes strategies to manage revenue collection, monitor performance, and report revenue for value capture.
With careful upfront planning, research, and stakeholder engagement, the focus of a proposed value capture technique can shift from the planning to the administration of implementation. Approaching the initiation and administration of a value capture technique does not mean that stakeholder support, market, financial, and legal challenges are behind you. Therefore existing operations and administrative practices can be leveraged along with new processes to ensure that the necessary information is available to monitor cash flow and payments, performance metrics are available for stakeholders, and the value capture implementation is meeting the legal and regulatory requirements. Efficient collection, effective monitoring, and robust reporting enable municipalities and agencies to:
This brief describes the collection, monitoring, and reporting practices that support successful value capture implementation.
Some value capture techniques can leverage existing municipal or county tax collection systems. Others may require modification to local ordinances, new staff capacity and systems, or interagency agreements to facilitate collection; other cases may require state support. Therefore, it is important to first identify the resources needed according to the preferred value capture techniques being considered. Isolating the techniques will allow you to investigate a narrow set of collection and supporting mechanisms necessary for a successful implementation.
Many value capture techniques require revenue collection, property value assessment, and accounting staff support and systems from jurisdictional offices covering finance, auditing, and assessments. These staff and resources are needed during the exploration, implementation, and operations phases of any value capture pursuit. These skills will be important to determine the appropriate methods and financial instruments required to generate needed revenue.
When the value capture technique has been identified, review the project funding needs, legal and regulatory requirements, and the estimated revenue potential. Use this information to create a funding and financing plan. Determine how projected revenues will meet the transportation project funding needs. The planning should address:
From the initial finance plan and needs assessment, assess the capabilities and resources available.1 Some resources or capacity may have to be created internally, sourced from other partners, or acquired. Other municipal departments, regional agencies, the state, or private consultants may help fill the gaps, depending on the level of effort required and the cost. Considerations when building or acquiring these resources are:
Systems or services required include budgeting, assessment, appraisal, and land cadaster. Particularly for the land value tax, tax increment financing (TIF), and special assessment districts value capture techniques.
Create a transparent process with clear guidelines for businesses, residents, consumers, and others impacted by the value capture collections:
For example, Boston has the option to review and adjust exaction rates for inflation every 36 months and offers two payment options for the housing fund contribution: upon receiving building permits or for seven years on the anniversary of permit issuance (equal payments).
Monitoring is good governance and provides transparency for the value capture implementation while creating opportunities for communication with stakeholders. Monitoring is also critical for evaluating progress and determining whether revenue generation is meeting expectations and withstanding legal challenges and can provide early warning to administrators if collections fall behind or if other problems arise.
Ill-suited or poorly implemented value capture can be critiqued for creating market distortions— by making development more expensive through fees or exactions, developers may build less. Therefore, periodic market studies and planning analysis are important for implementing a successful value capture strategy.
Although many departments or municipalities already perform annual monitoring for budgeting and financial audits, consider other monitoring practices as well. Monitoring should evaluate progress and outcomes achieved against established benchmarks, thereby establishing a feedback loop to refine planning, programming, and future target-setting decisions. Monitoring involves using performance data to obtain key insight into the effectiveness of decisions and identifying where adjustment is needed to improve performance.2
FHWA’s Transportation Performance Management Capability Maturity Model suggests project or program-level monitoring be created for “tracking program and project outputs, and their effects on performance outcomes.” With flexibility in mind, insights from monitoring can be used for “midstream adjustments and [to] guide future programming decisions”. Insights can have relevance for short-term and long-term performance and decision making. The monitoring systems should incorporate, at a minimum, financial and accounting management, interagency coordination, performance measures, and communications.
Financial and accounting management. The financial and accounting systems required for value capture techniques vary—they may be tied to land value or special districts or may cross municipal boundaries. Financial and accounting support can be provided by a single agency or department or can be shared across jurisdictions. Staff should be able to perform business and financial accounting, manage internal budgets, administer government grants, communicate with state infrastructure banks and financial institutions, and collaborate with private and public partners—or should be able to acquire the skills.
Interagency coordination. Working relationships with municipal planning organizations and local planning authorities may need to go beyond traditional transportation planning and prioritization. Dialogues with partners should include discussion of how value capture techniques may fit the needs of other planned projects and the progress of existing value capture projects or programs. Data sharing is important for interagency coordination and future support of value capture.
Performance measures. Value capture revenues can be used in a pay-as-you-go fashion, where funds accrue then are used for transportation projects. In some cases, revenue can be borrowed against through municipal bonds or a state infrastructure bank. In any case, revenue receipts should be monitored relative to projections to refine future projections and to provide early warning if receipts trail repayment schedules or funding needs. Setting goals and thresholds enables the time necessary for adjustments or implementing a backup plan to ensure that the revenues needed are available without undue burden on the backing organization or agency.
Communications. Strong communication practices and platforms are important for maintaining relationships with public and private partners. Communication should target leadership, partners, stakeholders, and the public. Communications should highlight overall revenue generation, benefits from transportation projects funded, and other regional goals met through the value capture implementation. Financial reports, project and value capture websites, quarterly or annual reports, and press releases are common communication tools. Performance measures should be articulated in messaging and platforms with interpretations of the outcomes, and explanations of contributing factors (e.g., real estate conditions, inflation, or over- or underestimated projections). The communication strategy should focus on what monitoring information can help in creating or maintaining relationships with private sector and public stakeholders on projects involving value capture. Leadership should be comfortable in communicating the monitored and reported benefits to constituents.
Some value capture techniques involve market risk, which can affect the ability to generate adequate revenue to fund the project. Market risk may be related to unexpected responses or inadequate buy-in from stakeholders. An implementing agency should anticipate potential ways in which stakeholders may respond to the project or value capture technique, plan for how to address a funding shortfall, and create contingency plans, as they do for navigating an economic or real estate market downturn.
Prepare for the possibility of a downturn from the project’s inception, anticipating potential ways in which stakeholders may respond to a downturn, planning for how to address funding shortfalls, and creating contingency plans. Preparation for a potential market downturn will require a detailed understanding of the local and larger real estate markets. Through monitoring value capture fees or performance, alternative or backup measures can be put on standby or implemented if revenue is insufficient to make debt payments or meet future project funding needs. Alternatively, monitoring can find market distortions resulting from the value capture’s administration. For example, monitoring ensured positive outcomes for the following localities by providing critical information that demonstrated the need to adjust the program:
Most value capture implementations are subject to accounting, audit, or other financial and statutory requirements. These documents and processes can be leveraged to achieve robust reporting to support current or future implementations. Support from the public, policy makers, and local politicians can expedite implementation and maintain use of value capture in the future. Clear messaging on the benefits (including equity), transparency on where and how funds will be spent, and where value is extracted from are important aspects of outreach and education. Cross-neighborhood or -jurisdictional projects will require support from multiple communities and leadership. Close political ties across jurisdictions are essential for cross-jurisdictional projects and can be bolstered by clear, active communication with constituencies.
FHWA’s Transportation Performance Management Capability Maturity Model suggests reporting
products, techniques, and processes used to communicate performance information to different audiences for maximum impact. Reporting is an important element for increasing accountability and transparency to external stakeholders and for explaining internally how transportation performance management is driving a data-driven approach to decision making.6
Reporting for value capture projects should include:
The Atlanta BeltLine’s $4.8 billion estimated cost for completion, its innovative and evolving financing, and its long timeline from 2005 through 2030 demonstrate the need for clear project information and communication. The Atlanta BeltLine’s website provides critical information about the projects funded, goals of the BeltLine, financial information, jobs created, private development dollars attracted, square feet of development space, units of affordable housing completed, and progress toward completion. More detailed reporting can be found here: www.beltline.org.
The City of Boston collects exactions and community contributions benefits from nonresidential construction projects larger than 100,000 square feet. The Boston Planning and Development Agency website (www.bostonplans.org) provides education primers, research, and information about other contributions that projects make. Projects under construction also now sport “wraps” highlighting the project benefits to the surrounding community (see Figure 1).7
Figure 1 . A Wrap on a Project Location
Photo: Boston Planning and Development Agency.
Value capture implementations that go beyond the typical regulatory requirements for collection, monitoring, and reporting are important for the success of value capture initiatives. Reporting can provide decision makers with the necessary information to monitor revenue collection relative to projections, to showcase outcomes, and to generate stakeholder support for new value capture techniques. Monitoring is important to ensure that the revenue needed for transportation projects is adequate and evaluated against preestablished performance indicators, so if projected revenue collection levels are not realized, program administrators know when to initiate risk mitigation factors. Swift implementation of mitigation strategies, rate reviews, or adjustments will avoid insufficient revenue and mitigate perceived market distortions. Quick action through monitoring and reporting allows for changes to that ensure goals and outcomes are realized, while creating support for value capture.
1 See FHWA, “Public Agency Self-Assessment Tool for Value Capture Implementation” to perform assessment and view results of Capability Maturity Matrix
2 Transportation Performance Management Capability Maturity Model, Office of Transportation Performance Management, Federal Highway Administration, Washington, DC, September 2016 (https://www.tpmtools.org/wp-content/uploads/2016/09/tpm-cmm.pdf, accessed February 10, 2021).
3 Pasco County, Florida, “Multimodal Mobility Fee Program Case.” https://www.fhwa.dot.gov/ipd/pdfs/value_capture/case_studies/atlanta_beltline_service_district.pdf
4 Atlanta BeltLine, “Special Service District.” www.beltline.org/the-project/special-service-district.
5 Biddeford, Maine, “Pearl Street Garage and Riverwalk“ https://www.fhwa.dot.gov/ipd/pdfs/value_capture/case_studies/pearl_street_garage.pdf
6 Transportation Performance Management Capability Maturity Model, Office of Transportation Performance Management, Federal Highway Administration, Washington, DC, September 2016 (https://www.tpmtools.org/wp-content/uploads/2016/09/tpm-cmm.pdf).
7 Boston Planning and Development Agency, “Building Wraps” http://www.bostonplans.org/projects/development-review/building-wraps
