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Appendix: Case Studies

Overview

The case studies in this Appendix highlight real-world examples of the value capture techniques discussed in this Manual. They cover the main details of each project, key regulatory characteristics, and funding and financing, as well as chief areas of collaboration and conflict between the various stakeholders involved. The cases take place in rural, suburban, and urban settings and involve many modes of transportation - including roadways, transit, and multimodal facilities. Table 15 highlights the value capture technique(s) used, mode(s) of transportation, and development type represented in each case study for user reference.

Table 15. Value Capture Technique, Mode, and Development Type

Case	Page Reference	Type(s) of Value Capture Technique	Mode(s) of Transportation	Development Type
I. Atlanta BeltLine - Tax Allocation District	Appendix	Tax Increment Financing	Highway, Transit, Multimodal	Urban
II. Bel-Red Subarea, Bellevue, WA - Impact Fees	Appendix	Impact Fees	Multimodal, Road	Suburban
III. Bozeman, MT - Impact Fees	Appendix	Impact Fees	Road, Highway, Multimodal	Suburban, Rural
IV. The Cap at Union Station - Joint Development	Appendix	Above-Grade Joint Development	Highway	Urban
V. Capitol Crossing - Air Rights Joint Development	Appendix	Above-Grade Joint Development	Road, Highway	Urban
VI. Colorado E-470 Toll Road and Vehicle Registration Fees	Appendix	Negotiated Exaction, Impact Fees, Sales Tax District	Highway	Suburban, Rural
VII. Hays County, TX - Transportation Reinvestment Zones	Appendix	Tax Increment Financing	Highway	Suburban, Rural
VIII. Silver Line/Dulles Metrorail - Special Assessment District	Appendix	Special Assessment District	Transit	Urban, Suburban
IX. U.S. 63 in Missouri - Sales Tax District	Appendix	Sales Tax District	Highway	Rural
X. Virginia Route 28 - Special Tax District	Appendix	Special Assessment District	Highway	Suburban, Rural

I. Atlanta BeltLine - Tax Allocation District

The Atlanta BeltLine project highlights the use of tax increment financing (TIF), known in Georgia as a tax allocation district (TAD), for a multimodal project that includes roadway improvements, bike lanes, pedestrian paths, and transit, in addition to the development of green space and other amenities.

I.1 Project Overview

The Atlanta BeltLine is a planned 6,500-acre development that will loop around Downtown Atlanta. It is expected to spur an additional 15,000 acres in development beyond its immediate area. The project aims to connect 45 neighborhoods through 45 miles of streetscape alterations, 33 miles of trails, 22 miles of streetcars, and 2,000 acres of parks. It has been under construction since 2006, opening in phases in the years since. By 2030, all phases of the Atlanta BeltLine are expected to be complete. The Atlanta BeltLine loop is built on a historic 22-mile rail corridor, and the 15,000-acre planning area includes 22 percent of the city's population and 19 percent of its land area. ²⁹⁶

The objectives of Atlanta BeltLine are as follows:

• Increase mobility within Atlanta.
• Increase the accessibility and connectivity of Atlanta communities.
• Increase the amount of greenspace within Atlanta.
• Provide an interactive space for the community.
• Spur development of underdeveloped areas.
• Construct new housing, with an emphasis on affordable housing. ²⁹⁸

The Atlanta BeltLine is considered to be successfully achieving many of these goals, although it is falling behind on affordable housing construction and faces other equity challenges. ^{299 300} Several of the goals above seek to address many of the challenges of Atlanta's public spaces and neighborhoods. For example, prior to the BeltLine's construction, the surrounding neighborhoods were distressed. From the perspective of greenspace, in the early 2000s, Atlanta was ranked 50th out of the Nation's 55 most populous cities in terms of parkland as a percentage of city area.

The Atlanta BeltLine concept was first conceived in 1999 as Georgia Tech graduate student Ryan Gravel's master's thesis. The idea quickly took off after gaining the interest of several citizen groups and Atlanta City Council President Cathy Woolard. ³⁰¹ By 2005, the Atlanta BeltLine had moved from concept to construction, after receiving the approval of the city of Atlanta and several other government entities, as well as the backing of several private and nonprofit organizations.

Atlanta BeltLine Stakeholders

The creation and continued progress of Atlanta BeltLine is the result of coordination between several governmental organizations, non-profit organizations, and local businesses. Several organizations were already in existence prior to the planning of the BeltLine, while others were created for the purpose of carrying out the project. Table 16 and Table 17 briefly describe the roles of key parties involved in the development of the project.

Table 16. Public and Quasi-Public Organizations Involved in the Development of the Atlanta BeltLine

Stakeholder	Description of Role
City of Atlanta	The city of Atlanta, which is the future owner of all Atlanta BeltLine investments, participates in the Atlanta BeltLine TAD. It also appoints members to the Atlanta BeltLine, Inc. (ABI) and Atlanta BeltLine Affordable Housing Advisory boards.
Fulton County	Fulton County participates in the Atlanta BeltLine TAD. It makes appointments to the ABI board of directors and the Atlanta BeltLine Affordable Housing Advisory Board.
Atlanta Public Schools	Atlanta Public Schools is an Atlanta BeltLine TAD participant and appoints members to the ABI Board of Directors and the Atlanta BeltLine Affordable Housing Advisory Board.
Invest Atlanta	Invest Atlanta is the city's economic development agency. It is responsible for the creation and management of all Atlanta-based TADs. It is playing an active role in the affordable housing components of the project.
Atlanta BeltLine, Inc. (ABI)	ABI was formed by Invest Atlanta as a nonprofit organization to manage the Atlanta BeltLine program. The organization defines the program, seeks grants and other funding, facilitates community engagement, manages vendors, tracks progress and reports to government entities.
Metropolitan Atlanta Rapid Transit Authority (MARTA)	MARTA is the Atlanta transit agency that will develop intermodal linkages to the Atlanta BeltLine and be responsible for the development of the Atlanta BeltLine's transit components.
Georgia Department of Transportation (GDOT)	GDOT owns the ROW on the Atlanta BeltLine corridor and coordinates with ABI to manage the Atlanta BeltLine's ROW. GDOT also administers the Statewide Transportation Improvement Program, part of which funds the Atlanta BeltLine's design, ROW acquisition, and construction.
Atlanta Regional Commission	The Atlanta Regional Commission is a planning and intergovernmental coordination agency that has supported ABI's planning and assisted in securing State funds.
Tax Allocation District Advisory Committee (TADAC)	The Atlanta BeltLine TADAC was established by the city of Atlanta to make recommendations to ABI, Invest Atlanta, and the city on issuance, allocation, and distribution of TAD bond proceeds. The TADAC also measures the Atlanta BeltLine's impact and progress on implementation of its redevelopment plan.
BeltLine Affordable Housing Advisory Board	The BeltLine Affordable Housing Advisory Board advises on issues related to affordable housing, with members from Fulton County, the city of Atlanta, Atlanta Public Schools, community development corporations, and the real estate community.
Department of City Planning	The Atlanta Department of City Planning is responsible for the Atlanta BeltLine's planning area zoning. It separated the 16,000 acres within one-half mile of the rail corridor into 10 subareas for land use master plans, which encourage land uses that facilitate transit, parks, denser development, walking, and bicycling.

Table 17. Private Organizations Involved in the Development of the Atlanta BeltLine

Stakeholder	Description of Role
Atlanta BeltLine Partnership	The Atlanta BeltLine Partnership is funded by the private sector. It was created to raise capital, awareness, and support for the project. The Atlanta BeltLine Partnership hosts guided tours, "adopt-a" programs, speakers, and other programming.
PATH Foundation	The PATH Foundation was created to enhance and preserve Georgia greenways. The organization works with ABI and the Atlanta BeltLine Partnership to develop the Atlanta BeltLine trail network, including coordinating the use of private funding.
Trust for Public Land	The Trust for Public Land helped evaluate the Atlanta BeltLine TAD's financial feasibility and purchased the parcels on which Atlanta BeltLine parks will be developed.
Trees Atlanta	Trees Atlanta is working with ABI to create an arboretum, plant trees, and remove certain species from the Atlanta BeltLine area.

BeltLine Progress

Since its inception, the Atlanta BeltLine has visibly progressed, which has helped to strengthen its image and the commitment of policy makers and stakeholders to the project. As of mid-2019, $500 million in capital improvements had been made, mostly related to parks and trails. According to ABI, as of the end of 2018, $559 million in capital improvements had been invested in the Atlanta BeltLine project, spurring $4.6 billion in private redevelopment (an 8.5-to-1 return on investment). Figure 14 and Figure 15 highlight the dramatic transitions in the Atlanta BeltLine planning area.

Roadway Improvements

Some of the 45 miles of planned streetscape work will be completed as a component of transit construction and some, such as the Ponce de Leon improvements, are the result of coordination between multiple agencies and funding sources.

The Atlanta BeltLine, Inc. (ABI) 2005 Redevelopment Plan set out a vision for roadway improvements as a tool for increasing economic redevelopment in the Atlanta BeltLine's neighborhoods. ABI anticipates that some streetscape projects will be implemented as part of private developments and as part of transit implementation. ³⁰² Additional streetscape improvements beyond those identified in the Redevelopment Plan will continue to be implemented as part of other Atlanta BeltLine projects. ³⁰³

In addition to streetscape improvements, a number of roadway projects to mitigate traffic impacts of redevelopment were identified as part of the Redevelopment Plan. These projects were further defined and additional projects were identified through the Subarea Master Planning process; many are located outside the Atlanta BeltLine TAD. ³⁰⁴

I.2 Regulatory Considerations

The Atlanta City Council approved the Atlanta BeltLine's 25-year financial plan in 2005, following a 12-3 vote, establishing the Atlanta BeltLine TAD. Shortly after, Atlanta Public Schools and the Fulton County Board of Commissioners voted to enter into an intergovernmental agreement with the city to share future tax revenues with the Atlanta BeltLine through the TAD. ³⁰⁵ Soon after its formation, the TAD faced a legal challenge from local attorney John Woodham, ³⁰⁶ who argued that participation by Atlanta Public Schools in the TAD violated the "Educational Purpose Clause" in the Georgia State Constitution, as it diverted funds that could be used for education to non-educational purposes. ³⁰⁷ The case pushed for the removal of Atlanta Public Schools from the agreement, a move that, if successful, would dramatically decrease the Atlanta BeltLine's primary funding source, reducing TAD revenues by 45 percent. ³⁰⁸

In 2008, due to the ABI lawsuit and the broader risk to other TADs in Georgia, the State held a referendum to change the constitution to allow TADs to use educational purpose revenue. The referendum narrowly passed with 51 percent of the vote, after which Georgia passed House bill 63, also known as the "Redevelopment Powers Law." The Redevelopment Powers Law explicitly allows TADs to use school district revenue to fund redevelopment projects. ³⁰⁹

As inactive rail corridor, the Atlanta BeltLine has utilized the "Rails to Trails" program to mitigate some of the real estate title risks commonly associated with purchasing rail corridor and converting it to a trail and transit system. ³¹⁰

I.3 Market Considerations

The Atlanta BeltLine revenue projections were based on a financial feasibility study estimating future growth in the value of properties in the 6,500-acre redevelopment area of the Atlanta BeltLine that comprises the TAD. Initial projections were completed in 2006 and based on historic property value increases. The TAD boundary was drawn in order to include key Atlanta BeltLine-driven redevelopment opportunities, avoid single-family neighborhoods, connect trails to nearby parks, and include major roadway corridors that would be improved in relation to the project. ³¹¹

The ABI issued tax allocation district bonds based on the robust growth projections included in its initial feasibility study. However, the 2007-2009 recession led to a major slowdown in the growth of property values in the Atlanta BeltLine TAD area, such that these projections required a downward revision (see Figure 18).

I.4 Funding Plan

Initial Funding Plan

The growth in property tax revenues within the 6,500 acres that comprise the Atlanta BeltLine TAD is to be directed to capital expenditures for parks, trails, and transit. ³¹² These revenues can be spent as they are collected or used to secure financing.

Property values were estimated to rise by $20 billion between 2006 and 2030, and of this growth, the TAD was originally projected to collect $3 billion in revenue for the BeltLine, or 66 percent of the project's $4.4 billion in required investments. The balance was expected to come from Federal, State, local, and private philanthropic funds.

Funding for the Atlanta BeltLine is expected to be used for a number of purposes, based on the relative flexibility of the TAD guidelines. The uses of the $4.4 billion are illustrated in Figure 16 and Figure 17.

Transit investments account for about half of the costs, with spending on parks, streetscapes, affordable housing, and trails taking significant shares.

Shifts in Funding Plan

As a consequence of the 2007-2009 recession and a lawsuit that paused Atlanta Public Schools' revenue contribution, funding from the TAD was halved, as illustrated in Figure 18.

Despite this decline in revenue, the Atlanta BeltLine's initial program and projected costs have remained at $4.4 billion, requiring it to seek other funding sources and delay some projects. As of mid-2019, an estimated $900 million in funding had yet to be identified.

Furthermore, the ABI's revenue shortfall resulted in amendments to the agreement between it and the Atlanta Public Schools - two in 2009 and one in 2016. The process that led to these amendments is described in Section I.5.

I.5 Coordination and Partnership

As TAD legislation was passed in 2009 after years of legal wrangling, the 2007-2009 recession was at its worst and the ABI struggled to pay its payments in lieu of taxes (PILOTs) to Atlanta Public Schools and make the investments to complete its master plan. In 2012, the city of Atlanta stepped in on behalf of ABI to renegotiate the PILOT payment with Atlanta Public Schools, which was eventually paid several months late.

In December 2013, the city communicated that the Atlanta BeltLine TAD would be unable to make the next payment. Atlanta Public Schools was unwilling to accept a lower PILOT payment as it was struggling with its own financial problems. The city and Atlanta Public Schools held meetings throughout 2014 and 2015 to resolve the issue, and in early 2016, they signed a third amendment. The city agreed to become current on payments through 2015, use funds from the sale of a civic center to make additional payments, and transfer property owned by the Atlanta Housing Authority to the school system for educational purposes. In turn, the PILOT payments to Atlanta Public Schools were lowered to $100.8 million from $174.9 million, a 42-percent reduction. ³¹⁶

I.6 Takeaways

• Coalitions can create a self-sustaining cycle to overcome inertia. It took the Atlanta BeltLine 5 years to go from thesis to construction. The rapid push for this project occurred in large part because of support from a wide range of interest groups who lobbied politicians and key private sector stakeholders.
• Execution bolsters a project's resilience. Part of the reason the transaction survived the 2007-2009 recession through difficult negotiations was that the Atlanta BeltLine was well underway and its benefits were evident to all stakeholders. This shows the value of frontloading key visible developments.
• When things go wrong, parties should be open to creative solutions. The Atlanta BeltLine renegotiations were heated, yet all parties displayed creativity and flexibility in developing a new agreement that went beyond the scope of the original agreement.

II. Bel-Red Subarea of Bellevue, Washington - Impact Fees

The Bellevue-Redmond (Bel-Red) corridor project highlights how impact fees may be used to finance improvements and drive the development of a multimodal transportation district that includes arterial streets, bicycle paths, pedestrian paths, and significant roadway enhancements.

II.1 Project Overview

The corridor connecting Redmond, Bellevue, and Seattle in Washington State is one of the fastest-growing areas of the Pacific Northwest. With the Central Puget Sound Regional Transit Authority, known as Sound Transit, expanding its light rail network across metro Seattle, the city of Bellevue saw an opportunity to promote transit-oriented development around the future light rail line and generate maximum benefit from it.

Bellevue focused its planning efforts on the Bel-Red subarea, a 900-acre, strategically located neighborhood. Bel-Red links three key parts of the region: Downtown Bellevue, a dynamic, high-rise employment and residential center; Wilburton, a major, multiple-institution medical district; and Redmond's Overlake area, a prominent, high-technology employment center that is home to Microsoft's headquarters. The area is also conveniently located near the I-405 and SR-520 highways.

The original alignment for Sound Transit's East Link Project followed SR-520 before turning into downtown Bellevue. To maximize transit-oriented development, the city proposed an alternative alignment that would bring the line into a light industrial district several blocks inside the highway. Figure 19 shows the ultimate alignment of the light rail line.

The Bel-Red subarea had long been the location of light industrial uses, including warehouses and auto repair shops. Bellevue saw the opportunity to transform the 900-acre site into mixed-use, transit-oriented neighborhoods while improving the environment and creating thousands of new jobs and housing units. The vision, defined by the city of Bellevue's Citizen Steering Committee, comprised the following six goals:

• Creation of 10,000 new jobs and 5,000 new housing units.
• Construction of transit-oriented developments around light rail stations.
• Restoration of streams and ecological functions.
• Improvement of local and regional transportation connections.
• Creation of new parks, trails, bike paths, and other amenities.
• Generation of significant economic development.

The redevelopment was estimated to cost $200 million, of which a significant portion was expected to come from zoning incentives and citywide impact fees. Other sources of financing were expected to be from TIFIA loans and State grants. An aerial view of the light industrial area, pre-development, is shown in Figure 20. Upon completion, the area will be home to three of Bellevue's six light rail stations:

• Wilburton Station
• Spring District/120th Station
• Bel-Red/130th Station

The location of the three stations, as well as a schematic of the overall land use plan for the Bel-Red subarea, is shown in Figure 21. The Bel-Red subarea is bound by SR-520 to the north, I-405 to the west, Bel-Red Road to the south, and 148th Avenue to the east.

To ensure that the East Link Project will support Bellevue's smart growth goals, each station is put through Sound Transit's station area planning process, in addition to an overall master plan.

The city's overall master plan comprises a variety of multimodal transportation investments designed to leverage the East Link Extension to the greatest extent possible, including arterial streets, bicycle facilities, pedestrian facilities, parks, and stream enhancements. Roadway improvements include new connections, realignments, widenings, turn pockets, new and upgraded signals, bike lanes, sidewalks, landscaping, drainage, and street lighting.

II.2 Regulatory Considerations

The city had to manage several regulatory issues in executing its plan for the project.

Rezoning of the Subarea

The most obvious need was for the city to rezone the subarea from light industrial to accommodate mixed-use commercial development. The rezoning was relatively uncontroversial among property owners, because there was no existing residential space in the area and the rezoning greatly increased property values.

Washington's Growth Management Act

The Washington State Growth Management Act is a State law that requires municipalities to manage growth by designating urban growth areas, preparing comprehensive plans and implementing them through capital investments and development regulations. This act provided guiding principles in the planning process.

Tax Increment Financing

In Washington, State property tax revenues cannot be diverted for local economic development as is the case with traditional tax increment financing (TIF). Traditional TIF was ruled unconstitutional by the Washington State Supreme Court because it diverts State property tax revenue from schools.

Washington's "budget-based" property tax system makes it impossible for a local government to capture property value increases that are driven by public investments. Property taxes are levied in gross amounts, based on budgetary needs and subject to a statutory cap. Because of statutory caps on budget amounts, increases in assessed values are not captured by municipalities under existing law.

The lack of TIF meant there were few ways for the city to capture the increased property values in the new zone.

II.3 Market Considerations

The primary market consideration was real estate market risk. However, the strategic location of the Bel-Red Street Network project proved highly desirable to new businesses and developers well in advance of project completion. REI, the global sporting goods retailer, is constructing its global headquarters in the district. Also under construction is a 100,000-square-foot Global Innovation Exchange, a graduate academic institute focused on technology innovation created by a partnership between the University of Washington and Tsinghua University of Beijing and supported by Microsoft. In total, at least 3.3 million square feet of retail and residential space is under development in the subarea.

II.4 Funding Plan

Investment Strategy

To develop the street network, the city budgeted $200 million out of an overall $500 million citywide budget for transportation improvements. The project's investment strategy will include city revenues supported by developer contributions from impact fees, right-of-way contributions, and zoning incentives, as well as transit agency revenue and Federal and State grants. A developer zoning incentive system will help fund open space and stream restoration and contribute to affordable housing, so that development will partially fund its own needs.

Transportation Infrastructure Finance and Innovation Act (TIFIA) Loan

To fund the street network improvements, the city applied for and was granted a $100 million TIFIA direct loan. The TIFIA loan is secured by a limited tax general obligation pledge from the city of Bellevue. The TIFIA loan agreement was executed on June 9, 2017, and is expected to mature in 2056. The loan has an interest rate of 2.86 percent and a term of 35 years after substantial completion to finance the completion of the street network improvements.

Development Impact Fees

Developers pay impact fees on new developments to help mitigate traffic impacts and to provide some of the funding for the city's transportation infrastructure. Both the Bellevue City Code and the State Growth Management Act discussed previously authorize these fees.

Bellevue's transportation impact fees vary for different types of land uses. Residential fees and commercial fees, for example, are not the same because of the differences in the amount of traffic generated by each type of development.

Incremental Revenue Analysis

To help justify its street network improvements, Bellevue calculated the expected incremental revenue that would be generated through densification and higher value development in the Bel-Red subarea. By showing evidence that the State stood to gain significant incremental revenue from the Bel-Red developments, Bellevue was able to build a strong case in its requests for State grant money to fund street network improvements.

Table 18. Bel-Red Subarea Impact Fee Revenue Projection

Stakeholder	City	County	State	Other Districts	Total
Property Taxes	$3,500	$3,000	$8,700	$20,700	$36,300
Sales Tax on Construction	$3,300	$4,500	$25,200	$3,500	$36,500
Ongoing Sales Tax	$12,500	$16,900	$95,300	$13,200	$137,900
Business and Occupation Tax on Construction	N/A	N/A	$7,000	N/A	$7,000
Ongoing Business and Occupation Tax	N/A	N/A	$16,800	N/A	$16,800
Utility Taxes	$1,500	N/A	$700	N/A	$2,200
Total Incremental Revenues	$20,800	$24,400	$153,700	$37,400	$236,700

II.5 Coordination and Partnership

City-Sound Transit

To undertake the project, the city needed to convince Sound Transit to relocate the original planned route parallel to State Route 520 south into the subarea. This would involve extra cost to Sound Transit since it would need to acquire land in the subarea, unlike along State Route 520. Ultimately, Sound Transit agreed on the basis that relocating the line would improve ridership numbers, which would in turn help Sound Transit's revenue and business case for the East Link Extension over the longer term.

City-Business

The city coordinated with businesses throughout the master planning process to ensure the transportation network would be fit for purpose. It is funding part of the infrastructure improvements through impact fees on development. The city needed to achieve buy-in from potential developers to set and levy the fees. Those fees are levied on a citywide basis and not unique to the subarea, however.

City-Community

The city set up a Community Steering Group to guide the planning and set overarching goals.

II.6 Takeaways

• Get involved early. Bellevue benefited by intervening early in the planning process with Sound Transit to advocate for a route that created the best opportunity for transit-oriented development.
• The private sector will pay for improvements that benefit business in the long run. The project shows successful use of citywide impact fees and partnerships with developers to co-invest in street network investments.
• Municipalities should work around State shortcomings. Bellevue did not have a major opportunity to take advantage of TIF due to State law that prohibits TIF and statutory caps on property tax levels. Rather than simply lobbying the State, Bellevue found alternative ways to raise funds through value capture and developed projections that bolstered its case for receiving a State grant.

III. Bozeman, Montana - Impact Fees

Bozeman, MT's impact fees program highlights how impact fees can be used to finance a significant share of capital investments in roads, bike lanes, and pedestrian facilities, as well as other classes of infrastructure.

III.1 Project Overview

The city of Bozeman, MT, in Gallatin County, is Montana's third-most populous city, with a population of about 45,000. It is well situated, given its relative closeness to two national tourist attractions, Big Sky Resort and Yellowstone National Park, and it is home to Montana State University and its 16,000 students. Bozeman has grown rapidly over the last two decades, and it is consistently ranked as one of the fastest-growing micropolitan cities in the United States as well as one of the strongest economies of its size.

Bozeman's population growth accelerated in the 1990s. After increasing by only 5 percent between 1980 and 1990, it grew by 20 percent during that decade. Its population also grew by 32 percent in the 2000s, with its housing stock increasing by over 50 percent during that time. Bozeman is projected to grow by another 33 percent in the 2010s. The city's rapid growth drove it to annex several thousand acres of land, and it currently covers 12,900 acres - 80 percent more than in 1996. ³¹⁷ Details of Bozeman's population growth can be found in Table 19.

Table 19. Bozeman Population, 1990-2020 ³¹⁸

Year	1990	1995	2000	2005	2010	2015	2020 (Projected)
Population	22,827	27,555	28,210	34,983	37,326	43,399	50,000

By the 1990s, Bozeman's growth started to strain its resources. To address its growing pains, city leadership implemented impact fees in March 1996 to fund additional infrastructure. Impact fees were charged to new developments in Bozeman to pay for the capital aspects of key services, specifically the additional road, sewer, water, and fire/emergency medical service needs that the construction of these new developments would drive. Bozeman policymakers took the view that new users were the drivers of increased capital needs, rather than existing users, and therefore impact fees were a much fairer way to pay for this construction than increased property taxes on existing developments. Any new home or business that connects to water or sewer services or contracts with the city for fire protection must pay impact fees. Bozeman still levies property taxes, but they primarily cover basic municipal services and operations.

Impact fees in Bozeman are set based on formal studies estimating the cost of growth over time and assigning a proportionate share of this cost to new construction. The amount of impact fees is dependent on key development attributes, such as whether the development is commercial, residential, or industrial; the size of the development; and other characteristics such as the development's number of bathrooms, parking lot size, and greenspaces. The city reviews the level of impact fees every 3-5 years.

III.2 Regulatory Considerations

When impact fees were first established, Bozeman's authority to charge them was unclear under the Montana State Constitution. The city had started studying impact fees a decade prior to implementing them when it hired a private attorney to study their legality, along with a team of city and county lawyers. Despite the city's significant legal preparation in advance of launching its impact fee program, it faced challenges almost immediately from the inception of the program. In December 1996, less than a year after impact fees were launched, the executive director of the Business and Consumers Bureau of Montana, Inc., requested an official legal opinion on the program from Montana's attorney general. He pointed to language in Montana's constitution stating that cities do not have self-governing powers, but "only those powers expressly given them by legislature." ³¹⁹ The city, on the other hand, believed that given its express jurisdiction over services such as fire, water, and streets, it also had the right to raise money for these services. This dispute between the city of Bozeman and developer advocates continued for several years. It is outlined further in Section III.5.

In 2005, the Montana State House and Senate passed Senate bill (SB) 185, which gave Bozeman and other municipalities the clear authority to impose impact fees. SB 185 was a compromise bill that also included some safeguards developers had sought in order to limit the scope of these fees. For example, SB 185 established limits around the use of impact fees, disallowing their use to pay for services and requiring they be used for capital improvements. SB 185 also restricted the collection of impact fees to five types of public facilities: water supplies, sewers, transportation, stormwater, and emergency services, the latter of which included police, emergency medical services, and fire protection. Any impact fees beyond these five categories must be approved by a two-thirds city council vote. Finally, the law established advisory committees to review how impact fee funds are spent. ³²⁰

III.3 Market Considerations

Impact fees have facilitated the improvement of Bozeman's infrastructure as it has continued to expand in population and size. To accommodate these ongoing changes and determine the impact fee levels that approximate the cost of providing new infrastructure, the city regularly hires consultants to conduct market studies on its impact fees. The studies gauge how population expansion and certain types of developments, such as retail, restaurants, and industrial, will affect traffic and in turn affect road needs, based on person-miles added to the system. Bozeman then calculated how many city roads and State roads will need be built according to the city's transportation master plan, at a cost of $3.3 million per lane-mile, and determined how to allocate these newly needed roads across new developments. Each person-mile of travel has been estimated to have a cost of $319. Bozeman also began calculating and allocating bicycle and pedestrian miles created from new developments and included new bike lane and sidewalk construction as part of a more holistic transportation impact fee. ³²¹

Through this process, Bozeman was able to calculate the maximum allowable impact fee for each new development. This maximum allowable impact fee has increased with each study as costs and city needs have increased. The city council decides what percentage of the maximum allowable impact fee to charge. Bozeman has raised these fees several times, with street impact fees increasing to 60 percent of the maximum allowed in 2008. This increase caused fees for a 1,500- to 2,499-square-foot single family home to rise from $2,380 to $3,238. Those for a bank nearly doubled, from $10,470 to $19,024 per 1,000 square feet. Industry advocates viewed impact fees as harmful on the housing market, especially as the economy was struggling. For example, a 2007 study by the National Association of Home Builders concluded that every $819 charged at the time of construction would add $1,000 to the final price of a home. ³²² Nonetheless, Bozeman went ahead due to significant needs to fund new infrastructure. After implementation, the city still expected to be short $7.4 million over 5 years for capital improvement program street projects. ³²³ Between 2011 and 2012, Bozeman considered cutting street impact fees by one-third to stimulate sluggish home building in the aftermath of the 2007-2009 recession. However, a reduction in impact fees would have required the city to raise property taxes to cover the growth-induced costs, which many residents and politicians in the region would consider an unfair distribution of responsibility. The proposal was not implemented. ³²⁴ The housing market quickly recovered, and in 2013 Bozeman voted to charge the maximum allowable street impact fees. ³²⁵

III.4 Funding Plan

As discussed previously, Bozeman's impact fees cover road and other transportation infrastructure capital expansions and major renovations that can be attributed to growth, while property taxes cover operations and basic services. For instance, of the $33 million in street construction estimated as required between 2015 and 2020, $25.4 million or 77 percent, was projected to come from impact fees. ³²⁶

In order to avoid increasing property taxes to pay for its remaining capital needs, in 2015 Bozeman established an "Arterial and Collector Special Assessment." The city expects to fund the remainder of its $7.9 million in roadway capital needs from this assessment on all property owners within the Bozeman city limits. ³²⁷ , ³²⁸ The city's arterial and collector fund also included significant monies from owner or developer payback agreements, Federal and State grants, reimbursements, and other sources.

Impact fees pay for a much larger share of Bozeman's streets' capital costs than in Montana's larger cities, in part because its small size precluded access to State funds. ³²⁹

The impact fees calculated in Bozeman's most recent draft study (conducted in May 2018) would, when adopted, generate an average of $3.5 million to $5.0 million per year through 2040, or a total of $80 million to $115 million over the next 23 years. ³³⁰ The city's capital improvement plan for fiscal years 2018-2023 accounts for about $57 million in total improvements, utilizing accumulated funds from past years and projected impact fee and arterial revenue during that period. About 70 percent of this capital funding is expected to come from road impact fees, with arterial revenue funding the balance. The revenue breakdown is shown in Figure 22.

III.5 Coordination and Partnership

Legal Challenges to Impact Fees

From the first year impact fees were implemented, Bozeman faced legal challenges, and for more than two decades, developer groups have continued to push back against them. A timeline of these disputes is as follows:

• 1996: The Business and Consumers Bureau of Montana, Inc. challenged the authority of the city of Bozeman to establish impact fees.
• 1997: Bozeman's streets impact fee was challenged by home developers, who argued that impact fees were charged too early, during the project approval phase, as opposed to when the impact occurs, after homes are built. Additionally, they charged that fees were unfairly allocated based on lot size, rather than the number of residents likely to occupy a unit. For example, a lot with a single home would pay the same amount as a multiplex development, regardless of expected occupancy. ³³¹
• 1998: The city sought to double impact fees through a vote and put "Initiative 19" on the ballot. In November 1998, Bozeman voters passed Initiative 19.
• 1999: In part because of Initiative 19, the developer community fully organized its opposition against the fees, and the Southwest Montana Business Industry Association filed a class action lawsuit challenging impact fees.
• 2001: Developers achieved their first victory. In a blow to the city, Deer Lodge County Judge Ted Mizner did not rule against impact fees in general, but ruled that a ballot initiative was not an acceptable method to raise fees since fees could also be lowered through this process, and allowing fees to be subject to voter approval would make the city's finances unstable. The city planned to appeal the case to the Montana Supreme Court.
• 2003: A developer-sponsored bill to limit impact fees was voted down in the Montana State Senate.
• 2005: The Southwest Montana Business Industry Association's (SWMBIA) class action suit against the city succeeded. Bozeman agreed to return $5 million in impact fees collected to developers and reduce impact fee levels by 10 percent for 2 years until a study to determine the appropriate fee amount was completed. Shortly after, the Montana State House and Senate issued Montana cities the clear authority to charge impact fees, although limiting how they could be spent and providing for spending oversight.
• 2017: SWMBIA again sued the city over impact fees, claiming that Bozeman misspent impact fee revenue by subsidizing better services for those already living in Bozeman, rather than adding capacity to accommodate new growth. ³³²

Throughout this process, citizen activists, who had significant influence in Bozeman given its culture and small size, supported the impact fee. While developers on the other side of this argument were highly influential and well-resourced, the citizen activists made very vocal arguments that helped explain the benefits of the policy to residents, preventing developers from solely shaping the impact fee debate. ³³³

Impact Fee Effects on Developers and Attempts to Mitigate

Although impact fees enjoyed broad support, even sympathetic citizens and council members were concerned that they could harm the city's economy. As Bozeman sought to woo several national commercial chains, it found that many of its efforts failed or came close to failure. Citing impact fees, Kohl's threatened to scrap its plans for a new Bozeman store, although it ultimately relented. Meanwhile, Qdoba and Best Buy scoped Bozeman for potential locations, but both chose not to open sites in the city, with Qdoba choosing to locate 2 hours away in Billings, MT, instead. While it is unclear whether impact fees were the true motivation behind these stores' decisions, it is clear that Bozeman had higher fees than other cities in Gallatin County, other Montana cities, and other regional hubs such as Boise, ID, and Spokane, WA. ³³⁴

Bozeman made several tweaks to its impact fees, mindful of the business community's concerns. For example, when Bozeman increased road impact fees to 60 percent in 2008 during a period when the city's retail market was especially sluggish, it included special incentives for retail spaces so that street impact fees dropped from $6,672 to $5,599. ³³⁵ In 2013, by unanimous vote, Bozeman also began permitting developers to defer payment of street impact fees until a structure was ready to be occupied, rather than when construction began, in line with an argument that developers had made at least since 1997. To reduce the risk of nonpayment if this option were exercised, the impact fee deferral process required a $50 application fee, a lien against the property, a $1,000 penalty, interest, and responsibility for the city's legal costs if fees were not paid on time. ³³⁶

III.6 Takeaways

• Impact fees can work in tax-unfriendly environments. While Bozeman residents were generally opposed to property tax increases, impact fees faced limited public backlash, such that voters were willing to increase them shortly after their passage. They were generally viewed as a fair way to allocate the costs of construction and, equally importantly, the constituency that would have opposed impact fees was relatively limited.
• Prepare for legal challenges and seek authorization early. Although confident they had the authorization, Bozeman could have lobbied the State to change legislation as early as possible and waited for this authorization before implementing impact fees. This may have saved the city from facing legal costs, fines, and the refunds required by various rulings.
• Be mindful of the risks created by a fee and consider incentives to mitigate them. While Bozeman did not always make the decision that developers would prefer, the city tried to balance some of the its capital needs with the potential economic effects of impact fees and found ways to make them more palatable.

IV. The Cap at Union Station - Joint Development

The Cap at Union Station case study describes how governments and private developers can utilize above-grade joint development both to fund an infrastructure investment and to reconnect divided neighborhoods and improve the condition of distressed areas.

IV.1 Project Overview

The Cap at Union Station in Columbus, OH, demonstrates how governments can partner with the private sector to create and share value in highway-related investments. The project began in 1995 when the city of Columbus was looking for a way to reconnect sections of downtown that had been bisected by the construction of I-670, an inner-belt highway, about 20 years earlier. The construction of the expressway became a barrier to the development of the area north of I-670, the Short North arts and entertainment district. Community groups opposed the proposed widening of the expressway, claiming it would further damage the urban landscape. The large convention center located downtown near I-670 was illustrative of this chasm, as restaurant owners south of I-670 received regular convention traffic, while those north of the highway received very little convention-related business. ³³⁷

The location of the project is shown in Figure 23. Before the construction of the Cap at Union Station, the more prosperous southern neighborhood was separated from the less prosperous northern one by a pedestrian-unfriendly chain-link fence walkway. To heal the scar created by the expressway, the city sought to build a hard "cap" over it. While other cities such as Seattle and Kansas City have erected convention centers and/or parks over urban highways, the objective of the I-670 cap would be to create a pedestrian and retail space, one of the first speculative real estate projects of its kind.

A local developer, Continental Real Estate Companies, approached the city and expressed interest in investing in the project. The company signed a memorandum of understanding with the city in 1999 to jointly develop a cap. The city determined that the development should evoke Columbus's former Union Station, which was demolished in the 1970s to make way for the nearby convention center. A depiction of the old Union Station building is shown in Figure 24.

The memorandum of understanding (MoU) between Continental and the city included the following:

• The city would pursue clear title to the air rights above the highway and obtain permission from Ohio DOT (ODOT) and FHWA to construct the cap platforms.
• Once clear title was achieved and permits were obtained, Continental would enter into a ground lease for the platforms and construct the buildings.
• Continental would reimburse the city for up to $75,000 in architectural fees for work completed prior to construction of the buildings on the cap.

The project was ultimately composed of three separate bridges: one for through-traffic across the highway, one for pedestrian bridges, and one for retail structures. Construction of the cap structures began in 2002, and Continental began work on the buildings in April 2003. Figure 25 depicts the final project.

IV.2 Regulatory Considerations

This section discusses the regulatory issues that arose during the project's development.

Air Rights

Obtaining air rights over the development proved to be a hurdle. When I-670 was constructed, the State acquired only ground rights. The city attorney's office undertook a title search on the land parcels under the proposed cap. The process of finding the owners of the air rights and procuring clear title to the project site took 2 years.

Permits from FHWA

FHWA places restrictions on use of highway easements for commercial use. Specific to this project and similar efforts involving private developers, it required that for the easement to be used for a non-highway use, fair market rent be charged to Continental for the use of the cap platforms. This proved challenging because, even without paying rent, Continental would need to charge above-market rates for retail leases to fund the project's construction cost. Also, parking was severely limited, further reducing the investment's attractiveness.

Ultimately, Continental was not willing to pay any rent, but instead negotiated an alternative arrangement whereby it would give the city 10 percent of the development's annual profits in lieu of paying rent, beyond a nominal $1 annual lease for the platforms.

Design Restrictions

The unique restrictions of a project above a highway meant the city had to agree to the following:

• ODOT retained the right to evacuate the project in case of emergencies.
• No windows or signage were permitted on the back of the building.
• No access to the building's rear was allowed, such as via catwalk or the roof.

IV.3 Market Considerations

Key to the economic viability of the project was Continental's ability to secure long-term, above-market leases for the new buildings. Before Continental was able to secure financing, it secured tenants willing to pay rents that, at $25 to $35 per square foot, were approximately 20- to 30-percent higher than those in the surrounding area.

Tenants were willing to pay higher rents because they valued the cachet of the location and proximity to the convention center. Continental also ensured a mix of day and night tenants to keep the space as active as possible. The space currently features a wine bar, a clothing store, an apparel and gift shop and smaller specialty food stores.

IV.4 Funding Plan

The funding plan consisted of a number of elements, as discussed below.

Preliminary Design

The city spent $115,000 on the preliminary design needed to secure the regulatory approvals. Per the MoU, Continental reimbursed the city for $75,000 of this cost.

Construction of the Cap and Bridges

ODOT agreed to pay $1.3 million for the construction of the three bridges. The city paid the additional $325,000 required to extend utilities to the platform via the concrete bay.

Construction of the Retail Building

Continental assumed the entire cost of the improvements on top of the cap.

The company originally used the following to finance the construction:

• A $4.2 million conventional loan.
• $1.3 million in mezzanine debt.
• An equity contribution of $500,000.

Later, after securing more tenants, Continental refinanced to a $7 million conventional loan on more favorable terms. The additional financing was used to fund the higher-than-expected costs of tenant improvements.

The city also provided Continental a 10-year, 100-percent property tax abatement, improving the project's economics.

IV.5 Coordination and Partnership

Several partnerships were required to make the project successful.

City-Developer

The relationship between the city and developer was important from the outset. In addition to the areas of cooperation in the MoU described above, the city had to work with the developer on the difficult task of extending utilities across a bridge to the project. This was ultimately resolved with the design innovation of an internal concrete bay.

FHWA-City

Since FHWA funded the original construction of the expressway, the alternative use of the highway easement required FHWA approval and buy-in.

ODOT-City

Similarly, since ODOT would be operating the highway, all the design elements of the project required close coordination with and approval from ODOT.

Other Planning Authorities

Prior to construction, Continental had to obtain design approval from the Downtown Commission, the Italian Village Commission, and the Victorian Village Commission.

IV.6 Takeaways

This project highlights an innovative partnership between a private developer, a city, a State DOT and FHWA to support urban development. Key takeaways include the following:

• The project demonstrates how interstate widening projects can contribute to urban renewal with limited incremental cost to government.
• Community groups originally opposed the I-670 widening but were appeased with the cap that increased urban walkability and provided accessibility to the Short North area. The widening was eventually built.
• Retailers are willing to pay a premium for locations with high accessibility and cachet.

V. Capitol Crossing - Air Rights Joint Development

The Capitol Crossing project, formerly the I-395 air rights project, highlights the use of property taxes and air rights as funding techniques for a real estate development.

V.1 Project Overview

Capitol Crossing is a $1.3 billion, 2.2-million-square-foot real estate development, often also referred to as a community revitalization project, in downtown Washington, DC, between the U.S. Capitol, Union Station, and the Verizon Center (see Figure 26). The project's objective is to reconnect the Capitol Hill and the East End areas that were cut off from each other by the construction of I-395 in the late 1960s. The project is privately funded and is one of the largest ongoing private developments in DC. ³³⁸ Once finished, the project is expected to create a first-of-its-kind "ecodistrict" in DC, with all of its five buildings designed to qualify for a Leadership in Energy and Environmental Design (LEED) platinum rating and to have green roof areas and a water capture and containment system. The project is expected to transform the area by reconnecting the street grid and offering commercial office and ground-floor retail space.

History of the Project

Capitol Crossing has several decades of history. In the mid-1980s, T. Conrad Monts, owner of Travenca Development Corporation, submitted an unsolicited proposal to the District of Columbia to buy or lease the air rights over I-395. Monts planned to build a $200 million office and hotel complex. Community activists and DC City Council members pushed back against Monts' proposal, for reasons that included the $12 million relocation cost for the city's main financial computer facility and the proposal's unsolicited format, but these concerns were not strong enough to halt Monts' proposal. ³³⁹

In 1989, then-DC Mayor Marion Barry awarded Monts the air rights over I-395 between D Street and Massachusetts Avenue, and on December 28, 1990, the city and Travenca Development Corporation signed a final lease for the property. With the support of Mayor Barry, Monts submitted plans to the Washington, DC, Zoning Commission. The plans called for 3 office buildings, a 300-room hotel, and 266 apartments. After the plan was approved, criticism continued from community activists and the DC City Council, with Georgetown University Law Center also supporting the opposition. New complaints about the project also surfaced, including concerns about the shortcomings of the size, footprint, and design of the project and that the $45 million appraisal of air rights was too low. However, city officials continued to back the proposal. ³⁴⁰

The DC Zoning Commission approved Monts' plan in 1991, but only after requesting modifications that altered the size of the project and minimized certain traffic concerns. By 1995, construction still had not started, and Monts filed a request to extend the order for 2 years, which was approved. By 1999, no progress had been made. The collapse of the real estate market in the early 1990s halted DC developments, financing was difficult to obtain, and objections to the project continued. ³⁴¹

In July 2000, the DC City Council sued in order to evict Monts from the I-395 property and compel him to pay $4 million in lost rent. Monts responded with a countersuit seeking $15 million for spent costs and another $50 million in compensatory damages. In 2004, a DC Superior Court grand jury awarded Monts $8.4 million in damages. Both sides appealed to the DC Court of Appeals and continued negotiations. ³⁴² In July 2003, after another year of public hearings and disputes, the Zoning Commission voted unanimously to deny the request for the extension, thereby ending Monts' ability to develop the project. ³⁴³

In 2005, the New York-based Property Group Partners offered to pay a settlement to Monts in exchange for the right to buy the property from the city at fair market value. Property Group Partners paid the sum in 2009, after Monts' death, and acquired the air rights for the project in 2012. Property Group Partners also negotiated an arrangement with the city in which the cost of the building would determine how much they would ultimately pay the city for the property air rights. ³⁴⁴

In 2011, the environmental assessment for the I-395 Air Rights project commenced. The project was also reviewed under Section 106 of the National Historic Preservation Act, and the environmental assessment included a Section 106 Effects Assessment. A public hearing was organized on November 2, 2011. ³⁴⁵ On March 26, 2012, FHWA approved the environmental assessment with a finding of no significant impact (FONSI).

Scope and Construction Timeline

The 7.5-acre site spans three city blocks. Four of the five planned buildings are expected to be used for office space, with the remaining building to be used for residential purposes. The five buildings will be connected by public greenspace and an F & G Street bridge replacement. ³⁴⁶ The project will also include an underground, four-level parking garage with space for 1,146 cars and 440 bicycles. ³⁴⁷

In May 2015, one year after beginning site work, Property Group Partners broke ground on the project. ³⁴⁸ Construction is expected to continue until 2021. The process began with a site excavation/preparation and utility installation, followed by the construction of a new southbound on-ramp and the relocation of the existing northbound on-ramp on Massachusetts Avenue. The final stages of the project include the completion of the center block. Access to the two parking entrances will be located along Third Street, with the loading dock entrance on E Street.

V.2 Implementation Considerations

Property Group Partners requested the closure of more than half a mile of I-395 for more than a year in order to save 18 months of construction time. The request, which the District Department of Transportation forwarded on to FHWA, was opposed by community members. The closure would have had a significant impact, as that stretch of I-395 carries up to 90,000 vehicles daily. In addition, because the closure was not considered as part of the original environmental impact studies, it would have required a FONSI re-evaluation and potentially an environmental assessment and an environmental impact statement. This could have taken up to 36 months. ³⁴⁹ In the end, the closure was not approved, although lanes and ramps were permitted to be closed temporarily, mostly during off-peak hours. ³⁵⁰

V.3 Market Considerations

One of the challenges for a project like Capitol Crossing is to have sufficient land value to justify the platform building cost. Robert Braunohler, regional vice president for Property Group Partners, noted that "there are only two cities where land value is high enough and they are New York and Washington. There aren't just empty sites just sitting around." ³⁵¹ A project like Capitol Crossing may not be easily replicable in other cities or jurisdictions for this reason. ³⁵²

V.4 Funding Plan

Many of the specific financial details of this transaction remain confidential. According to news sources, the $1.3 billion project is expected to generate roughly $40 million in property taxes and $120 million in air rights to the District. ^{353 354}

V. 5 Coordination and Partnership

Political Support for the Project

The city has supported and been committed to this project since its beginning. Despite decades of delays and controversies, as well as the collapse of the first attempts to construct the project, the idea for the project was never fully abandoned.

Relationship with Stakeholders

As part of the regulatory processes, the developer engaged local communities, including Georgetown University, the Downtown DC business improvement district, the Federal City Shelter, Holy Rosary Church, the Jewish Historical Society, and the residents in the adjacent buildings. The project required the relocation of DC's oldest synagogue and the Holy Rosary Church. Both were managed without significant project opposition.

Relationship with the Federal Government

Federal officials criticized Property Group Partners' request to close I-395 for a year to speed up construction. ³⁵⁵ The main complaint raised was that officials were not informed about the proposal and found out about it from media outlets. This highlights the importance of clear stakeholder communication. ³⁵⁶

FHWA has been a major critic of the project because the initial processes, including the right-of-way agreement, were conducted under regulations that are no longer relevant today. After the initial project had been approved, relevant project regulations changed, as did FHWA personnel. Another criticism voiced by FHWA was related to a low-income housing component that was originally part of the project plans but was moved out of the development and into a less desirable neighborhood. This drew criticism of the project from a social equity perspective. ³⁵⁷

V.6 Takeaways

• Impacts: The construction phase for an air rights project has impacts on the existing infrastructure, and these impacts should be clearly communicated to stakeholders. Although the closure of I-395 requested by Property Group Partners was rejected, there would still be numerous closures of lanes and ramps throughout the construction period. Such closures can impact community support for the project if not carefully managed and communicated.
• Platform Cost: One of the challenges with an air rights project like Capitol Crossing is to have sufficient land value to justify the cost of building the platform. Because of this consideration, a project like this may not be replicable in many cities.
• Change in Regulation: For a project like Capitol Crossing that experiences numerous starts and stops over a period of decades, changes in regulations and requirements should be carefully managed to ensure the final project is brought up to date with any changes that may have occurred since the project was initially approved.

VI. E-470 Toll Road and Vehicle Registration Fees

The E-470 is a Colorado toll highway that received most of its funding from toll revenues, yet also received material support from value capture methods including developer right-of-way (ROW) contributions, vehicle registration fees, and highway expansion fees. It also benefited from modest joint development on its ROW.

VI.1 Project Overview

E-470 is a 47-mile, primarily four-lane, limited-access toll road that makes up a major portion of a circumferential beltway around the eastern portion of the Denver metropolitan area. E-470 connects in the south to the I-25/C-470 interchange and in the north to the I-25/Northwest Parkway interchange. It is also a major link to the Denver International Airport. ³⁵⁸

The idea of E-470, or I-470 as originally planned, began in the 1960s when the Colorado Department of Highways (predecessor to the Colorado Department of Transportation [CDOT]), perceived a need for a beltway around the Denver metro area. ³⁵⁹ The project was initially delayed due to opposition from the Colorado Department of Health and other stakeholders concerned it would create air pollution. ³⁶⁰

In 1987, the project was relabeled C-470, reflecting State rather than Federal ownership, and in 1990, the southwestern quadrant of the road segment was completed. ³⁶¹

The implementation of E-470 dates back to 1981, when Arapahoe County, Douglas County, Greenwood Village, and private developers began the "Centennial Airport Influence Area Transportation Study." The 1982 study recommended the extension of C-470 east and north to I-70. In the absence of Federal and State funding, Adams, Arapahoe, and Douglas counties joined to form the E-470 Authority, the predecessor of the current E-470 Public Highway Authority, through an intergovernmental memorandum of understanding. The city of Aurora joined a year later. ³⁶²

VI.2 Regulatory Considerations

Framework Legislation

As planning commenced in the 1980s, stakeholders sought legislative powers to realize the project. In 1987 the Colorado Legislature approved the Public Highway Authority Act, giving E-470 the following powers:

1. To construct, finance, operate, or maintain beltways and other transportation improvements.
2. To take private property by condemnation.
3. To establish and collect tolls on any highway provided by the E-470 Public Highway Authority.
4. To establish and collect highway expansion fees from persons developing property within the boundaries of the E-470 Public Highway Authority, generally 1.5 miles on either side of the highway centerline.
5. To issue bonds and pledge revenues to the payment of bonds.
6. To succeed to the obligations of other governmental entities.
7. With voter approval, to impose vehicle registration fees and create special districts.
8. Also, with voter approval, to impose taxes and fees within any part of the member governments' jurisdiction. The fees and taxes requiring an election are a sales or use tax, an employment privilege tax, a business occupation tax, and a motor vehicle registration fee. ⁶³

E-470 used all the powers listed above in items 1 through 8, except for those in item 7 to create special districts. The successful 1988 vehicle registration fee election was the only E-470 measure that was voted on by affected residents. E-470 never imposed taxes, and the ability to impose taxes was removed by subsequent legislation. ³⁶⁴

In August 1988, the Authority unanimously adopted a resolution endorsing a finance plan that included a $10 per vehicle registration fee to be collected within E-470's voting boundaries (parts of Adams, Arapahoe, and Douglas counties), highway expansion fees to be imposed within the Authority's geographical boundaries, and highway tolls on E-470 as sections of it opened. ³⁶⁵

The highway expansion fees were one-time fees paid when a building permit was issued for new construction within 1.5 miles of the E-470 centerline. ³⁶⁶ The fee schedule was based on the following real estate characteristics:

• Fees varied by single family residential, multi-family residential, retail, office, and industrial property.
• Traffic impact on E-470.
• Unique traffic trip-generating factors for different locations, ³⁶⁷ including scaling fees so that developments closer to E-470 or interchanges paid more. ³⁶⁸

Beginning in 1989, E-470 began to impose and collect highway expansion fees, which resulted in negligible total fees of $14,000 in 1990. The fee eventually increased to over $300,000 per year, serving as an important funding source in the project's early years. ³⁶⁹

Regulatory and Financing Conditions for First Segment

The project's first financing came in August 1986 when Arapahoe County issued more than $722 million in bonds on behalf of the Authority. These monies were escrowed until adequate credit protections were in place. ³⁷⁰ E-470 was able to begin construction when it obtained a 1989 letter of credit from the Union Bank of Switzerland (UBS) that secured payment of the bonds, 3 months after a successful voter election. The UBS arrangement permitted E-470 to break escrow on $68.7 million in bonds, enough to complete construction on the first segment.

VI.3 Market Considerations

Segment I Business Case

The 1989 financial feasibility analysis projected that tolls would pay 85 to 92 percent of the capital costs, with about 7 percent of these costs through the highway expansion fee and the remainder covered by the $10 per vehicle registration fees. ³⁷¹

In actuality, tolls were the project's primary funding source, yet vehicle registration fees were also a material funding source. When Segment 1 opened in mid-1991, toll revenue for that year totaled $226,000 and the Authority received approximately $4.7 million in revenues from vehicle registration fees, underscoring the importance of that source in the early years. ³⁷²

Highway expansion fees supported the project in the early years as well. They amounted to $150,000 on average in the first 5 years of operations, from 1995 to 1999, ranging from 0.63 percent to 2.06 percent of total revenue. The fees grew to as much as $1.3 million in 2005. During the time that they were in place, from 1995 to 2017, they averaged $335,000 per year. ³⁷³

By 2015, vehicle registration fees of $10.1 million were 5 percent of total revenues, and highway expansion fees were again below 1 percent of total revenues. ³⁷⁴ Vehicle registration fees are not traditionally considered a value capture source, since they are usually imposed on a regional or statewide basis. However, this vehicle registration fee was only collected within E-470's voting boundaries - parts of Adams, Arapahoe, and Douglas counties - similar to sales tax districts used to fund transportation projects.

Segment II-IV Business Case

The construction of the subsequent Segments II-IV was more challenging than Segment I. In October 1990, UBS withdrew its April 1990 proposal to provide letter of credit financing for the remaining tollway segments due to the Persian Gulf crisis, international economic crises, and the savings and loan crisis. A joint venture led by Morrison-Knudsen (MK), an international construction firm, proposed to design and build Segments II-IV and take the lead in realizing the financial plan as follows: ³⁷⁵

• A $20 million loan from CDOT and a similar $20 million loan from Douglas and Adams counties, as well as Parker, Thornton, Aurora, and Brighton.
• Moving the alignment about 1 mile closer to the already established population base, driving more traffic and more toll revenue and reducing construction costs.
• The purchase by MK of $16 million of subordinate bonds, which would be repaid after the senior toll road bonds and the local and State loans were repaid.

This plan was eventually accomplished, but only after 2 years of litigation from a jurisdiction opposing the plan, since they perceived the new alignment as diminishing their development opportunities.

VI.4 Funding Plan

Other Funding Sources

E-470 also benefited from other sources, including cell tower and solar panel installation. Along a 17-mile portion of the corridor, the Authority installed 22 solar sites to host solar-generated electricity panels for road surveillance cameras, signage, variable message signs, streetlights, toll collection equipment, toll plazas, maintenance facilities, and the E-470's headquarters. While this reduced E-470's electricity costs, ³⁷⁶ as with highway expansion fees, these savings were not material, amounting to less than 1 percent of total revenues.

Creditworthiness, Finance, and Funding

The Authority has paid all debt service on outstanding debt and/or retired its obligations, including State and local loans that were repaid earlier than expected. For the remaining debt, E-470 bondholders enjoyed high ratings which, as of February 2017, were BBB+, A-, and A3 for Fitch Ratings, Standard & Poor's, and Moody's, respectively. ^{377 378}

In the highway expansion fee and the vehicle registration fee were rescinded in 2017 and 2018, respectively. The former was rescinded because the fee collection placed a high administrative burden on the member jurisdictions, which had to calculate the fees and then collect them with the building permits, and there were 15 pages of fees that varied according to real estate characteristics. Furthermore, over time, the fees became smaller as a percentage of revenue and less important overall. ³⁷⁹

E-470 has had a major impact on the Denver metropolitan area. The Authority estimates that, since 1986, E-470 has been the catalyst for more than $38.4 billion in real estate construction and appreciation along its 47-mile-long corridor, and that corridor developments contribute $467 million in annual property taxes. ³⁸⁰

Furthermore, E-470 has catalyzed development in the far eastern suburbs of Denver, increased the rate of development in the region, and accelerated the timetable for development by as much as 15 years, according to some observers. ³⁸¹

VI.5 Coordination and Partnership

Three major sources of support helped to realize the E-470 project. First, E-470 was supported by three counties and several municipalities that planned it. CDOT also supported it eventually with monies that helped with its design and engineering.

Second, the successful ballot election in 1988 was a critical referendum on the project, confirming the support of most residents and giving the Authority permission to apply the vehicle registration fee and highway expansion fee. These funds also provided valuable non-toll funding sources at project start and demonstrated local commitment. ³⁸²

Third, the project relied on significant support from developers and landowners along or near the alignment. Initial proponents included George M. Wallace, who had earlier helped develop the Denver Tech Center, which is considered Denver's second downtown. ³⁸³ They also included Cal Fulenwider III, who owned property near the project. The E-470 Executive Advisory Committee, chaired by Fulenwider, comprised a half-dozen major land developers who came to the table to discuss land acquisition options. Furthermore, several advocates, including developers, funded and ran an independent political group, the BELT Committee (Build E-470 for Less Traffic), to support the project. ³⁸⁴

These developers donated around $175 million in ROW to E-470, ³⁸⁵ a major contribution to the project given its cost of over $1 billion. According to Fulenwider, "E-470 came to me to put together an executive committee of major landowners. We both wanted a pioneering, productive P3 with give and take. We donated probably 4-5 miles of land. In exchange, we were given a voice on where the interchanges would be built." ³⁸⁶ Fulenwider was later involved with major developments in the E-470 corridor, including the 3,000-acre Reunion master planned community in Commerce City and the Peña Station, a transit-oriented development near Denver International Airport. ³⁸⁷

About 25 percent of the ROW in Segment I was acquired through donations. Significant donations continued for other highways, such as Cal Fulenwider's donations between 56th and 112th Avenues. ³⁸⁸ For the remaining ROW, the Authority negotiated most purchases, with a total outlay of around $50 million. Condemnation was rarely used. ³⁸⁹

VI.6 Takeaways

Various forms of value capture helped make the E-470 possible:

• The highway expansion fee, a form of development fee, was expected to play a material role in phasing the first E-470 segment, yet this did not occur. The actual highway expansion fee revenues were de minimis compared to the project's $1.23 billion capital cost. ³⁹⁰
• Vehicle registration fees were a material funding source, especially early on when they amounted to as much as 8 percent of total revenues. They can could be interpreted as a form of value capture, since they were imposed primarily on areas adjacent to E-470.
• The contribution of developers and landowners for ROW was very material to the project, amounting to more than 10 percent of project costs.
• Developers were also very instrumental in providing other resources and advocating for the project.

While value capture helped realize the project, the primary funding source was toll revenues. Bondholders, financial intermediaries, local and State agencies, and the design-build joint venture took significant risks in lending to this project.

VII. Hays County, Texas - Transportation Reinvestment Zone

The Hays County transportation reinvestment zone (TRZ) project highlights the use of TRZs in funding and facilitating major highway projects. It highlights the need to do thorough analysis of potential legal threats to value capture initiatives.

VII.1 Project Overview

The Growth of Hays County and San Marcos

Hays County, TX, is located about halfway between Austin and San Antonio, and the city of San Marcos is the county seat. San Marcos is also home to Texas State University, which has nearly 40,000 students. Both Hays County, with a population of 200,000, and San Marcos, with a population of 65,000, have grown rapidly over the last several years. Both have frequently ranked among the five fastest-growing jurisdictions in the United States, with San Marcos having registered the fastest growth rate in the country several times in the last few years. ³⁹¹ The university's population has also increased significantly. It is a commuter school, with about 60 percent of its students living outside of the San Marcos area. The rapid growth of the city, the county, and the university has strained the region's roads, which are notorious for congestion.

To accommodate this growth, as well as to repair existing roads, the county adopted a transportation master plan in 2013. As part of this effort, it established the Hays County-Texas Department of Transportation (TxDOT) partnership. The partnership's projects sought to allow the county to keep up with the increased number of vehicles traveling on its roadways and have allowed Hays County to build roads today that would otherwise have taken 20 or more years to construct. ³⁹² , ³⁹³

Formation of the Hays County and San Marcos TRZ

Local leaders pushed for implementation of TRZs soon after this legislation was passed. Two Hays County commissioners approached TxDOT's executive director about whether the new legislation could help a critical road project, farm-to-market (FM) road 110, which was a 13.1-mile loop (see Figure 27) that had been planned by the county and city since the 1960s.

The FM 110 project is the development of a key corridor through central Hays County with the goal of reducing congestion on existing connections such as I-35. This project was the county's "number one priority" ³⁹⁴ at the time it was approved. While the project was historically planned and critically important, TxDOT had no funding for FM 110, and it was not programmed for construction for over 10 years. Working with the city of San Marcos, a financial partner in the project, Hays County entered into a contract, known as an advance funding agreement, with TxDOT to implement a TRZ to fund FM 110. By 2014, Hays County and the city of San Marcos had created a TRZ to build FM 110. There was little or no opposition to the FM 110 project and TRZ creation, with Hays County voters twice overwhelmingly approving road bonds for portions of FM 110. Unique to this project as compared to other TRZs in the State was that both the county and city were involved.

VII.2 Regulatory Considerations

TRZ Background

The Texas Legislature enabled TRZs in 2007 for counties and municipalities. The purpose of a TRZ is to allow a transportation project to capture a share of revenue from the incremental property and/or sales tax revenue growth in a designated area.

The following steps are required to form a TRZ:

1. Identify project/needs.
2. Research for zone formation.
3. Define boundaries.
4. Hold a public hearing.
5. Pass an ordinance or order.
6. Establish base year for tax collection.
7. Determine tax increment through feasibility study.
8. Establish funding mechanism.

TRZs do not increase taxes, but they capture additional tax revenue from increased property values, new development, and/or increased sales. When TRZs were initially created, they were only permitted for counties and municipalities receiving pass-through funding from TxDOT for transportation projects, but this is no longer the case. Several updates to Texas's TRZ law have occurred since its initial 2007 creation. In most cases, the legislature expanded use of the tool. The following are the most notable legislative updates to TRZs: ³⁹⁶

• TRZs are decoupled from pass-through funding.
• Sales tax increment is permitted for TRZs.
• TRZs are permitted in adjacent jurisdictions to a project, rather than solely in the project jurisdiction.
• TRZ administration by multiple jurisdictions is permitted.
• Port, airport, rail, parking, and other TRZs are enabled.

Driving Factors behind TRZ Legislation

In 2003, the Texas Legislature approved House bill 3588, which established a pass-through financing system in the transportation code. This system allowed public or private entities to construct State highways and receive payment from TxDOT following project completion based on the anticipated volume of traffic on a road. The State found that its pass-through program was extremely popular, as it helped many localities get projects off the ground faster. However, the program did not have the resources to sustain itself, as the high demand from localities exceeded the funds available. Therefore, TRZs were considered as a way to shore up the pass-through program with a dedicated local revenue source. House bill 3588 was championed most heavily by then-State Senator Eliot Shapleigh from El Paso, which was the first jurisdiction in Texas to establish a TRZ.

Texas had other forms of value capture, including tax increment financing (TIF) districts, prior to establishing TRZs. However, under Texas law, traditional TIF could be time-consuming and expensive to create and manage. All taxing jurisdictions in a city or county, including school districts, junior colleges, hospital districts, and others are required to sign a participation agreement and have a seat on a TIF board, even if they do not financially participate. The plan of finance for a TIF district can also be time-consuming to manage. As Texas TIF laws require votes to form a majority of any TIF board to make any key decisions, a local municipality can easily lose control of a TIF district, posing risks to any project for which such a district is established. While the complexity of the decision-making structure of TIF districts provided many key stakeholders with a voice in these projects, it was cumbersome for local elected officials to administer. Because of this, TRZs were created in part to allow counties and cities to quickly and effortlessly create a tax increment district. TRZ legislation ensured that these arrangements would be relatively simple and quick to establish and manage. As such, TRZs serve a similar purpose as TIF districts, without their complications. ³⁹⁷

VII.3 Market Considerations

Under the terms of the 2014 advance funding agreement with TxDOT, Hays County paid for 100 percent of the project development, including construction plan development, right-of-way acquisition, utility relocation, and preliminary engineering and construction activities for FM 110, amounting to approximately $15.4 million. ³⁹⁸ The county funded these activities with voter-authorized general obligation bonds. In addition, TxDOT agreed to build the project and loan the county the money for 100 percent of the FM 110's $48 million construction cost through the Texas State Infrastructure Bank (SIB). Local officials recognized there would be significant economic development associated with FM 110 and were willing to commit part of their future tax base to repay TxDOT. Without the road, development in the area was likely to be constrained. The revenue from the Hays County TRZ was calculated on the incremental growth of the aggregate property values within the TRZ multiplied by local property tax rates, multiplied by 50 percent. Therefore, 50 percent of the new tax revenue was designated to FM 110, while the remaining revenue was to be allocated to existing city and county needs. ³⁹⁹

Hays County had enlisted a consulting firm to assess the viability of a TRZ. At the establishment of the TRZ in 2013, land values in the district were valued at $1.1 billion. The study analyzed potential boundaries, taxable ad valorem value, the duration of the TRZ (projected to not extend past 25 years), and different levels of tax increment from 25 to 100 percent. Underpinning this research was data on regional population growth, constraints to growth in the TRZ, employment growth, and real estate and housing market trends. The housing trends data included new construction, a mix of single- and multi-family housing and home prices data. The consultant also assessed the number of new developments that were already planned within the zone, as these would serve as a relatively low risk source of new property tax revenue - and thus TRZ revenue. Based on the study results, the city and county settled on TRZ boundaries and a 50 percent increment. After these parameters were set, the zone was estimated to be able to generate between $63.3 million and $74.9 million in net present value terms and, as such, could conservatively repay the $48.0 million SIB loan principal and interest in 22 years. ^{400 401}

VII.4 Funding Plan

During the negotiations with TxDOT, there was an issue regarding the county paying interest on the $48.0 million TRZ loan. While TxDOT wanted to treat the loan as a SIB loan, the county pushed back on the loan interest rates and TxDOT's requirement that the loan be classified as a liability on the county's balance sheet. The county wanted the TRZ financing to be an off-balance sheet financing, in other words, non-recourse to the county. ⁴⁰²

A compromise was developed with then-TxDOT Finance Director James Bass that allowed the county to classify the obligation as "off-balance" sheet financing, while also reducing the risk to TxDOT. The county, using the consultant firm's financial feasibility study, developed a 20- to 30-year payment schedule with the county paying TxDOT 100 percent of collected TRZ revenues every year, regardless of the scheduled repayment. This way, if development in the TRZ was significant and the tax increment collected was larger than projected, the full amount of the 50-percent TRZ monies would flow to TxDOT. Monies that were in excess of the expected annual amounts to pay debt service were used as "prepayment," thereby allowing TxDOT to be repaid sooner than expected. Thus far, collected TRZ revenues significantly exceed the forecast. The long-term payback through the TRZ and variable annual payments were more favorable to the county than any alternative sources of financing. ⁴⁰³

VII.5 Coordination and Partnership

The Hays County TRZ has experienced some complications. In 2015, after the Hays County TRZ was established and financing documents were executed, the Texas attorney general struck down county TRZs, stating they violated the "Equal and Uniform Taxation" clause in the Texas State Constitution. The clause requires that property owners within a particular county must all contribute the same share of their taxes to a county's general fund. ⁴⁰⁴ A TRZ would violate this clause, because while property owners within a TRZ were paying the same tax rate as other property owners within a county, fewer of their payments would go into the general fund because a share of their property taxes would flow to a separate project. ⁴⁰⁵ After this ruling, several Texas counties shelved their plans for TRZs or eliminated TRZs that they had already established. Similarly, the Hays County/ San Marcos arrangement was at risk.

Based on the Texas attorney general's opinion, the county and TxDOT had to devise an alternative way to repay TxDOT. The county and its advisors developed another approach, which consisted of dissolving the TRZ but continuing to set aside a 50-percent increment from the properties in the area. Those funds would all go into the county general fund, like all collected property taxes, and the county would then write a check to TxDOT to pay down project costs, as they have done under other advance funding agreements. Under this arrangement, the same payment schedule and term of the original advance funding agreement would remain. This device, which was approved by TxDOT, has allowed the payments to continue in the near term. In the long term, Hays County and other Texas counties are seeking an amendment to the constitution's Equal and Uniform Taxation clause to allow for implementation of county TRZs without such workarounds. ⁴⁰⁶

The county's repayment to TxDOT has had some impact on its economic development policies. As the FM 110 project opens the eastern part of the county to new development, many new residences and mixed-use retail/warehouse developments have opened, including a new Amazon fulfillment center, and thousands of new properties are expected to follow. Once the county and city each committed 50 percent of the property taxes from the zone, there was little room left for future tax abatements with new developments. There continue to be many companies proposing to locate in the new corridor, and many are requesting tax abatements as high as 80 percent, which is not possible with 50 percent of property taxes from the area already committed, especially since the remaining 50 percent of property taxes are needed to fund county and city services there. So far, that has not dissuaded businesses from locating in the area. ⁴⁰⁷

VII.6 Takeaways

• Existing value capture tools may be outmoded and may require modifications to succeed. Although Texas already had TIF legislation, very few municipalities thought it worthwhile to go through the cumbersome process to set up a TIF district. As a result, many projects languished for years with no clear source of funding. Rather than accept this status quo, Texas legislators pushed for the implementation of a similar tool with fewer strings attached and because of this simple reset, more municipalities were able to utilize the tool and work on critical transportation projects.
• Even popular initiatives may require constitutional amendments to survive judicial challenges. TRZs were approved overwhelmingly by a bipartisan group of legislators in both Texas legislative bodies. They were immensely popular among local politicians and rarely faced significant citizen opposition. Despite this, they were challenged in court and partially struck down.

VIII. Silver Line/Dulles Metrorail - Special Tax District

The Silver Line/Dulles Metrorail project highlights the use of a special tax district to pay for a significant portion of a major transit project. The project also involved significant support and cooperation from the local business community. ⁴⁰⁸

VIII.1 Project Overview

The Dulles Metrorail Corridor Project, also known as the Silver Line, is a 23-mile extension of the Washington, DC, region's Metro system. The project is being designed and built in two phases by the Metropolitan Washington Airports Authority (MWAA). Phase 1 consists of 11.7 miles of rail and five stations, connecting some of the DC region's largest employment centers to downtown Washington, DC. Phase 2 will add 11.4 miles of rail and six stations, including a station at Dulles International Airport. Now operational since July 2014, Phase 1 has been transferred to the Washington Metropolitan Area Transit Authority. That phase is now known as the Silver Line, a designation that will also apply to Phase 2. Figure 28 shows a map of the project.

In total, the project will increase the size of the Metro system by over 20 percent. Value capture sources have funded approximately one-fifth of the project. Overall, the two phases of the project, totaling $5.7 billion, are being funded with a combination of tolls, commercial tax districts, and Federal and State grants, as shown in Table 20.

Table 20. Dulles Metrorail Funding and Financing ($ million) ⁴¹⁰

Source of Capital	Phase 1	Phase 2	Total Budget	Project Budget (%)	TIFIA1 Loan
Federal Grant	$900	N/A	$900*	15.8%	N/A
Commonwealth of Virginia	$252	$323	$575*	10.1%	N/A
Fairfax County	$400	$515	$915	16.1%**	$403
Loudoun County	N/A	$273	$273	4.8%**	$195
MWAA (Aviation Funds)	N/A	$233	$233	4.1%**	N/A
MWAA (Dulles Toll Road)	$1,354	$1,434	$2,788	49.0%***	$1,277
Total Sources of Funds	$2,906	$2,778	$5,684	100.0%	$1,876 (33% of total)

1 Transportation Infrastructure Finance and Innovation Act
*Fixed amount, **Fixed percentage of total cost, ***Residual

Local funding responsibility was allocated as follows:

• Fairfax County: 16.1 percent
• Loudoun County: 4.8 percent
• MWAA: 4.1 percent

This case focuses on the contribution from Fairfax County, particularly the first of its two transportation improvement districts (TIDs), the Phase 1 TID, which provided most of the project's value capture funding. The Phase 1 TID set the precedent for the Phase 2 TID and the Loudoun tax district.

Fairfax County's 16.1 percent share of the project is estimated to be approximately $915 million (the amount will be known once Phase 2 is complete in 2019). Fairfax County is expected to contribute the following:

• For Phase 1: $400 million from the Phase I tax district.
• For Phase 2: $515 million.
  • $330 million from the Phase II tax district.
  • $185 million will consist of proceeds from a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan that will be repaid using the county's commercial and industrial real estate tax and regional funds from the Northern Virginia Transportation Authority. ¹¹

VIII.2 Regulatory Considerations

Dulles Metrorail stakeholders initiated a variety of planning changes following the Phase 1 TID formation. In general, these changes were made to allow denser, urban-like developments around the Dulles Metrorail stations within the Phase 1 and Phase 2 TIDs. Many of these changes were expected to benefit some of the landowners since, with greater density, their property would become more valuable.

In 2010, Fairfax County adopted the Comprehensive Plan for Tysons Corner. Concurrently, Fairfax County adopted a zoning ordinance amendment that established a new district called the Planned Tysons Corner Urban District. These included several transportation initiatives, including redesign of the street grid to make it more urban, reengineering of major intersections, and implementation of a bike share program. ⁴¹²

Fairfax County also made planning changes under a comprehensive plan amendment that affected the three Metrorail stations that were part of the Phase 2 TID. It adopted a new plan for street grids and bike lanes and new overpass planning. ⁴¹³

Furthermore, in 2011 Fairfax County, in collaboration with developers, created a new non-profit called Tysons Partnership that sought to move forward a comprehensive approach to redevelopment that included marketing and branding, transportation, urban design/planning, public facilities and community amenities, and finance. ⁴¹⁴

Securing the funding for the Dulles Rail Corridor was a pre-requisite for enacting the Comprehensive Plan for Tysons. Since the adoption of this plan, 15 major redevelopment proposals have been approved or are pending approval within Tysons. These projects are primarily located within a quarter of a mile of a Metrorail station and represent 61 million square feet of development. ⁴¹⁵

The additional $0.19 Phase 1 TID tax has increased the base tax rate for property owners in the area by 22 percent, not including other tax costs, such as for stormwater, leaf collection, and water, that are assessed in certain parts of Fairfax County. In theory, this could have been a competitive disadvantage, but developer representatives believe that competing locations throughout the Washington, DC, region have similar all-in tax burdens. Furthermore, the tremendous development at Tysons and in other parts of the Dulles Metrorail Corridor in the last 5 years suggests that the tax rates have not been an obstacle. ⁴¹⁶ Table 21 gives an overview of this timeline.

Table 21. Dulles Metrorail Value Capture Timeline ^{417 418 419 420}

Year	Project Stage
1964	The Federal Aviation Administration recommends reservation of median of Dulles International Airport Access Highway for future transit line.
1985	Dulles Access Rapid Transit sponsors study for transit line to Dulles International Airport, raising funds through assessments.
1988	Virginia General Assembly permits creation of special taxing districts for transportation for landowners along Route 28.
2002	The Federal Transit Administration announces that, due to funding limitations, project cannot be funded as a single project.
2003	City of Herndon turns down participation in special tax district out of concern as to whether its businesses would support a project that benefits Tysons area competitors while Phase 2 project would be delayed.
2003	Landowners submit Phase 1 TID petition.
2004	Fairfax County establishes Phase 1 TID.
2009	Fairfax County establishes Phase 2 TID.
2010	Fairfax County adopts Tysons Plan.
2010	MWAA issues $343 million of Dulles Toll Road bonds.
2011	Fairfax County issues $206 million Phase 1 TID bonds.
2012	Fairfax County issues $42 million Phase 1 TID bonds.
2013	Loudoun County creates Metro Service Districts.
2014	Washington Metropolitan Area Transit Authority opens Phase 1 Line for passenger service.
2014	Fairfax County and Loudoun County close TIFIA loans, in part supported by Fairfax County Phase 2 TID and Loudoun County Metro Service Districts.
2019	Phase 2 completion (expected).

Legal Approach: Phase 1 TID

Fairfax County had an obligation to fund 16.1 percent of the $5.7 billion project, or $400 million for Phase 1 and $515 million for Phase 2. ⁴²¹ The county established a special tax district on commercial and industrial properties in 2004 to fund its portion of the Phase 1 TID. The Phase 1 TID consisted of most of the Tysons Corner Urban Center and an area around the Phase 1 stations, as shown in Figure 29.

TIDs were authorized by the Commonwealth of Virginia. Commercial and industrial property within a TID can be taxed to raise funds for transportation improvements within its boundaries. A TID can be created upon the petition of the owners of at least 51 percent of the real property located within the proposed district that is zoned or used for commercial or industrial purposes, as measured by land area or assessed value. In a TID, most multifamily rental properties are also considered to be for "commercial purposes," and thus count toward land area and assessed value and are taxed. However, no other residential properties are taxed. The properties that signed the petition for the Phase 1 TID constituted more than 64 percent of such property as measured by assessed value. ⁴²²

The Phase 1 TID allows a tax level of up to $0.40 per $100 of assessed fair market value, but the Fairfax Board of Supervisors cannot adopt a plan of finance that would require a tax greater than $0.29 per $100 of assessed fair market value. ⁴²³ The most recent tax rate is $0.19 per $100 of assessed value. ⁴²⁴

The Phase 1 TID financing does not rely on the credit of either Fairfax County or the Commonwealth of Virginia and is therefore truly "non-recourse," ⁴²⁵ unlike the Route 28 financing nearby as discussed in the Virginia Route 28 case study (see Appendix Section X).

VIII.3 Market Considerations

The Dulles Corridor is a key portion of the Washington, DC, region and contributes heavily to its economic activity. The Dulles Corridor includes Tysons Corner, with approximately 37 million square feet of office, commercial, and retail space and five Fortune 5000 company headquarters, and the Reston-Herndon area, a fast-growing commercial district, among other key properties on the way to Dulles Airport. ⁴²⁶

The DC region has benefited from the growth of the Federal Government and ancillary businesses, including aerospace, information technology, and telecommunications. As Figure 30 shows, the assessed value of the taxable commercial and industrial properties in the Phase 1 TID essentially doubled from 2001 to 2010 from $5.0 billion to $12.4 billion and grew at a compounded annual growth rate of 4.6 percent between 1985 and 2016, despite enduring several major real estate market downturns. This also included the impact of Federal Government budget cuts that reduced jobs at some major government contractors in defense and other sectors, some of which are located on the Dulles Corridor. ⁴²⁷

Furthermore, projections show that over the next 25 years, the population in the Dulles Corridor's Tysons Corner area is expected to grow by 45 percent, and the number of jobs in the area is projected to grow by 63 percent. ⁴²⁸

VIII.4 Funding Plan

As shown in Figure 30 , the taxable property value in the Phase 1 TID has grown steadily from 2011 onwards, reflecting strong asset valuations in spite of a slight decrease in the tax rate from $0.22 in 2012 to $0.19 in 2016. ⁴²⁹

Due to the Phase 1 TID's robust revenues, its bonds were rated AA, Aa1, and AA by Fitch, Moody's, and Standard & Poor's, respectively. ⁴³⁰

VIII.5 Coordination and Partnership

The planning and organization that went into the Dulles Metrorail is complex, goes back decades, and is linked to the creation of the Dulles International Airport. The Dulles Metrorail, or a form of it, was always considered as part of the airport, but could not be realized for several decades due to a lack of funding. ⁴³¹

One of the major initiatives to push the Dulles Metrorail forward was spurred by a group of developers in the Dulles Corridor who agreed to fund a portion of the local share of the project through special district tax financing. The group was called Landowners Economic Alliance for the Dulles Extension of Rail (LEADER) and consisted of early Tysons Corner landowners. This group began to evaluate the possibility of a rail connection to Tysons as early as the 1980s, putting money into planning studies. The work went through several economic slowdowns in the early 1980s and 1990s. ^{432 433}

LEADER's work heated up in the late 1990s and into the early 2000s as it sought to recruit 50 percent of the landowners by assessed value in the Dulles Corridor to approve the Phase 1 TID. Convincing major landowners and lease holders to support the effort, including the large corporations in the corridor, was relatively straightforward, since they understood the benefits of providing employees and visitors with alternative transportation options in an increasingly congested corridor. Convincing smaller landowners was more difficult, since many of them owned or leased to small retail operations, including gas stations, strip malls, and auto dealers. These smaller landowners did not necessarily value the benefits of the Phase 1 TID or simply were not interested in participating in the process. Furthermore, some developers had long-term leases with major corporations that meant they were opposed to paying the higher Phase 1 taxes that would be passed through to them in the lease. ⁴³⁴

LEADER hired two well-known Virginia politicians to work with the group to convince the remaining landowners to support the TID. This effort was ultimately successful. ⁴³⁵

The project was very complex because, as Table 22 shows, it involved two major transportation agencies, two county governments, the Commonwealth of Virginia, and the Federal Government. These governmental bodies played various roles, including providing funding and financing and participation in key negotiations.

Table 22. Major Project Participants ^{436 437 438 439}

Stakeholder	Description of Role
Washington Metropolitan Area Transit Authority (WMATA)	Transit agency that took over Phase 1 of the project and operates the Silver Line. WMATA is expected to do the same for Phase 2 once it becomes operational.
Metropolitan Washington Airports Authority (MWAA)	Airports authority that is overseeing the construction of the project.
Fairfax County, Loudoun County	Municipalities that have the primary public responsibility for value capture funding and financing through special districts.
Commonwealth of Virginia	State entity that provides project grants and has enacted legislation allowing for special districts.
LEADER	One of the major private developer groups that advocated for the project and helped organize the Phase 1 TID.
U.S. Department of Transportation (USDOT)	The USDOT's Federal Transit Administration gave a New Starts grant to and provided a loan to Phase 2 of the project. USDOT also played a role in bringing parties together to overcome Phase 2 challenges.

VIII.6 Takeaways

The Dulles Metrorail, combining Phases 1 and 2, is one of the largest single U.S. transit rail projects and value capture efforts undertaken in the last two decades. As with all projects, there are several unique elements, but a number of this project's characteristics are also typical of large projects and broader value capture efforts. These include the following:

• Growing Market. The project was located in a growing corridor in a growing region. As Figure 30 shows, the Phase 1 TID's assessed value grew healthily over the last two decades. This relative prosperity motivated private landowners to push for the project and gave local and State policymakers and capital market investors confidence in the project.
• Committed Public and Private Participants. Numerous public and private participants were committed to the project for years, overcoming a variety of challenges including questions about alignment, planning delays, debates about costs of project elements (such as tunnels), interregional differences, and Federal funding limitations. This advocacy continued through economic downturns, which in retrospect appear to be small "blips" as shown in Figure 30, but at the time, this market weakness severely challenged a number of businesses that were advocating for the project.
• Meaningful Planning. The Tysons Corner Plan and similar planning throughout the corridor reflected the transportation goals of the Dulles Metrorail - fostering a denser, more pedestrian-oriented area. It also allowed developers to leverage their landholdings further, justifying their early investment in advocating for the project and setting up the TIDs.
• Managing Value Capture Burden. It will take a decade or more to truly assess the costs and benefits of the TIDs and their impact on land values. Based on the available anecdotal evidence, the increased assessments in Fairfax and Loudoun counties do not appear excessive and are reportedly not creating a competitive disadvantage for developers. Nevertheless, obtaining agreement on special assessments among smaller landholders was a challenge, given their relative indifference toward the project.
• Phasing Flexibility. The project and value capture effort were both broken down to make these efforts feasible. As such, both the project and the Fairfax County TIDs were split into two phases.

IX. U.S. Highway 63 in Missouri - Sales Tax District

The U.S. Highway 63 project highlights the role of transportation corporations, an organizational structure used to improve the efficiency of delivery for some road projects.

IX.1 Project Overview

For decades, residents of Kirksville in north central Missouri wanted to expand a 22-mile stretch of U.S. Highway 63 between Macon and Kirksville from two to four lanes. In 1992, the Highway 63 project as well as several others across the State were included in a Statewide Improvement Plan. However, in 1998, the Missouri Department of Transportation (MoDOT) deferred many of these planned projects, including Highway 63, until 2020 or later due to funding constraints. ^{440 441}

Kirksville citizens sought to move the project forward. The Kirksville Area Chamber of Commerce met with leaders from MoDOT and the Missouri Highway and Transportation Commission, forming a Highway 63 Taskforce. The Missouri Highway and Transportation Commission was willing to pursue the project if local sources of funding could be found. In 1999, with the cooperation of MoDOT, the Missouri Highway and Transportation Commission, the citizens of Adair and Macon Counties, and other interested parties, the Highway 63 Transportation Corporation was created as a vehicle to help mobilize funding for and speed implementation of the project. ⁴⁴²

Once established, the transportation corporation issued a request for proposals, to which more than 10 engineering and construction firms responded. The winning bid was developed by Koch Performance Roads, Inc. In November of 2001, the transportation corporation presented the proposal along with a pledge that it would seek a one-half percent increase in sales tax to provide up to 30 percent of the project's total cost to the Missouri Highway and Transportation Commission, which subsequently endorsed the plan. ⁴⁴³ In April 2002, the Kirksville City Council held a referendum on whether to increase the sales tax by one-half percent for 10 years to help fund the highway expansion. The ballot initiative was overwhelmingly successful, receiving 78.9 percent of the vote. ⁴⁴⁴

On May 3, 2003, more than 600 residents brought shovels to the groundbreaking site, kicking off the construction of their new highway. ⁴⁴⁵ The ribbon-cutting ceremony took place at four locations along the highway - Macon, Atlanta, La Plata and Kirksville - and the new lanes opened to the public in October 2005, signaling on-time completion. ⁴⁴⁶

IX.2 Regulatory Considerations

The Legal Framework

The legal framework for the creation of a transportation corporation was in place well before the start of this project. The 1990 Missouri Transportation Corporation Act allowed localities to form non-profit quasi-governmental agencies called "transportation corporations" to develop and oversee transportation projects. After the Highway 63 Taskforce recommended that the rights granted in the legislation be exercised, the Highway 63 Transportation Corporation was established in April 2000. The corporation's members included jurisdictions that would benefit from the project, including the Kirksville Area Chamber of Commerce; the city of Kirksville; Adair, Macon, and Schuyler counties; and the cities of Macon, Atlanta, and La Plata. ⁴⁴⁷ The Highway 63 Transportation Corporation would continue to operate until all funds from the sales tax had been collected, expended, and accounted for; all debts paid; and its business finalized. ⁴⁴⁸

IX.3 Market Considerations

The key market consideration was the impact of market conditions on expected sales tax revenues. Since the sales tax revenues were used to back debt for the project, a financial feasibility study conducted early in the project development process forecasted the adequacy of sales tax revenues. ⁴⁴⁹ If sales taxes were not sufficient, the corporation had access to some State grants. So far, sales tax receipts reached their targets in every year of the project.

IX.4 Funding Plan

Project costs were $37.4 million. Roughly 30 percent of the project cost was covered by sales tax revenues of approximately $11.5 million, which were used to meet debt obligations. The remaining funding was provided by the Missouri Highway and Transportation Commission. The sales tax revenues were collected by the city of Kirksville and paid through the Highway 63 Transportation Corporation, giving taxpayers confidence that the funds were only dedicated to the project. Sales tax revenues began coming in before construction. The duration of the sales tax was 10 years, ending in 2013. ⁴⁵⁰

IX.5 Coordination and Partnership

Successful local partnerships were critical in allowing this project to be implemented effectively. Following is a list of the project partners:

• Kirksville residents and city of Kirksville
• Highway 63 Transportation Corporation
• Missouri Highway and Transportation Commission
• MoDOT
• Koch Performance Roads, Inc. (design-build-maintain agreement for 15 years)

Kirksville Residents

One of the key elements that helped make this project successful was the willingness of Kirksville residents to move it forward. Voters approved the half-cent sales tax increase by an overwhelming 78.9 percent majority, highlighting the strength of local support for this project.

Highway 63 Transportation Corporation

The formation of the Highway 63 Transportation Corporation was one of the elements that allowed this project to ultimately come to fruition. Members of the general public formed a non-profit corporation that served as a quasi-governmental agency, partnering with and sharing roles with MoDOT and contracting services with a private firm. The Highway 63 Transportation Corporation was unusual in that it assembled resources, sped up project management, and allowed each partner to focus on its area of responsibility. ⁴⁵¹ The transportation corporation was not a funding tool per se but a technique to accelerate the project timetable by overseeing and promoting the project and helping secure project funding.

IX.6 Takeaways

• Local support and willingness to pay can drive challenging projects forward. This case illustrates the importance of local support to move a sales-tax funded project forward. Residents continued to fight for the project even when the State DOT had deferred it; voters approved the sales tax district with an overwhelming majority.
• Alternative governance structures can force efficiency. The case also illustrates how the creation of a quasi-governmental entity, the transportation corporation, can bring project resources together, help to establish a sales tax district, and help maintain the momentum for successful implementation.

X. Virginia Route 28 - Special Tax District

The Virginia Route 28 project illustrates how special tax districts can be used together with bond financing to fund highway construction.

X.1 Project Overview

The Virginia Route 28 special tax district financing improvements are the earliest - and to date only - example of value capture for Virginia roads. The special assessments were used to finance corridor improvements almost 30 years ago in two major phases. ⁴⁵²

State Route 28 is a primary State highway that traverses the counties of Loudoun, Fairfax, Prince William, and Fauquier in Virginia. It is a major artery through Northern Virginia. Figure 31 shows the location of the corridor in the DC Metro area.

The Dulles Corridor is the area along the 14-mile-long Dulles Toll Road between Washington Dulles International Airport and the Washington, DC, region's Capital Beltway (I-495). It is one of the fasting-growing commercial districts in the United States. It is home to dozens of national and regional offices of defense contractors, information technology companies, consulting firms, media conglomerates, accounting firms, communications companies, and other technology-related industries. Like much of Northern Virginia, the Dulles Corridor suffers from severe traffic congestion.

In the late 1980s, Route 28 was a two-lane country road that intersected the Dulles Corridor just east of Dulles International Airport. As a result of the region's growth, Route 28 had to be upgraded in order to handle the resulting traffic volumes. In 1985, VDOT hired an architecture and engineering consulting firm to prepare the design plans for widening Route 28. However, Virginia DOT (VDOT) lacked the resources to construct the project. ⁴⁵³

In 1987, Virginia authorized the creation of special tax districts to finance transportation improvements. The following year, Fairfax and Loudoun counties formed the first transportation improvement district (TID) in the Commonwealth, following a petition of the landowners representing 51 percent of the land zoned or used for commercial or industrial purposes in the proposed district, as is required by statute.

As part of the agreement forming the district, costs for the Route 28 expansion were to be split 75/25 between the TID and VDOT. Furthermore, a 20-cent surcharge per each $100 in commercial and industrial property value within the district was applied. The surcharge financed bonds to pay for improvements to Route 28. From 1989 to 1991, 14 miles of Route 28 were widened from two lanes to six, and interchanges were built at Route 50, Route 7, and the Dulles Toll Road. Initially, the debt service was supported by State construction allocations for the Northern Virginia District in the Six-Year Improvement Plan. ⁴⁵⁴

X.2 Regulatory Considerations

The primary regulatory issue was that implementing the value capture solution required action by the Virginia General Assembly.

The original authorization was passed by the legislature in 1988, and the same statutory authority was used in 2012 to authorize funding for an expansion project, based on the same revenue base. ⁴⁵⁵

X.3 Market Considerations

The success of the project depended heavily on whether real estate market values would materialize to the extent required to support the new financing.

Initially, the tax district had some issues when the property market weakened in 1988 and 1989 and tax district revenue was insufficient to pay debt service. The rebound of real estate values in 1992 allowed for the refinancing of debt to take advantage of lower interest rates. Annual revenues have exceeded annual debt service since 2001, allowing the tax district to move forward with additional design and construction. ⁴⁵⁶

X.4 Funding Plan

The capital costs were as follows:

• Phase 1 - $138.5 million
• Phase 2 - $349 million

The uses were as follows: ⁴⁵⁷

• Phase 1 - $138.5 million Route 28 TID (1988), funded with:
  • Commonwealth Transportation Board (CTB) bonds ($138.5 million)
• Phase 2 Part 1 - $201.7 million Route 28 TID (2003-2004), funded with:
  • CTB bonds - $75.4 million
  • Phase 1 balance - $36.3 million
  • Fairfax County Economic Development Authority - $90 million
• Phase 2 Part 2 - $119.2 million (2007-2009), funded with:
  • Improvement District Revenues - $93.0 million
  • CTB bonds - $23.96 million
  • State Transportation Opportunity Fund grant - $5 million
• Phase 2 Widening - $17 million

The tax district revenues supported the sale of tax-exempt bonds that were backed by the moral obligation of both Fairfax and Loudoun counties.

X.5 Coordination and Partnership

The authorizing legislation for the special assessment district was structured in such a way that it could not go into effect without a petition from 51 percent of the land area owners. As such, the project required extensive coordination and partnership between VDOT and the landowners along the corridor.

X.6 Takeaways

• Value capture techniques should align interests without giving outsized power to any one individual. The legislation authorizing the use of the special assessment district can only be activated with the consent of 51 percent of landowners, requiring alignment of interest between public and private parties. ⁴⁵⁸
• Need for backstop. Due to a real estate downturn, real estate-related revenues were not adequate to pay for debt service during the early years of the project. Instead, it had to rely on the backstop and funding support from public agencies, underscoring the need for support from other highly creditworthy sources for some projects.

Glossary

Ad valorem - An ad valorem tax is "a tax that is calculated according to value of property, based on an assigned valuation of a piece of real estate or personal property." Source: Legal Information Institute, https://www.law.cornell.edu/wex/ad_valorem_tax

Blight - An area that is distressed based on economic and other indicators. The exact definition varies by State.

Brownfield - A brownfield project refers to an investment (an upgrade, modification, etc.) on existing infrastructure facilities.

Greenfield - A greenfield project refers to a new infrastructure investment. Typically, a greenfield investment is made on unused land, with no constraints from prior buildings or facilities.

Ring fence - Protect specific funds from being used for purposes other than for what they were intended.

Pay-as-you-go - Using available revenues to pay for a project.

Rational nexus - The "rational nexus" test requires that the local government demonstrate a reasonable connection between the need for the additional infrastructure investment, the cost of that additional infrastructure, and the benefit that accrues as a result of the additional infrastructure. The "rough proportionality" test requires demonstrating that the exaction or fee charged is proportional to the impact of the proposed development.

Footnotes

296 Owens, "The Atlanta BeltLine."

297 Atlanta BeltLine Redevelopment Plan, report prepared for the Atlanta Development Authority, November 2005, beltlineorg.wpengine.netdna-cdn.com/wp-content/uploads/2012/05/Atlanta-BeltLine-Redevelopment-Plan.pdf.

298 Atlanta BeltLine, Inc., Atlanta BeltLine 2030 Strategic Implementation Plan: Final Report, December 2013, issuu.com/atlantabeltline/docs/beltline_implementation_plan_web.

299 Nedra Rhone, "Can the Atlanta Beltline Improve Its Image?" The Atlanta Journal-Constitution, April 30, 2018.

300 "Affordable Housing," Atlanta BeltLine, Inc., 2019, beltline.org/category/programs/affordable-housing-programs/.

301 "Project History," Atlanta BeltLine, Inc., 2018, beltline.org/progress/progress/project-history/.

302 Atlanta BeltLine, Inc., Atlanta BeltLine 2030 Strategic Implementation Plan: Final Report.

303 Atlanta BeltLine, Inc., Atlanta BeltLine 2030 Strategic Implementation Plan: Final Report.

304 Atlanta BeltLine, Inc., Atlanta BeltLine 2030 Strategic Implementation Plan: Final Report.

305 "How the Atlanta BeltLine is Funded," Atlanta BeltLine, Inc.,2018, beltline.org/about/the-atlanta-beltline-project/funding/.

306 Woodham v. City of Atlanta, 657 S.E.2d (Ga. 2008).

307 Alyson M. Harter, "Update on Tax Allocation Districts (TADs) and the BeltLine Project," Williams Mullen, October 1, 2008, www.williamsmullen.com/news/update-tax-allocation-districts-tads-and-beltline-project.

308 Dan McRae, "Quick Takes: TADs - What to Do After the BeltLine Case," Seyforth Shaw Attorneys LLP, February 21, 2008, www.danmcrae.com/quicktakes/qt_08-feb21.pdf.

309 Molly Bloom, "After Years of Conflict, Mayor Kasim Reed and APS Reach Beltline Deal," The Atlanta Journal-Constitution, January 29, 2016, www.ajc.com/news/local-govt--politics/after-years-conflict-mayor-kasim-reed-and-aps-reach-beltline-deal/Wm6CxnlSwUmsVu78pcNsaK/.

310 "Rails to Trails," Surface Transportation Board, Public Information Resources, https://www.stb.gov/stb/public/resources_railstrails.html.

311 City of Atlanta, Georgia, The BeltLine, www.atlantaga.gov/Home/ShowDocument?id=1628.

312 "We're Developing a New Future for Atlanta!" Atlanta BeltLine, Inc., 2018, https://beltline.org/about/resources/for-developers/.

313 Atlanta BeltLine, Inc., Atlanta BeltLine 2030 Strategic Implementation Plan: Final Report.

314 Atlanta BeltLine, Inc., Atlanta BeltLine 2030 Strategic Implementation Plan: Final Report.

315 Atlanta BeltLine, Inc., "How the Atlanta BeltLine is Funded."

316 "City, APS Finally Settle 3-Year Feud Over Beltline TAD Payments," Buckhead View, January 31, 2016.

317 Bozeman Transportation Master Plan, prepared by Robert Peccia & Associates and Alta Planning + Design for the city of Bozeman, Montana, April 25, 2017, mdt.mt.gov/publications/docs/brochures/bozeman_tranplan_study.pdf.

318 "Google Public Data," Google, September 18, 2018, www.google.com/publicdata/directory.

319 Gain Shontzler, "Attorney General Declines Request for Impact Fee Opinion," Bozeman Daily Chronicle, December 9, 1996, www.bozemandailychronicle.com/attorney-general-declines-request-for-impact-fee-opinion/article_3b0c3487-7fed-5858-87a4-4e7347888a2d.html.

320 Walt Williams, "County May Study Impact Fees," Bozeman Daily Chronicle, December 7, 2005, www.bozemandailychronicle.com/news/county-may-study-impact-fees/article_245282f4-1655-5e76-837c-91b5ca96d37b.html.

321 City of Bozeman Transportation Impact Fee Update Study, prepared by Tindale Oliver Consulting for the city of Bozeman, Montana, 2018, www.bozeman.net/Home/ShowDocument?id=6942.

322 Amanda Ricker, "City to Consider Tripling Fire Impact Fees," Bozeman Daily Chronicle, June 21, 2008, www.bozemandailychronicle.com/news/city-to-consider-triplingfire-impact-fees/article_91600ade-6499-512a-9e81-83c9ba0952a7.html.

323 Amanda Ricker, "City Vote Upholds Impact Fee Increase," Bozeman Daily Chronicle, January 14, 2008, www.bozemandailychronicle.com/news/city-vote-upholds-impact-fee-increase/article_25870262-9a2f-5191-991e-595289f74707.html.

324 Amanda Ricker, "Bozeman to Consider Cutting Street Impact Fees Monday," Bozeman Daily Chronicle, October 23, 2011, www.bozemandailychronicle.com/news/city/bozeman-to-consider-cutting-street-impact-feesmonday/article_38845172-fd3b-11e0-b4d8-001cc4c03286.html.

325 Amanda Ricker, "Bozeman Votes to Charge Full Amount for Street Impact Fees." Bozeman Daily Chronicle, February 5, 2013, www.bozemandailychronicle.com/news/city/bozeman-votes-to-charge-full-amount-for-street-impactfees/article_f002ba3c-6fae-11e2-9c48-001a4bcf887a.html.

326 City of Bozeman, Montana, City Manager's Recommended Budget for Fiscal Year 2016, May 11, 2015, https://www.bozeman.net/home/showdocument?id=3731.

327 "Arterial and Collector Street Special Assessment," Bozeman, Montana, www.bozeman.net/government/finance/special-assessments/arterial-and-collector-street-special-assessment.

328 Eric Dietrich, "Building Industry to Audit Bozeman Impact Fee Program," Bozeman Daily Chronicle, December 16, 2015, www.bozemandailychronicle.com/news/city/building-industry-to-audit-bozeman-impact-fee-program/article_d0cbb86c-3091-5e21-abdb-7f43109a727e.html.

329 Amanda Ricker, "Chamber, Developers Say Impact Fees Driving Businesses Away from Bozeman, But City Says It Would Have to Raise Taxes Without the Fees," Bozeman Daily Chronicle, July 31, 2011, www.bozemandailychronicle.com/news/chamber-developers-say-impact-fees-driving-businesses-away-from-bozeman/article_903b4002-bafa-11e0-9e91-001cc4c002e0.html.

330 Tindale Oliver Consulting, City of Bozeman Transportation Impact Fee Update Study.

331 Al Knauber, "Developers Fight Impact Fees," Bozeman Daily Chronicle, March 30, 1997, www.bozemandailychronicle.com/developers-fight-impact-fees/article_5a79d055-efd8-577a-97a0-743eda547da5.html.

332 Eric Dietrich, "SWMBIA Again Suing Bozeman Over City Impact Fees," Bozeman Daily Chronicle, June 15, 2017, www.bozemandailychronicle.com/news/city/swmbia-again-suing-bozeman-over-city-impactfees/article_d8bca7ae-d777-54d5-8ef9-13e97e462dc5.html.

333 Steven Kirchhoff, former Bozeman mayor, Interview, December 5, 2018.

334 Ricker, "Chamber, Developers Say Impact Fees Driving Businesses Away from Bozeman."

335 Ricker, "City Vote Upholds Impact Fee Increase."

336 Amanda Ricker, "Bozeman Builders Will Be Allowed to Defer Impact Fees," Bozeman Daily Chronicle, April 2, 2013, www.bozemandailychronicle.com/news/city/bozeman-builders-will-be-allowed-to-defer-impactfees/article_af8b45d6-9b47-11e2-9bcd-001a4bcf887a.html.

337 Kathy Showalter, "Merchants Set to Open in The Cap at Union Station, Amid Concerns Over Parking," Columbus Business First, August 30, 2004, www.bizjournals.com/columbus/stories/2004/08/30/story1.html.

338 Capitol Crossing (@CapitolCrossingDC), "Capitol Crossing Construction Animation," Video, 2:44, December 14, 2016, www.facebook.com/CapitolCrossingDC/videos/1681934075166129/.

339 Wally Mlyniec, "Make No Little Plans; Part III  -  Early Attempts to Develop the Air Rights," Medium, February 12, 2018, medium.com/construction-notes/make-no-little-plans-part-iii-early-attempts-to-develop-the-air-rights-a18bf2e51eaf.

340 Mlyniec, "Make No Little Plans."

341 Mlyniec, "Make No Little Plans."

342 Douglas A. Willinger, "Previous Center Leg Air Rights Proposals Respected the Freeway Right-of-Way," A Trip Within the Beltway (blog), December 13, 2014, wwwtripwithinthebeltway.blogspot.com/2014/12/previous-center-leg-air-rights.html.

343 Mlyniec, "Make No Little Plans."

344 Justin Rice, "D.C. Air Rights Project Restores City Traffic Grid," ENR MidAtlantic, December 19, 2016, www.enr.com/articles/41120-dc-air-rights-project-restores-city-traffic-grid.

345 Federal Highway Administration, District of Columbia Division, Notice of Availability and Public Hearing, "Environmental Assessment for the I-395 Air Rights Project," Federal Register, 76 FR 64991, October 19, 2011, www.federalregister.gov/documents/2011/10/19/2011-27033/environmental-assessment-for-the-i-395-air-rights-project.

346 Capitol Crossing, "Construction Animation."

347 Michelle Goldchain, "Capitol Crossing: What to Expect from One of DC's Largest Revitalization projects," Curbed Washington DC, April 6, 2016, dc.curbed.com/2016/4/6/11376906/capitol-crossing-washington-dc.

348 Michael Neibauer, "Capitol Crossing Returns ‘a Whole Section of the City That Was Lost to Us,'" Washington Business Journal, May 12, 2015, www.bizjournals.com/washington/breaking_ground/2015/05/capitol-crossing-returns-a-whole-section-of-the.html.

349 Goldchain, "Capitol Crossing: What to Expect."

350 Luz Lazo, "Study Needed to Decide on Request to Close Part of I-395 in DC, Federal Officials Say," The Washington Post, December 8, 2014, www.washingtonpost.com/local/trafficandcommuting/study-needed-to-decide-on-request-to-close-part-of-i-395-in-dc-State-officials-say/2014/12/08/30a633ae-7f00-11e4-8882-03cf08410beb_story.html?utm_term=.f3185403cb84.

351 Rice, "D.C. Air Rights Project."

352 O'Connell, "Capitol Crossing Is ‘Very Tough to Get,' but Will Be Worth It."

353 Michael Neibauer, "Capitol Crossing on the Verge of Going Vertical," Video, Washington Business Journal, January 13, 2016, www.bizjournals.com/washington/breaking_ground/2016/01/capitol-crossing-on-the-verge-of-going-vertical.html.

354 Goldchain, "Capitol Crossing: What to Expect."

355 Meyer, Eugene L. "A Project Mends a Gash in the Street Grid of Washington." New York Times, October 25, 2016, www.nytimes.com/2016/10/26/realeState/commercial/a-project-mends-a-gash-in-the-street-grid-of-washington.html.

356 Michelle Goldchain, "Capitol Crossing Developers Outrage Congress Over I-395," DC Curbed, December 9, 2014, dc.curbed.com/2014/12/9/10014032/capitol-crossing-developers-outrage-congress-over-i395-closing.

357 Interviews with District employees, November 29, 2018.

358 Thomas J. Noel, E-470: More Than a Highway, the Story of a Global Tolling Industry Pioneer, Denver: E-470 Public Highway Authority, 2018, www.e-470.com/Documents/AboutUs/E-470%20History%20Book.pdf.

359 Noel, More Than a Highway, p. 7.

360 Noel, More Than a Highway, p. 7.

361 Noel, More Than a Highway, p. 8.

362 Noel, More Than a Highway, p. 9.

363 Noel, More Than a Highway, p. 12-13.

364 Noel, More Than a Highway, p. 12-13.

365 Noel, More Than a Highway, p. 13.

366 "E-470 Board Votes to Eliminate Highway Expansion Fee," Toll Roads News, July 27, 2017, tollroadsnews.com/mailbag/e-470-board-votes-eliminate-highway-expansion-fee/.

367 "E-470 Fee Explanation," Commerce City, Colorado, November 29, 2018, www.c3gov.com/home/showdocument?id=1008.

368 "Project: E-470 Denver," AASHTO EconWorks Case Study, planningtools.transportation.org/290/view-case-study.html?case_id=40.

369 Erin Douglas, "E-470 Eliminates Development Fee Near Highway," Denver Post, July 31, 2017, www.denverpost.com/2017/07/31/e-470-eliminates-development-fee-near-highway/.

370 Noel, More Than a Highway, p. 4.

371 Noel, More Than a Highway, p. 4.

372 Noel, More Than a Highway, p. 15.

373 Jason Meyers, E-470 HEF to Total Revenue 1994-2017, Spreadsheet provided via email to Sasha Page, November 30, 2018.

374 E-470 Public Highway Authority, Year 2015 Cash Flow Summary, 2016, www.dacbond.com/dacContent/doc.jsp?id=0900bbc78013f2a4.

375 Noel, More Than a Highway, p. 18.

376 Noel, More Than a Highway, p. 36.

377 Noel, More Than a Highway, p. 36.

378 Fitch Ratings, "Fitch Affirms E-470 Public Highway Authority's (CO) Revs at ‘BBB'; Outlook Stable," June 15, 2016, www.sectorpublishingintelligence.co.uk/news/1427230/fitch+affirms+e470+public+highway+authoritys+co+revs+at+bbb+outlook+stable

379 Jason Meyers, FHWA Every Day Counts: E-470 Case Study, email to Sasha Page, November 30, 2018.

380 Noel, More Than a Highway, p. 48.

381 AASHTO EconWorks, "Project: E-470 Denver."

382 Jason Meyers, email.

383 Noel, More Than a Highway, p. 9.

384 Noel, More Than a Highway, p. 14-15.

385 Noel, More Than a Highway, p. 4.

386 Noel, More Than a Highway, p. 10.

387 Noel, More Than a Highway, p. 10.

388 Noel, More Than a Highway, p. 16.

389 Noel, More Than a Highway, p. 16.

390 "Project Profile: E-470 Tollway," U.S. Department of Transportation Federal Highway Administration, www.fhwa.dot.gov/ipd/project_profiles/co_e470.aspx.

391 Chris Eudaily, "San Marcos Rate of Population Growth Leads Nation - Why It's Booming," Texas Public Radio, May 30, 2013.

392 Bailey Buckingham, "Hays County Continues to Lead Growth, Named Fastest Growing County in Texas." The University Star, 4 April 2016.

393 Buckingham, "Hays County."

394 Debbie Ingalsbe, Memo: Hays County-TxDOT Partnership Proposal, December 10, 2012.

395 "Transportation Reinvestment Zones in Hays County and the City of San Marcos," TXP, Inc., September 2013.

396 Interim Report to the 85th Texas Legislature. Texas House Committee on Transportation. January 2017.

397 Mike Weaver, Interview, October 10, 2018.

398 Hubert Stewart, Executed Advance Funding Agreement, Memorandum, Hays County and Texas Department of Transportation Contract Services Office, July 9, 2014.

399 W. Ferguson, "Hays County, San Marcos Partner on FM 110," Community Impact Newspaper, August 13, 2013,

400 "Hays County and San Marcos Partner on TRZs to Benefit Roads, FM 110," TXP, Inc., October 2013, txp.com/news/hays-county-and-san-marcos-partner-on-trzs-to-benefit-roads-fm-110.

401 Mike Weaver, Notes, November 12, 2018.

402 Mike Weaver, Notes, November 12, 2018.

403 Mike Weaver, Notes, November 12, 2018.

404 Ken Paxton, Texas Attorney General, to Joseph C. Pickett, Chair, Committee on Transportation, Texas House of Representatives. Opinion No. KP-0004. February 26, 2015.

405 Interim Report to the 85th Texas Legislature. Texas House Committee on Transportation. January 2017.

406 Mike Weaver, Notes, November 12, 2018, and December 17, 2018.

407 Mike Weaver, Notes, November 12, 2018.

408 This case is based on material from Sasha Page et al., TCRP Report 190: Guide to Value Capture Financing for Public Transportation Projects, 88-96.

409 "What is Dulles Metrorail?" Dulles Corridor Metrorail Project, 2015, www.dullesmetro.com/about-dulles-rail/what-is-dulles-metrorail/

410 Dulles Corridor Metrorail Project, "What is Dulles Metrorail?"

411 Fairfax County, "Fund 40120: Dulles Rail Phase II Transportation Improvement District," FY 2017 Fairfax County Advertised Budget Plan, 2016, http://www.fairfaxcounty.gov/dmb/fy2017/advertised/volume2/40120.pdf.

412 Fairfax County Economic Development Authority, $173, 960,000 Fairfax County Economic Development Authority, Transportation District Improvement Revenue Refunding Bonds (Silver Line Phase I Project), Series 2016.

413 Fairfax County Economic Development Authority.

414 Fairfax County Economic Development Authority.

415 Fairfax County Economic Development Authority.

416 Interview with individual who worked with the developer group in Phase 1 TID, April 11, 2016.

417 Fairfax County, "Fund 40110: Dulles Rail Phase II Transportation Improvement District." FY 2017 Fairfax County Advertised Budget Plan, 2016, http://www.fairfaxcounty.gov/dmb/fy2017/advertised/volume2/40110.pdf.

418 Fairfax County, "Fund 40120: Dulles Rail Phase II Transportation Improvement District."

419 Fairfax County Economic Development Authority.

420 Dulles Corridor Metrorail Project, "What is Dulles Metrorail?"

421 Fairfax County, "Fund 40110: Dulles Rail Phase II Transportation Improvement District."

422 Fairfax County, "Fund 40110: Dulles Rail Phase II Transportation Improvement District."

423 Fairfax County Economic Development Authority.

424 Fairfax County Economic Development Authority.

425 Fairfax County Economic Development Authority.

426 Fitch Ratings, "Fitch Rates Fairfax County, VA Econ. Dev. Auth. Revs 'AA'; Outlook Stable," February 19, 2016, www.businesswire.com/news/home/20160219006017/en/Fitch-Rates-Fairfax-County-VA-Econ.-Dev.

427 Fairfax County Economic Development Authority.

428 Chrissy M. Nichols, "Value Capture Case Studies: Washington, DC Metro Expansion to Dulles Airport," Metropolitan Planning Council, April 12, 2012, www.metroplanning.org/news/6384/Value-Capture-Case-Studies-Washington-DC-Metro-expansion-to-Dulles-Airport.

429 Fairfax County Economic Development Authority.

430 Fairfax County Economic Development Authority.

431 Paul Dugan, "The Silver Line Story: A New Route is Born after Decades of Faulty Planning, Political Paralysis," The Washington Post, June 23, 2014, www.washingtonpost.com/local/trafficandcommuting/the-silver-line-story-a-new-route-is-born-after-decades-of-faulty-planning-political-paralysis/2014/06/23/bdf619c4-f894-11e3-a606-946fd632f9f1_story.html.

432 Interview with individual who worked with the developer group in Phase 1 TID.

433 Dugan, "The Silver Line Story."

434 Interview with individual who worked with the developer group in Phase 1 TID.

435 Interview with individual who worked with the developer group in Phase 1 TID.

436 Fairfax County, "Fund 40110: Dulles Rail Phase II Transportation Improvement District."

437 Fairfax County, "Fund 40120: Dulles Rail Phase II Transportation Improvement District."

438 Fairfax County Economic Development Authority.

439 Dulles Corridor Metrorail Project, "What is Dulles Metrorail?"

440 "The Highway 63 Transportation Corporation," Florida Council for Public-Private Partnerships (FCP3), 2004, https://www.fcp3.org/case-studies/transportation-infrastructure/the-highway-63-transportation-corporation/.

441 Vadali, Using the Economic Value Created by Transportation to Fund Transportation.

442 FCP3, "The Highway 63 Transportation Corporation."

443 FCP3, "The Highway 63 Transportation Corporation."

444 Kristine Williams, Alternative Funding Strategies for Improving Transportation Facilities: A Review of Public Private Partnerships and Regulatory Methods, prepared by the Center for Urban Transportation Research (CUTR) for the North Carolina Department of Transportation, December 2006, www.cutr.usf.edu/oldpubs/Fairshare%20Report.pdf.

445 FCP3, "The Highway 63 Transportation Corporation."

446 FCP3, "The Highway 63 Transportation Corporation."

447 Vadali, Using the Economic Value Created by Transportation to Fund Transportation.

448 "Highway 63 Transportation Corporation," Truman State University Pickler Memorial Library Archives, library.truman.edu/manuscripts/H3-Hiway%2063.asp.

449 Vadali, Using the Economic Value Created by Transportation to Fund Transportation.

450 Vadali, Using the Economic Value Created by Transportation to Fund Transportation.

451 FCP3, "The Highway 63 Transportation Corporation."

452 Laura Farmer, Value Capture: Route 28 Transportation Improvement District, Virginia Department of Transportation, 2015.

453 "Project Profile: Route 28 Corridor Improvements," Federal Highway Administration Center for Innovative Finance Support, www.fhwa.dot.gov/ipd/project_profiles/va_route28.aspx.

454 Farmer, "Value Capture: Route 28."

455 "Code of Virginia: Chapter 20. Local Transportation Districts," $50,620,000 Commonwealth of Virginia Transportation Contract Revenue Refunding Bonds Series 2012, Commonwealth Transportation Board (Route 28 Project), 2012, Virginia Legislative Information System, law.lis.virginia.gov/vacode/title33.2/chapter20/.

456 Farmer, "Value Capture: Route 28."

457 Farmer, "Value Capture: Route 28.'

458 Farmer, "Value Capture: Route 28."

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