FHWA Center for Innovative Finance Support - Value Capture Strategy Primers

Value Capture: Making the Business and Economic Case–A Primer

January 2022

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TABLE OF CONTENTS

Cover and Introductory Materials
Executive Summary
Chapter 1. Introduction
- 1.1 Goals and Objectives of this Primer
- 1.2 Organization of this Primer
Chapter 2: Value Capture Implementation Process
- 2.1 Overall Value Capture Implementation Process
- 2.2 Detailed Implementation Process–Special Assessment District Example

LIST OF FIGURES

LIST OF TABLES

Notice

This document is disseminated under the sponsorship of the U.S. Department of Transportation (USDOT) in the interest of information exchange. The U.S. Government assumes no liability for the use of the information contained in this document.

The U.S. Government does not endorse products or manufacturers. Trademarks or manufacturers' names appear in this report only because they are considered essential to the objective of the document.

The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide information and clarity to the public regarding existing requirements under the law or agency policies. Value capture techniques and policies are often implemented outside of Federal funding or regulatory requirements.

Quality Assurance Statement

The Federal Highway Administration (FHWA) provides high-quality information to serve Government, industry, and the public in a manner that promotes public understanding. Standards and policies are used to ensure and maximize the quality, objectivity, utility, and integrity of its information. FHWA periodically reviews quality issues and adjusts its programs and processes to ensure continuous quality improvement.

Cover photos source: FHWA

TECHNICAL REPORT DOCUMENTATION PAGE

1. Report No.
FHWA-

2. Government Accession No.

3. Recipient's Catalog No.

4. Title and Subtitle
Value Capture: Making the Business and Economic Case–A Primer

5. Report Date
December 2021

6. Performing Organization Code
FHWA-

7. Author(s)
Julie Kim, BeneTellus; Thay Bishop and Stefan Natzke, Federal Highway Administration

8. Performing Organization Report No.
FHWA-HIN-21-008

9. Performing Organization Names(s) and Address(es)
Federal Highway Administration
1200 New Jersey Avenue, S.E.
Washington, DC 20590

10. Work Unit No.

11. Contract or Grant No.
IAA HW5NA2,
Modification #5

12. Sponsoring Agency Name(s) and Address(es)
Federal Highway Administration
1200 New Jersey Avenue, S.E.
Washington, DC 20590

13. Type of Report and Period Covered
Covered

14. Sponsoring Agency Code
Agency Code

15. Supplementary Notes

16. Abstract
16. Abstract
This primer demonstrates how local and regional agencies tasked with providing transportation infrastructure can make the business and economic (B/E) case for using one or more value capture (VC) techniques to address funding challenges. The primer starts with an overview of the overall VC implementation life cycle and identifies the appropriate timing for making the B/E case. It also discusses the basic building blocks necessary for developing the B/E case. For select prevalent VC techniques, the primer provides comparative qualitative assessments based on the key metrics and evaluation criteria. An important element in making the B/E case is determining the magnitude of potential VC revenues that could be allocated to infrastructure purposes. Using ample case studies, this primer provides detailed, step-by-step quantitative assessments to estimate such VC revenue potential. Finally, the primer discusses the relevance of making the B/E case for VC in different project contexts.

17. Key Words
Value capture, road and highway funding, innovative finance, special assessments

18.Distribution Statement
No restrictions

19. Security Classification of Report
Unclassified

18. Security Classification of This Page
Unclassified

19. No. of Pages

20.Price N/A

Form DOT F 1700.7 (8-72)
Reproduction of completed page authorized

ACKNOWLEDGMENTS

The Federal Highway Administration (FHWA) would like to express appreciation to the members of its Value Capture Implementation Team and acknowledges its contribution of expertise and guidance throughout the development of this report.

FOREWORD

State and local governments often struggle to mobilize the necessary funds to maintain, rebuild, and expand their local transportation networks. Planned projects often face funding hurdles that may result in projects being delayed or cancelled altogether, leaving important safety and mobility objectives unmet.

Value capture (VC) refers to a set of techniques that allow monetizing the appreciation in real property values that is triggered by infrastructure improvements. Such monetization enables the generation of future revenues that can be leveraged up front to help finance current or future infrastructure improvements. Under the right circumstances, this may allow practitioners to close funding gaps and accelerate project delivery, as well as trigger much needed economic development to provide livable communities, create jobs, and improve environmental conditions.

To maximize VC monetization potential, an effective VC strategy is to start early during project planning and public involvement phases and well in advance of right-of-way acquisition and project procurement. Making the VC business case is thus about developing a strategy to strengthen and preserve agencies' VC negotiating leverage with developers early in the planning stage. This primer demonstrates how local and regional agencies tasked with providing infrastructure can make the business and economic (B/E) case for using one or more VC techniques to address increasing funding challenges.

This primer is based on literature reviews, interviews, case studies, and lessons learned from practicing agencies. It introduces qualitative and quantitative approaches to developing the B/E case for select VC techniques and how these techniques could be integrated to maximize the VC potential. It also provides a specific case example to illustrate the integrated approach to making VC B/E case along a major corridor or at system level.