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APPENDIX B: QUANTITATIVE ASSESSMENTS–TOD PROJECT EXAMPLES

The following provides a detailed description of quantitative assessments pertaining to transit and transit-oriented development (TOD) examples. As mentioned in Chapter 5, there are existing TOD practices–including guidance (e.g., recommended TOD density range) established by the Federal Transit Administration (FTA), local/regional agencies, and industry organizations⁴³–that are directly applicable to value capture (VC) quantitative assessments that make it easier to demonstrate the basic concepts. The examples presented are from the recent value assessment study conducted by LA Metro on its new transit corridors that are either in planning or under construction (LA Metro 2020). Focusing on tax increment financing (TIF) and special assessment district (SAD) techniques, the discussions below mirror the basic steps outlined for quantitative assessment in Chapter 5 using LA Metro station and corridor examples. The basic approach and concepts presented below are still relevant and useful in the highway context, especially when contemplating the type of guidelines that may be useful in the future for highways to facilitate the VC quantitative assessments.

B.1 Defining Value Capture Opportunity Areas

As mentioned in Chapter 5, the first step in the quantitative assessment of making the VC business/economic (B/E) case is to identify the VC opportunity area (OA) and the maximum development density that could be accommodated in that OA. As described in Section 3.2, defining VC OAs entails three primary factors: (1) defining the VC catchment area, (2) determining the VC propensity factor, and (3) developing the VC buildout scenario.

First, for the VC catchment area, for dedicated light rail transit (LRT) or heavy rail transit (HRT) corridors, the Federal Transit Administration (FTA) recommends a 1/2-mile radius⁴⁴ around each station as the geographic boundary where the higher density TODs are be most likely to occur (referred to as the TOD buffer zone) (FTA 2014). For bus rapid transit (BRT), this buffer zone is reduced to a 1/4-mile radius. These TOD buffer zones could serve as the catchment areas for transit station VC nodes.

Second, regarding the VC propensity factor, Figure B.1 shows the relative TOD propensity scale recommended by the Center for Transit-Oriented Development (CTOD) relative to the locational characteristics (CTOD 2010, 2011, 2013). As shown, the higher the percentage of workers in the population (i.e., higher commuter concentration) and the higher the average vehicle-miles traveled per household (VMT/HH) (i.e., higher commuting distance), the more amenable the location is for TODs and, as a result, the higher the VC propensity (as represented by the darker shades and higher rankings).

Finally, regarding the VC buildout scenario, several Federal, State, and local guidelines currently exist regarding the recommended TOD density range along the urban-suburban locational spectrum (see, for example, FTA 2014, PPIC 2011, PSRC 2014, and MPC-SP 2018). For dedicated LRT or HRT, Table B.1 provides examples of TOD density guidelines for commercial (in floor area ratio or FAR) and residential (in dwelling units per acre or DU/acre) uses. These densities could serve as the maximum target densities in developing the maximum buildout scenario for the VC catchment area under consideration.

These target densities should be compared against the maximum allowable densities specified by the local land use and zoning regulations. Where the TOD density guidelines are above the locally allowable density, the local zoning governs the buildout density used.

Figure B.1. Illustration. Relative TOD propensity mapping/scale.

	Residential	Balanced	Employment
Highest VMT/HH	3	2	1
	4	3	2
	5	4	3
Lowest VMT/HH	6	5	4
	0%	% Workers	100%

Source: Based on CTOD (2010, 2011, 2013)

Table B.1. Recommended density range in TOD buffer zone.

Setting	FTA Guidelines		Select Local Guidelines on Residential Density (DU/Acre)
	FAR (Commercial)	DU/Acre (Residential)	Bay Area MTC	City of San Diego	Sacramento Regional Transit
Urban Center (Central Business District)	n/a	n/a	16-60	n/a	36 (minimum)
Urban	2.1 (mean); 1.37 (median)	36.3 (mean); 36 (median)	10-30	17-30 (mean); 12 (minimum)	15 (minimum)
Suburban	0.65 (mean); 0.32 (median)	17.4 (mean); 10.9 (median)	5-20	13-20 (mean); 8 (minimum)	10 (minimum)

Sources: FTA (2014), PSRC (2014)

B.2. Developing Value Capture Buildout Scenarios

Once the catchment area and target buildout density are defined, the next step is to develop a VC buildout scenario for the catchment area by converting the current uses into higher density uses. This step first involves obtaining parcel-level data on existing properties within the VC catchment area, including:

• Allowable density range by local zoning designation (e.g., residential, commercial, industrial, public, open space/other)

• Zoning designation for each parcel

• Land and building areas for each residential and nonresidential parcel

• Assessed value (AV) of each residential and nonresidential parcel for both land and building

• Number of dwelling units for each residential parcel

• Floor area ratio for each nonresidential parcel

These data help establish existing conditions for the base case upon which incremental developments can be added to reach the buildout potential.

For TODs, the overall development potential for a given station considers the current characteristics of the community and the types of growth that are consistent with TOD land uses–i.e., more commercial and higher density residential and less industrial uses. In other words, to develop the TOD buildout scenario for each station, the existing densities for residential and commercial zones would be increased to reach the higher recommended TOD density for that use–specifically, recommended DU/acre and FAR for residential and commercial uses, respectively, from Table B.1. In addition, where additional land area is required to accommodate the new densities, land not utilized to its highest and best use (e.g., industrial uses or vacant land) would be converted to residential and commercial uses. For each station, both general plans (GPs) and specific plans (SPs) from local jurisdictions would specify the maximum allowable densities for each use.

Table B.2 presents a TOD buildout example for the new Greenwood Station currently under planning by LA Metro. Greenwood is one of six stations along the proposed new corridor that further extends LA Metro's existing Gold Line. The table provides–for residential, commercial, and industrial land use/density categories, respectively–(1) existing uses and densities (rows 1-5, 16, 19), (2) incremental uses and densities (rows 6-10, 17, 20) that are needed to reach (3) the TOD buildout densities and uses (rows 11-15, 18, and 21).

Greenwood is in a suburban locale and, as such, the residential target density used is 15.0 DU/acre (column 4, row 15), which is within the FTA recommended range presented in Table B.1. For commercial use, the target density used is 1.0 FAR (column 5, row 18), higher than that recommended by FTA in Table B.1 due to much higher FARs generally prevailing in Los Angeles County.

The exercise of developing the TOD (and VC) buildout scenario is in part about increasing the density of incremental uses to the maximum allowable level possible. In Table B.2, for example, for incremental residential uses, both Mid/High (row 8) and Very High (row 9) density categories (i.e., multifamily) are increased to the maximum limit (22.4 and 35.4, respectively; column 4) within the density range allowed in that category (8-22 and 22-35, respectively; column 2), while keeping the low density uses (i.e., single family) at the existing level (row 7). These incremental densities result in, respectively, 1.56 million square feet (SF) and 2.76 million SF of new developed building and land areas (row 10, columns 6 and 8).

For incremental commercial (row 17), as shown in Table B.2, the land area is kept at the existing level (column 8) and 212,000 SF of new building area is added (column 6) to increase the FAR from 0.36 to 1.0 (column 5, rows 16 and 18). To accommodate these new high-density residential and commercial developments, the current building and land areas for industrial uses (row 20) are reduced by 859,000 SF and 2,760,000 SF, respectively. Finally, as shown in Table B.2, land uses pertaining to open space, governments/public institutions, and other public space would generally be left untouched (row 22).

Table B.2. Buildout scenario–TOD example (LA Metro Greenwood Station).

	Land Use/ Density Category [1]	Zoned Density Range (DU/acre) [2]	Actual No. DUs [3]	Actual DU/acre [4]	FAR [5]	Bldg Area (SF) [6]	SF/Unit [7]	Land Area (SF) [8]	Assessed Value (AV) (in $M)		$/Unit (in '000$) [11]	$/SF [12]
									Land [9]	Building [10]
	Existing Residential:
2	- Low	0-8	819	6.5		1,152,174	1,407	5,488,428	$128.8	$87.1	$264
3	- Mid/High	8-22	1,215	17.8		1,162,199	957	2,981,697	$78.8	$103.4	$150
4	- Very High	22-35	187	30.5		151,064	808	266,796	$10.8	$14.5	$136
5	Total/Average		2,221	11.1		2,465,437	1,110	8,736,922	$218.6	$205.0	$98
6	Incremental Residential:
7	- Low	0-8	0			0		0	$0		$500
8	- Mid/High	8-22	900	22.4		900,000	1,000	1,742,888	$270		$300
9	- Very High	22-35	830	35.4		664,000	800	1,017,277	$208		$250
10	Total/Average		1,730	27.2		1,564,000	904	2,760,164	$478		$276
11	TOD Buildout Residential:
12	- Low	0-8	819	6.5		1,152,174	1,407	5,488,428	$215.9		$157
13	- Mid/High	8-22	2,115	19.5		2,062,199	975	4,724,585	$452.3		$165
14	- Very High	22-35	1,017	34.5		815,064	801	1,284,073	$232.9		$215
15	Total/Average		3,951	15.0		4,029,437	1,020	11,497,086	$901.1		$176
16	Existing Commercial:				0.36	121,539		333,676	$10.6	$9.9		$168
17	Incremental Commercial:					212,137		0	$0	$58.3		$275
18	TOD Buildout Commercial:				1.0	333,676		333,676	$10.6	$68.2		$204
19	Existing Industrial:				0.31	2,811,650		9,038,160	$167.0	$112.4		$24
20	Incremental Industrial (Reduced):					-858,650		-2,760,164	-$51.0	-$34.3		$24
21	TOD Buildout Industrial (Reduced):				0.31	1,953,000		6,277,995	$116.0	$78.1		$24
22	Gov't/Inst./Open Space (Unchanged)					67,070		7,882,504	$6.9	$7.5
23	TOD Buildout (Total)		3,951	15.0	1.0	6,383,183	1,020	25,991,261	$1,188.2		$176	$204
24	INCREASE IN ASSESSED VALUE (in $M)								$450.5

Source: LA Metro (2020).

B.3. Estimating Increase in Assessed Value

In general, real property values increase for new developments for three primary reasons: (1) increase in density, (2) increase in unit value, and (3) reassessment where the increase in AV can exceed the statutory limit. The previous section discussed how higher densities would generate significant new developments for the Greenwood Station TOD example presented in Table B.2. These new developments would be reassessed at a higher unit pricing for residential (i.e., $500, $300, and $250 per DU for Low, Mid/High, and Very High density, respectively) (column 11, rows 7-9) and commercial (i.e., $275/SF) (column 12, row 17), when compared to existing prices (i.e., $264, $150, $136 per DU for Low, Mid/High, and Very High residential, respectively, and $168/SF for commercial) (column 11, row 204; column 12, row 16).

As shown in Table B.2, with the new developments, the change in AV for each use (columns 9 and 10 combined) is:

• Residential: +$478 million (row 10)

• Commercial: +$58 million (row 17)

• Industrial: -$85 million (row 20)

• Total increase in AV for buildout scenario: $451 million (row 24)

For the Greenwood Station TOD, this $451 million AV increase would be the basis for applying, respectively, the ad valorem property tax and various non-ad valorem special taxes for TIF and SAD VC techniques.

As a check and balance, the higher density buildout scenario needs to be reviewed with respect to market absorption–whether there is sufficient population and employment base to absorb the proposed future growth. This involves reviewing the current and future demographics associated with the VC catchment area, which are shown in Table B.3 for the Greenwood Station TOD example.

Table B.3. Current and future demographics–Greenwood TOD example.

Category	Timeframe	Area Covered from Station
		1/2-Mile Radius	1-Mile Radius	2-Mile Radius
Population	Current (2019)	7,591	18,492	89,615
	Future (2069)	8,367	20,381	98,771
No. Households	Current (2019)	2,023	4,834	24,920
	Future (2069)	2,225	31,537	87,710
No. Employees	Current (2019)	4,439	16,228	63,552
	Future (2069)	4,826	17,642	69,091
No. Businesses	Current (2019)	336	940	4,138
	Future (2069)	354	1,022	4,499

For VC, it is ideal if all of the high-density new developments could be absorbed by the demographics within the VC catchment area. Falling short of that, the market absorption area can be extended further out progressively to draw additional population and employment for the new developments. In Table B.3, for example, in addition to the 1/2-mile TOD buffer zone, the demographics data are also presented for both 1-mile and 2-mile radii. As shown, the average household size (i.e., population divided by number of households) is forecast to remain relatively constant for the next 50 years. For the Greenwood TOD, if the number of dwelling units increases to 3,951 under the buildout scenario (Table B.2, column 3, row 15), based on average household size of 3.75, this results in a total population of 14,816 (3.75 times 3,951). Table B.3 shows that this level of population falls somewhere between the 1/2- to 1-mile radius.

In terms of timeline, new developments associated with the TOD buildout scenario generally occur over a long period. The terms of VC financing (e.g., TIF- or SAD-backed bonds) are also generally quite long.⁴⁵Therefore, the timeframe for future demographic projections should be just as long to provide sufficient time for market absorption to take place (in Table B.3, for example, a 50-year timeframe is used). Especially for VC opportunities that are open ended, the initial quantitative assessment is focused on the maximum potential that could be achieved with the assumption that the demand will be there at some point (and, less importantly, on the pace and timing with which they are reached).

B.4. Estimating Value Capture Revenues–Tax Increment Financing

Jurisdictions that have had TODs consider the organic increase in ad valorem tax revenues resulting from the increase in AVs as their own revenues, wholly at their discretion and without any consideration for investments in transit facilities that helped to generate them. To generate new revenue sources for infrastructure purposes using TIF, cities and counties must agree to contribute some part of their incremental revenues to the transit authority that is responsible for building the transit facilities.

California allocates a portion of ad valorem property taxes every year to cities and counties based on a pre-established formula (with the remainder going to the State). For the Greenwood Station TOD example, Table B.4 presents how a 1 percent ad valorem tax is allocated to different tax rate areas (TRA) for Los Angeles County and the cities that are included within the 1/2-mile TOD buffer zone–in this case, the cities of Montebello, Pico Rivera, and Commerce. The table also shows the total current AV associated with each TRA and corresponding annual tax revenues due to the county and the cities.

Table B.4. Ad valorem tax allocation–Greenwood Station TOD example.

TRA	1% Ad Valorem Tax Allocation		Jurisdiction City	Current AV	Ad Valorem Tax Revenue (Annual)
	City	County			City	County
06311	0.3441541120	0.0985862800	Montebello	$174,206,742	$599,540	$171,744
06330	0.3441541120	0.0985862800	Montebello	$517,583,960	$1,781,286	$510,267
06331	0.3441542550	0.0985862360	Montebello	$19,068,826	$65,626	$18,799
06338	0.3441460860	0.0985892140	Montebello	$23,131,141	$79,605	$22,805
07947	0.2435379590	0.0666711480	Pico Rivera	$475,339	$1,158	$317
07955	0.3561723780	0.1005718000	Montebello	$5,863	$21	$6
07965	0.3544174650	0.1010272080	Montebello	$49,402	$175	$50
07971	0.2435319890	0.0666711480	Pico Rivera	$140,895	$343	$94
12462	0.3739087920	0.0695135980	Commerce	$3,165,730	$11,837	$2,201
Avg.	0.3441982767	0.0984351551	Total	$737,827,898	$2,539,591	$726,282

It is important to note that these are annual tax revenues. If an agreement could be reached with the county and the cities, a portion of these tax revenues could be allocated every year for TIF purposes. In the case of the Greenwood TOD, for example, a potential tax allocation scenario could be a 50 percent contribution from the county and each of the cities for any new tax revenues derived specifically from the TOD buildout. The revenues thus allocated could be leveraged to secure the upfront debt financing with a term that can be as long as 45 years.

The final step in the quantitative assessment is to develop long-term cash flow estimates for both the full life cycle of the VC revenue potential and the potential TIF bonding capacity. This step requires additional information on the following:

• Timeframe of the VC revenue collection

• Timeframe for the TOD buildout, i.e., market absorption period discussed earlier

• Statutory property value appreciation rate allowed for existing properties

• Average turnover rate on existing properties and resulting average appreciation rate over and above the statutory rate to account for turnovers

• Discount rate for net present value (NPV) analysis

Table B.5 provides the TIF life-cycle cash flow based on a 45-year term for the Greenwood TOD example. Table B.5 assumes the timeframe for the VC revenue collection is the same as the TIF bond term of 45 years, beginning when the detailed design of the Greenwood Station starts in 2028 (column 1).⁴⁶ The assumed timeframe for the TOD buildout is 20 years, starting with the opening of the Greenwood Station in 2035 (column 4). In California, the statutory AV appreciation for existing properties is currently limited to 2 percent per annum. An additional 1 percent in appreciation is added to the 2 percent limit to account for turnover. The ending AV each year (column 5) is calculated based on the initial AV (column 2) plus new developments (column 4) appreciated at 3 percent (inclusive of turnovers) minus the industrial properties that were removed (column 3) to accommodate the new developments. Incremental AV (column 7) in each year is calculated by subtracting the base year AV (column 6; equivalent to the total AV of all existing properties within the TOD buffer zone presented in Table B.2).

Table B.5 also shows the total ad valorem property tax revenues (column 8) associated with the incremental AV for each year, with specific allocations to the county (column 9) and the cities identified earlier (column 10) and based on the weighted average TRA tax rates presented in Table B.4. Assuming a 50 percent contribution of these revenues by the county and all cities, the total annual contributions are shown in the last column and the total nominal revenues over the 45-year VC life cycle are shown to be $167.4 million (second-to-last row). Using a discount rate of 3 percent,⁴⁷this revenue translates into $65.4 million in NPV.

Table B.5. TIF life-cycle cash flow–Greenwood Station TOD example (in $M).

Year [1]	Initial AV [2]	Rmv'd [3]	New TODs [4]	Ending AV [5]	Less Base AV [6]	Incre-mental AV [7]	Total Tax @ 1.0% [8]	County [9]		City [10]		Total Contrib.
								Total (0.0984)	50% Contrib	Total (0.3442)	50% Contrib.
2028	738			760	738	22	0.22	0.02	0.01	0.08	0.04	0.05
2029	760			783	738	45	0.45	0.04	0.02	0.15	0.08	0.10
2030	783			806	738	68	0.68	0.07	0.03	0.24	0.12	0.15
2031	806			830	738	93	0.93	0.09	0.05	0.32	0.16	0.20
2032	830			855	738	117	1.17	0.12	0.06	0.40	0.20	0.26
2033	855			881	738	143	1.43	0.14	0.07	0.49	0.25	0.32
2034	881			907	738	170	1.70	0.17	0.08	0.58	0.29	0.38
2035	907	(6)	35	964	738	226	2.26	0.22	0.11	0.78	0.39	0.50
2036	964	(6)	36	1,023	738	285	2.85	0.28	0.14	0.98	0.49	0.63
2037	1,023	(6)	37	1,085	738	347	3.47	0.34	0.17	1.20	0.60	0.77
2038	1,085	(6)	38	1,150	738	412	4.12	0.41	0.20	1.42	0.71	0.91
2039	1,150	(6)	39	1,218	738	480	4.80	0.47	0.24	1.65	0.83	1.06
2040	1,218	(6)	41	1,288	738	551	5.51	0.54	0.27	1.90	0.95	1.22
2041	1,288	(6)	42	1,363	738	625	6.25	0.61	0.31	2.15	1.08	1.38
2042	1,363	(7)	43	1,440	738	702	7.02	0.69	0.35	2.42	1.21	1.55
2043	1,440	(7)	44	1,521	738	783	7.83	0.77	0.39	2.70	1.35	1.73
2044	1,521	(7)	46	1,606	738	868	8.68	0.85	0.43	2.99	1.49	1.92
2045	1,606	(7)	47	1,694	738	956	9.56	0.94	0.47	3.29	1.65	2.12
2046	1,694	(7)	49	1,786	738	1,048	10.48	1.03	0.52	3.61	1.80	2.32
2047	1,786	(7)	50	1,882	738	1,145	11.45	1.13	0.56	3.94	1.97	2.53
2048	1,882	(7)	52	1,983	738	1,245	12.45	1.23	0.61	4.29	2.14	2.76
2049	1,983	(8)	53	2,088	738	1,350	13.50	1.33	0.66	4.65	2.32	2.99
2050	2,088	(8)	55	2,198	738	1,460	14.60	1.44	0.72	5.02	2.51	3.23
2051	2,198	(8)	56	2,312	738	1,574	15.74	1.55	0.77	5.42	2.71	3.48
2052	2,312	(8)	58	2,431	738	1,694	16.94	1.67	0.83	5.83	2.91	3.75
2053	2,431	(8)	60	2,556	738	1,818	18.18	1.79	0.89	6.26	3.13	4.02
2054	2,556	(8)	62	2,686	738	1,948	19.48	1.92	0.96	6.70	3.35	4.31
2055	2,686			2,766	738	2,028	20.28	2.00	1.00	6.98	3.49	4.49
2056	2,766			2,849	738	2,111	21.11	2.08	1.04	7.27	3.63	4.67
: :	: :	: :	: :	: :	: :	: :	: :	: :	: :	: :	: :	: :
2065	3,609			3,718	738	2,980	29.80	2.93	1.47	10.26	5.13	6.59
2066	3,718			3,829	738	3,091	30.91	3.04	1.52	10.64	5.32	6.84
2067	3,829			3,944	738	3,206	32.06	3.15	1.58	11.04	5.52	7.10
2068	3,944			4,062	738	3,325	33.25	3.27	1.64	11.44	5.72	7.36
2069	4,062			4,184	738	3,446	34.46	3.39	1.70	11.86	5.93	7.63
2070	4,184			4,310	738	3,572	35.72	3.51	1.76	12.29	6.15	7.90
2071	4,310			4,439	738	3,701	37.01	3.64	1.82	12.74	6.37	8.19
2072	4,439			4,572	738	3,834	38.34	3.77	1.89	13.20	6.60	8.49
2073	4,572			4,709	738	3,972	39.72	3.91	1.95	13.67	6.84	8.79
Total Nominal (in $M)									37.21		130.17	167.38
Total NPV (in $M)									14.53		50.83	65.36

B.5. Estimating Value Capture Revenues–Special Assessment District (SAD)⁴⁸

Maximum VC revenue potential for SADs can also be estimated from the same incremental AV for the buildout scenario. This requires an understanding of basic local tax structure. For the Greenwood TOD, the local tax structure for TRA 6311 in the city of Montebello is shown in Table B.6 below (same as Table 8 in Chapter 5; refer to Table B.4 for TRAs).

Footnotes

⁴³ See, for example, CTOD (2010, 2011, 2013), FTA (2014), MSP-SP (2018), PSRC (2014).

⁴⁴ Generally indicative of the maximum distance a commuter is willing to walk to a nearby transit station.

⁴⁵ VC financing terms are typically 30 years but they can vary by State. In California, for example, community facilities district (CFD) bonds generally have 30-year term but TIF bonds can be as long as 45 years if linked to enhanced infrastructure financing districts (EIFD) described earlier.

⁴⁶ Assumes no voter approval is required. In California, as discussed earlier, TIF under an Enhanced Infrastructure Financing District (EIFD) vehicle requires no voter approval for district formation nor for TIF bond issuance.

⁴⁷ Three percent discount rate is typically used in project financing, which is considered a risk-free rate under the Capital Asset Pricing Model (CAPM) in project financing.

⁴⁸ This section is essentially the same as Section 5.4.2 but is repeated here for purposes of coherence in discussion with the Greenwood example.

⁴⁹ Some of the discussion in this section is covered in Section 5.5 but repeated here for the sake of coherence in detailing the Greenwood TOD example.

⁵⁰ Keeping in mind that the stations need to be sufficiently far apart and there is market potential to warrant TODs for each station.

Table B.6. Local tax structure (city of Montebello)–Greenwood TOD example.

Taxing Agency	TRA 6311 Tax Rate (2020-2021)
City of Montebello	0.197875
Community College	0.040162
LA County	0.000000
General (Ad Valorem–See Table 7 in Chapter 5 for City/County Allocation)	1.000000
Metro Water District	0.003500
Unified Schools	0.097063
Total Effective Tax Rate	1.338600
Total Non Ad Valorem (Special Taxes Already Spoken For)	0.338600
Maximum Statutory Tax Rate	2.000000
Residual Tax Rate (Available for Additional Special Taxes)	0.661400

As shown, the total current effective tax rate for this area is 1.3386 percent, which is made up of a 1 percent ad valorem general tax rate and an additional 0.3386 percent of special taxes that are allocated variously to the city of Montebello, Los Angeles County, local school systems, and the water district. With the maximum statutory tax rate of 2 percent in California, this leaves a residual tax rate of 0.6614 percent available to impose new special taxes.

At a conceptual level, the maximum possible revenues from all special tax-based VC techniques can be estimated by applying this residual special tax rates to the incremental assessed value under the buildout scenario. This is shown in Table B.7 (same as Table 9 in Chapter 5) for the Greenwood TOD example.

Table B.7. Maximum potential for SADs–Greenwood TOD example.

Description	Greenwood TOD
Current Assessed Value	$738,000,000
TOD Buildout Assessed Value	$1,189,000,000
New Incremental Assessed Value Under Buildout Scenario	$451,000,000
Current Total Effective Tax Rate	1.34%
Maximum Statutory Tax Rate	2.00%
Residual Tax Rate Unspoken For	0.66%
Remaining Taxing Capacity at Buildout	$2,976,600
NPV at 5% for 30 years	$45,800,000

As shown, under the buildout scenario, the $451 million increase in AV can potentially generate almost $3 million additional revenues each year in special taxes if the total tax rate was taken to its maximum statutory limit of 2 percent. Using a 30-year term with a 5 percent interest rate more typical of SAD bond issuance, the corresponding NPV is estimated to be about $46 million–in comparison to $65 million under the TIF technique. As practical, for this step, alternative taxing scenarios could also be tested. For example, instead of taking to the maximum statutory limit, a maximum tax rate of 1.75 percent could be considered more reasonable and acceptable by the industry, making the residual tax rate 0.41 percent instead of 0.66 percent shown in Table B.7.

B.6. Estimating VC Revenues–Corridor or System Level (Multiple Nodes)⁴⁹

The quantitative assessment described above is for a single node–i.e., TODs at a single transit station–which is a useful exercise particularly for the local jurisdiction where the node is located. Similar assessments can be made at multiple nodes to determine the VC potential at corridor and/or system levels. These broader assessments could be useful for Federal, State, and/or other regional agencies (including metropolitan planning organizations [MPOs] and transit authorities) that are engaged in providing major infrastructure projects that cut across multiple jurisdictions.

To continue with the LA Metro case, Greenwood Station is part of the Gold Line Eastside Extension that includes six new stations altogether along the new extended corridor. Table B.8 provides potential VC revenue estimates for the entire corridor based on similar TOD buildout assumptions for each station as used for the Greenwood TOD case.⁵⁰As shown, the corridor-level VC potential is much more substantial, reaching over $1 billion in nominal amount and over $410 million in NPV.

Table B.8. Corridor level assessment–LA Metro Gold Line extension example.

Corridor	Station	Current AV (Annual)	TOD Buildout AV (Annual)	Potential VC Revenues from Tax Increments (45-Yr Cumulative)
				Nominal	Present Value
Gold Line Eastside Extension	Atlantic/Whittier	$876,190,272	$1,401,904,435	$107,018,771	$41,766,783
	The Citadel	$936,111,044	$1,497,777,670	$220,153,135	$85,920,331
	Greenwood	$737,712,566	$1,188,233,069	$167,400,962	$65,366,071
	Rosemead	$788,983,508	$1,262,373,613	$130,274,783	$50,843,030
	Norwalk	$675,696,691	$1,282,644,801	$146,926,627	$57,136,498
	Lambert	$991,520,494	$2,056,218,318	$284,189,113	$110,219,233
9Corridor Total		$5,006,214,575	$8,689,151,906	$1,055,963,392	$411,251,946

Likewise, a quantitative assessment can be performed at the system level involving multiple corridors. The only difference here is that the implementation of each corridor may be phased with a different timeline and the cash flows would need to be staggered to reflect such phasing. Figure B.2 (same as Figure 3 in Chapter 5) provides an example for all future corridors currently under construction or planning by LA Metro, inclusive of the Gold Line Eastside Extension (and Greenwood Station). The example represents 45-year cash flows consistent with the TIF bond term, which are staggered based on the opening date of each corridor. Consistent with the other LA Metro examples, Figure B.2 assumes that the TOD buildout would occur over a 20-year period (indicated by the black squares) starting with the opening date for each corridor. It also shows that the TIF district formation and, therefore, the collection of VC revenues could start a few years prior to the opening date to coincide with the construction start date for each corridor.

Figure B.2. Chart. Cash flow phasing under systemwide assessments–LA Metro example.

Line/ Corridor	No. Stations	Opening Date (Status)	2020-30					2030-40					2040-50					2050-60					2060-70					2070-80
			2	4	6	8	10	2	4	6	8	10	2	4	6	8	10	2	4	6	8	10	2	4	6	8	10	2	4	6	8	10
Crenshaw/LAX	9	2022	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
Regional Connector	4	2022	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
Purple Line Extension	5 (Sect 1&2)	2024	⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
	2 (Sect 3)	2028			⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
Gold Line Extension	4 (Foothill)	2026		⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
	6 (Eastside)	2036							⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
E. San Fernando Valley	14	2028			⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
Green Line to Torrance)	2	2030				⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
W. Santa Ana Branch	9	2042										⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
Sepulveda Transit	4 (to Westside)	2034						⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿	⦿
	5 (to LAX)	2058																		⦿	⦿	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	◼︎	⦿

Source: LA Metro (2020). (Note: "⦿" denotes the 45-year span in the VC assessment life cycle and "◼"︎denotes the 20-year buildout period with the 45-year span.)

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