TABLE OF CONTENTS
LIST OF FIGURES
LIST OF TABLES
In making the business/economic (B/E) case for value capture (VC), it is useful at the outset to have a good understanding of the overall VC implementation process. This helps determine when it would be most beneficial to conduct the B/E case assessment. The process will differ depending on the specific VC technique under consideration and any institutional and regulatory requirements associated with the technique under State or local law.
Broadly speaking, the overall VC implementation life cycle for most VC techniques entails the following basic steps (see Figure 13):
Stakeholder Coordination–engage key stakeholders for VC buy-in and approval (throughout)
Feasibility/Evaluation–assess VC potential and identify VC opportunity areas and key stakeholders
Preparation–define relevant projects and project areas, secure internal support, develop VC implementation plan (including negotiating/leveraging strategy), and identify internal VC team
Formation (Institutional)–establish a VC administrative body (e.g., tax increment financing [TIF] district, special assessment district [SAD]) that complies with institutional and regulatory requirements related to the specific VC technique chosen
Financing–obtain final approval and issue VC revenue-backed bonds (e.g., TIF or SAD bonds)
Life-cycle Administration–manage VC district and administer financial transactions
Ideally, B/E case assessments should be both qualitative and quantitative in nature. As indicated in Figure 1, the B/E case could be made early in the feasibility/evaluation stage when the assessment would be more qualitative in nature. Once the decision is made to proceed with one or more VC techniques, a more detailed quantitative assessment could be performed in subsequent stages to provide input to the VC implementation and financing plan.
In the current VC implementation climate, B/E case development is often not considered a prerequisite. Rather, it is used as an afterthought to justify the decisions that have already been made, or it is performed much later–e.g., as part of preparing a financing plan to assess a VC debt requirement–when it no longer serves as a decision-support tool. In general, B/E case assessments are best implemented as an integral part of the overall VC decision-making process, providing critical inputs to early decisions–including evaluating whether to pursue VC, selecting preferred VC techniques, communicating equity and benefits, building the foundation for leveraging negotiations, and preparing a public involvement and transparency plan.
Figure 1. Illustration. Overall VC implementation process and B/E case assessment timing.
Because the VC implementation process can be substantially different from one technique to another, it is beneficial to look at the details of at least one technique to gain a better understanding. Figure 2 provides an example of the process involved in implementing a community facilities district (CFD), a common form of special assessment district (SAD) used in California.4 The diagram illustrates the level of complexity involved in SAD implementation in general. Because most VC techniques–especially those that are government-sponsored such as SAD and tax increment financing (TIF)–likely involve issuing tax-exempt debt backed by the government, the process can be quite rigorous, with multiple layers of regulatory and institutional requirements. The implementation steps depicted in Figure 2 detail this.
The B/E case assessment may be either qualitative or quantitative in nature, depending on when and how it is used. For example, a qualitative B/E case assessment could be performed early as part of the planning process when the feasibility of various VC techniques is evaluated to help select the preferred technique(s). This can serve as critical input in stablishing the local government's goals and policies for the chosen technique(s) and help kick-start the implementation process (at "Start" and Step 1 in Figure 2). In addition, a qualitative assessment will also help identify stakeholder concerns to facilitate the public hearing process (at Step 4 in Figure 2).
A quantitative B/E case assessment, on the other hand, provides critical knowledge regarding the magnitude of potential VC revenues. This can offer important input to decisions regarding the geographic area to be covered, public improvements to be included, and the nature of the VC-related debt to be issued (at Steps 2, 3, and 6 in Figure 2).
Figure 2. Chart. Detailed VC implementation steps–CFD example in California
Source: LA Metro 2020
3 Unless otherwise indicated, figures and tables without sources were prepared specifically for this primer.
4 In California, the Mello-Roos Community Facilities Act of 1982 (Government Code 53311-53368.3) established community facility districts (CFDs) to be used for new developments, where their formation can be initiated by either a local agency or one or more developers/landowners. CFDs allow issuing of tax-exempt bonds (called CFD bonds) to raise funding for public improvements needed on private development projects. The bonds are backed by the new assessments to be imposed on future property owners (buyers) once the development project is complete. Issuing CFD bonds enables upfront funding of the improvements needed on the project.
