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Making the Business and Economic Case for Value Capture

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5. Quantitative Assessment

Quantitative Assessments-Basic Components

The basic steps in the quantitative assessment consist of: (1) Defining VC opportunity areas (OAs) (for each node), (2) Developing buildout scenarios for the OAs (for each node), (3) Estimating VC revenue potential for viable VC technique(s) for the buildout scenarios (for each node), (4) Developing cash flows over the VC lifecycle for each node and, for corridor or system level assessment, estimating cumulative VC revenue potential by integrating the cash flows across all OAs, all techniques, and all nodes

VC Opportunity Areas and Buildout Scenarios

VC Opportunity Areas (OAs)

Identify where substantive new developments could occur:

  • OA "Nodes": (1) Major highway intersections; (2) Transit stations with high growth potential
  • Local GPs and SPs can help determine the extent of OA coverage
Buildout Scenarios for OAs

Incremental development potential based on up-zoning:

  • Maximum allowable density by land use
  • Long-term growth plans per local GPs and SPs
  • TOD guidelines (e.g., recommended urban/suburban density within 1/4 & 1/2-mi radius of BRT & rail transit stations)

Maximum VC Revenue Potential

TIF

Estimate incremental tax revenues based on:

  • Base year/baseline assessed value (AV)
  • Buildout absorption schedule
  • Future property value, AV escalation
  • City/County participation levels
SAD

Estimate new special assessment revenues based on:

  • Max. potential effective tax rate above existing rate
  • Same as TIF assumptions on absorption, future value, AV escalation
DIF

In the absence of full nexus study, estimate revenues based on:

  • Current DIF levels in adjacent areas (i.e., market-accepted rates)
  • Different fee schemes: (1) urban/in-fill (marginal cost basis), (2) suburban (total cost basis)

VC Opportunity Areas and Buildout Scenarios

Cash Flow by VC Technique

For each VC technique, establish:

  • Lifecycle timeframe (e.g., TI or SA district term)
  • Bonding capacity based on timing of bond issuance(s) and debt financing terms
  • Base year for PV analysis

TI–Tax Increment, SA–Special Assessment

Integrated Lifecycle Cash Flow

Estimate cumulative lifecycle cash flows:

  • Single node: total combined cash flow for all VC techniques at an intersection or station
  • Multiple nodes (corridor level): total combined cash flow for all VC techniques for multiple intersections/station

Integrated Lifecycle VC Cash Flow–Single Node San Diego Central Mobility Hub (CMH) Example

Annual Cash Flow: High Scenario
This example is for a single node representing VC revenue potential for a new Central Mobility Hub in San Diego, a multi-modal hub that connects their transit systems, major highways, and the airport. Within the VC OAs defined for the CMH, this shows annual cash flows in nominal future year dollars for TIF, SAD, and DIF over the 45-year term allowed in CA. For TIF and SAD (blue and purple), revenues are collected for the entire lifecycle, whereas for DIF (red), being a one time payment collected typically at permitting stage, the cash inflow ends when the new development associated with buildout scenario are complete. The green line shows combined annual cash flow for all techniques.

VC Type Present Value (2025$)
45-Year Lifecycle Cash Flow Potential Bond Proceeds
TIF $463.2 M $188.2 M
SAD $306.1 M $189.9 M
DIF $189.5 M n.a.
Total $958.8 M $378.1 M

Notional Only

Source: SANDAG Central Mobility Hub Alternative Funding Strategy (2021)

Integrated Lifecycle VC Cash Flow–System Level LA Metro New Rail Transit Corridor Example

This example is for system wide assessment involving multiple corridors. It is for LA Metro representing all new future rail corridors that are either under construction or in planning. For each new corridor, there are multiple stations (i.e., nodes) and each corridor is scheduled to come on board at different times–yellow shaded areas representing the new development absorption schedule for buildout scenarios at multiple stations within each corridor. For this systemwide assessment, total lifecycle annual cash flows for the entire system would be developed by combining VC techniques for all stations and for all corridors based on the phasing schedule depicted in this graph.
Source: LA Metro Value Capture Assessment Study (2020)

Notional Only


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