Development Agreements and Other Contract-Based Value Capture Techniques-A Primer

December 2020

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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. They are included for informational purposes only and are not intended to reflect a preference, approval, or endorsement of any one product or entity.

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

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.

Derived from real estate developments, value capture refers to a set of techniques that allow monetizing the appreciation in real property values triggered by infrastructure improvements. Such monetization enables 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 help close funding gaps and accelerate project delivery, as well as trigger much-needed economic development/redevelopment to promote livability, create jobs, and improve environmental conditions.

Contract-based value capture techniques (the subject of this Primer)-such as development agreements (DAs), community benefits agreements (CBAs), joint development agreements (JDAs), and right-of-way (ROWs) use agreements-are among the most evolved value capture techniques available today. Relative to other techniques, they provide more flexible and less litigious means to generating new revenues to finance infrastructure improvements.

This primer was developed on behalf of the FHWA Every Day Counts (EDC-5) Value Capture Implementation Team and is based on literature reviews, interviews, case studies, and lessons learned from practicing agencies. The primer introduces the concept of contract-based value capture techniques and how they can provide a gap funding source to help maintain and improve road networks and other critical infrastructure needs. Several cases within the primer illustrate how public agencies have approached instituting and managing DAs, CBAs, JDAs, and other contract-based value capture techniques.


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Acknowledgements

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

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