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Value capture is a set of techniques that take advantage of increased property values related to enhanced transportation-related opportunities and benefits created by the new or improved infrastructure. Property values can change because of one or more of the following:
Infrastructure investments increase the attractiveness of certain areas, raising demand and property values. Many value capture techniques seek to capture some of these property value increases.
This section provides a high-level overview of the various value capture techniques discussed in this Primer. For more detailed information and the underlying motivations State and local governments for using these, readers are encouraged to refer to Value Capture: Capitalizing on the Value Created by Transportation Implementation Manual (FHWA 2019).
Possible impacts of economic shocks on special assessment districts:
Special Assessment Districts (SADs) are a funding technique under which a fee is charged to property owners within a designated district whose properties are the primary beneficiaries of an infrastructure improvement. Other names for this value capture technique include benefit assessment districts (California), local improvement districts (Washington), community improvement districts (Missouri), downtown improvement districts, transportation improvement districts (Virginia, Ohio), special service areas (Illinois), and special services districts (Atlanta).
Possible impacts of economic shocks on tax increment financing:
A tax increment financing (TIF) district is a geographic area administered by a special authority in which incremental property tax value increases from an infrastructure investment are captured to fund or finance the infrastructure investment. Other names for TIF districts include transportation reinvestment zones (TRZs), specifically for Texas highways, metropolitan districts in Colorado, and tax allocation districts (TADs) in Geo Georgia3
Joint development involves the creation of commercial property adjacent to a transportation project, such as a rail station or an interchange, often with the benefit of defraying the cost of that project. There are generally two forms of joint development:
Possible impacts of economic shocks on joint development:
Joint development is most common at transit stations. The public agency that either owns an asset or is undertaking an improvement may solicit the private partner involvement. Alternatively, a private enterprise that owns land or a building may seek to partner with a public agency to develop transportation enhancements that will benefit their property as well as the traveling public. Joint development can also involve the development of communications and data transmission installations or power generation assets within publicly owned rights-of-way.
Joint development projects are generally beneficial to both parties and may lead to increased revenue for the public agency owning the property, decreased costs for operating or constructing public transportation systems, and location benefits to the real estate developer. It also may result in complementary infrastructure, increased transit ridership, or enhanced amenities for transit riders or motorists. Common joint development arrangements range from air-rights development to ground leases (also known as right-of-way use agreements), station interface, or connection improvements, cost-sharing arrangements, and incentive agreements. In addition to transit, joint development agreements have also been used to implement highway improvements and parking projects.
Joint development may also involve public sector land banking to prepare for transportation infrastructure construction or a public entity's sale of development or property rights in exchange for cash.
Impact fees are charges imposed on developers by municipalities to help fund additional public services, infrastructure, or transportation facilities required due to the new development. In California5 and Washington, impact fees are often known as mitigation fees; in Florida, as mobility fees; in Oregon, as system development charges; in Minnesota, as service availability charges; and in North Carolina, as facility fees. In States such as Kansas, Colorado, and Tennessee, impact fees are referred to as adequate facility taxes or excise taxes.6 Developer contributions are also sometimes known as fair-share fees.
Possible impacts of economic shocks on impact fees:
Transportation utility fees (TUFs) are periodic fees paid by a property owner or a renter/leasee to a municipality based on transportation system use. TUFs treat the transportation system like a utility, charging property owners or occupants for their share of transportation costs based on system use. “Use” is defined as the generation of trips, generally as estimated by the Institute of Transportation Engineers,7 and fees are based on an estimated number of trips generated by each land use.8 TUFs are also referred to as transportation maintenance fees, street maintenance fees, road use fees, pavement maintenance utility fees, or street utility fees.9
In a naming rights transaction, an agency sells the rights to name infrastructure to a private company or non-profit institution. This is similar to the sports facilities naming rights deals, which has recently boomed with over $1 billion in naming-rights revenue pledged from 2020 to mid 2021.10 This type of value capture does not have to involve a traditional real estate developer; it can involve any private company that is looking to advertise or enhance its brand.
2 This section draws from Value Capture: Capitalizing on the Value Created by Transportation Implementation Manual (FHWA 2019), https://www.fhwa.dot.gov/ipd/value_capture/resources/value_capture_resources/value_capture_implementation_manual/.
3 Vadali, Using the Economic Value Created by Transportation to Fund Transportation, National Cooperative Highway Research Program Synthesis 459, 2014, https://nap.nationalacademies.org/catalog/22382/using-the-economic-value-created-by-transportation-to-fund-transportation.
4 FHWA, “Joint Development,†https://www.fhwa.dot.gov/ipd/value_capture/defined/joint_development.aspx.
5 “Mitigation Fees for New Development,” Marina, CA, Municipal Code, https://www.codepublishing.com/CA/Marina/html/Marina03/Marina0326.html.
6 Mathur, Shishir and Adam Smith, “Transit Impact Fee: Enabling Statutes and Equity Concerns,” Transportation Research Record: Journal of the Transportation Research Board, No. 2346, Transportation Research Board of the National Academies, Washington, D.C., 2013, pp. 13-22.
7 FHWA, “Transportation Utility Fees,” Federal Highway Administration, Center for Innovative Finance Support, https://www.fhwa.dot.gov/ipd/value_capture/defined/transportation_utility_fees.aspx.
8 Turkley, Carole “Promises and Pitfalls of Transportation Utility Fees,” Presentation to the TRB 5th International Conference on Surface Transportation Financing, July 11, 2014, http://onlinepubs.trb.org/onlinepubs/conferences/2014/Finance/30.Turley,Carole.pdf.
9 Turkley, “Promises and Pitfalls of Transportation Utility Fees.”
10 Broughton, David “Naming-rights deals thrive: Despite the pandemic, new partnerships struck, with emerging categories leading the way,” Sports Business Journal, August 2, 2021. https://www.sportsbusinessjournal.com/Journal/Issues/2021/08/02/Portfolio/Sports-marketing.aspx.
