Getting Our Money’s Worth: Using Value Capture to Fund Transit
near these investments commands higher prices, benefiting property owners and developers. Value capture is Value Capture Roundtable.jpg transportation investments are “captured” to repay the cost of the public investment. Value capture mechanisms , Atlanta, Ga., and Tysons Corner, Va., outside of Washington, D.C., are using value capture to generate capture financing tools to supplement traditional funding sources. What is value capture? Because well Getting Our Money’s Worth: Using Value Capture to Fund Transit , “Getting Our Money’s Worth: Using Value Capture to Fund Transit,” we explored how San Francisco Value Capture
TIFIA plays a critical role in funding transit
Value Capture
Development Impact Fees to fund transportation
Value Capture
Funding Transit with TIFsf
Value Capture
Value capture case studies: What is value capture?
San Francisco's Transbay Transit Center is being rebuilt using value capture financing mechanisms. By Chrissy Mancini Nichols Jan 23, 2012 This post first appeared at metroplanning.org At MPC’s November 2011 roundtable on innovative financing tools for transportation funding, the Brookings Institution’s Rob Puentes offered sage advice for elected officials and policy makers: “We’ve run out of money. It’s time to start thinking!” he said. Fifty-five years ago President Eisenhower signed the first federal transportation bill into law, spurring an unprecedented era of transportation construction. Today, most of that infrastructure has reached beyond its useful life, and returning it to a state of good repair – much less expanding it to serve a growing population and new economic realities – will require hundreds of billions of dollars. What’s more, as consumers continue to choose fuel-efficient vehicles over gas guzzlers, less frequent trips to the pump mean even fewer dollars to replenish the nation’s bankrupt Highway Trust Fund. With the advancement of the federal long-term reauthorization stuck in Congress, and no increase for traditional transportation funding sources like the gas tax on the table, it’s up to states, cities, and regions to think differently about how to fund transportation projects. One tool in the transportation funding toolbox is value capture. What is value capture? Because well-planned transportation investments increase people’s access to desirable destinations, locations near these investments command higher land prices, benefiting land owners and developers; studies of the Chicago region show a 10 percent to 20 percent increase in land values near transit stations. Value capture mechanisms are a type of public financing where increases in the private land values generated by public transportation investments are “captured” to repay the cost of the public investment. Using value capture mechanisms to finance new or existing transportation infrastructure connects the benefit of the infrastructure investment with the cost to provide it. Types of value capture mechanisms: • Tax Increment Financing: A special district created during a development period, where the tax base is frozen at the predevelopment level (on the assumption redevelopment would not occur in the area without public investment or intervention). Property taxes continue to be paid, but taxes derived from increases in assessed values (the tax increment) resulting from new development either go into a special fund created to retire bonds issued to originate the development, or leverage future growth in the district. • Land Value Tax: An additional tax solely on the land value of a property, without regard to improvements on the property. • Special Assessment: An additional tax or assessment on the full value of a property, usually paid by property owners within a defined district Special Assessment District or Special Service Area that benefits from the improvement. • Development Impact Fee: A one-time fee charged to a development based on a justifiable relationship between the impact of the proposed development and the improvements it makes. • Joint Development: A municipality or agency utilizes land it owns, often in the form of surface parking lots or excess rail right-of-way, for a redevelopment project and then shares profits. Value Capture Case Studies will highlight ways in which cities and regions across the country are using value capture mechanisms to fund transportation plans. These case studies will present novel learnings for the Chicago region as it grapples with how to pay for necessary transportation improvements. This series is intended to spur creative thinking and fresh ideas turning Chicago’s transportation plans into reality. Value capture case studies: What is value capture? San Francisco's Transbay Transit Center is being rebuilt using value capture financing mechanisms. Value Capture
Financing Transit with Special Assessment
By Chrissy Mancini Nichols Feb 3, 2012 This post first appeared at metroplanning.org Did You Know? Fourteen percent of Washington, D.C.’s Metrorail line extension to Dulles Airport will be funded through a voluntary special assessment on business and industrial property owners. Transit agencies across the country are facing severe budget challenges as infrastructure ages, demand increases, and new federal funding commitments are uncertain and even on the decline. To supplement fare box revenue and other traditional funding sources, one strategy to generate revenue for transit and improve the surrounding community is value capture. Value capture mechanisms are a type of public financing where increases in the private land values generated by nearby public transportation investments are “captured” to repay the cost of the public investment over time. Because transit investments increase surrounding land values, it is sound policy to use value capture strategies to pay for them. Numerous types of value capture strategies for transportation exist. The last edition of Talking Transit featured tax increment financing; this edition explores special assessments. A special assessment is an additional tax or assessment on the full value of a property, usually paid by property owners within a defined Special Assessment District that benefit from a specific public improvement. It can be used to fund a wide variety of infrastructure improvements including transit. One of the nation’s largest projects to use special assessment financing for transit is the Dulles Metrorail expansion in the Washington, D.C. region. The Dulles Corridor, located in northern Virginia west of the nation's capital, is home to Dulles International Airport and Tysons Corner, a massive retail shopping and employment center. Projections show that over the next 25 years, the population in the corridor will grow by 45 percent and employment by 63 percent. The increases in travel demand that correspond with this kind of growth will strain the already overburdened traffic system, resulting in more gridlock, environmental degradation and threatening local economic opportunities and livability. As part of the solution to maintain the corridor’s quality of life and regional competitiveness, the Washington Metropolitan Area Transit Authority (WMATA) is constructing a 23-mile extension of the existing Metrorail system to Dulles Airport, serving Tysons Corner and the communities of Reston and Herndon, two of the region’s other major employment centers. The extension is estimated to cost $5.2 billion and will be built in two phases. Because the rail expansion will benefit businesses in the corridor and their customers, commercial landowners petitioned to establish a special assessment district to fund the local share of Phase 1 and 2 construction. During Phase 1, commercial and industrial (not residential) real estate in the assessment zone around Tysons Corner will be charged an additional 22 cents per $100 of assessed value (in addition to normal property taxes). There is a $400 million cap on the amount that can be raised through the Phase 1 special assessment. Phase 2, which will build the line through Reston and Herndon and to Dulles Airport, will be funded in part with a special assessment of five cents per $100 of assessed value in the Phase 2 zone in 2010, rising to 20 cents per $100 of assessed value in 2013. The Phase 2 special assessment is capped at $330 million. Importantly, these funds generated by the special assessment districts in Phase 1 and 2 will cover the local match needed to leverage federal dollars and service debt. Dulles is not the only special assessment district for transit in the D.C. region. The city implemented a special assessment district around the New York Avenue metro rail station, contributing $35 million of the $110 million total cost. And it paid off: The area was transformed into a vibrant neighborhood with mixed-use housing, shops, restaurants, and a farmer’s market. Assessed value of the area increased from $535 million in 2001 to $2.3 billion in 2007. More than 15,000 jobs have been created and $1.1 billion in private dollars invested. Realizing the economic benefit they would receive from the investment in the South Lake Union Streetcar, 750 property owners in Seattle approved a special assessment district to provide $25 million, half of the total capital costs to build the streetcar. Construction of Portland’s initial 4.8-mile streetcar totaled $87 million, most of it coming from local funds including $14.6 million in a one-time special assessment imposed on businesses within the district. Interestingly the additional levy assessed for each property was defined based on their size and proximity to the line. The availability of local funds meant construction moved quickly avoiding the lengthy federal funding process. Illinois law permits special assessments on property taxes via two mechanisms, special service areas (SSA) (35 ILCS 200/27) and special assessment districts (SA) (65 ILCS 5/9). Both allow a governing body to levy additional real estate taxes to fund additional services in a defined area rather than the entire community. The establishment of an SA in Illinois is a complicated process in which a municipality must demonstrate a specific benefit to property owners who will pay the assessment. SAs are most often used to finance debt service on bonds used to pay for the cost of public infrastructure in new developments. To establish an SSA a local government must notify all affected taxpayers of the proposed SSA ordinance by mail and hold a public hearing. Land owners in the proposed SSA can defeat the ordinance by submitting a petition within 60 days of the public hearing signed by at least 51 percent of registered voters and 51 percent of property owners residing in the proposed SSA. If no opposition arises, the ordinance is adopted by a simple majority vote by the local governing body. The City of Chicago contracts with local nonprofits to manage SSAs. There are 44 active SSAs in Chicago with budgets ranging from $10,000 to $2.7 million and an average budget of $540,000. Funds are used to finance a range of projects from streetscaping to planning. During a time when our cash-strapped transit agencies are searching for ways to stretch every dollar – and experiencing increased demand for their services - special assessment districts along transit corridors are an innovative financing strategy. Examples from across the country prove that homeowners and businesses will pay more for access to transit in their communities. Locally, the Regional Transportation Authority has offered some suggestions on using special assessments to fund transit station development and transit-oriented development through the creation of special “corridors” along a transit line. The Chicago Metropolitan Agency for Planning also has called for pursuing this strategy in its GOTO 2040 comprehensive regional plan for the Northeastern Illinois. Value Capture
Value Capture Case Studies: Atlanta BeltLine
project is another great example of how value capture mechanisms can be used to fund a significant Value Capture Case Studies: Atlanta BeltLine By Chrissy Mancini Nichols Mar 1, 2012 This post first appeared at metroplanning.org Value Capture Case Studies is an ongoing series highlighting ways in which cities and regions across the country are using value capture mechanisms to fund transportation plans. These case studies present novel learnings for the Chicago region as it grapples with how to pay for necessary transportation improvements. Each post will focus on real-life examples of value capture mechanisms at work. To learn more about the basics of value capture read: Value capture case studies: What is value capture Value capture mechanisms referenced in this post: • Tax Allocation District (similar to Tax Increment Financing) Atlanta is widely known for its traffic gridlock and suburban sprawl. Over the last few decades, growth in region’s low-density suburbs has extended greater metropolitan Atlanta’s reach nearly to Chattanooga, Tenn. The average commuter in Atlanta spends 127 minutes on the road every day or more than 10.5 hours each week. This pattern of growth has resulted in unbalanced development and congested roads, and has strained the region’s economy and quality of life. Absent a plan to manage future growth, traffic gridlock will only get worse as the region is expected to gain 3 million people and 1.6 million jobs by 2040. Recognizing that Atlanta’s economic future was dependent on counteracting sprawl and reducing congestion, in 2005 the Atlanta City Council, Fulton County Board of Commissioners, and Atlanta Public School Board of Education approved the Atlanta BeltLine Redevelopment Plan, a comprehensive redevelopment and mobility project that will build a network of public parks, multi-use trails, workforce housing and transit. The BeltLine will increase the overall health and livability of the entire region over the next several decades, by targeting growth to infill areas in the south and west near transit and open space. The $2.8 billion BeltLine is the most ambitious public works project in the city’s history and one of the largest and most comprehensive urban redevelopment efforts underway in the United States. It will connect people with place – specifically, Atlanta’s urban core. The $2.8 billion budget will build: • Transit: A 22-mile loop of rail transit, using mostly abandoned former rail lines, through 45 neighborhoods surrounding Atlanta’s urban core, with anticipated daily ridership of 73,000 people; • Trails: A 33-mile network of multi-use trails; • Parks: Nearly 1,300 acres of new parks and green space that will increase Atlanta’s total green by nearly 40 percent; and • Affordable workforce housing: More than 5,600 new units of affordable workforce housing. In total, the 6,545 acres of redevelopment (approximately seven percent of the city’s land area) will create more than 29,000 new housing units, 30,000 new permanent jobs, 48,000 temporary construction jobs, 5.3 million sq. ft. of office space, over 1.3 million sq. ft. of retail space, and 5.2 million sq. ft. of industrial space. The project is funded through philanthropic, and local, state, and federal public funds, including $1.7 billion in Tax Allocation District (TAD) dollars. Created in 2005 as part of the redevelopment plan, the 6,500 acre BeltLine TAD is the primary local source of funding for the project and operates the same way as a tax increment finance (TIF) district. Atlanta BeltLine Inc., in partnership with the City of Atlanta, is the entity tasked with managing, securing funding and implementing the Atlanta BeltLine. Spending of BeltLine TAD bonds is approved by the Atlanta City Council, who approved the Atlanta BeltLine Redevelopment Plan with extensive community engagement and input. The redevelopment plan outlines the 25-year vision for the project. In July 2006, Atlanta City Council approved the BeltLine Five-Year Work Plan, including priorities, goals, organizational structure, and a $427 million budget for the project’s first five years. As part of the Community Engagement Framework authorized by the BeltLine legislation, the Tax Allocation District Advisory Committee (TADAC) was created to advise on how TAD funds are used. This committee is comprised of technical experts and community leaders and is managed through Atlanta BeltLine, Inc. The TADAC makes recommendations to the Atlanta Development Authority and the City on the issuance, allocation and distribution of tax allocation proceeds within the BeltLine Development Area; monitors the effective and equitable distribution of the BeltLine Redevelopment Plan; and measures the impact of the BeltLine. How the Atlanta BeltLine’s TAD works TIF financing (TAD and TIF are used interchangeably in Atlanta) is a useful value capture funding mechanism for promoting community development without raising taxes. A TIF district is created early in the development period, when the area is still considered “blighted” or economically depressed. The tax base is frozen at the predevelopment level, with the assumption redevelopment would not occur in the area without public investment or intervention. Property owners continue to pay taxes, but the “tax increment” – tax revenues derived from increases in assessed values that result from new development – is either funneled into a special fund created to retire bonds issued to finance the development, or is used to leverage continued community revitalization by attracting additional private investment. As new development occurs on the BeltLine, spurred by the public investment in transit, open space, and affordable housing, land values will increase generating additional property tax revenue. Beginning in 2005, all of the incremental property tax revenue from that new development will go into the BeltLine TAD fund. It will be used to pay off the principal and interest on the bonds issued to fund the capital investments in the BeltLine over the 25-year project period. Property taxes in the City of Atlanta are split between the City, Fulton County, and Atlanta Public Schools, who all approved the TAD. They also agreed to continue to receive the same 2005 level of property tax revenue within the BeltLine TAD for the next 25 years, at which point the TAD will expire. It’s a win for the three government entities: Land in the BeltLine TAD was comprised of parcels of underutilized or abandoned industrial properties that did not generate considerable property tax revenues (the TAD boundaries were created to avoid the inclusion of existing single-family homes). When the TAD expires after 25 years, they will receive the entire tax revenue generated by properties within the BeltLine TAD, but at a tax base projected to be approximately $20 billion higher than in 2005, as a result of the redevelopment associated with the BeltLine. How will TAD funds be spent? The Atlanta BeltLine Redevelopment Plan guides spending of BeltLine TAD bonds. The money will be used to invest in land acquisition, trails, green space, brownfield cleanup, transit, and transportation improvements. The Atlanta City Council requires that 15 percent of TAD bond proceeds are set-aside to capitalize a housing trust fund that will build 5,600 affordable workforce housing units in the corridor. The new affordable housing units are intended to ensure working families can afford to live near the BeltLine; the units will be marketed to service sector workers, including firefighters, police officers, teachers and nurses. To keep housing costs within reach for middle-class families, the Atlanta Land Trust Collaborative (ALTC) is working to establish community land trustsin the projectarea. These trusts will keep homes prices attainable by separating the price of homes from the price of the land that are built upon. The trusts buy and hold land permanently, while allowing the homes themselves to be bought and sold by residents with limited incomes. Schools in the Atlanta BeltLine TAD also will benefit directly by the project, with $10 million in funding for construction of recreational facilities or athletic fields at school sites, subsidized or free transit rides for APS students, and $150 million for educational programming paid in $7.5 million installments in years six through 25 of the life of the TAD. To date, several trails and parks have opened to the public, which will serve to attract new development that will provide the necessary density to support transit. TAD bond proceeds provided $8.8 million in capital to seed the BeltLine Affordable Housing Trust Fund. Right of way acquisition and transit design and engineering is underway. The first leg of transit is projected to start running by 2015. Heath Impacts To better understand the health impacts of Value Capture
Value Capture Case Studies: Portland’s Cascade Station and Light Rail to PDX
By Chrissy Mancini Nichols Mar 26, 2012 This post first appeared at metroplanning.org Value Capture Case capture mechanisms referenced in this post: • Joint Development • Tax Increment Financing Portland’s about the basics of value capture read: Value capture case studies: What is value capture? Value Value Capture Case Studies: Portland’s Cascade Station and Light Rail to PDX Value Capture are using value capture mechanisms to fund transportation plans. These case studies present novel improvements. Each post will focus on real-life examples of value capture mechanisms at work. To learn more
Value Capture Case Studies: Washington, DC Metro expansion to Dulles Airport
Value Capture Case Studies: Washington, DC Metro expansion to Dulles Airport about the basics of value capture read “Value capture case studies: What is value capture?” Value By Chrissy Mancini Nichols pr 12, 2012 This post first appeared at metroplanning.org Value Capture Case projects to use value capture financing is the Dulles Metrorail expansion in the Washington, D.C Value Capture are using value capture mechanisms to fund transportation plans. These case studies present novel improvements. Each post will focus on real-life examples of value capture mechanisms at work. To learn more
Value Capture Case Studies: San Francisco’s Transbay Transit Center
about the basics of value capture read: Value capture case studies: What is value capture Value Value Capture Case Studies: San Francisco’s Transbay Transit Center Transit Center, office tower, and surrounding neighborhood is a great example of using value capture mechanisms By Chrissy Mancini Nichols Jan 27, 2012 This post first appeared at metroplanning.org Value Capture Case Value Capture are using value capture mechanisms to fund transportation plans. These case studies present novel improvements. Each post will focus on real-life examples of value capture mechanisms at work. To learn more
Value Capture Case Studies: Denver’s Historic Union Station
By Chrissy Mancini Nichols Apr 19, 2012 This post first appeared at metroplanning.org Value Capture Case capture mechanisms referenced in this post: • Tax Increment Financing The word “no” was not an option about the basics of value capture read “Value capture case studies: What is value capture?” Value Value Capture Case Studies: Denver’s Historic Union Station Value Capture are using value capture mechanisms to fund transportation plans. These case studies present novel improvements. Each post will focus on real-life examples of value capture mechanisms at work. To learn more
Chicago gets $10 billion in transit projects
Area” in Illinois, this financing is a value capture mechanism— a type of public financing where transit, repaid with similar value capture financing. Five years ago I held a roundtable on value capture to fund transit, bringing in leaders from Washington, D.C., Atlanta and San Francisco, all Value Capture
How an idea becomes a law: Chicago’s new Transit TIF
construction? Many were using a finance mechanism called value capture or Transit TIF—Denver, San how Transit TIF financing worked in those cities. I Held roundtables on value capture to fund Value Capture
A look at the CTA pass price increase
. Further, innovative financing tools such as public-private partnerships and value capture instruments using value capture tools to generate revenue to improve transit service and transform communities. Of
President’s proposed budget would boost transit; states not waiting on Washington
new financing solutions, such as the infrastructure trust, value capture and variable-priced parking
New fuel economy standards reinforce need for a more sustainable approach to transportation funding
tools such as public-private partnerships and value capture instruments can supplement these funding
Transit stations as destinations pay economic dividends
front future station improvements through value capture financing. Cities across the globe are Value Capture
Atlanta votes no on solving traffic congestion, What’s next?
billion in value capture to fund the $2.2 billion project. Perhaps the T-SPLOST vote is another
It takes an entire year for Chicago to grow as much as Nashville does in one day
invest more in transit is leveraging value capture. Atlanta, Denver, New York City, Washington, D.C occurring, Nashville could institute a value capture for transit district to fund new and better bus and . and San Francisco all use innovative financing mechanisms like value capture to reap the benefits of
What if Chicagoland grew like Minneapolis, Indianapolis, Atlanta or Seattle?
York City, Washington, D.C. and San Francisco all use innovative financing mechanisms like value capture to reap the benefits of increases in private land values generated by public transportation
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