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Value Capture: Myth or Reality? Capturing the value of public transit investments can be a tricky business. Everybody has a vested interest. Everyone wants a piece of the pie. Value capture strategies include joint development, special assessment districts, tax increment financing and development impact fees. But how much of the value actually makes it back to the transit agency? Where have these strategies been successful and why? What does the FTA think about value capture? Explore the concepts of value capture, learn from real projects and hear the latest thinking directly from the FTA. Moderator: David M. Levinson, Professor, Center for Transportation Studies, University of Minnesota, Minneapolis, Minnesota Nadine Fogarty, Principal/Vice President, Strategic Economics, Berkeley, California Dan Ngo, Program Analyst, Federal Transit Administration, US Department of Transportation, Washington, DC John Howe, Vice President of Strategic Consulting, Parsons Brinckerhoff, Toronto, Ontario Presentation from Rail~Volution 2014
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VALUE CAPTURE STRATEGIES FOR TRANSIT
Nadine Fogarty Principal/Vice President Strategic Economics September 23, 2014
Q: Value Capture: Myth or Reality? A: Yes.
§ Limited use of value capture to date
§ Success stories thus far: § Streetcars
§ Infill stations
§ Extensions to existing lines
§ Major multimodal projects
Steps to Develop a Value Capture Strategy
1. Demonstrating Value
2. Identifying Tools
3. Estimating Revenues
Demonstrating Value
Property Value Benefits of BART San Francisco Bay Area, CA
BART Station Areas
2%
Land Area
BART Station Areas 13%
Assessed Property Value
EXAMPLE:
§ BART station areas generate $750 million each year in general property tax revenues for local governments; value in these areas is growing faster than the region as a whole
BART’s Residential Property Value Impacts
§ BART contributes an estimated $17.3 billion in added property value to for-sale residential properties in Alameda, Contra Costa, and San Mateo Counties
15.0%
10.4%
7.4%
1.3%
10.7% 9.6%
5.4% 4.6%
Within 1/2 Mile 1/2 to 1 mile 1 to 2 miles 2 to 5 miles
BART Price Premium Condominiums Single Family
Downtown/Riverfront Streetcar Project Sacramento and West Sacramento, CA
EXAMPLE:
Estimated Benefits for Property Owners $1.3 Billion in Additional Property Values by 2035
Growth in Property Values Over Time Existing & New Development within 3 Block Area
(2013 dollars)
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
2013 2018 2023 2028 2033
Bill
ions
Baseline Streetcar Benefit (Midpoint)
Streetcar Opens
Property Value Benefit by City
Streetcar Benefit to Property Value as of 2035 in 3 Block Area (2013 dollars)
$14M $159M
$560M
$567M
$0
$200
$400
$600
$800
West Sacramento Sacramento
Mill
ions
New Development
Existing Development
Identifying Tools
Value Capture Tools: The Devil is in the Details
§ Availability of tools varies from state to state
§ Who has the authority to implement tools, eligible transit uses, ability to issue bonds, etc. also differs
§ Tools are subject to changing laws and shifting legal interpretations
Potential Central Subway Extension San Francisco, CA
EXAMPLE:
Mechanism Revenue Source Voting Requirements Nexus Requirement? Infrastructure Finance District (IFD)
Increases in revenues from the existing property tax rate (tax increment)
2/3 of property owners or registered voters
No
Mello-Roos Community Facilities District (CFD)
Additional property assessment
2/3 of property owners or registered voters
No
Special Assessment District
Additional assessment (usually of property)
50% plus one of property owners (weighted by amount)
Size of assessment must be proportional to “special benefit” received by property owners
Development Impact Fee
One-time fee on new development
None May only be used to mitigate impacts on transit system caused by the new development
Estimating Revenues
Estimated Value Capture Potential (Illustrative, not actual results)
$0
$200
$400
$600
Infrastructure Financing District
Community Facilities District
Special Assessment District
Mill
ions
Total Estimated Revenues (Current $) Estimated Financing
Estimated Annual Revenues (Illustrative, not Actual Results)
Ann
ual R
even
ues
(Cur
rent
$)
Infrastructure Finance District
Community Facilities District
Special Assessment District
Source: Strategic Economics, 2014.
Key Takeaways
§ “Making the case” is key for value capture strategies
§ Start with the value proposition for property owners in the specific context, then consider the tools
§ Be realistic about market strength and development potential – timing of revenues is key for financing up front improvements
Thank you!