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

1. VALUE CAPTURE STRATEGIES
FOR TRANSIT
Nadine Fogarty
Principal/Vice President
Strategic Economics
September 23, 2014

2. 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

3. Steps to Develop a Value Capture Strategy
1. Demonstrating Value
2. Identifying Tools
3. Estimating Revenues

4. Demonstrating Value

5. Property Value Benefits of BART
San Francisco Bay Area, CA
BART
Station
Areas
2%
Land Area
Assessed Property Value
BART
Station
Areas
13%
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

6. 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%
BART Price Premium
Condominiums Single Family
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

7. EXAMPLE:
Downtown/Riverfront Streetcar Project
Sacramento and West Sacramento, CA

8. 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)
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
2013 2018 2023 2028 2033
Billions
Baseline Streetcar Benefit (Midpoint)
Streetcar
Opens

9. Property Value Benefit by City
Streetcar Benefit to Property Value as of 2035
in 3 Block Area (2013 dollars)
$14M $159M
$560M
$567M
$800
$600
$400
$200
$0
West Sacramento Sacramento
Millions
New Development
Existing
Development

10. Identifying Tools

11. 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

12. EXAMPLE:
Potential Central Subway Extension
San Francisco, CA
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

13. Estimating Revenues

14. Estimated Value Capture Potential
(Illustrative, not actual results)
$600
$400
$200
$0
Infrastructure
Financing District
Community Facilities
District
Special Assessment
District
Millions
Total Estimated Revenues (Current $) Estimated Financing

15. Estimated Annual Revenues
(Illustrative, not Actual Results)
Annual Revenues (Current $)
Infrastructure Finance District
Community Facilities District
Special Assessment District
Source: Strategic Economics, 2014.

16. 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

17. Thank you!