Value capture (VC) is a mechanism for generating revenue to pay for transportation system improvements by collecting fees or taxes on the increased value of land or economic activity served by those improvements. Investments in new or enhanced facilities such as highway interchanges and transit stations improve access and generate commercial activity, reduce costs, or otherwise enhance the locational advantages of a geographic area. Capturing a portion of the increased value—typically through supplementary property taxes, incremental sales taxes, developers’ payments, or other exactions—can be an instrumental component of the funding needed to undertake the project. As a public-sector funding tool, VC mechanisms can be crucial to feasibility and can accelerate project delivery.
Many local and regional transportation agencies have used VC mechanisms, but for state departments of transportation (DOTs) the practice is relatively rare. Few states have legislation in place to enable use of VC. The best-known examples of successful VC involve major real-estate developments in metropolitan areas, for example for transit stations or highway interchanges serving large commercial and employment centers. Such examples typically entail not only analyses of project economics and design of revenue instruments, but also forming of partnerships of private and public entities, and legislation and other provisions to enable creation and enforcement of the VC mechanisms.
A body of literature has developed describing VC and analyzing specific applications in transportation. NCHRP Synthesis 459: Using the Economic Value Created by Transportation to Fund Transportation (2014) described nine VC mechanisms used by transportation agencies across the United States. The synthesis highlighted the need for decision tools to aid implementation. Implementing VC mechanisms equitably and legally depends on agencies’ capabilities to estimate such factors as the impacts of transportation improvements, the areas likely to be affected, and the likely timing of changes in economic activity or property values. Research is needed to provide guidance and analysis methodology to assist DOTs and others to determine when VC may be effective and to apply appropriate VC mechanisms in particular situations.
The objective of this research is to develop guidance for DOTs, state policy makers, metropolitan planning organizations, development agencies, local government agencies, and others on the use of VC for funding transportation system improvements, including replacements and renewals as well as development of new facilities. The guidance will build on the results of NCHRP Synthesis 459 and address at least the following topics:
a. Framework for considering how VC may be useful as a funding mechanism in particular settings—empirical evidence of value enhancement; typical legislative and regulatory limitations and incentives; model inter-governmental relationships; interests and concerns of elected officials, directly-involved stake-holders, and the general public; business perspectives on VC; application of VC for funding of life-cycle costs in single-mode and multi-modal settings
b. Options for applying VC and the obstacles and opportunities associated with such options —necessary legislative actions, potential use of VC funds in bonding to finance system improvements, partnerships with developers and other business interests, local land-use and zoning regulations to facilitate VC implementation
c. Methodology for developing practical VC applications—identifying the geographic extent of value enhancement; estimating value increases, cost reductions, and other sources of VC potential; identifying critical parameters in determining appropriate VC options; data needed to develop VC options and administer VC through implementation and beyond
d. Critical case-study examples of VC application—including a variety of actions taken to apply VC and enable funding success over time, critical concerns, and lessons learned
STATUS (June 2016): The initial meeting between the NCHRP project panel and the research team is pending.