Best planning and implementation toolbox

Land Use and Public Value Capture:

Purpose of Tool:
Public value capture, also known as land value capture, is a method of financing for capital infrastructure in which an increase in private land value generated by public projects or investments is “captured” through a land tax. The levied tax is used to help to pay for the project or investment that is constructed in the “benefit area”. This method is most often used as an alternative approach to traditional types of financing for transportation and infrastructure projects.

Generally, land values are determined by the value of goods and services that are available to them on neighboring sites and/or by the desirability of their surroundings. As “community interventions” are made through the construction of public works projects, as opposed to private landowner actions, adjacent property owners benefit because the value of their land goes up. This increase in land value to neighboring land owners is potentially a windfall profit for the private landowners since they benefit at the expense of the public investment. Public value capture returns to the public the wealth that is primarily created through the initial public investment through measures such as taxes, fees, or exactions.

Benefits of Using Tool:

The DART Mockingbird Station is a 10-acre mixed-use, transit-oriented development in North Dallas located five miles from the City’s downtown. The compact site is filled with shops, offices, and rental lofts. A busy commuter hub, the community also offers residents and employees the option of taking a train rather than driving. This light rail transit-oriented development (TOD) has significantly increased land values and encouraged the expansion of commercial development surrounding it. The increment of increased property taxes generated in this area has been applied to fund future public transit improvements at the station and elsewhere in the DART system.

Image Source: Barbara Ballinger, Aug 25, 2008, Online: http://www.developeronline.com/full-steam-ahead-a-cutting-edge-transit-oriented-development-transforms-a-suburban-downtown-neighborhood-in-dallas/
Public value capture is beneficial to communities because:
  • Public agencies are able to claim part or all of the value created by investments they make in communities
  • It helps to finance infrastructure or other public improvements through property-owner contributions
  • As public works improvements are made, economic development is encouraged

    Steps Involved to Use Tool:
    Methods for public value capture are typically implemented at the local level. Primarily, there are three types of arrangements that are used to implement these methods for transportation purposes, including:
  • Transportation Development Districts (TDD)
  • Transportation Improvement Districts (TID)
  • Tax Increment Financing (TIF) Districts, also known as Tax Allocation Districts (TADs).

    Other methods that can also be utilized include:
  • Local improvement districts
  • Split-rate property taxes, which are separate taxes for land and for buildings
  • Rezoning and reselling - in areas where zoning is used, agencies buy land that is zoned for low-density, rezone for a higher density, and sell on the open market
  • Traffic impact fees
  • Special assessment taxes
  • Development impact fees
  • Exactions, user fees, or developer contributions
    In many states, mechanisms for public value capture require the approval of the affected property owners. For this reason, it is important to build support for the proposed method of value capture.

    Special Requirements to Use Tool:
    The value capture mechanism must be in place prior to the improvement that is being made. If zoning is used, this must already be in place as well. In addition, there may be other state and/or local requirements in order to implement these measures.

    Specials Resources Needed to Use Tool:
    There are no additional resources required to use this tool.

    Communities / Agencies that Have Used Tool:
  • Loudoun County, Virginia: In 1987, the Route 28 Highway Transportation Improvement District was created to provide improvements to State Route 28, which connects Loudoun County to Fairfax County, Virginia. This value capture allowed for accelerated highway improvements as opposed to slower, pay-as-you-go financing that would have been relied on otherwise.  Contact:

    Loudoun County Planning Department
    703-777-0246
    1 Harrison Street SE
    P.O. Box 7000
    Leesburg, VA, 20177
    dop@loudoun.gov

  • Southern California Rapid Transit District (Los Angeles): In 1985, two benefit districts were formed by the Southern California Rapid Transit District, now the LA County Metropolitan Transportation Authority, in order to help fund Segment I of the Metro Red Line. Within each district, zones were created and each had assessment fees that were graded according to how close they were to the transit station. Contact:

    Los Angeles County Metropolitan Transportation Authority Administrative Offices
    1 Gateway Plaza
    Los Angeles, CA, 90012
    213-922-6000

    Metrics to Use to Monitor Tool Effectiveness:
    The majority of the published studies involving public value capture focus on the impacts of transit facilities on the surrounding property value. These studies show that the use of public value capture methods is typically a successful method of financing infrastructure improvements.

    List of Resources to Obtain Additional Info:
    For more information on public value capture, please see:
  • “Using Value Capture to Finance Infrastructure and Encourage Compact Development,” Rick Rybeck, Deputy Administrator, Transportation Policy & Planning Administration, District Department of Transportation. http://www.njrati.org/files/technology%20transfer/conferences/portland/updatedPDFs/Portland_Rybeck.pdf
  • “Value Capture: How to Get a Return on the Investment in Transit and TOD,” Gloria Ohland, Vice President for Communications, Reconnecting America Center for Transit-Oriented Development. http://www.drcog.org/documents/ValueCaptureTOD.pdf
  • “Value Capture for Transportation in Minnesota,” Zhirong (Jerry) Zhao, Hubert Humphrey Institute of Public Affairs. http://citizensleague.org/events/Value%20capture%20-%20Jerry%20Zhao%205.5.08.pdf
  • “Financing Transit Systems Through Value Capture: An Annotated Bibliography,” Jeffrey J. Smith and Thomas A. Gihring, American Journal of Economics and Sociology, July, 2006. http://findarticles.com/p/articles/mi_m0254/is_3_65/ai_n27009308
  • U.S. Department of Transportation Section 1909 Commission Briefing Paper 5A-11, “Evaluation of Impact Fees and Value Capture Techniques,” AECOM, Inc., January 19, 2007. http://transportationfortomorrow.org/final_report/pdf/volume_3/technical_issue_papers/paper5a_11.pdf