Value capture

From HousingWiki
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Value capture is a type of public financing that recovers some or all of the value that public infrastructure such as transit generates for private landowners. The concept may also be applied more generally to methods of capturing the value gain that result from upzoning or any change in the environment that is not attributed to actions of the landowner -- this is also called Land value tax.

Description

"Public investments, such as building transportation or sewer facilities, can increase adjacent land values, generating an unearned profit for private landowners. The unearned value (increases in land value which otherwise profit private landowners cost-free) may be "captured" directly by converting them into public revenue (see Georgism). Thus, value capture internalizes the positive externalities of public investments, allowing public agencies to tax the direct beneficiaries of their investments.

"Urban planners and finance officials are often interested in value capture mechanisms, for at least two reasons: 1) because they offer a targeted method to finance infrastructure benefiting specific land, and 2) because some such investments can generate private investment in the area, which will more widely benefit the city (e.g., by providing employment opportunities, shopping and other amenities, and a more robust and diverse tax base.) It can be politically useful to capture for the city treasury a share of the positive externalities of city-financed investment. This can help address public concern about the fact or perception of unfair windfalls when specific owners’ land values increase after urban infrastructure investment is paid from general city revenues.

"Although it is not always talked about as such, the most common value capture mechanism is the general real property tax, with no special features other than regular assessment of market value; this is because the common real estate tax includes the less known land value tax. The value of any given land is determined by its proximity to various amenities (both public and private). Thus, for example, when a new subway station or highway interchange is installed, land near the new facility becomes more valuable. Investment in capital improvements to land can synergistically generate capital investment in other nearby locations, which further increases land value. Thus, even if the rate of taxation does not change, the tax revenue generated from properties which benefit goes up by way of higher land values and increased development. The effectiveness of value capture depends, of course, on a smoothly functioning ad valorem property or land value tax system, with regularly updated assessments."

 

Application to proposed California legislation SB 827, Transit Zoning Bill 

Schweitzer, Lisa. "What I’d fix about SB827, aka that white paper has sooooooo been written already."  02/09/2018. 
https://lisaschweitzer.com/2018/02/09/what-id-fix-about-sb827-aka-that-white-paper-has-sooooooo-been-written-already/. 

"Since we are with SB827 setting up special districts around transit stations anyway, we should set up them up special assessment districts, use the transit-value and up-zone value in land appreciation to derive revenues to put into a fund for: a) rental vouchers; b) school districts with new student need from the new developments and c) transit operations and support."  

on general idea of taxing land value, Schweitzer notes: 

Henry George, Progress and Poverty. 1879. http://www.econlib.org/library/YPDBooks/George/grgPPCover.html.

LA Times op-ed by UCLA professors: 
Michael Manville, Paavo Monkkonen, and Michael Lens (2017). "A better way to solve the housing crisis—tax land, not development." LA Times, JUL 19, 2017.
 

SOOOOOOoo is there any info on the value capture strategy of which you speak? Yes! Yes there is! It has been bigily studied and described! It’s been implemented I places. It’s been evaluated

There’s this big huge lineup of reports from researchers at the University of Minnesota.


[Center for Transportation Studies, University of Minnesota. "Value Capture for Transportation Finance." 2008-2010.]

There’s this discussion The Man Himself David Levinson writing for CityLab.

[Levinson, David. "How to Make Mass Transit Financially Sustainable Once and for All." CityLab, JUN 5, 2014.]
 

This friendly brief from APTA! 

[American Public Transportation Association (2015). "Value Capture for Public Transportation Projects: Examples." August 2015.]

This friendly informer from the High Speed Rail Advocacy folks.


[Center for Transit-Oriented Development. "Capturing the Value of Transit." November 19, 2008.
"The Center for TOD is a partnership of the national nonprofit Reconnecting America, the Center for Neighborhood Technology, and Strategic Economics, an urban economics firm in Berkeley, CA."]
 

This nice summary paper from an open access journal.

[Zhao, Zhirong, Michael Iacono, Adeel Lari, and David Levinson (2012). "Value Capture for Transportation Finance." Procedia - Social and Behavioral Sciences. [open access]. 

Abstract
"Value capture seeks to generate revenue by extracting a portion of the gains in the value of land that result from improvements to transportation networks. In this paper we identify value capture strategies, including land value taxes, tax increment financing, special assessments, transportation utility fees, development impact fees, negotiated exactions, joint development, and air rights. We evaluate each of the policies according to four criteria: efficiency, equity, sustainability, and feasibility. The value capture concept is placed within a more general framework of transportation finance that emphasizes the relationship between different types of charges and groups of beneficiaries from transportation investments."]
 

This nifty book from the Transportation Research Board (a secret Illuminati organization if there ever was one).

[Transportation Research Board (2016). "Guide to Value Capture Financing for Public Transportation Projects."
     "TRB's Transit Cooperative Research Program (TCRP) has released Research Report 190: Guide to Value Capture Financing for Public Transportation Projects. Value capture is the public recovery of a portion of increased property and other value created as a result of public infrastructure investment. The report identifies the requirements necessary for successful value creation through transportation infrastructure investment and capturing a portion of that value through specific value capture mechanisms. It includes six case studies that provide practical examples of successful value capture from public transportation investments."]
 

This awesome report from Brookings.

[David M. Levinson and Emilia Istrate. "Access for Value: Financing Transportation Through Land Value Capture." Brookings, April 2011. 
https://www.brookings.edu/wp-content/uploads/2016/06/0428_transportation_funding_levinson_istrate.pdf.

Abstract:
"The worsening financial straits of governments at all levels pose a significant challenge to discretionary programs, such as transportation. The United States transportation system must become more efficient if it is to provide the same level of services with less money at all levels of government. At the same time, the competitive forces in the global economy require an increasingly effective U.S. transportation network, able to support a changing American economy. This study examines accessibility and its importance in assessing transportation performance and in creating a sustainable transportation funding source. It first delineates the concept of accessibility through a comparison with the common transportation performance metric of mobility. The paper then explains how accessibility can help fund transportation through a virtuous circle of access, land value, and transportation infrastructure. Local, state, and federal governments must better understand the structure and characteristics of value-capture policies if they are to develop their full potential as a sustainable funding source." ]
 

This cool study on TOD Value Capture in Massachusetts.

Strategic Economics (2017). "Expanding the Use of Value Capture for Transportation and TOD in Massachusetts." 
January 20, 2017. prepared for Metropolitan Planning Area Council (MAPC), City of Somerville, Barr Foundation, A Better City.

"The study examines the Commonwealth’s current value capture tools, drawing on examples from around the country, as well as interviews with 35 state, regional and local officials. The study also considers the potential for value capture through five case studies of transportation and TOD projects currently planned or underway in Massachusetts. Based on this research, the study recommends a number of ways in which Massachusetts laws, policies, and regulations could be changed in order to encourage broader use of value capture for transportation and TOD infrastructure generally, with a special focus on transit. This executive summary provides an overview of key findings and recommendations from the report, and is organized into the following sections:

  • Massachusetts’ Infrastructure Needs: Describes the types of transportation and TOD-supportive infrastructure that the Commonwealth, cities, and towns are expected to prioritize in the coming five to ten years, and that are the focus of this study.
     
  • Overview of Value Capture Tools: Reviews the types of value capture tools that are used around the country, as well as the tools that are authorized for use in Massachusetts.
     
  • Considerations for Implementing Value Capture: Describes the conditions that are required for the successful use of value capture, in the context of the specific fiscal and governance issues that shape the use of value capture in the Commonwealth.
     
  • Common Uses of Value Capture in the U.S. and Massachusetts: Discusses the ways in which value capture is currently used, both nationally and in Massachusetts.
     
  • Recommendations: Provides a series of recommendations for action by state and local governments for expanding the use of value capture to pay for transportation and TOD in Massachusetts, with a focus on transit capital improvements and operations."

 

This little blurb from Smart Growth California folks at SCAG who have a really helpful discussion of tools that may be used in California!

Southern California Association of Governments. "Value Capture" [section on web site]. http://iff.scag.ca.gov/Pages/ValueCapture.aspx. Accessed 10 Feb 2018.

"Value capture is not one thing but a bundle of tools that raise revenue by capturing the value generated by public infrastructure improvements and/or a strong or strengthening real estate market. Value capture can entail the creation of a new assessment, tax, or fee (such as a special localized tax or development impact fee), the diversion of new revenues generated by an existing tax (as in tax increment financing), or a revenue-sharing agreement that allows a government agency to share in some of the revenues generated by developing publicly owned land (known as joint development).

  • Redevelopment Tax Increment Financing
  • Development Impact Fees
  • Infrastructure Finance District
  • Special Assessment District
  • Mello-Roos Community Facilities District
  • Development Agreements
  • Joint Development
  • Private Transaction/Transfer Fee" 

 

This fantastic report from the Lincoln Land Institute. That has a GREAT submission from Mr. Windfalls for Wipeouts Himself, Dean J. Misczynski, who first published (brilliantly) about this particular topic in 1978.

Dean J. Misczynski, Dean J. "Special Assessments in California: 35 Years of Expansion and Restriction." 
in: Ingram, Gregory K., and Yu-Hung Hong, editors (2012). "Value Capture and Land Policies: Proceedings of the 2011 Land Policy Conference." Lincoln Institute of Land Policy, 2012.  
 

From FHWA here.

Federal Highway Administration. "Value Capture" (web site section). https://www.fhwa.dot.gov/ipd/value_capture/.
Subsections: 

  • Value Capture Defined
  • Sources and Tools
  • Legislation
  • Resources
  • Project Profiles
  • Contact Us
  • Value Capture A-Z
     

We might, for example, just tweak this approach a bit.

[California's new Enhanced Infrastructure Funding District (EIFD) system. 

Kaufman, Rachel. "New California Financing Twist Could Help L.A. River Makeover." Next City, FEBRUARY 5, 2015.
https://nextcity.org/daily/entry/new-california-funding-tool-eifd-financing-la-river-makeover.
 

Some private consultants have been working on this VERY IDEA in affordable housing!

David Paul Rosen & Associates. "Tax Increment Financing."

David Paul Rosen (2011). "Out of the Wreckage: A New Agenda for Affordable Housing in California." 
California Housing Conference: CRA/CalALHFA - Keynote Address).  See slide 45 onward for value-capture proposal - proposed successor system to Redevelopment Agencies. 
 

OH BOY OH BOY IT’S GOT ITS OWN WIKIPEDIA PAGE!! (A little light; David L, go fix it. )

https://en.wikipedia.org/wiki/Value_capture.

"Value capture is a type of public financing that recovers some or all of the value that  https://en.wikipedia.org/wiki/Public_infrastructure public infrastructure  generates for private landowners.

Public investments, such as building transportation or sewer facilities, can increase adjacent land values, generating an unearned profit for private landowners. The unearned value (increases in land value which otherwise profit private landowners cost-free) may be "captured" directly by converting them into public revenue (see Georgism). Thus, value capture internalizes the positive externalities of public investments, allowing public agencies to tax the direct beneficiaries of their investments.
 

New York City is eyeballing it.

Irvin Dawid. "Value Capture Takes Prominent but Controversial Role in Fixing New York Subway." Planetizen, January 31, 2018.
   "Value capture, collecting tax increment from subway adjacent properties to help provide money needed to repair the 114-year old subway system, is proposed by New York Gov. Andrew Cuomo and opposed by the New York City Mayor Bill de Blasio."

"Value capture is “the solution of the moment,” said Kathryn S. Wylde, the president and chief executive of the Partnership for New York City, an influential group of business leaders."
 

And of course, the very nice VTPI Report from Jeffery J. Smith and Thomas A. Gihring, which is a GIGANTICALLY LARGE annotated bibliography. 

Jeffery J. Smith and Thomas A. Gihring, with Todd Litman. "Financing Transit Systems Through Value Capture: An Annotated Bibliography." Victoria Transport Policy Institute, 27 February 2017.

"This paper summarizes the findings of more than 100 studies concerning the impacts transit service has on nearby property values, and the feasibility of capturing a portion of the incremental value to finance transit improvements. The results indicate that proximity to transit
often increases property values enough to offset some or all of transit system capital costs."
    A shorter version of this paper was published as,
“Financing Transit Systems Through Value Capture: An Annotated Bibliography.” American Journal of Economics and Sociology, Volume 65, Issue 3, July 2006, p. 751. 
 

 

References

 

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