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!