Strategies for using value capture to fund transit

By Mary Ebeling

Seventy-five percent of transit funding comes from state and local sources, pointing to a clear need to develop diverse revenue sources to support transit service. As vehicle miles traveled (VMT) continue to decline while transit use increases, the need for new revenues grows in importance. Recent work documents the results from communities utilizing value capture mechanisms shows the increased popularity of value capture strategies for funding the nation’s growing transit systems. Some of the larger value capture programs, such as the Washington Metropolitan Transit Authority program, have shown great success in both revenue generation and policy development to reduce VMT, manage congestion, and improve quality of life.

Positive impacts on property values associated with the development of transit infrastructure are well documented in the literature. Not surprisingly, transit systems and local governments are using value capture tools to assist with meeting necessary revenue targets and to maintain or expand their transit systems. Case studies show that the success of value capture strategies depends heavily on legal, policy, and local government structures. Many agencies with larger projects use a combination of value capture strategies to successfully generate revenues. Tax increment financing, special assessment districts, sale of air rights, and ground leases are proving the most lucrative.

The Charlotte Area Transit Authority (CATS), for example, is advancing a project with the North Carolina Department of Transportation (NCDOT) and a partnership of local governments to promote a regional light rail line known as the Red Line Light Rail. The partnership anticipates approximately 50 percent of the project costs will be paid through the value capture plan, and the remainder will be split evenly between CATS and NCDOT transit funds. Total project costs are currently estimated at about $500 million. The financing plan includes Special Assessment Districts and Tax Increment Financing districts to help fund the 25-mile rail project.

The Red Line Light Rail project, along with numerous other value capture and revenue enhancing strategies, is featured in an upcoming SSTI report on sustainable revenue sources, expected on the SSTI web site in July.

Mary Ebeling is a Transportation Policy Analyst with SSTI.