Capturing value for transit improvements

By Mary Ebeling
A new transportation enhancement fund assessment on real estate developers in Cambridge, Massachusetts’ Kendall Square will help fund transit improvements in that area, including possible enhancements to the Red Line Kendall/MIT station. Some at the MBTA are looking at Cambridge’s program as a model for other projects like the Green Line extension. This type of strategy, known broadly as value capture, is not new, and has been used in other cities such as San Francisco, Portland, and Washington, DC. However, the proposals in Cambridge have potential to serve as a model, developing into a value capture policy and process that can aid the T with further improvements going forward. If the T can assure this process is “a formula that is fair”, it will not only help this cash-strapped system but it could offer lessons and a template for other DOT’s or transit agencies to use in the future.
Public transportation investments like transit stations, rail lines, or road networks increase the value of adjacent land, as accessibility to transportation improvements plays an important role in location choices made by employers, employees, and more generally, the traveling public. Value capture works to monetize the increased land value to the benefit of the transportation system. In the past developers have paid for highway improvements based on development-induced auto traffic more often than transit-demand impacts. A variety of strategies for capturing this value exist, but some of the more commonly used ones include development impact fees, joint development, special assessment districts, and tax increment financing. Revenue from these fees could help pay for a variety of projects, from improved bus service, renovated stations, or the Green Line extension.
In the current environment of declining transportation budgets, municipalities and state DOT’s are taking a fresh look at value capture mechanisms to finance transportation system maintenance and improvements. Rather than continuing a one-off approach that reacts to development projects as they arise, a more consistent funding paradigm could establish a system where states, transit agencies, and developers expect to be partners in funding improved transportation, whether that improvement focuses on auto, transit, bicycling and walking, or some combination. Examples from Massachusetts may be of benefit to other agencies seeking creative financing opportunities.
Mary Ebeling is a Transportation Policy Analyst at SSTI.