Value Capture And The Federal Role
The Government Accountability Office has sent a report to congressional committees exploring what the federal government might do to facilitate the efforts of state and local agencies to fund transit systems by capturing the value generated by the transit-oriented improvements.
As the title of the report clearly states: "Federal Role in Value Capture Strategies for Transit Is Limited, but Additional Guidance Could Help Clarify Policies."
Value capture strategies include joint development, special assessment districts, tax increment financing, and development impact fees. These dedicate to transit either a portion of increased tax revenue or additional revenue through assessments, fees, or rents based on value expected to accrue as a result of transit investments.
GAO reviewed the extent to which transit agencies and local governments use value capture strategies to fund or finance transit; what stakeholders have identified as facilitators of, or hindrances to, the use of these; and what stakeholders have said about the effects of federal policies and programs on the use of these strategies.
Among other things, the report found:
- While use of value capture strategies has been limited, it can be critical in financing transit.
- Public-sector coordination and private-sector support can facilitate implementation of transit projects using value capture strategies.
- Transit project location and design influence how much value can be captured.
- Unfavorable economic conditions can hinder use of value capture strategies.
- State laws can authorize but may also limit use of value capture strategies.
- FTA’s joint development policy is confusing and impedes joint development.
- While FTA isn't directly involved in the use of value capture strategies, other agencies can affect the use of these.
- Potential and existing federal loan programs could support use of value capture strategies.
"Value capture strategies can be an effective means for the direct users and beneficiaries of a transit system to contribute to its funding, although past use of these strategies to fund and finance transit is limited," the report concludes.
While the federal role in the use of joint development and other value capture strategies will remain limited, "federal transportation policies can affect local governments’ ability to use some value capture strategies, particularly when a federal grant is part of the funding for a transit project."
In particular, the revision of the New Starts method of grading projects to emphasize economic development will likely improve opportunities for transit agencies to secure federal funding for projects that use value capture as a funding source.
Standing in the way of this effort is confusion over federal joint development requirements and the rules governing parking replacement. The GAO concludes that the FTA should issue additional guidance on federal joint development requirements and parking replacement. The report says FTA has agreed to consider GAO’s recommendations.
The report has been added to Best Practices.