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.

Federal Role in Value Capture Strategies for Transit Is Limited, but Additional Guidance Could Help Clarify Policies

In an effort to encourage and reward innovative projects that coordinate housing, economic development and transportation investments, the U.S. Department of Transportation and the Department of Housing and Urban Development have created a single point of entry for applications for $35 million in TIGER (Transportation Investment Generating Economic Recovery) II Planning Grants and $40 million in Sustainable Community Challenge Grants.

The first-of-its-kind joint program builds on the Partnership for Sustainable Communities, the interagency collaboration between DOT, HUD and the Environmental Protection Agency announced in 2009. That partnership is designed to remove the traditional federal government silos that separate resources and inhibit collaborative efforts. DOT's $35 million comes from its $600 million in TIGER II planning grants and HUD's $40 million comes from the $200 million Congress approved for HUD to launch the first-ever Office of Sustaninable Housing and Communities. The grants will be awarded jointly by the agencies.

According to the press release announcing this effort, TIGER II Planning Grants may be used to plan, prepare or design surface transportation projects that would be eligible for funding under the TIGER II Discretionary Grant program. HUD’s Sustainable Communities funding will target urban and community planning projects that foster reform and reduce barriers to achieving affordable, economically vital and sustainable communities.

The release offered these examples of projects that could qualify for grants from this pool:

• Planning activities that support the development of affordable housing near transportation through the adoption of inclusionary zoning ordinances and other activities such as acquisition of land for affordable housing projects.
• Preparing or amending local codes and ordinances that prevent the private sector from developing neighborhoods more sustainably and inclusively, with housing located near transportation and retail.
• Planning activities related to the development of a particular transportation corridor or regional transportation system that promotes mixed-use or transit-oriented development with an affordable housing component.
• Planning activities related to the development of a freight corridor that seeks to reduce conflicts with residential areas and with passenger and non-motorized traffic.  In this type of project, DOT might fund the transportation planning activities along the corridor, and HUD might fund changes in the zoning code to support appropriate siting of freight facilities and route the freight traffic around town centers, residential areas and schools.
• Developing expanded public transportation options, including accessible public transportation and para-transit services for individuals with disabilities, to allow individuals to live in diverse, high opportunity communities and to commute to areas with employment and educational opportunities.

State and local governments, including U.S. territories, tribal governments, transit agencies, port authorities and others, are eligible to apply for funding.

Pre-applications are due 30 days from the publication of the Notice of Funding Availability in the Federal Register.  Full applications are due on Aug. 23, according to the press release. For more information on how to apply, click here.