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

Senator Frank Lautenberg (D-NJ), with co-sponsors Senator Patty Murray (D-WA) and Senator Maria Cantwell (D-WA), today introduced the Focusing Resources, Economic Investment, and Guidance to Help Transportation Act of 2010 (FREIGHT Act), a landmark bill seeking to transform America’s transportation policy and investment by focusing on the freight network.

The FREIGHT Act provides a comprehensive, systemic approach to infrastructure investment that addresses the nation’s commerce needs while providing a solid foundation to help our nation meet its energy, environmental and safety goals. The bill also calls for the creation of a new National Freight Infrastructure Grants initiative – a competitive, merit-based program with broad eligibility for multimodal freight investment designed to focus funds where they will provide the most public benefit.

“Poor planning and underinvestment in our transportation infrastructure has led to increased congestion at our ports, highways, airports, and railways, and increases the cost of doing business. If we want to help U.S. businesses succeed and create new jobs, we need a freight transportation system that works better and can grow with the changing needs of the global economy,” said Sen.  Lautenberg in his statement.

“The FREIGHT Act is a paradigm shift our CAGTC members have long advocated and represents a bold step toward ensuring our nation’s economic competitiveness in the 21st century,” said Mortimer Downey, CAGTC Chairman, Senior Advisor, Parsons Brinckerhoff and former U.S. Deputy Secretary of Transportation. “For the first time ever, the bill establishes a comprehensive freight policy with outcome-based goals and creates a broad multimodal, competitive freight–specific program to provide the infrastructure necessary to move this country’s commerce and drive the economy.”

The FREIGHT Act of 2010 directs the Department of Transportation (USDOT) to develop and implement two institutional advances that will improve and coordinate policy within the federal government and the states. The first is a National Freight Transportation Strategic Plan to guide and inform goods movement infrastructure investments in future years. In addition, it calls for the creation of an Office of Freight Planning and Development, led by an Assistant Secretary for Freight Planning and Development. The bill instructs USDOT to develop baselines, tools and methods within two years to measure progress.

“A truly multimodal national freight program that is accountable to measurable performance targets and benchmarks is something the U.S. has needed for a long time,” said James Corless, director of Transportation for America. “We applaud Senator Lautenberg for recognizing that our freight system can move our goods from coast to coast and power the economy while also being part of the solution for many of our most pressing problems: air quality, dangerous emissions, oil dependence, and congestion on our highways and interstates, to name just a few."

In developing the National Freight Transportation Policy, the FREIGHT Act also encourages concurrent improvements in air quality impacts, carbon emissions, energy use and public health and safety by establishing environmental goals to complement goals for reducing delays and improving travel time reliability on freight corridors, at gateways and heavy freight population centers. Similarly, the grant program sets criteria to prioritize projects that improve freight mobility and enhance economic growth, while incentivizing environmental improvements.

"Congress must modernize our outdated freight infrastructure to reduce its harmful environmental and public health impacts," said Kathryn Phillips, a transportation expert with the Environmental Defense Fund. "This important bill provides a roadmap to target federal investment to create a cleaner, more reliable freight system for the 21st century."

System performance is emphasized throughout the FREIGHT Act and projects will be judged on benefit-cost analysis. The significant overlap among public and private interests in the freight system is recognized through encouraged planning and cooperation with private sector interests, while the grant program leverages Federal investment by promoting non-Federal contributions to projects.

“The National Freight Infrastructure Investment Grants program proposed in this bill would be an important addition to the federal toolbox. It would help fund exactly the type of multi-modal, multi-jurisdictional, major transportation infrastructure projects that have historically been overlooked by the federal transportation investment process," said Chuck Baker, CAGTC Member and President of the National Railroad Construction and Maintenance Association.

The Coalition for America’s Gateways and Trade Corridors, Environmental Defense Fund and Transportation for America commend Senator Lautenberg and the other co-sponsors of this visionary and strategically important policy. The three organizations have agreed to work together in support of the FREIGHT Act and call upon all in the transportation community to join in support.