"Guide to Value Capture Financing for Public Transportation Projects" published


December 21, 2016 — Yesterday, the Transit Cooperative Research Program (TCRP) published the Guide to Value Capture Financing for Public Transportation Projects. The Guide was developed on behalf the American Public Transportation Association (APTA) and TCRP to provide transit agencies, local governments, developers and others with insight regarding value capture as a source to address funding of public transport. The Guide can be downloaded.

Value capture is the public recovery of a portion of increased property value created as a result of public infrastructure investment. Common value capture mechanisms include: special assessment districts, joint development, and tax increment financing.

Successful value capture is subject to a number of enabling conditions that include: real estate market vitality, accommodative zoning, compelling business case(s) for public and private partners, and institutional capacity on the part of all stakeholders.

Value capture techniques can generate revenue from within transit benefit areas that extend beyond the traditional ½-mile radius in part due to enhanced mobility, transit accessibility, and improved bike/ped access.

Transit-influenced value creation varies with the real estate market. Understanding market dynamics is vital for achieving value creation and the most successful strategies will align risk tolerances and time horizons among value capture participants.

Realizing value creation requires supportive planning, land-use regulations, and zoning, including: replacing density maximums with minimums, modifying rules requiring segregation of various land uses, and reducing minimum parking requirements.

Marketability of debt associated with transit infrastructure often depends on credit ratings. The credit rating potential of debt secured by real estate-dependent revenue streams can improve once stable performance is demonstrated over three to five years. Since credit rating agencies dislike giving “investment grade” ratings to debt secured solely by value capture revenue, at least initially, transit agencies or local governments often issue bonds secured by a pledge of creditworthy sources in addition to a real estate-dependent revenue stream. Such “backstops” may be comprised of sales tax revenues or local governments guarantees.

In order to optimize value capture, transit agencies need to engage early in partnerships with developers, local governments, and other stakeholders as shown in the graphic below.

The Guide includes six case studies that demonstrate attributes of successful value capture finance associated with significant funding of bus and rail projects in Boston, Denver, Hong Kong, Kansas City, Portland, Washington, D.C.

Further material can be downloaded from www.IMGrebel.com. Please contact the authors for more information: Sasha Page, SPage@IMGRebel.com; Bill Bishop, bill.bishop@dpfg.com; and Waiching Wong, WWong@IMGRebel.com.