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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2014. Using the Economic Value Created by Transportation to Fund Transportation. Washington, DC: The National Academies Press. doi: 10.17226/22382.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

NAT IONAL COOPERAT IVE H IGHWAY RESEARCH PROGRAM NCHRP SYNTHESIS 459 TRANSPORTATION RESEARCH BOARD WASHINGTON, D.C. 2014 www.TRB.org Research Sponsored by the American Association of State Highway and Transportation Officials in Cooperation with the Federal Highway Administration SubScriber categorieS Economics • Finance • Highways Using the Economic Value Created by Transportation to Fund Transportation A Synthesis of Highway Practice conSultant Sharada R. Vadali Texas A&M Transportation Institute College Station, Texas

NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed research provides the most effective approach to the solution of many problems facing highway administrators and engineers. Often, highway problems are of local interest and can best be studied by highway departments individually or in cooperation with their state universities and others. However, the accelerating growth of highway transportation develops increasingly complex problems of wide interest to highway authorities. These problems are best studied through a coordinated program of cooperative research. In recognition of these needs, the highway administrators of the American Association of State Highway and Transportation Officials initiated in 1962 an objective national highway research program employing modern scientific techniques. This program is supported on a continuing basis by funds from participating member states of the Association and it receives the full cooperation and support of the Federal Highway Administration, United States Department of Transportation. The Transportation Research Board of the National Academies was requested by the Association to administer the research program because of the Board’s recognized objectivity and understanding of modern research practices. The Board is uniquely suited for this purpose as it maintains an extensive committee structure from which authorities on any highway transportation subject may be drawn; it possesses avenues of communications and cooperation with federal, state, and local governmental agencies, universities, and industry; its relationship to the National Research Council is an insurance of objectivity; it maintains a full-time research correlation staff of specialists in highway transportation matters to bring the findings of research directly to those who are in a position to use them. The program is developed on the basis of research needs identified by chief administrators of the highway and transportation departments and by committees of AASHTO. Each year, specific areas of research needs to be included in the program are proposed to the National Research Council and the Board by the American Association of State Highway and Transportation Officials. Research projects to fulfill these needs are defined by the Board, and qualified research agencies are selected from those that have submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Research Council and the Transportation Research Board. The needs for highway research are many, and the National Cooperative Highway Research Program can make significant contributions to the solution of highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement rather than to substitute for or duplicate other highway research programs. Published reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at: http://www.national-academies.org/trb/bookstore Printed in the United States of America NCHRP SYNTHESIS 459 Project 20-05, Topic 44-02 ISSN 0547-5570 ISBN 978-0-309-27129-5 Library of Congress Control No. 2014931675 © 2014 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FMCSA, FTA, or Transit Development Corporation endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the National Cooperative Highway Research Program, conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. The members of the technical panel selected to monitor this project and to review this report were chosen for their special competencies and with regard for appropriate balance. The report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the Governing Board of the National Research Council. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board, the National Research Council, or the program sponsors. The Transportation Research Board of the National Academies, the National Research Council, and the sponsors of the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the object of the report. NOTE: The Transportation Research Board of the National Academies, the National Research Council, the Federal Highway Administration, the American Association of State Highway and Transportation Officials, and the individual states participating in the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the object of this report.

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished schol- ars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and techni- cal matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Acad- emy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achieve- ments of engineers. Dr. C. D. Mote, Jr., is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Acad- emy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. C. D. Mote, Jr., are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transportation Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisci- plinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transporta- tion, and other organizations and individuals interested in the development of transportation. www.TRB.org www.national-academies.org

TOPIC PANEL 44-02 LISA FREESE, Scott County (MN) Community Services Division, Jordan, MN KONSTANTINA “NADIA” GKRITZA, Purdue University, West Lafayette, IN MARTINE A. MICOZZI, Transportation Research Board BENJAMIN T. ORSBON, South Dakota Department of Transportation, Pierre DAVID O. TOLMAN, Idaho Transportation Department, Boise GLEN WEISBROD, Economic Development Research Group, Boston, MA RICHARD Y. WOO, Maryland State Highway Administration, Baltimore KEVIN D. ADDERLY, Federal Highway Administration (Liaison) RABINDER K. BAINS, Federal Highway Administration (Liaison) SYNTHESIS STUDIES STAFF STEPHEN R. GODWIN, Director for Studies and Special Programs JON M. WILLIAMS, Program Director, IDEA and Synthesis Studies JO ALLEN GAUSE, Senior Program Officer GAIL R. STABA, Senior Program Officer DONNA L. VLASAK, Senior Program Officer TANYA M. ZWAHLEN, Consultant DON TIPPMAN, Senior Editor CHERYL KEITH, Senior Program Assistant DEMISHA WILLIAMS, Senior Program Assistant DEBBIE IRVIN, Program Associate COOPERATIVE RESEARCH PROGRAMS STAFF CHRISTOPHER W. JENKS, Director, Cooperative Research Programs CHRISTOPHER HEDGES, Manager, National Cooperative Highway Research Program NANDA SRINIVASAN, Senior Program Officer EILEEN P. DELANEY, Director of Publications NCHRP COMMITTEE FOR PROJECT 20-05 CHAIR CATHERINE NELSON, Salem, OR MEMBERS KATHLEEN S. AMES, Springfield, IL STUART D. ANDERSON, Texas A&M University BRIAN A. BLANCHARD, Florida DOT CYNTHIA J. BURBANK, FHWA (retired) LISA FREESE, Scott County (MN) Community Services Division MALCOLM T. KERLEY, Virginia DOT (retired) RICHARD D. LAND, California DOT JOHN M. MASON, JR., Auburn University ROGER C. OLSON, Minnesota DOT ROBERT L. SACK, New York State DOT FRANCINE SHAW WHITSON, Federal Highway Administration LARRY VELASQUEZ, JAVEL Engineering, LLC FHWA LIAISONS JACK JERNIGAN MARY LYNN TISCHER TRB LIAISON STEPHEN F. MAHER Cover figure: Funding and financing of urban investments: Tapping land development. Photo illustration credit: iStock.

FOREWORD Highway administrators, engineers, and researchers often face problems for which infor- mation already exists, either in documented form or as undocumented experience and prac- tice. This information may be fragmented, scattered, and unevaluated. As a consequence, full knowledge of what has been learned about a problem may not be brought to bear on its solution. Costly research findings may go unused, valuable experience may be overlooked, and due consideration may not be given to recommended practices for solving or alleviat- ing the problem. There is information on nearly every subject of concern to highway administrators and engineers. Much of it derives from research or from the work of practitioners faced with problems in their day-to-day work. To provide a systematic means for assembling and evaluating such useful information and to make it available to the entire highway commu- nity, the American Association of State Highway and Transportation Officials—through the mechanism of the National Cooperative Highway Research Program—authorized the Transportation Research Board to undertake a continuing study. This study, NCHRP Proj- ect 20-5, “Synthesis of Information Related to Highway Problems,” searches out and syn- thesizes useful knowledge from all available sources and prepares concise, documented reports on specific topics. Reports from this endeavor constitute an NCHRP report series, Synthesis of Highway Practice. This synthesis series reports on current knowledge and practice, in a compact format, without the detailed directions usually found in handbooks or design manuals. Each report in the series provides a compendium of the best knowledge available on those measures found to be the most successful in resolving specific problems. This report presents information on financing mechanisms used by transportation agen- cies to capture a portion of the economic value created by public investment in transporta- tion infrastructure to fund transportation improvements. The report provides an overview of ten types of “value capture” mechanisms and presents case examples of how transportation agencies have used these mechanisms to help fund specific highway projects. Information used in this study was acquired through a review of the literature and inter- views with agency staff involved with implementing value capture mechanisms presented in the case examples. Sharada R. Vadali, Texas A&M Transportation Institute, College Station, Texas, col- lected and synthesized the information and wrote the report. The members of the topic panel are acknowledged on the preceding page. This synthesis is an immediately useful docu- ment that records the practices that were acceptable with the limitations of the knowledge available at the time of its preparation. As progress in research and practice continues, new knowledge will be added to that now at hand. PREFACE By Jo Allen Gause Senior Program Officer Transportation Research Board

ACKNOWLEDGMENTS The research reported herein was performed under NCHRP Project 20-05 by the Texas A&M Transportation Institute, a member of The Texas A&M University System. The author would like to acknowledge Dr. Rafael Aldrete for his initial contributions to this research study. Thanks are extended to Juliet Valejo, who helped in survey coding. The development of the case examples in chapter three and the findings in chapter four would not have been possible without the cooperation of knowledgeable state transportation personnel. Nineteen responses to the synthesis screening survey helped guide the selection of case examples. The author is indebted to those state DOT offices listed in Appendix B that participated in the screening survey and to those who partici- pated in the follow-up interviews or responded directly via e-mail. Their responses to the follow-up interviews reflected the degree of their under- standing of the importance of this synthesis topic. Officials in the case example agencies took the additional time to define and describe their proposed case, send documentation of relevant information including project maps and signed agreements, participate in follow-up telephone interviews, and review drafts of their respective cases. Members of the Missouri Department of Transportation and the Virginia Department of Transportation went the extra mile in providing all the relevant informa- tion and providing contacts. The author thanks all respondents from all agencies for their extensive cooperation. The author would like to thank the positive contributions and insights of all topic panel members as well as the project director, Ms. J.A. Gause.

CONTENTS 1 SUMMARY 5 CHAPTER ONE INTRODUCTION Background, Motivation, and Study Objectives, 5 Methodology and Study Approach, 5 Value Capture Defined, 6 Value Capture—Key Issues, 8 Synthesis Organization, 8 Summary, 8 10 CHAPTER TWO OVERVIEW OF METHODS TO CAPTURE VALUE CREATED BY TRANSPORTATION INVESTMENTS— VALUE CAPTURE MECHANISMS Literature Review of Value Capture Mechanisms, 10 Impact Fees, 11 Special Assessment Districts, 17 Sales Tax Districts, 21 Negotiated Exactions and Contributions—Description, 22 Air Rights—Description, 23 Joint Development—Description, 25 Land Value Tax—Description, 26 Tax Increment Finance—Description, 27 Transportation Utility Fees—Description, 28 Other Mechanisms—Description, 30 General Efficiency, Equity, and Other Considerations, 31 Summary, 32 35 CHAPTER THREE CAPTURING THE VALUE: STATE-OF-THE-PRACTICE CASE EXAMPLES Screening Survey Motivation and Criteria for Selection of Case Examples, 35 Preview of Case Examples Grouped by Geographic Scale, 35 Site- and Project-Level Mechanisms, 37 Corridor-Level Mechanisms, 53 District or Areawide Mechanisms (Programmatic Approaches), 70 Other Areawide or Regional Examples (Project and Programmatic Approaches), 82 Summary, 86 87 CHAPTER FOUR SUMMARY OF FINDINGS AND COMMON THEMES Findings from the Study, 87 General Implementation Findings, 87 Common Themes, 93 Summary, 97

98 CHAPTER FIVE CONCLUSIONS Study Objectives and Case Examples, 98 Value Capture as a Net Generator of New Funds, 98 Choosing a Value Capture Mechanism as Part of a Funding Mix, 98 Challenges to Wider Implementation, 99 Future Research Suggestions, 99 Summary, 100 101 ACRONYMS 102 REFERENCES 107 APPENDIX A SURVEY QUESTIONNAIRE 109 APPENDIX B SCREENING SURVEY PARTICIPANTS/RESPONDENTS 110 APPENDIX C INTERVIEW GUIDE 111 APPENDIX D RESEARCH PROBLEM STATEMENT Note: Many of the photographs, figures, and tables in this report have been converted from color to grayscale for printing. The electronic version of the report (posted on the Web at www.trb.org) retains the color versions.

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TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 459: Using the Economic Value Created by Transportation to Fund Transportation presents information on financing mechanisms used by transportation agencies to capture a portion of the economic value created by public investment in transportation infrastructure to fund transportation improvements.

The report provides an overview of ten types of “value capture” mechanisms and presents case examples of how transportation agencies have used these mechanisms to help fund specific highway projects.

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