Using the Economic Value Created by Transportation to Fund Transportation (2014)

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35 Chapter three presents case examples to demonstrate various aspects in the planning, design, and implementation dimen- sions of the various VC mechanisms, including the legal basis allowing for the adoption of each of the mechanisms within that context. To provide greater clarity on the context, background, and implementation of the example practices, this chapter delivers narrative descriptions of the project context complemented by information compiled from inter- views and discussions, and collected and compiled from the review. These narratives are intended to offer descriptions of the players involved, how the process was initiated, the chal- lenges faced, and the keys to implementation. Another aspect that is covered in the case examples is the use of one or more VC mechanisms as part of a strategy. SCREENING SURVEY MOTIVATION AND CRITERIA FOR SELECTION OF CASE EXAMPLES Case examples illustrating the use of VC mechanisms are at the core of this synthesis. A screening survey was created as part of the process to identify potential candidates. The primary objective of the screening survey was to increase the chances of identifying prospects for the case examples, complementing the other efforts described in chapter two (information gained from the state-of-the-practice review). Owing to the cross-cutting nature of the topic, for state DOTs, questionnaires were sent to the respective members of the AASHTO SCOFA and also members of the SCOP. This synthesis aimed to include at least one example for each of 10 categories mentioned in the review. Telephone and e-mail interviews were conducted with professionals involved in the planning or implementation or otherwise directly aware of development or use of the mechanism within the context. In some instances, more than one professional was inter- viewed for each case. Twenty-two (seven longer and several shorter examples) case examples of varying geographic scales illustrate how the tools discussed in chapter two have been used in vari- ous contexts and combinations to fund and finance highway infrastructure. These are state-of-the-practice examples, projects, and plans from across the country and illustrate the variety of ways in which local and regional governments, DOTs, and other highway agencies are using VC funding and financing mechanisms. The following general criteria were used for selecting case examples from the screening survey and literature review: • Key contacts could be identified and amenable for follow- up discussions. • Sufficient data on the project were made available or could be compiled. • The case example was applicable for highways. • The case example was fairly recent in application or otherwise exemplary in some way. • Boundaries of the project. • Revenue and finance considerations. • Equity considerations, if available. PREVIEW OF CASE EXAMPLES GROUPED BY GEOGRAPHIC SCALE Table 4 shows the example mechanisms grouped by the geo- graphic scale of application. Table 4 also shows that all pro- grammatic applications are areawide in application and that in some cases, an areawide approach has been used to fund individual projects. Content of Case Examples and Sources of Data The 22 case examples are compiled with data from three specific sources: (1) telephone and e-mail interviews with contacts provided by respondents; (2) a variety of materials provided by respondents, including project documentation, websites, and maps; and (3) supporting literature review of examples that were noted by respondents. The general types of questions presented at the interviews are discussed in Appendix C, and the responses and discussion provided the basis for the case study development. Two agencies did not respond to the survey but directly provided information on their case and program. The case examples illustrate the vari- ety of factors that local governments, DOTs, other agencies, metropolitan planning organizations, or other project spon- sors are likely to consider in adopting a mechanism to fund and finance highway infrastructure. These factors are practical aspects affecting implementation and the actual design itself and include items such as project size, community support/ political will, the legal framework provided by state and local law, and more importantly, factors related to the process of chapter three CAPTURING THE VALUE: STATE-OF-THE-PRACTICE CASE EXAMPLES

36 Example/Facility Mechanism Scale/State, Local Highway Massachusetts Turnpike—Boston’s Copley Place AR and JD Site/Interstate 90 Virginia’s I-495 and Fairfax Parkway Proffer Mechanisms. NEs Site/Interstate, local WMATA—McPherson Square Station Area JD Site/Transit Kansas City of Olathe Transportation Development District STD, TDD Site/Local Eagle Road/Fairview Avenue Improvements Other—STARR Site/Local Missouri, Transportation Development Districts STD, TDD Project/State US 63 Expansion Project, Missouri TCs, sales taxes Project/State Hwy 36 Expansion Project, Missouri— TDD TCs, STD Project/State US-67 Expansion Project, Missouri TCs, STD Project/State State Route 28, Virginia (Corridor) SAD—TIDs Corridor/State I-25 Corridor, Denver SAD—JSPIA Metropolitan District Corridor/Interstate Michael A. Fox Highway, Butler County, Ohio Countywide special assessment—TIDs Corridor/State Northern Macadam TSDC, Portland, Oregon IFs Corridor/Local Interstate 95/295 Corridor, Mercer County, New Jersey IFs—TDD Corridor/Interstate El Paso (Comprehensive Mobility Plan [CMP] Improvements) TIF-TRZ Corridor/State Elgin O’Hare Route 53/120 (Planning Study) Special assessments—SSA Corridor/State City of Bozeman, Montana IF Areawide (programmatic)/Local Portland, Corvallis IFs—TSDC Areawide (programmatic)/ Local–city CIP Washington’s Transportation Benefit Districts Special assessments—Benefit Districts Areawide (programmatic)/Local Oregon’s Pavement Maintenance Facility Fee Program TUF Areawide (programmatic)/Local Harrisburg, PA LVT Areawide (programmatic)/Local and state Washington Road Fund Levy Countywide assessments district Areawide (programmatic)/Local Bellingham Transportation District, Washington Regionwide TBD Areawide (programmatic)/Local and state Wisconsin, Washington—IFs across cities/counties and other methods these regions and allow. Montana IFs. California’s Measure R and TransNET (half-cent sales tax). Georgia’s TSPLOST (sales tax measure). Arkansas—Connecting Arkansas Program. Massachusetts I-Cubed Program. TABLE 4 CASE EXAMPLES BY MECHANISM TYPE, SCALE OF APPLICATION, AND ROADWAY TYPE capturing the value itself. The case examples are generally organized around the following format: • Title. • Facility name. • VC mechanism. • Background and description: provides context on the project area to explain why the tools used in the case study were appropriate and describes the planning pro- cess that created the mechanism. • Legal authority. • Local partnerships. • Implementation considerations, including: – Levy basis: describes how the VC mechanisms work through levies and periodicity/frequency of levies. – Duration: describes the length of agreements. – Boundaries: aside from the area-based typology, this section serves to describe if finer boundaries are used in the creation of service areas and benefit districts within which the levies would apply. – Timing and collection of revenue streams: describes how and when the revenue was collected and the actual performance of the mechanism to the extent that information could be gathered and compiled.

37 the Prudential Center in Boston and Star Market in Newton in 1963. Some others that preceded the Copley development and close to the I-90/I-93 interchange in the Back Bay area include the Hancock Garage, completed in 1976. Copley Place is a completed (in 1986) development on the turnpike and provides a case example for the use of ARs and JD adjacent to highway rights-of-way. The project helped to bridge the South End and Back Bay, resulting in significant contributions to urban design and stimulating economic growth in Boston. The development agreement was between the Urban Investment and Development Corporation (UIDC) from Chi- cago and the MTA, who had ownership and control of the air space and rights over the property. The community review pro- cess went on over a period of 3 years through a Copley Place Citizens Review Committee, which included neighborhood associations, government agencies, and advocacy groups. The 9.5 acres are constructed over a railroad right-of-way as well as over the turnpike, in a prime area of downtown Boston. The project had to get through a rigorous community review pro- cess and had to be viable in terms of its construction technology and economic potential, something that no one to that point had been able to do. The Copley Place development includes two hotels, an office/retail area, and 900 parking spaces. Legal Authority Private development of ARs over the Boston Extension of the Mass Pike was first authorized by the Massachusetts Legisla- ture in 1963. Boston’s civic vision (Boston Redevelopment Authority 2000; Figure 9) guides the development of ARs in the corridor. The civic vision, while not a zoning code, provides the framework for the future citizen’s advisory committees and the city of Boston to review ARs proposals. A total of 23 additional ARs parcels are included in this civic vision (including Parcels 8–10 but not including Copley Place). It is the corridor master plan. Copley Place preceded the civic vision, and it was noted it may have been out of scale with the context at the time. In 1997, the city of Boston and the MTA entered into a memorandum of understanding regarding review and approval of future ARs development. Local Partnerships The local partners and key players in the ARs developments for Copley Place and Parcels 8–10 are: • Private developers (induced beneficiaries): – Copley Place: K. Dun Gifford with Urban Invest- ment and One Development Co. – One Kenmore Place: Meredith Team. • Public entity—Boston Redevelopment Authority. • Public entity and parcel owner (initiator and beneficiary from ownership of rights). Massachusetts Turnpike Authority. – Financing aspects and risk considerations. – Cost-efficiency or ability of mechanism to meet stated goals. – Equity aspects in implementation. • When possible, any lessons learned as reported by respondents and/or based on the review of pertinent project documentation. • Project-related websites. SITE- AND PROJECT-LEVEL MECHANISMS Boston’s Copley Place, Massachusetts Facility Name The facility discussed in this section is the Massachusetts Turnpike (I-90) in Boston. VC Mechanisms The VC mechanisms employed in this project are ARs and JD parcel-specific developments of 9.5 acres adjacent to the I-90 right-of-way. The joint successful use of two mecha- nisms is part of a strategy because the adoption and develop- ment of ARs could not have occurred in the absence of JD. Background Air rights refer to the right to use or control the air space under, over, or adjacent to an existing structure, such as high- way, rail, or other property. Such rights can be afforded by a landowner to another party for purchase or use through a contractual agreement. JD, on the other hand, is a formal arrangement between the public sector and private entities such that the private entities share some costs of infrastruc- ture improvement or contribute some benefits back to the public sector based on a mutual recognition of the benefits of such infrastructure improvements. Almost all 23 ARs parcel developments on the Massachusetts Turnpike (Mass Pike) are examples of ARs combined with JD because they bring together private parties such as developers to harness the value in air space development over highway rights-of-way. This example showcases how a public entity, Massachusetts Turnpike Authority (MTA), contracts parcels it owns with private developers by means of a TDR. The Mass Pike was planned and constructed with an aim to revitalize Boston’s economy and provide access to down- town. In 1952, the MTA was authorized by the Massachu- setts Legislature as an independent entity charged with the construction and operation of a tolled highway from the bor- der of New York east to the newly completed Route 128. By 1957, the new highway was completed and was soon extended to central Boston. The MTA was the first public transportation authority to use ARs with the development of

38 change area and ARs) signed a memorandum of understanding with the UIDC (developer) to develop the site. The developer financed the reconstruction and relocation of infrastructure, including water, electrical, and telephone lines; rail right-of- way; and turnpike ramps, in return for development rights. Timing and Collection of Revenues: The joint use of JD and AR mechanisms in this example provided for up-front costs, which were collected by the MTA. The Copley Place, with 3.4 million square feet of ARs development, includes 1.6 million square feet of high-end hotels (luxury and conven- tion), Class A office space, high-end retail, and restaurants. Construction was phased to limit any impact to adjacent busi- nesses and residents (Campbell 2004). Savvides (2004) notes the project’s 21.73% internal rate of return and documents the Copley Place ARs development financial aspects as follows: • Hard and soft costs: $125.7 million. • ARs premium: initially valued at $9.5 million (this was the amount of public money required by the developer to make the project economically feasible). Implementation Considerations The project initiator and beneficiary (as owner of ARs) is MTA, and the induced beneficiary is the developer. Imple- mentation considerations covering cost–revenue agreements, duration, and other aspects are discussed here. Funding: Federal grants in the amount of $19 million were part of the project. The developer applied for an Urban Develop- ment Action Grant from the United States Housing and Urban Development Authority. The rent payments and schedule were subsidized by MTA to enhance the economic feasibility to the developer. UIDC wanted the lease divisible to enhance its abil- ity to finance the project by separate leasehold mortgages, but MTA was unwilling to do this. The MTA wanted (if there were to be separate leases of portions of the project) cross-default clauses so that default under any one lease would be a default under the others. Any such provision would take away benefits the developer hoped for through separate leases. UIDC agreed to purchase treasury bonds for an amount equal to $12 million (Rice Center 1986). The MTA (agency with ownership of inter- FIGURE 9 Boston Civic Vision (2000) and the 23 AR parcels. (Source: Boston Redevelopment Authority 2000, Civic Vision 2000, and MTA.)

39 mixed-use project. (Long-term lease is a JD mechanism.) Figure 10 shows the location of Parcels 8, 9, and 10 as exam- ples (in relation to Mass Pike) and Copley Place in 1984. Figure 11 shows the project timeline for Copley Place and Parcels 8, 9, and 10. Equity Goals: Campbell (2004) discusses a few social equity goals that the development of ARs furthered in refer- ence to the Copley Place development. Valuation of ARs: The value of the rights was finally agreed upon and set at $12 million based on separate valua- tion or appraisal of the development. The value agreed upon was slightly less than the basic land costs of other sites in the area, but land and reconstruction costs considered together were roughly equivalent to nearby site values. Duration and Timeline: UIDC had a 99-year lease for the ARs over a portion of the Mass Pike used to construct the FIGURE 10 Mass Pike AR parcels 8, 9, and 10 and Copley Place in 1984. (Source: The Future of Boston: http://www.boston.com/ advertisers/bigdig/air_pop.htm.) Copley Place FIGURE 11 Mass Pike AR timeline and involved parties (Copley Place and Parcels 8, 9, and 10 on the Turnpike). (Source: Adapted from The Future of Boston: http://www.boston.com/advertisers/bigdig/air_pop.htm.) 1957 Turnpike opens. 1964–1976 Prudential Center and Hancock Tower, which houses John Hancock completed. 1984 Copley Place 99- year lease. Mixed use. 3–4 years of community involvement. 1998–2000 70+ community meetings held for Master plan: "A Civic Vision for Turnpike Authority and City of Boston." 2001 Massachusetts Turnpike Authority buys parcels 8,9,10 for development. Spring– August 2002 MTA issues and reviews RFQs. One team to bid Rosenthal Parcels 8, 9, 10. 2002–2003 Design review by community. 2004 Construction begins. and 18–24 months later move in after 10+ years.

40 VC Mechanisms Joint development (transit JD) and air space utilization of parcel-specific developments of McPherson Square Sta- tion, Bethesda, Maryland, and other excess land owned by WMATA are considered. Background This example is a transit-related JD example and is drawn from a Transit Cooperative Research Report 102 (Cervero et al. 2004) and Cord (1981). However, it is presented here because the WMATA JD experience is one example that is most closely related to VC, and WMATA often is noted as a national leader in this area. This experience is of value to all transit and highway modes. Generally, WMATA has had two major elements in its JD program, TDR and system interface, which the authority defines as follows: • TDR is the disposition, by lease or sale, of excess owned or controlled real property interests, including ARs, at or near a station area. The earlier example of ARs on the Mass Pike right-of-way is similar in concept to the WMATA sale/lease. • System interface is the direct, physical connection of pedestrian, vehicular, or visual access to WMATA facili- ties from adjoining private or public development. Con- necting facilities could include station mezzanines or entrances, kiss and ride lanes, parking, or bus areas. Many of WMATA’s JDs occur through ARs/sale/lease of land/sale exchange and system interface combined. The example in this case is McPherson Square Station, an 11-story office building over a two-story retail space, which was completed in 1983. In preparing for JD, WMATA typically conducts prelimi- nary market studies to determine the feasibility of development at station sites. Visioning and community planning processes typically are handled by local jurisdictions. Provisions of mas- ter plans, urban design standards, access needs, infrastructure, or other local policies are sometimes negotiated with local jurisdictions in the early stages of JD, often before a private developer is selected. This approach helps make the JD deal more alluring to the private partner because preparations for the site are done ahead of time. In selecting private developers, WMATA has formal guidelines for evaluating projects. Legal Authority Washington Metropolitan Area Transit Authority generates additional revenue and promotes smart growth by leasing and selling property and development rights, sharing operat- ing responsibilities, and charging fees for developments that can connect retail space to stations. WMATA’s formal poli- cies and guidelines steer its decisions. The top-performing • Maximization of the opportunities for residents and groups to benefit from employment opportunities made possible through the developments in Copley Place. • Provision of affordable housing on site by leveraging Housing and Urban Development Authority funds. • Creation of safe pedestrian links. Campbell also notes that the project advances environ- mental goals related to the reduction of automobile trips and emissions and economic goals pertaining to enhanced com- mercial character and tax base. The JD aspect in this project avoids equity issues by not resorting to the tax mechanism. Stakeholder Involvement: Copley Place required signifi- cant coordination and planning, as the timeline indicates (Fig- ure 11). More than 70 community meetings were held for the master plan for the development of Parcels 8, 9, and 10. Cop- ley Place involved 4 years of community involvement. Such ventures also require a guiding vision for the parcel or parcels when applied at the corridor level. The civic vision continues to be the guiding vision for the Mass Pike parcel developments. Potential Feasibility and Administrative Aspects: These factors have been compiled from several studies, including those of Campbell (2004) and Savvides (2004), and from the Boston Redevelopment Authority. These translate as les- sons that can be shared from the experience of Copley Place. These lessons indicate that success: • Depends on the real estate demand, risk tolerant inves- tors, and urban density. There have been several success- ful ventures and several that have not been as successful on the same corridor. Columbus Center, which started in 1998, is one of the ARs development parcels on the same corridor that has not been as successful, partly as the result of the associated crash of the real estate market in 2008. • Requires pulling together landowners and financial backers to create a strong development team. • Requires significant construction and stakeholder coor- dination. The highway and associated transit lines must remain fully active throughout construction. • Requires a strong real estate market and desire to maxi- mize density of development along with a potential for absorption of that extra density. Several applications of ARs are being considered in the Virginia over highway and transit rights-of-way. Examples noted in the case of Virginia include WMATA stations over Interstate 66 in Arlington County. Washington Metropolitan Area Transportation Authority McPherson Square Facility Name The facility discussed in this section is WMATA.

41 Census. Conditional zoning is applicable only for projects such as turn lanes, reconstruction, and widening turn lanes (Grimes et al. 2006). Background Virginia has a long history of using proffer zoning. It is preva- lent in many counties in Virginia in various forms. The proffer system has been an element of land use regulation in Fair- fax County, Virginia, for more than 25 years. In July 1975, proffers were introduced to the process for rezoning property within Fairfax County. The specific type of mechanism is typically determined in conjunction with Virginia DOT. Project US-50/I-495 The US-50/I-495 project involved interchange reconstruc- tion and widening of arterials and freeway. The site of the proposed project was approximately 360 acres located in Fairfax County at the intersection of I-495 (Capital Beltway) and US-50 (Arlington Boulevard). At that time, this site was the largest privately held undeveloped land parcel within the Beltway. In the 1970s, the land was still undeveloped, and access to the site was restricted, so the land was subsequently zoned for residential use. Developers offered to proffer the contraction of a diamond interchange to connect the site to Arlington Boulevard in exchange for rezoning the land to commercial use. The roadway improvements proffered by the developers, acting in concert, included not only immedi- ate site access but also major reconstruction of the I-495/ US-50 interchange. The cost of this work was then estimated at about $12 million, but the in-place cost when completed was closer to $20 million (Spielberg 1987). The rezoning proposition was defeated as a result of community opposi- tion owing to the size of the proposed commercial develop- ment among other concerns. Project—Fairfax Parkway Planned as a four-lane divided highway, except for a few sec- tions near Herndon and Springfield, where it would be six lanes, the Fairfax Parkway was to extend for 35 miles from Route 7 Southward to Route 1, with a spur connecting to the express lanes of Interstate 95. The road was described as badly needed to connect residential and employment areas in Reston, Herndon, and Fair Lakes. From the developers’ point of view, the parkway would make the Franklin Farm area easily accessible to the growing employment and shopping centers in the Dulles Corridor. The county government was seeking a right-of-way through the Franklin Farm area for the Fairfax Parkway. The parkway had been under consideration for many years, and the developers were reasonably certain that it would be built; thus, a proffer mechanism was a logical choice (Harrigan and Hoffman 2004). In November 1988, the Hazel-Peterson firm and Cavalier Land Development JD project, the Metro Center in Bethesda, Maryland, features 400,000 square feet of office space, a 380-room hotel, and 60,000 square feet of retail space and has spurred nearby office, retail, and residential development. The ARs lease generates $1.6 million annually in rent, the highest for any single JD project in the country (Cervero et al. 2004). WMATA is able to charge connection fees or sell or lease land because WMATA has been involved with JD of par- cels since the 1970s and adopts a model of land banking JD that allows it to involve the private sector in revenue-sharing agreements through its land. Implementation Considerations The project initiator (as owner of land) is WMATA, whereas the induced beneficiary is the developer. Implementation considerations in this project included the following: • Use of master plans: Ballston and Bethesda, two of the Washington, D.C. area’s most successful station area projects, used master plans for coordinating long-term development around the station. The master plans coor- dinated public and private investments, linked station area planning with planning efforts for other areas, harnessed existing implementation tools for the station area, and committed public resources to the station area over time in coordination with private development. • Development of supportive zoning near station areas. • Understanding of all the opportunities for JD as present in projects to attract contributions from private devel- opers and landowners (Cervero et al. 2004). Timing and Collection of Revenues: The WMATA approach of JD and AR in this example provides for up-front costs and ongoing costs because of transit JD features related to system interface. Virginia’s Proffer System Facility Name The facilities under consideration in this section are US-50/ I-495 and Fairfax Parkway, Fairfax County. VC Mechanism The specific mechanism considered is the use of proffers NE: two office parks (a total of 4.2 million square feet of office) and residential areas (ITE Technical Council Committee 1988). Proffers are monetary payments from developers to localities and can be delineated into two categories: fees for improvement (or cash proffers) and conditional zoning (or noncash proffers). Cash proffers apply for counties with population growth of at least 10%, according to the 2000

42 new Metrorail station. Fairfax County also has many other examples of this mechanism applied elsewhere. Eagle Road/Fairview Avenue CenterCal Project (Meridian City, Ada County), Idaho Facility Name The facility discussed in this section is Eagle Road/Fairview Avenue improvement. VC Mechanism The mechanism discussed in this case is a sales tax anticipa- tion revenue rebate agreement (STARR) with developer. Background The Eagle/Fairview project is located in the city of Merid- ian, Ada County (see Figure 12). The candidate project is a highway expansion project to seven lanes with accompany- ing access management improvements at several locations. The city of Meridian relies on Ada County Highway District (ACHD), Idaho Transportation Department (ITD), and the Community Planning Association of Southwest Idaho for street/highway planning. The city does not have a separate CIP for roads. The project is divided into three phases. • Phase 1 concentrates mainly on the area between Fair- view Avenue and River Valley Street, and the more detailed breakdown of Phase 1 includes: – Construct River Valley Street from Eagle Road to Records Avenue (Phase 1) and intersection improvements. – Construct Records Avenue from Fairview Avenue to the north property line. – Construct the new quarter-mile roadway between Eagle Road and Records Avenue. – Signalize and reconstruct the Eagle Road/River Val- ley Street intersection. – Widen and reconstruct the Fairview Avenue/Records Avenue intersection. – Widen and reconstruct the Eagle Road/Fairview Avenue intersection. – Remove the free-running, right-turn lanes and replace them with standard dedicated right-turn lanes on all four approaches of the Eagle Road/Fairview Avenue intersection when the intersection is widened to accommodate the third through lane on each approach. – Construct the third westbound through lane on Fair- view Avenue between Records Avenue and Eagle Road. – Install a raised concrete median to restrict the exist- ing driveways to right-in/right-out along this seg- ment of Fairview Avenue. Corporation paid for the construction of a stretch of the new parkway running 0.8 mile between Franklin Farm and Stringfellow Roads. Eleven months later, a 3-mile section of the Fairfax County Parkway opened. The project cost was $23.6 million, and drivers could travel from West Ox Road near Herndon to Interstate 66. Local Partnerships The local partners include: • Developer • Virginia DOT • Fairfax County. Legal Authority The legal authority was the Code of Virginia (Section 15.2. 2303 and other parts). Proffers are listed as regulatory land use tools that utilize zoning. Implementation Considerations The initiator and beneficiary are the developers (Harrigan and Hoffman 2004; ITE Technical Council Committee 1988; Fairfax County 2009; American Planning Association 2012). The agencies benefit in terms of the proffer. Some implemen- tation considerations include: Stakeholder Involvement: Obtaining community support can be tedious. Timing and Collection of Revenues: Exactions and devel- oper contributions can take the form of up-front contribu- tions or periodic payments over the duration of a project. In the case of the Fairfax Parkway, the developer contributions were received both up front to fund the cost of improvements and on an ongoing basis to monitor traffic (ITE Technical Council Committee 1988). Political and Administrative Feasibility: Ensuring con- sistency or conformity to land use plans can be difficult at times. The first example shows the kind of problems that can happen when there is a lack of coordination or agree- ment on types of development. Since then, Fairfax County has many additional guidelines on proffers (Fairfax County 2009), including the use of comprehensive plans and a growth mechanism (American Planning Association 2012). The example also shows the inherent conflict between com- munity and project development on one hand and developer goals on the other. Understanding the opportunities for NE as present in projects to attract contributions from private developers and landowners is vital. More recently, Alexan- dria, Virginia, negotiated a $10 per square foot developer contribution for all development within a quarter-mile of a

43 • Phase 3 will be a third lane southbound on Eagle Road. Ada County is unique in that most local road construction is within ACHD’s jurisdiction, rather than under the direct control of individual cities. The project is estimated to cost $25,448,475. Phase 2 plans were near completion at the time of the interviews. As part of this project, the developer intends to develop a single retail town center, known as Meridian Town Center, in the city of Meridian. The complex is located at the Eagle Road/Fairview Avenue intersection (shown in Figure 12) and is estimated to cost $4 million. As part of a sales tax rebate agreement, the developer agreed to absorb the cost of Eagle Road/Fairview Avenue improvements from its own financ- ing. The developer would eventually be repaid through sales – Construct a 12-foot-wide dedicated right-turn lane on Fairview Avenue for the Eagle Road/Fairview Avenue intersection. – Construct a 5-foot-wide bike lane on Fairview Ave- nue from approximately 400 feet east of Records Avenue to Eagle Road abutting the site. – Construct a 12-foot-wide third westbound through lane west through the Eagle Road/Fairview Avenue intersection approximately 900 feet west of Eagle Road. – Install a raised concrete median to restrict the exist- ing driveway to right-in/right-out on Fairview Ave- nue between Eagle Road and Hickory Way. • Phase 2 includes right-turn lanes for northbound traffic at Fairview Avenue and Franklin Road, and a through lane from Franklin Road to Fairview Avenue. FIGURE 12 Eagle/Fairview Improvements and the Meridian Town Center Location. (Source: Sales Tax Anticipation Revenue Reimbursement Agreement, Meridian Town Center 2012, Idaho DOT.)

44 Applicable Mode(s) The applicable modes are highway-related improvements with project-specific agreements similar in framework to NEs. Lessons Learned The following points were noted by interviewees as impor- tant lessons to be shared: • The project was not on the plan to be funded by ITD. Thus, developer buy-in was critical for this project to be funded. The use of the approach allowed accelerated construction because the developer provided the initial funding for the road improvements. • The developer can receive only the rebate subject to actual sales tax collected. Thus, market analysis of demand was critical. Project Contacts The Idaho Transportation Department was the project contact. Transportation Development District— City of Olathe, Kansas Facility Name The facility name is Olathe Pointe and Gateway access improvements. VC Mechanism The mechanism is a STD, with a transportation-related sales tax. Background Transportation development districts are available to any city or county in Kansas. The city uses several economic devel- opment tools for funding and financing tools, but TDDs are used specifically for transportation. There are currently 36 TDDs operating in the state of Kansas, and the city of Olathe is one of them. The transportation infrastructure improvements must be constructed to serve commercial development projects, with a goal of spurring development with use of a TDD. Figure 13 shows the examples discussed in this section. Legal Authority Resolution 11-1066 provides for the development of TDDs in the city of Olathe, Kansas (City of Olathe 2012). However, tax rebates from complex property sales. The rebate is based on the Idaho sales tax rate of 6%. Legal Authority Idaho Code 64-3641 allows the developer 60% of the sales tax revenues collected from the development to be used for the reimbursement. Once the costs of the improvement from sales tax revenues have been made (not to exceed $35 million, which is capped under Idaho Code), no additional reimburse- ments can be made (Sales Tax Anticipation Reimbursement Agreement 2012). This act is also the STARR Act. Accord- ing the agreement between the developer and ACHD and ITD, Phase 2 must begin when the occupancy permits exceed 680,000 square feet, and Phase 3 must begin when the per- mits exceed 950,000 square feet. The developer is entitled to receive sales tax reimbursements for all portions of the project cost, except costs for which the developer receives IF credits or reimbursements from ACHD. Project Funding This project has no federal contributions. The project is a local project, and costs are part of ACHD and shared with the developer. Local Partnerships The project’s local partners include: • The developer, Meridian CenterCal Properties, LLC (beneficiary and main collaborator and initiator), • ACHD (collaborator), • ITD (collaborator), and • Community Planning Association of Southwest Idaho. Implementation Considerations Some key implementation considerations include: Boundaries: Single parcel (retail complex), the Meridian Town Center development. The proposed development is 1,017,911 square feet of mixed-use/lifestyle center including retail, commercial, office, and residential uses. Levy Basis and Duration: Up-front payments are made by the developer toward the project with sales tax reimburse- ments based on revenues with duration determined by cost and amount of rebate accrued annually. It is noted that the duration is as long as it takes for the cost share to be paid off (capped at $35 million). The agreement was signed in 2011. Risk Considerations: The agreements include several default clauses on payments by the developer.

45 transportation projects, In this case, a transportation sales tax was used with the following parameters: • In any increment of 0.10% or 0.25% not to exceed a max- imum of 1% additional local sales tax within the district. • A maximum duration of 22 years. The Olathe Pointe TDD was set up in 2005 with 1% sales tax, whereas the Gateway 1A was set up in 2007. These are among the several set up by Kansas. The TDD reimburse- ment costs are $14.94 million for this project, whereas total project costs are noted to be $30 million. Timing, Collection of Revenues, and Financing Consid- erations: The Olathe Pointe TDD inception-to-date revenues are $2,001,928. The city of Olathe TDD and other TDDs in Kansas are required to: • Maintain a separate fund for each district and project and assign a suitable title or name (i.e., Fifth Street Reconstruction TDD Fund). • Withdraw the tax once the principle and interest are paid; any extra collections or surplus may be expended for purposes allowable for local sales tax receipts. • Use the TDD sales revenues to back sales tax revenue bonds if needed or required by the project. Applicable Mode(s) This example showcases small-scale, highway-related improvements that serve commercial developments and access-related projects. the purposes of such TDDs are to fund and finance transpor- tation projects, including: • Roads, • Traffic signals, • Parking lots and parking structures, • Sidewalks, • Utilities within or without the public right-of-way, • Façade improvements, and • Airport terminals or hangars. Local Partnerships The project local partners were: • The City of Olathe (initiator), and • The public because a petition and public hearing are required to establish a TDD (beneficiaries). Implementation Considerations Boundaries: The Olathe Pointe and TDD Gateway 1A bound- aries are shown in Figure 13. The Gateway 1A is bounded by three streets: 119th Street, Kansas City Road, and Renner Road. The highlighting features of all the TDDs are they are small areas, cover one or more developments, and are bounded by the access roads surrounding those lots. Levy Basis and Duration: Kansas TDDs in general and the city of Olathe TDD in particular use special assessments or new transportation sales tax within the district to finance FIGURE 13 Olathe Pointe TDD—Access road improvements and Gateway 1A TDD-related improvements. (Source: City of Olathe, http://www.olatheks.org/Finance/EconomicDevelopment/TDD.)

46 highway between Macon, Missouri, and Monroe City, Mis- souri, by September 30, 2010. East of the Monroe City exit, US-36 is a four-lane highway to US-61, where I-72 takes over the alignment. The project is noted to be the Missouri DOT’s longest TDD project at 52 miles (83.2 km) in the northeastern part of Missouri; it spans five counties. The project is designed in three phases and is part of a larger project to upgrade Route 36 to four lanes between Macon and Hannibal. The value cre- ation opportunities came from the need to upgrade a vital link. The three phases are: • Monroe City–Hannibal • Shelbina–Monroe City • Shelbina–Macon. The project is part of the 10-year transportation improve- ment long-range plan but is not in the 5-year transporta- tion improvement plan. Because Missouri DOT indicated a funding shortfall, the regions were told there was no money essentially until 2025–2030. Thus, the community decided to mobilize its own resources. Table 5 presents the project timeline, and the project location is shown in Figure 14. Legal Authority The TDD Act, Sections 238.200 to 238.280, allows for the for- mation of TDDs. The revenues of a TDD, the majority of which are sales taxes, can be used only for transportation-related proj- ects (Missouri DOT 2004; Revised Statutes Missouri 2013). The actual project costs for this expansion project started out at $100 million and then increased to $227 million for expanding 52 miles (83.2 km). However, costs came down to $89 million as the result of (1) value engineering studies that were conducted by Missouri DOT before construction, (2) letting of contracts, and (3) construction bid prices lower than engineering estimates because of slack demand. Project Funding The funding package includes a $7 million federal earmark and a TDD sales tax. The TDD’s share was agreed upon Websites for the Project • h t tp : / /www.o la theks .o rg /F inance /Economic Development/TDD. • http://www.olatheks.org/files/purchasing/Olathe PointeTDD.pdf. Project Contact The project contact is the city of Olathe, Kansas. Missouri Sales Tax District— Highway 36 Expansion Facility Name The facility discussed in this section is the US-36/I-72 cor- ridor in Missouri. VC Mechanism The specific mechanism discussed in this example is the use of multi-county STD, a TDD, for Missouri’s US-36/I-72 Corridor Transportation District. Background and Special Features US-36 in Missouri passes through or near St. Joseph, Cam- eron, Chillicothe, Brookfield, Macon, Monroe City, and Hannibal. From 1922 to 1926, it was “Route 8.” It is also Interstate 72. On August 3, 2005, residents of Macon, Marion, Monroe, Shelby, and Ralls counties approved Proposition 36B, which excluded Ralls County from the TDD and allowed for the construction of a four-lane US-36 to be constructed without Ralls County’s participation. This construction would serve as an extension of Interstate 72 west from Hannibal to Cameron and would make US-36 four lanes across Missouri. With the passage of Proposition 36B, the US-36/I-72 Corri- dor Transportation District was created to help fund construc- tion to convert the remaining 38 miles (61 km) of a two-lane Date Project Activity September 2005 Preliminary design plans for Macon to Shelbina section presented to public October 2005 Preliminary design plans for Shelbina to Monroe City section presented to public Fall 2005 Land acquisition begins for Monroe City to Hannibal section Spring 2006 Land acquisition begins for Macon to Shelbina section Summer 2006 Land acquisition begins for Shelbina to Monroe City section Summer 2007 Construction begins on Monroe City to Hannibal section Fall 2007 Construction begins on Shelbina to Monroe City section Winter 2007 Construction begins on Macon to Shelbina section July 2010 All four lanes open to traffic TABLE 5 PROJECT TIMELINE—HIGHWAY 36, MISSOURI

47 FIGURE 14 U.S. Hwy 36 Monroe, Shelby, Marion, and Ralls County Segment (D3, top) and Macon, Linn, and Livingston Segment (D2, bottom). (Source: Maps provided by Missouri DOT District Offices.)

48 total projected revenue for the year 2013 was $2+ million, not including an investment income of approximately $130,000. Projected costs were $41,330 (mostly legal). The beginning balance was on the order of $8.6 million for the year beginning 2013. The revenue is collected by the Missouri Department of Revenue and paid out to the TDD on a monthly basis. Cost Efficiency: This case example provides an opportu- nity not only to assess the timing of revenues in relation to construction, but also the extent to which the TDD has been able to meet the projected 38% share in the project cost. As of this point, an amount of $12+ million (of the $34.3 million TDD cost basis, or approximately 38%) has been paid off from sales tax revenues. This project has until 2020 to pay off the balance of approximately $21 million of the TDD share. Financing Based on Revenue Streams: The Missouri Department of Revenue transfers funds to a bank account. Annual loan payments from the account are made to the MTFC according to an amortization schedule provided by MTFC by the end of the calendar year. The role of a feasibil- ity assessment/study was noted to determine the adequacy of sales tax revenue streams and to aid the financial analysis. Risk Considerations in Agreements: The agreement with MTFC was such that there was a loan repayment break for the first 3 years into the TDD and that Missouri DOT would pay off any unpaid loan balances in the event of default. Accord- ing to the interviewees, there is no indication that is likely to happen. The TDD was set up in 2005 with the first collection on January 1, 2006. However, the first loan payment was not required to be paid off until December 31, 2009. Lessons Learned The agency representatives interviewed pointed to some of following lessons learned: • The mechanism allowed for accelerated delivery of a project that was on the long-range plan but with no funds available until 2035. • The cost reductions made because of value engineering made the project easier to sell to the public for commu- nity support. • The mechanism is not costless. There are transaction costs associated with a TDD, and institutional capacity is required to manage the TDD. Transaction costs were kept down by keeping the area of influence limited to immediately adjacent counties in totality. The costs associated with the TDD were noted to be limited at 1% (mostly legal costs) and were low owing to general political will to get this project going from all quarters because it was widely accepted as a needed vital freeway for these regions. • The mechanism requires institutional capacity for man- aging and overseeing the process and revenues, which was handled by the TC. as half of the construction cost, but it ended up equaling $34,299,339.63. This did not include any costs related to design, engineering, acquisition of right-of-way, utility relo- cation, or administration cost or the maintenance cost of the roadway after construction. Local Partnerships The TC was set in 2003, and partnerships were made among Missouri DOT, MHTC, and the counties (initiators) and com- munity (beneficiaries). The Missouri Transportation Finance Corporation (MTFC) financed the TDD loan of $34.3 million for 15 years. Implementation Considerations Some key implementation considerations include: Boundaries and TDD Influence Area: The area of influence was based on five adjacent counties: Macon, Marion, Monroe, Shelby, and Ralls. However, Ralls County opted out of the TDD sales tax. On August 3, 2005, residents of Macon, Marion, Monroe, Shelby, and Ralls Counties approved Proposition 36B, which excludes Ralls County from the TDD and allows for the construction of a four-lane US-36 to be constructed with- out Ralls County’s participation. Thus, the other four counties were therefore included in the TDD area. In addition, the city of Clarence wanted on/off ramps at its overpass on Missouri Hwy 151 at US Hwy 36 (in Clarence), which were not part of the original design. Because this was essentially a change order of a design, the city of Clarence’s portion was used to fund and finance on/off ramps at US-Highway 151. A separate funding agreement over the base agreement was made with the city of Clarence, Shelby County Commissioner, and Missouri DOT to add ramps on U.S. Hwy 36. Levy Basis and Process for Capturing the Value: A half- cent additional sales tax was approved by voters. Voters in all four counties approved the sales tax. The required major- ity vote of 51% was not attained in Ralls County. However, to get it on the ballot, an intergovernmental agreement was signed, and the agreement met the Missouri statutes guiding the TDD. The revenues from the sales taxes are deposited in a separate account from which the TDD pays the obligations, makes loan payments, and makes investments to meet future obligations. The VC sales tax revenues portion was limited to 50% of construction costs only. The TDD was not respon- sible for project costs associated with design and engineer- ing, right-of-way, utility relocation, and administrative costs. Duration of the TDD: The duration of the TDD is 15 years starting from 2005, after which the extra tax goes away. The last payment is set for December 2020. Timing and Collection of Revenues: The revenue streams started to come in from 2005, one year before construction. The

49 to have the highway built. These people included board members of US-63 (some of whom were interviewed for this report) and KOCH Performance Roads Incorporated. The presidents of A.T. Still University and Truman State Uni- versity were among the founding ex officio members of the corporation who communicated the message of Highway 63 4 Life: Safety, Economic Development, Recruitment of Stu- dents to Universities, and Life! The US-63 project was part of a 15-year plan for the city of Kirksville. Figure 15 shows the project map. Figure 16 shows the project timeline based on project agreements shared by Missouri DOT (Missouri DOT Project Agreements Highway 63). Legal Authority In 1990, the Missouri Transportation Corporation Act was created to allow quasigovernmental agencies called TCs to seek alternate funding for and oversee highway improve- ment projects. Sections 238.300 and 238.360 of the revised statutes of Missouri authorize the formation of nonprofit cor- porations for the purpose of promoting and developing pub- lic transportation facilities and systems and alternate means. The corporation was set up to include jurisdictions that would be interested in and affected by the expansion of this project. The core groups were the Kirksville Area Cham- ber of Commerce (four members); city of Kirksville (three members); Adair County (two members); counties north and south of Adair County (one from each); and the cities of Macon, Atlanta, and LaPlata (one from each). Project Costs and Funding Projects costs were noted to be $37.4 million (Highway 63 Cooperation Agreement Provided by Missouri DOT). The funding included the half-cent sales tax revenues of city of Kirksville. KOCH Performance Road worked with Missouri DOT in sharing road-building mechanisms and provided a 15-year maintenance guarantee on the section of US-63 between Macon and Kirksville, Missouri. MHTC provided the balance funding. These revenues provided 30% of the project cost with the remaining provided by MHTC. Local Partnerships The project local partners were: • Kirksville residents and city of Kirksville (beneficiaries and key collaborators) • Highway 63 Corporation (nonprofit TC) • MHTC • Missouri DOT (partner) • KOCH Performance Roads Inc. (design–build–maintain agreement for 15 years). • The opting-out clause from TDD areas is noted to retain the acceptability, but it is also noted to lead to free-rider problems in other regions. • The development of stakeholder support is challeng- ing and requires vision and time. Political acceptabil- ity is important for voter approval, as is clear from the lengthy community involvement phase. Project Website The project website is http://www.modot.org/northeast/ projects/route36_projectinformation.htm. Contact The contact for this project is the Missouri DOT. Missouri Transportation Corporation— US-63 Expansion Facility Name The facility discussed in this section is the US-63 Corridor Expansion Project, Missouri. VC Mechanism The mechanisms discussed in this example include TC (High- way 63 Transportation Corporation) and citywide sales tax. Background and Sources for Value Creation This project’s mission is indicated in the following paragraph. To fund, promote, plan, design, construct, maintain and oper- ate, or assist therein, the . . . construction of two additional lanes on Highway 63 . . . from Route KK in Adair County to the inter- section of Highway 63 bypass of Kirksville . . . to issue revenue bonds and refunding revenue bonds . . . to pursue additional funding through the State Infrastructure Bank . . . to secure and obtain rights-of-way . . . [in] a Cooperative Agreement with the Commission, the County of Adair and the city of Kirksville (Highway 63 Transportation Corporation). In 1998, when Missouri DOT deferred the four-lane expan- sion plans for US-63 from Macon to Kirksville until at least 2020, Kirksville citizens decided to take advantage of that act to move the project forward. A Highway 63 Taskforce was formed by the Kirksville Area Chamber of Commerce, and with the cooperation of Missouri DOT, MHTC, the citizens of Adair and Macon Counties, and other interested parties and organizations, the Highway 63 Transportation Corporation (H63TC) was incorporated in 1999. Several members travelled to Jefferson City to meet with Missouri DOT and legislators to manage the strategic steps

50 Equity Considerations: No equity aspects were specifi- cally noted because the process was approved by voters. Timing and Collection of Revenues: The corporation had a feasibility study based on forecast analysis of sales tax rev- enues conducted and provided guidance to the city as needed. The sales tax revenues were collected by the city of Kirksville and paid through the Highway 63 Transportation Corporation. Because of the corporation, there is a mechanism in the agree- ments between the corporation and the city for the accounting of the revenues. Approximately $11.5 million was projected from sales tax revenues. Collections started before construction. Financing Based on Revenue Streams and Risk Consider- ations: The sales tax revenues were used to back debt issued. Implementation Considerations Some key implementation considerations include: Levy Basis and Service Area: The sales tax measure was a specific tax approved by the state in 2000 for the funding of economic development projects approved by the voters, including the TC. The citizens of Kirksville approved a half- cent sales tax (citywide) in April 2003 by an overwhelmingly supporting vote by 78.9%. The tax was to be used to build a road to the south of the city limits. Duration: The duration of the sales tax was set at 10 years, ending in 2013. The construction started in 2003. It was com- pleted in 2005. FIGURE 15 U.S. Hwy 63 project and location map (Kirksville, Missouri). (Source: Maps provided by Missouri DOT District Offices.) FIGURE 16 U.S. Hwy 63 project timeline (Kirksville, Missouri). (Source: Developed from Highway 63 Project Agreement, Highway 63 Corporation Documentation, Missouri DOT—Truman State University Archives.)

51 Missouri Transportation Corporation— US-67 Corridor Expansion, Missouri Facility Name The facility discussed in this section is the US-67 corridor expansion in Missouri. VC Mechanism The mechanism adopted in this project context is a TC (Hwy 67 Transportation Corporation) and city sales tax. Background and Sources for Value Creation Highway 67 is part of the state highway system and is owned by MHTC. The commission, city of Poplar Bluff, and the cor- poration desire to provide for the acquisition of right-of-way, design, and construction of two additional lanes to the existing Hwy 67 lanes located between Poplar Bluff and Frederick- town, beginning approximately 1 mile south of Highway JJ and extending north to 1 mile south of the Route E overpass. This would make Hwy 67 a four-lane project from Poplar Bluff (Butler County, Missouri), through Wayne County, and to Fredericktown (Madison County). The four-lane improve- ments were constructed over and through hilly terrain and over the St. Francis River and several other smaller creeks. The project length is 50 miles (80 km). Figure 17 shows the project limits and location relative to the St. Francis River as well as project cost sharing. The project started in 2005 and was completed in 2011. Project Cost The total project cost is noted as $180 million. The city and corporation were responsible for 50% of the project con- struction and construction inspection cost. Legal Authority In 1990, the Missouri Transportation Corporation Act was created to allow quasigovernmental agencies called TCs to seek alternate funding for and oversee highway improve- ment projects. Sections 238.300 and 238.360 of the revised statutes of Missouri authorize the formation of nonprofit cor- porations for the purpose of promoting and developing pub- lic transportation facilities and systems and alternate means. The not-for-profit 5013C Hwy 67 Corporation was required by the state of Missouri through Missouri DOT to serve as the official liaison with Missouri DOT. In addition, the Hwy 67 Corps provided the campaign leadership to provide meet- ings and gain support of the community of the city of Poplar Bluff to pass the half-cent tax. If the sales tax funds generated were not sufficient, it was expected that the city’s federal aid urban dollars would be used to make up the shortfall. The sales tax receipts have been sufficient each year. The role of a feasibility assessment/ study conducted early in the process helped determine the adequacy of sales tax revenue streams and aid the financial analysis. Cost-Efficiency: Thirty percent of the project cost was pro- posed to be covered by the TDD sales tax. This project paid its share of the project cost of $11.5 million from economic development sales tax revenues to meet debt obligations. Lessons Learned Interviewees reported the following points as key lessons learned: • The project presented an opportunity to share in a uni- fied, collective effort contributing to the building of the community. • The stakeholders were proactive and could send a mes- sage that reached across diverse groups. The process took more than 4 years. • The communication efforts through focus groups were facilitated by the corporation members, and an educa- tional team of citizens of Kirksville were identified to articulate the benefits of a four-lane “Highway 4 LIFE.” This was vital because voter approval was required for the sales tax to be approved. • The delivery project was accelerated as a result of the adoption of accelerated delivery methods and funding. The public–private partnership (PPP) elements helped maintain the roadways and deliver the safety benefits faster than would have been possible with a traditional approach. • The TC is not a funding tool in itself but an engine to support the overseeing of the project, project funding, and promotion. Project Website • The project-related documents archive is at Truman University Library. • http://library.truman.edu/manuscripts/H3-Hiway%2063. asp. • http://www.modot.org/plansandprojects/documents/ D2HwyConstSched.pdf. • http://www.corporationwiki.com/Kansas/Wichita/ koch-performance-roads-inc/30070674.aspx. Contacts Missouri DOT is the project contact.

52 • The landowners provided through sales taxes $60 mil- lion or 50% of the project cost. • The Delta Regional Authority provided $5 million grant funding applied to corporation obligations (Hwy 67 Project Agreement). Local Partnerships The project local partners are: • City of Poplar Bluff residents (beneficiaries; initiator and collaborator), • Hwy 67 Corporation (nonprofit TC), • MHTC, • Missouri DOT (partner), and • USACE (beneficiary and partner). Project Funding The funding included the half-cent, citywide, voter-approved sales tax revenues of the city of Poplar Bluff. The interview- ees noted that there was already an existing TDD in the city, and the TDD chose not to participate in this project but had set aside $30 million for other related projects in the region. Thus, the half-cent sales tax was additional to the existing $0.01 sales tax in the region (Hwy 67 Project Documentation and Interviews). The project funding breakdown is as follows: • The Missouri DOT ($92 million of total project cost). • The U.S. Army Corps of Engineers (USACE) funded the cost of $28 million to build a new four-lane bridge over the St. Francis River plus approximately 6 miles (3 miles on each side of the bridge). The $28 million was a part of the $180 million total cost. FIGURE 17 U.S. Hwy 67 project location, limits. (Source: Maps shared by Missouri DOT District Offices.)

53 • http://www.morail.org/southeast/Route67Improvements SouthofPoplarBluff.htm. • http://www.semissourian.com/story/1757353.html. • http://dar.rustcom.net/story/1780860.html. • http://dar.rustcom.net/story/1771606.html. • http://www.morail.org/southeast/documents/FINAL_ APRIL2.pdf. Contacts Missouri DOT is the contact for the project. CORRIDOR-LEVEL MECHANISMS Transportation Improvement Districts— State Route 28, Virginia Facility Name The facility that is discussed in this section is State Route 28 (SR-28), Virginia (corridor). VC Mechanism The mechanism discussed in this section is the SAD, which is used to fund improvements in the corridor. The special assessment mechanism was used as a part of a corridor fund- ing and bond strategy, where Phases 2 onward were part of a PPP agreement. Background and Source for Value Creation As discussed in chapter two, TIDs are a type of SAD used in Virginia to fund transport projects. This section discusses specific examples of TID use in Virginia. This example show- cases a high-growth area characterized by funding shortfalls in capital programs used to finance a state transportation facil- ity (State Route 28, Virginia). Located in Northern Virginia just east of Washington, D.C., SR-28 forms a major north–south corridor in Loudoun and Fairfax Counties, running 15 miles between I-66 on the south and Route 7 on the north; both are major east–west corridors. SR-28 is a primary state highway traversing the counties of Fairfax, Loudoun, Prince William, and Fauquier in Virginia. In the late 1980s, SR-28 was a two-lane country road. Growth pressures in the region demanded that SR-28 be upgraded to increase its capacity to handle the resulting traffic volumes. Thus, the primary source for value creation was the upgrade for a critical part of the network under pres- sure from growth. However, there was no formal justification in terms of an economic impact analysis, community support for the upgrade, and willingness to allow the property tax surcharge. Implementation Considerations Some key implementation considerations include: Duration: The duration of the sales tax is set at 30 years, ending in 2035. The construction started in 2005. Levy Basis and Service Area: The half-cent, citywide, sales tax measure was a specific tax approved by the voters of the city of Poplar Bluff, including the TC. There was an existing TDD in the area that chose to not participate. Equity Considerations: No specific equity issues were noted by the interviewees, even within the context of 50% of the proj- ect cost borne by landowners of Poplar Bluff. Timing and Collection of Revenues: The collections started in the same year as construction. Because of the corporation, there is a mechanism in the agreements between the corporation and the city for the accounting of the revenues. The sales tax receipts have been sufficient each year so far, and it was indi- cated by respondents that the sales tax will be able to pay off the $60 million share over the duration for which the tax is active. Risk Considerations: The share of local contributions was linked to state revenue performance with an understanding that local contributions would come down if state revenues exceeded $500 million, according to the agreement docu- ments shared by interviewees. Lessons Learned The following points were noted by interviewees as key lessons: • Communication with citizens and business and prop- erty owners was recognized as very important in build- ing trust from all concerned. • The TC is not a funding tool in itself but an engine to support the overseeing of the project, its funding, and its promotion. The not-for-profit 5013C Hwy 67 Corpora- tion was required by the state of Missouri through Mis- souri DOT to serve as the official liaison with Missouri DOT. The Hwy 67 Corporation provided the campaign leadership to provide meetings and gain support of the community of the city of Poplar Bluff to obtain voter approval to pass the half-cent tax. • The process was noted to be a time-consuming process but one that got them the desired result. The process has been quite involved, as the cooperation agreements and archived documentation showcase. Project Website or Project-Related Information • http://www.modot.org/southeast/news_and_information/ special_events/mid-americaexpress.htm.

54 local petition. The other main partners, including the Phase 2 P3 parties, include: • Virginia DOT (initiator based on support of the district act and local governments and landowner petition). • Developer: Clark Construction Group. • Developer: Shirley Contracting Group. • Designer: Dewberry and Davis, LLC. • Route 28 Corridor Improvements, LLC (Route 28 Proj- ect Website and personal discussions). Legal Authority In 1986, under the leadership of Governor Gerald L. Baliles, Virginia was confronted with transportation challenges, and the governor initiated a comprehensive program to address current and future transportation needs in the Commonwealth. As an integral component of this program, the Virginia Gen- eral Assembly approved the special tax district with an alter- nate means of financing critical transportation improvements. Following Virginia Law, such a district was formed only upon the joint petition of owners of at least 51% of the land area in each county located within the boundaries of the adopted dis- trict, and zoned or used for commercial or industrial purposes. Loudoun County and Fairfax County entered into a contract with the district on September 1, 1988. The Virginia TID is encapsulated in the Virginia Acts of Assembly Sections, Vir- ginia Code. This act allows for the development of special local transportation districts, transportation tax districts, or TIDs. The district is governed by a commission of nine mem- bers composed of four of the elected members of the Board of Supervisors of Fairfax County, four of the elected mem- bers of the Board of Supervisors of Loudoun County, and the chairman of the transportation board or his or her designee. The chairman of the district is elected by and from among its members. There are other local TIDs in Virginia, and the SR-28 TID is just one example. On October 17, 1987, a group of owners of land along SR-28 in Fairfax County and Loudoun County filed with the boards of supervisors of the counties a joint petition for the creation of the State Route 28 Highway Transportation Improvement Dis- trict (SR28-HTID) pursuant to the Multicounty Transportation Improvement Districts Act (Virginia Code Section 15.2-4600 et seq.). In the petition, the petitioning landowners proposed that (1) certain transportation improvements be constructed within the district, (2) the district should enter into a contract with Virginia DOT pursuant to which Virginia DOT would provide the design, planning, and construction and any other undertaking deemed necessary for the construction and annual provision of such transportation improvements in the district, and (3) the boards of supervisors of the counties should impose a special improvements tax within the district on commercial and industrial property and collect the revenues therefrom, which the district would use solely for the district’s portion Highway Improvements Funded Through SR-28 TID Special assessments were used for funding two phases of SR-28 improvements. • Phase 1 Improvements (1991–1998): 14-mile (23-km) expansion of SR-28 (from two to six lanes) and three interchanges (at Routes 50, 7, and Dulles Toll Road). In 1988, the Commonwealth Transportation Board issued $138 million for Phase 1 and agreed to a 75/25 split of shared costs between the district (75%) and the Virginia DOT (25%). • Phase 2 Improvements (2002–2007): This part of the agreement was signed as a public–private partnership (P3) between several partners and carried out as part of Virginia’s P3 Act (source: http://www.28freeway.com and personal discussions). A $200 million investment was undertaken for the conversion of six at-grade inter- changes with signalized intersections to high-capacity, grade-separated interchanges in this agreement. This was subsequently amended in 2006 to include four more interchanges (for a total of 10 interchanges). Virginia DOT contributed more than $70 million, with ultimate plans calling for an expansion of SR-28 to eight lanes. The original six interchanges include: – Air & Space Museum Parkway Interchange— Completed summer 2004. – Route 625 Interchange—Completed. – Route 625 Interchange (Waxpool/Church Roads), Flyover Bridge and Waxpool Road Widening— Completed fall 2005. – Church Road Widening and Washington & Old Dominion (W&OD) Trail Bridge—Completed fall 2006. – Route 606 Interchange (Old Ox Road)—Completed spring 2005. – Route 662 Interchange (Westfields Boulevard)— Completed fall 2005. – Route 668 Interchange (McLearen Road)—Completed spring 2006. • Phase 3 (2007–2010): Four additional interchanges at a cost of $136 million: – Willard Road Interchange—Completed summer 2009. – Route 608 Interchange (Frying Pan Road)—Completed spring 2010. – Innovation Avenue—Phase 1 (partial interchange; Center for Innovative Technology)—Completed fall 2007. – Route 1793 Interchange (Nokes Boulevard/Dulles Town Center)—Completed summer 2009. • A final phase includes the expansion of SR-28 to eight lanes under the project scope. Local Partnerships The major local partners in this venture were the local land- owners (beneficiaries) because the process was driven by

55 ments in this SR-28 project, taking advantage of the law passed by the governor. Loudoun County, in partnership with Fairfax County, formed the Route 28 Highway Transportation Improvement District on December 21, 1987, the first TID in the Commonwealth. Figure 18 shows the location of SR-28 and the geographic boundary associated with the TID used to fund and finance SR-28 improvements. The district boundar- ies encompass approximately 14,800 acres of land; the district is approximately 14 miles in length and is located generally along SR-28 in the counties. Eight miles of the project are located in Fairfax, and approximately 6.2 miles are in Loudoun County. Both counties are located in the northeastern corner of Virginia and are part of the Washington, D.C., metropolitan area, which includes jurisdictions in Maryland, the District of Columbia, and Northern Virginia (Figures 19 and 20). The key criterion in the boundary development is the require- ment for contiguity within local jurisdictions. The code itself allows for the creation of local TIDs in a single city or county or in two or more “general benefit areas” that are contiguous cities or counties. However, the process for defining the actual service area in terms of properties to be included/excluded for the SR28-HTID could not be established beyond direct proximity. Figure 19 shows only the Loudoun County portion. of the annual payments required under the contract with Vir- ginia DOT and related costs as authorized under the district act for services performed in connection with the implementation of such transportation improvements. After public hearings, the boards of supervisors adopted resolutions establishing the district and also adopted concurrent resolutions setting forth the material understandings of the counties and the petitioning landowners with respect to the district, including a 75/25 ratio of the costs to be shared by the district and Virginia DOT with respect to the transportation improvements. In 1995, the Virginia General Assembly also passed the Public Private Transportation Act, which allowed Phase 2 to be carried out as P3 design–build–develop (Chapter 22, Code of Virginia 1995; Virginia DOT 1995). Implementation Considerations Many implementation considerations listed in this section are interconnected. The important considerations in this case example include: Boundaries: In 1987, Virginia authorized the creation of the first special tax districts to finance transportation invest- FIGURE 18 Virginia SR-28 TID boundary (Fairfax and Loudoun counties). (Source: Virginia DOT.)

FIGURE 19 Virginia SR-28 TID Loudoun County boundary. (Source: Loudoun County Geographic Information System Office.) FIGURE 20 Location of Fairfax and Loudoun counties and SR-28. (Source: Virginia DOT.)

57 the district project and creating a schedule of financing by the transportation board and the authority for Phase 2’s six grade-separated interchanges for SR-28. The plan called for funding these interchanges through the issu- ance of bonds by the authority in an amount sufficient to provide funding for approximately $90 million of the costs of the district project (the initial authority bonds), and the issuance of bonds by the transportation board to produce an additional $36 million of the costs of the dis- trict project, with debt service on all bonds to be payable from the special improvements tax levied in the district. • 2003: At the request of the transportation board, the authority issued the series 2003 bonds to provide $30 mil- lion for costs of the district project. • 2004: The authority issued its series 2004 bonds to finance an additional $60 million of costs of the district project. The proceeds of the initial authority bonds and the investment income thereon were sufficient to fund the construction costs of Phase 2’s six interchanges on SR-28, and such interchanges were completed in 2007. • 2006: The contract was amended to consider an interest- free loan, which was subsequently replaced by an allo- cation of state funds. TID bonds continue to hold AAA ratings. Risk Considerations and Performance of the SR28-HTID: Initially, tax revenue collections at the maximum amount were not sufficient to pay the debt obligation in full as a result of land values not holding up (Table 6). Consequently, the difference was made up from the Northern Virginia State Highway Allocation. This process is expected to continue until such time as district revenues are sufficient to fund Levy Basis and Duration: Both Loudoun and Fairfax County agreed to pay all tax revenues to the Commonwealth Trans- portation Board. The contract specified that (1) the County Administrator shall include in the budget all amounts to be paid by the county under the district contract for the fiscal year (75/25 split of shared costs between TID and Virginia DOT); (2) the county shall provide by February of each year the total assessed fair market value of the district as of January 1 of that year; and (3) the district in turn shall notify the county of the required payment and request a rate sufficient to collect that amount, to a maximum of $0.20 per $100 of assessed value. Property values are used as the basis for assessments; how- ever, the revenues generated are not considered ad valorem taxes or property taxes. Instead, they are considered as non-ad valorem assessments based on benefits or improvement to the property from district expenditures because benefits are pre- sumed to be proportional to property values, and land values are used as a substitute or proxy for direct measurement of benefits generated. The levies satisfy the following criteria: • TID levies are recurring on an annual basis. These funds, in addition to funds received through the state primary road fund allocation formula, are to be used for the road improvements and debt service on bonds issued by the state. • TID levies apply to all current and future development. • The periodicity is annual. The fiscal year 2013 assess- ment is $0.18 per $100 valuation. The levy has been ongoing for 25 years as of 2013. • The levy was aimed only at commercial and industrial property in the service area, which subsequently cov- ered 10,204 acres. The tax district defined a distinct scope of work when it formed in the 1980s. It was noted during the interviews that once that scope is completed, the tax district will dissolve. Timing and Collection of Revenues: The collected tax revenues for the SR28-HTID were deposited to a project completion fund (PCF). Revenues were collected from 1995, a few years after Phase 1 construction began. Financing Considerations: The chronological breakdown of the financing is provided here: • 1988: Debt issued by the state to fund road improve- ments to SR-28 was authorized during the 1988 Virginia General Assembly and became effective July 1, 1988. The Commonwealth of Virginia issued $138.5 million in revenue bonds for the SR-28 project in September 1988. These tax revenues were used for road improvements and debt service on bonds along with funds received through the state primary road fund allocation formula. • 2002: In 2002, the transportation board, the authority, and the commission amended the original 1988 district contract, adopting a plan of financing and refinancing Fiscal Year Total ($) 1995 5.877 1996 4.274 1997 3.839 1998 4.638 1999 5.905 2000 7.524 2001 9.907 2002 11.244 2003 12.847 2004 11.434 2005 12.834 2006 14.980 2007 19.117 2008 21.886 2009 23.694 2010 21.015 2011 17.705 2012 18.412 Total since 1996 227.13 TABLE 6 SPECIAL ASSESSMENT TAX REVENUE HISTORY SR28-HTID (FAIRFAX AND LOUDOUN COUNTIES)

58 • A similar rail-related TID has been established to finance rail in the parts of the same corridor (Dulles Rail TID) and is being discussed elsewhere. The Phase 1 Dulles Rail TID was established in 2004, and Phase 2 was established in 2012 at $0.22/$100 valuation (http://www. fairfaxcounty.gov). The points listed here are not barriers per se but factors reported by interviewees as those that other agencies will need to consider in their use of this mechanism. • The tax revenues provide a steady flow of funds, yet debt finance is linked to real estate cycles even with sur- charges. When a large percentage is covered by the dis- trict, as in this case (75%), there needs to be clear vision of shortfall agreements for debt service. Revenue short- falls relative to the amount needed to service the debt required an arrangement from another entity to service that shortfall. In this case, the Commonwealth’s Northern Virginia State Highway Allocation provided the backup guarantee and bridged that gap initially when the tax dis- trict had some issues with land values not holding (1988, 1989) and revenue was insufficient to pay debt service. The rebound of real estate values in 1992 allowed the refinancing of the debt to take advantage of lower interest rates. Surpluses to the PCF accrued since 2001, allowing full debt service repayments and the tax district to move forward with additional design and construction using the PCF (100% tax district financed). There are transac- tion costs associated with the setup, maintenance, and management of a TID. Applicable Mode(s) • The applicable mode in this example is highway, but examples abound in transit. • The same TID mechanism is used for funding transit and rail elsewhere in the same counties (Dulles Rail). Website for Project The website for the project is http://www.28freeway.com/ projectoverview.html. Project Contact The contact for the project is Virginia DOT. Joint Southeast Public Improvement Association— I-25 Corridor, Colorado Facility Name The facility discussed in this section is the I-25 corridor, in Denver, Colorado. debt service costs in full. In 1992, real estate rebounded and allowed debt refinancing at lower interest rates. The revenue performance since 2001 has been above what is needed to pay debt service. This allowed the SR28-HTID to go ahead with additional design and construction using the project comple- tion fund as 100% self-financed. For Phase 2, the TID sup- ported $470 million of improvements. In fiscal year 2007, the SR-28 TID was projected to generate $8,200,000 in current and delinquent tax revenue, and it surpassed that estimate. Lessons Learned Virginia law allows for single county and multicounty TIDs. The SR28-HTID example highlights some of the consider- ations, including infrastructure financing and phasing, that communities have to take into account to successfully imple- ment TIDs, as well as some of the challenges of financing infrastructure investments within the TIDs. Here are some of the key lessons as pointed out by interviewees. This example also highlights that financial performance of the project corri- dor TID revenues is closely reflected in county bond ratings, which are AAA in this case, or investment grade (Route 28 TID Prospectus, Fairfax County 2012). This project was not in the region’s long-range transportation improvement plan. • The SR28-HTID involved a diverse group of stakehold- ers, including the local landowners and private-sector participants (Clark and Shelly Construction companies) over the project phases. A voluntary joint petition from the landowners was required to support the special assessment for funding transportation improvements to allow growth in the corridor and area. • The project allowed acceleration of planned highway improvements adopted by the state, which relied primar- ily on slower pay-as-you-go financing from the North- ern Virginia region’s share of the state primary road fund allocation. With the PPP under Phase 2, significant cor- ridor improvements funded with a 75/25 split allowed design and construction to proceed much sooner than if the project were publicly funded. The major improve- ments were provided years before they would have been realized through traditional financing. The SR28-HTID supported $470 million of improvements. • The TID board could use debt as a way to finance the projects secured by the tax revenue funding made pos- sible by TID revenues. The TID approach is noted to make a substantial difference in a corridor where, for example, a local match is needed to leverage federal grant funds for construction of a new rapid transit line, or where grade-separated interchanges are needed along a highway corridor to improve traffic flow, as this exam- ple specifically showcases. • Another reported advantage of this TID approach is that it provides a steady stream of funding from year one, which may even avoid the need for bonding as a financ- ing mechanism. It does not affect general funds for the jurisdictions because it is based on an additional charge.

59 2004, SPIMD joined with the Southeast Business Partnership and representatives from each of the corridor governments in formation of the Southeast Urban Corridor Transportation Steering Committee. In alignment with this group, SPIMD helped to fund numerous projects to ease and better the com- pletion of the Transportation Expansion Project, specifically funding $7.5 million to ensure the construction of additional pedestrian overpasses at three new light rail stations. Now SPIMD is partnering with Denver’s Regional Transportation District for transit planning in the region. Implementation Considerations Many implementation considerations listed in this section are interconnected. The important considerations in this case example include: Boundaries and Improvement Type: Areawide. Arapahoe County, Colorado. • Four metropolitan districts in 1983; 18 districts in 2003 due to growth. • Yosemite Street Overpass at a cost of $4.5 million, but other improvements were also made in the corridor, including park-and-ride areas to serve light rail. Duration: Continued for 20 years. Levy Basis: The district is a type of SAD, in which prop- erty owners are taxed to pay off bonds for transportation VC Mechanism The mechanism discussed in this example is a SAD of a much larger scale, called the “metropolitan district,” that is used in conjunction with a voluntary organization such as a TC. Background One of the earliest examples of TID was the 1983 creation of Denver’s Joint Southeast Public Improvement Association (JSPIA), a voluntary cooperative organization, such as a TC, among commercial property owners located in a 5-mile sub- urban corridor along I-25. Over time, funds recovered by the JSPIA TID were used by the Colorado DOT to cover two- thirds of the cost of improvements to five interchanges and one overpass located in the district (Murphy 2010; Strathman and Simmons 2010). According to Colorado statutes, landowners can form quasipublic entities known as metropolitan districts. During the late 1970s and early 1980s, unprecedented growth caused the south I-25 corridor to gridlock, including the inter- changes along the I-25 corridor and the major thoroughfares, such as Belleview Avenue, Orchard Road, and Arapahoe Road. Traffic backed up onto connecting thoroughfares, placing pressure on adjacent residential neighborhoods. In short, the entire southeast corridor was in jeopardy of gridlock (Special District Association of Colorado 2007). As a result, in 1983, the JSPIA brought together four Title 32 metropolitan districts along the south I-25 corridor to comprehensively address long-term transportation planning and funding improvements. As businesses continued to emerge along the southeast cor- ridor, the number of Title 32 districts involved also grew, from four to 18 by 2003. By 2004, the process had become cumber- some, and the growth led to the development of one common district called the Southeast Public Improvement Metropoli- tan District (SPIMD). This approach combined the metropoli- tan districts with zoning. Through the public–private effort, JSPIA committed to approximately $40 million to support and upgrade transportation improvements on the I-25 corridor and a number of arterial roadways in the Denver region. The area covering JSPIA was mostly office land use and a prime growth area for the Denver region and is referred to as the second central business district for Denver (Figure 21). Local Partnerships The local partners were • Developer, • State, • FHWA, and • Landowners (beneficiaries). JSPIA was initiated by private owners/developers with a long-term plan for the corridor to raise revenue to fund and finance the corridor improvements. Since its inception in FIGURE 21 Location of JSPIA, Denver, Colorado, relative to the central business district. (Source: Reprinted from Ullevig 2000.)

60 • South Portal, Phase 1 • Moody/Bond Street Improvement: Gibbs to Sheridan (east leg of couplet) • South Light Rail • SW Kelly Way/Hood Avenue ramp improvement (South Portland circulation) • North Portal: SW Corbett and Sheridan Street improvements. Legal Authority System development charges for transportation, sewers, or other infrastructure are authorized by ORS 223.297-223.314 (http://www.portlandoregon.gov/transportation/46210). Portland’s TSDC was the first multimodal TSDC, allocating project costs among motorized vehicles, transit, and non- motorized (bicycle and pedestrian) trips (City of Portland 2009). Oregon’s System Development Act requires that SDCs be based on an adopted CIP. Local Partnerships The key developers include: • Developers (beneficiaries) and • City of Portland (initiator). Implementation Considerations Many implementation considerations listed in this section are interconnected. The city of Portland conducts feasibil- ity assessments/studies of rates and revenues. The important considerations in this case example include: Levy Basis and Eligible Projects: For the city of Port- land, the TSDC fee-generated revenues are vital to funding projects. These fees are one-time assessments on developers of new development based on the number of vehicle trips the developments are forecast to generate. The fee basis is the new development building permit issued to the devel- oper and is based on trips only to and from the development. The rates are based on required infrastructure capital costs to accommodate the additional trips the development creates. Generally, about one-quarter of a project’s cost may be paid for by TSDC revenues. The remainder of the project cost is paid with other revenues, in part because a portion of the needed investments addresses existing transportation needs, and transportation infrastructure is not one of them. A devel- opment that is part of the North Macadam overlay has to pay both the citywide TSDC and the North Macadam TSDC. The rate-setting process is such that it reflects the multimodal nature of trips generated from a site. The evaluation proce- dure for projects to be funded based on SDCs in Portland is based on a two-tier scale. The first is a minimum qualifica- tion criteria list set followed by a more exhaustive set based improvements that benefit their property. In Colorado, these districts act as quasigovernmental entities. The goal was to construct a $4.5 million overpass based on proportional share of district members’ total assessed valuation (Meisner 1984). Timing of Revenues: The revenue streams accrued along- side improvements on the corridor. Performance of Revenue Streams: Over the course of 20 years (1983–2003), JSPIA provided more than $30 million to fund a variety of transportation improvements along the I-25 southeast corridor, including the construction of overpasses, the construction of essential interchanges, and the widening of roads frequented by commuters on their way to work in the busy business district. In addition, JSPIA helped to provide expansive landscaping and highway beautification programs. Administrative Feasibility: The JSPIA TID become cum- bersome as a result of addition of districts over time, leading to difficulties in communication and management. Transportation System Development Charges— Northern Macadam, Portland, Oregon Facility Name The facilities discussed in this section are part of the city of Portland’s Northern Macadam TSDC. VC Mechanism The mechanism discussed in this section is an IF within a ser- vice area called “overlay” in the context of Oregon’s TSDC. The project is from the 10-year CIP. Background The city of Portland first adopted a Citywide System Develop- ment Charge for Transportation by Ordinance 171301, effec- tive July 18, 1997. The purpose of the charge was to support a prioritized list of multimodal capital investments from the 10-year lists of capital improvements. The project included in this report is a corridor project, the Northern Macadam Proj- ect. It includes six projects whose total cost (low confidence level) is estimated at $194.5 million, of which $32.9 million is eligible for North Macadam TSDC overlay funding. The city of Portland also uses another citywide TSDC. The Macadam TSDC overlay project focused on developing a project list and TSDC rates for an overlay district that will charge special TSDC rates to development in North Macadam to be spent on high-priority transportation improvements in the North Macadam area. The TSDC overlay rates are in addition to the citywide TSDC rates. The projects include: • SW Harbor Drive and River Parkway intersection improvements

61 Timing and Collection of Revenues: The revenues are one- time assessments. They are collected on an ongoing basis when permits are issued in the construction area. Revenue Performance: In 2007, the citywide TSDC pro- gram had collected an estimated $44.7 million to help pay for 70% of the projects on the 1997–2007 TSDC project list. With extensive public input, the city identified a list of growth-oriented, multimodal transportation improvement projects to guide the spending of TSDC revenues over the 10-year duration. This particular TSDC application was developed in 2009. According to the city, this TSDC has been successful in con- tributing $10 million toward street networks and light rail (Portland Milwaukee Light Rail). The actual revenues of this overlay for the year 2010–2011 are not known. Equity, Sustainability, or Livability Incentives/Credits: The TSDC program adopted by the city provides built-in incentives to encourage transit-oriented development, afford- able housing, and small-scale development through TSDC discounts and exemptions. These tend to reduce revenues from system development charges (City of Portland 2007). Multimodal consideration and basis allow an equitable distri- bution of project funds. The credits are noted to be a positive incentive for developers. on Table 7. The legislation is clear on how TSDC charges can be used for all modes, as is implicit in the rate calculations. The city also periodically revises its rate structure. Permits for a new development or redevelopment project must generate more than 15% of new transportation trips to the site and meet certain other criteria to be assessed a TSDC. The TSDC total is then determined by multiplying the num- ber of projected additional trips by a rate set for the proposed land use. The North Macadam example charges for the 2013–2014 rates (for new developments) are listed here and have built splits for motorized transport (75%), transit (12%), and non- motorized transport (13%), developed using the process shown in Figure 22: • Single-family residential: TSDC charge per unit of $2,529. • Multifamily residential: $1,793. • Commercial hotel/motel: $2,251. • Commercial service station: $14,067. • Commercial bank: $26. • Commercial restaurant drive-thru: $46.83. • Commercial retail: $5.09–$57.39. • Commercial institution: $2.84–$475. • Truck terminals: $24,300. Evaluation Criteria Evaluation Subcriteria Criteria Set A: Projects are required to meet Criteria 1–3 to be considered for TSDC 1. Support bicycle, pedestrian, and/or transit modes (i.e., add capacity, improve access, improve connections, remove bottlenecks, fill in missing links) a. Accommodates increased density b. Supports mixed-use development c. Supports 2040 Growth Concept land-use components d. Improves connections and access from neighborhoods to employment and industrial areas e. Fills a gap f. Improves safety 2. Improve movement of freight and goods a. Reduces conflicts between freight and nonfreight uses b. Provides access to intermodal terminals and related distribution facilities c. Fills a gap d. Improves safety e. Supports emergency services 3. Reduce congestion, improve access, and/or Circulation a. Benefits to community/economic development b. Among business districts c. To and within activity centers d. Fills a gap e. Improves safety f. Supports emergency services Criteria Set B: If one of Criteria 1–3 are met, the additional criteria 4 and 5 are used in evaluation 4. Community and business priority a. Priority expressed by neighborhood and business interests b. Addresses equitable geographic distribution of projects 5. Strong potential leverage a. Amount and likelihood of potential funding from other sources Source: Update on TSDC, http://www.portlandoregon.gov/transportation/article/313028). TABLE 7 CITY OF PORTLAND EVALUATION CRITERIA

62 who contributes land, improvements, or other assets receives a credit for qualified public improvements that reduces the amount of SDC due. Uses of TSDC Revenue: SDC revenue can be used for the capital cost of public facilities. SDCs cannot be used for oper- ating or maintenance expenses. The costs of capital facilities that can be paid for by TSDCs are specified in Portland’s City Code 17.15.100. SDCs and Impacts of Development: When determining SDCs, governments generally take the following four factors into account: • Demand (impacts)—Demands placed on public facili- ties vary among different types of development. The city of Portland TSDC is based on the number of trips generated on the transportation system by each type of TSDC Reductions: TSDCs cannot double dip (i.e., they need to take into account the payment by new development of other fees, taxes, and such that the government uses to pay for the capital cost of the same public facilities). These other revenues are accounted for by subtracting them from the cost of capital improvement projects that are attributable to SDCs. The adjustment includes only the taxes, fees, and such that are earmarked for or proratable to the same capital improvements that are the basis for the SDC. Portland uses general transportation revenue, grants, and funding from other local, state, and federal sources to pay for portions of its transportation improvement projects. Port- land’s TSDCs take into account future use of general trans- portation revenue, grants, and other funding by subtracting city-budgeted commitments for those revenues from the cost of projects in the TSDC Capital Improvement Program. In addition to the adjustment described previously, a developer FIGURE 22 North Macadam TSDC rate-setting protocol. (Source: City of Portland, http://www.portlandoregon.gov/transportation/article/338700.)

63 Administrative Feasibility: Initial levels of investment in management and transactions costs associated with adminis- tration of TSDCs are high. Applicable Modes (Multiple), Rates, and Evaluation Criteria The city of Portland TSDCs are designed to support the prin- cipal modes of travel in a multimodal system. For the purpose of organizing and analyzing data that support the TSDCs, the city identified three categories to encompass different modes of travel: • Motorized: automobile, truck, and motorcycle travel but not bus or railcar travel. • Transit: rail and bus travel. • Nonmotorized: pedestrian and bicycle travel. The mode-based evaluation criteria used by the city are designed to meet “rough proportionality” rules and are applied for all growth-related capacity additions and improvements, including Intelligent Transportation System additions; they are shown in Table 7. Applicability to Other Regions This example requires enabling legislation. In this case, the enabling act was the TSDC Act, and the city of Portland issued an ordinance to adopt a citywide SDC. Applicability to Other Project Types A recent study conducted for the Oregon DOT explores the potential of SDCs in the context of funding Oregon DOT’s interchange and access management through the practice of preparing an Interchange Area Management Plan; such a plan is required for all new interchanges and developed collabora- tively with the local government (Strathman and Simmons 2010). Strathman and Simmons note that SDCs had been adopted in North Ontario, under a resolution passed by the city council in July 2006 (Resolution #2006-129, A Resolu- tion Establishing Fees and Charges for System Development Fees for the City of Ontario). The resolution laid out a sched- ule for transportation SDCs based on the ITE land use code per unit of development. Website for Project Update of TSDC–2007 at http://www.portlandoregon.gov/ transportation/article/338700. North Macadam SDC at http://www.portlandoregon.gov/ transportation/article/386066. development. Portland’s TSDC is based on trip genera- tion rates reported nationally by the ITE and mode of travel data from the Portland area. Portland’s City Code 17.15.070 allows developers to submit data and analy- sis to demonstrate that the impacts of their proposed development are less than the impacts used in this rate study. For the city to accept alternative (reduced) impacts, those impacts must be permanent and enforce- able (i.e., through land use restrictions, deed restric- tions, lease terms, etc.). • Benefit criteria—Benefit criteria include personal use and use by others in the family or business enterprise (direct benefit), and use by persons or organizations who provide goods or services to the fee-paying prop- erty (indirect benefit). Portland’s TSDC is based on the number of trips generated on the transportation system by each type of development, which includes some direct benefit trips and some indirect benefit trips. By basing the TSDC on the number of trips, the TSDC is related to the impacts generated and benefits received by the development. • Levels of service—The city of Portland determines its needs for transportation facilities by reviewing a vari- ety of factors, including the volume of traffic and levels of congestion on major roads. • Size of development—SDCs are typically charged on the basis of the size of the development (i.e., number of dwelling units or number of square feet of develop- ment). Portland’s TSDC rate schedule lists the TSDC amount per unit of development (i.e., dwelling unit or square foot). The size of each proposed development is multiplied by the TSDC rate per unit. Revenue Projections, Duration, and Boundaries Zones (or Overlays): In 2008, stakeholder input led staff to recommend a TSDC overlay rate projected to collect $18 million over 20 years. System development charges use an overlay area (or area of impact) to levy charges. Although the actual criteria used for the development of the overlay are not known, the overlay area appears to be based on new developments and redevelopments within a reasonable distance of the proposed projects (Figure 23). TSDC Benefits: TSDC funds are used to leverage federal, state, and other available funds to get maximum value from the investment—sometimes attracting as much as 85% of a project’s cost from other sources. As a result, the total value of projects completed so far is nearly $119 million. Stakeholder Involvement: The city has an active commu- nity participation framework, which includes all stakehold- ers, such as business leaders and local community members. It also has a very transparent process in rate development with respect to equity across modes and across income classes. Garnering public support can be a barrier. Portland had an extensive public input process required to move for- ward with the process.

64 FIGURE 23 North Macadam overlay or area of TSDC charges. (Source: City of Portland, http://www.portlandoregon.gov/transportation/article/386066.) Texas Transportation Reinvestment Zones— El Paso Improvements, Texas Facility Name The facilities discussed in this section are the El Paso Com- prehensive Mobility Plan corridor improvements. VC Mechanism The mechanism adopted in this example is the TRZ, which is related to tax increment finance but differs in important ways. The mechanism is adopted as part of a loan financing strategy and a way to leverage other federal and state fund- ing sources. Background The Texas DOT El Paso District actively started exploring the applicability of innovative financing mechanisms to com- plement traditional transportation funding sources and meet pressing infrastructure funding needs of projects in the com- prehensive mobility plan (CMP) for the region. In December 2008, the city of El Paso established a TRZ to set up a revenue stream adequate to support an obligation for the projects iden- tified in the 2008 CMP. In 2010, the city of El Paso revisited the original study. The special features of this example are: • The use of an increment-based mechanism for funding transportation projects by a local government process made possible by the state.

65 state dollars, as well as American Recovery and Reinvest- ment Act (ARRA) funds. The project funds were: • ARRA, $96 million. • SIB loan, $30 million at 4.95% interest rate. The TRZ 2 funds are being used to repay the SIB loan. • Coordinated border infrastructure funds, $15 million. • Texas DOT, $5 million (Camino Real Regional Mobil- ity Authority 2010). Legal Authority Texas HB 563 provides for the institutional framework present in the TRZ. Two TRZs (TRZ 2 and 3) were adopted by local ordinance 017332, El Paso, Texas, in 2010 through a public hearing. The El Paso TRZs are tax increment TRZs in that only property-tax–related increments are used. The legal provisions also allow for the establishment of the same TRZ as STDs in specific cases. There have been no applica- tions of sales tax within TRZs. According to the law, TRZs require all or a portion of the local entity portion of incre- ments to be set aside for the purpose of transportation. TRZs do not impose new taxes. They also do not involve other tax- ing districts, such as schools and hospitals. The mechanism is applicable only to roadways that are on the state highway system. • The use of tax increments that are negotiated with the local entity. • The use of corridor-based projects that are part of the metropolitan planning organization comprehensive long- range mobility plan for the region. • The use of a state infrastructure bank (SIB) loan. • The combination of several types of funding sources. The value-creating proposed improvements include inter- change improvements, new connections between existing roadways, new roadways, safety and pedestrian access improvements, and aesthetic and transit improvements in the corridors shown in Figures 24 and 25. The TRZ 2 primarily focuses on two projects: • Loop 375 at FM 659 (Zaragoza). • Loop 375 at I-10/Americas Interchange. The TRZ 3 focuses on just Loop 375 Northeast. Project Funding Total project cost for one project, the I-10/Americas Inter- change, is noted as $146 million. The funding provided by the TRZ 2 was part of a local match that includes federal and FIGURE 24 Map of proposed TRZ corridors (TRZ 2), El Paso, Texas. (Source: Vadali et al. 2010b.)

66 notes that contiguity needs to be maintained for zones. When individual units/entities exist within the boundaries that may break the boundaries owing to exempt status or other privi- lege, they are included in the boundary but excluded from payments. Another requirement that this TRZ and all other TRZs have is to maintain within their boundaries a record of all active preexisting financial commitments through other economic development tools, such as tax increment finance or tax abatement districts. When a boundary includes any of these existing other economic development tools, the TRZs are required to exclude them from all financial commitments so as not to double dip. Although this reduces the revenue potential, it is an equity-preserving feature. Equity is also preserved through the use of surpluses of revenues (after financial obligations for CMP projects are met) for transit, through the provisions of consideration of unproductive land in the corridors, through the requirement to meet safety needs, and through the requirement to facili- tate development within the zones. In the case of the El Paso project, the TRZ 2 boundary consists of five separate corridors but contiguous boundaries. Local Partnerships The local partners include: • City of El Paso, Texas (initiator). • Camino Real Regional Mobility Authority (CRRMA). • El Paso Metropolitan Planning Organization (through the CMP evaluation and assessment). • Texas DOT—El Paso District. • Local property owners (beneficiaries and share in increment). Implementation Considerations Many implementation considerations listed in this section are interconnected. Many of these factors are determined through feasibility studies conducted early in the process, as noted by the agency. The important considerations in this case example include: Boundaries and Equity Considerations: The law lays down contiguity requirements for boundaries and explicitly FIGURE 25 Map of proposed TRZ corridors (TRZ 3), El Paso, Texas. (Source: Vadali et al. 2010b.)

67 Lessons Learned Some of the important lessons reported by interviewees include: • The TRZs include substantial acreage with undeveloped land in comparison to traditional TIF. Because land development is speculative, the CRRMA chose not to issue debt but instead took a loan. The city’s good finan- cial ratings allowed the CRRMA to obtain a low interest rate for the loan and Build America Bond subsidies. • The presence of existing financial precommitments through other tax-increment agreements and abatement programs is a positive factor in the TRZ development; too many precommitments will reduce the ability of TRZ to generate increments. These financial commitments must all be considered at the time of establishment. • The TRZ is a good source for local matching funds. It is still dependent on the economic climate and can be valuable as a complementary source of funds. It is important that alternative methods be investigated for maintenance and operations. Applicable Mode(s) The applicable modes include • Highway projects, such as in this example, • Transit projects through use of surplus funds, • Safety, and • Transit. Website for the Project The website for the project is http://www.crrma.org. Project Contact The project contact is Texas DOT. Mercer County Impact Fee, New Jersey Facility Name The facility discussed in this section is the I-95/295 corridor, Mercer County, New Jersey. VC District The mechanism discussed in this section is the TDD. Background In late 1988, faced with significant development pressure in a relatively undeveloped area, Mercer County initiated a study The boundaries are developed based on proximity and revenue/cost consistent distances as well as provisions within the code that make it difficult to remove property once adopted. The TRZ 3 comprises three separate contiguous boundaries. The two TRZs together include approximately 10,000 acres of land. Levy Basis and Duration: The mechanism is such that the levy basis for capture of value occurs through the existing tax rates of the jurisdiction that initiates the TRZ, which could be the municipality, the county, or both jointly. The process does not issue new taxes or new fees but works though the existing property tax rates. The estimated tax increment is developed, and municipalities voluntarily agree on a sharing of a percentage of increment (maximum of 100%) for a set duration to meet project obligations. The duration in this case is set at 30 years, starting in 2010 and using a 100% increment sharing agreement between the city of El Paso and the regional mobility authority. The base year set for tax increment purposes was the 2010 appraised taxable base. There is no additional levy. The levy basis is considered to be the base year assessed taxable value on an ad valorem basis. Timing and Collection of Revenues: The revenues were collected from year 2011 onward prior to construction. Risk Considerations: Default clause arrangements were built in dealing with revenue shortfalls with the local entity (city) such that the city would balance any shortfalls in increment-based portions of the loan repayment. The cost of Loop 375 at FM 659 (Zaragoza) is noted as $32 million. The funding package includes $12 million of State Category 2 (Metropolitan and Urban Corridors Funding) funds and $20 million from TRZ 2 revenues. The TRZ will not generate funds for infrastructure right away, much like every incre- ment mechanism. The increments trickle in over the lifetime of the district. Because construction costs are incurred ear- lier in the process relative to increments, the partnering local government/entities had to find ways to pay for the up-front costs of any initial improvements. In this case, the regional mobility authority had access to other funds, including an SIB loan. Revenue Performance: The impact of TRZ 2 and 3 was $641,132 for the fiscal year 2012 budget based on a property valuation base of $97.4 million, with actual revenues exceed- ing the forecasts. TRZ 2 alone was $575,426. Stakeholder Involvement: The city’s support through increment sharing and other agreements made the process of using the TRZ possible. The method of voluntary contribu- tions implicit in the concept can be developed in a revenue- consistent manner or in proportion to cost. Some of these may be addressed as part of feasibility studies.

68 Legal Authority The Transportation Development District Act of 1989 P.L.1989, c.100 (C.27:1C-1 et seq.) provides for the assess- ment of fees for off-tract transportation improvements. It allows counties, in cooperation with the New Jersey DOT and the private sector, to establish TDDs in high-growth areas. These districts form the backdrop for a PPP to fund and imple- ment transportation improvements necessitated by growth. The act was approved in 1990 and required a JPP to be in place in its amendment. The law requires that a fee formula be established that assesses developers for their fair share of transportation improvements and that developers are able to know or calculate their fee based upon the plan. The JPP met 12 times throughout the process, commencing on May 8, 1990, and concluding on November 1991. Under this law, counties in cooperation with New Jersey DOT may establish TDDs to assess development fees for transportation improvements. TDD Ordinances The Mercer County Board of Chosen Freeholders adopted local ordinances 92-17, 94-19, and 97-1. The ordinances require the establishment of a trust fund, and any fees not committed to a project within 10 years are to be reimbursed to the developer. Implementation Considerations Some of the key implementation considerations include: Boundaries: The service area was approved in 1990. This is shown in Figures 26 and 27. The TDD is generally bounded by Pennington–Washington Crossing Road (Route 546) to the north, Federal City Road to the east, and Upper Ferry Road to the south, and the western edge includes lots west of Scotch Road. Duration: The horizon year for the planned improvements was 2010, with a 20-year planning horizon from a base year of 1990. Joint Planning Process/Local Partners: The JPP required by the legislation ensures that the opportunity for participa- tion in the planning process is afforded all levels of govern- ment and the private sector. There were several members of the JPP, including New Jersey DOT; New Jersey Transit Authority; Mercer County Planning; Mercer County Engi- neering; the townships of Ewing, Hopewell, and Lawrence; and private sector partners. Levy Basis and Equity: The TDD law establishes a frame- work for the assessment and collection of IFs for district improvements. The TDD law states that development fees must be based on a cost-sharing formula and reasonably aimed at determining the appropriate intensity of develop- ment and effectuating the necessary infrastructure improve- ments. This process involved a cooperative effort between the county, municipalities, and landowners. This led to an infrastructure impact analysis study conducted for the Mer- cer County I-95/295 Corridor, which formed the basis for the TDD application, and the TDD was approved by DOT Commissioner Thomas Downs on April 2, 1990. The overall goal of the TDD was to manage growth and coordinate and finance transportation infrastructure improve- ments in a regional growth area. The transportation goals were to: • Maintain acceptable traffic flows: – Encourage transportation-efficient land use. – Recommend appropriate zoning and other regula- tory changes. – Identify needed roadway improvements. – Encourage travel demand management. – Develop access management plan for district. • Protect quality of life for existing residents: – Reduce through traffic in existing residential areas that border the district. – Develop an integrated system of roadway improve- ments orienting district traffic away from existing residential areas that border the district. • Make alternatives to single-occupancy autos more attractive: – Explore mass transit alternative. – Provide opportunity for bicycle and pedestrian activity. • Encourage participation in the transportation manage- ment agency. Public-sector costs for several highway improvements are distributed among the state, Mercer County, and Ewing, Hopewell, and Lawrence Townships. The appropriate costs are based on existing and anticipated roadway jurisdictions. Public-sector costs for those improvements that are to be funded through the TDD Trust Fund were noted to be as follows: • New Jersey DOT = $11,583,368, • Mercer County = $6,191,818, • Ewing Township = $1,993,773, • Hopewell Township = $700,527, and • Lawrence Township = $153,669. Local Partnerships The local partners include: • Townships (Ewing, Hopewell, Lawrence) and Mercer County (initiators). • New Jersey DOT (initiator through the JPP). • Development community (beneficiaries).

69 FIGURE 26 Mercer County, New Jersey Transportation Development Districts. (Source: Mercer County Planning Department, personal communication.) FIGURE 27 Mercer County, New Jersey Transportation Development Districts Road Network. (Source: Maps shared by Mercer County Planning Department.)

70 DISTRICT OR AREAWIDE MECHANISMS (PROGRAMMATIC APPROACHES) Michael A. Fox Highway—Ohio, Butler County Transportation Improvement District Facility Name The facility discussed in this section is the road improvement on State Route 129 (Michael A. Fox Highway), Ohio. VC Mechanism The mechanism discussed in this section is the district or areawide SAD. This example showcases a unique venture just for inno- vative financing for road improvements and a first in many categories in the country. The Butler TID started out with a single project but used an areawide concept for funding and financing of the project. This soon paved the way for the consideration of other transportation needs in the county. Although this Ohio TID and other TIDs in Ohio are primarily project-driven, the approach taken is areawide and program- matic and thus included in this section. In addition, the sales tax revenues were used to back SIB loans. Background The Butler County project was initiated in 1971 and cor- responds to the Butler Regional Highway. Limited state and federal funding led to Ohio’s search for alternatives for building and improving roads. The Butler Regional Highway Project was also one of the first FHWA Test and Evaluation (TR 045) projects. As a result of the Butler TID’s performance, the state law was changed in 1995 to allow all counties in Ohio to establish their own TIDs. The Butler County TID (BCTID) is also a national model. It is the first organization in the United States to receive funds from Ohio’s SIB, a practice that was then adopted in other projects in the county. This TID is the largest TID in the region. The same concept has been used in at least nine other projects besides SR-129. SR-129, or Michael A. Fox Highway (Figure 28), is a four- lane, limited-access, divided highway connecting the city of Hamilton to I-75 through Fairfield and Liberty Townships. This 10.7-mile project begins at the former SR-129/SR-4 intersection in Hamilton and runs east between Princeton and Hamilton-Mason Road. Interchanges are located where the highway meets I-75 and at Bypass 4, SR-747, and Cincinnati– Dayton Road. Construction of this highway began in May 1998. With only 19 months of construction, the highway opened December 13, 1999, 8 months ahead of schedule. Route 4 to Hampshire Drive in Hamilton and Cincinnati-Dayton Road to I-75 opened in related to the added traffic growth and other criteria attrib- utable to a particular development. Therefore, savings that accrue to one developer as a result of these exclusions cannot be distributed to the district. These costs, then, must shift to government. The JPP exercises oversight on the fee structure. Exclusions were made for low- and moderate-income housing units; developments with preliminary approval pre- dating the development assessment liability date; savings associated with successful trip reduction mechanisms; and specified beneficial or neutral impact land uses. The first two exclusions are required by law, whereas the last two are per- mitted by law. Costs for these exclusions were calculated as if they were to be paid by the developer, but the cost was added to the government share, rather than the developer share. This method was expected to simplify plan maintenance and ensure that developers are not paying more than their fair share. The levy basis is a per-trip fee that is set for the entire subdivision at the time the development receives approval from the municipal approval authority. Fees are deposited in the TDD fund, which is overseen by the county treasurer. Trip reduction credits are applicable for trips during the peak hour when guidelines for flex hour/staggered work hour schedules are specifically developed. Revenue Performance: The Mercer County share of pub- lic improvement costs was the highest local share at approx- imately $6 million, and it has been paid in full. Lessons Learned Some of the key lessons as derived from project documenta- tion and based on interviewees. • The development of this plan was a collaborative effort through formation of the required JPP. • The equity provisions are built into the law and in imple- mentation through credits. • The TDD must have a plan of development and be con- sistent with other land use and development plans, as is true in this case. • The TDD process is long with legal hurdles. TDDs are high in transactions costs. • The allocation of planning costs needs to be clear because the TDD does not allow planning costs to be included. Website The project website is http://nj.gov/counties/mercer/ departments/planning/transport.html. Project Contact The project contact is the Mercer County Planning Department.

71 budgets. A TID is a special district—a unit of government organized for a geographic area to find innovative and alterna- tive funding for improving the existing transportation system. Some of the features include: • The area of a TID can include the entire county or a portion of the county. • A TID is a vehicle for intergovernmental and public– private collaboration. • A TID is a local structure coordinating federal, state, and local resources in planning, financing, construct- ing, and operating transportation projects. • A TID can be created only by the county commissioner. Local Partnerships The local partners are: • Local developers (with $7 million in contributions). • BCTID consisting of partnership with local landowners (with $17 million in contributions). No state or federal money was involved. • County commissioners who authorized the TID (county—initiator). • Landowners (beneficiaries). October 1999. Table 8 shows the project timeline. The TID is defined as an entity seeking “to bring local units of government together as one to share powers, create revenues to fund and build transportation projects and associated facilities” (Butler County TID). It coordinates federal, state, and local resources in planning, building, financing, and operating transportation FIGURE 28 State Route 129, Butler County, Ohio. (Source: Butler County TID, http://www.bctid.org.) Year Event 1959 Petition for interchange. 1968 Ohio bond issue approved. Butler and Hamilton Counties appealed for access to interstate highway. 1970–1972 Project announced by Governor Rhodes for $28.6 million in the hope that it would open up areas. Michael A. Fox Highway journalized. Cost $34.7 million. 1979–1981 Butler and Warren Counties contributed funds when state funding was threatened. Contract awarded to complete the environmental impact statement (EIS). 25% local funding, 75% federal funding. 1988 Decision made to terminate the project at I-75. Revisions were made to EIS regarding traffic. City of Hamilton and Butler County agreed to continue study using 100% local funds. 1993 The Ohio General Assembly established the Transportation Improvement District Program under House Bill 154 and Ohio Revised Code Section 5540.02. Public hearing, and in October the TID was established. 1994–1995 Final EIS with a relocation alternative. Record of decision made in 1995. The Michael A. Fox Highway is the first innovative financing project in the nation approved by the FHWA. 1996 TID receives first SIB loan in the nation for $10 million. The Ohio DOT and the TID sign the lease agreement for the Michael A. Fox Highway. Under this lease agreement, Ohio DOT agreed to pay for the construction costs of the highway, and the TID agreed to maintain the highway for 20 years and complete much-needed improvements to local roads. The improvements included the construction of the Union Centre Interchange, the widening of State Route 747, and the extension and widening of Muhlhauser Road. 1997 TID receives second ($10 million) and third ($15 million) SIB loans. Sale of $158.5 million in Butler County TID highway improvement bonds to pay for construction. TID becomes the first entity to repay SIB loans. 1998 Kokosing Construction awarded the contract along with two other companies, including Resource International. May 1998: TID Board of Trustees passed a resolution authorizing the study of tolls to pay for the TID’s obligations outlined in the lease agreement with Ohio DOT. June 1999 Tolls removed. Ohio DOT agrees to maintain the highway and relinquishes TID of its obligations. December 1999 TID opens Michael A. Fox Highway. Source: http://www.bctid.org. TABLE 8 STATE ROUTE 129, BUTLER COUNTY TID TIMELINE

72 • The project uses bond authority of a TID. Ohio TIDs are tax exempt and can issue tax-exempt highway improve- ment bonds to finance projects. • The TIDs can leverage funds from other sources (fed- eral, state, and local). According to several annual and financial reports of this TID, the TID notes that it has seen reductions in federal and state of Ohio dollars. In addition, the state also continued with restrictions on certain types of projects under the Ohio Transportation Review Advisory Council program. Thus, the TID took a progressive view on economic development in the region. • The TID has been noted to have helped in three ways: – The TID is local and is therefore noted to be more responsive to community concerns and allows for consensus building. It has allowed the county to invest in transportation to lay the foundation for economic growth. With the oversight of several state and federal agencies, including the FHWA and Ohio DOT, the TID serves Butler County, two cities, and three townships. – The TID accelerates the development of road con- struction through concurrent design and engineering and expedited construction schedules. – The accelerated schedule for Michael A. Fox Highway eliminated 4 to 5 years from traditional schedules. The BCTID notes that it is saving $8 to $10 million on the cost of the highway, a $158 million project. • This project was the first Ohio TID in several ways. It was the first FHWA Test and Evaluation (TE 045 proj- ect), the first project for which the roadway was leased to Ohio DOT, and the first SIB loan project. • The implementation of the infrastructure improvements required to support a TID such as the areawide BCTID for investments required a long-term vision and coordi- nation among multiple public agencies. Applicable Mode(s) This TID was set up for a highway project. Website for Project The BCTID site is the website for the project: http://www. bctid.org. Contact The project contact is Ohio DOT. Ohio TID—Other Facility Name The facilities discussed in this section are Ohio road improvements. Legal Authority In response to increasing demands for such alternatives, the Transportation Improvement District Program was authorized by the Ohio General Assembly in June 1993 from legislation sponsored by former State Representative Mike Fox. Butler County’s TID was formed by the Butler County Commission- ers in January of the following year. Originally established as a demonstration project to test the TID concept, the BCTID is Ohio’s first TID. Implementation Considerations The implementation considerations include: Boundaries: Countywide TID. It applies to all properties in the county. Duration: It is still active and has supported several improve- ments beyond Michael A. Fox Highway. It was promised for 20 years. Levy Basis: TID special assessments may be levied only once annually per lot or parcel at an amount not to exceed 10% of the assessable value of the lot or parcel assessed pursuant to a statutory method for determining fair market value. The board must determine the fair market value of the assessed property in the calendar year that the area is designated a TID. The fair market value is multiplied by the average rate of appreciation of the lot or parcel since that calendar year. The assessable value of the lot or parcel is the current fair market value of the lot or parcel minus the amount reflecting the average rate of appreciation. One research report (Williams 2006) points out that the special assessment process in legislation is less effective than that available to local governments. As a result, TIDs have not been widely used, and instead, a variety of other methods have been used to structure financial packages for projects. In addition, TIDs have enabled the use of innova- tive construction methods that have resulted in cost savings. Examples include the ability to purchase excess property around locally funded interchanges that can be sold to offset project costs, advance acquisition or right-of-way, and lease agreements with Ohio DOT that served as a credit stream for bond payments. Lessons Learned The lessons reported in the project documentation include: • The TID is envisioned as a consensus-building exer- cise and process because it brings many stakeholders together. The TID ensures that there is consensus among all interested parties and that those who benefit also con- tribute their fair share.

73 cal year 2014, $3.5 million is available to TIDs on a competitive basis. To be eligible for funding, a TID has to register annually with Ohio DOT. The earmark provides the seed money. Fund- ing must be used for a specific project (or projects). Funding may be used for preliminary engineering, detailed design, right-of-way acquisition, construction, or other eligible project costs under certain circumstances. TID funds cannot be used for administrative costs (Ohio DOT 2013). Implementation Considerations The implementation considerations include: Boundaries for Ohio TIDs: All Ohio TIDs are meso scale or countywide, with the exception of Rossford, which is a municipal TID. County commissioners authorize all TIDs. Duration: In principle, a TID would have a duration/ expiration if it were provided for in the resolution from the TID as put forth by the county commissioner. For fiscal year 2014–2015, according to Ohio DOT, TIDs will be required to register with the Ohio DOT each year to be eligible for fund- ing (that said, they could still exist at the county level and not register with Ohio DOT or receive funding). TIDs must now have a minimum program of projects, as follows: • $10 million+ within the past 8 years. • $15 million+ within any time frame (thus, if a TID com- pleted a large project before 2005, it is still eligible). • For new TIDs that are registering for the first time, a program of $10 million+ going forward. Levy Basis: Assessments based on the county portions of a tax. Applicable Mode(s) Funding must be used for a specific project (or projects). Funding may be used for preliminary engineering, detailed VC Mechanism The mechanism discussed in this section uses the areawide SAD. Other TIDs in Ohio (Districtwide or Areawide) According to the Ohio Program Resource Guide (Ohio DOT 2013), TIDs were created to promote intergovernmental and public–private cooperation by coordinating resources in transportation projects. For the 2012–2013 biennium, the TID program provides or earmarks $3.5 million each fiscal year to finance TIDs. In addition to providing funding, Ohio House Bill 114 now establishes a new process for TIDs in comparison to the old process established in the 1993 origi- nal code. As of fiscal year 2013, Ohio registered 16 TIDs, as shown in Table 9 and Figure 29. This section serves to high- light that TIDs have evolved since their original inception in 1995 for Butler County. Now, the TIDs are considered an institutional mechanism and a nonprofit agency that provides seed money through earmarks for highway projects. Legal Authority Under the revised Ohio code (Chapter 5540), proposed proj- ects will be considered based on their ability to address at least one of the following needs: economic development, safety, preservation, or capacity. The total amount of funding provided for each project is limited to 10% of total project costs or $250,000 per fiscal year, whichever is greater. TIDs may cosponsor a project and individually apply for as much as $250,000, as long as the combined amount does not exceed 10% of the project’s total cost (Ohio DOT 2013). Ohio TIDs can also issue revenue bonds following the code to serve as the financing engine for local transportation improvement projects, primarily highway. A summary of TID projects and their funding though TIDs is provided here (Ohio DOT 2011; see Table 9). According to the Program Resource Guide, in fis- Butler County (in millions) Montgomery County Warren County Bypass 4—Millikin $1.3 I-70—Ohio 202 $10.2 I-75—Ohio 73 interchange $4.4 Symmes Road $8.1 I-70—Ohio 201 $1.5 I-71—Mason-Montgomery $25.5 Union Centre Interchange $24.9 Kingsridge—Lyons Ridge $6.3 Total $29.9 million Ohio 129 $164.9 Austin Interchange $43.9 Ohio 747—Tylersville $2.1 Byers Road $12.2 Ohio 747—Port Union $3.9 Motoman Road $2.2 Muhlhauser Road $9.3 Austin Landing $16.3 Lakota West Drive $.3 Austin enhancement $2 West Chester Road $2.9 Austin Landing Phase II $14.1 Bypass 4—Princeton $2.3 Miami Township Trail $.7 Ohio 747—Princeton $1.1 Medlar Road Trail $1.2 Ohio 747—Ohio 129 $5.6 Multimodal freight $19.8 Liberty Way Interchange $50.4 Dog Leg Road $8 Bypass 4 widening $26.4 Mound Connector $18.7 Total $303.4 million Total $155.2 million TABLE 9 OHIO TRANSPORTATION IMPROVEMENT DISTRICTS AND HIGHWAY PROJECT FUNDING

74 design, right-of-way acquisition, construction, or other eli- gible project costs under certain circumstances. TID funds cannot be used for administrative costs. Website for Project The Ohio DOT Program Resource Guide (2013) is avail- able at (http://www.dot.state.oh.us/Divisions/Planning/Local Programs/Documents/ODOT%20Program%20Resource%20 Guide.pdf. Contact The project contact is Ohio DOT. Bellingham–Transportation Benefit Districts, Washington Facility Name The facilities discussed in this section are Bellingham, Wash- ington, road and multimodal improvements. VC Mechanism The mechanism discussed in this section is the STD based on benefit districts. Other levies, such as vehicle registration fees, can be combined with this district to form a funding strategy Background Transportation benefit districts are quasimunicipal corpora- tions with independent authority, including the authority to impose certain taxes and fees—either through a vote of the people or city council action—for transportation purposes. These areawide TBDs are used to fund and finance the city’s 6-year transportation improvement program projects. The Bellingham City Council formed Transportation Benefit District No. 1 on July 10, 2010. Bellingham Mayor Dan Pike originally proposed that the city council create the district to help provide dedicated funding for priority transportation needs within Bellingham. Washington has several TBDs, just as Ohio and Kansas have several TDDs. The TBDs are also used in conjunction with vehicle registration fees in the case of Washington. FIGURE 29 Ohio TIDs fiscal year 2012–2013. (Source: http://www.dot.state. oh.us/Divisions/JobsAndCommerce/tid/Documents/2011_Nov_Registered_ TID_Map.pdf.)

75 Local Partnerships The local partners are • City of Bellingham (initiator) and • Buyers. Legal Authority The formation of transportation benefit districts by cities is governed by RCW 35.21.225 and RCW 36.73, Bellingham Ordinance Number 2010-07-240. Implementation Considerations Boundaries (areawide): The boundaries of the benefit dis- trict coincide with city boundaries and specification of the transportation improvements to be funded by the district. The district is governed by the members of the city council acting as district board of directors. Levy Basis and Duration: The rate and periodicity of the fee is as follows: • A $0.002 cent sales tax. • The district was effective July 2010, with an annual fee. Applicable Mode(s) The Bellingham TBD is used for multimodal projects, such as (a) arterial pavement resurfacing projects in the city, (b) bikeway and sidewalks, and (c) transit enhancement proj- ects as per RCW 36.73.015. Websites Websites relevant to the project are: • http://www.mrsc.org/subjects/governance/spd/tbd. aspx#Bellingham, • http://www.cob.org/government/tbd/index.aspx, and • http://www.cob.org/web/legilog.nsf/0/87A22C2DC4F 665A288257773007A20F7/$file/201007040.pdf. Contact The project contact is Washington DOT. Oregon’s Transportation/Pavement Maintenance Facility Fee Program—Corvallis Facility Name The facilities discussed in this section are located in the city of Corvallis, Oregon. VC Mechanism The mechanism discussed in the section is the use of TUFs for funding pavement maintenance only. Background In 1993, Corvallis was in a good position to provide adequate street funding, including pavement maintenance, at an average rating of 85 of 100. The city had the following funding sources: • SDCs to provide extra capacity. • Development requirements to provide adequate street and sidewalk infrastructure. • State gas tax share that kept up with inflation. • Property tax levy devoted to the street fund that was growing with assessed values. However, since 1993, the purchasing power of state high- way fund revenues has decreased owing to inflation. Measure 50 (1997) reduced property tax revenue, forcing the city to prioritize services. Eventually, the city stopped using any general fund rev- enue for streets and furthermore transferred the property tax levy revenues to the general fund. At the same time, revenues declined, the burden on the street fund increased. In response to the declining street fund revenues, the city formed a task force to look at current transportation funding resources and assess the funding need. The task force came up with two funding options: a vehicle registration fee and a transporta- tion maintenance fee (TMF). The city agreed to settle on the maintenance fee. The city worked to inform the public about the state of city streets and the need for additional invest- ments (League of Oregon Cities 2008). The TUF, called a transportation maintenance fee, was passed in 2005. The funds are used for street reconstruction and overlays. Legal Authority In most states, localities may levy taxes only if specifically authorized by state law, but they have blanket authority to charge user fees. Therefore, a TUF is typically collected as part of a unified municipal utility bill, rather than as an add- on to the local property tax bill. These cities have moved with the presumption that TUFs are fees for the provision of public infrastructure services similar to water and electricity. TUFs are adopted by local city ordinance. Local Partnerships The local partners include: • City of Corvallis (initiator) and • Landowners (beneficiaries).

76 Implementation Considerations The implementation considerations include: Boundaries: TUFs are areawide and involve the entire city. Levy Basis: Residential users are charged a flat fee, whereas commercial users are charged based on trip generation rates in Corvallis. However, Oregon has several such applications (see League of Oregon Cities 2008), and the rate types vary from region to region. In some, they are similar to those of Corvallis, in others they are flat, and in yet others they are based on trip generation. In Corvallis, the fee was structured so that 75% of the revenue comes from residential users. The charge is collected on a monthly basis, much like a utility bill. Duration: 2005—Sunset was programmed for 2011 origi- nally. However, the city voted to continue it past 2011. Use of Revenues: Revenue is invested only in the streets under city jurisdiction. With this mechanism, revenues can- not be used to construct new infrastructure to expand the transportation system or enhancements not directly related to improving or maintaining the condition of existing city streets. The revenue potential of this mechanism is modest (evaluated annually). Originally, the use of the revenue gen- erated from the fee was strictly regulated, with about one- third going to pavement preservation activities (overlays) on arterial and collector streets and the other two-thirds being used to reconstruct portions of existing boulevards. From 2012, the revenue was set aside for pavement preservation activities on all streets (local, arterial, and collector). Street reconstruction will be supported by other revenue sources. Equity Considerations: The rate basis is the way equity issues can arise and also be addressed in TUF implementation because the rates are estimated from generation or sometimes set at flat rates. Everyone is a beneficiary and pays for the service. Revenue Performance: The TMF generates more than $400,000 per year, and the revenue is dedicated to specific pavement maintenance projects. In the year 2006–2007, the revenue was $408,000. Lessons Learned (City of Corvallis, Portland) The lessons, as compiled from project documents, include: • The funds from the TMF contribute to almost 50% of Corvallis’ locally raised street fund revenue, which has helped the city bridge part of the street funding gap. • The decision to adopt was made on an overall fiscal assessment of all revenue sources used by the city. This process started in 2003 for Corvallis City with recom- mendations made by panel in 2004. • Obtaining stakeholder support is a lengthy process. The city conducted more than 20 presentations to business and community groups, such as Kiwanis and rotary clubs, to make their case (League of Oregon Cities 2008). • The clear methodology, clear purpose, and clear rate structure may help with increasing stakeholder support and addressing equity concerns. In Corvallis, for exam- ple, only 75% of the revenue came from residential users. In Oregon City, for instance, residential custom- ers are charged for maintaining local streets, whereas nonresidential customers are charged for maintaining arterials. Maintenance of collector streets is equally shared. In addition, the fee is based on the average num- ber of trips by land use, based on trip generation rates established by ITE. A similar Clackamas County experience demonstrated that the larger aspects of implementing the proposed TUF were the associated policy choices and public education required to implement the program (Springer and Ghilar- ducci 2004). Applicability to Other Regions • At least 12 cities in Oregon use this mechanism: Ashland, Canby, Bay City, Corvallis, Eagle Point, Grants Pass, Hubbard, La Grande, Lake Oswego, Medford, Mil- waukie, North Plains, Philomath, Phoenix, Talent, Tigard, Tualatin, West Linn, and Wilsonville. A few others are considering it. • Clackamas County, Oregon, has been discussed in detail by Springer and Ghilarducci (2004). It is noted that local streets in unincorporated areas of Clackamas County are typical targets for deferred maintenance in favor of investments in higher functional classes. Sev- eral local facilities have degraded to such a poor level as to be impassable by motor vehicle traffic. The county worked with five local cities to develop a TMF for their jurisdictions. The participating cities included Oregon City, Milwaukie, Gladstone, Happy Valley, and Estacada. The county maintenance forces supply road maintenance services to these cities on a contract basis. Other cities within the county opted to not participate or had a city- based TMF program already in place. Clackamas County TUF policy targeted activities and services with a clear and direct benefit to roadway users and set aside eight core elements to represent the road maintenance program. Springer and Ghilarducci discuss a detailed three-stage process for developing rates. • At least six cities in Montana also adopted this mecha- nism (Bozeman, Billings, Helena, Hamilton, Lewiston, Butte–Silver Bow). In Montana, the TUF is called a street maintenance fee. A few cities in Florida (including Port Orange) also use this mechanism).

77 Websites Relevant websites include: • http://www.apwa-wa.org/forums/OregonCities2007 TUFReport.pdf, • http://www.mdt.mt.gov/research/toolkit/m1/ftools/fd/ tuf.shtml, • http://www.corvallisoregon.gov (Corvallis), and • http://www.mdt.mt.gov/research/toolkit/m1/casestudies/ bozeman_cip_mt.shtml (Bozeman). Harrisburg Land Value Tax, Philadelphia Facility Name The facilities discussed in this example are transportation improvements in the city of Harrisburg, Pennsylvania. VC Mechanism The mechanism discussed in this section is land value taxa- tion or split-rate property taxation on land and buildings. Background Pennsylvania is the one example where an LVT through a split-rate property tax has been implemented in the United States. Cites such as Harrisburg and Pittsburg are often cited in the literature as examples of these applications (Center for Economic Studies 2012; Junge and Levinson 2012a). Some other states, such as Connecticut, are considering this type of taxation. A pilot program authorizing LVT in Connecticut was recently passed into law (House Bill 6706, Connecticut Gen- eral Assembly 2013). According to Speirs (2010), 17 cities in Pennsylvania employ this mechanism, with Harrisburg being among the first to institute it. This tool splits the stan- dard property tax into its two components of land values and building values. The tax rate is increased on the land part of the property and decreased on the building. The city of Harrisburg, the capital of Pennsylvania, began gradually phasing in split-rate land value taxation in 1975. Since the introduction of a split-rate LVT, the mill rate on land has been gradually raised, while the mill rate on improvements has gradually decreased. The changes in the mill rates on land and improvements were revenue neutral; that is, they were intended to keep total property tax rev- enues the same while redistributing the tax burden. Initially, in 1975, the ratio of tax on land to tax on improvement was set at 1.4:1. In the 1980s, the city made split-rate LVT central to its economic development and land use mechanism and raised the land-to-improvement ratio to 3:1. The ratio was raised again in 1999 to 4:1 and again in 2002 to 6:1, where it remains today (City of Harrisburg 2005). Legal Authority This policy has been credited to Harrisburg’s former mayor, Stephen R. Reed. The actual implementation was adopted through local ordinance. Local Partnerships The local partners include: • City of Harrisburg (initiator) and • Landowners (beneficiaries). Implementation Considerations Some of the implementation considerations include: Boundaries: Citywide. Duration: The city ultimately wants to eliminate the tax on the buildings/improvements and turn the taxation into a pure LVT. Levy Basis and Periodicity: The value of a property is split into (1) land, and (2) building and improvements. This is what makes it a split rate, with the land-to-improvement tax ratio being 6:1. It is levied annually (sometimes monthly) on those who own the title of the land. It has been continu- ously in place since 1975. Equity Considerations: The LVT is considered a revenue neutral shift in tax base that does not lead to an increase in tax base. It can have positive or negative social equity implica- tions. Its application in Harrisburg has been shown to have beneficial social and vertical equity effects. Revenue and Performance Aspects: The tax revenues go to city development in infrastructures, public facilities such as schools and hospitals, and such. Thus, transport infrastructure receives a part of revenues. This research was not able to identify how or what revenues are allo- cated across competing city needs. The city has made $4.8 million worth of investments since 1982 through this mechanism. Applicable Modes The revenues should be applicable to all modes. According to Mr. Reed (Common Ground OR-WA 2003), with the two- tier tax rate policy, Harrisburg aims for city revitalization by incentivizing urban renewal and curbing urban sprawl, spe- cifically by doing the following: • Inducing the highest and the best use of the land. • Rewarding the better use of the land.

78 • Discouraging land being left vacant or unused. • Encouraging vertical and high-rise development. • Discouraging spread and preserving natural areas and open-space areas, such as parks and historic sites. Lessons Learned Some of the key lessons complied from project documenta- tion include: • The potential role LVT played in promoting Harris- burg’s growth: More than 20 years ago, Harrisburg was ranked as the most distressed city in the United States. From 1950 to 1977, Harrisburg lost nearly half its population. According to federal criteria, it was the second most distressed city in America. After the intro- duction of two-tier property taxation, along with other revitalization policies, Harrisburg made an impres- sive comeback. In the ensuing decade, the number of vacant sites fell by nearly 90%, and the number of businesses more than doubled (Common Ground OR-WA 2003). • The potential positive role of LVT-induced tax base growth: Although the policy does not aim to decrease crime rates and such, the increasing tax revenues do in a way support the development of the public and social sectors of the city, improve the overall living standard of the city, and benefit the residents. It is reported that the city and its economic development as a whole have benefited from the LVT (Common Ground OR-WA 2003). • The low implementation costs: Implementation costs would be similar to an area TDD. When the city of Harrisburg switched to an LVT, the main expense came from reprogramming the software. The system needed to be programmed to allow the two rates to be sepa- rated and the calculations for each property tax bill redone to reflect the separation. The appearance of the bills and an explanation of the change to a two-tiered tax system attached to the bills were the only changes affecting the taxpayer. This system was implemented by city ordinance and approved by the city council (Speirs 2010). Applicability to Other Regions Land value taxes have been adopted in 17 cities in Pennsyl- vania. Current rates for the different cities are shared by the Center for Economic Studies (Speirs 2010). Connecticut has recently (May 2013) authorized LVTs. Website A relevant website is http://www.urbantoolsconsult.org. Washington State’s Road Fund Levy Facility Name The facilities discussed in this section are Washington State county roads. VC Mechanism The mechanism discussed in this case is the countywide spe- cial assessment. Background Washington’s RCW 36.82.050 allows a special road fund levy for the purpose of “raising revenue for establishing, laying out, constructing, altering, repairing, improving, and maintaining county roads, bridges, and wharves necessary for vehicle fer- riage and for other proper county purposes.” This is applied in every county in Washington. This tax sounds similar to an LVT but is not strictly an LVT. Legal Authority The mechanism is provided for by RCW 36.82.050. Implementation Considerations The implementation considerations include: Boundaries: Countywide. Levy Basis: At the time of making the levy for general purposes, the RCW allows counties to make a uniform annual additional tax levy throughout the county, or any road district thereof, per the following guidelines: • Levy as great as $2.25 per $1,000 assessed value. • Limited by 1% annual growth (plus new construction). • May be increased with voter approval. • May exceed $2.25 (within 1% limit) if total county levy and road levy does not exceed $4.05. • May be diverted to county general use and spent only on unincorporated area uses. • May be shifted to county general use with tax levy spread over unincorporated and incorporated areas. Duration: Annual. Collection of Revenues: All funds accruing from the levy are to be credited to and deposited in the county road fund, except that revenue diverted under RCW 36.33.220 is to be placed in a separate and identifiable account within the county current expense fund and revenue diverted under

79 Chapter 39.89 RCW be expended as provided under Chap- ter 39.89 RCW. Revenue Performance: See Figure 30 for visual represen- tation of revenue performance since 2002. Applicable Modes County roads. Website The relevant website is http://apps.leg.wa.gov/rcw/default. aspx?cite=36.82.040. Contact The project contact is Washington State DOT. Montana’s Impact Fee Program Facility Name The facilities discussed in this section are located in the city of Bozeman and are part of the Greater Bozeman Area Trans- portation Plan. VC Mechanism The mechanism discussed in this section is transportation IFs. Background This funding source is becoming an increasingly common method for financing transportation infrastructure needs in Montana and in other states. The city of Bozeman is located in Gallatin County in southwestern Montana. Yellowstone National Park and the Big Sky resort area are nearby. The city of Bozeman continues to grow in geographic size by annexing new land to accommodate population and business growth. In 2008, Bozeman was approximately 19.25 square miles in size. Bozeman’s substantial growth since 1990 has put significant demands on the city to provide necessary infrastructure and services for new development. The public funding mechanisms available to Bozeman during this time were insufficient to meet this need. The city explored new ways to fund new infrastruc- ture and services. There are a number of factors that prompted Bozeman to consider and ultimately adopt IFs, including: • Lack of funding to pay for improvements needed to accommodate new growth. • Growing resistance to increased development exactions. • Perceived need to be proactive in maintaining the cur- rent service levels. • Bozeman’s history and tolerance of “user pays,” a prin- ciple that places the cost of new infrastructure resulting from new development on the developer, not the entire community (Montana DOT). The city of Bozeman and Gallatin County, in conjunction with the Montana DOT, completed a major revision to the Greater Bozeman Area Multimodal Transportation Plan in 2007, which outlines a 2030 vision for transportation improve- ments in the region. The major street network improvement FIGURE 30 Washington’s road fund levy rate and revenue trends. (Source: Washington State Department of Revenue.)

80 projects recommended in the long-range transportation plan are considered for inclusion in the CIP. Bozeman lists its 5-year funding priorities for capital projects in the CIP, which is updated annually. IFs are part of a broad-based funding mecha- nism used by the city. Funding for projects listed in the CIP can come from a variety of sources, but projects funded by trans- portation IFs must be included in the CIP. Besides IFs, gov- ernmental transfers (state urban funds), and assessments from special improvement districts, general fund revenues, develop- ment exactions, and TIFs are all available for Bozeman. For instance, Bozeman has a downtown TIF, the funds from which are used to fund and finance street projects and parking. Over the next 10 years (2013–2022), the funding from IFs will go to support $19.7 million of capital improvements on road seg- ments and $5.3 million in intersection improvements. Legal Authority Montana Code Annotated, Title 7, Chapter 6, Part 16 enables local governments to establish IFs to help pay for public infra- structure services. A governmental entity that intends to pro- pose an IF ordinance or resolution must establish an IF advisory committee. Bozeman initially enacted the IF program based on the city’s general police power granted by the Montana State Constitution. The legal basis for IFs became explicit when the 2005 Legislature passed Senate Bill 185, which granted gen- eral authority to adopt IFs and established certain standards for documentation and procedures in adopting an IF. Local Partnerships The local partners include: • City of Bozeman (initiator) and • Developers (beneficiaries). Implementation Considerations Some implementation considerations include: Boundaries: Citywide (Gallatin County—City of Bozeman), as shown in Figure 31. The entire city forms a single integrated network that serves all parcels in the city limits, and the entire city is considered the service area pursuant to Montana Code Annotated 7-6-1602(1)(f). Levy Basis: Bozeman assigns 80% of the calculated cost of service to new development. The other 20% of the cost of FIGURE 31 City of Bozeman’s impact fee service area. (Source: Washington State Department of Revenue. http://www.bozeman.net/ Smarty/files/c7/c7362884-6467-4fdc-a12f-ac591e3e46ce.pdf.)

81 service must be met through other funding means. Fees are typically assessed by local governments according to a for- mula in Montana. In Bozeman’s case, the rates are established by a special study conducted in 2008. This study revises ear- lier guidelines established in 1996. The rate is adjusted annu- ally (City of Bozeman Traffic Impact Fee Study 2008; Streets Development Impact Fee Study 2012). The transportation IFs are imposed on all new development at the time of building permit approval. The street IF is based on ITE trip generation rates, trip adjustment factors, and net capacity cost per average trip length. For residential uses, trans- portation IFs are calculated based on the number and kind of dwelling unit, such as single-household detached or manufac- tured home. For commercial, industrial, and institutional uses, transportation IFs are calculated on a per 1,000-square-foot basis. Trip characteristics are inputs to the demand component of the transportation IF and include the following: number of daily trips generated, length of those trips, and proportion of travel that is new travel. The trip characteristic variables were obtained from a previous trip characteristics study conducted in Bozeman and from the ITE Trip Generation reference report. Other variables used in calculating the IF include cost per lane-mile, equivalent gas tax credit, facility life, interest rate, fuel efficiency, effective days per year, capacity per lane- mile, interstate adjustment factor, and tax credit. The 2012 development IF study conducted for Bozeman lays out three criteria based on need, benefit, and proportional- ity as the rational nexus test. This study lays out a systematic framework for IFs based on (1) an incremental expansion cost method; (2) a plan-based fee for future improvements, which allocates costs for a specified set of improvements to a speci- fied amount of development (all identified in a long-range plan, essentially a cost-per-demand approach); and (3) a system of credits, including revenue credits for those developments as a result of double payment situations, which could occur in a sce- nario such as Bozeman resorting to multiple revenue sources and a site credit for a developer reimbursement for land dedica- tion or construction of system improvements. The estimated IF cost for road segments in the CIP is approximately $1.64 mil- lion per lane-mile (Street Impact Fee Study 2012). Duration: Levied annually over from 2013–2022. Revenue and Performance: A 2012 study shows that street IFs should yield approximately $29 million over the next 20 years (2013–2022), which will go to support $19.5 mil- lion in capital improvements and another $5.3 million in intersection improvements. Applicable Modes Funds can be used for a wide variety of capital investments, including bicycle or pedestrian facilities that are built in con- junction with and included in a capacity-adding transportation system facility. The Montana code also restricts use of funds from transportation IFs for operation, maintenance, repair, alter- ation, or replacement of transportation facilities or equipment (such as buses). Bozeman has a four-step process to ensure that these uses and restrictions are respected, as noted here: • Preparation of long-range transportation plan. • Classification of project types. • Development and update of a CIP. • Implementation and cost verification of project. Bozeman applies IFs to major streets along with govern- ment transfers and taxes. Lessons Learned Some lessons compiled from the IF documentation include: • The program requires consistent and clear identification of the process and methods that the area to require private developers to pay for public services or infrastructure needs triggered by new development. • The role of community education is critical. Bozeman has an IF advisory committee, as specified in the Montana Code, the main goal of which is to review and monitor the process of calculating, assessing, and spending the fees. • The approach adopted by Bozeman is to evaluate the use of IFs as part of a larger fiscal study in conjunction with all other revenue sources it uses, and these mechanisms are built into the rate structure (TischlerBise Inc. 2012). • The rate-setting process requires much up-front work and follow-up. • There is significant regional coordination to ensure that developer actions in communities do not create strate- gic conflicts. • The revenues are a moderately stable source but are still dependent on the economic climate. • The IF approach does have high initial transaction costs in terms of conducting feasibility studies, planning, and assessments for consistency with CIPs and following up with developers and managing revenues later, but offers a moderate to sizeable source of steady revenues. Websites Relevant websites include: • http://mdt.mt.gov/research/toolkit/m1/ftools/dei/ if.shtml, • http://www.bozeman.net/Departments-%281%29/ Planning/Home.aspx#.UbX9UeRjWt8, and • http://www.bozeman.net/Smarty/files/1b/1b59f5a2- 9469-4922-b4f6-0430f4230979.pdf. Contact The project contact is Montana DOT.

82 OTHER AREAWIDE OR REGIONAL EXAMPLES (PROJECT AND PROGRAMMATIC APPROACHES) Chicago Metropolitan Agency for Planning’s ‘GO TO 2040’ Initiative Facility Name The facility discussed in this section is the Elgin O’Hare West Bypass Project—Central Thruway/Route 120, Illinois. VC Mechanism The mechanism discussed in this section is the special assessment. Background and Implementation Considerations “GO TO 2040” is the Chicago area’s comprehensive regional plan to help its seven counties and 284 communities. One of the top priority projects under the GO TO 2040 plan is the Elgin O’Hare West Bypass (EOWB) Project, a $3.57 bil- lion (2010 dollars) project. VC opportunities are being investigated for the project, which is planned to include new construction (and reconstruction of existing facilities) of 16 miles of highway, 17 interchanges, 12 miles of fixed- route transit, and other improvements to adjacent roadways. The GO TO 2040 plan notes that toll revenues are expected to cover a large portion of the project cost. A critical aspect of this project is its bonding capacity. The final EOWB report will include a further examination of the impacts of imple- menting VC mechanisms in the Elgin O’Hare project area. The initial hypothesis is that, when instituted carefully, VC mechanisms will be an efficient and effective way to fill the financing gap for this project. Of course, implementing VC mechanisms will require significant buy-in from local elected officials and the public. If VC shows promise, the next phase of project development will require significant outreach to the communities. For some mechanisms, state legislative action may be required. Figure 32 shows the EOWB area. Value capture planning analysis was undertaken for some parts of the EOWB project, in particular the Central Lake Thruway/Illinois Route 120 Bypass part of EOWB. The Route 120 Corridor Planning Council recently published a unified vision for the Central Lake Thruway. The vision proposes a new 8-mile long, four-lane boulevard that traverses undeveloped areas south of the current IL-120 (see Figure 33). High-level funding options have been evaluated for the project, including federal, state, county, and municipal contributions, as well as user fees. Currently, the project is estimated to cost approxi- mately $461 million, nearly 90% of which is attributable to the proposed bypass. Rough federal, state, and local funding con- tributions have been estimated, and an analysis of the funding potential of user fees (tolls) has been completed. A VC analysis was completed in 2011 to quantify an order of magnitude level of local funding that could be generated using VC mechanisms and provide another funding option for the bypass. In particu- lar, only two mechanisms were considered: (a) special service area (a type of SAD allowed by law in Illinois but currently limited to single jurisdictions), and (b) tax-increment finance- like mechanisms primarily focused on commercial uses for FIGURE 32 Elgin O’Hare West Bypass Project area. (Source: http://www.elginohare- westbypass.org/SitePages/Home.aspx.)

83 SSA portions using flat and graduated tax rates. The service areas used in this study are shown in Figure 33. The study concluded that for VC to work in this project setting, the following conditions must be met: • The project will require stakeholder coordination. • Rates must be calibrated to show proportionality to benefits if the SSA mechanism is to be used. • A governance structure needs to be defined because the boundaries traverse several municipal jurisdictions. • Legislative amendments or new legislation will likely be needed to facilitate the application of TIFs and SSAs for regional transportation projects. • If the bonding capacity relies on future development and a credit enhancement is provided by a credit-worthy entity, it is likely that the entity will require broad consen- sus on future growth policies by communities, including the appropriate level of zoning and density to facilitate the anticipated level of new development. The preliminary study concludes that VC tools are vital and needed but can provide only a part of the revenues to fund the project. Website The relevant website is http://www.cmap.illinois.gov/ 2040/main. Arlington County Commercial Transportation Tax, Virginia Facility Name The facilities discussed in this section are the Arlington County, Virginia, transportation improvements. VC Mechanism The mechanism discussed in this section is special assessment. Background Arlington County has adopted a countywide program to gen- erate revenues for transportation investments. The commercial FIGURE 33 Central Thruway/Route 120 value capture service area boundaries for SSA and TIF type mechanisms. (Source: http:// www.cmap.illinois.gov.)

84 transportation tax of a maximum of $0.125 per $100 assessed value on commercial and industrial properties will be used to fund regional transit programs, a complete street investment program, and a share of a future streetcar system. This tax was authorized in Virginia by the Virginia General Assembly in 2007 and is applicable not only to Arlington County but also for all counties and cities that are part of Northern Virginia Transportation Authority and the Hampton Roads Metropoli- tan Planning Area (Code of Virginia 2007). The provision laid out by the Virginia General Assembly allows localities within these two transportation authorities to impose the tax on com- mercial and industrial property and use the revenues exclu- sively for transportation purposes that benefit the locality. Not all localities have approved this proposition. For instance, Fairfax County and Fairfax City have adopted this proposition and charge $0.11 and $0.55, respectively, per $100 valuation of commercial property. Website The relevant website is http://www.arlingtonva.us. TRANSNET, California (San Diego) Facility Name The facilities discussed in this section are multimodal trans- portation improvements in San Diego, California. VC Mechanism The mechanism discussed in this section is the local option sales tax—Transportation. Background TRANSNET is the half-cent sales tax for local transporta- tion projects that was first approved by voters in 1988 and then extended in 2004 for another 40 years. Administered by San Diego Association of Governments, the program has been instrumental in expanding the region’s transportation system, reducing traffic congestion, and bringing critical transportation programs to life. During the 60-year life of the program, more than $17 billion will be generated and distributed among highway, transit, and local road projects in approximately equal thirds. That initial 20-year TRANSNET program generated approximately $3.3 billion between 1988 and 2008. San Diego Association of Governments distributed the money in equal thirds among transit, highway, and local road projects. In addi- tion, $1 million was earmarked annually for bicycle paths and facilities. The program also funded seven innovative walkable community demonstration projects in Encinitas, San Marcos, Oceanside, El Cajon, and the communities of North Park, Golden Hill, and Claremont in the city of San Diego. In November 2004, more than 67% of voters countywide approved the extension of TRANSNET to 2048. The 40-year extension will generate more than $14 billion for transporta- tion improvements, with the funds allocated using a similar formula (dedicated to transit, highway projects, local roads, and other new programs). The extension funds major high- way expansion projects along Interstates 5, 8, 15, and 805, as well as State Routes 52, 54, 56, 67, 76, 78, 94, 125, and 905 and numerous local road projects. In addition, it supports a robust public transportation system, including new bus rapid transit services and carpool/express lanes along many of the major transportation corridors. Website The relevant website is http://www.keepsandiegomoving. com/transnet-about.aspx. Washington Transportation Impact Fees (City of Olympia) Facility Name The facilities discussed in this section are Washington state roads. VC Mechanism The mechanism discussed in this section is IF. Background The city of Olympia and other cities in Washington have charged transportation IFs (Washington RCW 39.92.040) to developers of new construction since 1995 in accordance with Washington’s Growth Management Act of 1990. The fees are used to offset the costs of the transportation sys- tem improvements that new growth necessitates. The Public Works Department determines the schedule and use of the fees. The Community Planning and Development Depart- ment collects the fees from developers, typically as part of the building permit process. According to Washington’s Growth Management Act, the IFs are used to meet the main goal of the act, which is to address the negative impacts of uncoordinated growth through comprehensive and inclu- sive land use planning. Under the act, counties and cities of a certain size and growth rate are required to implement plans and regulations to address the potential negative impacts of growth within the community. In Washington, IFs are authorized for jurisdictions making plans under the Growth Management Act (RCW 82.02.050-110), as part

85 of “ voluntary agreements” under RCW 82.02.020, and as mitigation for impacts under the State Environmental Pol- icy Act (Ch. 43.21C RCW). GMA IFs are authorized only for public streets and roads; publicly owned parks, open spaces, and recreation facilities; school facilities; and fire protection facilities in jurisdictions that are not part of a fire district. Setting fee schedules for IFs is a complex pro- cess typically involving rate studies; generally, IFs do not recover the full cost of a new facility because these fees must be directly and proportionately related to impacts associated with new development (Municipal Research and Services Center). Website The relevant website is http://olympiawa.gov/city-government/ budget-financial-reports/~/media/Files/AdminServices/ CapitalFacilitiesPlan/2009-2014/Transportation%20with%20 Impact%20Fees%20A.pdf. Arkansas—Connecting Arkansas Program Facility Name The facilities discussed in this section are Arkansas state roads. VC Mechanism The mechanism discussed in this section is the sales tax with turnbacks. Background Connecting Arkansas Program (CAP) is an ambitious pro- gram used to fund several highway projects in Arkansas over the next 10 years, starting in 2013. The plan included a con- stitutional amendment with a dedicated half-cent sales tax (programmatic approach) to support a $1.8 billion program and the highway projects listed here and shown in Figure 34. FIGURE 34 CAP planned highway projects in Arkansas. (Source: http://www.arkansashighways.com/2012_hcstax/HalfCent_ Statewide_10_12_2012.pdf.)

86 The sales tax will be abolished by the constitution when debt service is paid off (no later than 2023). The mechanism is also supposed to provide turnback revenues to counties and cities. • Completion of widening of I-40 to six lanes between Little Rock and Conway. • Completion of widening of U.S. Hwy 67 to six lanes from Jacksonville to Cabot. • Improvements to I-30 connecting Little Rock and North Little Rock, including widening of the I-30 Arkansas River Bridge. • Continuation of widening of I-630 in Little Rock from Baptist Hospital to University Avenue. • Completion of widening of U.S. Hwy 64 to four lanes between Conway and Beebe. • Continuation of widening of I-30 to six lanes between Benton and U.S. Hwy 70. • Widening of U.S. Hwy 70 to four lanes between I-30 and Hot Springs. • Continuation of widening of U.S. Hwy 270 to four lanes from Hot Springs westward. • Completion of widening of U.S. Hwy 412 to four lanes between Paragould and Walnut Ridge. • Completion of widening of Arkansas State Highway 18 to four lanes between Jonesboro and Blytheville (to I-55) in east Arkansas. • Continuation of widening of U.S. Hwy 64 to four lanes between Marion and Wynne. • Widening of I-540 to six lanes between Fayetteville and Bentonville. • Completion of the initial two lanes of the future four- lane Bella Vista bypass. • Beginning of four-lane construction of the U.S. Hwy 412 Springdale bypass from I-540 to the Northwest Arkansas Regional Airport connector. • Continuation of widening of U.S. Hwy 65 to four lanes between Harrison and Clinton. • Completion of widening of U.S. Hwy 167 to four lanes between I-530 and El Dorado. • Completion of widening of U.S. Hwy 425 to four lanes from Hamburg to the Louisiana line. • Beginning of the widening of U.S. Hwy 82 to four lanes from El Dorado to Magnolia to Texarkana. Arkansas’s 75 counties are projected to gain from this by means of turnback revenues. A somewhat similar mechanism is Georgia’s adoption of the Transportation Special Purpose Local Option Sales Tax (TSPLOST). Authorized by the 2010 Transportation Invest- ment Act, the 2012 TSPLOST referendum was held on July 31 but has continued to meet opposition in many counties. In July 2012, three of Georgia’s 12 economic development regions approved the TSPLOST, a one-cent sales tax earmarked to fund a list of transportation improvements specific to each region. TSPLOST passed in the Central Savannah River, River Valley, and Heart of Georgia regions. As of January 1, 2013, sales tax in the 46 Georgia counties located in these regions increased by 1% (http://www.taxrates.com/blog/2012/12/10/ georgia-tsplost-sales-tax-rate-changes-january-2013/). Website The relevant website is http://www.arkansashighways.com/ 2012_hcstax/issue_1.aspx. SUMMARY Information from the literature review was combined with anecdotal evidence derived from interviews and discussions with agency personnel who applied the mechanisms sum- marized in chapter two. No universal VC approach exists, of course. Each location/application is unique, and agency per- sonnel proved adept at tailoring mechanisms to their individual needs. In many cases, more than one source was adopted (e.g., in Washington State, Montana, Virginia, Oregon, and Texas). To assess how different states apply the mechanisms, members of SCOFA and the SCOP, both of AASHTO, were surveyed. Twenty-two case examples (organized by geo- graphic scale and mechanism used) are presented, profiling applications at the corridor, project, local, and regional lev- els. These case examples document various elements of the mechanisms as reported by agencies or as documented in the literature in terms of: • Political acceptability. • Transaction cost-efficiency (includes implementation- related transaction costs to agencies). • Practical (e.g., design and implementation) consider- ations (including revenues). • Local partnerships involved. • Equity with regard to burden across different income groups and equity of revenues and costs. The case examples in this chapter have provided many examples of how VC mechanisms have been used to fund highways. Each case example has focused on a particular application and the practices and viewpoints of a particular agency and the local context in which the mechanism was adopted. The next chapter steps back from the set of cases to take a broader look at common themes that emerge from the literature review and the case examples.