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2018 N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP RESEARCH REPORT 873 Guidebook to Funding Transportation Through Land Value Return and Recycling Sharada Vadali Johanna Zmud Todd Carlson Texas a&M TransporTaTion insTiTuTe College Station, TX Karin DeMoors HigH sTreeT ConsulTing Chevy Chase, MD Rick Rybeck JusT eConoMiCs Washington, DC Steven Fitzroy Naomi Stein eConoMiC DevelopMenT researCH group Boston, MA Mark Sieber ernsT Basler + parTner Boston, MA Subscriber Categories Administration and Management â¢ Finance â¢ Policy Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration
NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed research is the most effective way to solve many problems facing highway administrators and engineers. Often, highway problems are of local interest and can best be studied by highway departments individually or in cooperation with their state universities and others. However, the accelerating growth of highway transportation results in increasingly complex problems of wide inter- est to highway authorities. These problems are best studied through a coordinated program of cooperative research. Recognizing this need, the leadership of the American Association of State Highway and Transportation Officials (AASHTO) in 1962 ini- tiated an objective national highway research program using modern scientific techniquesâthe National Cooperative Highway Research Program (NCHRP). NCHRP is supported on a continuing basis by funds from participating member states of AASHTO and receives the full cooperation and support of the Federal Highway Administration, United States Department of Transportation. The Transportation Research Board (TRB) of the National Academies of Sciences, Engineering, and Medicine was requested by AASHTO to administer the research program because of TRBâs recognized objectivity and understanding of modern research practices. TRB is uniquely suited for this purpose for many reasons: TRB maintains an extensive com- mittee structure from which authorities on any highway transportation subject may be drawn; TRB possesses avenues of communications and cooperation with federal, state, and local governmental agencies, univer- sities, and industry; TRBâs relationship to the National Academies is an insurance of objectivity; and TRB maintains a full-time staff of special- ists in highway transportation matters to bring the findings of research directly to those in a position to use them. The program is developed on the basis of research needs identified by chief administrators and other staff of the highway and transportation departments, by committees of AASHTO, and by the Federal Highway Administration. Topics of the highest merit are selected by the AASHTO Special Committee on Research and Innovation (R&I), and each year R&Iâs recommendations are proposed to the AASHTO Board of Direc- tors and the National Academies. Research projects to address these topics are defined by NCHRP, and qualified research agencies are selected from submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Academies and TRB. The needs for highway research are many, and NCHRP can make significant contributions to solving highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement, rather than to substitute for or duplicate, other highway research programs. Published research reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet by going to http://www.national-academies.org and then searching for TRB Printed in the United States of America NCHRP RESEARCH REPORT 873 Project 19-13 ISSN 2572-3766 (Print) ISSN 2572-3774 (Online) ISBN 978-0-309-44688-4 Library of Congress Control Number 2018937953 Â© 2018 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FMCSA, FRA, FTA, Office of the Assistant Secretary for Research and Technology, PHMSA, or TDC endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The research report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the National Academies of Sciences, Engineering, and Medicine. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; or the program sponsors. The Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; and the sponsors of the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade or manufacturersâ names appear herein solely because they are considered essential to the object of the report.
The National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, non- governmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Marcia McNutt is president. The National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. C. D. Mote, Jr., is president. The National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president. The three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. The National Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine. Learn more about the National Academies of Sciences, Engineering, and Medicine at www.national-academies.org. The Transportation Research Board is one of seven major programs of the National Academies of Sciences, Engineering, and Medicine. The mission of the Transportation Research Board is to increase the benefits that transportation contributes to society by providing leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Boardâs varied committees, task forces, and panels annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. Learn more about the Transportation Research Board at www.TRB.org.
C O O P E R A T I V E R E S E A R C H P R O G R A M S AUTHOR ACKNOWLEDGMENTS The authors would like to thank Sruthi Ashraf for her help and contributions during the initial phases of this research. Thanks go out to the following individuals for their participation in the discussions to inform the case studies and methods: â¢ Tom Murphy, former mayor, Pittsburgh, Pennsylvania, â¢ Audrey Moruza, Virginia Department of Transportation, â¢ Elizabeth Schuh, Chicago Metropolitan Planning Agency, â¢ Barbara Fraser, Oregon Department of Transportation, and â¢ Paul Jasin, Specialized Public Finance, Dallas, Texas. Thanks also go to the numerous individuals and panel members who provided feedback on the various versions of the guidebook and at different stages of the project. CRP STAFF FOR NCHRP RESEARCH REPORT 873 Christoper J. Hedges, Director, Cooperative Research Programs Lori L. Sundstrom, Deputy Director, Cooperative Research Programs Andrew C. Lemer, Senior Program Officer Sheila A. Moore, Program Associate Eileen P. Delaney, Director of Publications Natalie Barnes, Associate Director of Publications Janet M. McNaughton, Senior Editor NCHRP PROJECT 19-13 PANEL Field of AdministrationâArea of Finance John W. Fuller, University of Iowa, Iowa City, IA (Chair) Ben T. Orsbon, South Dakota DOT, Pierre, SD Barbara K. Fraser, Oregon DOT, Salem, OR Myron G. Frierson, Michigan DOT, Lansing, MI Daniel G. Haake, SRF Consulting Group, Inc., Minneapolis, MN C. Russell Hulin, Oklahoma DOT, Oklahoma City, OK Karen J. Rae, New York State Empire Development Corporation, Galway, NY Stefan M. Natzke, FHWA Liaison Monica Starnes, TRB Liaison
Investments in transportation infrastructure that improve access to land and resources often lead to increased property values. NCHRP Research Report 873: Guidebook to Funding Transportation Through Land Value Return and Recycling presents guidance for state depart- ments of transportation (DOTs) and other agencies seeking to mobilize some portion of that property-value increase to fund maintenance and operations as well as investment in the infrastructure. Because local government typically has authority to deal with matters related to land use and land-related revenue-generating mechanisms, DOT access to land value return and recyclingâa subset of real estateâbased value capture methodsâmay require enabling legislation or partnering with local agencies. The Guidebook includes examples of applications of land value return and recycling as well as model legislation and institutional structures to facilitate the strategy. Investments in new or enhanced facilities such as highway interchanges and transit sta- tions improve access and generate commercial activity, reduce transportation costs, or otherwise enhance the locational advantages of a geographic area; these advantages are often observable as increased land values. Land value return and recyclingâa subset of real estate value capture mechanismsâis a method for generating revenue to pay for improve- ments in the transportation system by collecting fees or taxes on that increased value. Reve- nues generated by supplementary property taxes, other land-based fees or taxes, developersâ payments, or other mechanisms can provide funding for operation and maintenance of transportation infrastructure as well as investment. Land value return and recycling has been employed by local and regional transportation agencies in the United States and elsewhereâfor example for development of rail transit stations or highway interchanges serving large commercial and employment centersâbut DOTs have rarely used the practice. Not only does a state agency face the institutional chal- lenges of working with multiple local authorities to implement such practices, but many states lack legislation to enable the DOT to use land value return and recycling. The objective of NCHRP Project 19-13, Guidance for Use of Land Value Return and Recycling to Fund Transportation, was to produce a guide for DOTs, state policy makers, metropolitan planning organizations, development agencies, local government agencies, and others seeking to use land value return and recycling for funding transportation sys- tem improvements, including replacements and renewals as well as development of new facilities. The research was undertaken to present an analytical framework for assessing how land value return and recycling may be useful as a funding mechanism in settings typically encountered by DOTs, considering such factors as likely value enhancement, legislative and regulatory limitations and incentives, inter-governmental relationships, and stakeholder F O R E W O R D By Andrew C. Lemer Staff Officer Transportation Research Board
perspectives on the issues of the distribution of public and private benefits of transportation services. The analytical framework is supplemented by discussions of exemplary mecha- nisms for implementing land value return and recycling and illustrative cases and examples of land value return and recycling usage. The research team was led by the Texas A&M Transportation Institute and included High Street Consulting, Just Economics, Economic Development Research Group, and Ernst Basler + Partner. The research team reviewed the literature, interviewed practitioners, and drew on their own experience to characterize current and leading practices of land value return and recycling and develop guidance for DOT practitioners. The product of this research, NCHRP Research Report 873: Guidebook to Funding Transportation Through Land Value Return and Recycling, is intended to help DOT staff and other stakeholders to under- stand the principles and practices of land value return and recycling and how they may be useful in particular instances for generating revenue to fund the transportation system.
1 Summary 8 Chapter 1 Guidebook Purpose and Overview 8 What Is the Guidebookâs Purpose? 8 Is Land Value Return and Recycling the Same as Value Capture? 9 Who Is the Guidebookâs Intended Audience? 10 How Is the Guidebook Organized? 13 Chapter 2 Understanding Land Value Return and Recycling 13 Why Donât We Pay for Infrastructure in the Same Way We Pay for Other Goods and Services? 13 What Is the Beneficiary Pays Principle? 14 What Is the Cost Principle? 15 What Is Land Value Return and Recycling? 16 What Are the Benefits and Drawbacks of Land Value Return and Recycling? 20 Chapter 3 How Land Value Return Works 21 Land Value Return and Recycling Methods 32 Land Value ReturnâLike Methods 41 Chapter 4 Funding Transportation with Land Value Return 41 What Is the Revenue-Generating Ability of Land Value Return Methods? 58 What Are the Legal Requirements for Land Value Return? 67 Chapter 5 Making Land Value Return Successful 67 How to Generate Stakeholder Support 70 How to Meet the Administrative and Institutional Requirements 71 How to Integrate Land Value Return into Transportation and Land Use Planning A-1 Appendix A Acronyms and Glossary B-1 Appendix B Summary of Case Examples C-1 Appendix C Common Questions and Answers D-1 Appendix D Legislative Aids E-1 Appendix E Economic Theory of Land Value Return and Recycling F-1 Appendix F Useful Resources and Prior Studies G-1 Appendix G NCHRP Project 19-13 Report H-1 Appendix H Implementation of Research Findings C O N T E N T S Note: Photographs, figures, and tables in this report may have been converted from color to grayscale for printing. The electronic version of the report (posted on the web at www.trb.org) retains the color versions.