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From page 99... ... 6 1 Chapter 6 Value Capture and Other Innovative Financing 6.1 Massachuses' Value Capture Experience 6.2 Historical Context for Value Capture 6.3 Scope of Value Capture Strategy 6.4 Value Capture Techniques 6.5 Value Capture and Airport Cies 6.6 Marine Port Districts and Foreign Trade Zones 6.7 Other Sources of Public Financing 6.8 Key Points and Conclusions 6.9 Wrap up 6.10 Addional References Transportaon systems, and airports in parcular, are essenal to the conduct of business, producvity, and quality of life. User fees and taxaon are the primary revenue sources that fund transportaon, supplemented with loans, bonds, and public private partnerships. Read the entire page →
From page 100... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 2 6.1 MASSACHUSETTS' VALUE CAPTURE EXPERIENCE In the early 1990s, the Commonwealth of Massachuse s began to invesgate the feasibility of building new convenon facilies in several areas of the state, including creang a large new facility in Boston. Proponents of a downtown Boston locaon, including the city administraon, acknowledged that a new facility would not generate enough revenue to cover construcon and operang costs. Read the entire page →
From page 101... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6-3 This chapter examines the applicaon of value capture strategies and alternave public financing opons that could be available for use by airports. 6.2 HISTORICAL CONTEXT FOR VALUE CAPTURE Scores of economic impact studies recognize that airports are economic engines for a region, although most of the economic impact occurs on land and with businesses not located on airport property. Read the entire page →
From page 102... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 4 in land that comes from improved access benefits primarily private landowners and developers. If there are incremental increases in sales taxes, income taxes, and property taxes because of a project, these revenues typically flow back to municipal, county, and regional general funds to fund government operaons, services, and a variety of public projects. Read the entire page →
From page 103... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 5 retail sales taxes from new commercial establishments. The before and a er difference is the measurable incremental change. Read the entire page →
From page 104... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 6 6.4 VALUE CAPTURE TECHNIQUES Because value capture has its origin in transit projects, evaluaon of techniques includes both exisng pracces by airport sponsors and evaluaon of pracces used to finance transit projects. This secon introduces eleven value capture techniques. Read the entire page →
From page 105... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 7 Each of these techniques has the potenal for generang revenue for airport sponsors, but varies in the degree of financial risk and difficulty/complexity to implement. Table 6 2 describes each technique according to the following aributes: Contributors – the main beneficiaries of a project (ulmately, the groups asked to contribute resources because of the improvement) Read the entire page →
From page 106... ... Table 6 2: Techniques to Implement Value Capture Strategy Contributor Coordinator Timing Impacted Area Benefit Basis Use of Revenue Code Value Capture Techniques P r o p e r t y O w n e r s D e v e l o p e r s V e h i c l e O p e r a t o r s R e s i d e n t s / E m p l o y e e s V i s i t o r s / P a s s e n g e r s A i r p o r t T a x i n g A u t h o r i t y N e g o a o n P a r t n e r s h i p M a n a g e m e n t / O v e r s i g h t B e f o r e D e v e l o p m e n t / A c v i t y A e r D e v e l o p m e n t / A c v i t y O n A i r p o r t S p e c i fi c O f f A i r p o r t A r e a E n r e J u r i s d i c o n N e w D e v e l o p m e n t O l d D e v e l o p m e n t L e v e l o f A c v i t y / U s e I n i a l C a p i t a l C o s t s O n G o i n g O & M Finance and Property Management – FN FN 4 Joint Development FN 6 Airport Access Fees and Privilege Fees FN 7 Tax Increment Financing (TIF) District FN 8 Local Income and Payroll Tax FN 9 Sales Tax/Occupancy Tax FN 10 Transfer of Development Rights (TDRs) Read the entire page →
From page 107... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 9 6.4.2. Value Capture Techniques with Potential for Airport Application Various techniques are available to convert value creaon into value capture. Read the entire page →
From page 108... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 10 unclu ered' posion at the terminal."7 The government's finding, together with the willingness of some providers to pay a premium for curbside service, demonstrates that these businesses derive value from such locaons. Airport sponsors are moving toward charging companies a percentage of gross revenues for airport access. Read the entire page →
From page 109... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 11 FN 7: TAX INCREMENT FINANCING (TIF) DISTRICT Extent of Airport Use Revenue Potential Airport Assumption of Risk Capital Required Complexity to Implement Political & Institutional Challenges Many transit projects in the United States use tax increment financing (TIF) Read the entire page →
From page 110... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 12 The amount of revenue generated by TIF will depend on several factors, including the size of the TIF district, the type of improvements made in that district, and general market condions. Risk varies by requirements of the enabling legislaon. Read the entire page →
From page 111... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 13 Advantages of TIFs TIFs allow municipal control but do not usually count against a municipality's debt limit (because there is a dedicated repayment stream) and typically are not viewed by the public as a tax increase. Read the entire page →
From page 112... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 14 FN 9: SALES TAX/OCCUPANCY TAX Extent of Airport Use Revenue Potential Airport Assumption of Risk Capital Required Complexity to Implement Political & Institutional Challenges States, counes, or municipalies can levy special sales taxes in an area that will benefit from a transportaon facility (the impact area) to create financing specifically dedicated to that facility. Read the entire page →
From page 113... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 15 FN 4: JOINT DEVELOPMENT Extent of Airport Use Revenue Potential Airport Assumption of Risk Capital Required Complexity to Implement Political & Institutional Challenges Public private partnerships (P3s) involve partnerships between a public agency and a private developer to develop a site, usually on publicly owned land, wherein project parcipants will both help pay for the costs of the development and share in the revenues generated by the development. Read the entire page →
From page 114... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 16 Implementaon Joint development is a form of public private partnership (P3) Read the entire page →
From page 115... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 17 A TDR can be used to pay for a specific infrastructure investment or for maintenance and operang costs. Municipalies may also choose to deposit TDR proceeds into the general fund. Read the entire page →
From page 116... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 18 FN 11: CONNECTION FEES Extent of Airport Use Revenue Potential Airport Assumption of Risk Capital Required Complexity to Implement Political & Institutional Challenges A connec on fee is a one me fee charged to a private landowner to allow a direct connec on to a transporta on infrastructure investment, u lity line, or other facility. For example, in Atlanta, in Washington, DC, and in Seale, transit agencies nego ated connec on fees with property owners interested in direct connec ons to transit sta ons. Read the entire page →
From page 117... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 19 these techniques appear to outweigh the gains that airport sponsors could realize. They have been included in this Airport Guide because, depending on the local situaon, adapng one or more of these techniques may be a viable strategy. Read the entire page →
From page 118... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 20 road, occupancy, revenues, impacts, and so forth. For example, in West Hollywood, California, a BID fee is assessed on hotel occupants within the district.17 Polical, Governance, and Legal Issues BIDs rely on businesses or property owners deciding to assess a fee on themselves or their customers. Read the entire page →
From page 119... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 21 assessment district and requires property owners to pay either a one me fee or annual assessment to cover the cost of the improvement. Special assessment/beerment districts differ from BIDs in that the assessments are not voluntary, and they become part of a property owner's tax bill. Read the entire page →
From page 120... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 22 FN 14: LAND VALUE TAX Extent of Airport Use Revenue Potential Airport Assumption of Risk Capital Required Complexity to Implement Political & Institutional Challenges Land value taxes separate the value of the land itself from the value of any development (anything that may be built on the land) Read the entire page →
From page 121... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 23 Disadvantages of a Land Value Tax Use of a split tax strategy like a land value tax could decrease the compeve posion of property in communies that adopt it relave to communies that do not adopt it. The taxing authority may find it difficult to assess the relave benefit of the airport to individual parcels of land. Read the entire page →
From page 122... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 24 Implementaon State enabling legislaon is required to implement TUFs. Local taxing authories administer the fees. Read the entire page →
From page 123... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 25 An airport city begins on the airport and includes third party passenger, cargo, and general aviaon services that generate rent to airport sponsors. Off airport, the airport city includes businesses that rely on or support: Frequent, speedy access to air freight Passenger air service (for client meengs, visitors from corporate headquarters/branch offices, and supplier/vendor representaves) Read the entire page →
From page 124... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 26 Figure 6 4: Spaal Layout of Airport City Development Concepts Source: Adapted from Peneda, M., V Read the entire page →
From page 125... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 27 of value capture techniques and revenue sharing would be defined in the enabling regulaon and legislaon for the airport city, and would be transparent to businesses coming into the airport city. Designaon of airport cies will require extensive and coordinated land use planning, zoning, enforcement, and clear definions of airport related businesses. Read the entire page →
From page 126... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 28 Table 6 3 (Connued) Read the entire page →
From page 127... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 29 pending. FTZs handle over $500 billion of goods and employ 350,000 people. Read the entire page →
From page 128... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 30 Figure 6 5: El Paso Internaonal Airport FTZs Source: Annual report to the U.S. Foreign Trade Zones Board, October 1, 2009–September 30, 2010, El Paso Internaonal Airport BD 9: MARINE PORT DISTRICTS Extent of Airport Use Revenue Potential Airport Assumption of Risk Capital Required Complexity to Implement Political & Institutional Challenges Water ports and working waterfronts provide examples of municipalies and states adopng regulatory measures to support and encourage uses specific to a parcular transportaon facility or feature. Read the entire page →
From page 129... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 31 Several U.S. cies have adopted marine industrial zoning that designates land near fishing harbors and deep water ports for marine related industrial uses only. Read the entire page →
From page 130... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 32 The city of Gloucester, Massachuses, has had marine industrial zoning in place since 1969 to protect its working waterfront. In 1978, the Massachuses Coastal Zone Management Program enhanced protecon of the working waterfront by naming the area a Designated Port Area. Read the entire page →
From page 131... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 33 6.7 OTHER SOURCES OF PUBLIC FINANCING Value capture techniques provide alternate ways to raise capital for improvements and pay for regular operaons and maintenance. Because of high capital requirements for transportaon improvements, capital projects increasingly depend on a combinaon of public and private finance. Read the entire page →
From page 132... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 34 improvements, air traffic control towers, snow removal equipment, pavement reconstrucon, and land acquision. FN 17: TIFIA The federal Transportaon Infrastructure Finance and Innovaon Act (TIFIA) Read the entire page →
From page 133... ... CHAPTER 6 – VALUE CAPTURE AND OTHER INNOVATIVE FINANCING 6 35 Table 6 5 summarizes the funding sources for the project to illustrate the magnitude and complexity of the Chicago O'Hare financial package. Table 6 5: Financing Mechanisms Used for the Chicago O'Hare Consolidated Joint Use Facility Project Funding Source Amount General Airport Revenue Bonds $95.6 million Customer Facility Charge (CFC) Read the entire page →
From page 134... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 36 near an airport and development plans can effecvely target and recruit aviaon related industries and businesses. 6.9 WRAP UP The value capture strategy is parcularly relevant in a funding environment for large capital projects that involves public and private investment from mulple sources. Read the entire page →
From page 135... ... Table 6 6: Summary of Value Capture and Other Public Sector Financing Techniques Code Value Capture Techniques Extent of Airport Use Revenue Potential Airport Assumption of Risk Capital Required Complexity to Implement Political & Institutional Challenges Finance and Property Management – FN FN-4 Joint Development FN-6 Airport Access Fees and Privilege Fees - FN-7 Tax Increment Financing (TIF) District FN-8 Local Income and Payroll Tax FN-9 Sales Tax/Occupancy Tax - FN-10 Transfer of Development Rights (TDRs) Read the entire page →
From page 136... ... INNOVATIVE REVENUE STRATEGIES – AN AIRPORT GUIDE 6 38 6.10 ADDITIONAL REFERENCES CPCS, First Class Partnerships, Harral Winner Thompson Sharp Klein, Inc., Portscape Inc., Thompson Galenson and Associates, LLC, Alternave Financing Approaches for Passenger and Freight Rail Projects, Dra Working Paper 1: Global Scan and Assessment of Established Financing Models, NCRRP 0701, Washington DC, August 2013 Enrico, S., B Boudreau, D Read the entire page →

From page 99...

... 6 1 Chapter 6 Value Capture and Other Innovative Financing 6.1 Massachuses' Value Capture Experience 6.2 Historical Context for Value Capture 6.3 Scope of Value Capture Strategy 6.4 Value Capture Techniques 6.5 Value Capture and Airport Cies 6.6 Marine Port Districts and Foreign Trade Zones 6.7 Other Sources of Public Financing 6.8 Key Points and Conclusions 6.9 Wrap up 6.10 Addional References Transportaon systems, and airports in parcular, are essenal to the conduct of business, producvity, and quality of life. User fees and taxaon are the primary revenue sources that fund transportaon, supplemented with loans, bonds, and public private partnerships.