When government invests in transportation infrastructure, the improvements gained from the resulting projects enable further development and increase property value for the adjacent property owners.
Value capture, May’s Every Day Counts round five (EDC-5) innovation of the month, seeks to capture a portion of the value created by transportation infrastructure investment, which can then be reinvested into roadway operations, maintenance, or financing current or future transportation construction projects. It is one powerful tool to address the growing gap between available funding and roadway construction and maintenance needs.
Approximately three million miles of public roads are not eligible for Federal-aid Highway Program (FAHP) funding, and rely primarily on State and local funding to finance new projects and maintain existing facilities. Value capture provides an opportunity for local governments to raise money to pay for these efforts or provide local matching funds for FAHP projects.
Value capture can be used in a wide range of settings including urban, suburban, and rural areas. Across the nation, value capture has helped fund the delivery of many successful projects. In Yankton County, SD, a project that upgraded a township road serving an industrial park stimulated millions in economic growth. A $6 million loan from the South Dakota Department of Transportation in State highway funds has resulted in over $250 million in private investment in the industrial park, generating new jobs with millions of dollars in annual payroll for the area and millions of additional dollars in property taxes. The project is paying the State back with the increased taxes—through Tax Increment Financing (TIF).
As shown in Yankton, TIF captures a portion of future tax revenue increases in a designated geographic area to pay for transportation investments. This technique follows a common value capture philosophy – those that benefit most from transportation investments should help fund those investments.
Over the next few weeks, we will look at examples of different value capture techniques and how they have benefited communities all over the country.
If you would like to learn more about this innovative financing approach, contact Stefan Natzke of the Federal Highway Administration Office of Planning, Environment, and Realty or Thay Bishop of the FHWA Center for Innovative Finance Support.
May 16, 1 to 2:30 p.m. ET Register
May 21, Midwestern & Southern Region 1 to 3 p.m. ET
May 22, Northeast & Southeast Region 1 to 3 p.m. ET
May 23, Western & High Plains Region 1 to 3 p.m. ET