Value Capture for Transportation Finance

Researchers identify eight potential strategies to raise funding for transportation

A team of University of Minnesota transportation and public policy researchers has identified eight potential strategies to raise funding for transportation infrastructure investments. When a large public facility is built—such as a new freeway interchange or transit station—the value of surrounding private property can go up, sometimes substantially. The eight strategies capture a part of this value. The following documents describe the strategies, their policy implications, and the legal considerations needed to use several of them in Minnesota.

• News release about the study
• Harnessing Value for Transportation Investment: Policy Summary (16 pages, 496 KB PDF)
• Value Capture for Transportation Finance: Report to the Minnesota Legislature (56 pages, 1.9 MB PDF)
• Value Capture for Transportation Finance: Technical Research Report (373 pages, 8.0 MB PDF)

Project Summary

Large public investments in state transportation infrastructure–such as new freeway interchanges, highways, or transit stations–can increase the value of adjacent private land, sometimes substantially. Capturing the value of this benefit through various tools is gaining interest as a finance mechanism for infrastructure investments. But many questions remain: Does "value capture" promote or hinder economic development? How high should the tax rate be? How stable is the revenue?

To answer these and other questions, the state legislature appropriated funding to CTS to study the public policy implications of value capture.

Researchers reviewed the relationship between transportation and land values, including the measurement of benefits from a transportation improvement, as well as the legal and economic frameworks for capturing the value gains. They explored the major financing techniques associated with value capture–such as joint development of infrastructure and adjacent private parcels, rezoning and reselling, impact fees, special assessment districts, and tax increment financing–and some examples of their implementation. They then evaluated several of the proposed policies and their suitability for implementation locally, based on the criteria of economic efficiency, social equity, adequacy as a revenue source, and feasibility.