Financing Transportation Through the Capture of Land Value Gains: Taxes, Exactions and Synthesis

Principal Investigator(s):

David Levinson, Former U of M Professor, Civil, Environmental and Geo-Engineering

Co-Investigators:

  • Michael Iacono, Former Research Fellow, Civil, Environmental and Geo-Engineering

Project summary:

The accessibility that transportation networks provide has a direct influence on the value of land, particularly in urban areas. Improvements to transportation networks alter the relative accessibility of places and, in turn, their land values. The capitalization of these accessibility benefits into land value provides a source of benefit that can be extracted in order to finance, at least partially, transportation facilities and services. This practice of "value capture" is particularly useful in cases where it is difficult or impossible to finance improvements from direct user charges. This project was part of a collaborative research project that explored how to use value capture to fund transportation in Minnesota. Research tasks in this project included: contribution to a review of the existing financing framework; a review of literature relating to the relationship between transportation improvements and value capture strategies (tax increment financing (TIF), special assessments, joint development, and air rights); evaluation of these policies on the basis of several criteria; and making recommendations on the potential for value capture policies to be successfully applied in a local setting. A team of University of Minnesota transportation and public policy researchers identified eight potential strategies to raise funding for transportation infrastructure investments, and evaluated each of the policies according to four criteria: 1) efficiency, which relates to how well the policies allocate scarce resources, 2) equity, which describes the fairness of resource allocation among different strata of society, 3) sustainability, which refers to the ability of the policy to serve as an adequate, reliable source of transportation revenue, and 4) feasibility, which refers to the degree of political and administrative difficulty associated with each policy. The report summarizes the strategies, their policy implications, and the legal and administrative considerations needed in order to implement them in Minnesota.

Sponsor(s):

Project details: