|Friday, February 3, 2012|
Innovative Financing for Transit: Special Assessment
Construction of the Dulles Metrorail extension at sunrise in Tysons Corner (Metropolitan Washington Airports Authority)
Transit agencies across the country are facing severe budget challenges as infrastructure ages, demand increases, and new federal funding commitments are uncertain and even on the decline. To supplement fare box revenue and other traditional funding sources, one strategy to generate revenue for transit and improve the surrounding community is value capture.
Value capture mechanisms are a type of public financing where increases in the private land values generated by nearby public transportation investments are “captured” to repay the cost of the public investment over time. Because transit investments increase surrounding land values, it is sound policy to use value capture strategies to pay for them. Numerous types of value capture strategies for transportation exist. The last edition of Talking Transit featured tax increment financing; this edition explores special assessments.
A special assessment is an additional tax or assessment on the full value of a property, usually paid by property owners within a defined Special Assessment District that benefit from a specific public improvement. It can be used to fund a wide variety of infrastructure improvements including transit.
One of the nation’s largest projects to use special assessment financing for transit is the Dulles Metrorail expansion in the Washington, D.C. region. The Dulles Corridor, located in northern Virginia west of the nation's capital, is home to Dulles International Airport and Tysons Corner, a massive retail shopping and employment center. Projections show that over the next 25 years, the population in the corridor will grow by 45 percent and employment by 63 percent. The increases in travel demand that correspond with this kind of growth will strain the already overburdened traffic system, resulting in more gridlock, environmental degradation and threatening local economic opportunities and livability.
As part of the solution to maintain the corridor’s quality of life and regional competitiveness, the Washington Metropolitan Area Transit Authority (WMATA) is constructing a 23-mile extension of the existing Metrorail system to Dulles Airport, serving Tysons Corner and the communities of Reston and Herndon, two of the region’s other major employment centers.
The extension is estimated to cost $5.2 billion and will be built in two phases. Because the rail expansion will benefit businesses in the corridor and their customers, commercial landowners petitioned to establish a special assessment district to fund the local share of Phase 1 and 2 construction. During Phase 1, commercial and industrial (not residential) real estate in the assessment zone around Tysons Corner will be charged an additional 22 cents per $100 of assessed value (in addition to normal property taxes). There is a $400 million cap on the amount that can be raised through the Phase 1 special assessment. Phase 2, which will build the line through Reston and Herndon and to Dulles Airport, will be funded in part with a special assessment of five cents per $100 of assessed value in the Phase 2 zone in 2010, rising to 20 cents per $100 of assessed value in 2013. The Phase 2 special assessment is capped at $330 million.
Importantly, these funds generated by the special assessment districts in Phase 1 and 2 will cover the local match needed to leverage federal dollars and service debt.
Dulles is not the only special assessment district for transit in the D.C. region. The city implemented a special assessment district around the New York Avenue metro rail station, contributing $35 million of the $110 million total cost. And it paid off: The area was transformed into a vibrant neighborhood with mixed-use housing, shops, restaurants, and a farmer’s market. Assessed value of the area increased from $535 million in 2001 to $2.3 billion in 2007. More than 15,000 jobs have been created and $1.1 billion in private dollars invested. Realizing the economic benefit they would receive from the investment in the South Lake Union Streetcar, 750 property owners in Seattle approved a special assessment district to provide $25 million, half of the total capital costs to build the streetcar. Construction of Portland’s initial 4.8-mile streetcar totaled $87 million, most of it coming from local funds including $14.6 million in a one-time special assessment imposed on businesses within the district. Interestingly the additional levy assessed for each property was defined based on their size and proximity to the line. The availability of local funds meant construction moved quickly avoiding the lengthy federal funding process.
Illinois law permits special assessments on property taxes via two mechanisms, special service areas (SSA) (35 ILCS 200/27) and special assessment districts (SA) (65 ILCS 5/9). Both allow a governing body to levy additional real estate taxes to fund additional services in a defined area rather than the entire community. The establishment of an SA in Illinois is a complicated process in which a municipality must demonstrate a specific benefit to property owners who will pay the assessment. SAs are most often used to finance debt service on bonds used to pay for the cost of public infrastructure in new developments.
To establish an SSA a local government must notify all affected taxpayers of the proposed SSA ordinance by mail and hold a public hearing. Land owners in the proposed SSA can defeat the ordinance by submitting a petition within 60 days of the public hearing signed by at least 51 percent of registered voters and 51 percent of property owners residing in the proposed SSA. If no opposition arises, the ordinance is adopted by a simple majority vote by the local governing body. The City of Chicago contracts with local nonprofits to manage SSAs. There are 44 active SSAs in Chicago with budgets ranging from $10,000 to $2.7 million and an average budget of $540,000. Funds are used to finance a range of projects from streetscaping to planning.
During a time when our cash-strapped transit agencies are searching for ways to stretch every dollar – and experiencing increased demand for their services - special assessment districts along transit corridors are an innovative financing strategy. Examples from across the country prove that homeowners and businesses will pay more for access to transit in their communities. Locally, the Regional Transportation Authority has offered some suggestions on using special assessments to fund transit station development and transit-oriented development through the creation of special “corridors” along a transit line. The Chicago Metropolitan Agency for Planning also has called for pursuing this strategy in its GOTO 2040 comprehensive regional plan for the Northeastern Illinois.
Value capture case studies: What is value capture?
Value capture case ctudies: San Francisco’s Transbay Transit Center
MPC releases 2012 policy agenda
Placemaking Case Study: Westhaven Park Community Garden
House transportation bill to be marked-up today
CTA updates train tracking feature
City launches winter snow plow tracker web site
Forest Park adopts active transportation plan
Grand station rehab was worth the wait, aggravation
Illinois Tollway Awards More Than $60 Million in Construction and Construction Management Contracts for 2012 Season
City sets timetable for $212 million in new downtown CTA stations
House Republicans to unveil transportation bill
Transportation, jobs, and the 2012 State of the Union
U.S. Transportation Secretary LaHood Announces $77 Million in Transportation Research and Education Grants
Commuters Who Resolve to Save Money in 2012 Take Note: Transit Riders Save More As Gas Prices Increase
Alabama governor says he plans to ask voters to OK borrowing $2 billion for roads, bridges
Federal transportation video highlights Utah's I-15 project
SunRail construction to kick off Jan. 27
Sweden: Bombardier Partnership Project Outlines Green Train of the Future
Kazakhstan: A Beautiful, Futuristic New Subway System
Canada: A new Toronto transit proposal delivers more bang for the $8.2 billion buck
Bangladesh: ‘Bus Rapid Transit’ soon in city
Dhaka: Construction works of 20-kilometre ‘Bus Rapid Transit (BRT)’ from Airport to Gazipur is going to be begun soon involving $255 million in bid to curb the traffic jam in the city. The decision came from a meeting between of Communications Minister Obaidul Quader and a delegation of Asian Development Bank (ADB) at his office in the city.
China: Xiamen's public bike-sharing system to be launched this year
South Africa: Rustenburg joins rapid transport race
Email design by WebitectsMetropolitan Planning Council | 140 S Dearborn St | Suite 1400 | Chicago, IL 60603
Phone (312) 922-5616 phone | (312) 922-5619 fax | firstname.lastname@example.org
Copyright © 2014 Metropolitan Planning Council. All rights reserved.
To stop receiving this newsletter visit metroplanning.org/unsubscribe.html?EmailMsgId=157&email=