UBC Graduate Research

Transit value capture finance : a global review towards measuring monetary efficiency Olajide, Oladapo (Alex)


Land Value Capture (LVC) is an alternative method of transit finance that recovers land value gains (an unearned income) enjoyed by transit proximate properties, for transit project funding purposes. The application of transit value capture funding is predicated primarily on transit induced land value increases (capitalization) enjoyed by private land owners, and the increasing funding responsibilities of transit agencies globally. There are two approaches to land value capture (LVC); they include Development Based Land Value Capture (DBLVC) and Taxation Based Land Value Capture (TBLVC). The former leverages land assets and development rights in transit proximate areas in order to meet a transportation funding objective, whereas the latter leverages and applies taxation powers and instruments available to transit agencies and governments on transit benefitting properties. DBLVC instruments discussed in this report include: Direct Property Development, Joint Property Development, Land Sales, Land Lease Agreements, Land Readjustments, and Urban Redevelopment Schemes. Direct Property Development and Joint Property Development are highlighted in this report by conducting case studies on Nanchang, China and Hong Kong Mass Transit Railway (MTR) Corporation respectively. TBLVC instruments discussed in this report include: Tax increment financing, Special Assessments, Land Value Tax, Betterment Charges, Transportation Impact Fees, and Station Connection Fees. Betterment Charges are highlighted in this report by conducting a case study on London’s Crossrail Business Rate Supplement (BRS). Using limited public financial data, the financial performance of the three highlighted LVC case studies – Nanchang Direct Property Development program, Hong Kong MTR Rail plus Property program, and London Crossrail BRS - are assessed using the Transit Land Value Capture Cost Recovery Ratio (TLVCCR) – a ratio comparing the implementation cost of LVC mechanisms to revenues generated. In terms of distinct advantages: • DBLVC through property development has a higher revenue potential • DBLVC involves relatively low political risk • DBLVC is based on partnership between agency and private land developers and owners in sharing land value gains through mutually beneficial land and development transactions as opposed to exactions • TBLVC requires low financial cost of implementation (land acquisition not incurred) • TBLVC involves low financial risk during implementation • TBLVC can be applied multiple times over a long period of time to transit benefitting properties in order to generate significant revenues for transit project funding. The critical success factors and supporting conditions required to successfully apply transit value capture finance in any context include: Feasibility, Equity, Efficiency, and Revenue Capacity.

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Attribution-NonCommercial-NoDerivatives 4.0 International