Table 34 codifies the findings from the cases analyzed and from the overview of VC. This information can provide some insights for decision makers who must choose one of the VC mechanisms or a combination of them.
In addition to the ten comparison criteria discussed above, two criteria need to be considered when choosing a VC mechanism: (1) whether the transit infrastructure is to be provided in a new or an existing urban area and (2) the geographical size of the area that will benefit from the transit infrastructure. For example, while TIF is most commonly used to revitalize existing blighted urban areas (hence the “E” in column 3 of the TIF row in Table 34), impact-fee revenues are expected to be substantial for newly urbanizing areas (hence the “N” in column 3 of the Impact-fees row).
le 34. Decision-Support Matrix alue Tool New (N) or Existing (E) DevelopmentBenefit Area Size Existence of Enabling Env.
Existence of Inst. Capacity Potential for Resident Opposition Potential for Business Community Opposition Potential for Developer Community Opposition Potential for Other Public Agency Opposition
Revenue YieldRevenue Stability Potential for Horizontal Inequity
Potential for Vertical Inequity NM/L EM/L N/EM/L - N/ES/M/L = Large. High Moderate Low/none
The following simple scenario illustrates application of the decision-support matrix.
Scenario
A city would like to develop a light-rail transit system to serve its automobile-oriented inner core. The inner core is largely non-residential and not blighted. The real estate market cannot be considered strong, although it is not very weak either. The state-level legislation allows TIF and impact-fee funding for transit. Furthermore, the city is making several efforts to retain existing office and commercial development in its inner core and is hesitant to put an additional financial burden on the non-residential property owners. The city does not have well-developed joint development guidelines but has undertaken a few such projects in the recent past.
Decision Support Matrix Application
The legal environment and the large transit-benefit area allow use of all five VC mechanisms.
However, the inner-core is already developed, the real estate market is not strong, and the city does not want to financially burden property owners. As a result, impact fees are neither likely to generate significant revenue nor to be politically feasible. Therefore, the city can choose one or a combination of the remaining mechanisms—TIF, SAD, and joint development and air rights. It might want to assess property-owner support for SADs and TIF. If property owners are not opposed, then all the remaining VC mechanisms are available for use.
TIF and SADs are capable of generating revenues that can fund a moderate to large portion of the transit-system costs. Joint development and air rights can be used to generate additional revenue that can be used to fund station construction and increase station-area density. However, joint development alone cannot be a significant funding source for the entire transit system. The city might then want to assess whether other property-tax-supported agencies (such as the county government and the school district) are likely to oppose TIF. If strong opposition is likely, the city might want to go ahead with a SAD and joint development and air rights. However, if the opposition to TIF is weak or can be addressed (for example, by allowing other taxing governments a share of TIF revenue), then both TIF and SADs can be used as major funding sources (as was the case in the Portland Streetcar Project), with supplemental revenues generated from the joint development and air rights.
CONCLUSION
As the trends of decreased federal funding and fiscal belt-tightening continue at all levels of government, transit agencies and municipalities need alternative revenue sources to fund transit projects. VC mechanisms can provide revenue for projects that may otherwise lack funding. Over the past several decades, VC has increasingly caught the attention of transit providers as an alternative source of funding. However, determining which
Our case studies of uses of VC mechanisms were evaluated using the following criteria:
enabling legal environment, stakeholder support, institutional capacity, revenue yield, revenue stability, and equity. The decision-support matrix we have developed should help policymakers, local governments, and transit agencies decide which mechanisms would suit their particular needs.
Key findings of the study include the following:
• Revenue yield from TIF and SADs is likely to be the highest among the five VC mechanisms.
• Local governments often use a combination of two VC mechanisms—for example, TIF and SAD fund the Portland Central Streetcar Project; TIF and joint development fund CCC Transit Village and the GTC in Cedar Rapids.
• The use of TIF requires significant institutional capacity, community support, and agreement among taxing agencies.
• Transit impact fees are rarely used. Their use benefits from state- and local-level enabling legislation, robust nexus studies, a strong real estate market, and developer support.
• Transit impact fees and SADs need to be carefully designed and implemented in order to minimize inequities.
• Strong real estate markets, significant institutional capacity, and clear policy guidelines are needed to undertake joint development.