“Value Capture” as Rail-to-Dulles Financing Tool

Station site plan for Silver Line METRO station on Route 772 in Loudoun County. (Click for larger image.)

The decision of the Loudoun County Board of Supervisors to fund its $270 million share of the Rail-to-Dulles project by taxing landowners around its two METRO stations could create a prototype for financing transportation projects in the future, argues Jay Corbalis, regional coordinator of LOCUS at Smart Growth America.

“The importance of the vote — and particularly the use of a funding concept called value-capture — goes far beyond Northern Virginia, and could have implications for how transit projects nationwide are funded in coming decades,” writes Corbalis in the D.C. Streets Blog. LOCUS is a national network of real estate developers and investors who advocate sustainable, walkable urban development.

Corbalis touts the potential for the Silver Line to re-shape the auto-oriented pattern of development in Loudoun County into mixed-use, walkable transit districts but acknowledges the difficulty in raising money for Phase 2, which is estimated to cost $2.7 billion. He writes:

The cost of Loudoun County’s contribution to the extension… as well as ongoing contributions to the line’s operations of around $17 million a year starting in 2019, made the vote especially contentious to fiscally conservative county officials. Ultimately, what broke the deadlock amongst commissioners, who were evenly split on the decision until the vote, was the structure of the financing the county would use to fund the project. Rather than increase taxes on all county residents and businesses, the county adopted an innovative funding structure that seeks to capture the value created along the rail line.

To achieve this, the Loudoun Board of Supervisors established special tax districts of commercial and undeveloped properties surrounding the future stations. Properties within a half-mile of the stations would pay a tax of 20 cents per $100 of assessed value. Properties further out would pay less. As noted by the Washington Post, most current residential properties would be excluded from the district. Future residential development would be subject to the tax though.

As Corbalis points out, value-capture financing aligns the costs and benefits of transit funding better than general tax funding. Landowners near transit stations enjoy a big spike in valuations of their property, reaping an economic windfall. Why not tap some of that increased value to help cover the capital costs of building the transportation asset? “Politically, value capture impacts fewer people than broad-based taxes like sales and gas taxes, and those who are affected stand to benefit directly from the investment, making it an easier sell.”

That is precisely the case I have been making on Bacon’s Rebellion for years. I just didn’t call it “value capture.” I’ll have to start doing so from now on.

I do have some quibbles with Corbalis’ piece. He neglects to mention that roughly half the cost of building Phase 2 of the Silver Line will be borne by riders on the Dulles Toll Road — many of whom may never use the METRO at all. The funding structure for the project is still inequitable, creating a massive transfer of wealth from middle-class commuters to well-positioned property owners, construction contractors and METRO riders. Also, he doesn’t acknowledge the risk that the hoped-for development may never occur, with the result that the hoped-for property tax revenue may not materialize.

But his larger point is well taken. Virginia should employ “value capture” financing more aggressively as a tool to finance needed transportation projects — not just transit but roads and highways — in the commonwealth.


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  1. Conceptually, it is very hard to argue against this proposal/concept. Rail enables large increases in density that, in turn, creates huge increases in the value of land. Presumably, both tenants and buyers will pay more per square foot for property with access to rail and high-quality, mixed use development than they would pay for property without such access. From both an economic and public policy perspective, it makes good sense for government to capture some of that added value in higher taxes to fund the rail that triggers the value. The same principle can be applied statewide for both roads and transit.

    However, as we’ve seen with Phase 1 of Dulles Rail, the costs for building rail and the necessary supporting road and bus transit improvements greatly exceeds the willingness (and possibly, the ability) of benefited landowners to pay for the bulk of those costs. Hence, we see the fleecing of middle class drivers for the benefit of the landowners.

    Tysons is even more instructive. The Fairfax County BoS has charged the Planning Commission to develop options for the funding of the $3 billion in road and bus transit improvements (2012 dollars, excluding interest and other bond-related expenses and the cost of two additional heavy rail projecxts needed to allow growth in Tysons beyond c. 2030). County staff has proposed (Strawman III) c. 55% of those costs be borne by the public sector (federal, state and Fairfax County). Moreover, the current draft of the Strawman contains language that would make Fairfax County taxpayers guarantors of the public share in the event state or federal financing is not forthcoming. “Subsidize me. I own land and I will prevent sprawl, so subsidize me.”

    The facts contradict the theory. And then try to explain why Tysons will be different from Loudoun County, the rest of Virginia or anywhere else in the U.S.A.

    1. I agree, “value capture” is elegant in theory but ugly in practice. Inevitably, special interests and constituencies will use the political system to stack the deck in their favor. Fairfax County’s handling of the Rail-to-Dulles financing is a case study.

      However, I don’t see what alternative we have to “value capture.” The fact that the concept has been applied imperfectly in the past is no reason not to try to do better in the future.

      1. reed fawell Avatar
        reed fawell

        I also fully agree with James Bacson’s statement immediately above.

  2. reed fawell Avatar
    reed fawell

    Well at last folks are catching on. How it’s all about aligning resources. Namely the capital, people, expertise and the building economic structures and systems that attract same, those who know how to make it work real estate wise, for the profit, prosperity and livability of all. Good news indeed.

  3. not so fast….

    I too am a proponent of tax districts for development but take a look at what happened at one down in Fredericksburg.


    long story short – land in a tax district that ends up not developed ..or developed but not producing sufficient revenues puts the tax district in default jeopardy.

    this scenario has happened with 3 separate tax districts that were set up when the economy was booming and then it went away and the tax districts started to see property owners in arrears… and the bondholders of the infrastructure not happy.

  4. Basically with tax districts, the local jurisdiction is sharing some risk and betting/gambling a bit on the development prospects of the project.

    Question is – what happens if the bonderholders take over the tax districts?

  5. Larry, I don’t believe the tax district bonds are secured with anything beyond specified tax revenues from the tax district. In case of default, its SOL. That’s why revenue bonds pay a higher rate of interest than GO bonds.

  6. DJRippert Avatar

    As a daily commuter on the Dulles Toll Road who will rarely ride Metro – I am more than willing to pay the increased tolls. Why? Because I don’t have Jim Bacon’s hopelessly myopic view of the world. Unless Northern Virginia finds a way to create more efficient, high density locations it will lose its ability to attract bright, energetic young people. This, in turn, will hinder my children’s future and will result in a downturn in economic strength in NoVa. Of course, my home would be worth less and I’d suffer for that.

    See, Jim – your idea that only people who ride Metro benefit from Metro is badly, badly flawed. The Wilson Boulevard corridor in Arlington was a disaster 35 years ago. Nobody wanted to live there, nobody wanted to work there, no businesses wanted to form there. Then came Metro, density, redevelopment, mixed use businesses, vastly increased taxes, economic development, etc.

    “User pays” is beyond simple-minded. “Beneficiaries pay” might make sense. And the beneficiaries of Metro in Arlington go far, far beyond the people who ride the trains.

    So, we see the “Richmond philosophy” and the “NoVa philosophy”. The Richmond approach uses and accountants’s toolset to make decisions. The NoVa approach uses an economist’s toolset. The Richmond approach is better at avoiding problems. The NoVa approach is better at seizing opportunity.

    God bless – it appears that Tidewater is moving toward the NoVa / economist view …


    Holy crap! Professional sports in Virginia! Capitalizing on Tidewater’s resort appeal! Now, if they just fix that damn airport I’d open an office down there and start recruiting.

    1. Don said: “User pays” is beyond simple-minded. “Beneficiaries pay” might make sense.

      That was the whole point of the post. That’s what “value capture” accomplishes — it creates a way for beneficiaries (landowners whose property value rises) to contribute to the cost of building infrastructure.

      What’s your preferred financing mode? Raise the gas tax — and spend the money on projects that Don Rippert likes. Unfortunately for you, Don Rippert doesn’t control the General Assembly, so the projects that Don Rippert likes aren’t necessarily the ones that get approved. It’s the nature of politics (and not just in Virginia): Everybody wants a piece of the pie, regardless of how much economic sense their projects make.

      1. DJRippert Avatar

        But you complain that the drivers on the Toll Rd (like me) pay but don’t benefit. You made this point 1,000 times. I am all four of the following:

        1. A driver on the Toll Rd
        2. A person who virtually never has a reason to ride Metro
        3. NOT a landowner in the vicinity of the Metro stations
        4. A beneficiary of the Rail To Dulles project

        I benefit from Metro in Arlington because that areas attracts talented people who would leave for SF or Austin if there weren’t areas like that. I will benefit from the Metro in Loudoun County for the same reasons.

        So ….

        1. Your definition of value capture is way too narrow and,
        2. People who drive on the Toll Road benefit whether or not they have land within walking distance of the Metro. They gain this value because good mixed use development encourages economic development which provides everybody with better job opportunities and higher real estate values.

  7. TMT – who are the bondholders in this article:


    I presume that they are the ones who paid up-front for the transportation infrastructure and now are expecting a return on that investment, no?

  8. re: “value capture”, “user pays”, “beneficiary pays”, who pays?

    At the end of the day – who else would be expected to pay for NoVa transportation needs?

    RoVa is not interested, nor is Hampton Road, Richmond, Charlottesville, Roanoke, Lynchburg, etc.

    and who else would be better at deciding what local/regional taxes should pay for (or not)?

    People outside of NoVa get no real benefit from METRO and the argument that NoVa is Va’s economic powerhouse is about as bogus as saying that money grows on Federal Govt trees and everybody gets some.

    1. DJRippert Avatar

      “RoVa is not interested, nor is Hampton Road, Richmond, Charlottesville, Roanoke, Lynchburg, etc.”.

      And I’m not interested in whether they educate their damn kids or not.

      So, we’ll keep our transfer payments in region and they don’t have to pay for our transportation.

      Trust me pal, that would be just f’ing fine with us.

      I have argued for regional autonomy IN EVEYTHING for years.

      LarryG only want autonomy on his terms:

      1. We don’t pay for your transportation, but …
      2. You do pay for our schools.

      LarryG – is it past your bed time?

  9. DJ – it’s pretty simple. If you do not educate their “damn kids”, then your kids will end up paying for their entitlements. Capiche?

    besides – I have NEVER seen any kind of money totals between transportation and education in NoVa but I’m willing to bet that education for RoVa is dirt cheap compared to transportation for NoVa but the whole thing goes to illustrate your blatant irresponsibility to be responsible for your region and your willingness to blame any/all for what you won’t do yourself.

    re: crony capitalism.

    I just LOVE what boils down to anonymous websites with no credentials or identification of any kind.

    And I ask … where were these websites when Bush and Cheney were in bed with Haliburton and a panoply of other “crony” companies?

    why do we get this stuff NOW?

    1. DJRippert Avatar

      It’s not simple at all. They CHOOSE to have rock bottom real estate taxes because they don’t value education for their kids. Fine. Their choice.

      As for money transfers – who knows? When the money flow SLIGHTLY tipped back toward NoVa keeping more of its own money (per the existing funding formulae) Kaine tried to screw NoVa by suspending the formulae and then McDonnell reversed Kaine and sent RoVa the money by failing to fully fund the state retirement fund. If the amount were inconsequential, I assume it wouldn’t have devolved in a huge deal.

      1. Kaine’s attempt to screw Fairfax County by freezing the LCI formula for allocating state aid to K12 education would have cost Fairfax County about $61 M – or slightly more than three cents on the real estate tax rate.

        Now to show you how stupid NoVA people are politically, Kaine is ahead in the polls in Fairfax County. We get exactly what we deserve – screwed day in and day out.

    2. DJRippert Avatar

      “And I ask … where were these websites when Bush and Cheney were in bed with Haliburton and a panoply of other “crony” companies?”.

      The Republicans are every bit as bad. However, I once harbored some hope that our Community Organizer in Chief might bring some welcome change to at least the crony capitalism ledger. He has brought no such change. In fact, it seems worse than with Bush.

  10. “It’s not simple at all. They CHOOSE to have rock bottom real estate taxes because they don’t value education for their kids. Fine. Their choice.”

    Absolutely correct. Vince Callahan told me that, every time state aid for education is increased, a number of localities in Virginia cut their local tax support for their public schools. Screw ’em.

  11. “Unless Northern Virginia finds a way to create more efficient, high density locations it will lose its ability to attract bright, energetic young people.”

    How does density do this? I understand 20-somethings like apartments and urban settings. But will they be able to afford them in Fairfax County? JBG informed McLean area residents that it would need to charge $2600 per month for an 800 sq ft apartment to be constructed in NW Tysons. Note that this construction is stick as the buildings would only be three to four stories. So what would the rent be for an 800 sq ft high-rise apartment? I dread to think. For the foreseeable future, Tysons is likely to attract more empty nesters than talented young professionals. Moreover, once the latter start having children, kiss new urbanism goodbye. It’s a SFH near a good elementary school.
    And we still don’t know anything about the Silver Line’s capacity. How many of the 17 hourly train slots will the Orange Line give up for the Silver Line? A lot of these 20 somethings will be like the 40 somethings who are driving to work at Tysons.
    I’ve been working on Tysons issues for at least 8 years now. New urbanism is a big rip-off to enrich a few more cronies. I think more choices in housing is always a good thing. But I don’t see any significant benefits to society. New urbanism doesn’t work without massive taxpayer subsidies. It doesn’t reduce traffic congestion. It’s expensive and may actually make the new urban location less attractive because of high prices and more traffic.

    1. TMT, Tysons Corner is important, but Tysons Corner is not the entirety of Northern Virginia. I suspect that NoVa planners and developers managed to create an unfixable mess there over the years. As you have pointed out, the current “solution” is going to be hideously expensive. I don’t know if there’s enough money in Fairfax or the state of Virginia to make Tysons work at any density.

      However, there are many other places in Fairfax where greater density does makes sense, especially if it contributes to the kind of “balance” between jobs, housing, retail and amenities that EM Risse writes about. The new development around the Dunn Loring METRO station may be a good example. (I’m not familiar enough with the particulars to speak with any authority, but I understand it to be the case.) Densification around the non-Tysons METRO stops may make sense as well. I’m sure there are other locations near major intersections where increased density makes sense.

  12. re: ” a number of localities in Virginia cut their local tax support for their public schools. Screw ‘em.”

    I’m starting to think this is an Urban Legend.

    I do not see specifics for example..how about some counties in particular?

    The other thing is the phrase “Required local effort” of which the state contribution is based. If they lower their effort before the required amount, there are consequences.


    how much money is involved AFTER you deduct the extra State stipend for NoVa “cost of living” supplements?

    I see the assertions. I do not see real numbers to back them up.

  13. re: “… However, there are many other places in Fairfax where greater density does makes sense,”

    whose responsibility is that? Is it the Gov or the General Assembly to make sure that Tysons “works”?

    how about the toll payers on the Dulles Toll Road? Is it their responsibility?

    and to be charitable – what are the things that Fairfax is prevented from doing because of Dillon that the GA could grant relief on?

    TMT rightly points out that the proposed implementation is problematic, not very realistic.

    My question is – who is responsible for it being feasible?

    It appears to me that Fairfax intends to go forward, in hopes that the State, the Feds, and the MWAA will “help out”. Jim B keeps asking what is the process for determining ROI on transportation projects. How about the process for determining ROI for Tysons?

    Tysons walks, talks and quacks a LOT LIKE a much bigger version of lesser sized projects from other localities that usually depending on VDOT “stepping up”…

    I always found this same aspect troubling with Ed Risse’s ideas of which he seemed to depend on “central planning” and and money from “somewhere” to get the job done.

    Arlington seems to have gotten the job done from sheer strong and committed local governance.

    Tyson’s OTOH seems to be “fishing” for “help”.

  14. In terms of infrastructure for Tysons, Fairfax County approved more density in the Comp Plan than can be afforded — period. New Urbanism is a fraud. While adding density at rail stops can provide benefit to many, developing an urban center requires massive amounts of public facilities, most especially when there is no existing grid of streets. The needed infrastructure is much more than the landowners/developers can afford to fund. And, except for the enviro extremists, there is little public benefit from the added density to justify significant expenditures of tax dollars from the public.

    IMO, most people are more concerned about the quality of their neighborhood schools and local traffic than some nebulous concepts as preventing sprawl or reducing carbon emissions. If you go to Soccer Moms with the choice of spending limited tax dollars on their children’s local school and accepting sprawl (where the other children will be in schools paid for by other taxpayers living in the next few counties), dollars to donuts the Moms will gladly accept sprawl. Ditto for retired people who would gladly accept more carbon emissions rather than more traffic from an urban center.

    Arlington vs Fairfax. I believe that the level of citizen activism in Fairfax County now rivals that of Arlington, such that if the former continues, we will see similar results in Fairfax that have occurred in Arlington. The Fairfax County of which Til Hazel fondly remembers is gone.

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