The story of Frank McCourt, the embattled L.A. Dodgers owner, provided some fitting context for the discussion of value capture at the 6th Annual Land Policy conference last month. McCourt owned a premiere L-shaped 25-acre parcel on the South Boston Waterfront, Boston’s new frontier for urban development. In the 1990s, two big projects got underway. The $15 billion Central Artery and Tunnel project, otherwise known as the Big Dig, included an underground extension of I-90 connecting to the Ted Williams Tunnel to Logan Airport – and an interchange letting out right at McCourt’s property. At the same time, the Silver Line, Boston’s experiment in bus rapid transit, ran in a dedicated tunnel with a station also positioned at the center of McCourt’s land. The Silver Line, which has since exceeded all ridership projections, provides access to the Seaport and Logan airport from South Station, the hub for the city’s subway, commuter rail, and Amtrak.
When it came time for McCourt to put the financing together for the Dodgers, he found that all this infrastructure had boosted the value of his property, from the roughly $10 million he paid for it to $200 million. “These investments were a tremendous boon to the landowners in the area,” said Richard Henderson, at the time part of Massport, one of the agencies involved in the Seaport’s transformation, at the opening night dinner at “Prospects For Land Value Capture,” a three-day gathering of over 100 scholars, researchers, and practitioners.
The Seaport story would have been different if a system of value capture was in place, where private owners who benefit from public investment in infrastructure contribute to the financing of projects, based on a formula for the land value increment. Forms of value capture are familiar policy in Latin America; Certificates of Participation and other mechanisms support urban development in Sao Paolo, Brazil, and numerous studies have shown that the bus rapid transit system in Bogota, Colombia, increased property values along the network. Until recently, value capture has been a foreign concept in the U.S. Its use is being considered to help finance the planned 62-mile Cotton Belt rail line in Dallas, and inherent in the establishment of a Business Improvement District -- where private owners pay for services like maintenance, in recognition that a clean street or well-run downtown park can have a positive impact on property values. Consideration of value capture and a new BID has been ongoing along the Rose Kennedy Greenway in Boston.
Lincoln Institute president Gregory K. Ingram said it was not surprising that value capture was "in the air," given the fiscal strains on local, state, and the federal government, and the need for new financing mechanisms for major infrastructure. The conference examined the myriad ways that value capture or value capture-like mechanisms are in place -- whether special assessments, betterment tax, community improvement districts, airport improvement fees, inclusionary housing, or public land leasing. The presentations included Perry Shapiro, University of California, Santa Barbara, Takings and Givings: The Analytics of Land Value Capture and its Symmetries with Taking Compensation; Philip A. Booth, University of Sheffield, The Unearned Increment: Property and the Capture of Betterment Value in Britain and France; Lawrence C. Walters, Brigham Young University, To What Extent are Property Related Taxes Effective Value Capture Instruments?; John E. Anderson, University of Nebraska, Collecting Land Value Through Public Land Leasing; Dean J. Misczynski, Public Policy Institute of California, From City-wide Special Assessments to Localized Business and Community Improvement Districts; Michael I. Luger, University of Manchester, Expanding Town and Gown Partnerships to Research Parks; Laura Wolf-Powers, University of Pennsylvania, Community Benefits Agreements in a Value Capture Context; Bishwapriya Sanyal, MIT, Land Pooling: Town Planning Schemes in Gujarat, India; Susan M. Wachter and Richard P. Voith, University of Pennsylvania, Assessing the Durability of Inclusionary Housing and Community Land Trusts; Jin Murakami, University of California, Berkeley, Transit Value Capture: New Town Co-development Models and Contemporary Market Profiles in Tokyo and Hong Kong; Anming Zhang, University of British Columbia, Airport Improvement Fees, Benefit Spillovers and Land Value Capture Mechanisms; Joseph J. Cordes, George Washington University, Arguments for Taxing Charitable Non-Profit Entities for Using Local Public Goods; and Susan K. Culp and Dan W. Hunting, Sonoran Institute, Experimenting with Land Value Capture on Western State Trust Land.
Susan S. Fainstein, professor at Harvard University, took matters a step further, suggesting that the model of outright government ownership of land and housing in The Netherlands and Singapore had resulted in community balance and equity.
The final conclusion: the idea of harnessing the power of public infrastructure investments shouldn't be so exotic after all.
The proceedings of the three-day conference will be published in a book next spring. The proceedings of the previous Land Policy Conference, in 2010, were recently published in the volume Climate Change and Land Policies. Another version of the Frank McCourt story appeared at The Infrastructurist, including numerous interesting reader comments.