Value capture is a type of

public financing Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achie ...

that recovers some or all of the value that

public infrastructure Public infrastructure is infrastructure owned or available for use by the public (represented by the government). It is distinguishable from generic or private infrastructure in terms of policy, financing, purpose, etc. Public infrastructure is ...

generates for private landowners. In many countries, the public sector is responsible for the infrastructure required to support urban development. This infrastructure may include road infrastructure, parks, social, health and educational facilities, social housing,

climate adaptation Climate change adaptation is the process of adjusting to current or expected effects of climate change.IPCC, 2022Annex II: Glossary öller, V., R. van Diemen, J.B.R. Matthews, C. Méndez, S. Semenov, J.S. Fuglestvedt, A. Reisinger (eds.) InClimat ...

and mitigation tools, and more. Such infrastructure typically requires great financial investment and maintenance, and often the financing of such projects leans heavily on the government bodies themselves. Public entities, tasked with creating and maintaining this infrastructure, are constantly in search of mechanisms which can allow for fiscal support of these investments. One such mechanism of financing is Value Capture. Value capture schemes secure and recover a portion of the benefits delivered by public investments, in order to offset the costs of the investment itself. Value Capture strategies operate under the assumption that public investment often results in increased valuation of private land and real estate. "Capturing” the subsequent increase in value, governments are able to recuperate funds, which can ultimately be used to generate additional value for communities in the future.

Description

Public investments, such as building transportation or sewer facilities, can increase adjacent land values, generating an unearned profit for private landowners. The unearned value (increases in land value which otherwise profit private landowners cost-free) may be "captured" directly by converting them into public revenue (see

georgism Georgism, also called in modern times Geoism, and known historically as the single tax movement, is an economic ideology holding that, although people should own the value they produce themselves, the economic rent derived from land—including ...

). Thus, value capture internalizes the positive

externalities In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...

of public investments, allowing public agencies to tax the direct beneficiaries of their investments. Urban planners and finance officials are often interested in value capture mechanisms, for at least two reasons: 1) because they offer a targeted method to finance infrastructure benefiting specific land, and 2) because some such investments can generate private investment in the area, which will more widely benefit the city (e.g., by providing employment opportunities, shopping and other amenities, and a more robust and diverse tax base.) It can be politically useful to capture for the city treasury a share of the positive externalities of city-financed investment. This can help address public concern about the fact or perception of unfair windfalls when specific owners’ land values increase after urban infrastructure investment is paid from general city revenues. Although it is not always talked about as such, the most common value capture mechanism is the general real property tax, with no special features other than regular assessment of market value; this is because the common real estate tax includes the less known

land value tax A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...

. The value of any given land is determined by its proximity to various amenities (both public and private). Thus, for example, when a new subway station or highway interchange is installed, land near the new facility becomes more valuable. Investment in capital improvements to land can synergistically generate capital investment in other nearby locations, which further increases land value. Thus, even if the rate of taxation does not change, the tax revenue generated from properties which benefit goes up by way of higher land values and increased development. The effectiveness of value capture depends, of course, on a smoothly functioning ad valorem property or land value tax system, with regularly updated assessments.

Examples

Value capture strategies can be applied to developers or landowners, and they can be applied before or after a public improvement is built. In the case of new public transit facilities, the property value premium nearby can be as high as 167%. Types of value capture include the following:A Decision-Support Framework For Using Value Capture to Fund Public Transit: Lessons From Project-Specific Analyses , Mineta Transportation Institute Research Report
/ref> *

Land value tax A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...

(LVT) *

Tax-increment financing Tax increment financing (TIF) is a public financing method that is used as a subsidy for redevelopment, infrastructure, and other community-improvement projects in many countries, including the United States. The original intent of a TIF program is ...

(TIF) * Special assessment districts or improvement districts * Infrastructure

impact fee An impact fee is a fee that is imposed by a local government within the United States on a new or proposed development project to pay for all or a portion of the costs of providing public services to the new development.Juergensmeyer, Julian C., an ...

s (such as traffic or utility fees) *

Joint development A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to acces ...

Air rights Air rights are the property interest in the "space" above the earth's surface. Generally speaking, owning, or renting, land or a building includes the right to use and build in the space above the land without interference by others. This legal ...

Exaction An exaction is a concept in US real property law where a condition for development is imposed on a parcel of land that requires the developer to mitigate anticipated negative impacts of the development. The rationale for imposing the exaction is to ...

s, public

easement An easement is a nonpossessory right to use and/or enter onto the real property of another without possessing it. It is "best typified in the right of way which one landowner, A, may enjoy over the land of another, B". An easement is a propert ...

s, or other nonpossessory interests

References

Sources

* David M. Levinson and Emilia Istrate
Access for Value: Financing Transportation Through Land Value Capture.
Brookings, 2011.
Financing Transit Systems Through Value Capture: An Annotated Bibliography
Jeffery J. Smith and Thomas A. Gihring i
Victoria Transport Policy Institute Encyclopedia
Victoria Canada, Nov. 2004
Value Capture as a Policy Tool in Transportation Economics
American Journal of Economics and Sociology, Jan, 2001 by H. William Batt
Developing a Methodology to Capture Land Value Uplift Around Transport Facilities: Executive Summary
for Scottish Executive, October 2004.
Land Value and Public Transport
Royal Institution of Chartered Surveyors (RICS) and the Office of the Deputy Prime Minister (ODPM), London, Oct. 2002 *

Challenges in Implementing Colombia's Participación en Plusvalías
Botero, Carolina Barco and Smolka, Martim, March, 2000, Lincoln Institute of Land Policy
Using Value Capture to Finance Infrastructure and Encourage Compact Development
Rick Rybeck, Public Works Management & Policy Journal, Vol. 8 Number 4, April 2004, (Sage Publications) pp 249 – 260.

External links

Consult Australia Value Capture Roadmap
* ttp://www.lincolninst.edu/index-high.asp Lincoln Institute of Land Policy (USA)br>Land Tenure CenterLand Values Research Group
(Australia)
The Center for the Study of EconomicsLiberal Democrats Action for Land Tax and Economic ReformCentre for Land Policy Studies (UK)
{full citation needed, date=July 2012
Labour Land CampaignHenry George FoundationLand Value Taxation Campaign Committee websiteGeonomy Society
*Land caf
home page
an
email group
(international expert discussions, shared library, program)
Land Theory
(more international expert discussions)
Just Economics LLC
Public finance Tax reform

Description

Examples

See also

References

Sources

External links