 Henry George is back in the news (okay, it's blogs and opinion pieces). Those who are knowledgeable of value capture are generally aware of role that Henry George played in popularizing the concept in the 19th century. His work inspired Ebeneezer Howard's Garden City Movement, the formation of several Georgist Communities (for example, Free Acres New Jersey), and the establishment of the Lincoln Land Institute. Though not directly related to transit value capture, several commentators have mentioned Henry George in relation to housing affordability. For one, Harvard economist Ed Glaeser has gotten in on the action with an opinion piece in the Boston Globe. In Glaeser's words: George vastly oversold his proposal, insisting that “the simple plan of taxation I propose would equalize the distribution of wealth, preventing waste and increasing productivity.” But he was right that taxing land more and buildings less would encourage the construction that many cities — including Boston — need to become more affordable and more inclusive. In addition, blogger Noah Smith suggested in a recent (and popular) blog post that a Georgist land tax could help alleviate the price pressures in San Francisco. What San Francisco needs now is a Henry George Tax. The policy would bring rents down, and thus encourage tech companies and their brilliant employees to keep moving into the city, to keep interacting and mixing and generating the ideas that make the tech world go. At the same time, it would raise the money the city needs to build better trains, run more bus lines, and build more public housing that will benefit the poor and middle class of San Francisco. And it would do it all in a way that seems much more fair than other kinds of taxation. Perhaps Noah oversold the possibility of a Georgist tax in San Francisco. He puts forward the caveat that such a tax would have to overcome the political hurdles enacted by California's Prop 13. Quite a political hurdle!
Even if you could overcome Prop 13, Matt Yglesias points out that in places like San Francisco it's not speculation that's limiting the supply of housing, it's zoning. One would have to relax zoning to see any impact from a Georgist tax. But how much can San Francisco relax zoning so that there's room for a Georgist tax to have an impact? Last year, San Francisco's Chief Economist put to rest the idea that San Fran could bring about affordability by increasing supply when he suggested that it would take 100,000 new units to make the city's housing stock affordable. That's the same number of housing units produced in San Francisco from 1920 to today. If you know anything about San Francisco politics, you know that's bad news. In contrast, if you know southeastern politics, it's a different story. Affordability driven by supply-side pressure is happening now in places like Charlotte (no Georgist tax there!). Whereas the topic has been framed in terms of housing affordability in San Francisco, the issue in Charlotte is framed around the viability of business interests who are seeing rents decline. Glaeser has long spoken of the advantages of low-regulation environments for housing affordability and this case seems to support the notion expressed by Matt Yglesias as well.
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There's a long history of joint development in Atlanta and a robust organization to carry out the work. MARTA was built with several development projects in mind (for example, the old BellSouth tower at North Avenue or Sloppy Floyd state office towers in downtown) and has been the subject of much TOD-related study. Now there's a new joint development project in the works. A relatively suburban apartment developer, Walton Communities, has been selected to pursue development at the King Memorial Station in downtown. According to reports, after winning an RFP process, the developer now has time to secure financing and finalize designs for a project on the site. Time will tell if this developer is able to proceed to construction and capture value for MARTA (I worked in Atlanta in the mid-2000's when this station's parking lot was the subject of a student housing proposal that fell through).
It's possible that an East Bay transit station will be funded using an unusual variation on a common value capture mechanism. A Contra Costa Times article suggests that local officials are considering the implementation of a property-based funding district to help pay for the new rail station in Pittsburg, CA. Commercial property owners near the site of a proposed eBART station will be asked to vote on establishing a district that would allow the city to collect a one-time tax to help build it. If the community facilities district is established, an estimated $3.3 million collected from the tax would go toward the cost of building the Civic Center station at Railroad Avenue and Highway 4 as part of the 10-mile-long eBART extension. The difference between this community facilities district and most Mello Roos districts used in California is that this won't be an annual assessment that appears on landowners' property tax bills. Under this proposal, fees would only be collected when major improvements are made to properties within the district. The tax revenues, which would be collected only when property owners file a building permit for new construction, would reimburse city funds advanced to BART to help pay for the Pittsburg station, estimated to cost between $13 million and $14 million. This sounds like a very politically palatable mechanism because it appears to fall on non-resident developers. However, these fees will be capitalized (negatively) into the price of the land if landowners choose to sell to a developer. Also, a landowner's profit would be reduced if they chose to develop their property themselves.
This may also seem like a very politically viable mechanism if few of the property owners in the district anticipate that their properties will be developed (they'd be voting to form the district and incur a fee on others). If the district's boundaries generally encompass developable parcels, then the city is essentially holding a referendum on the value of a transit station in this location. If more than half of the landowners in the area consider the benefits of a station worth the cost of the district, they will vote 'Yes.' Sounds like a fair proposal if the district boundaries are drawn to include only developable parcels. That said, this isn't an unusually large value capture opportunity. At most, this district would fund 3% of the anticipated cost of the transit project. According to a recent Sac Bee news report, the Sacramento Kings stadium developers are planning to fund $500,000 of the total cost of a planned 3-mile, ~$130M rail line through downtown Sacramento. The legal justification for the payment is a mitigation for the proposed development's transportation impacts on roadways near the proposed arena (a remedy for negative externalities). There is no stated nexus between the value that the streetcar will generate for the property and the payments made to fund the streetcar (classic value capture). However, "but for" the streetcar, it would appear that the property owners would not be allowed by the City of Sacramento to use the property for the proposed land use, potentially reducing the value of the asset if an arena is the highest and best use for the land at this time. It will be interesting to see if property assessment districts help fund the streetcar (as has happened elsewhere). That way, the stadium operators might contribute significant funds to the project through another value capture mechanism.
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AuthorIan Carlton is a transportation and land use expert specializing in transit-oriented development (TOD). He helps clients - including transit agencies, planning departments, and landowners - optimize real estate development around transit. 
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March 2019
CategoriesSpecial thanks to Burt Gregory at Mithun for permission to use the Portland Streetcar image above.
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Copyright 2008-2024. Ian Carlton. All Rights Reserved.
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