Jarrett Walker produced yet another compelling post on the transit investment planning process that is well worth a read. He muses about what level of sophistication plans should achieve at various points in the planning process and it led me to think about what level of sophistication value capture plans should be at various stages of the transit planning process.
It’s easy for a journalist to say that a plan is short on specifics, but all plans are short on specifics. If included every detail, you’d have construction drawings, escrow arrangements, employee work shifts, and so on. But that’s a lot of work, so you don’t do it until you’re sure you want to proceed.
Jarrett uses New York's recently announced BQX project to illustrate his points (see route diagram above). He notes that there are plenty of questions that still remain regarding fares, frequencies, connections, reliability, and other important transit matters. However, the plan is being put forward at this level of completion to see if it has legs and if it can go forward. The mayor is seeking fellow backers and gathering the support the project will need to proceed and flourish. According to Jarrett, now is not the time to spend millions on design.
Further, as Walker argues, putting out too much information too early suggests a level of specificity that doesn't yet exist. And, perhaps, the specificity shouldn't exist for a freshly announced publicly funded project. Too many specifics is cause for great concern on the part of citizens and advocates who may perceive that they were inadequately consulted.
In the case of BQX, I expect that the plan is being presented in a napkin sketch format partly to illustrate the amount of fine tuning and dialogue still to take place (those curves on the illustrative map don't correlate to exact rights of way). The project is conceived thoroughly enough to be thrown against the wall without morphing into something completely different and De Blasio can now see if the idea sticks.
In fact, we now know that a diverse HDR team spent approximately five weeks to develop high level plans for the project before it was announced. It shouldn't surprise anyone that there are factors still under consideration and that important details continue to emerge, including the number of bridges that will need to be built for the optimal alignment.
As part of HDR's five week planning process, high-level value capture estimates were also developed. The mayor considered the value capture funding opportunity important enough and solid enough to include it in his introduction of the project (likely to ameliorate concerns that he'd be dipping into transit funds that had already been allocated to other projects). The expectation has now been set that some portion of the project's cost will be covered through real estate value capture.
Administration officials believe the system’s cost can be offset by tax revenue siphoned from an expected rise in property values along the route.
So, at this early point in the transit planning process, what level of value capture estimating should be conducted? Should there be back of the envelope estimates or should there be property level estimates of the value that might be captured? Well, you only need as much detail as is required to make an informed decision. Any more detail and you've wasted your resources.
You need to know a few things:
In the case of BQX, I have to assume that someone made sure that value capture's cost coverage potential was "substantial" or "significant" before the mayor included value capture in his announcement. Leading up to the next election cycle, De Blasio cannot afford to go back to elected officials and citizens to inform them that value capture might fund only 10% of the cost of the project and other sources will be required to pay for 90%.
So, what is "substantial" or "significant" cost coverage? If you think you can get federal funding for 50% of the project, does value capture need to be all of the local match (50% of project costs)? If you cover half of the local match (25% of the total project cost), does that meet the mayor's promise that BQX would be funded through value capture?
This is a political question. What cost coverage is De Blasio comfortable with given the expectation that he has set?
For the mayor to achieve a minimum level of comfort, does he need detailed value capture analytics? Well, I hope not.
You see, there's a analytical issue. Even if you had the most sophisticated value capture analyses produced from the outset, cost coverage calculations rely on an estimate of the cost of the project. At this stage of the planning process, the cost of the project is highly uncertain. So, you're potentially faced with estimation errors in the denominator of your critical metric.
Furthermore, detailed value capture projections are likely to be wrong the further one is from implementation, so early specificity does little to actually improve your results.
And the same political issues also exist for the specificity of value capture programs. Value capture inherently impacts real estate interests. Proceeding toward detailed analyses requires that you make assumptions about the value capture policies, which are factors that should be addressed with stakeholders. By making assumptions, it could appear that planners and the mayor have short circuited the political process and dictated terms - not something that works well in the U.S. political system.
It would seem that a back of the envelope value capture estimate is as sophisticated as one needs if you only have a sketch transit plan. You really cannot know what the cost coverage might be until you're deeper into the planning process and closer to implementing the value capture program (which you're unlikely to do in advance of finalizing the transit plans!). I'm sure the mayor had enough evidence to support anything that was said and it was probably wise that his statements were vague about the funding situation until more robust plans can be developed and more sophisticated value capture estimates are warranted.
But, it's worth noting that financing plans are a critical component of developing any transit investment. It's inefficient and ineffective to go too far down the path with transit designs if there's no way to fund them.
So, as a critical part of the funding planning process, value capture estimates should probably be refined at the same pace as the project cost estimates, though a few steps behind. Why behind? For one, the transit design dictates the value capture analysis so you might as well wait until after the next iteration of transit project plans is completed before defining the value capture opportunity. Also, as previously mentioned, your estimates are more accurate the closer you get to implementation. Additionally, you might as well not waste money on sophisticated analytics if a napkin sketch will do.
In the case of the BQX, it is an early transit plan that is appropriately vague and only deserves a high-level estimate of the value capture potential. I look forward to following the BQX planning process and using it as a case study.
Ian 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.
Special thanks to Burt Gregory at Mithun for permission to use the Portland Streetcar image above.