David Montgomery of the Pioneer Press interviewed me for “Minnesota debates ‘value capture’ tax for road projects“. Selections below:

A Political Economy of Access: Infrastructure, Networks, Cities, and Institutions by David M. Levinson and David A. King

“The people who are getting all of the benefits, or many of the benefits, from the infrastructure are adjacent landowners,” said David Levinson, a professor at the University of Minnesota who has studied value capture.

“The people who pay for the infrastructure are not generally those people. So there’s a mismatch.”

Value capture, he said, “is a way of essentially trying to close the feedback loop so people who are benefitting … help pay for it.”

…

“Assuming that (a transportation project) is creating more value than it costs to build, there should be enough (from value capture) to build as much as we want, to the point where transportation stops creating value,” Levinson said.

Practically, Levinson said, it’s politics and not economics that limits the revenue from value capture.

…

Some aspects of value capture, such as TIF districts, have been used extensively in Minnesota. Others are relatively unknown here but have been tried elsewhere in the world, including land value taxes in Pennsylvania, “transportation utility fees” in Oregon and “joint development” in Asia, Levinson said.

Though value capture might please people trying to avoid gas tax hikes, it’s not a free lunch — in the end, someone has to pay for the cost of new roads or rails.

The “best” way to fund transportation projects, Levinson joked, is to “get somebody else to pay for it.” But barring that, he said Minnesota could fund part of its transportation needs by getting beneficiaries to pay.

“If the choice is between you pay for it and you get it, or you don’t pay for it and don’t get it, some people will choose to pay for it and get it,” he said.

 

WHAT IS VALUE CAPTURE?

Value capture is a series of methods of getting people who benefit from transportation projects to pay for them. A 2009 report to the Minnesota Legislature identified eight major different forms:

• Land value tax: A general tax on land, excluding the value of property on it. Land tax revenue rises when transportation projects make a lot more valuable, but not if it’s developed.
• Tax Increment Financing: Increased property taxes from a development are redirected to pay for the development’s cost.
• Special assessments: Nearby landowners are assessed a tax to pay for a new transportation project.
• Transportation utility fees: Homes and businesses are charged a fee for accessing transportation networks, just as they pay a fee for access to water or electricity.
• Development impact fees: One-time fees paid by developers to offset the costs to government of infrastructure to serve their development.
• Negotiated exactions: Similar to development impact fees, but negotiated on a case-by-case basis instead of applied using a formula.
• Joint development: A government works with private business to build both transportation infrastructure and a development, and to share the cost.
• Air rights: Government sells the right to build above or below a transportation facility, such as a train station or a capped highway.

Sadly the Governor appears not to have read our study.

See also David Montgomery in the Pioneer Press Political Animal Blog: Value Capturing with a Land Tax.