Fund SEPTA With Value Capture

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We’ve known for a while that SEPTA is badly in need of more revenue, and yesterday Christine Fisher reported that they’re declaring a capital funding crisis. The agency already has a $4.7 billion backlog of state-of-good-repair projects waiting for funding, and unless something changes soon they’re going to have to start cutting back service.

Most people envision this being resolved either through higher fares or more state and federal transfers, but I would argue that Douglas Diehl has the best idea:

Douglas Diehl, of the transportation advocacy group Tri-State Transit Center, encouraged SEPTA officials to extend the vision beyond federal and state funding and to push for increased local funding as well.

SEPTA will continue to plan for FY 2014 based on current funding levels but the authority is eager for Governor Corbett to release the state transportation-funding package, which SEPTA hopes will be adequate, predictable and able to grow, Popp-McDonough said.

I’m not sure what Diehl has in mind, but my preference would be to fund SEPTA with value capture.

The biggest untapped revenue source for SEPTA is the land value around train and bus stations.

The public has invested in a very good network of transit infrastructure, which is very useful to many people, and it should not surprise anyone that the land next to the transit stops is very valuable. This is evidenced by high selling prices for land close to transit stops, and diminishing prices for land the further away you get from transit connections.

Currently, much of the value created by the government’s investment in transit is captured by owners of land near transit stations. To fund transit, the government could capture back some or all of the publicly-created value with a tax on the value of the land near transit stations. I would say the land tax should apply to land within a mile radius of transit stations, but others may prefer a larger or smaller radius.

The point is that there is a lot of potential for transit-oriented infill development along the SEPTA network, especially around the regional rail stations in the suburbs, and this land is underdeveloped. The taxpayers and the fare-payers have made a huge investment, but the development potential of this investment isn’t being fully realized. People who are using the expensive land near SEPTA stations for low-value uses like surface parking lots should have to pay more for the opportunity cost of wasting that land.

This would be much more fair than a fare hike on transit riders, or tax increases on state and federal taxpayers.

In the future, I would like to see SEPTA fund its entire budget with value capture, completely doing away with fare-based financing. The Mayor of Estonia’s capital city recently did away with fares for transit, making the transit system free for all residents.

Free train, trolley and bus transit in Philly is a perfectly attainable long-run goal if politicians are willing to think creatively, and capture back the windfall that fare-payers and state and federal taxpayers have gifted to landowners in the SEPTA network.

This entry was posted in Budget, Land Use, Transportation.