Bill Peduto’s Exciting Jury-Rigged Value Capture Plan for Transit Funding

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Generally speaking, public investments in transit tend to raise the value of the land around stations. If you own some land, and the government builds out a nice convenient Bus Rapid Transit system, and they put a fancy station on the sidewalk right next to your parcel, the value of your land is going to go up. You’re getting a windfall.

The idea behind value capture financing is that city government should tax away that windfall to pay for the infrastructure. Think of it as a kind of user fee – the people who derive the most benefit should pay the most. Near-in landowners are the silent users of the transit system, and it makes sense to charge them user fees too, maybe even more than it makes sense to charge riders.

The idea that landowners should help pay for transit operating budgets hasn’t made much headway in PA outside of this blog, but I’m pleased to report that it’s starting to enter the official political conversation via – where else? – the Bill Peduto campaign.

Peduto has an interesting idea to combine a Transit Revitalization Investment District (where new property tax increment is used to fund public transit improvements within a specified geographic area) with a Transit Oriented Development zoning overlay (which should expand the property tax base within the TRID) which is basically a jury-rigged version of the value capture idea.

One difference is that value capture would simply raise the land millage rate in the areas around transit stations, but you need a split-rate real estate tax to do that, and Pittsburgh unfortunately got rid of theirs in the 2001 reassessment. The other difference is that the TRID would only capture the property tax increment, which is the incremental increase in revenue the city will get from future development.

If I ran the zoo, I’d reestablish the two-rate property tax and fund transit improvements by increasing the land millage rate on the land close to transit stations. That’d be a much cleaner way to do it, but I am not confident it would be legal.

Check out the Peduto plan below the fold:

In 2004, the Pennsylvania General Assembly passed the Transit Revitalization Investment District (TRID) law. This law allows municipalities and redevelopment authorities to create TRID Districts so new revenue can be utilized to expand and create new public transit opportunities. Stakeholders in East Liberty are working on implementing the city’s first TRID District in conjunction with new developments in the area. The TRID will allow a portion of the new property taxes created through redevelopment efforts to be dedicated to improvements in public transit, pedestrian, and bicycle infrastructure in the surrounding area. Our hope is that this TRID District becomes a model that can be used in other neighborhoods. But creating TRID may not be enough. To supplement the district and ensure that the development within it is in line with the goals of expanding and creating transit opportunities, I will work with our City Planning Department to create the city’s first Transit Oriented Development zoning overlay.

1. Zoning for Transit

A Transit Oriented Development (TOD) zoning overlay would allow us to work directly with developers to tailor their commercial or residential buildings to the opportunities created by the TRID District. I see these two planning tools working hand in hand to help expand our transit network and improve quality of life and accessibility. The TOD zoning overlay would provide guidelines to create greater density, improve pedestrian and bicycle infrastructure, require open public space, minimize or eliminate the creation of new parking spaces, limit the construction of surface parking lots, and limit some types of businesses (e.g. gas stations). The idea is to create a district within a neighborhood, or several neighborhoods, that encourage and support public transit, walkability, and bicycling. This TOD zoning overlay would be well suited to the many business districts throughout the city that are easily accessible by public transit. The idea is to allow people to get to and from a district without having to rely on a car.

This TOD zoning overlay is the perfect partner for a TRID District. When a district has been designed to encourage and support public transit, the revenues its TRID generates have a multiplier effect. Greater density means higher tax revenues, which means more money to put towards improving the public transit system. Pairing a TRID District with a well-sited TOD zoning overlay will create a positive feedback loop that will allow us to more rapidly make the transit investments that we critically need to attract more jobs and more people to Pittsburgh. I am looking forward to working with East Liberty to move this plan forward and working with stakeholders in other neighborhoods across our city to create the 21st century transit system we need.

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