Bacon's Rebellion

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CDAs, TIFs and TDMs

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by

James A. Bacon
in

In my column in the new edition of the Bacon’s Rebellion e-zine, I develop an idea that has become a recurring theme in this blog.

The starting premise is this: When government makes transportion improvements — highways, transit stations, interchanges, road widenings, whatever — it creates economic value for the landowners lucky enough, or shrewd enough, to own property in the right location. The public (through the agency of the government) creates this value, not the landowner. Why, then, shouldn’t the public capture some of that value to help finance the transportation improvement?
Virginia transportation policy relies overwhelmingly upon taxation of motorists to build the improvements, and to a lesser degree upon tolls levied upon the users of a particular facility. In some localities, developers contribute to the funding of road improvements through proffers, but the proffers are rarely integrated into a coherent system. I propose a four-part approach to major transportation projects:

  • Create a Community Development Authority (CDA) to issue bonds to pay for public improvements such as roads, light and heavy rail lines, transit stations or even bus shelters.
  • Overlay the CDA with a Tax Increment Financing (TIF) district that taxes the landowners who benefit from the public investments. Use the revenue stream to pay off the CDA bonds.
  • Sweeten the pot, as necessary, by giving landowners the right to develop their parcels at greater density. The combination of higher density and public improvements would more than compensate landowner/developers for the expense of the special tax district.
  • Require developers to implement Traffic Demand Management (TDM) plans to offset local congestion resulting from denser development. It is critical that these plans be robust, capable of taking large numbers of cars off local streets. They also must be sustainable, capable of standing on their own after developer has completed the project and has ended subsidies to van pools and other ride-sharing programs.

I don’t pretend this approach will work everywhere. It won’t. But it can work in a lot of places. When combined with the other alternatives explored on this blog — congestion tolls, telew0rk, ride sharing, VDOT reforms, intelligent transportation systems and all the rest — there’s no reason that Virginia can’t stitch together an effective transportation policy without recourse to higher taxes.

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8 responses to “CDAs, TIFs and TDMs”

  1. Ray Hyde Avatar
    Ray Hyde

    I don’t get it, Jim.

    You say here:

    The starting premise is this: When government makes transportion improvements — highways, transit stations, interchanges, road widenings, whatever — it creates economic value for the landowners lucky enough, or shrewd enough, to own property in the right location. The public (through the agency of the government) creates this value, not the landowner. Why, then, shouldn’t the public capture some of that value to help finance the transportation improvement?

    Well, OK. But isn’t that exactly why we don’t currently require that 100% of road costs are paid for by those that use them? And isn’t that one of the arguments that people use against autos, that road taxes don’t pay the full costs? Don’t we already pay for much of our infrastructure through land taxes and general revenue (which depends on the economic value that infrastructure provides) for exactly the reasons you state??

    You point out that the development in Loudoun will be one of the largest developments on the East coast and yet you say that Mark my words, eventually CDAs, TIFs and TDMs will become a routine part of the political lexicon. That’s because they provide the General Assembly a way to have its cake and eat it too: raising money for transportation without taxing or tolling the public. . Well, with such huge parts of the public becoming citizens of these places, and just about everybody driving someplace that will be tolled eventually, just who do you think the public who won’t be taxed is?

    And you recognize the problem, because you say Do the CDA bonds tax the property owners whose property values benefit from the public improvements they finance? Or are they a mechanism for shifting the cost of those improvements to someone else….

    This is the same problem EMR noted in his piece: the “been heres” and “come heres” erecting barriers against the “new heres”.

    It’s a circular taxation shell game. We need a lot of money to get done the things we need to do, and somebody is going to pay, whether it is CDA, land tax, income tax, tolls, gas tax, or death tax. Or congestion tax.

    Take your pick, but call it what it is and get on with it.

    It’s a tax increase. The longer we wait the more likely that it will be ALL of the above.

    (BTW, As a corollary, if you are going to recognize and tax value that you create through infrastructure, are you then willing to pay for value you take away through negative actions?)

  2. Scott Avatar
    Scott

    CDA’s, huh? You mean like the Broad Street CDA in downtown Richmond? That’s one CDA that I have some serious questions about.

    Look, Jim, I appreciate you tackling these transportaon and housing issues. I really do. Your questioning of taxes is important.

    So why are you not reporting on what’s going on in Richmond? Now we have city, state, and federal taxpayer money being poured int eh VaPAF debacle. This should be a cmapaing issue for Webb vs. Allen, now that Allen’s earmark has become public knowledge.

  3. Jim Bacon Avatar
    Jim Bacon

    Scott, Actually the Broad Street CDA is one of the better ones: The bonds are backed by parking revenues, not just taxes. The City of Richmond is on the hook if everything goes to hell, but it has a lot of protection. I don’t think there’s a significant risk at this point. As I recall, there is no direct connection with the Virginia Performing Arts Center.

    Ray, I’m not sure what your concerns are. I’m trying to devise a way to raise more revenue to add more transportation capacity. But instead of sticking it to the general taxpayer, I’d be looking to the property owners who’d benefit most financially from the construction of the facility. Quite simple really.

  4. Scott Avatar
    Scott

    Look at who’s on the Board of the Broad Street CDA. Read up on Greg Will’s paper on it.

    The Convention Center, the VaPAF are definitely in play here.

  5. Ray Hyde Avatar
    Ray Hyde

    It just seems like we are going around in a circle. On the one hand we claim that drivers (and transit riders) are not paying their full costs, and they would make better living and working arrangements if they did.

    On the other hand, we recognize that transportation is critical to economic activity, andthat transportation infrastructure is critcal to property values. So those that benefit (property owners and businesses) should pay a good chunk of the costs as well.

    That takes some of the burden off of the drivers, so they are more free to make “bad decisions”.

    In the end, just as you noted in your piece that NOVA creates many jobs elsewhere in the state, the benefits are pretty diffuse.

    We already have a method that charges drivers some, businesses some, and property owners some. What is wrong with the system we have except that it hasn’t got enough money in it?

    Do I think the property owners should pay a good chunk?, Yes. but I don’t think that lets us off the hook if we expect to get any of the residual benefits. Otherwise TMT is right, it’s another strategic stalemate with no end benefit, the price will be so high the owners wil balk.

    At some point we are going to have to learn, that if we really want something, we are going to have to foot the bill. Whether what we want is scenic vistas or a view of the subway tunnels.

  6. Toomanytaxes Avatar
    Toomanytaxes

    Paying for what we want. One of the problems of living in a diverse society is that not all of us want the same thing. Many local officials, selected landowners and developers, some local residents and others living in rural areas want dense development at Tysons Corner and other areas in and around Fairfax County. Those people generally favor extending Metrorail through and beyond Tysons Corner. Commercial real estate interests in that general area agreed to pay extra real estate taxes up to and including $400 M to fund Metro’s extension.

    Many other people, including some who live near Tysons Corner, some businesses paying the higher taxes and even some commercial real estate owners paying the extra tax, as well as many toll road users, do not want the added density or the great new Silver Line that does not reduce traffic congestion and, left to their druthers, would pay nothing or little more than nothing to extend Metrorail and to see Tysons Corner become a denser urban area. What happens when there is no consensus?

    Many people want to see road capacity increased and new roads built. Most of them probably would favor paying higher taxes. (However, I understand that a segment of the Fairfax County business community that favors more road construction and higher taxes generally are strongly opposed to the GOP’s proposed 30 cent tax increase on commercial real estate. I guess Senator Long was right when he said: Don’t tax you; don’t tax me; tax that fellow behind the tree.”

    Yet, there are others who believe road construction simply begets more development and more traffic. Others oppose any road construction and support only transit. Some in NoVA fear that an increase in transit spending means additional tax subsidies will flow from NoVA to RoVA (I love that.) Even others simply oppose any tax increases regardless of the purpose. What happens when there is no consensus?

    In short, I don’t think that there is any consensus beyond “we sure would like traffic to diminish.” Perhaps, the reason that the General Assembly did not make progress on transportation is because there simply is no agreement as to what constitutes progress.

  7. nova_middle_man Avatar
    nova_middle_man

    You just outlined why we have elections. It gets tricky on development and growth though because there are republicans and democrats on both sides of these issues.

  8. Ray Hyde Avatar
    Ray Hyde

    You are both correct. The operative word is *If* we really want something.

    Otherwise, as Jim says, let the landowners pay for it. All of it.

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