Value Capture and SMART
August 20, 2011 Leave a comment
If you follow the Marin IJ online, you’ve probably seen me posting a lot on SMART-themed articles. Sometimes the comments from critics can be, to be kind, ill-informed, although it’s typically a fun and spirited debate on the subject. One comment that falls into the latter category recently got me thinking about value capture for SMART.
I had just posted about Larkspur Landing’s owners. The SMART train was originally slated to extend down to the Larkspur Landing area and connect with a ferry into the City but has been scaled back to extend only as far as Central San Rafael as a cost-saving measure. This, I argued, was a loss for the Larkspur Landing neighborhood and that the owner might want to pay to extend that last couple of miles:
Something I’ve been wondering about has been whether the owner of Larkspur Landing would be willing to help finance the Larkspur station. Although whoever does own that area isn’t the most transit-oriented (to understate), being able to market your location as only 30 minutes to anywhere by bus, train, or ferry would significantly lift the value of that property.
Kevin Moore, who had seemed to be in opposition to the SMART project, replied:
In that line of thought… for every housing unit built near the new SMART stations, there should be a reasonable, but substantial “permit fee” for each bedroom and parking space. When Disney put in the monorail from his hotel to the theme park, he paid for it!
Although I was imagining a public-private partnership between SMART and Larkspur Landing, rather than a fee or tax levied across the whole system, Mr. Moore touched on an important concept. When a station is built, it typically increases the value of the land around the station, boosting property tax receipts. One method of value capture returns that extra boost to the transit agency, giving a consistent stream of income to the transit agency.
Mr. Moore’s idea is another type of value capture, allowing the agency to assess a one-time fee on new residential development that occurs around the stations. To tweak it a bit, the fee would be levied on whole units rather than bedrooms, to discourage strictly studio apartment developments, and would apply to retail square footage or some other commercial metric. This would allow the SMART development to capture some of the value created by their system, hopefully bringing the system into a better financial position in the process. A fee on parking would discourage parking spaces, which would be good for the County’s traffic and for neighborhood walkability. Ostensibly the developments would be exempt from parking minimums, allowing them to opt out of the spaces they felt they didn’t need.
I’m hesitant to fully endorse the concept, however. This provides a one-time stimulus to the system but doesn’t have the staying power of a value-capture tax. If SMART is really successful, it would eventually expand to a Phase 3, perhaps to Sausalito, Richmond, or even San Francisco itself, and slowly add a second track, and these expansions will need a stable funding mechanism. Sales tax, as we now see, is not terribly stable, and is not terribly dependent upon whether the system works well or not. As well, imposing a fee on any new development would disincentivize the new construction so desperately needed by the downtowns served by SMART.
The parking fee, though – that’s a marvelous idea. Any new space within a half-mile of a station could be levied at one rate, and any new space above the local parking minimum (at time of construction) would be levied at a higher rate, discouraging developers from overbuilding their parking capacities. Although there shouldn’t be a parking minimum in the first place, this would go some way to produce a less car-dependent corridor.