Conference Paper
Financing Rail Transit Infrastructure through Property Taxes: Prospects for Chicago

Land value capture offers a strategy consistent with public finance theory for funding transportation infrastructure investments. We demonstrate the potential using residential properties in Chicago. Hedonic price models suggest that proximity to urban rail transit stations are associated with higher values (16% for single-family homes and 9% for multi-family properties) compared to similar properties further from stations. At-grade lines, however, have a negative relationship with residential property values. We estimate Chicago’s urban rail is responsible for a net $4.0 billion in current residential property market value (about 3.5% of total). Based on these results, we explore scenarios by which land value capture could be used to help finance transit capital investment programs. We estimate that urban rail could justifiably be entitled to receive between $20 and $54 million in current annual property tax collections or about $100 million per year if it were allowed to recapture the full market value added over a 40-year period. We also demonstrate the implications for financing a hypothetical transit expansion to support a new urban redevelopment project, finding that land value capture could justifiably provide $11.5 to $32.8 million (present value) revenues over 40-years, enough to fund up to about 55% of estimated station construction costs.

Title
Publication TypeConference Paper
Year of Publication2017
AuthorsP. Zegras C, Jiang S, Grillo C
Abstract

Land value capture offers a strategy consistent with public finance theory for funding transportation infrastructure investments. We demonstrate the potential using residential properties in Chicago. Hedonic price models suggest that proximity to urban rail transit stations are associated with higher values (16% for single-family homes and 9% for multi-family properties) compared to similar properties further from stations. At-grade lines, however, have a negative relationship with residential property values. We estimate Chicago’s urban rail is responsible for a net $4.0 billion in current residential property market value (about 3.5% of total). Based on these results, we explore scenarios by which land value capture could be used to help finance transit capital investment programs. We estimate that urban rail could justifiably be entitled to receive between $20 and $54 million in current annual property tax collections or about $100 million per year if it were allowed to recapture the full market value added over a 40-year period. We also demonstrate the implications for financing a hypothetical transit expansion to support a new urban redevelopment project, finding that land value capture could justifiably provide $11.5 to $32.8 million (present value) revenues over 40-years, enough to fund up to about 55% of estimated station construction costs.

URLhttps://ses.library.usyd.edu.au/handle/2123/17520