New Land Value-Capture Strategies for Strong Communities

This week, we are featuring a blog on municipal financing tools for urban revitalization from our sister program, ProGov21. Like the Mayors Innovation Project, ProGov21 is a project of COWS at the University of Wisconsin-Madison. 

By: Max Prestigiacomo & Walker Kahn, ProGov21

Land value-capture policies ensure that everyone benefits when public investment increases the value of privately held land. Value-capture mechanisms like Special Assessment Districts (SADs), Business Improvement Districts, and Local Improvement Districts help local governments drive economic growth even when budgets are tight. Land Banks purchase and hold distressed properties, enabling revitalization projects that raise the values of both public and private real estate holdings. Well-executed value-capture policies can create true win-win outcomes.

SADs are an established municipal financing tool that fund public works by establishing supplementary taxes only for parcels that will directly benefit. Both Washington, DC and Alexandria, VA have used SAD districts to fund the construction of metro rail stations: when these projects increased the value of nearby real estate, SAD supplementary taxes enabled these cities to capture some of this new value to pay for the infrastructure improvements. It doesn’t always have to be construction: Orland, CA, created a special assessment ​​to fund new parks and improved maintenance, while Santa Monica, CA, has a special assessment district to conserve green space. Both of these projects increased the value of nearby properties, and SADs allowed the cities to reduce the costs to local residents who did not financially benefit. The League Of Minnesota Cities has a helpful toolkit on how local governments can best use SADs.

Business Improvement Districts (BIDs) and Local Improvement Districts (LIDs) are privately organized and publicly sanctioned organizations that fund expanded public services through special tax assessments on businesses or property owners that benefit. Property owners and businesses that bear these additional assessments vote on how to use these new funds best while the city grows its tax base. BIDs are extremely flexible: Oshkosh, a small Wisconsin town, has used BIDs to fund concerts, festivals, conferences, and more attractions, generating downtown foot traffic and increasing local business revenue. Portland, OR, and Seattle, WA, both used LIDs to fund streetcar construction while capturing a portion of increased property values and economic activity. Pomona, CA has used BIDs to fund capital improvements and increase its tax base by transforming the run-down city center into a vibrant destination for recreation, shopping, and dining.  

The Federal Highway Administration has a helpful primer, including working examples of localities using value-capture tools like SADs, BIDs, and LIDs and a model enabling ordinance. 

Land Banks are public or non-profit entities that buy distressed properties as both investments and resources for community development. The Denver Urban Land Conservancy strategically purchases vacant and delinquent land near planned transit routes, holding it until it is ready to be developed. Denver leads the nation in acquiring low-value properties near planned transit infrastructure to capture increased property values and create affordable housing. The City of Madison Land Bank purchased underutilized land for mixed-use development, creating new housing and jobs while raising nearby property values. Detroit and Kansas City use land banks to purchase homes for resale as affordable housing, reducing barriers to home ownership.  Seventeen states currently have legislation enabling land banks, with more on the way. See ProGov21’s Policy Roadmaps for more policymaker resources and ProGov21’s Free Policy Search Engine for briefs, ordinances, and resolutions. 

Helpful Organizations & Institutions

About ProGov21

Progressive Government for the 21st Century (ProGov21) is a free library of model ordinances, resolutions, and policy white papers to help local elected officials stay on the cutting edge of progressive policy from around the country.

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