There are currently dozens of transportation projects using value capture financing. Most project value capture revenues are in the millions to hundreds of millions of dollars. Only a few show value capture revenues in excess of $1 billion. Two of them, Transbay and Hudson Yards, are mentioned in this article. It comes down to scalability. Value capture is successful when there is a relatively small, well-defined area, preferably in the same city or county. It is not evident that value capture methodology alone would be able to scale to address the financing requirements of a megaproject such as high-speed rail (HSR), where the project costs are in the hundreds of billions of dollars and are spread over wide geographical areas. Value capture could play an important part in a local project, as it is in Transbay, where the transit center will be home to the San Francisco HSR station. It would be difficult to see value capture alone being able to finance construction in the long distance right of way from Los Angeles to San Francisco.
There is a requirement for a broader solution, with a predictable, reliable revenue stream to finance large-scale, national megaprojects, such as HSR. A national HSR system would offer 220 mph top speed, 160 mph average speed service that is time-competitive and cost-competitive with air travel, in the 200 to 600 mile sweet-spot distance. The challenge is securing the one-half to three-quarters of a trillion dollars for construction costs. Finding the votes in Congress to appropriate $25 to $30 billion per year from general tax revenues, for 25 to 30 years, will be difficult in the current environment.
What is needed is a dedicated funding source, one based on a user fee for existing high-speed travel. The proposal is a High Speed Passenger Transport Fund (HSPT) that would be based on a 6 percent fee on:
- Airline Tickets
- Charter Flights
- Air Freight Revenues
- Amtrak Tickets
- Future High-Speed Rail Tickets
The HSPT fee will generate $10 billion in revenue per year. The revenue would be split three ways: 20 percent each to existing intercity rail and the air travel’s NextGen air traffic control system, and 60 percent to HSR. The guaranteed revenue would permit the HSR JPA to bond $100 billion to purchase main line right of way, and land for stations and transit-oriented development. The funds would also be used to start the permitting and environmental work. The JPA would enter into PPP arrangements with private contractors and developers that will actually build the HSR network. Additionally, the same revenue stream could be utilized to initiate value capture financing programs at local transportation centers for future HSR stations.
Value capture is an important instrument in the toolbox to spur local transportation infrastructure. It would require the combination of value capture and PPPs, both supported by the revenue from the High Speed Passenger Transportation Fund, to finance and build transportation megastructure for a 21st century America. MT
Richard J. Arena (firstname.lastname@example.org) is president of the Association for Public Transportation (APT) and is on the Advisory Board of US High Speed Rail (USHSR). The views in this article are his own and do not necessarily reflect those of APT or USHSR.