Value Capture: Lessons from Latin America
Of all the themes explored in Meeting of the Minds related to urban development and infrastructure, the elephant in the room remains the question of financing. The fiscal situation is dire at the local, state, and federal level, just at the time when new investments are needed for the support of the 21st-century city.
So it is that a hitherto obscure policy – value capture – is getting more attention in the broader context of public-private partnerships. Value capture is based in the recognition that public investments and government actions – a new light rail line, for example, or a zoning change – result in increases in property value for private landowners. Governments are increasingly identifying these specific increases in value, known as the land value increment, and are working with private landowners and developers to seek a commensurate contribution.
The approach is being tested in the U.S. in cities such as San Francisco and Chicago, and in the construction of the Cotton Belt rail system in the Dallas-Fort Worth region. An article last year in The Next City provides a comprehensive overview of these efforts. One tale cited in that article is a particularly vivid illustration of how taxpayer investments are essentially privatized: the case of Frank McCourt, who owned more than 25 acres of prime waterfront property in Boston’s emerging Seaport district. The parcel, just across the Fort Point Channel from downtown Boston, was the site of two major projects: the I-90/Ted Williams Tunnel connector and interchange that was part of the $16 billion Big Dig, and the $1 billion bus rapid transit corridor, the Silver Line, snaking its way underground from South Station through the Seaport and on to Logan Airport. Both a major highway interchange and a Silver Line station were positioned right at McCourt’s property, which became so valuable for residential and commercial development, McCourt was able to sell the land to help him buy the LA Dodgers.
McCourt contributed funds for the Silver Line station, but in retrospect, local and state leaders questioned why he wasn’t asked to pay more, based on the identifiable increase in the value of his property that these major infrastructure projects prompted.
The rest of the world, it turns out, isn’t waiting to pose that question in hindsight. Many countries in Latin America, notably Brazil and Colombia, have passed legislation that supports value capture principles, says Martim O. Smolka, director of the Lincoln Institute’s Program on Latin America and the Caribbean, and author of the newly published Policy Focus Report Implementing Value Capture in Latin America: Policies and Tools for Urban Development.
The policy is manifesting in several key areas of both voluntary and compulsory methods: property taxation and betterment contributions; exactions and broader charges for building rights or for the transfer of development rights; and large-scale approaches such as development of public land through privatization or acquisition, land readjustment, and public auctions of entitlements for additional building rights.
Value capture has long been part of the worldwide urban planning agenda. Its increasing popularity in Latin America, Smolka says, is attributed to urbanization putting pressure on serviced land and concerns about equity and affordable housing. Although in most places revenues are still low, the applications of betterment contributions in Bogotá and of building right entitlements (CEPACs) in São Paulo have generated revenues in excess of a billion dollars for those cities.
Yet value capture is often resisted by powerful stakeholders, notably landowners, opinion leaders, and academics all along the ideological spectrum, Smolka says. He advocates a better dialogue about how value capture actually works in practice, careful management, and public participation. Value capture tools, he adds, are more likely to succeed when used to solve a locally recognized problem.
Cities in North America might do well to look south for some valuable lessons in changing the paradigm for urban development and financing key infrastructure.
Leave your comment below, or reply to others.
Please note that this comment section is for thoughtful, on-topic discussions. Admin approval is required for all comments. Your comment may be edited if it contains grammatical errors. Low effort, self-promotional, or impolite comments will be deleted.
Read more from MeetingoftheMinds.org
Spotlighting innovations in urban sustainability and connected technology
I see the outcomes of Duke Pond as a representation of the importance of the profession of landscape architecture in today’s world. Once obscured by the glaring light and booming voice long-generated by building architects, landscape architects are steadily emerging as the designers needed to tackle complex 21st century problems. As both leaders and collaborators, their work is addressing the effects of rising sea level on coastal cities, creating multi-modal pedestrian and vehicular transportation systems to reduce carbon emissions, reimagining outdated infrastructure as great urban places, and as with the case of Duke Pond, mitigating the impacts of worsening drought.
AI has enormous potential to improve the lives of billions of people living in cities and facing a multitude of challenges. However, a blind focus on the technological issues is not sufficient. We are already starting to see a moderation of the technocentric view of algorithmic salvation in New York City, which is the first city in the world to appoint a chief algorithm officer.
There are 7 primary forces determining the success of AI, of which technology is just one. Cities must realize that AI is not the quick technological fix that vendors sell. Not everything will be improved by creating more algorithms and technical prowess. We need to develop a more holistic approach to implementing AI in cities in order to harness the immense potential. We need to create a way to consider each of the seven forces when cities plan for the use of AI.
In New Zealand, persistent, concentrated advocacy and legal cases advanced by Māori people are inspiring biocentric policies; that is, those which recognize that people and nature, including living and non-living elements, are part of an interconnected whole. Along the way, tribal leaders and advocates are successfully making the case that nature; whole systems of rivers, lakes, forests, mountains, and more, deserves legal standing to ensure its protection. An early legislative “win” granted personhood status to the Te Urewera forest in 2014, which codified into law these moving lines:
“Te Urewera is ancient and enduring, a fortress of nature, alive with history; its scenery is abundant with mystery, adventure, and remote beauty … Te Urewera has an identity in and of itself, inspiring people to commit to its care.”
The Te Urewera Act of 2014 did more than redefine how a forest would be managed, it pushed forward the practical expression of a new policy paradigm.