Guidebook to Funding Transportation Through Land Value Return and Recycling (2018)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

20 This chapter describes the land value return and recycling and land value return–like methods listed below. • Land value return and recycling methods: – Land value tax or split rate tax, – Betterment levy, – Special assessment district fee, – Sale of public land or public air rights, – Lease of public land or public air rights, and – Joint development fee and interface fee. • Land value return–like methods: – Transportation utility fee, – Tax increment financing, – Development impact fee, and – Exaction or proffer. As the implementation of land value return and recycling increases and the practice evolves, variants of these methods can be expected as jurisdictions seek to meet their unique circum- stances. Land value return and recycling methods recover a portion of the increased land value created as a result of public-sector investment in infrastructure, and land value return–like methods are other funding methods related to real estate that are commonly discussed in the same context as land value return under the umbrella of value capture. Land value return and recycling is the recovery of a benefit, whereas land value return–like methods are generally established to recover costs. The former are typical beneficiary-based fees and are levied on land alone, while the latter are typically based on cost recovery principles and target land use, development activity, and property value (referring to both land and building value). For each method discussed in this chapter, the following information is provided: • Definition—a descriptive understanding of how the method works and is applied; • Levy basis—the value on which the tax or fee is applied, such as assessed value of land, acre- age, or cost of infrastructure; • Revenue—a formula, as applicable, that would be applied to calculate revenue generation and whether the method is a one-time charge or recurring; • Considerations—benefits and drawbacks as well as specific requirements that warrant review before implementation; and • Case example—a real-world implementation of the method to illustrate its use. Additional case examples are provided in Chapter 4, “Funding Transportation with Land Value Return” and Chapter 5, “Making Land Value Return Successful.” Additional information and refer- ences for each case example are provided in Appendix B, “Summary of Case Examples.” C H A P T E R 3 How Land Value Return Works

How Land Value Return Works 21 Land Value Return and Recycling Methods Land Value Tax or Split Rate Tax Definition A land value tax and a split rate tax are variants of the traditional property tax. Most juris- dictions tax land value and improvement value at the same rate. A land value tax is a recurring charge on only the land portion of property, not including improvements (such as buildings). If no tax rate is levied on improvements, the result is a pure land value tax. Some jurisdictions, instead of applying a pure land value tax, apply two separate tax rates—a higher rate on the value of land and a reduced rate on the value of improvements. This is referred to as a “split rate tax” (Case Example 1). Case example 1: Split Rate Tax Project: General-purpose infrastructure and other governmental services Location: Pittsburgh Metropolitan Area Pennsylvania state law authorizes cities to tax land value at a higher rate than structures or improvements. This authority was given to Pittsburgh and Scranton in 1913 and to smaller cities in 1951. Various localities have implemented split rate taxes over time, and, currently, between 15 and 20 jurisdictions tax building values at lower rates than land values. Select examples are described below. Pittsburgh Pittsburgh implemented a split rate tax from 1913 to 2000. In 1913, proponents included steel manufacturers who needed scarce flat land for their factories. They believed taxing land values more heavily than building values would compel owners of flat riverfront land to make that land available at more favorable prices. The new tax structure was phased in over about five years and, when fully implemented, the tax rate on buildings was one-half the rate applied to land values—a 1:2 ratio. Later, during the 1970s and 1980s, the ratio increased to 1:6. The revenue funded the city’s general budget. Between 1930 and 1940, land value declined in most major U.S. cities (New York, 21 percent; Milwaukee, 25 percent; Cincinnati, 26 percent; New Orleans, 27 percent; Cleveland, 46 percent; Los Angeles, 50 percent; and Detroit, 58 percent). The magnitude of the decline in land value was exacerbated by a real estate boom and bust just prior to the Great Depression. Land values in Pittsburgh, however, declined by only 11 percent, demonstrating the ability of the land value tax to discourage land speculation. Further, in the late 1970s, Pittsburgh faced a budget shortfall and the city council increased the land portion of the city’s split rate prop- erty tax to cover the shortfall. The cost of the tax increase to the average family was $80 (compared with $200 for a proposed wage tax increase). Most of the land value subject to the land tax increase was commercial, not residential, and so the burden on residential property was mitigated. Despite the tax increase, Pittsburgh development outpaced its suburbs. In the late 1990s, a statewide reassessment of all property was ordered that focused on the total assessed value without regard for how the value was distributed between the land and building components. At the time, Pittsburgh taxed buildings at one-sixth the rate applied to land. As a result of the reassessment, land values for affluent Pittsburgh neighborhoods increased dramatically. In 2000, Pittsburgh abandoned the split rate tax in favor of a traditional 1:1 tax on both land and buildings as a way to avoid large tax increases for these neighborhoods. (continued on next page)

22 Guidebook to Funding Transportation Through Land Value Return and Recycling Land value incorporates the benefit of nearby infrastructure investments and, therefore, rep- resents the value of the public goods and services available at the location, along with other loca- tional attributes. Because property tax is shifted off of the value of improvements (i.e., value created by private entities that build on the site) and onto the value of the land (i.e., value created in part by the government through transportation, water and sewer, and other services), property owners’ payments are more in proportion to the benefits they receive from public investments. This shift can encourage development and growth without reducing revenue (and potentially increasing revenue) for the jurisdiction. Levy Basis Typically, a land value tax is based on the assessed value of land, which is estimated separately from improvement value. A land value tax or split rate tax approach could be imposed jurisdiction- wide (entire municipality, city, county, or state). It also could be applied within a special assess- ment district. Revenue The revenue for a land value tax = tax rate × value of land. The revenue for a split rate tax = (Tax Rate 1 × value of land) + (Tax Rate 2 × value of improve- ments). Typically, a lower tax rate is charged on the value of improvements. Case example 1 (continued): Split Rate Tax McKeesport, Duquesne, and Clairton In the late 1970s, these three cities had similar demographics and economies (heavy manufacturing) with large shuttered factories in their downtowns. The cities were distressed as a result of the loss of thousands of manu- facturing jobs during the 1970s and 1980s. The number and value of building permits had been declining from year to year in each city. McKeesport adopted a split rate property tax in 1980. Thereafter, the number and value of building permits rose while building permits continued to decline in nearby Clairton and Duquesne. Duquesne and Clairton, see- ing the increase in McKeesport’s building permits, implemented a split rate tax in 1985 and 1989, respectively. In each instance, building permits increased after adoption of the split rate tax. Tax reform, by itself, cannot reverse the impacts of an economic dislocation. A split rate tax may, however, enable economic improvement. Percentage Change in Building Permits Issued –20% –28% Duquesne Clairton –40 –30 –20 –10 0 10 20 30 40 50 38% McKeesport P er ce nt For additional information and references, please see Appendix B.

How Land Value Return Works 23 Tax rates typically are expressed per $100 or per $1,000 (a millage rate) of assessed value (e.g., $2 per $100 or $1,000 of assessed value). Payments are made on a recurring basis. Considerations • Land value or split rate taxes can provide incentives for development, increased density, and infill. • Land value or split rate taxes capture all location-specific benefits, such as those related to a well-performing transportation system, but also other infrastructure services as well as natu- ral features such as location near a waterfront. • Land value and improvement value may already be assessed separately in some jurisdic- tions, thereby facilitating implementation. A less-optimal approach when assessments are not separated is to parse land value by using suitable methods to facilitate implementation. • Property taxation is an almost universal method of revenue generation. The techniques and staff devoted to property tax assessments, appeals, forecasts, and collections could be applied to implement land value or split rate taxation. However, most jurisdictions do not currently implement separate tax rates. • Property taxes are often local governments’ largest source of revenue, and there are many competing uses for such funds. This will remain true under a land value or split rate tax system. Thus, transportation agencies would have to lobby for a fair share of the revenue. • As an area-wide approach, the revenue must be allocated first to all competing infrastructure investments by using suitable methods at the program level. They must then be allocated to individual projects. • Because of potentially significant changes in property tax liabilities for some property owners, it may be beneficial to phase in land value or split rate taxes over time. A phase-in period enables property owners to adjust their investment decisions to the new incentives. • A land value or a split rate tax is a mandatory method. It implies that once the method is adopted, the agency can unilaterally use the option to raise funds such as gas taxes or other methods. Betterment Levy Definition Betterment levies are one-time payments based on the actual (or estimated) increase in land value for particular properties as a result of new or improved infrastructure. Betterment levies are intended to return to the public sector a portion of the increase in land value (not improve- ment value) induced by an infrastructure investment that improves the performance of the transportation system. Such levies can be established jurisdiction-wide or in specific benefit areas. (See Case Example 2.) Betterment levies can be implemented before or after an infrastructure investment is made. If implemented before the investment, the amount of the levy would be based on predicted land value increases; if implemented after the investment and value enhancement is observed, the levy would be based on the actual increase in land value. Levy Basis Land value is determined prior to the investment or after the investment occurs. The levy can be imposed retroactively, which requires a historical look at the changes in value, or prospec- tively, which requires a projection of changes in value induced by the investment. The levy must bear a relationship to the benefit induced on the land by the investment.

24 Guidebook to Funding Transportation Through Land Value Return and Recycling Case example 2: Betterment Levy Project: Road and bridge improvements Location: Bogotá, Colombia Bogotá, Colombia implements a betterment levy to fund road and bridge improvements. As of 2011, Bogotá had completed approximately $1 billion worth of investment in public works by using this approach and planned to collect $1.1 billion from 2008 to 2015 for financing road and bridge investments. The Urban Development Institute administers the levy and identifies the road construction projects to be financed by the levy. The levy is assessed on all properties affected by a given project (or set of projects, such as a corri- dor) and is calculated by multiplying different benefit factors, as described below. Colombian law (decree 1604 of 1966) stipulates the upper bound of the levy is the lowest value among three parameters: (a) cost of the construction project; (b) value added to properties that can be attributed to the project; and (c) affordability of the levy (i.e., capacity of property owners to pay). Typically, in Bogotá, the levy is capped at the cost of the project, which makes the method land value return–like. The criteria used to establish the area of influence and level of benefit include proximity and accessibility to the project—which afford greater use of the road and thus increase property values, as measured by the project impact on the assessed value and the economic conditions of the real estate properties in the area. To reduce the average amount of the levy, the largest possible number of parcels is included in the benefit area. If multiple projects are being financed, the boundary of the area of influence is defined by superimposing the individual areas of each project and adjusting them to account for the complementary effects of the benefits from the combined set of projects. A series of factors is used to represent the benefit of the project. Land value increase is not estimated explicitly; rather, benefits estimated through cost–benefit analysis and economic impact analysis guide levy setting. The benefits resulting from the project or set of projects are calculated by city zone, taking into account benefit factors defined for each project. In a recent road project, the benefit factors were • Greater mobility, which translates into greater travel speeds, lower travel time, lower operating costs, and higher quality of life; • General urban planning benefits as the project normalizes the road network and rationalizes the use of public space; • Changes generated in land use and stimulation of productive and commercial activities; • Greater market value of nearby real estate properties; • Integration of the project into the urban structure of the city; • Optimization of circulation and mobility; and • Recovery of deteriorated or depressed areas. Once the benefits of the project are defined and its cost estimated, the distribution of the levy takes into account the following additional factors: the type of land use, density, degree of benefit allocated to each parcel, and the payment capacity of the property owners as measured by household quality-of-life surveys. Administrative success was made possible by a comprehensive database of the extent, value, and ownership of land, as well citizen participation and oversight. Controversies continue over how the charge is assessed and distributed among properties, as calculation of project benefit does not measure the value added to the properties directly, but instead relies mostly on indirect indicators of benefit. The degree to which this is imposed is unclear, however, owing to the legal requirement to select the lowest of the three parameters. On the basis of recent levies on 1.5 million properties, collection is generally accepted by taxpayers and default rates are relatively low (lower than for property tax). For additional information and references, please see Appendix B.

How Land Value Return Works 25 Revenue There are two options for calculating revenue for a betterment levy: • Option 1. Tax the full amount of the value increase: revenue = (value of land in benefit area with investment) − (value of land in benefit area before investment). • Option 2: Tax the portion of the value increase: revenue = (value of land in benefit area with investment) − (value of the land in benefit area before investment) × percentage of value to be taxed. Payment is made one time, not on a recurring basis. Considerations • Betterment levies have yet to be implemented in the United States. • It may be difficult to calculate the portion of land value created by a discrete infrastructure investment. The difficulty will increase if – The estimate is made before the infrastructure goes into service or – There is minimal or no prior experience with the particular type of infrastructure improve- ment in the real estate market. • Additional difficulties associated with estimating the timing and geographic extent of land value increase can exist. Land value may sometimes increase in anticipation of future infra- structure investments. • Typically, only a fraction of the estimated incremental increase to land value is taxed, in rec- ognition of the uncertainty in accurately determining the amount of the increase. • The calculation of land value increase related to investment must be done by experienced analysts, since betterment levies can be politically contentious and prone to litigation. • A one-time lump-sum payment can be burdensome for property owners. • A betterment levy is a mandatory method. It implies that once the method is adopted, the agency can unilaterally use the option to raise funds like gas taxes or other methods. Special Assessment District Fee Definition Special assessments are fees levied in special assessment districts. A special assessment district is a defined geographic area that is determined to benefit from an infrastructure investment. Such districts go by different names, such as “benefit districts,” “improvement districts,” “busi- ness development districts,” “community improvement districts,” “downtown improvement districts,” and “special services areas.” The general model is that property owners within the district are charged a special fee on the assessed value of their property (which may include pri- vately created improvement value or publicly created land value or both). This special fee or tax is in addition to the existing property tax that is otherwise applied to all parcels in the district. A special assessment fee on land is identical to a betterment levy. Special assessment districts go by different names in rural areas. They are called “local improvement districts” and have been used to fund transit. They are also called “benefit districts” and “infrastructure financing districts.” The additional fee or tax reflects a portion of the benefit received by the property from the public infrastructure investment. If the amount of the fee or tax is based on the increase in land value resulting from the public infrastructure investment, it is a land value return and recycling method. If the fee or tax is based on the improvement or building value, it is a transfer of pri- vately created value to the public sector (land value return–like). Special assessment districts also may impose a special sales tax, payroll, or other fee or tax not based on property values. These other fees may be appropriate funding sources for transportation investment but are not land value return and recycling. (See Case Example 3.)

26 Guidebook to Funding Transportation Through Land Value Return and Recycling Case example 3: Special Assessment District Fee Project: State Route 28 improvements Location: Fairfax and Loudoun Counties, Virginia Fairfax and Loudoun counties formed Virginia’s first transportation improvement district (TID), which is a form of special assessment district. The Route 28 TID accelerated highway improvements that otherwise would have relied on pay-as-you-go funding. The improvements, conducted over decades and multiple phases, generally included widening and improvements to interchanges throughout the corridor. The TID encompasses 14,800 acres of land, approximately 14 miles in length, along Route 28 in the two coun- ties. A surcharge of up to $0.20 per $100 of assessed value is levied annually on the general property tax on commercial and industrial property within the TID. The billing, collection, penalties, and other procedures are the same as those for the general property tax. Project costs are funded by the Route 28 TID (75 percent) and Virginia Department of Transportation (DOT) (25 percent). To cover the Route 28 TID portion, several series of bonds have been issued, repayable from the TID revenue. To provide credit support to the bonds, each county covenants to make up any deficiencies in revenue to ensure debt service is paid. The TID is created pursuant to the Multicounty Transportation Improvement Districts Act (Virginia Code Section 15.2-4600 et seq.). A district is formed upon the joint petition of commercial and industrial landowners of at least 51 percent of the land area or assessed value of real property within the contiguous TID. The Route 28 TID joint petition was filed in 1987 and outlined the following: • Certain transportation improvements would be constructed in the TID. • The Virginia DOT would provide design, planning, and construction of improvements. • A special improvement tax would be imposed and collected by the counties on commercial and industrial property in the TID. • Revenue would be used solely for annual payments required under the Virginia DOT contract. The Route 28 TID, like all TIDs in Virginia, is governed by a nine-member commission—four each of the elected members of the Board of Supervisors of Fairfax County and the Board of Supervisors of Loudoun County plus the secretary of transportation of the Commonwealth of Virginia. The TID chairman is elected by and from among its members. The commission is advised by an advisory board of 12 taxpayer representatives. The Route 28 TID is an example of many forms of partnering. The two counties came together to form the TID. The landowners signed on via the petition and participated on the advisory board. The Commonwealth worked with the counties and the landowners to advance the project construction. In addition, the Common- wealth’s Northern Virginia State Highway Allocation bridged a funding gap in 1988 and 1989, when the TID saw declining property values. The public sector also partnered with the private sector to deliver a substantial portion of the project. In 2002, the Shirley Design Build Team was awarded the first Public–Private Transporta- tion Act project to be implemented in the Northern Virginia area by the Virginia DOT, which meant a public– private partnership would complete the remaining improvements in the corridor. Over multiple phases and projects beginning in 1988 and continuing through today, the TID has supported several hundred million dollars of improvements years before they would have been realized through traditional funding. The project made a significant difference in a corridor where a local match was needed to leverage federal funds. For additional information and references, please see Appendix B.

How Land Value Return Works 27 Levy Basis The basis for the levy is frequently the assessed value of the property (land and improvements) used for standard property taxation. The basis for the levy, however, can be other measures such as land value, frontage along the roadway, access, or other factors. Once the basis for the levy is determined, the geographic boundary of the benefit area must be established and the amount of the tax or fee set. The amount of the tax or fee can be set to recoup the full cost or a portion of the cost of infrastructure investment. Revenue The revenue for a special assessment district fee = basis for the levy (often property value in the benefit area) × tax rate. Typically, tax rates are expressed per $100 or per $1,000 (a millage rate) of assessed value (e.g., $2 per $100 or $1,000 of assessed value). Payments are made on a recurring basis with the dura- tion often based on the time required to achieve the total amount of desired revenue collection. Considerations • The rationale for the fee or tax level is accessibility of the property to the infrastructure, which creates unique and special benefits for nearby properties that are not available to properties outside the benefit area. The amount of the fee should be commensurate with the benefits. The basis for the fee is equally important. If the basis for the fee is land value, the fee will be propor- tionate to the benefit received and may encourage development within the special assessment district. If the basis is improvement value, sales revenue, or some other source, there is little or no relation to publicly created value. In such a case, the result would be a tax instead of a fee. • Special assessment fees or taxes can be imposed on select property types within the district. For example, the fee or tax could include charges on commercial and industrial property but not residential property, depending on the benefits anticipated as well as the jurisdiction’s policy goals. Care must be taken to avoid any violation of uniformity or equal protection requirements (for additional discussion of this topic, please refer to the section on the legal requirements for land value return in Chapter 4, “Funding Transportation with Land Value Return”). • Establishing district geographic boundaries (i.e., the benefit area) requires analysis of distance- or proximity-based benefits. • Many options exist for the basis of the fee or tax, such as a flat fee for all users; a graduated fee or tax based on distance, frontage, access, or value of property; or split valuation of land and improvements. • Generally, if special assessments are imposed to provide funding for a specific public facility, the legislative authority for their imposition requires that neither the property benefit, in a unique and demonstrable way, nor the assessment may exceed the direct benefit that accrues to the property. • Equity aspects can be built into fees or rates. • A special assessment district fee is a mandatory method. It implies that once adopted then the agency can unilaterally use the option to raise funds like gas taxes or other methods. Sale of Public Land or Public Air Rights Definition The sale of publicly owned land or air rights at market value is another land value return method. The market value price includes the value imparted to the land or air rights by nearby public infrastructure and publicly determined development limits such as zoning. Payment of Air Rights Owning land includes the right to use and develop the space above the land. The right to develop the space above the land can be bought and sold separately from the land.

28 Guidebook to Funding Transportation Through Land Value Return and Recycling the sale price is, therefore, a land value return method. This payment allows transportation facility owners to extract additional revenue when they identify that residential and commercial density has increased in the surrounding areas and created a high demand for additional space. (See Case Examples 4 and 5.) Levy Basis The basis for the levy is determined by terms of agreement for sale of property. Generally, payment is based on an agreed-upon value for the acreage or square footage sold. Revenue The revenue is calculated as the agreed-upon value of acreage or square footage sold. Payment is made one time, not on a recurring basis. Case example 4: Sale of Air Rights Project: Washington Bridge Apartments Location: New York City, New York The Washington Bridge Apartments, located between Wadsworth and Audubon Avenues and West 178th and 179th Streets in the Washington Heights neighbor- hood of Manhattan, New York City, were built in 1964 and were designed by Brown & Guenther. The complex of four 32-story buildings includes 480 rental units that straddle the Trans-Manhattan Expressway (Interstate 95), just west of the George Washington Bridge Bus Station. The complex was built with air rights sold to the developers by the City of New York. In 1960, in an attempt to get more middle-income housing built, New York City auctioned off air rights of a three-acre area near the George Washington Bridge for $1 million, and the four buildings were constructed. For additional information and references, please see Appendix B. Case example 5: Sale of Air Rights Project: Interstate 395 Capitol Crossing Location: Washington, D.C. The Capitol Crossing deck and development, covering three blocks between Massachusetts Avenue and E Street NW, will close a freeway-created gap that separates the central business district from the East End in Washington, D.C. The Capitol Crossing involves 6.8 acres and 2.2 million square feet of mixed-use devel- opment soaring over Interstate 395. Capitol Crossing will establish a concrete deck over the highway stretching from E Street on the south to Massachusetts Avenue on the north. It is the largest air rights project in the District of Columbia. It will also be known as the nation’s first ecodistrict. The project started in 2015. Property Group Partners acquired from the District the air rights above a three- block long recessed portion of the Center Leg Freeway, setting the stage for con- struction of the $1.3 billion Capitol Crossing project. For additional information and references, please see Appendix B.

How Land Value Return Works 29 Considerations • Sales may be relatively straightforward if there are comparable commercial transactions on which to base the sale price. Sales of air rights, however, can be more challenging because of the uniqueness of each location. • The development of air rights is most effective where a strong real estate market exists because of increased costs of development. • Below-market sale prices may be desired to achieve other development-related objectives. • Sales provide a one-time infusion of cash. Land value return through sale, therefore, is limited to the value imparted to the land by the transportation system at the time of sale. Increases in land value that result from future transportation investments will accrue to the new owner. • Implementation requires a clear land use and transportation policy framework to ensure consistency in implementation. • Any level of government that owns public land or air rights could utilize this method if it has the necessary power or the authority and provided that there is no accompanying restriction on the disposition or alienation of such land or air rights. • Sale of land or air rights is typically for nontransportation use, most often real estate devel- opment. However, transportation uses (e.g., decking or deck parks, intermodal uses such as transit stations) and nontransportation uses other than real estate development are also pos- sible (e.g., rest areas along rural roadways). These uses often involve partnering with private entities. • This method is a voluntary agreement between the agencies to partner. Lease of Public Land or Air Rights Definition Publicly owned land or air rights at market value may also be leased. The market value price includes the value imparted to the land or air rights by nearby public infrastructure and publicly determined development limits such as zoning. Payment(s) for the lease, therefore, constitute a land value return method. These payments allow transportation facility owners to extract additional revenue when they identify that residential and commercial density has increased in the surrounding area and created a high demand for additional space. (See Case Example 6.) Levy Basis The basis for the levy is determined by terms of agreement for the lease of property. Generally, payment is based on the market value for the acreage or square footage leased. Revenue Lease income is calculated as lease rate × square footage, acreage, or usable air rights leased. Payments are made on a recurring basis. Considerations • Leases may be relatively straightforward if there are comparable commercial transactions. Leases of air rights, however, can be more challenging because of the uniqueness of each location. • Air rights development is most effective where a strong real estate market exists because of the increased costs of development. • Below-market lease rates may be desired to achieve other development-related objectives.

30 Guidebook to Funding Transportation Through Land Value Return and Recycling • A long-term lease provides an income stream over several years, and long lease terms are typi- cal (e.g., 99 years). • Lease of land or air rights retains the potential for the government to benefit from future increases in value through renegotiated lease terms. • Leasing retains public ownership and control of the land or air rights. • Implementation requires a clear land use and transportation policy framework to ensure consistency in implementation. • Any level of government that owns public land or air rights could utilize this method if the government has the necessary power or authority and provided that there is no accompanying restriction on the disposition or alienation of such land or air rights. • Lease of public land or air rights is typically for nontransportation uses, most often real estate development. However, transportation uses (e.g., decking or deck parks, intermodal uses such as transit stations) and nontransportation uses other than real estate development are also possible (e.g., rest areas along rural roadways). These often involve partnering with private entities. • This method is a voluntary agreement between agencies to partner. Case example 6: Joint Development and Air Rights Lease Project: Copley Place Development over the Massachusetts Turnpike Location: Boston, Massachusetts The Massachusetts Turnpike provided access to and supported the revitalization of downtown Boston. The highway, however, also cut through the urban fabric of the city. Air rights development was viewed as a solution to mending the urban fabric of the city. Copley Place, a large-scale ($500 million) mixed-use joint development on a 9.5-acre site over the Huntington Avenue Turnpike interchange, broke ground in 1980. The Massachusetts Turnpike Authority leased air rights for 99 years to the private-sector developer, Urban Invest- ment and Development Corporation. Through the lease, the Turnpike Authority receives land value return revenue from the developer. The Copley Square Citizens’ Review Committee (CRC), formed by the Massachusetts Office of State Planning, provided feedback and design review input, although the Turnpike Authority provided final project approval. Development of air rights over the turnpike was legally exempted from local zoning, and, at the time, no regulatory framework existed from which to define by-right development, circumstances that added to the importance of the CRC’s role. There are numerous potential air rights parcels along the turnpike; however, no projects have been completed since the opening of Copley Place. For example, a proposed Columbus Center development failed in 2010 when developers pulled out because of economic infeasibility. In recent years, air rights developments have received a more formalized legal framework, first through a review process memorandum of understanding between the city and the Turnpike Authority and subsequently through legislation that subjects all turnpike air rights developments in Boston to local zoning and regulations. More recently, air rights development opportunities have started moving. Real estate market conditions are significant in determining whether air rights developments are feasible. Although the nexus between the transportation investment benefit and the value of air rights development is not direct in this case example, over the long term, the turnpike undoubtedly contributed to the overall growth of Boston by creating land scarcity that justified air rights development. For additional information and references, please see Appendix B.

How Land Value Return Works 31 Joint Development Fee and Interface Fee Definition Joint development is the cooperative undertaking of a development project by a public agency and a private developer. Joint development often includes the sale or lease of publicly owned land or air rights (discussed earlier in this chapter). In addition to proceeds from the sale or lease of publicly owned land or air rights, a joint development fee is paid by a private entity for the ability to develop publicly owned land or air rights that is spatially coincidental or adjacent to a transportation facility, or both. The transportation facility is commonly a transit station, but joint development is possible near other transportation facilities, such as highway overpasses, interchanges, or within right-of-way. In contrast with the simple sale or lease of public land or air rights, the public sector typically constrains or directs important aspects of the development. The sale or lease price to the private partner will reflect how those constraints or directions are expected to affect the revenue-generating potential of the development for the private partner. Highway joint development is physical development that uses land or air rights in the highway rights-of-way constructed jointly with the highway within its right-of-way. A similar definition can be used for transit joint development. (See Case Example 7.) Case example 7: Joint Development and Air Rights Lease Project: High Street Cap development Location: Columbus, Ohio The High Street Cap, also called the Cap at Union Station, is a $7.8 million retail development built on air rights above Interstate 670 (I-670) in Columbus, Ohio. The development provides 25,496 square feet of retail space with a Main Street design and reconnects downtown Columbus with the Short North neighborhood. In 1999, the developer and the city signed a memorandum of understanding stating that if the city obtained title to the air rights and permissions from the Ohio Department of Transportation (DOT) and the Federal High- way Administration (FHWA), the city would lease the air rights platforms to the developer. When I-670 was constructed, the state only acquired ground rights. After air rights titles from the parcels under the Cap were obtained, construction began in coordination with the I-670 widening project; thus, the complexity (and cost) of the air rights construction were reduced. The Cap opened in 2004. Under federal law, development within right-of-way is permitted if the development does not interfere with highway operations, maintenance, or safety and fair market value is obtained for federally acquired land or air rights (23 Code of Federal Regulations 710). Federal funds were spent to acquire this real estate as part of the initial construction of I-670; therefore, FHWA sought to ensure appropriate payment for its use. Determining fair market value, however, is difficult. While there is a fair market price for nearby commercial land, air rights platforms come with FHWA restrictions and risks not associated with typical development sites. The developer argued that the restrictions created risks that jeopardized the economic viability of the project. To alleviate this risk, the developer proposed a base rent combined with a profit-sharing agreement. FHWA agreed to this arrangement. Such unconventional agreements, however, are the exception. Under the agreement, the developer leases the air rights platform from the city for $1 per year and 10 percent of ongoing profits from the leased retail space. If the developer sells the buildings, the city receives 10 percent of the sale price. In the easement agreement, the city gave the Ohio DOT certain operational guarantees (e.g., the Ohio DOT can close down the Cap in emergencies) and the Ohio DOT imposed design constraints, including limiting access to the backs of the buildings along I-670. Notably, the city abated 100 percent of the property taxes for 10 years. Tenants were ultimately willing to pay up to a 30 percent premium for the retail space. For additional information and references, please see Appendix B.

32 Guidebook to Funding Transportation Through Land Value Return and Recycling An interface fee is a similar fee paid by a private entity to create or maintain a direct connec- tion to a transit facility that enables access from private property without first going into public right-of-way (e.g., an entrance from a private building into a transit station). Joint development fees and interface fees are land value return methods if the amount of fee charged represents the market value of the development or connection rights. Levy Basis The basis for the levy is determined by terms of agreement. Payment should be based on the agreed market value of the development rights or the market value of an infrastructure interface or both. Revenue The amount of the fee varies according to the specifics of the project and agreements. Depend- ing on the terms of agreement, payment can be made one time or on a recurring basis. Considerations • Joint development agreements, which establish and cover all aspects of the real estate develop- ment and possibly operations, can be complex. • As outlined in the agreements, the parties share the cost, revenue, and financial risk of the transportation investment and real estate development. • The sale price or lease rate may deviate from the typical market value of the land or air rights, to the extent that it reflects any special conditions, restrictions, and requirements of the public sector. • Revenue from joint development is site and project specific. • Joint development is most effective where a strong real estate market exists. • This method is a voluntary agreement between agencies to partner for joint development with private entities or other. Land Value Return–Like Methods Transportation Utility Fees Definition Transportation utility fees are ongoing fees to pay for the operation and maintenance costs of a transportation facility or system. As the tool evolves, it may be used to fund capital costs as well. The fee is paid by real estate occupants (whether they are owners or tenants) and is based on the intensity and type of land use (commercial or residential) at the location. Transportation utility fees may be imposed jurisdiction-wide or within a benefit area. Transportation utility fees are calculated on the basis of the character and density of property occupants and on assumptions about their utilization of transportation resources (e.g., roads, transit, parking). For example, the Institute of Transportation Engineers conducts surveys and develops trip generation rates for different types of land use activities (e.g., retail stores, theaters, apartments, restaurants, offices, single-family homes). (See Case Example 8.) Given the fee’s basis on the estimated utilization of transportation infrastructure (as opposed to actual use), transportation utility fees are a cost-reimbursement approach, or land value return–like. A transportation utility fee must demonstrate a special benefit from the nearby transportation infrastructure, and the fee must be proportionate to the costs imposed by the payers.

How Land Value Return Works 33 Levy Basis The levy basis is determined by the fee level and the basis for measuring the intensity of trans- portation system use, such as • Number of trips generated; • Length of street frontage (feet or some other measure); • Number of units (apartments, condominiums, offices); • Square footage of building space; • Number of employees, residents, visitors, customers; • Amount of employee compensation (e.g., total payroll, average compensation per employee); • Value of sales (e.g., average annual); and • Number of parking spaces. Revenue The revenue for a transportation utility fee = basis for levy × tax rate. Payments are made on a recurring basis. Case example 8: Transportation Utility Fee Project: Pavement maintenance Location: Oregon City, Oregon Oregon localities have authorization to implement transportation utility fees. Transportation utility fees are implemented at the local level for local projects. As one example, Oregon City’s pavement maintenance utility fee—a transportation utility fee—was adopted in 2008. The monthly charge is collected from residences and businesses within city limits on the basis of the number of trips a particular land use generates. The revenue is collected through the city’s regular utility bill and is designated for maintenance and repair. Revenue is not used to construct new infrastructure or to expand or enhance the transportation system. Residential payers of the transportation utility fee are charged for maintaining local streets, and nonresidential payers of the transportation utility fee (e.g., commercial properties) are charged for maintaining arterials; maintenance of collector streets is shared equally. Through this fee, the costs of maintenance needed to keep the street system operating at an adequate level are shared by residents and businesses within the city. The fee is based on how many trips are considered average for the property according to data developed by the Institute of Transportation Engineers, whose Trip Generation report provides guidelines for how proposed land uses might add traffic to a local street system. On average, one housing unit is estimated to generate nine to ten one-way vehicle trips each weekday. Some houses have fewer trips, and others have more, but for a larger neighborhood with a range of family sizes, income levels, number of licensed drivers, and number of registered cars, the average is a good indicator of overall trip intensity. The fee was phased in over several years to lessen the immediate burden. Single-family residential properties paid approximately $4.50 per month in the first year. The fee increased by $1.50 per month for each of the next three years, with a $2.00 per month increase the fifth year. Multifamily residential units pay about 70 percent of the single-family fee. Nonresidential bills depend on the type and size of the development. Five business groups were established on the basis of similar trip rates per square foot of gross floor area. In the first year, business charges ranged from $0.154 to $7.70 per square foot of gross floor area, depending on the type of use and trip generation. This range gradually increased to $0.384 to $19.20 per square foot of gross floor area over the following four years. For additional information and references, please see Appendix B.

34 Guidebook to Funding Transportation Through Land Value Return and Recycling Considerations • Imposition prior to construction of the transportation facility may reduce the attractiveness of locating near the transportation facility. • Demonstration that the fee is associated with a particular benefit and that that benefit is not shared by members of community who are not being charged may be required. • Fee revenue must be dedicated to expenditures reasonably related to transportation investment. • Legality of transportation utility fees depends on the validity of the basis for approximating usage of the transportation facility. • If imposed only within a benefit area, transportation utility fees may discourage location in the area (i.e., near the transportation facility). The value for locating near the transportation facility, including the reduced costs associated with easier access, is already included in the rent or purchase price. The fee would add to the rent or purchase cost. The additional cost could put the business at a disadvantage with competing firms not located near the transpor- tation facility. • The transportation utility fee is a mandatory fee. Tax Increment Financing Definition Tax increment financing is a mechanism for capturing all or part of future tax revenue increases above an established base level within a designated geographic area that will benefit from a trans- portation investment. Tax increment financing is widely used in the United States and may be referred to by names such as “tax allocation districts,” “enhanced infrastructure financing dis- tricts” (in California, these are regional increment finance districts and are special districts), “tax increment reinvestment zones,” and “transit revitalization investment districts.” In a few cases, tax increment financing is considered for transportation alone. The tax increment revenue is depicted in Figure 3-1. A tax increment financing district can collect increases above a base level in a variety of existing taxes, including property taxes (from increased values or increased density), sales taxes, hotel and restaurant taxes, amusement taxes, and even income taxes. Given that growth in development also can increase demand for munici- pal services such as schools and police and fire protection, it is possible to structure tax incre- ment financing so that only a portion of the increased revenue is dedicated to recovering the cost of the infrastructure improvement. Figure 3-1. Tax increment revenue (TIF = tax increment financing).

How Land Value Return Works 35 As tax increment financing revenue results from infrastructure investment, it is often charac- terized as land value return. Property owners and businesses within the tax increment financing district pay the same level of taxes (and at the same tax rate) that they would in the absence of a tax increment financing district. Instead of all revenue going to the jurisdiction’s general rev- enue, however, a portion that exceeds the pretransportation project (base level) amount is dedi- cated to pay for the new infrastructure. Tax increment financing, therefore, is best characterized as revenue segregation. (See Case Example 9.) Case example 9: Tax Increment Financing Project: Roadway improvements Location: El Paso, Texas In Texas, municipalities may establish transportation reinvestment zones (TRZ) to fund projects that are, like tax increment finance zones, solely for transportation. The municipality designates a contiguous zone in which it will promote a specified transportation project. Once the zone is created, a base year is established, and the incremental increase (or a portion of the increase) in property tax revenue accruing to the municipal- ity is collected from within the TRZ and used to partially fund the project’s capital cost. The proposed zone must be deemed underdeveloped, and the TRZ must (a) promote public safety; (b) facilitate the improvement, development, or redevelopment of property; (c) facilitate the movement of traffic; and (d) enhance the local entity’s ability to sponsor transportation projects. TRZs can be established by municipalities only, not by counties. A municipality could use TRZ revenue to fund its share of a county or state project. The City of El Paso adopted TRZs to generate revenue for $403 million in projects identified in its 2008 compre- hensive management plan. The value-creating investments included interchange improvements, new connec- tions between existing roadways, new roadways, safety and pedestrian access improvements, and aesthetic and transit improvements to several corridors in the city. Funding sources for the investments included motor fuel tax funds, tolls, and TRZ revenue. Local partners involved in planning, funding, or otherwise supporting implementation of the TRZ projects included the City of El Paso; the Camino Real Regional Mobility Authority; the El Paso Metropolitan Planning Organization; the Texas Department of Transportation, El Paso District; and local property owners. This is an example of voluntary agreement type of tax increment financing between agencies. It is also a form of special district. For additional information and references, please see Appendix B. Levy Basis The benefit area and the existing tax(es) of which a portion of the increase will be dedicated to the transportation investment are determined first. Then the base tax revenue level is established. Revenue The revenue for tax increment financing is calculated as (current tax revenue) − (baseline tax revenue) × percentage of increment dedicated to transportation investment. Payments are made on a recurring basis, with the duration often based on the time required to achieve the total amount of desired revenue collection. After the desired revenue collection is achieved, all of the tax revenue is again allocated to the general budget expenses of the imple- menting jurisdiction.

36 Guidebook to Funding Transportation Through Land Value Return and Recycling Considerations • Establishment of a tax increment financing district does not require imposition of new taxes or fees. As a result, the taxpayer burden does not change. • Tax increment financing revenue is speculative and can fall short of projections as a result of reasons both related and not related to the infrastructure investment (i.e., changes in general economic conditions, delayed or incomplete development, decline in assessed property val- ues, or abatements and incentives). • Use of tax increment financing revenue as a repayment source for debt could be challenged by credit concerns related to the speculative nature of tax increment financing unless additional credit support is provided (i.e., a pledge of another source of revenue to debt repayment). • When tax increment financing is implemented, consideration should be given to tax abate- ments, exemptions, or other tax incentives, as these may reduce revenue increases over the baseline level. • Costs associated with municipal services—police, fire, sanitation, education—will rise as devel- opment occurs and must be covered from the percentage of the increase not dedicated to the investment or other general tax revenue of the jurisdiction. • Establishing tax increment financing districts can fragment the tax base, especially as tax increment financing districts grow in use and potentially overlap with other taxing districts, thereby restricting the availability of tax revenue for municipality-wide investments. • State law could require a finding of “blight” as a precursor to implementation; definitions of blight vary. • Generally, tax increment financing districts are associated with a set geographic boundary, although jurisdiction-wide tax increment financing districts are possible. • Depending on the context these districts are either mandatory or voluntary agreements with local entities. Development Impact Fees Definition Development impact fees are one-time charges intended to cover costs incurred by the public sector in providing needed infrastructure, including transportation to serve a new development. Agreement to pay these fees is a condition for obtaining development permits. Development impact fees are imposed when infrastructure is not sufficient to support the proposed development, and the amount of the fee is based on increases in public infrastruc- ture spending associated with private development. These fees are, therefore, more accurately described as cost reimbursement or land value return–like, not land value return. (See Case Example 10.) Levy Basis The amount of a development impact fee is required to be (a) related to and (b) proportional to the anticipated additional public infrastructure costs associated with and required by a pro- posed new private development. This “rational nexus” test demonstrates a clear connection between the new development and the need for new public facilities. Development impact fees are typically established through completion of a study that demonstrates a relationship between the size, character, or value of a private development and the cost of various public services the development requires. The impact area is typically defined as the development in question, and rates for each required public facility or service are applied to the size or value of the proposed development to compensate for the cost of the new public infrastructure investment required to serve the development.

How Land Value Return Works 37 Case example 10: Development Impact Fee Project: Transportation system development charge Location: Portland, Oregon Portland, Oregon, imposes a transportation system development charge (TSDC), which is a development impact fee. The city first adopted a citywide TSDC by Ordinance 171301, effective July 1997. System develop- ment charges (SDCs) for transportation, sewers, or other infrastructure are authorized by Oregon Revised Statutes 223.297–223.314. The statutes outline the types of charges that are considered to be SDCs and impose a variety of requirements on governments that impose SDCs. Provisions that directly affect calculation of SDC rates require the City of Portland to • Adopt a capital improvement plan to designate capital improvements that can be funded with SDCs; • Set forth a methodology for the SDC; • Calculate the SDC as a reimbursement fee or an improvement fee or a combination thereof (a reimburse- ment fee is associated with capital improvements already constructed or under construction when the fee is established, for which the local government determines that capacity exists; an improvement fee is associated with capital improvements to be constructed); and • Limit SDCs to five types of capital improvements: transportation, water, sewer, drainage, and parks and recreation. In Portland, each development type pays a one-time TSDC. Revenue can be used for the capital cost of public facilities, but not for operating or maintenance expenses. The rate for transportation is based on how many trips the new development is expected to create. The TSDC helps to fund the infrastructure improvements that are needed to accommodate new growth. The Portland Bureau of Transportation oversees the rate methodol- ogy, which is based on the most current data about person trip generation in two primary ways: 1. Base rates on system value per trip calculated both for the existing transportation system and for a 10-year list of eligible projects and 2. Base rates on the total number of person trips generated by development within the city; this would calculate the cost of a person trip within the current transportation system and use this cost as the maximum rate that could be charged per future trip to pay for the 10-year list of eligible projects. The city identified a list of growth-oriented, multimodal transportation improvement projects that will guide the spending of TSDC revenue over the next 10 to 20 years. About one-quarter of the projects’ costs, repre- senting that portion of new capacity projects that will serve new transportation trips, will be paid with TSDC revenue. The remainder of project costs will be paid with other revenue, in part because a portion of needed investments addresses existing transportation needs, and TSDCs cannot be used for those. If the city does not collect as much money as anticipated, some projects will not be built, or the city council may choose to update and renew the project lists. The city will ultimately determine which projects to fund as part of its annual Capital Improvement Plan process. TSDC revenue can only be used for new capacity improvements. Interestingly, the City of Portland also recreated a TSDC overlay area in the North Macadam urban renewal area. TSDC overlay rates in this area are in addition to the citywide rates. The overlay area uses the same methodology as the citywide program. The main differences are that the overlay area has its own list of projects that are the basis for the overlay rates, and the rates only consider trips to and from the North Macadam district. For additional information and references, please see Appendix B.

38 Guidebook to Funding Transportation Through Land Value Return and Recycling Revenue The amount of the fee is the total of benchmarked public infrastructure spending across all areas of public investment to cover system expansion costs including schools, water and sewer, police and fire protection, roadway capacity, parks and recreation, and other areas shown to be lacking the capacity to accommodate new development. Payment is made one time, not on a recurring basis. Considerations • Completion of a detailed study, which could include a traffic study, may be required to estab- lish the – Inadequacy of the existing infrastructure (by type of public service) to support the new development and – Appropriate fee (per square foot of space by land use category) to compensate the govern- ment for serving the new development. • Development impact fees can help ensure that the capital costs of new public facilities are not shifted to taxpayers outside the new development. • Development impact fees can be imposed jurisdiction-wide on every new development or can be applicable only in specific geographic areas within the jurisdiction. • Development impact fees can help avoid premature development of areas that lack infrastruc- ture by adding the cost of infrastructure to the cost of the development. • Developers can pass on the cost of development impact fees in the form of increased rent or purchase prices to tenants or buyers within new development. • Variances in fee levels across jurisdictions can influence development patterns and location decisions. • A jurisdiction’s use of fee revenue is restricted to the public facilities that will be used or affected by occupants of the new development. • Development impact fees can face resistance from development interests, as these fees increase the cost of the development. • Historically, development impact fees have been used by local governments to support localized development projects. With appropriate legal authorization, a state may be able to impose a development impact fee if a development requires investment in state transporta- tion facilities. • These are mandatory fees. Exactions and Proffers Definition Exactions and proffers are one-time negotiated requirements placed on a private developer to provide in-kind services, property, or payment as a condition for development approval where existing infrastructure, including transportation, lacks the capacity to accommodate new devel- opment. Exactions and proffers differ from development impact fees, which are cash payments determined by a legislated formula. They can take the form of private provision of land or con- struction of transportation or other infrastructure facilities. The rationale is similar to that of development impact fees. Exactions and proffers are intended to cover costs that would otherwise be incurred by the public sector in providing needed infrastructure to serve a proposed development. Exac- tions and proffers are applied very locally to site-specific improvements and are negotiated on a case-by-case basis. The legal requirements for exactions and proffers are very similar to those required for development impact fees. The exaction or proffer must be related to and

How Land Value Return Works 39 proportional to the infrastructure requirements created by the proposed development. Exac- tions and proffers are more accurately described as cost avoidance rather than as land value return. (See Case Example 11.) Levy Basis The basis of the levy is case-by-case determination within the framework of infrastructure requirements that are created by and proportional to a proposed new development. Case example 11: Proffer Project: Specific infrastructure needs Location: Loudoun County and City of Chesapeake, Virginia In Virginia, proffers are incorporated into rezoning procedures and stipulate how the property may be used or developed. The intent of the proffer is to lessen the potential negative effects of unrestricted rezoning. In some instances, the proffer may include cash contributions to the locality. Cash proffers generally are used to offset the impacts of a particular development by providing funding for new roads, schools, or other public facilities and services. In Virginia, cash proffers constitute either • Money voluntarily proffered subject to rezoning and accepted by a locality pursuant to the authority granted by §15.2-2298 or §15.2-2303 of the Code of Virginia or • Payment of money made pursuant to a development agreement entered into under the authority granted by §15.2-2303.1 of the Code of Virginia. In 2016, the Virginia General Assembly adopted legislation regarding proffers and residential rezonings (§15.2-2303.4 of the Code of Virginia). Under the new legislation, localities are prohibited from requesting or accepting any proffer from residential rezonings that is not related and proportional to the impact. Previously, courts required only a reasonable nexus between the impacts of the proposed use and the conditions proffered to mitigate those impacts. Further, proffers related to offsite improvements (all cash proffers are considered offsite) are deemed unreasonable unless they address an impact to an offsite public facility such that • The proposed use creates a need or identifiable portion of need for a public facility improvement in excess of existing public facility capacity and • The proposed use receives a “direct and material benefit” from a proffer for a public facility improvement. The largest share of cash proffer revenue expended in 2016 went toward roads and other transportation improvements (50.3 percent of total expenditures), and proffers are sometimes used as a local match to Virginia Department of Transportation (DOT) funds. Following are two select examples of localities’ approach to proffers: • Loudoun County. More than 75 percent of new streets in Loudoun County are developer funded. The adopted county transportation plan is used to analyze development impact statements and to request fair- share contributions, which often include road improvements. Cash proffers are sometimes used as a local match for Virginia DOT funds. • City of Chesapeake. Chesapeake’s $345 million Dominion Boulevard Improvement Project included several interchanges and major bridges. A companion project, fully funded by the city, widened an adjacent 2-mile section of Dominion Boulevard. Two intersections, one in each of the projects, were previously widened as development proffers, so although lanes might need to be reconfigured, the right-of-way exists. As part of the city’s comprehensive plan, the master transportation plan shows developers what will be required in terms of right-of-way dedication. For additional information and references, please see Appendix B.

40 Guidebook to Funding Transportation Through Land Value Return and Recycling Revenue Case by case, revenue can be cash or in-kind goods. Contribution or payment is made one time, not on a recurring basis. Considerations • To impose an exaction or proffer, it must be demonstrated that the facility provided by the exaction would otherwise be required of and borne by the public sector and that the exaction is not greater than what would be required to meet the needs of the proposed private devel- opment. For example, a jurisdiction could require a developer to provide a new signalized intersection and dedicated turn lanes where the development meets a nearby arterial road, but could not require the developer to build a new highway interchange a few miles away that would benefit other properties as well as the new development. • Completion of a detailed study, which could include a traffic study, may be required to estab- lish the inadequacy of existing infrastructure (by type of public service) to support the new development. • Exactions and proffers can help ensure that the capital costs of new public facilities are not shifted to taxpayers outside of the new development. • Exactions and proffers can be imposed jurisdiction-wide on every new development or can be applicable only in specific geographic areas within the jurisdiction. • Exactions and proffers can help avoid premature development of areas that lack infrastructure by adding the cost of infrastructure to the cost of the development. • Developers can pass on the cost of exactions or proffers in the form of increased rent or pur- chase prices to tenants or buyers within new development. • Variances in exactions and proffers across jurisdictions can influence development patterns and location decisions. • Exactions and proffers can face resistance from development interests, as these measures increase the cost of development. • Historically, exactions and proffers have been used by local governments to support localized development projects. With appropriate legal authorization, a state may be able to impose exactions and proffers if a development required investment in state transportation facilities.