A Value-Capture Strategy for Transportation in Texas

Michael Morris, director of transportation for the North Central Texas Council of Governments (NCTCOG) that serves as the region’s metropolitan planning organization (MPO), does not mince words when he describes the current effort to build a transit line along a right-of-way called the Cotton Belt. “The Dallas/Fort Worth region is working on an innovative funding initiative that has the potential of changing the way transportation is funded in our country and making Dallas/Fort Worth a more sustainable region,” he says.

Map of the new “Cotton Belt” transit line.

The Cotton Belt is a 62-mile (100-km) corridor that starts in southwest Fort Worth and connects to that city’s downtown, the Fort Worth Medical Center, Texas Christian University, the Stockyards, growing suburbs like Grapevine, the Dallas/Fort Worth (DFW) International Airport, the north Dallas suburbs, and the campus of the University of Texas at Dallas, terminating in Plano, where light-rail service already exists.

The T—the transit authority on the west side of the Metroplex—is applying for, and likely to use, the traditional Federal Transit Administration (FTA) New Starts program for the western portion of the line in Fort Worth. But that funding will be insufficient. To accelerate the project from a projected 20 years out to the next few years, NCTCOG is seeking alternative financing and funding—some of it creative—in order to raise the $1.5 billion or so needed for the entire line.

NCTCOG has selected Partnership for Livable Communities, LLC, led by Scott Polikov of the Fort Worth–based Gateway Planning Group, Inc., to lead the Innovative Financing Initiative (IFI). The financing will be driven by a value-capture strategy to raise private equity based partly on real estate development. It will also rely on other economic development that will occur as a result of the access the line provides through the heart of the Metroplex as it links cities, universities, DFW Airport, and the existing DART light-rail system. “The key is to generate revenue from a sustainable economy in the corridor to repay a private investor for the design, construction, and operations of the line over time,” explains Polikov. “This approach relinks the economics of transportation along a corridor with the economy of that corridor.” Polikov underscores that success in the Cotton Belt corridor will set the stage for extending similar lines to Frisco, McKinney, Mesquite, and other communities, creating hundreds of miles of rail transit in DFW.

Scott Polikov

The IFI team has narrowed 100 possible revenue sources down to about ten in order to provide funding to cover construction costs and generate operating revenue for the Cotton Belt, such as enhanced fare box through “smartcard” technology, but also tax increment financing (TIF) and on-site revenue generated by advertising, naming rights for stations, and fiber-optic access leases; and alternative financing, such as perhaps concession-based real estate development rights on key adjacent parcels.

A fundamental part of the planning for the Cotton Belt, in lockstep with innovative financing, is that any development along the line will follow traditional neighborhood development principles. Form-based planning and coding to facilitate walkable urbanism will apply not only to the traditional quarter- or half-mile areas around the station areas, but also to a substantially larger context to harness suburban growth into sustainable neighborhoods.

“The much bigger story is sustainability,” says Morris. “We have to start measuring rail not just by trips, but how it changes the land use fabric.” A person may take ten trips a week on rail to get to work, but a walkable community that is developed adjacent to that rail line means that person may make 40 trips per week on foot instead of in a car. “The indirect benefits are greater than the direct benefits.”

Polikov thinks of Morris as the director of sustainable development patterns rather than just the director of regional transportation. The attitude of the NCTCOG—in elevating the discussion to sustainable land use rather than simply determining transportation improvements—raises the bar for other regional governments in the United States. The key will be whether these other governments can indeed create mechanisms not only to accelerate the rail transportation improvement, but also to encourage sustainable development in the process.