Value capture strategies and financial models
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Transcript of Value capture strategies and financial models
URBAN INFRASTRUCTURE: FULLING ECONOMIC DEVELOPMENT AND ADAPTING TO CLIMATE CHANGE
Gabriel Nagy Development Advisor and International Consultant Architect M.Sc.. PMP. Planning and Urban Economics
Quito, March 08, 2016
FINANCIAL MECHANISMS AND VALUE CAPTURE STRATEGIES: FUNDING URBAN TRANSFORMATION PROJECTS (INTEGRATED AND COMPREHENSIVE URBAN OPERATIONS)
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Alternative delivery model (PPP) delivering goods, services and urban social infrastructure
Index
Financial instruments Land Value Capture Concept Land Value Capture Strategies Municipal Payout Structure Alternative Supply Model: Public Private Partnership (PPP) PPP regulatory framework and processes ( Colombia ) Urban Transformation Projects (UTP) Concept UTP General Structure and Governance PPP Best Practices Project Integrator and Land Readjustment: An Alternative to Land Acquisition for Land
Assembly Disclaimer
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General Benefit Financial Instruments *
The general public is the beneficiary and financer of urban transformation projects
Instruments:
Subsidies (transport , housing, energy)
Property Tax
Climate Change related instruments
Note: Sustainable Urban Transport Financing from the Sidewalk to the Subway http://dx.doi.org/10.1596/978-1-4648-0756-5 3
Financial instruments Direct Benefit
Benefits received by an specific group
Instruments:
Rates ( parking, congestion , transportation ) tolls
Expense , Licenses , Assignments and Rights (utilities , roads , construction)
Taxes and surcharges (vehicle , distance , fuel , housing, area)
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Indirect Benefit Financial Instruments
Benefits charged to players who receive indirect benefits from urban transformation projects investment
Instruments:
Exclusive negotiation rights / concessions
Advertising and urban furniture
Employer contributions ( ' subsidies ' private sector)
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Land Value Capture Concept
Incorporation of rural land to urban sprawl floor , or consideration of rural land as suburban .
rezoning
The authorization of a better use of use of the building , either by raising the occupancy rate or the rate of construction, or both at once .
Public investment in goods and services.
Increase in private
property value
6Note: Utilizing Value Capture for Transportation Funding. SB Friedman Development Advisors. http://www.sbfriedman.com
Land Value Capture Strategies
Value capture comprise several mechanisms that have the same concept but with important differences in the design and implementation base.
The fundamental principle behind the recovery strategies of capital gains is that those who benefit from improvements through Urban Transformation Projects (whether or not users one or more service) must pay the respective investments.
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Land Value Capture Strategies Strategies:
Land Value/Betterment Levies Tax Incremental Finance - TIF Special Assessment Participation in Capital Gains Utility Fees including transportation Acquisition and sale of land under specific conditions Land readjustment schemes Development impact fee Land banks Negotiated exactions Joint development Construction and air rights Rezoning
8Note: Utilizing Value Capture for Transportation Funding. SB Friedman Development Advisors. http://www.sbfriedman.comNote: Sustainable Urban Transport Financing from the Sidewalk to the Subway http://dx.doi.org/10.1596/978-1-4648-0756-5
RECEPTORS
Fig. 1 Land Value Capture Financing Mechanism
GENERATORS
Land Value Capture Strategies Land Value Capture Financing Mechanisms
Land Value Taxes/betterment levies Acquisition and sale of land under specific conditions
Joint development Construction and air rights
Tax increment financing Land readjustment schemes
Rezoning
Special assessment Development impact fee
Utility fees including transportation Land banks
Participation in Capital Gains Negotiated exactions
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Municipal Payment Structures
Disbursements Debt instruments Compensation funds Construction and Development Rights Participation of Capital Gains Promissory notes Bonds Property Taxes such as the Socio-Economic Stratification Representative titles of Rights Construction TIF
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Public Private Partnership - PPP
economies of scale, performance -oriented efficiency due to their obligation to reward shareholders
regulatory flexibility
knowledge and extensive experience in complex industrial and commercial activities
combine safety and public sector commitment with the experience and efficiency of the private sector
It distributes the risks and responsibilities between the two parties , according to their capacity to manage them ( World Bank 2013 )
They are not a source of funding, but a way to raise funds
the benefit is general, therefore , who pays is the general public
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t1
t2t1
Long Term
30 yearsOPEXCAPEX
Short Term
Fig. 2 Law 80/93 and 1150/07 vs. Law 1508/12
30 yearsOPEXCAPEX
Short Term Long Term• RISKS• Operation• Accessibility• Maintenance• Exchange Rate• No payment leasing fee
Future Commitments
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Public Private Partnership - PPP
RISKSLand AcquisitionDesignTechniciansPurchasesFinancingConstructionLegal
Contractual Process Public and Private Initiative (Colombia)
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Processes and Timing – Prefeasibility (Colombia)
REGISTRO RUAPP
Registro (5 días)
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Processes and Timing – Feasibility (Colombia)
REGISTRO RUAPP
Registro (5 días)
Máximo 2 años
PUBLICACION SECOP
Dentro 6 meses desde concepto DNP y por 2 meses máximo 4
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Concept Urban Transformation Projets UTP
Assembling developed or underdeveloped land
Increase supply of environmental goods, transport infrastructure , housing and urban services
innovative supply models with greater private sector participation
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Why Cities Need Urban Transformation Projects?
Manage and control urban sprawl Provision of infrastructure Management densities and public space
Fiscal Sustainability Strengthening local tax base Increasing or retaining local jobs Local economic development Systems and GIS
Social sustainability Improving connectivity for people, places , destinations and means Building social housing Building community facilities safer communities Infill development projects
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Why Cities Need Urban Transformation Projects?
Environmental sustainability Generating environmental protected areas Addressing environmental issues Mitigating natural hazards Resilience Greenfield development
Sustainability infrastructure and services Building infrastructure Building utilities and basic services Recovering and preserving architectural heritage Systems and GIS
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Contratista
Monitoring & Evaluation
Equity
XXXXXXXANIFDN
FINDETER
Shareholder
Shareholder
Shareholder
Shareholder
INCOME
CONTRIBUTIONS
CONTRACTS PAYMENTS
Fig. 3 General Structure – Land Assembly and Urbanization
PTU’s General Structure and Governance
DEBT
DevelopersLots for saleRightsInstruments Direct BenefitIndirect Benefit instruments
MoneylenderLoans and grands from international organizationsClimate Change related instruments
Integrator(Single Purpose Vehicle)URBAN TRANSFORMATION
PROJECT
Land managementMaster Plan and ZoningStructuring project:Pre -feasibilityFeasibility
PAYMENTS
Best Practices - Public Private Partnerships
Include all stakeholders in planning process
Set priorities Area of intervention Project Type
Set acquisition model
Identify resources and set timing Financial sources Other potential sources and mechanisms
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Best Practices - Public Private Partnerships Get to know all partners and stakeholders
Assess impact and benefits
Economic feasibility Market analysis Cash flow and projections extraordinary costs Public infrastructure included in private project public goods desired risks
Review financial ‘gap’
Measure risk, returns and income
Assess community goals
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Concepto del Integrador Inmobiliario
Conduct Proactive Pre-Development Allows early negotiations on Master Plan and Zoning Activities Predictability of cost and time Economies of scale Performance -oriented efficiency due to their obligation to reward shareholders VxD commitment during the project Leverages on and maximizes limited local resources Captures financial and management capacity facilitates investment Municipality maintains influence Efficiency and lower costs in hiring Generates high residual value
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GOODS AND SERVICES – SOCIAL INFRASTRUCTURESUPPLY MODELS
Land Bank and Urbanism Goods and Services
Deliverables Advantages Model Model Advantages Deliverables
lands Urban works Capital Gains Rights
Predictability of cost and time
VxD commitment during the project
Maximize limited local resources
Capture financial capacity and management of the private sector
It facilitates investment
The municipality maintains influence
Efficiency and lower costs in hiring
Generates high residual value
INTEGRATOR PARTNERSHIPS Collaboration between the public and private sector
Greater assurance that the projects go forward
Health Education Housing Roads Infrastructure Others
Private Developer Scheme
Competitive Partnership
Local Funds Contributions
Incremental Partnership
Private Finance Traditional Public Procurement
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Real Estate IntegrationPrivate Initiative in Public Lands
SUCCESSFUL DEVELOPMENT
Single Purpose Vehicle Fiduciary Agreement Master Plan Structuring Individual Infrastructure Projects
Address Development Readiness of Site Evaluate Proposal
Prepare Proposal - Feasibility Select
Prioritize and Choose Acquisition Model Unsolicited Proposal -
Prefeasibility
Solicit Proposals
Negotiate Agreement Conduct Community Review
24Note: Utilizing Value Capture for Transportation Funding. SB Friedman Development Advisors. http://www.sbfriedman.com
Real Estate Integration (Land Readjustment)Private Initiative in Private and Public Lands
Land Status Valor M2 Area M2 Total Land Value
Input land 100 USD 1000 100,000 USD
Post-development land 200 USD 600 120,000 USD
Compensation + landowner - Municipality 20,000 USD
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Land Value Capture - Example of Land ReadjustmentRedistribution by Relative Value Method
Note: Levering Land to Enable Urban Transformation. The World Bank. January 2013
DISCLAIMER
The opinion and recommendations in this document are exclusive responsibility of the author. This are the author’s notes on Housing Finance, Housing and Community Development issues.
This information sheet is not to be interpreted as an advertisement of a public offering. This briefing is being delivered on a confidential basis. Any reproduction or distribution in whole or in part, or the disclosure of its content, without a prior written content is prohibited and all recipients agree they will keep confidential all information contained herein and not already in public domain.
For more information please contact Gabriel Nagy at [email protected]
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THANK YOU
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