Funding Transport Infrastructure Development Through Value Capturing: A Game Theoretical Analysis

Abstract

As already mentioned in Chap. 2 of this book, the development of major transportation infrastructure and location development (i.e. residential areas, industrial estates, office and retail parks) increasingly takes place in an integrated way. An integrated approach may not only contribute to a better, more sustainable spatial outcome of the development process (from the society’s point of view), but it might also be more efficient, although the increased complexity may have an unintended counter effect on efficiency as well (Van der Krabben et al. 2007). Moreover, in financial terms, the integrated approach also provides new opportunities. Traditionally, the public investments in transportation infrastructure are based on tax revenues. Usually, the according budgets available for transportation infrastructure development are limited and – almost by definition – not sufficient to develop all desired infrastructure. In looking for alternative funding for transportation infrastructure development, governments should try to find a way that allows for efficient economic performance, financial justice, and social facility. When transportation infrastructure and location development are combined, value capturing methods may, to a certain extent, offer an opportunity to achieve those goals (Banister and Berechman 2000; Batt 2001). Here, we define value capturing as a process by which all or a portion of increments in land value, that resulted from the installation of special public improvements or any other actions attributed to the ‘public effort’, are recouped by the public sector and used for public purposes (Smolka 2000; Smith and Gihring 2006). In Chap. 3, Debrezion et al. paid attention to the issue of value capturing especially on how to calculate the increment in property values caused by the infrastructure development, or to be specific a train station. However, there are still questions about whether value capturing might be a feasible method to finance infrastructure development projects and also about the explanation of decision-making process with respect to the implementation of value capturing methods.