Leveraging property tax to finance transit infrastructure

Millennium Line Broadway Extension

Existing bus services along the Broadway corridor, one of Vancouver’s busiest, were proving increasingly inadequate in the face of growing transportation demand
By extending the already-existing Millennium Line, travelers along the corridor would have access to fast, frequent and reliable SkyTrain service to several destinations in the metropolitan Vancouver area

The city faced a funding problem; while a 2014 study identified billions of dollars’ worth of regional transit infrastructure investment needs, a 2015 referendum proposing a sales tax increase to fund transit projects was rejected in a local referendum
Alternative funding mechanisms were therefore needed to ensure the project could be completed

Based on the observation from other cities, where improvements in transport led to increases in land values through improved access and mobility, the city decided to fund the extension through Land Value Capture
This involved an incremental increase in taxes on the value a property gained due to the new infrastructure, not on the property total value

Government of British Columbia (with contributions from the Government of Canada and the City of Vancouver) — Responsible for funding and delivery of the extension project
Residents — Contributed to funding via tax contributions

USD 7.5M1 additional property tax revenue in 2019, equivalent to c. USD 4.12 per household
Together with increases in transit fares, a sales tax on parking, and other increases2, the effort led to an average increase of USD 32.2M a year in funding for transportation in the region
The extension of the Millennium Line, expected to be completed by 2025, will lead to shorter travel times, improved train reliability, and increased capacity

Governments can capture additional value for infrastructure projects by including innovative revenue streams such as transit fare increases or taxes on assets, such as real estate, directly benefitting from the investment
Regional governments can capture land value increases due to transport infrastructure improvements through property taxes linked specifically to expected increases in property values
To avoid friction and ensure that all stakeholders make an equitable contribution, such increases should remain modest and target residents and visitors alike, where possible