Potomac Yard Metrorail Station

Performing value capture analysis to fund a new rail infrastructure around a new metro station

Identifying Value Capture Options

On behalf of the City of Alexandria (US), WSP analyzed the feasibility of using a combination of value capture mechanisms to finance a new Metrorail station adjacent to a rapidly developing former rail yard. The study compared several station locations, development scenarios, value capture strategies, and financing options to support the development of a preferred public-private partnership development strategy. WSP’s analysis demonstrated that use of the right mix of value capture techniques can provide an effective means to harness the future benefits of development at Potomac Yard to help finance the Metrorail station today. With a combination of special district financing, net new tax revenues, and developer contributions, our analysis showed the $240 million station to be self-financing.

Both the financial plan and developer agreement were approved by the City of Alexandria Planning Commission and City Council, laying the groundwork for the redevelopment of this former rail yard into a modern, mixed-use urban center.  Since then, WSP has provided the city with ongoing support, including revised financial forecasts based on more defined development plans in the area.

Unlocking the Development Potential

The City of Alexandria sought to investigate innovative strategies to finance a new rail station adjacent to a rapidly developing former rail yard. Existing and future travel demand in the area is on the rise. Improving accessibility to the Potomac Yard area and providing more transportation choices for current and future residents, employees, and businesses would establish a new access point to the regional Metrorail system.  The city did not have the funds necessary to pay for a new station.  However, the planned redevelopment of the Potomac Yard area represented a rare opportunity for large-scale, mixed-use, infill development within close proximity to the core of the Washington, DC region.  As such, there was potential to tap into the value created by this development, but the city needed to know how best to do that.


Identifying the Best Way Forward

WSP conducted a study that compared several station locations, development scenarios, value capture mechanisms, and financing options to support the development of a preferred public-private partnership strategy.

Our analysis demonstrated that the right mix of value capture techniques, which included development impact fees, tax increment financing, and special assessments, could provide an effective means of harnessing the benefits of future development at Potomac Yard. We worked with numerous stakeholders, including the city’s planning department and tax assessor’s office, Washington Metropolitan Area Transit Authority (WMATA), and private sector developers and landowners in the surrounding area to ensure assumptions and inputs to the financial analysis facilitated realistic forecasts of land use and development planning and the resulting revenue-generating potential that could be used to help pay for the station.

The analysis included revenue from residential, office, retail, and hospitality land uses, incorporating the city’s applicable taxes and fees. We also structured our financial model to provide results for four different station locations, incorporating varying station costs and development scenarios in each.

As development plans became more defined over time, the team periodically provided revised forecasts reflecting more specific plans, and factored in ongoing changes in market values. We also provided support for specific city tasks upon request, including assistance with a Transportation Investment Generating Economic Recovery (TIGER) grant application, a federal discretionary grant program in the United States, and analysis to support an application for a $50 million loan from the Virginia Transportation Infrastructure Bank (VTIB).  This analysis helped the city and the VTIB understand the overall impact of the loan on the city’s long-term debt service.

Our team delivered the following:

  • Value capture analysis

  • Financial analysis

  • Grant application assistance

  • State infrastructure bank loan application assistance

The Right Scheme to Fund the Project

Through a combination of two tiers of special district taxes, net new tax revenues from development, and developer contributions from construction within a quarter-mile from the station, our analysis showed the $240 million station can be financed solely on the revenue generated by the nearby development without any impact on the city’s existing tax base. This investment grade analysis was used to support negotiations of a memorandum of understanding with the landowner that resulted in an agreement by the developer for a $50 million contribution to the project.  

The city has since set up a station fund and is collecting special taxes in advance of construction.  Additionally, with WSP’s assistance, the city successfully applied for a $50 million VTIB loan in 2015.