# RECORD 5cf7ffdc50779ba179e5d6c37bf66eba2f4f8109
# TITLE: The value capture potential of the Lisbon Subway
# YEAR: 2012.0  VENUE: nan  DOI: 10.5198/jtlu.v5i1.251
# AUTHORS: L. Martinez; J. Viegas
# PAGES: 18  CANDIDATE TABLE PAGES (1-based): [7]
# ABSTRACT: This paper tries to build on traditional value capture measures, to estimate the potential of application of some of these mechanisms to the Lisbon subway, examining their ability to contribute to cover the financial costs of the system operation and development. The study will just focus on the municipality of Lisbon where this system mainly operates. This research uses spatial hedonic pricing models of the real estate of the region, calibrated on previous stages of the study, to asses, to which extent, transportation infrastructure is currently capitalised into the real estate market. The paper uses a Monte Carlo simulation procedure to estimate a synthetic population of residential and non residential properties that matches the census blocks statistics, allowing, measuring the subway valuation for each synthetic property and aggregate the results for the whole municipality. This potential value capture estimate is then used to estimate an annual tax that could be charged under different value capture measures configurations (i.e. land value tax, special assessment). The results suggest that there is a significant potential of the use of this instrument to finance the subway infrastructure.


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
http://jtlu.org
. 5 . 1 [Spring 2012] pp. 65–82
doi: 10.5198/jtlu.v5i1.251
The value capture potential of the Lisbon subway
Luis Miguel Garrido Martínez
Instituto Superior Técnico, Lisbon a
José Manuel Viegas
Instituto Superior Técnico, Lisbon b
Abstract:
is paper tries to build on traditional value capture measures, to estimate the potential of some of these mechanisms for the Lisbon
subway by examining their ability to mitigate the system’s operation and development costs. e study focus is on the municipality of Lisbon
where this system mainly operates. is research uses spatial hedonic pricing models of the real estate of the region, calibrated on previous
stages of the study, to assess the extent to which transportation infrastructure is currently capitalized into the real estate market. e paper uses
a Monte Carlo simulation procedure to estimate a synthetic population of residential and non-residential properties that matches the census
blocks statistics, measuring the subway valuation for each synthetic property and aggregating the results for the whole municipality. is po-
tential value capture estimate is then used to estimate an annual tax that could be charged under different value capture measure configurations
(i.e., land value tax, special assessment). e results suggest that there is significant potential for the use of this instrument to finance the subway
infrastructure.
Keywords:
Value capture; Transport financing; Fiscal simulation; Real estate hedonic price models; Subways; Lisbon
1
Introduction
Most of the cities across the world are currently facing chal-
lenges in financing public transport. For several decades now,
Urban Public Transport (UPT) has been unable to collect
enough revenues from clients to cover its production costs.
e fact that public transit is seen as an indispensable service
in all medium and large cities, accompanied by the operating
constraints and the multiple (and sometimes conflicting) ob-
jectives under which it performs, have largely prevented radi-
cal political moves to force its cost coverage to be more in line
with the normal market economy (Viegas 2005).
Parallelwiththesefinancialdifficulties,theserviceprovided
by UPT, even with younger fleets and more comfortable vehi-
cles, has not been attractive enough to resist the higher avail-
ability and comfort provided by the private car. us the
long term market share of UPT has been declining in all cities
around the world, with only a few recent short term excep-
tions. e financing problem of UPT, partly explained by
this loss of competitiveness and patronage, is accompanied by
the problem of generally low quality and sustainability (Vie-
gas 2005).
Civil Engineering Department. martinez@civil.ist.utl.pt
Civil Engineering Department. viegas@civil.ist.utl.pt
Furthermore, accessibility to desired destinations tends to
play a major role in location decisions of activities and resi-
dential location, which raises land value in highly accessible
locations. e monetary value of this accessibility is reflected
in the value of a home or a business, in addition to the value
of other features such as the specific physical attributes of the
building and neighborhood characteristics (Lari et al. 2009).
Value capture then arises as the process whereby a funding
agency (i.e., the city, the region, or the state) attempts to re-
cover a share of the value added to property resulting from any
infrastructure development (Hass-Klau 2006).
is paper examines the value capture potential of Lisbon’s
subway by testing several different mechanisms, and looks at
its integration with the current fiscal system in order to de-
velop a new financing framework for the system operation and
infrastructure development within the municipality of Lis-
bon.
is study uses a Monte Carlo simulation procedure in or-
der to estimate a synthetic market composition of the residen-
tial, retail, and office sectors from the aggregated statistical
data available at city block level, leading to an estimate of the
value capture potential of the subway in the Lisbon munici-
pality.
e potential value capture estimate is then analyzed in or-
der to extract an annual tax for dwellings and commercial ar-
Copyright 2012 Luis Miguel Garrido Martínez and José Manuel Viegas.
Licensed under the Creative Commons Attribution – NonCommercial License 3.0.


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e value capture potential of the Lisbon subway

Table 3: Summary of the hedonic price models used for property value estimation.
Residential model (Martínez and Viegas 2009)
Retail & office model (Martínez 2010)
Variables
Coef.
Std. Error
Variables
Coef.
Std. Error
SP_LAG_LOGPRICE
0.3561***
0.0085
SP_LAG_LOGPRICE
0.0394***
0.0088
Constant
6.9089***
0.0999
Constant
10.264 ***
0.1143
Structural attributes
Bedrooms
0.0427***
0.003
Store
0.4147***
0.0446
House
0.1685***
0.0154
Office
0.3892***
0.053
Floor
0.0155***
0.0009
Floor
0.0227**
0.0108
Area
0.0064***
0.0001
Area1
0.0079***
0.0002
Area2
0.0018***
0.0001
Area3
0.0005***
0.0001
Age2
−0.1034***
0.0063
Age2
−0.1775***
0.0281
Age3
−0.0729***
0.0068
Age3
−0.156 ***
0.0263
Garage
0.1126***
0.0059
Garage
0.1316***
0.0344
Neighborhood attributes
Educational Index
0.416 ***
0.0225
Educational Index
0.9892***
0.0939
Entropy Index
0.2312***
0.0234
Shopping Center
0.2308
0.1518
Accessibility Attributes
2MAccess
0.0916***
0.0133
2MAccess
0.2163***
0.0466
1Maccess
0.0652***
0.0084
1Maccess
0.0918**
0.0357
Network1
−0.0732***
0.0069
Network1
−0.127 ***
0.036
Network2
0.0458***
0.0064
Network2
0.1029***
0.0302
Network3
−0.038 ***
0.006
Sintra
−0.0614***
0.0134
Cascais
0.1517***
0.0259
Pseudo R2
0.795
Pseudo R2
0.76
LM statistic
1154.496 ***
LM statistic
19.940 ***
Log likelihood
236.608
Log likelihood
-693.486
Note: ***, **, and * denote coefficient significantly different from zero at the 1%, 5%, and 10% level of signifi-
cance, respectively.
4.2
Model description
In order to estimate the market value of the real estate stock
and the value capture potential of the Lisbon subway, two
simulation procedures were developed: one for the residen-
tial market and another for the non-residential market (retail,
office, and warehouse). Figure 2 presents the initial data pro-
cessing and estimate of the attributes of each property simu-
lated in the model for the residential market, while Figure 3
illustrates the structure of the simulation model with all the
cycles and processes invoked by the simulation model. A sim-
ilar structure was adopted for the non-residential market sim-
ulation model.
For each iteration, the model generates a synthetic popula-
tion of residential properties for Lisbon based on the statisti-
cal distributions available for the census block using a Monte
Carlo simulation procedure. All the structural attributes gen-
erated from the statistical census data are considered as inde-
pendent variables with the exception of area, which depends
on the number of bedrooms generated. is simplification as-
sumptionsignificantlyreduces thecomplexityof theinterrela-
tion between the different attributes; however it might lead to
some unreliable configurations in some low probability cases.
4.3
Results discussion
For the current study, 100 iterations for the residential and the
non-residentialsimulationmodelswereused. esummaryof
the average values obtained from the simulation are presented
in Table 4. e resulting values show that approximately 2.5


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Figure 2: Property attributes generation of the synthetic properties model for market value estimation.