TxDOT’s Value Extraction Activities (VEAs)

“A number of interested parties have suggested that the Texas Department of Transportation (TxDOT) extract additional value (be it economic or societal) from our ROW and other land holdings. A short list of potential uses that have been suggested include the following:

  1. solar arrays for electricity generation – including pre-fabricated pavement panels;
  2. wind energy and vehicle turbulence for electricity generation;
  3. extraction of geothermal energy, oil and gas;
  4. carbon sequestration;
  5. wildlife habitat;
  6. leasing air space for additional uses;
  7. long distance pipeline transportation;
  8. and long distance communications and power transmission.

“The research project will:

  1. Do outreach to all stakeholders to discuss applications, potential benefits, challenges, risks, and opportunities.
  2. Conduct a technical feasibility and economic viability examination of each potential value extraction application.
  3. Assess the value extraction potential of all viable applications against the overriding requirements to provide safe and adequate transportation.
  4. Assess legal issues of ownership/liability/revenue distribution that may result from potential viable applications.
  5. Develop guidelines to assist TxDOT in determining when, where, and under what circumstances to pursue value extraction strategies.
  6. Develop recommendations for potential changes to legislation and regulations to accommodate feasible value extraction applications. Source Organization: Texas Department of Transportation.” (click here for this source)

TxDOT’s Project Summary

“In Texas, a number of recent analyses, including the 2030 and 2035 Committee reports, have consistently pointed to an increasing gap between available funding and growing maintenance and capacity needs. This has sparked interest in the extraction of additional value from TxDOT’s right-of-way (ROW) and other land holdings. The objectives of this research study were to provide TxDOT with insight and guidance in determining when, where, and under what circumstances, to pursue the implementation of potential value extraction applications (VEAs).

“The researchers identified the following potential VEA categories: property management, airspace leasing, ROW leasing, advertising, solar panels, wind turbines, geothermal energy, special roads, carbon sequestration and biomass, and wildlife crossings. The literature review; however, revealed that most VEAs lacked in-depth research, scientific data, and conclusive results. Most of the literature comprised short articles, commercial presentations, and pilot project information. This research has thus contributed to an increased understanding of the different VEAs that can help TxDOT and other DOTs save costs, increase revenue streams, or enhance societal goals.

“This research also provides TxDOT and other DOTs with a framework to systematically review and identify potentially feasible VEA(s) given an agency’s property asset and intended objective. The multi-attribute criteria analysis and evaluation matrix has sequential steps that filter potential VEAs through a series of questions that the user has to answer. The initial questions address conditional factors – i.e., type of asset, primary objective, and major characteristics of the property – that could prevent the implementation of specific VEAs or impede the agency from achieving its objective. Seven criteria are subsequently used in analyzing potential VEAs: technical feasibility; political/public concerns; legal considerations; financial/economic feasibility; environmental considerations; potential social impacts/benefits; and safety considerations. The scores and criteria weights assigned by the user are then used to convert qualitative attributes into quantitative measurements. This allows for direct comparisons among VEAs. The evaluation matrix ultimately produces a feasibility and impact score for each VEA, which are plotted onto an impact versus feasibility quadrant diagram.

TxDOT: “What This Means”

“Based on the research conducted, the research team recommends that:

  1.  TxDOT consider pursuing a formal property management program – e.g., including investment in a GIS and/or other information management system. A formal property management program can facilitate the identification of opportunities for VEA implementation, as well as the actual implementation of feasible VEAs.
  2. When evaluating potential VEAs, TxDOT should involve employees with a diverse background and expertise to evaluate and anticipate potential challenges and concerns. In addition, TxDOT should assign one person to champion and lead the process. This person should be empowered to make decisions.
  3. TxDOT should document lessons learned, monitor results, and conduct a post-evaluation of implemented VEAs to enhance the decision-making process and methodological framework.
  4. Even if the evaluation matrix and methodological framework indicates a VEA is potentially economically feasible, TxDOT should conduct a detailed financial assessment to determine the actual financial benefits, payback period, and costs involved.
  5. Since most of the VEAs involve a private party, TxDOT should carefully evaluate who to partner with.
  6. Special attention should be given to the financial resources of, and sureties and warranties provided by the private entity. TxDOT should also retain legal counsel to review any agreement.” (click here for this source)

Guidance on Extracting Value from TxDOT’s Land Holdings

  • Financial/Economic Feasibility: The implementation of any VEA requires an upfront investment by TxDOT and/or private investors. The financial/economic feasibility criterion evaluates the upfront investment and the consequential payback period, as well as the potential financial and economic benefits that the implementation of a VEA can bring to TxDOT and society. For example, wildlife crossings typically require an investment of $1 to $3 million by the DOT, but the investment can be recovered through cost savings from eliminating the need to remove animal carcasses and vehicle wrecks caused by animal-vehicle-crash incidents (AVC). Wildlife crossings also benefit society economically by reducing human fatalities and injuries from AVC accidents, reducing vehicle insurance premiums, and creating temporary jobs (i.e., construction jobs). Another example is the property management VEA, which can generate revenue for TxDOT (e.g., selling or leasing land lots or properties) and/or save costs (e.g., swap transaction that result in the DOT acquiring a new facility). Furthermore, property management applications that result in TxDOT selling land in prime real estate locations can stimulate economic development (i.e., creation of business opportunities and jobs in urban areas) and raise tax revenues for the state (i.e., payment of property taxes by private owners).
  • Potential Social Impacts/Benefits: The social impacts and/or benefits criterion assesses a potential VEA’s impact on business opportunities, economic development, job creation, and general societal welfare.
  • Safety Considerations: TxDOT’s primary mission is to provide safe vehicle transportation routes with adequate capacity. The safety considerations criterion considers the potential impact of a VEA on the safety of road users and the general public.” (click here for this source)

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