Beware ‘Value Capture’

Memo to taxpayers: Beware of pols hawking “value-capture financing” as a magical way to fund new subways, bridges and so on.

From Mayor de Blasio to Gov. Cuomo to President Trump, politicians are suggesting this is a painless way to raise cash for infrastructure. But it’s just one tool, not a cure-all.

The idea is that a big public project, like a new subway station, will boost the value of nearby private properties, pushing up assessments and ginning up new tax revenue — which can be used to pay off the bonds that funded the project in the first place.

The model is Mayor Mike Bloomberg’s financing for the extension of the No. 7 line from Times Square to 34th Street and 10th Avenue. The subway was sure to help make the Hudson Yards development viable, so Bloomberg agreed to dedicate realestate taxes on new buildings there to pay back the billions spent on the new subway.

Now Gov. Cuomo is talking about doing something similar to fund other MTA projects in the city, like the one to bring LIRR trains to Grand Central. Under his plan, the MTA would get 75 percent of any new tax revenue after such projects boost realestate values.

De Blasio also floated the idea to pay for a lightrail line along the Brooklyn-Queens waterfront. And Trump’s new infrastructure plan seeks to force the use of value-capture financing on projects that get federal funds. All fair enough — if it’s done right, with an eye on the pitfalls.

One problem: It’s impossible to know how much of any rise in property values comes from a given project. The gimmick can easily divert more (or less) in dedicated funds than it really should.

Oh, and if the project turns out to not boost values, the new funds never show up.

Estimates of how much values will rise are just estimates — whereas bond covenants require a guaranteed source of income.

In the case of the No. 7 extension, the new revenue has yet to cover bond repayments — which has left the city making up the difference from its other revenues.

Plus: Hudson Yards was built from scratch — a high-end development on what’s now some of the most valuable real estate in the world, sitting above low-value railyards. That won’t be the case in many other places.

Finally, the scheme ought to target every property whose value rises thanks to the project.

The Grand Central upgrade, for instance, will largely benefit Long Islanders. But Cuomo’s plan doesn’t aim to “capture” any new tax revenue from the island.

In short, “creative financing” is a two-edged sword. It can be a fine way to finance infrastructure — or it can be highway robbery.