Australia seems to have a high-level public discourse on the merits of transit value capture policy. That's a hopeful thing for us since many scholars consider Australia the most comparable society/country to the United States. This opinion piece considers the risks of a transit value capture policy. For example, the author considers the timing of introducing new value capture policies: There is a real risk in Sydney that over-provision of high-rise residential properties will over-saturate the market, producing low returns and low "value uplifts". I look forward to this sort of discussion in our national political forums!
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Boston's MBTA is an example of the unfortunate reality that many U.S. transit systems are in desperate need of revitalization funds and operating funds right away - now, this instant, ASAP! Even with a great proponent of value capture leading the charge for MBTA (as I've mentioned before, Stephanie Pollack is pushing transit value capture in Massachusetts), the dire need for new funds has shifted attention from long-term transit value capture options to near-term solutions, like fare hikes. As reported by WCVB, officials are resorting to fare hikes having explored other options including real estate transactions. While WBUR has suggested that there is substantial push back on the fare hike proposals, including from citizens at the first of twelve public meetings being held this month, there was also skepticism about the viability and appropriateness of value capture. The Worcester Business Journal reported that officials and advocates wanted more time to consider value capture (TIF funding in this case). Tom Ryan, manager of public policy and government affairs at A Better City, said. "However, the details behind value capture are in need of special attention and, if implemented inappropriately, have negative implications." While many officials support value capture and believe it should be incorporated into MBTA's long-term funding mix, it isn't a silver bullet that can be loaded and fired at a moments notice. Even the sell-off of existing MBTA real estate assets would take time to broker, and then the revenues would yield one-time payments. Entering into long-term leases might provide more stable revenues, but payments would be relatively small compared to cost of building or operating transit and the payment period may only begin once a developer started construction or perhaps even reached a significant level of occupancy in a newly built project. To have a meaningful impact on agency finances, a transit value capture strategy must consist of numerous tactical approaches and be implemented in a consistent manner across broad geographies. I would suggest that this sentiment is shared by some value capture detractors in Boston, like Mr. Ryan of A Better City as quoted in the WBJ. While some form of value capture may have merit, it is a small and piecemeal approach to the challenge associated with the goal of seeing a 21st century, world-class transit system that will serve both today and the future economic needs of the commonwealth. But every journey begins with a single step. By definition, a consistent, broad, and diverse value capture strategy begins with a one-off, focused, and singular choice to implement a particular value capture tactic. And now seems like a good time to implement value capture in Boston. It's just too bad that even when the political will exists and political policy window opens, near-term solutions are needed and long-term solutions are put on the back burner. Fare hikes may be necessary to keep the trains and buses running, but I hope that leaders in Boston continue to explore the long-term potential of transit value capture.
Happy holidays! I was catching up on blog posts and came across some inspiring content. For one, I was reminded that requiring transit access as a prerequisite for new real estate development in a city is one way to promote transit value capture. According to a recent CityLab post, new housing developed in Copenhagen, Denmark is required to within 500 meters of a transit stop and this policy has led to a dramatic result in a recent mixed-use real estate project: a bike and pedestrian bridge hundreds of feet in the sky. Let's get more down to earth and consider what this sort of policy could mean for real estate developers in the United States and what it could mean for transit value capture. Imagine your town implemented a city-wide policy that predicated approvals for any new housing, retail, or office development based on its proximity to transit service, perhaps a reasonable 1/2-mile walking distance from a bus stop or rail station (see the walkshed image above for an example of a reasonable walk from the proposed Rainier Station in Seattle). Based on the policy, your building permits for a new suburban-style office complex wouldn't be approved if your property was 3,000 feet from the nearest bus stop. Because of a transit proximity policy, developers have to think about transit. That's not always the case in the United States (and parts of many other countries as well). U.S. developers often all but ignore transit as an access mode to their projects because transit access (or a lack of transit) does not impact the average U.S. real estate investment's viability. A second impact that such a policy would have on real estate development is that developers would have to know where transit access points are located and weigh their options if one is not within a reasonable walk. When they are considering developing sites, developers could:
In two of the instances above (#3 and #4), transit providers stand to benefit from developer-funded actions... transit value capture. Regarding #3, you can imagine developers funding shuttles or route extensions to add new access to their otherwise inaccessible projects. For this to be viable, real estate projects likely need to be close enough to existing services to incur the smallest possible marginal transit linkage costs, projects need to be dense enough to require the least transit investment within the new development (funding one additional stop is cheaper than funding several stops in a sprawling development), and projects need to be valuable/profitable enough to support the cost of the new transit links and nodes. In some cases, projects may be profitable enough (read: big enough) to support all new services such that they're not constrained by the existing scale and scope of nearby transit services (hopefully the policy is nuanced enough so that you cannot extend an infrequent bus line one stop to get approvals for a 10,000,000 square foot office park). The economics of these transit enhancements begin to sound a lot like the costs for other critical infrastructure. Developers face similar linkage and capacity dynamics as they consider roadway, water, electrical, and sewer access for their new developments. Value capture funds most utility service extensions (developers pay for internal roads, water lines, and sewer extensions and sometimes have to pay for offsite roadway expansions, new sewer treatment plants, new fire stations, etc.) and treating transit as a required utility could lead to many more instances of transit value capture. When it comes to #4 above, you can imagine developers buying properties that are close to existing transit stop as the crow flies but not close enough to be within a reasonable walking distance. When purchasing such properties, developers could also underwrite the cost of making offsite investments that provide more direct access to transit and allow them to build on a property that would, according to the transit accessibility policy, be undevelopable. For example, developers might fund a bike and pedestrian overpass to connect their site to an existing transit stop. They might purchase a few additional properties to cut new roadways or pathways through mega-blocks that stand between their property and the existing transit service. Such is the case in Copenhagen where a developer has proposed a bike lane in the sky. The developers hope to build two massive projects on either side of a waterway. Though the buildings are only a few hundred feet apart, one side of the waterway is close to an existing transit stop and the other is a much longer walk from decent transit access. Rather than fund new transit service to the far side of the waterway, their proposed solution is to build a massive skybridge between the two tall buildings over the very active waterway. The article and images are well worth a look. (When you see the renderings, remember that it's getting close to New Years, not April Fools Day! This appears to be a real proposal.) So, if you want developers to get serious about transit and creative about funding transit access, pass a minimum transit distance policy in your town today. When you do, you'll see examples of transit value capture take hold or at least you'll see amazing feats of architecture! Happy holidays!!! In any value capture scenario, the value comes from properties somewhere that are owned by someone. In Toronto, the plan to fund a new subway extension has been to levy charges on all property owners and on developments, all to the tune of $900M. Now, the Toronto Star reports that a real estate development coalition has come forward to oppose the levies based on their unfairness to homeowners. Toronto Mayor John Tory argues that the government's plan is fair and thoroughly considered. “I think the important thing to keep in mind here is that when you build transit, the land interests of those who own land around transit increases. And I think it’s only fair that those who are going to benefit pay some of the costs of servicing this land with new transit. That’s the principle we operated on. We operated within the law and the appeal will take its course.” It's a very lucid description of the benefits principle of taxation, the classic argument for value capture. And the mayor considers it a sound legal argument for the levies.
It will be interesting to see how this local battle plays out. I hope the ending of this story doesn't dampen my enthusiasm for Canadian transit value capture. |
AuthorIan Carlton is a transportation and land use expert specializing in transit-oriented development (TOD). He helps clients - including transit agencies, planning departments, and landowners - optimize real estate development around transit. Archives
March 2019
CategoriesSpecial thanks to Burt Gregory at Mithun for permission to use the Portland Streetcar image above.
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