Transit-Oriented Development in the United States: Experiences, Challenges, and Prospects (2004)

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PART 2 THE POLICY ENVIRONMENT In the United States, TOD takes form in a complex, sometimes charged policy environment. While market pressures have a strong imprint on TOD, public policy initiatives can also exert considerable influence. Part 2 probes TOD’s policy environment in its many shapes and forms. Chapter 3 reviews the institutional setting of TOD, focusing on the roles of transit agencies, local and regional governments, state agencies, and the federal government. In-house policies, legislation, regulations, interagency collaborations, and other initiatives introduced by public-sector actors are examined. Chapter 4 looks at TOD implementation, beginning with the process of visioning and planning and moving on to discuss how various tools, like zoning and fiscal measures, are being used to leverage TOD. Chapter 5 shifts to a private-sector perspective, relying on interviews of developers and lenders involved with TOD projects. The chapter examines the market for TOD, factors that weigh in on the decision to build around transit stations, and approaches to private financing of projects. Chapter 6 ends Part 2 with a discussion of impediments to TOD implementation, particularly in the minds of builders and developers, and what might be done to overcome them.

39 Chapter 3 The TOD Institutional Landscape in the United States Institutional Setting Given the many vested interests in TOD and joint development outcomes, not surprisingly a complex and sometimes fractured institutional environment— involving multiple jurisdictions, each with its own agendas, boards, staffs, budgets, and constituents—has evolved. Some large transit properties have set up in-house real-estate departments to negotiate joint development deals and assigned planners to TOD oversight duties. Many rail-served municipalities have enacted zoning ordinances that allow for high-density, multi-use development in neighborhoods surrounding stations. In quite a few inner-city neighborhoods, redevelopment agencies have seized on opportunities to assemble land using eminent domain powers to build affordable housing near rail stops. Moreover, some MPOs, such as those in the Portland (OR), San Diego, and Dallas- Fort Worth regions, have embraced TOD as part of their regional smart-growth strategies, using pass-through federal transportation dollars to promote and leverage transit-supportive development in rail-served communities. Even state DOTs have gotten into the picture, using carrots to entice local governments to target new growth along transit corridors. Two states—California and New Jersey— have undertaken “transit village” initiatives for this very purpose. These examples represent only the public side of things. On the private side are the developers, building associations, construction firms, and lending institutions that end up designing, financing, and building much of what happens on land parcels in and around transit stops. Not to be forgotten are the many nongovernmental organizations, or NGOs, that have an active voice in TOD outcomes as well, including neighborhood associations, bicycle coalitions, and sustainable transportation advocacy groups. Taken together, these vested interests form an institutional environment that more closely resembles a “marble cake” hierarchical model of governance—with interlocking agreements, checks and balances, and subtle chains of command—than the “wedding cake” model taught in high school civics courses. This has unavoidably created roadblocks and impediments to TOD implementation, but it has also served to democratize and infuse a certain degree of accountability and fairness into the process. This chapter draws upon stakeholder surveys, interviews, and other background information to characterize the administrative, budgetary, collaborative, and participatory dimensions of contemporary TOD practice in the United States. Transit-Agency Organizational Context Transit agencies are vital to TOD since, after all, they control where, when, and even if rail and bus services are

delivered. Further, when it comes to joint development, transit properties occupy the front line of implementation, deciding if and when agency-owned land and air rights are to be leased or sold. The role of transit agencies in promoting TOD and joint development raises fundamental questions regarding legitimacy and mission. Not all transit board members subscribe to the view that land development lies within the purview of a transit agency’s portfolio of tasks, preferring to define transit’s mission more narrowly. Moreover, transit agencies are sometimes so consumed by pressing everyday matters, such as securing full-funding agreements for investments and defusing labor tensions, that joint development falls way down the list of priorities. Moreover, some agencies have adopted firm parking replacement policies, all but precluding development opportunities in instances where land prices are high enough to warrant structured parking. Transit agencies are in a position to assume many roles in the TOD implementation process—brokers, facilitators, educators, funders, active development partners, and advocates. Sometimes these roles are co-dependent (e.g., equity participation requires a certain degree of advocacy and mediation), and sometimes they are in conflict (e.g., advocacy can compromise the ability of a transit agency to act as an impartial mediator). This section discusses the present-day organizational setting and context of TOD and joint development from a transit-agency perspective. This is done largely from the responses of the 90 surveyed U.S. transit properties. (See Appendix A for the instrument used in surveying transit professionals.) Transit Agencies and Land-Use Affairs For TOD to take form, public entities must plan for, manage, and regulate land uses. This often means promoting mixed uses through inclusionary and overlay zoning and increasing permissible densities by granting FAR bonuses. Normally, land-use controls and concessions are the prerogatives of local governments. However, as public entities, transit authorities not only control the use of agency-owned property but also are in a position to influence land-use decisions on adjacent and neighboring parcels through cooperative arrangements with local governments and negotiations with private landholders as part of joint development deals. The majority of transit agencies responding to the survey openly acknowledged that land use is first and foremost a local-government prerogative, with freely elected city council members and other local elected officials shouldering the lead responsibility (see Figure 3.1). However, nearly one out of five indicated that their transit agency shares responsibilities with other entities, including local governments, in land-use affairs. Moreover, in roughly one out of ten cases, the MPO was identified as taking the lead on land-use issues related to TOD, generally in the form of setting policies and promoting a pro-transit political climate. Three of the responding rail agencies— BART, NJ TRANSIT, and Triangle Transit Authority (in North Carolina)— provide funds for strategic station-area planning and for leveraging land-use 40

decisions by local jurisdictions. In contrast, several of the smaller bus companies responding to the survey indicated that “land use is not something that we are concerned with.” More telling is the fact that respondents from 95% of bus agencies and all rail agencies indicated that land use is something their transit agency is and will continue to be concerned about. While relatively few of the surveyed transit properties have staff who focus on TOD, full time or part time, half (45 of 90) stated they have staff or consultants assigned to work on land-use matters on an as-needed basis. The most frequent level of involvement on land- use affairs was 10% of a full-time equivalent (FTE) staff position. In-House Support for TOD Even though being involved in land-use affairs is widely considered to be within the mission of a transit agency, taking the next step of actively promoting TOD and joint development can be a big leap. Fifteen of 32 (46.9%) rail transit agencies surveyed indicated that they have “formal programs” designed to encourage TOD. Among bus operators, there was far less in-house support—just 5 of 58 agencies surveyed (8.6%). The amount of staff resources devoted to TOD activities (as opposed to land-use matters more generally) varied considerably. Only two of 58 bus agencies (3.4%) devoted full-time staff to TOD. Among rail agencies, 42% did.1 Among transit agencies without staff assigned to TOD tasks, more than three- quarters indicated that they encouraged TOD planning and implementation in other ways. In most instances, this involved agency staff routinely reviewing development proposals early in the process to ensure that they were supportive of transit—meaning 41 5.7% 1.9% 7.5% 11.3% 18.9% 54.7% 8.7% 2.0% 9.2% 17.4% 67.6% 0.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% Not Concerned With Uses Funds to Leverage Conducts Studies with Others MPO Leads Shares Responsibility Local Government Leads Percent of Transit Agencies Rail Agency Bus Agency How Transit Agency Addresses Land Use: Figure 3.1. How Transit Agency Addresses Land Use, Rail versus Bus Agencies, National Survey Results, 2002.

everything from having sufficient densities to support stepped-up transit services to designing streets that can accommodate the turning radii of standard coaches. A number of agencies also said they promote TOD through the preparation and distribution of transit- supportive design guidelines. Most respondents from smaller transit agencies indicated that they work with city planning departments and neighborhood groups on an ongoing basis as part of both short- and long-range transit planning. Table 3.1 outlines the nature of in-house TOD programs among five responding 42 Transit Agency Activity % of Time Utah Transit Authority Preparing RFPs for agency properties 33% Planning future land uses for agency properties 33% Public outreach and meetings 6% Developing transit pass program 10% Ongoing administration 18% Miami-Dade Transit Preparing RFPs for joint development projects 20% Negotiations of joint development projects 20% Zoning and regulatory reviews 20% Administration of leased properties 40% Maryland Transit Funding of TOD projects 40% Administration Administering local conservation grants 35% Administering TOD incentive grants 11% Planning pedestrian/cycling improvements 10% Ongoing planning and administration 4% Denver Regional Implementing joint development projects 60% Transit District Public outreach, education, and training 20% System integration of TOD 20% San Diego Reviewing development projects and proposals 40% Metropolitan Transit Interjurisdictional outreach and coordination 25% Development Board Preparing and updating development guidelines 10% Pursuing funding opportunities and grants 10% Ongoing planning and administration 15% Table 3.1. Activities of Transit Agency TOD Programs, Including Staff Time Allocations

transit agencies, along with staff time commitments to various tasks. Besides advancing joint development projects, the most common activity is public outreach and coordination, consuming 6 to 25% of TOD staff time. Reviewing development proposals typically takes a quarter to one- half of a TOD staff member’s time. The Maryland Transit Administration, responsible for transit in metropolitan Baltimore and other urbanized parts of Maryland, has assigned its staff to a range of TOD activities including planning and designing pedestrian/bicycle/bus-stop access improvements and administering development grants. The agency’s strong commitment to TOD is revealed by its generous budget allocations, far more than any transit agency surveyed. During the three fiscal years spanning 2000–2003, the Maryland Transit Administration invested $500,000 to $600,000 annually in TOD administration and planning, compared with $7 million to $13 million annually for TOD construction and implementation.2 Outreach and Education Public outreach and education have constituted the lion’s share of TOD activities among U.S. transit agencies. Around one-quarter of the surveyed transit agencies reported that they conducted such activities, targeted normally at the general public. In some cases, efforts are aimed at reaching local government staff, elected officials, developers, and lenders. The Utah Transit Authority, Dallas Area Rapid Transit, and SouthWest Metro Transit in Minnesota, for example, concentrate on reaching out to the development community. For NJ TRANSIT, the primary aim is to reach local elected officials. Most outreach by transit agencies involves technical assistance on TOD planning matters. The most common approach to general- public outreach on TOD matters among surveyed transit agencies has been design charrettes, that is, neighborhood meetings where residents and business- owners participate in the design of a master plan for a station area under the assistance of trained professionals (see Figure 3.2 and Text Box 3.1). Charrettes need not be expensive undertakings involving highly paid designers and architects. Charrettes can be facilitated community meetings that forge a consensus on future land-use directions. Many surveyed rail agencies have also turned to conferences and workshops on TOD to reach both the general public and professionals. Public hearings, media coverage (e.g., television shows), and web sites have also been used to market TOD, albeit less frequently than charrettes or conferences. The Maryland Transit Administration, for example, has its own local access cable show that has featured stories on the Symphony Center and Owings Mills TOD projects. Outreach programs generally get passing grades from transit-agency respondents. Figure 3.3 shows that around 40% of respondents felt outreach was significant in helping to initiate projects.3 Outreach generally received the lowest marks for effectiveness at helping to resolve conflicts and temper neighborhood opposition to TOD projects. Other Organizational and Legislative Contexts Other spheres of government and stakeholder interests have formed their own institutional forums for advancing 43

44 Initiative Taken: 32.5% 14.0% 25.6% 36.4% 26.1% 36.4% 42.9% 47.6% 66.7% 73.3% 74.4% 81.1% 0% 20% 40% 60% 80% Internet Web Site Media Coverage Public Hearing on TOD Conference for Professionals Conference for General Public Design Charrette Percent of Transit Agencies Bus Agency Rail Agency Effectiveness of Outreach at: 22.2% 27.8% 11.8% 16.6% 11.1% 39.9% 61.1% 70.6% 55.6% 66.7% 39.9% 11.1% 17.7% 27.8% 22.2% 0% 10% 20% 30% 40% 50% 60% 70% 80% Helping to Initiate Projects Resolving Conflicts Engaging Public Dialogue Increasing Private- Sector Awareness Increasing Public Awareness Percent Rating Significant Moderate Minimal Figure 3.3. Rating of Effectiveness of TOD Outreach Efforts by Transit-Agency Respondents. Figure 3.2. Outreach Initiatives Taken in Transit Agencies’ Service Areas Over Last 2 Years Involving TOD.

Pleasant Hill’s Second-Generation Transit Village Charrette BART’s Pleasant Hill Station is one of America’s most prominent suburban TODs, although some would call it more TAD than TOD. It currently boasts some 2,400 housing units and several million square feet of office and commercial floor space nearby, but it suffers from a poor-quality walking environment and the absence of a human-scale “feel.” Plans to add more retail and office space to the area unleashed a “not-in-my-backyard” (NIMBY) backlash, prompting local officials (in concert with BART, residents, business leaders, activist groups, and area employees) to organize a community-based design charrette aimed at building broad-based local support for transforming the 18-acre site from a TAD to a TOD. Portland-based Lennertz Coyle and Associates was retained to lead the charrette process. More than 500 people participated in the 6-day “give-and-take” event in the spring of 2001. Participants discussed dozens of ideas before agreeing on a plan that calls for the strategic siting and infill of mid-rise housing, community-oriented retail space, offices, and assorted public amenities. Emphasis was given to providing attractive, accessible, and automobile-restricted spaces for pedestrians and cyclists. Also, the process led to the revamping of local implementation tools, mainly in the form of devising building and site-design codes based on New Urbanism principles. How to replace the 1,294 park-and-ride spaces that will be lost to the development remains a bone of contention in seeing the plan through to implementation. For further information, see Pleasant Hill BART Station Design Charrette Outcome at http://www.co.contra-costa.ca.us/depart/cd/charrette/outcome/ outcome.htm. The citizen-driven charrette process led to a community plan that calls for the transformation from the present-day TAD (top left) to a second-generation, master- planned TOD with the ambience of Tuscan village (top right). With the aim of creating a human-scale, pedestrian-friendly environment, the charrette process relied on streetscale computer-generated visualizations to depict how current intersections (bottom left) might be transformed (bottom right). Text Box 3.1

TOD. TOD’s potential to spur economic growth and relieve pressure to expand roads can create a powerful incentive for local governments to become proactive. As stressed earlier, TOD often relies upon “precursors” that only municipal governments can introduce, like permissive zoning ordinances or streamlining entitlements. In distressed inner-city locations, responsibilities often lie with redevelopment entities. Higher levels of government, from regional entities to federal agencies, are also increasingly vital to TOD implementation if for no other reason than they often control funding and the legislative powers vested in transit agencies and local governments. Sub-State Institutional Roles Thirty percent of the surveyed local governments (7 of 23) have “formal programs” to encourage TOD in their jurisdictions. This has typically involved creating station-area development plans, matched by zoning reforms (e.g., overlay zones and interim-use restrictions) and building code revisions, topics addressed in the next chapter. A few of the surveyed local entities (the cities of Los Angeles, Charlotte-Mecklenburg, and Baltimore) have personnel who work full time on TOD affairs. Most local municipalities as well as redevelopment agencies support TOD through other means, such as cooperating and coordinating with other agencies. At the MPO level, the formal promotion of TOD is found mostly in large, rail- served regions, such as greater Philadelphia (the Delaware Valley Regional Planning Commission), San Diego (San Diego Association of Governments), Portland (Metro), San Francisco Bay Area (Metropolitan Transportation Commission), Seattle (Puget Sound Regional Council), and Dallas-Fort Worth (North Central Texas Council of Governments). Big MPOs mostly provide technical assistance germane to TOD (e.g., planning information and demand forecasts); a few provide grant assistance and occasionally broker cost-sharing arrangements among local governments (e.g., for funding strategic planning studies). Portland Metro budgeted $1.7 million specifically for TOD planning in fiscal year 2002–2003, the largest amount among MPOs nationwide. The more typical amount spent by MPOs was around $100,000 per year, funded mainly using federal pass-through planning grants.4 State Roles and Involvement More and more state DOTs are turning their attention to TOD because sprawl, left unchecked, poses a serious threat to scarce state resources—not only prime farmland, natural habitats, and open space but also thinly stretched state budgets. Most states with metropolitan and/or intercity passenger rail services encourage TOD indirectly through funding grants, technical assistance on planning, and participation on various interagency coordinating committees (see Text Box 3.2). A few states have adopted policies that explicitly call for steering future statewide growth to transit corridors. For example, in 2001, the state of Georgia approved a smart-growth initiative through the GRTA and the Governor’s Development Council that embraces TOD as a sprawl-curbing tool. Oregon’s recent Public Transportation Plan, an outgrowth of several decades of statewide land-use planning, encourages 46

public transportation projects that support compact or infill development or mixed-use projects.5 To date, few state laws or regulations have been enacted that pertain specifically to TOD. Four states have passed legislation or have provided funding through departmental agencies specifically aimed at promoting TOD: California’s Transit Villages Planning Act of 1994; Oregon’s Senate Bill 763 Vertical Housing Zone Bill; New Jersey’s Transit Village Initiative; and the Maryland Transit Administration’s funding of TOD planning, administration, and capital improvements throughout the state (discussed in the previous section). No other states in the country are thought to have passed similar legislation. Brief descriptions of the activities in California, New Jersey, and Oregon follow. • California: In 1994, California’s legislature passed Assembly Bill 3152, which promotes the adoption of transit village plans. The Act says that no public works projects, tentative subdivision maps, or parcel maps may be approved, or zoning 47 State Governments and TOD In a recent report, The Role of State Government in Transit-Oriented Development, the Pennsylvania Environmental Council identified nine possible roles for state governments on the basis of a review of experiences in 11 states that have been the most active in pursuing smart growth: ■ Promote regional coordination; ■ Forge collaborative working relationships among state entities such as transportation, transit, highways, community development, and housing; ■ Develop a set of goals to promote tax savings and environmental well-being through new community design strategies such as TOD; ■ Implement programs and funding initiatives (often using federal dollars) that achieve these goals; ■ Provide financial incentives; ■ Remove regulatory and statutory barriers to land use; ■ Promote public-private partnerships; ■ Provide planning, policy research, technical assistance, and information support and help local governments employ innovative redevelopment strategies; and ■ Establish pilot programs to test and show by example how new modes of thinking can work. Source: L. Hersh, The Role of State Government in Transit-Oriented Development (Philadelphia: Pennsylvania Environmental Council, December 2001). Text Box 3.2

ordinances adopted or amended, within an area covered by a transit village plan unless the map, project, or ordinance is consistent with the adopted plan. It also automatically exempts conforming projects in a transit village district from traffic impact assessments under the state’s Congestion Management Act. The lack of funds directly committed to TOD, however, is widely thought to have limited the Act’s effectiveness.6 Another noteworthy California requirement says that all new state office structures built within the service district of the Sacramento Regional Transit District lie within 1⁄2 mile of a rail stop. • New Jersey: The NJ TRANSIT Village Initiative, established by the New Jersey Department of Transportation (NJDOT) with numerous state agencies, assists communities in leveraging private redevelopment. A collaboration of state agencies provides technical assistance and resources to help communities implement the initiative. Additionally, communities designated as “transit villages” get priority access to NJDOT’s Local Aid for Centers Program, the Transportation Enhancements Program, and Bicycle and Pedestrian projects. (See Chapter 11 for further discussions of this initiative.) • Oregon: Senate Bill 763, passed by Oregon’s legislature in 2001, authorizes the creation of a “Vertical Housing Zone” within local jurisdictions. The bill applies to light-rail station areas, transit- oriented areas, and core areas of urban centers. Both light-rail station areas and transit-oriented areas are defined using definitions already in Oregon Revised Statutes. The most salient feature of the bill is that it authorizes tax abatement as an inducement to infill and moderate- to high-density development, especially near transit stations. In this sense, Oregon’s bill has more “teeth” and “purse-string punch” than initiatives in California and New Jersey. Federal Roles and Involvement The primary role of the federal government in encouraging the growth of TOD is one of funding. About 18% of all funding from the Transportation Equity Act for the 21st Century (TEA-21), roughly $36 billion between 1997 and 2003, was allocated to transit, mostly going for capital improvements. The federal government also encourages collaboration between government agencies as well as between the public and private sectors. An important program in this regard has been the Transportation and Community and Systems Preservation Pilot Program (TCSP) of the Federal Highway Administration. TCSP has provided grants to state, local, and regional agencies that partner with community groups, nonprofit organizations, or private investors to enhance transportation and land-use connections. NJ TRANSIT, for example, was recently awarded over $800,000 in TCSP grants to assist 11 municipalities in developing strategies to enhance connections between station areas and surrounding communities and to leverage private capital to redevelop station areas. Other important national policies and programs that have promoted TOD and 48

joint development include the following: • New Joint Development Policy: FTA’s 1997 reinterpretation of the Federal Common Grant Rule, among other things, permits transit agencies to sell land holdings financed by federal grants without having to return proceeds as long as funds are used to “help shape the community that is being served by the transit system.” Transit properties in Washington D.C., Atlanta, Portland, Southern California, and the San Francisco Bay Area have been particularly aggressive in exploiting this new ruling. For the BellSouth multi-tower complex, currently taking form at MARTA’s Lindbergh Station in the fashionable Buckhead district of Atlanta, MARTA took advantage of the ruling to expedite the construction of some 5 million square feet of mixed-use development on a former surface parking lot. (See Text Box 3.3.) • New Starts Criteria: This policy mandates that applicants for federal New Starts funds carefully address land-use matters as part of their capital investments.7 Key to successful applications for highly competitive New Starts funding are “transit-supportive existing land- use policies and future patterns,” “supportive zoning regulations near transit stations,” “tools to implement land-use policies,” and “the performance of land-use policies.” Several recent studies have concluded that this policy has spurred U.S. transit properties to take land- use matters and transit-supportive planning far more seriously than in the past.8 Some agencies have given priority to route alignments and station locations in jurisdictions that have adopted transit-supportive land- use plans, and many are seeking zoning and parking-code changes that are “transit friendly.” The national survey of 90 transit properties confirmed these findings. Figure 3.4 reveals that more than 40% of respondents from transit agencies felt that the New Starts process “raised the profile of the transit/land-use connection.” Respondents from several rail-served agencies, including Portland’s TriMet and San Francisco’s BART, indicated the new criteria “led directly to changes in locally adopted land-use policies and plans for transit corridors.”9 • Livable Communities: Launched by FTA in 1994, this program has sought to empower inner-city neighborhoods by making them eligible for special grants and tax credits. Assistance has gone to siting child-care centers and police substations near transit stations and improving access to and lighting conditions around rail stops in Cleveland, St. Louis, Baltimore, Philadelphia, and Oakland. • Other Federal Initiatives: Included here are Location Efficient Mortgage (LEM) programs, jointly sponsored by Fannie Mae and private banks, that make it easier to purchase a home near transit stations (under the premise that lower transportation costs free up earnings for housing consumption); the Environmental Protection Agency’s Brownfields Initiative for cleanup of former industrial sites (particularly 49

From Parking Lot to Mini-City: Atlanta’s Lindbergh Station Atlanta’s Lindbergh Station is in the midst of transforming into a “mini-city,” thanks in no small part to FTA’s joint development policy ruling that enables land purchased using federal funds, including parking lots, to be leased to the private sector as long as the resulting development is transit supportive. Using a competitive-bid process, the Metropolitan Atlanta Rapid Transit Authority (MARTA) selected a master developer, Carter and Associates, in 1997 to move full-speed ahead with a large-scale mixed-use project. Some 1.3 million square feet of office space, retail shops, and a hotel, plus residential condominiums, are slated for an 11-acre park-and-ride lot. A pedestrian-friendly Main Street, featuring retail shops and restaurants, will bridge over the rail station into a multifamily residential district. One of Atlanta’s largest companies, BellSouth, will be the project’s anchor tenant. BellSouth’s move to the Lindbergh site reflects a corporate decision to relocate scattered suburban offices to a central-city transit node in response to growing employee frustration over traffic congestion and a perception that quality of life was eroding. The consolidation of its offices into three new centers will mean that 80% of company employees in metropolitan Atlanta will work near a MARTA station, compared with 30% today. Due to pressure from local residents, parking ceilings have been introduced at the Lindbergh Station, an about-face given that the city of Atlanta has in the past always imposed parking minimums. (Local residents were not informed of the full extent of the BellSouth project, prompting a backlash over parking and traffic that required a mediator and a lawsuit before matters were settled.) Parking for retail and office space has been reduced by a third from the city’s standard of 3.7 and 2.3 spaces per 1,000 square feet, respectively. Shared parking between office and retail uses is also in the works. BellSouth hopes to lure its employees to MARTA by providing free or discounted transit passes and free private parking at outlying MARTA stations. Also, MARTA will consider eliminating some station parking as ridership numbers increase. Master Plan for Lindbergh City Center (top left); first-phase construction, 2003 (top right); streetscape rendering of Main Street (bottom left). Sources: http://www.carterusa.net/ lindberghcitycenter; G. B. Arrington, et al., Statewide Transit-Oriented Development Study—Factors for Success in California (Sacramento: California Department of Transportation, 2002). Text Box 3.3

important where rail is being built on abandoned railroad rights-of-way); housing subsidy programs under the U.S Department of Housing and Urban Development (HUD), which promote coordination between transit and housing; and Congestion Management/Air Quality (CMAQ) funds (designed to help local governments implement the federal Clean Air Act Amendments of 1990), eligible for TOD planning activities (CMAQ funds were recently used in Minneapolis’s Hiawatha corridor). Cooperation and Collaboration Given the various institutional roles and legislative mandates discussed above, what mechanisms have evolved for coordinating activities and building partnerships among stakeholders? This section reviews collaborative experiences at three levels: public-sector interagency initiatives, private-sector committees/ working groups, and public-private forums. Public-Sector Interagency Initiatives Almost all U.S. transit agencies with rail services and a majority of the big all-bus operators participate in some forum to coordinate transit and urban development among government entities. In Maryland, a TOD working group has formed with representatives and co-funding from the Maryland Transit Administration, the Maryland Department of Transportation, the Governor’s Office of Smart Growth, and the Maryland Department of Planning. Along the San Francisco– San Jose Caltrain commuter-rail corridor, each commuter-rail station project has a working group, spearheaded by the local agency, which brings public agencies together to coordinate activities (see Chapter 18). NJ TRANSIT actively participates in the state’s transit village 51 Effects of FTA’s New Starts Criteria on Land-Use Activities: 40.4% 10.6% 2.1% 29.2% 45.9% 8.3% 12.5% 4.2% 0.0% 40.4% 0% 10% 20% 30% 40% 50% No Impact Raised Profile of TOD Elevated TOD Planning Led to Changes in Land-Use Plans Significant Impact Percent of Transit Agencies Rail Agency Bus Agency Figure 3.4. Effect of Federal New Starts Land-Use Criteria on Transit Agencies’ Interests in TOD Planning.

program, working with the state DOT, the Economic Development Authority, the Office of State Planning, and other groups to promote transit-friendly planning and smart growth (see Chapter 11). The Greater Cleveland Regional Transit Authority has joined forces with Cleveland’s planning department and other local interests to form a Committee for Transit-Oriented Design that meets monthly to promote awareness and the need for TOD. An example of regional cooperation comes from the Seattle area, where Sound Transit and the Puget Sound Regional Council coordinate planning, funding, and development activities around existing and future transit stations. Figure 3.5 shows that the most common interagency cooperative agreement entered into to promote TOD, as identified by the 90 surveyed transit properties, has been between transit agencies and city governments. Comparatively few agreements have been entered into between transit agencies and state governments or redevelopment authorities.10 Private-Sector Initiatives Developers, builders, real-estate brokers, and others involved with TOD from the private side have over time formed their own forums to promote their collective interests. Examples include • Houston’s Main Street Coalition. Formed in 1994 to create a signature transit-and-pedestrian spine along an 8.5-mile boulevard stretch, the coalition is today focusing on the land-use and architectural integration along the $300-million light-rail line being built in downtown Houston. • Charlotte’s Business Community for Regional Transportation Solutions. Formed in 2000 as a task force of the Charlotte division of the Urban Land Institute, the association has raised developer awareness of TOD 52 Transit Agency Entered into a Cooperative Agreement with: 0.0% 14.0% 19.1% 35.3% 4.2% 17.6% 26.3% 26.3% 35.0% 17.6% 0% 5% 10% 15% 20% 25% 30% 35% 40% State Government Regional/MPO County Government City Government Redevelopment Agency Percent of Transit Agencies Rail Agency Bus Agency Figure 3.5. Cooperative Interagency Agreements Between Transit Agencies and Other Entities to Promote TOD.

opportunities for planned rail and bus corridors. • Envision Utah. A privately led initiative to promote regional smart growth in Salt Lake City’s rapidly urbanizing Wasatch Front, Envision Utah has embraced TOD as a central component of the region’s strategic long-range plan. An ambitious outreach program and visual simulations have been relied on in forging public consensus on how to best transform selected neighborhoods into transit-friendly environs. (See Text Box 3.4.) • Silicon Valley Manufacturing Group. Composed of senior managers of member companies in this burgeoning high-tech corridor, the Group addresses transportation and sustainable growth issues for 53 Envisioning Utah Through Visual Simulations Envision Utah hired a local consultant, Cooper, Roberts, Simonsen Architects, and a national consultant, Calthorpe Associates, to work with local communities in developing illustrative plans for four sites: Central Park and Murray North stations on the present TRAX light-rail line and proposed stations in West Jordon and downtown Layton. The consultants understood that citizens do not think of or view places in plan (i.e., bird’s eye) view, but rather from a streetscape perspective. Thus, visual simulations were relied upon to suggest how corridors, such as those near the Murray North TRAX station, might be transformed from dreary landscapes (left) to vibrant, pedestrian-active streets (right). These efforts culminated in the preparation of a handsomely illustrated report, Wasatch Front TOD Guidelines, published by Envison Utah in 2002. Source: Cooper, Roberts, Simonsen Architects and Calthorpe Associates, Wasatch Front TOD Guidelines (Envision Utah, 2002). Envision Utah has launched an ambitious outreach program, conducting various workshops and polling residents (through newspaper ads and focus groups) on their preferences for their community’s and the Wasatch Front’s future. Text Box 3.4

rail-served Santa Clara County. (See Chapter 18 for further discussion.) • 1000 Friends of Oregon/Livable Oregon. Nonprofit, grass-roots initiatives, led by 1000 Friends, were instrumental in winning support for the TOD-friendly Westside Metropolitan Express (MAX) line in metropolitan Portland in lieu of a planned beltway project. The group funded sophisticated planning and modeling of transportation/land-use futures for the region. Public-Private Forums Thirteen of the 90 transit agencies surveyed identified public-private organizations or committees that have formed to promote TOD at some level. These include the Salt Lake City Downtown Alliance Transportation Committee; Denver Regional Transportation District’s (RTD’s) TOD Task Force; Portland’s Livable City Housing Council (committed to identifying barriers to TOD and funding demonstration projects, with representatives from TriMet, the city of Portland, for-profit developers, insurance companies, Fannie Mae, and major banks); and the San Francisco Bay Area, where BART and private interests have entered into exclusive agreements to develop mixed-use TODs on agency land at Walnut Creek, El Cerrito del Norte, and several other stations. Regulatory Environment Many things stand in the way of TOD implementation, a topic addressed in the next chapter and throughout the case studies in Part 4 of this report. The boundaries delineating the degree to which transit agencies can pursue TOD are mainly defined through statutory regulations and legal mandates. The Utah Transit District Act limits transit authorities to building and operating transit services and facilities except as stipulated in federal grants and legislation.11 Miami-Dade Transit is limited in its leasing and sale of county property under State Statute 125. Under the State Transportation Article, the Maryland Transit Administration is required to offer the original owner any land acquired for transportation purposes that is no longer being used; some interpret this to mean that underutilized land banked or set aside for TODs may have to revert to its original ownership. Also, the state of Maryland’s procurement code did not anticipate public-private partnership agreements that are not always reached through an open-bid competitive process. Some enabling legislation expressly forbids transit agencies from engaging in land-use activities. State legislation that authorized the formation of the Southeastern Pennsylvania Transportation Authority (SEPTA), for instance, prohibits the agency from pursuing land development.12 Similarly, New Jersey’s Public Transportation Act of 1979, which created NJ TRANSIT, allows the agency to acquire property for “transportation uses” but not to pursue ancillary real- estate development opportunities, including TOD.13 Several transit agencies responding to the national survey cited FTA’s Third Party Contracting Requirements (Circular 4220.1D) as a regulation that ties their hands in negotiating the best land-use programs for TODs. 54

Even within the same state, statutory powers governing land development can vary markedly among transit properties. In California, for example, original statutes governing BART’s joint development powers are far more restrictive than those granted to Southern California’s Metropolitan Transit Authority (MTA). BART relies on powers of eminent domain, which the authority was originally granted to construct and operate the heavy-rail system, but MTA’s statutes are more permissive and explicitly allow the agency to pursue value-capture strategies like benefit-assessment financing.14 MTA was formed after BART, allowing the authority to review and improve on BART’s charter. Most state statutes are vague about transit joint development matters. Since most transit agencies were created before joint development gained ascendancy, many contemplating joint development face the prospect of bending the original intent of their authorizing statutes. The absence of clear state-level policy directives (outside of Oregon and Maryland) and authorizing legislation regarding land development has, de facto, steered some U.S. transit properties away from the practice of TOD and joint development. Internal Strictures According to transit-agency survey respondents, what ties their hands more in pursuing TOD than state regulations are internal ones—policies, strictures, mandates, and so forth within agencies that limit the practice of TOD. Around 15% of surveyed transit-agency respondents said such controls, whether explicit or tacit, existed within their organizations. Most transit properties are inclined to embrace TOD in principle, but, when it comes to specifics, they are sensitive to the fact that land use lies within the purview of local governments. They see themselves as mainly in the business of running trains and buses, deferring specific land-use decisions for station-area development to municipalities. As one respondent of a large east-coast transit property put it: “we try to assist and influence communities’ land-use decisions without overstepping local home rule.” The line between being in favor of TOD as a concept and actively promoting specific TOD projects is often a delicate one to cross. Parking Policies For several big rail properties, an in- house policy that has stood in the way of converting surface parking lots into on- site mixed-use developments is one-to- one replacement parking requirements. Fourteen of the respondents indicated that their agencies have replacement parking requirements.15 Given that half (45 of 90) of the respondents said that there are park-and-ride spaces at stations where TOD is being promoted, it appears that replacement parking strictures affect at least a third of TOD settings.16 In the case of BART, the elected board of directors’s one-to-one replacement policy has reduced ground-rent income by providing rent credits to developers who provide replacement parking. Even if BART’s board were to relax the one- to-one replacement requirement, this might not result in reduced parking since all local jurisdictions require that BART replace all parking displaced by development on agency land. In and around transit stations, parking is a double-edged sword. On the one hand, 55

it is absolutely essential for drawing customers to transit in low-density settings where feeder bus services are sparse. On the other hand, parking lots can form huge obstacles to the creation of viable and attractive TODs. Parking reduces opportunities for TOD in several ways. First, parking separates the transit system from the adjacent community, along with potential TOD parcels. Second, parking creates a station-area milieu that is distinctly automobile- rather than pedestrian-oriented. Third, parking demands lead to stations being sited in marginal settings that are not conducive to TOD. Finally, regulatory requirements on replacement parking severely limit the possibility of converting commuter spaces into TOD. It must be remembered that the cost of replacing parking becomes a TOD, not a transit-system, requirement. The TOD must develop enough revenue to replace surface parking with a costly deck structure. Replacement parking policies have placed a higher value on the short- term ridership generated from park-and- ride than on the long-term benefits from creating viable communities around stations. The notion of generating riders from TOD to offset the cost of replacement parking is quickly dismissed in many parts of the United States. This has been the case at Dallas’s Mockingbird Station. The developer of an adjacent mixed-use TOD inquired about the possibility of relocating parking in front of the station and developing the parcel as apartments. The Dallas Area Regional Transit agency, DART, has so far resisted. Even with a one-to-one replacement policy, DART is more interested in preserving this choice piece of land for commuter parking. For many local decision-makers and their constituents, parking is seen as a more important transit use next to the platform than a TOD. Notwithstanding the sometimes schizophrenic relationship transit properties have with parking, most transit-agency survey respondents did not feel that parking facilities inhibit TOD. Fifteen percent of transit-agency respondents said park-and-ride spaces were a “significant obstacle” to their agency’s ability to successfully plan and build TOD projects. Figure 3.6 breaks the responses down, revealing that respondents from rail agencies were generally more critical about parking as a deterrent to TOD. The figure shows some degree of sensitivity to the impacts of park-and-ride spaces on pedestrian environments. Almost half of rail- agency respondents and over 60% of those from bus agencies felt that parking spaces moderately detracted from the pedestrian-friendliness of station environments. Despite the obstacles to removing parking lots near stations, respondents from 17 of the 90 transit agencies (18.9%) said plans are underway to convert park-and-ride lots to TOD. In all, parking lots at over 50 rail stations or bus terminals are slated for conversion to commercial and/or residential development. The FTA’s new joint development ruling that allows transit agencies to sell off parking lots to private investors and retain proceeds has no doubt helped trigger this response. Agencies with park-and-ride conversions in the works are listed below with affected stations: • Washington Metropolitan Area Transit Authority. Branch Avenue, Suitland, Rhode Island Avenue, 56

Van Dorn, Prince George’s Plaza, Wheaton, Greenbelt, and Takoma Stations; • Metropolitan Atlanta Regional Transportation Authority: Chamblee, King Memorial, Lakewood-Fort McPherson, Abernathy Road, Kensington, Avondale, and Hamilton E. Holmes Stations; • San Francisco BART: Pleasant Hill, MacArthur, West Oakland, Richmond, El Cerrito Del Norte, El Cerrito Plaza, Ashby, Fruitvale, Hayward, and Union City Stations; • Miami-Dade Transit Authority: Coconut Grove, Overtown/Arena, Brownsville, Douglas Road, Dr. Martin Luther King Jr. Plaza, and Santa Clara Stations; • New Jersey Transit: Morristown, Hamilton, Liberty State Park, Jersey City, and Dover Stations; • Portland TriMet: Gateway, Rockwood, and El Monica (land swap) Stations; • Metropolitan Transit Development Board (San Diego): Morena/Linda Vista and Grossmont Stations; • Caltrain/SamTrans (San Mateo County): Redwood City and Colma Stations; • Maryland Transit Administration: Owings Mills, Old Court Metro, Reisterstown Plaza Metro Stations; • Dallas Area Rapid Transit: Mockingbird Station; 57 Impact g 38.9% 61.1% 45.0% 40.0% 5.0% 29.4% 47.1% 23.5% 42.8% 28.6% 28.6% 0.0% 0% 20% 40% 60% 80% 100% Minimal Moderate Significant Minimal Moderate Significant Percent of Transit Agencies Bus Agency Rail Agency Obstacle to TOD Harms Walkin Figure 3.6. Views of Transit-Agency Respondents on Impacts of Park-and-Ride Spaces on TODs and Quality of Pedestrian Environments.

• Utah Transit Authority: 10000 South Station; • SouthWest Metropolitan Transit Commission (Minnesota): Chanhassen Station; and • Regional Transportation District (Denver): Arapahoe Station. Summary Many voices shape the practice of TOD in the contemporary urban United States. A multi-layered, sometimes complex institutional and political environment has evolved that ensures accountability and instills a degree of responsibility and fairness into the decision-making process, but this environment can also form roadblocks to implementation, a topic addressed in Chapter 5. The spectrum of transit-agency participation can range from modest (providing technical guidance such as transit-supportive design guidelines) to ambitious (being the self-anointed lead developer). Most transit agencies get involved in land-use affairs, broadly defined; however, they generally limit their involvement in TOD matters to interagency coordination. What TOD work is carried out concentrates on public outreach and education. Design charrettes have been used quite successfully to draw public input into the TOD-planning process, as exemplified by the successes at the Pleasant Hill BART station and along the Wasatch Front under the guidance of Envision Utah. Local governments wield considerable control over TOD outcomes through zoning ordinances and building codes. Some states, notably California and New Jersey, have sought to jump-start TOD through transit village initiatives that critics view as mere window-dressing since little funding support is provided. Important recent federal initiatives have been the new joint development ruling (that enables transit agencies to sell land for TOD even if the land was purchased using federal dollars), New Starts criteria, and various livable community initiatives. Coordination among public agencies as well as with the private sector normally occurs through various ad hoc task forces and similar forums. In recent years, private developers, builders, and real-estate interests have joined forces to promote TOD in cities like Houston, Charlotte, and San Jose. The major institutional barriers to TOD are regulatory in nature, either a product of restrictive state statutes or self- imposed transit-agency rules. Some states limit, ipso facto, real-estate transactions undertaken by transit agencies to “transportation uses.” Many transit properties shy away from land development matters on the grounds that it is not central to their mission of delivering safe and efficient transit services. As a result, most transit agencies have no personnel assigned to TOD or, more generally, land development, leaving it to their legal departments to handle land-use affairs and disputes. One in-house rule that has clearly hampered TOD is one-to-one replacement parking requirements. Nonetheless, over 50 transit stations across the United States are presently being targeted for parking lot conversions, thanks in part to FTA’s new joint development rulings. 58

Notes 1 Sixteen of the 90 transit properties responding to the survey (17.8%) have people working part time on TOD affairs. BART has the most part-timers (11), followed by NJ TRANSIT (4) and the Regional Transit Authority of Northeast Illinois (3). 2 Funds used for TOD usually came from transit agencies’ operating budgets. Several agencies, however, have dedicated funding, targeted specifically at TOD planning and development. San Mateo County Transit District (SamTrans) supports its TOD functions with earmarked sales-tax revenues and developer fees. While most of Portland TriMet’s TOD activities are supported by the agency’s general fund, Interstate highway transfer grants have been used in the past to support station-area planning and development and are envisaged for the 5.8-mile Interstate MAX extension now under construction. The Maryland Transit Administration gets 98% of its funding from a State Transportation Trust Fund and 2% from a Transportation Enhancement Program grant under the federal TEA-21 legislation. In the past, NJ TRANSIT has supported its TOD functions with federal TCSP grant funds and support from the state budget. Denver RTD’s TOD functions are supported by developer contributions and community development grants, with the current focus on the Transportation Expansion Project (T-REX) in Denver’s Southeast Corridor. 3 A number of questions in all surveys discussed in this report judged attitudes using a 7-point Likert (ordinal) scale. In this figure and most others, scores of 1 or 2 were interpreted as “minimal,” scores of 3 through 5 were translated as “moderate,” and scores of 6 or 7 were weighed as “significant.” 4 These were an FHWA TCSP grant, FHWA planning funds under Section 112-PL, and FTA’s Section 5303 planning enhancement funds. 5 More common are state land-use planning and growth management rules that mandate statewide land-use plans (Oregon and Georgia), create regional authorities with quasi-control over land use and transportation planning (Oregon, Massachusetts, and Georgia), enact development of regional impact (DRI) requirements (Georgia and Massachusetts), and target state infrastructure funding to direct growth (Oregon). 6 R. Cervero, Transit Villages in California: Progress, Prospects, and Policy Reforms, Working Paper 98-08 (Berkeley: Institute of Urban and Regional Development, University of California, 1998). 7 49 U.S.C. § 509(a)(5), Federal Transit Administration, Technical Guidance on Section 5309 New Starts Criteria (Washington, D.C.: 1999). 8 Parsons Brinckerhoff Quade & Douglas, Transit Oriented Development in California (Sacramento: California Department of Transportation, 2001); E. Deakin, C. Ferrell, J. Mason, and J. Thomas, “Policies and Practices for Cost-Effective Transit Investments: Recent Experiences in the United States” (paper presented at the 81st Annual Meeting of the Transportation Research Board, Washington, D.C., January, 2002). 9 When asked whether “the presence of land use as an FTA New Starts rating criterion changed how your agency approaches land use in the development of transit projects,” around two-thirds of respondents from transit agencies stated “no.” Most responding “no” indicated that their agencies have always treated land-use issues seriously and would be addressing land-use issues regardless. Around a quarter indicated that “land use is a local issue; having a federal criterion has had little to no impact.” Respondents from WMATA, the Maryland Transit Administration, DART, and NJ TRANSIT, among others, felt the criterion “provided the impetus to more seriously address land-use issues.” Other respondents, including those from BART, MARTA, and the Houston Transit Authority, indicated that the criterion “has opened the door to get discussions going.” 10 Redevelopment districts exist in the service areas of 71% of transit agencies surveyed (62% of the non-rail agencies and 91% of the rail agencies). 11 Utah Transportation Code 17A-2-1101, et seq. 59

12 Pennsylvania Title 74 C.S.A. Chapter 17 (Transportation). 13 New Jersey Statutory Act 27: 25-1 et seq. 14 M. Bernick and A. Frelich, “Transit Villages and Transit-Based Development: The Rules Are Becoming More Flexible—How Government Can Work with the Private Sector to Make It Happen,” The Urban Lawyer, Vol. 30, No. 1 (1998): 1–31. 15 The fourteen are: Capitol Corridor Joint Powers Authority (Sacramento–San Jose), Dallas Area Rapid Transit, Los Angeles Metropolitan Transit Authority, Maryland Transit Administration, Metropolitan Transit Development Board (San Diego), New Jersey Transit, Peninsula Corridor Joint Powers Board (Caltrain), Regional Transportation District (Denver), San Francisco Bay Area Rapid Transit District, San Mateo County Transit District, Santa Clara Valley Transportation Authority, SouthWest Metro Transit Commission (Minnesota), Utah Transit Authority, and Washington Metropolitan Area Transit Authority. 16 According to responses, the mean size of the average agency parking lot was 220 spaces, with considerable variation (with the average size ranging from 40 to 1,200 spaces). 60

61 Chapter 4 TOD Implementation Tools Getting the Job Done Going from the theory of TOD to real- world implementation can be a gargantuan leap. Local governments, redevelopment authorities, regional planning organizations, and even public transit agencies have over time accumulated an arsenal of tools and techniques to get the job done. This chapter focuses on methods currently being used among multiple stakeholder groups in bridging TOD theory and practice. The focus is on tools introduced and controlled by the public sector; Chapter 5 provides a private-sector perspective. Most implementation tools reviewed in this chapter lie within the purview of local governments and special authorities, like redevelopment agencies. Funding and finance issues related to supportive TOD infrastructure (e.g., streetscape and access improvements) also receive attention in this chapter. TOD Visioning and Planning Step 1 in implementing TOD is to forge a shared vision and prepare a strategic plan. Transit can be a catalyst to achieving a desired community—the kind of place where people want to live, work, play, and raise a family. Two Scandinavian cities known as paragons of TOD, Copenhagen and Stockholm, adopted metaphors early on to articulate and market their visions of the future— the celebrated “Finger Plan” in case of Copenhagen and a “Planetary Cluster” concept in the case of Stockholm.1 Arlington County, Virginia, arguably the United States’s most successful example of TOD outside of a central business district, embraced this Scandinavian model when it adopted its “bull’s eye” concept plan for the Rosslyn-Ballston corridor in the 1970s (see Figure 4.1). Through a collaboration that engaged local stakeholders and an ambitious campaign that targeted supportive infrastructure improvements to rail stops along the corridor, Arlington County managed to transform the Metrorail Orange Line into a showcase of transit-supportive development, with mid- to high-rise towers and multiple uses today at the Rosslyn, Court House, Clarendon, Virginia Square, and Ballston Metrorail stations. Since 1970, over 15 million Figure 4.1. “Bull’s Eye” Vision for the Rosslyn-Ballston Corridor in Arlington County, Virginia. Source: Arlington County Department of Community Planning, Housing and Development.

square feet of office space, several thousand hotel rooms, and 18,000 housing units have been added to these station areas. With the bull’s eye metaphor in place to guide ongoing planning, Arlington County proceeded to leverage Metrorail’s presence and transform once dormant neighborhoods into vibrant clusters of office, retail, and residential development. (See Chapter 12 for more details on Arlington County’s experiences.) How prevalent is TOD visioning and planning in the United States today? In the national survey of 90 transit agencies, questions were asked about regional visioning and planning as well as the zoning of land around agencies’ transit stations. When asked whether there was “a regional vision, policy, or plan in place that calls for compact development organized around transit,” 44 agencies, or nearly half, said there was. Among the regional initiatives promoting station-area development are Charlotte-Mecklenburg’s “Centers and Corridors” plan promoting TOD along five transit corridors; the Washington (D.C.) Metropolitan Area’s “Corridors and Wedges” plan, introduced in 1957; the “Livable Communities Program” and “Housing Incentive Program” sponsored by the Metropolitan Transportation Commission and Association of Bay Area Governments in the San Francisco region; Portland Metro’s “Region 2040 Functional Plan” and “Regional Transportation Plan”; Envision Utah’s Long-Range Vision, committed to TOD as an alternative to sprawl; the Long- Range Plan of the Delaware Valley Regional Planning Commission in the Philadelphia area that embraces TOD principles; the San Diego Association of Governments’ designation of “Transit Focused Areas” as part of its “Land Guidance Program”; Miami-Dade’s Comprehensive Development Master Plan; Eugene-Lane County’s Regional Transportation Plan (RTP) that calls for mixed-use nodes around bus rapid transit (BRT) stops; and Grand Rapids, Michigan’s “Blueprint Plan” that similarly endorses bus-based TOD. When asked whether any cities or other governmental entities in their regions had adopted TOD plans or introduced TOD zoning, 38 of 90 national survey respondents (42%) answered “yes.” More than three-quarters of rail agencies had local TOD plans or zoning in their service areas, compared with 36% of non-rail agencies. Within BART’s service jurisdiction alone, 15 separate TOD plans have been prepared for station areas, along with complementary zoning.2 WMATA’s TOD planning has spanned two states (Maryland localities in Montgomery and Prince George’s Counties and Virginia localities in Arlington and Fairfax Counties) and the District of Columbia. Greater Chicago has seen TOD plans and/or zoning districts introduced in more than a dozen small- to medium-sized townships that collar Chicago proper: Tinley Park, Blue Island, Elmhurst, Westmont, Olympia Fields, Waukegan, Orland Park, Riverday, Robbins, University Park, Hazel Crest, Morton Grove, and Evanston, among others. In Plano, Texas, on the outskirts of Dallas, the city planned and developed a downtown transit village before light rail had even arrived. Plano offices agreed on a vision, set in place supportive zoning, landscaped and upgraded local infrastructure, and found a developer to bankroll and implement the vision. (See Chapter 15 for more details.) 62

The state of North Carolina has, as of late, witnessed a surge in TOD planning. In the Raleigh-Durham area, for example, Town Center Area Plans have been prepared for several stations under construction, with the largest amount of development slated for the fast-growing technology-driven employment center, Cary. North of Charlotte, the town of Huntersville has prepared a TOD plan to complement its neotraditional zoning ordinance. The town’s TOD-R district promotes residential growth with compatible commercial uses within a 1⁄2 mile of rapid transit stations; the TOD-E district, meanwhile, promotes high-density office employment with FARs between 0.5 and 1.5 within walking distance of transit stations. Huntersville’s TOD plan is an outgrowth of a 1999 design charrette, led by New Urbanist Andres Duany, which forged a community consensus to transform an abandoned garment factory into a multi-use retail- entertainment-hotel-civic complex that will open onto a planned commuter rail station. The nearby cities of Cornelius and Davidson have developed similar plans that orient future growth to planned rail stations. A semi-rural setting where transit- oriented zoning has been introduced is Garfield County, Colorado. There, a “Transit Planned Urban Development” district has been formed, and various streetscape improvements have been made to bus corridors. Chapter 16 reviews experiences with TOD planning and zoning in semi-rural areas of Colorado. TOD Zoning By and large, local governments wield almost complete control over permissible land uses, building setbacks, and allowable densities in and around transit stations. Land-use controls derive from eminent-domain and home-rule powers granted by states. The standard tool used by local governments to regulate land and enforce specific plans, such as those for station areas, is zoning. Zoning brings macro-visions of the future down to the parcel level, providing a fine-grained interpretation of TOD. Once regulations are written that embrace compact growth, a pedestrian orientation, and mixed uses, TOD visions can be implemented on a case- by-case basis, in a consistent fashion, as a city goes about its regular business. Incremental implementation through zoning is especially important in big cities that are essentially built out and prime for strategic infill development.3 Traditional, or Euclidean, zoning separates land uses, sets density thresholds and minimum lot sizes, and usually contains explicit regulations such as bulk and height controls and minimum parking. With TOD, however, traditional zoning is often turned on its head (i.e., uses are intermixed, not excluded, and parking caps, rather than parking floors, are sometimes set). TOD Overlay Zones To allow for TOD, a municipality can create a special TOD zone or change existing classifications. Officials in Mountain View, California, for example, recently rezoned 40 acres of industrial land for 520 housing units adjacent to the Whisman light-rail station. More common than either rezoning or new designations, however, is the creation of an overlay zone. As its name implies, an overlay zone is placed on the zoning 63

map over a base zone. The overlay modifies, eliminates, or adds regulations to the base zone. Overlays provide for effective land-use control without increasing the complexity of the regulations. A growing list of U.S. cities—San Diego, Seattle, Portland, Eugene, San Antonio, Oakland, Columbus, Durham (NC), Mountain View (CA), Morristown (NJ), and Bayonne (NJ), among others— have introduced overlay zoning in recent years to existing or planned station areas to promote complementary mixed-use development. San Diego’s overlay zone is the chief instrument for implementing transit-supportive design guidelines introduced early into the city’s light-rail program (see Text Box 4.1). An overlay district can be an effective interim tool when demand for land around a station is strong. To prevent automobile-oriented uses before station area plans could be enacted, the city of Portland created interim overlay zones along the westside light-rail extension to Hillsboro. Similarly, the city of Seattle’s interim overlay district prohibits automobile-oriented uses and lowers parking standards within a 1⁄4 mile of proposed light-rail stations to preserve future TOD opportunity areas (see Text Box 4.2). It has since been replaced by permanent overlay zones at seven planned light-rail stations. To prevent big-box retailers and automobile- oriented designs from preempting TOD, in 1998 the city of Minneapolis enacted interim overlay zones within 1⁄2 mile of the planned Hiawatha light-rail corridor. Parking ceilings were also set for TOD zones. Besides placing a maximum “lid” on parking, Columbus’s interim TOD overlay zone requires bicycle parking facilities to be installed within 50 feet of building entrances of all new office and multifamily structures. Even the city of Phoenix, long considered a haven for automobile travel, is planning an interim TOD overlay zone as it moves forward with its Valley Metro Rail program. TOD Land Uses Besides identifying unwelcome land uses, like automobile repair shops, TOD zones often specify activities that are permitted as-of-right, such as housing and convenience shops. Lynwood, Washington, for example, has created a special mixed-use/transit-supportive zone that grants special use permits to any of the following services that are sited near transit stops: banks, professional businesses, retail stores, offices, and child-care centers. Permissible uses often depend on the type of TOD; large-scale urban TODs, for example, might allow regional trip generators like entertainment complexes, whereas neighborhood-scale TODs are apt to ban such activities. Figure 4.2 portrays the land-use mixes and site- design features recommended by noted TOD designer Peter Calthorpe. These standards have been adopted by a host of cities that have hired Calthorpe and his associates over the past decade to prepare local design guidelines and TOD ordinances, including Portland, San Diego, Salt Lake City, and Minneapolis. Calthorpe calls for the employment and commercial components of a TOD to increase as it becomes more urban. The Puget Sound Regional Council suggests that to ensure a good balance of activity within a TOD, the number 64

San Diego’s TOD Zoning and Design Guidelines The city of San Diego pioneered TOD zoning in the early 1990s, relying upon zoning overlays, interim zoning, and floating zones to promote compact, mixed-use development around light-rail stops. A key document in framing the city’s zoning initiatives was the 1991 Transit-Oriented Development Design Guidelines, prepared by Peter Calthorpe and local planners.4 The guidelines present a typology of TODs. At the upper range of the hierarchy are regional-serving TODs that feature large mixed-use cores with supermarkets, professional offices, restaurants, and retail shops. Village greens and public plazas are also included. Neighborhood TODs, on the other hand, focus on moderate-density, grid-street designs that connect residents to rail stops and feature neighborhood parks. The guidelines stress that TODs should be inviting to pedestrians, with buildings that open onto sidewalks and design elements that enliven streets and form a pleasant walking milieu. According to the Guidelines, the following design principles are to be applied when station-area plans are drafted: Buildings must be of sufficient intensity to create safe and active streets enhanced by a sense of enclosure and visual interest, and to support transit. Orienting buildings to public streets will encourage walking by providing easy pedestrian connections, by bringing activities and visually interesting features closer to the street, and by providing safety through watchful eyes and activity day and night. Moderate to high intensities also support frequent and convenient transit service; and retail centers can provide a greater variety of goods and services if more residents and employees are within close proximity. Recommended residential densities are 12 to 25 dwelling units per net acre; single- family detached housing should be built at 12 to 17 units per acre on small lots with ancillary units (“granny flats”) on some parcels. Office densities vary according to parking provisions, with FARs of 0.35 to 0.6 for projects without structured parking and 0.5 to over 1.0 (with exact amounts set by community plans) for those with structured parking. In recognition of shared-parking possibilities, the city of San Diego recommends below-code reductions of 2% to 15% for different types of land uses in urban TODs. Also, retail, office, and public uses can count on-street parking spaces adjacent to their properties toward meeting minimum parking requirements. San Diego’s Transit-Focused Districts Hazard Center TOD, Mission Valley Trolley Line Text Box 4.1

Seattle’s Station-Area Interim Overlay Zoning District Seattle’s City Council passed Station-Area Overlay Zoning legislation in 2001 to preserve opportunities for transit- and pedestrian-oriented development around proposed Link light-rail stations and the voter-approved 14-mile monorail extension. Overlay zoning districts embody the following TOD characteristics: • A radius that extends up to 1,320 feet (1⁄4 mile) of a station or stop; • Medium- to high-density residential development; • Presence of a commercial or mixed-use area where goods and services are available to the public, with opportunities for enhancing the pedestrian environment; • Opportunity sites for new developments with good access to transit, bicycle, and pedestrian modes; and • Single-family development only if minimum density standards are met. Seattle’s overlay zoning district further requires conditional use permits for residential development in a pedestrian-designated zone that might otherwise be preferable for commercial and retail activities (i.e., bigger trip generators). Residential uses are prohibited at street level along principal pedestrian streets, and single-purpose residential structures are prohibited if they are located within a zone that has a height limit of 85 feet or higher. The district further defines activities that are prohibited, such as drive-in businesses and industrial uses. Flexible parking standards, on the other hand, are encouraged. Design standards call for the placement of parking between the rear or side lot lines of a structure. Also, nonconforming uses (such as gas stations, heavy commercial services, mini-warehouses, and vehicle repair shops) cannot be expanded by more than 20% of the existing gross floor area of an existing use. Besides light-rail and monorail station areas, overlay zoning is also being applied to two bus- based TODs: Convention Place Station, at the north end of the downtown bus tunnel, and Northgate Transit Center, a high-density, mixed-use urban development on the “super block” south of the Northgate Mall, which is to be built on 8 acres now occupied by two King County Metro park-and-ride lots. TOD in Seattle. The Central Link light-rail line (left photo) suffered a setback when local voters turned down a sales-tax referendum in 2002; current plans call for a 2011 opening, assuming funding can be obtained. Top right photo shows a rendering of light rail as a “redevelopment catalyst” in Seattle’s Rainier Valley. Bottom right photo shows the existing transit center at the Northgate Mall, which will soon be flanked by hundreds of apartments, retail shops, restaurants, and entertainment venues. Text Box 4.2

67 Use Neighborhood TOD Urban TOD Public 10 – 15 % 5 – 15 % Core/Employment 10 – 40 30 – 70 Housing 50 – 80 20 – 60 City/ Source TOD Type Minimum Residential Densities (Dwelling Units/Acre) San Diego TOD Guidelines Urban TOD (light-rail served) Neighborhood TOD (Bus served) 25 (18) 18 (12) Washington County, Oregon (Land Use and Transportation Air Quality Study) Urban TOD (light-rail served) Neighborhood TOD (Bus served) 15 (7) 8 (7) Portland Tri Met, TOD Guidelines Light-Rail Served TOD Bus Served TOD 30: 0–1/8 mi 24: 1/8–1/4 mi 12: 1/4–1/2 mi 24: 0–1/8 mi 12: 1/8–1/4 mi Table 4.1. Recommended Residential Density Thresholds for TODs Figure 4.2. Land-Use Prototypes for TODs. Source: P. Calthorpe, The Next American Metropolis: Ecology, Community, and the American Dream (Princeton: Princeton Architectural Press) 1993. Source: Community Design + Architecture, Model Transit-Oriented District Overlay Zoning Ordinance (Oakland: 2001). of jobs should not exceed the number of residents by more than three to one.5 NJ TRANSIT, in its design guidelines, encourages mixing of uses within station areas to generate peak and off- peak ridership (e.g., mixing offices with entertainment uses encourages activity beyond normal business hours).6 In general, industrial uses are discouraged in TODs, although not always. The city of Seattle bans manufacturing activities from TODs since such uses have few workers per acre. However, the city of San Diego’s TOD design guidelines hold that light industrial uses with low employment densities can be appropriate in some TODs if they are located outside of the mixed-use core and are compatible with other TOD uses. TOD Densities Some TOD zoning codes specify residential density thresholds. Table 4.1 reveals these can be as low as 7 dwelling units per acre for bus-based neighborhood TODs to 30 units per acre for larger TODs within 1⁄8 mile of a light- rail station. For non-residential uses, minimum FARs are sometimes defined in hopes of not only generating transit riders but also creating lively streetscapes and minimizing dead spaces created by surface parking lots. Based on a review of 11 TOD design guidelines across the United States, Reid Ewing concluded that the following rules of thumb are appropriate: 7 units per acre (basic bus

services); 15 units per acre (premium bus service); and 20 to 30 units per acre (rail services).7 Such numbers are not based on widely accepted research findings nor are they universally applicable. They merely represent thresholds found in transit-agency design guidelines and are not necessarily relevant to specific sites or corridors. By way of example, The Crossings in Mountain View, California, is noteworthy for its adaptive reuse of a marginal site in an older suburban area with good rail services. The Crossings replaced an aging and under-performing shopping center with 400 housing units clustered around a Caltrain commuter rail station. (See Text Box 4.3.) The city of Mountain View zoned the land on which The Crossings sits for compact, mixed-use development according to TOD-supportive design guidelines. Net residential densities at The Crossings include single-family homes at 12 units per acre, townhouses and rowhouses at 30 units per acre, and apartments at 50 units per acre. The average net density is 22 units per acre, 68 station access. Nevertheless, some U.S. The Crossings, Mountain View, California The top left diagram shows a former shopping mall, surrounded in big-box retail fashion by acres of asphalt parking. The bottom left diagram shows the site design of The Crossings, a residence-based TOD, with the new Caltrain station at the top. The right top photo shows row homes coming in at 30 units per acre, and the bottom right photo shows zero-lot-line single-family residences in the range of 15 to 18 units per acre. Text Box 4.3

which places all units within walking distance of the train station. What about the densities for employment and commercial uses? Peter Calthorpe suggests a minimum FAR of 0.35 for nonresidential activities in TODs, while the Puget Sound Regional Council suggests a target of 0.5 to 1.0 for commercial developments without structured parking and at least 2.0 for developments with structured parking. The Regional Council further contends that employment densities of 25 jobs per gross acre will support frequent, high- capacity transit service. This density translates into 15,000 jobs within a 1⁄2-mile radius of a station. For light-rail service, employment densities of 50 jobs per gross acre are needed.8 A recent national study on transit and urban form estimated that downtown densities of 100 workers per gross acre translate, on average, into 300 boardings per day for suburban light- rail stations that are surrounded by low- density residences (of five persons per acre) 20 miles from a downtown.9 Among medium-sized cities, Denver has pushed the envelope for commercial densities in TODs. Through Blueprint Denver, the first overhaul of city zoning regulations in 50 years, the new zoning designation of transit mixed use (TMU-30) allows FARs of up to 5 to 1; parking requirements for areas close to light-rail stations are slashed 25%. To qualify for TMU-30 zoning, sites must cover at least 12 acres and be a short walk from a station platform. See Chapter 16 for further discussion on Denver’s bold TOD zoning initiatives. How densities are arranged within a TOD zone can have a bearing on whether residents and workers are inclined to patronize transit. Guidelines normally call for densities to decline from the core of an urban TOD in a “wedding cake” fashion, so as to put more people closer to the train station (see Figure 4.3). Research suggests that density gradients that decay exponentially with distance from a station maximize ridership.10 TOD Parking Codes Rail transit has always had a schizophrenic relationship with parking. On the one hand, acres of surface parking detract from the walking, human-scale quality of stations. Yet, 69 Figure 4.3. Density Gradations for an Urban TOD at 18 Dwelling Units per Acre (du/ac). Source: P. Calthorpe, The Next American Metropolis: Ecology, Community, and the American Dream (Princeton: Princeton Architectural Press, 1993).

in the vast majority of suburban settings, densities are so low and feeder bus services are so meager that park-and-ride is the only viable means of station access. Nevertheless, some U.S. cities have sought to flex or even lower TOD parking standards. The city of San Diego recommends reductions between 2 and 15% for land uses in the urban TODs. The cities of Denver and Dallas have similarly enacted language reducing the number of parking spaces in mixed-use districts near rail stops. The city of Portland, meanwhile, has adopted parking maximums for several TODs, including the recently opened Cascade Station/Portland International Center Plan District. Montgomery County, Maryland, reduces minimum parking requirements for office uses in close proximity to Metrorail stations. Some cities allow projects within TODs to count on-street spaces in satisfying minimum parking requirements. The city of San Diego, for instance, allows retail, office, and public uses to count as on- street spaces for parcels adjacent to San Diego Trolley stations. Short-term parking meters are sometimes installed to ensure high rates of customer turnover. San Diego is also noteworthy for its shared parking initiatives at Trolley stops, a de facto form of capping parking supplies. There, the regional rail authority, Metropolitan Transit Development Board (MTDB), entered into a license agreement with a theater owner to share the transit-agency parking lot at the Grossmont Station (Photo 4.1).11 For use of the parking lot, the theater pays MTDB an annual lease. Theater- goers can use the parking lot at all hours, subject to the same limitations as Trolley patrons (e.g., no parking over 24 hours). A survey found that nearly one-third of theater employees commuted via transit, compared with a regional transit market share of just 3% for work trips.12 The arrangement generates $40,000 in annual lease revenues for MTDB. While capping automobile parking supplies, some jurisdictions have called for minimum levels of on-site parking requirements for bicycles. The Mid-Ohio Regional Planning Commission, which serves the greater Columbus area, has proposed a model TOD ordinance that requires that bicycle parking be installed for all office and multifamily structures as well as freestanding commercial uses and that it be located within 50 feet of the central or most frequently used building entrances (see Table 4.2). Zoning provisions requiring showering facilities for cyclists have been recommended in Atlanta’s Lindbergh Station District and similar guidelines have been enacted around Mountain View’s Caltrain commuter-rail station. 70 Photo 4.1. Shared Parking Sign at San Diego’s Grossmont Trolley Station. Parking demands of transit stations and entertainment venues dovetail nicely. Theater-goers can use Trolley Station parking on evenings and weekends, and Trolley park-and- riders can use theater parking spaces Monday through Friday, from early morning to early evening.

Zoning Obstacles It should be noted that not all TOD zoning has met with success. Clark County, Washington, north of Portland, Oregon, adopted a TOD ordinance in 1995 that was repealed a year later because of an anti-regulatory backlash mounted by small businesses and employers. The city of Vancouver, Washington, adopted a TOD ordinance the same year, and while still on the books, the absence of any firm guidelines on what goes within a TOD has rendered it, according to local accounts, “toothless.” Such roadblocks to TOD implementation are taken up in the next two chapters. Implementing TOD zoning and design guidelines can also give rise to unforeseen institutional conflicts. Many transit-supportive design manuals call for generous turning radii at street intersections to allow buses to negotiate turns. Such designs are generally at odds with the minimalist street designs advanced by neotraditionalists and TOD advocates. In the case of proposed TODs in California, Oregon, and Virginia, developers have been caught in a crossfire between traffic engineers and fire marshals who complained that planned streets were too narrow (for safety and liability reasons) and neo-traditional planners who insisted they were too wide (and thus oriented to automobiles). Implementation Tools and Ratings To the extent that TOD represents a desirable land-use outcome, a number of planning, policy, and implementation tools are available to local entities to encourage TOD. In addition to zoning strategies, these include density bonuses, favorable lending terms through dedicated bonding issues, direct grants or loans, assistance with land assembly, relaxed parking standards, streamlined development reviews, and other mechanisms that encourage developers to undertake projects that might not fit their usual business model. Among the many available implementation tools, which have been applied most widely in practice? Figure 4.4 summarizes experiences to date as identified by survey respondents. Percentages are broken down by instances where tools have been applied for both rail and bus services. To date, U.S. rail cities have been most aggressive in applying policy tools to leverage TOD. Also included in the table are the mean “effectiveness ratings” of each tool as assigned by public-sector survey respondents (based on a 7-point Likert scale, where 1 is the lowest score and 7 is the highest). Tools are listed in the table in descending order (from right to left) of mean effectiveness, revealing the degree to which those that are rated the highest have been embraced in practice. The most widely applied tool to leverage TOD has been the expenditure of 71 Land Use Minimum Bicycle Parking Requirement Multifamily residential 1.00 space per dwelling unit Retail 0.50 spaces per 1,000 sq. ft. Office 0.25 spaces per 1,000 sq. ft. Industrial 0.14 spaces per 1,000 sq. ft. Table 4.2. TOD Bicycle Parking Requirement for Model Overlay Ordinance, Columbus, Ohio, Region Source: Mid Ohio Regional Planning Commission, Model Transit Oriented Development Zoning Overlay District (Columbus: 1999).

planning funding, in most instances to pay for consultants to prepare strategic station-area plans. Next most common are zoning/density bonuses and relaxed parking standards, followed by capital funding (for ancillary improvements like streetscape enhancements and pedestrian ways). Near the Ballston Metro station in Arlington, Virginia, bonuses have been introduced to create housing and retail spaces in buildings that would otherwise be exclusively office space, creating a 24-hour district. Density bonuses in Montgomery County, Maryland, have been used around the Bethesda and Silver Spring Metro stations to relieve developers of the cost burden of an inclusionary housing ordinance that mandates affordable unit set-asides.13 The city of Atlanta’s Lindbergh Station District also includes an incentive for affordable housing. Developers can increase the residential floor areas to twice a parcel’s lot area if at least 20% of the units are affordable.14 Developers must agree to keep the units affordable for at least 15 years. In suburban Chicago and greater Denver, there are good examples of capital improvements, such as refurbishment of aging commuter-rail stations and provision of shared parking facilities, which have attracted private investment to station areas (see Chapters 14 and 16, respectively). Figure 4.4 shows that a number of U.S. rail cities have also introduced land- based policies, such as buying land on the open market (for land banking), as well as providing land assembly help. In the San Francisco Bay Area, for instance, redevelopment agencies have been instrumental in assembling and delivering to master-builders large plots 72 3.9 4.2 4.3 4.4 4.4 4.5 4.6 4.7 4.7 4.9 4.9 5.2 5.3 5.6 0% 10% 20% 30% 40% 50% 60% 70% 80% Ex clu sio n fro m Co nc ur re nc y S tan da rds Em ine nt Do ma in Str ea m line d R ev iew Ta x A ba tem en t Re lax ed Pa rki ng St an da rds Su bs idiz ed Ho us ing Un de rw riti ng La nd Co sts Zo nin g/D en sity Bo nu se s Ta x I nc re m en t F ina nc ing Bu y L an d o n O pe n M ar ke t La nd As se m bly He lp Pla nn ing Fu nd ing Ta x-E xe mp t B on ds Ca pita l F un din g TOD Tools Pe rc en ta ge W he re T oo l A pp lie d 0 1 2 3 4 5 6 M ea n Ef fe ct iv en es s Ra tin g (1: Lo w; 7: Hi gh ) Bus Transit Systems Rail Transit Systems Mean Effectiveness Rating Figure 4.4. Transit Agencies’ Experience with and Perceived Effectiveness of TOD-Supportive Policy and Planning Tools.

of land that accommodate major mixed- use projects at Pleasant Hill, El Cerrito del Norte, and Fruitvale stations. In the case of El Cerrito del Norte, the city’s redevelopment agency forged a workable partnership to create Del Norte Place, a mixed-use project with 135 multifamily units (20% of which are affordable) and 21,000 square feet of street-level commercial space (Photo 4.2).15 The redevelopment agency acquired a site next to the BART station for $3 million through the issuance of qualified redevelopment bonds and then leased it to the Ibex Group, the project owner- developer, for a 65-year period. The redevelopment agency in return will receive 20% of the net project cash flow (after the 5th year) and 20% of the share of retail-sales proceeds.16 Construction and permanent financing of some $11 million was provided through 40-year, fixed-rate, tax-exempt mortgage revenue bonds issued by Contra Costa County. The loan proceeds were insured through the FHA coinsurance program, 221(d)(4), which gives the bonds a Government National Mortgage Association guarantee and thus a superior bond rating. Remaining funds were in the form of equity provided by the Del Norte Place Limited Partnership. The Ibex Group contributed approximately $3.2 million. Low- income housing tax credits were syndicated to 30 individual limited partners for a further $1.8 million in equity contributions. Moreover, the Contra Costa County Department of Community Development kicked in $200,000 in block grants. BART joined the partnership by selling an easement for parking under the adjoining elevated track. As Figure 4.4 shows, implementation strategies that are procedural in nature, like streamlined review and exclusion from concurrency standards, have not been put into practice very often. Where applied, however, they have made a difference. According to the lead developer, the 86-unit Atherton Place project near BART’s Hayward Station owes its existence in large part to the local redevelopment authority, which expedited the project through the city’s bureaucracy. As noted in the next chapter, this sentiment is often heard among TOD developers. A good example of TOD-friendly evaluation standards comes from Santa Clara County, California, where sliding-scale impact fees have been used to bring down the cost of affordable housing at several light-rail stations where parking lots have been infilled. The county, 73 Photo 4.2. Del Norte Place Mixed-Use TOD, El Cerrito, California.

through its Congestion Management Agency, recommends that localities reduce the estimated traffic impacts of new housing projects by 9% if they are within 2,000 feet of a light-rail station and 2% if they are within 2,000 feet of a bus stop. Trip generation rates for mixed-use projects are further adjusted downward. The Los Angeles MTA has recently followed suit, offering a 15% credit for residentially oriented mixed- use projects that have at least 24 units per acre and that are within 1⁄4 mile of a light-rail station. The biggest credits for a mixed-use TOD were given to the 34-acre mixed-use megaproject at WMATA’s White Flint Station in the Washington (D.C.) Metropolitan Area. Traffic mitigation credits granted to this project in light of its proximity, mix, and orientation to transit were • Mixed-use reduction: 10%–25%; • Proximity to station reduction: 40% for apartments, 50% for offices (a.m. peak), 28% for offices (p.m. peak), 25% for retail, and 5% for cinema; and • Traffic management reduction: 10%–23%. Together, these measures afforded the project a 45% reduction in estimated vehicle trip generation rates. Smart- growth planning requires a smart calculus, such as in these TOD examples. Through sliding-scale impact assessments such as those used in northern and southern California and the nation’s capital, mixed-use projects built near light-rail stations end up paying considerably lower impact fees than other comparably sized projects. Presumably, some of these savings get passed on to tenants, thus boosting the market demand for TOD. It bears repeating that most of the implementation tools listed in Figure 4.4 have not been applied by transit agencies themselves, but rather by municipalities or other local interests. The most common contributions of transit agencies have been capital and planning funding as well as acquisition of land on the open market. In terms of mean effectiveness rating by public-sector respondents, the most highly regarded tools are fiscal measures, like capital funding, tax- exempt bonds, and planning funding. Those working “in the trenches” of TOD implementation seem attuned to the notion that “money matters.” In keeping with their more limited use, procedural tools like concurrency exemptions and streamlining of permit reviews are generally considered to be the least effective. The simple correlation between usage of a tool and its mean effectiveness rating was a respectable +0.668. For the most part, tools that are viewed by public-sector stakeholders as most effective at leveraging TOD are the ones actually being used by transit agencies and their local government partners. TOD developers and other private interests generally have a different perspective on the effectiveness of tools. As discussed in the next chapter, interviews with real-estate developers from across the United States (all with firsthand experience with TOD projects) revealed that tools that increase certainty, reduce turnaround time, and upgrade transit services are generally preferred. However, developers also generally agree that supportive zoning, help with land assembly, funding set- asides for streetscape improvements, and 74

other tools within the sphere of public- sector control can be a boon to TOD implementation in some circumstances. Help from Above Survey respondents from transit agencies, municipalities, and redevelopment authorities were also asked to weigh the importance of initiatives introduced by higher levels of government (e.g., regional, state, and federal) toward promoting TOD. While the hands of higher-level governments are often tied when it comes to exercising direct control over land use or the behavior of developers and lenders, state and federal authorities can exert influence by introducing financial incentives or providing local governments with the legislative and statutory means to enact smart-growth measures like TOD. Figure 4.5 summarizes the views of transit-agency respondents regarding desired roles of higher levels of government; rankings were similar among respondents from municipalities and redevelopment agencies. Initiating planning grants and targeted infrastructure funding (such as for new highway access or regional utility improvements) were actions that higher- level governments could take that were most valued among local-level respondents. Smart-growth initiatives, typically introduced at the state level, were also generally looked on favorably. Smart-growth legislation often ties state infrastructure dollars to local anti-sprawl programs, as in Maryland where counties must designate priority funding areas and faithfully strive to restrict growth to those areas. State tax-abatement programs introduced through smart- growth initiatives were looked upon 75 (1=minimal; 4=moderate; 7=significant) 3.1 3.2 3.3 3.6 3.8 4.0 4.5 2 3 4 5 Mean Rating Development of Regional Impact Requirements Required Siting of Govt. Buildings Near Transit Concurrency/Adequate Public Facilities Ordinance Requirements Tie Capital Grants to Local TOD Commitments Smart-Growth Legislation Targeted Infrastructure Funding Planning Grants Initiative: Figure 4.5. Transit-Agency Respondents’ Mean Importance Rating of Initiatives by Higher Levels of Government to Promote TOD.

favorably by local respondents from big rail cities. Like the state of Oregon, which authorized tax exemptions for multifamily housing near transit stops, Minnesota’s state legislature has sought to incentivize TOD, although unlike Oregon, its focus is on commercial development. In 1996, Minnesota authorized a 12 to 15% tax break for commercial and industrial projects that lie within 1⁄4 mile of high-frequency bus or rail stations. High-frequency stations are defined as either regional transfer hubs or stations served by routes with 30-minute or shorter headways during peak hours. Regulations imposed by higher levels of government generally received low marks among local respondents. Strictures such as adequate public facilities ordinances, required siting of government buildings near rail stations, and DRI requirements (such as those recently introduced in Georgia and Florida) were not of much interest to many local respondents. Despite such low ratings, some of these higher- government measures have paid off nicely; an example is the ridership boon that followed the Franchise Tax Board’s recent opening of its new headquarters near an existing Sacramento light-rail station (see Text Box 4.4). Overall, local-level interests place the highest value on federal, state, and local initiatives that provide capital “concrete and steel” improvements to TOD districts as well as cash grants and are less enthusiastic about those that are procedural or broad-based in nature. Funding TOD: Public Perspective As with most real-estate development, TOD occurs largely through the private marketplace. Still, transit agencies, local and regional governments, and redevelopment authorities have turned to a variety of sources to finance ancillary improvements and amenities, like sidewalks, civic plazas, and under- grounding of utilities. Such enhancements, proponents contend, can be a catalyst to private investment, particularly in marginal neighborhoods suffering from an image problem. This section reviews experiences with funding TODs and the physical armature associated with them. Funding tools and finance issues are discussed from the perspective of four public stakeholders: transit agencies, municipalities, redevelopment agencies, and MPOs. Chapter 5 discusses finance further, although from a private-sector perspective. Transit Agencies Rarely, if ever, are general funds from transit agencies’ budgets used for ancillary improvements like streetscape upgrades; transit operations and on-site capital investments usually lay claim to any discretionary agency dollars. A number of transit agencies have received federal and state grants, through such entities as TCSP, to finance ancillary improvements around stations. In the national survey, transit-agency respondents were asked to identify whether different funding sources have been used to finance either the pre- development (e.g., planning) or actual construction of TODs and their appurtenances. Table 4.3 summarizes the responses. For the most part, non-grant sources have been used sparingly to finance ancillary improvements around stations. Besides inter-governmental grant transfers, individual investor funds 76

77 Building a State Office Campus Near Light Rail With multiple locations in Sacramento, California’s Franchise Tax Board (FTB) wanted to unite employees on a single campus site. State-owned land near the Butterfield light- rail station, where two preexisting FTB buildings stood, was chosen as the desired site, in keeping with a state mandate that requires relocated state-government offices within a rail transit service district to be within walking distance of a station. The Butterfield station served as a catalyst for the design of a pedestrian-friendly, human-scale project focused on light-rail transit. The state entered into a joint development agreement with Sacramento Regional Transit to use portions of the existing Butterfield light-rail station for the expanded facility. The 1.85-million-square-foot campus includes a town center building, two new office buildings, and an existing tax processing building, all linked by an indoor pedestrian main street. The town center, which is open to the public, serves as the front door to the campus and includes a dining facility, auditorium, daycare facility, and various sundries and shops. The complex includes 300 bicycle lockers and shower and change facilities. Proximity to the light-rail station and various transportation- demand management measures reduced the number of parking spaces needed by about 1,500. A light-rail passenger can step off the train, walk 75 feet, enter the town center building, and reach various facilities on campus without going outside. Still, all good campuses invite outdoor activities; thus, the FTB project includes a 1.8-acre courtyard connecting two office buildings and a landscaped plaza to the light-rail station. M AYH EW RO AD New Town Center Existing Light Rail Station New Office Building Complex New Warehouse Central Plant Bldg. 2 Bldg. 1 Staff Parking RT Parking RT Parking Staff Parking Proposed Theater/Retail Complex Butterfield Entry Mayhew Entry North Fol so m Blv d. M ayhew Rd . . Frw y. 5 0 Future Oates Dr. Connection New Butterfield Way Extension Text Box 4.4

have been most widely used for planning and constructing TOD improvements. These funds are followed by nonprofit and foundation funding in frequency of usage. Pension, union, and Real Estate Investment Trust funds (REIT) have been used sparingly. BART and Denver’s RTD have been particularly proactive in tapping into various fiscal resources in order to leverage TOD. Nearly half of the transit-agency survey respondents said their states offer planning and construction grants that can go toward TODs, but just 10 of the 90 respondents (11%) have received such grant funds to date. Lane County Transit in Eugene, Oregon, for instance, received funds from the Oregon Department of Transportation to pursue TOD planning around several BRT stations currently under construction. BART received state Environmental Justice Grants to conduct community- based planning around six inner-city rail stations. What about joint development projects? Where have transit agencies generally secured funds to finance their share of public-private co-ventures? Figure 4.6 reveals that traditional funding sources— grants and loans—have largely been relied on for these purposes. As a set- aside, individual investor funds have been used more often to pay for advanced planning and other predevelopment activities. Sources more directly controlled by equity owners, like union funds and REIT funds, are used far less frequently for transit joint development. A majority of surveyed transit properties with joint development projects have built-in financial safeguards. Over three- quarters of surveyed transit properties with joint development projects have equity partnerships in which the agency receives a share of profits from the sale of properties. This is usually in return for the transit agency having written down land costs (and occasionally having donated land outright). An equal share of surveyed transit properties receives guaranteed minimum rents, regardless of market cycles. A slightly smaller share—58% of respondents— participates directly in the profits of private real-estate ventures. Less 78 Number and Agencies Using Funds for: Type of Fund Predevelopment Development Pension Funds 1: RTD-Denver 2: SamTrans; WMATA Union Funds 0 SamTrans REIT Funds 2: BART; RTD- Denver 2: BART; WMATA Individual Investor Funds 7: BART; Jacksonville Transit; Metro North; Miami- Dade; TriMet; RTD-Denver; WMATA 10: BART; Jacksonville Transit; Maryland Transit Administration; Metro North; Miami-Dade Transit; NJ TRANSIT; Riverside Transit; Southwest Metro (MN); TriMet; WMATA Nonprofit/ Foundation Funds 5: BART; Kitsap Transit (WA); Miami-Dade Transit; RTD- Denver; TriMet 5: BART; Kitsap Transit (WA); Miami- Dade Transit; RTD-Denver; TriMet 2: TriMet; Table 4.3. Non-Grant Funds Used by Transit Agencies to Leverage TODs

common is the levy of penalties against developers who finish projects late. One out of four surveyed agencies practicing joint developments exact a late fee. Local Governments Municipalities are not as active as transit agencies in financing ancillary improvements around transit stations. Rarely do general municipal funds go for these purposes because of other pressing needs. Special assessments or transfer grants from higher levels of government are for the most part relied on by municipalities to finance sidewalks and other streetscape improvements in and around transit stations. Where one does find direct local funding of station-area ancillary improvements is in redevelopment districts. Tax increment financing (TIF), a quintessential redevelopment-agency tool, is often used for reducing the costs of development that the private sector might otherwise bear. TIF secures funds by floating bonds based on the anticipated future increases in property- tax revenues that will result from planned development within the redevelopment area. Table 4.4 shows how redevelopment funds have been used within redevelopment districts in four jurisdictions. Three of the four jurisdictions—Houston, Contra Costa County, and Redwood City—have spent TIF funds on such infrastructure improvements as roads, utilities, and parking. The La Mesa Community Development Agency has used TIF to purchase land around a trolley station 79 0.0% 4.0% 0.0% 6.0% 14.0% 6.0% 3.9% 2.0% 7.7% 9.8% 12.0% 15.0% 0% 5% 10% 15% 20% Union Funds REIT Funds Pension Funds Nonprofit/Foundation Funds Individual Investor Funds Grants/Loans Percent of Transit Agencies Practicing Joint Development That Have Used Funding Source Development Predevelopment Funding Source: Figure 4.6. Joint Development Funding Sources, Predevelopment and Development.

and underground a stream channel so as to make a parcel more usable and attractive for TOD. TIF, it should be noted, is not available in all states, in large part because it is politically controversial, effectively subsidizing development by creating tax-privileged districts. Besides TIF, special assessments are also used to finance TOD improvements. Montgomery County, Maryland, for example, charges a special parking assessment on new development near the Bethesda Metro Station. Developers who opt not to comply with requirements for structured parking must pay a fee that is used by the county to build and maintain its own multi-story parking lots in the area. Higher Levels of Government MPO funding sources for TOD planning come primarily from federal and state government in the form of pass-through grants. These include FHWA TCSP grants; FHWA planning funds under Section 112-PL; and FTA’s Section 5303 planning enhancement funds. For example, the Delaware Valley Regional Planning Commission has a 2-year-old grant program (the Transportation and Community Development Initiative) that provides Transportation Improvement Program funds for TOD planning studies and other activities targeted to the region’s core cities and inner-ring suburban municipalities. In a few instances, regional planning bodies have used their own funds. Portland Metro, for example, uses its general funds as a local match for state and federal planning and enhancement grants. As the nation’s only directly elected regional governing body, Portland Metro is the exception more than the rule. There are no states that provide funding explicitly for TOD planning and development, although several (New Jersey and California) give TODs priority access to state-controlled transportation funding under certain conditions. State support tends to be more indirect, in the form of technical assistance. State governments do channel funds to pedestrian and bicycle improvements that can enhance the quality of non-motorized access and circulation around transit stops. The state of Illinois, for example, under the “Illinois Tomorrow: Balanced Growth for a Better Quality of Life” initiative, recently award $3.7 million in grants; some of this money went to improve the walkability of local streets and 80 Redevelopment Agency Uses of Tax- Increment Financing Houston, TX: Midtown Redevelopment Authority * Utilities * Streets * Curbs * Gutters * Sidewalks * Street lighting * Street furniture * Landscaping/Irrigation Contra Costa County, CA: Redevelopment Agency * Streets * Drainage * Utilities * Parking Structure (Public) * Housing Redwood City, CA: Redevelopment Agency * Infrastructure improvements * Landscaping La Mesa, CA: Community Redevelopment Agency * A channel was under- grounded to provide more usable land for new development adjacent to a trolley station. * Public street improvements and land acquisitions were completed for a new development fronting a trolley station. Table 4.4. Redevelopment Agency Respondents’ Uses of Tax Increment Financing

streetscapes in and around aging commuter-rail stations. Summary TOD implementation ideally starts with a vision, cultivated from broad-based public input, and proceeds to strategic station-area planning backed by appropriate zoning as well as policy incentives and regulations. Around half of the surveyed transit properties in the United States stated that their regions have a vision, policy, or plan in place that embraces TOD principles. The most common means of controlling land uses, densities, and site designs of TOD is overlay zones. Most overlays— often introduced on an interim basis to head off automobile-oriented uses that might compromise a TOD—specify desired land uses as-of-right, such as housing and convenience shops. For urban TODs, densities of 20 to 30 dwelling units per residential acre and FARs of 1.0 and above are not uncommon. Some of the more progressive TOD zoning districts also lower automobile parking requirements and sometimes even set bicycle parking mandates. The national survey of U.S. transit agencies revealed that, besides standard zoning, the most frequently used tools introduced to leverage TOD are funding for station-area planning and ancillary capital improvements; the introduction of density bonuses, sometimes used to encourage the production of affordable housing units; and relaxation of parking standards. These measures, moreover, received high marks in terms of their overall effectiveness among transit professionals who responded to the survey. Next in the order of frequency of usage have been land-based tools like land purchases on the open market (for land-banking and potential “deal- making”) and assistance with land assemblage. For the most part, redevelopment agencies have applied these tools, meaning that their role in leveraging TOD has been mainly limited to economically depressed or blighted neighborhood settings. Because of the higher risk involved, redevelopment tools have often been accompanied by other funding sources, sometimes with a dozen or more participants involved in the process. Implementation strategies that are procedural in nature, like expediting entitlement reviews and excluding TODs from concurrency requirements, have been applied less often in practice and are also viewed by public-sector interests as less effective than other measures in jump-starting TOD. As discussed in the next chapter, this view does not square with that of many TOD developers. In terms of what MPOs, state DOTs, and the federal government might do to help implement TODs, respondents from the local levels stated loudly and clearly that what they need most is money—specifically for strategic station-area planning, infrastructure, and on-the-ground improvements. Smart-growth legislation that targets state infrastructure and urban renewal grants to transit station areas (which currently exists in the state of Maryland) is also looked upon favorably by local interests. Regulations like concurrency requirements, on the other hand, generally received low grades among survey respondents from the local level. 81

For financing streetscapes and other ancillary improvements around transit stations, monies have mostly come from federal and state grants such as the TCSP program under the Transportation Equity Act for the 21st Century. The most common sources of non-grant funds used to leverage TOD are individual investor funds and nonprofit/foundation funds. Notes 1 R. Cervero, The Transit Metropolis: A Global Inquiry (Washington, D.C.: Island Press, 1998). 2 Specific TOD plans have been adopted for these stations: Pittsburg/Bay Point, Concord, Pleasant Hill, McArthur, West Oakland, Richmond, San Leandro, Hayward, Union City, Fremont, Castro Valley, El Cerrito del Norte, El Cerrito Plaza, and Richmond. 3 N. Bragado, “Transit Joint Development in San Diego: Policies and Practices,” Transportation Research Record, No. 1669 (1999): 22–29. 4 Calthorpe Associates, “Transit-Oriented Development Design Guidelines: City of San Diego,” Department of Planning, August 1992. 5 Puget Sound Regional Council, Creating Transit Station Communities in the Central Puget Sound Region: A Transit-Oriented Development Workbook (Seattle, 1999). 6 New Jersey Transit, Planning for Transit- Friendly Land Use: A Handbook for New Jersey Communities (Newark, NJ: NJ Transit, 1994). 7 R. Ewing, Transportation and Land Use Innovations (Chicago: Planners Press, 1997). 8 Puget Sound Regional Council, 1999, op. cit.; R. Ewing, Pedestrian and Transit-Friendly Design: A Primer for Smart Growth (Washington, D.C.: Smart Growth Network, 1999). 9 Parsons Brinckerhoff Quade & Douglass, Inc., R. Cervero, Howard/Stein-Hudson Associates, and J. Zupan, “Regional Transit Corridors: The Land Use Connection,” TCRP Project H-1 (Washington, D.C.: Transportation Research Board, National Research Council, Washington, D.C., 1995). 10 JHK and Associates, Development-Related Survey I (Washington, D.C.: Washington Metropolitan Area Transit Authority, 1987); JHK and Associates, Development-Related Survey II (Washington, D.C.: Washington Metropolitan Area Transit Authority, 1989); R. Cervero, Ridership Impacts of Transit-Focused Development in California, Monograph 45 (Berkeley: Institute of Urban and Regional Development, University of California, 1993). 11 San Diego Metropolitan Transit Development Board, “License Agreement for Parking,” April 19, 1990. This agreement was between the San Diego Metropolitan Transit Development Board as Licensor and CCRT Properties as Licensee. 12 Bragado, 1999, op. cit. 13 Montgomery County’s Moderately Priced Dwelling Unit (MPDU) program, one of the first inclusionary zoning requirements in the United States, stipulates that 12.5% to 15% of all units in projects of 50 units or more be set aside for households earning moderate income (roughly 60% of the area’s median). In exchange for the set-aside, developers who comply with the program are given density bonuses that allow more units—22% in the MPDU program—to be constructed on the same amount of land. 14 The Atlanta City Council has defined the price of low-income units at 1.5 times the city’s median family income and the rent of low-income units at 60% of fair market rent. 15 M. Bernick and R. Cervero, Transit Villages for the 21st Century (New York: McGraw-Hill, 1997). 16 R. Dunphy, D. Myerson, and M. Pawlukiewicz, Ten Principles for Successful Development Around Transit (Washington, D.C.: The Urban Land Institute, 2003). 82

83 Chapter 5 Building and Bankrolling TOD: A Private-Sector Perspective TOD and the Private Sector Real-estate developers occupy the front lines of TOD, organizing the financial, physical, and human resources needed to build projects around transit stations. Beyond their role in implementation, developers also often have a strong hand in the planning and design of TOD. Dating from the streetcar suburbs of the early 1900s, the history of development in the United States is replete with examples of private real-estate interests responding to market demand by planning, designing, and building projects around rail stations. Today this tradition is carried forward by a dedicated corps of developers who see TOD as a smart investment in increasingly congested and built-out urban areas. These developers are drawn to TOD in hopes of making nice financial profits, but they usually require and expect supportive public policies that allow them to do so. Also essential to TOD implementation are banks and other lending institutions because, after all, as Willie Sutton said when asked why he robbed banks, “that’s where the money is.” At the end of the day, the prettiest drawings, most elegant cost pro formas, and greatest intentions of green-minded planners will matter little if those who finance the majority of real- estate projects in the United States are unwilling to put their money on the line. This chapter draws on interview responses from developers and lenders, among other inputs, to probe a host of TOD implementation issues mainly related to project financing. A series of one-on-one phone interviews were conducted with 35 real-estate developers from across the United States who have been involved with projects near transit stations. The head offices of interviewed developers, reflecting, for the most part, where they have been most active, were distributed as follows: Portland (8), San Francisco Bay Area (7), Washington D.C. (4), Boston (3), Chicago (3), Denver (3), Atlanta (2), and Los Angeles, Minneapolis, New York City, Sacramento, and San Diego (1 each). Surveyed developers come from large public corporations, mid-sized private firms, and small nonprofit housing and community development corporations.1 More than two-thirds of the surveyed developers indicated that residential development is their firms’ main focus.2 Appendix B presents the protocol used to guide developer interviews.3 The experiences of those interviewed are discussed in this chapter, focusing on the financial, market, and public policy issues that affect developers’ ability and willingness to undertake TOD. A similar tact was used in soliciting inputs from the lending community. Lenders from four large metropolitan areas—the San Francisco Bay Area (4), Philadelphia (2), Chicago (1), and Los Angeles (1)—were queried about their past experiences with TOD and joint development projects in the United

States. Professional staff members known to have been involved in making loan decisions for TOD projects were interviewed over the telephone.4 While an interview protocol was used to guide the discussions (shown in Appendix C), for the most part, interviews were open- ended and conversational, covering topics that the interviewees felt were most important, on their terms. Lender interviews were often factual and to the point, peppered with anecdotes and frank opinions. The Market for TOD Developer interest in TOD stems in large part from the fact that the market for transit-oriented living, working, and shopping continues to expand, particularly in big cities that are increasingly choked with traffic. Traffic congestion, in particular, is prompting more and more Americans to pay a premium for housing near rail stations, even if it means living in smaller houses on smaller lots. Between 1990 and 2000, the average travel time to work nationwide rose by 13%, or almost 3 minutes, to 25.5 minutes. In big cities notorious for their traffic congestion, like Atlanta and Los Angeles, mean commute times rose by nearly 20%. Besides the increased stress that accompanies traffic congestion, many working parents complain about what John Whitelegg, a transportation geographer from Great Britain, calls “time pollution”: being robbed of quality time, time that could be better spent with children and family. Besides worsening traffic congestion, the market for TOD is being driven by shifting demographics and receptive public policies. The “Ozzie and Harriet” household of a male breadwinner, stay- at-home mom, and two kids is pretty much a thing of the past, especially in big U.S. cities with rail systems. Nationwide, the share of “non- traditional” households—single parents, childless couples, divorced or never- married people, or two or more unrelated adults—rose from 69.8% in 1980 to 76.5% in 2000.5 The numbers of new- immigrant households are also on the rise, and the location of choice for new immigrants tends to be big cities where economic opportunities are the greatest; big cities, of course, are also where urban rail systems are concentrated. Many recent immigrants from Latin America and Asia are accustomed to transit and understand the value of living and working near regional rail systems. They constitute a natural niche market of TOD dwellers. Also, as America continues to “gray,” retired couples seeking to downsize are increasingly opting to locate in walkable neighborhoods that are well served by transit. (Projections are eye opening; by 2025, more than one out of five residents in 27 states are expected to be 65 years of age or over, higher than in Florida today.6) The neighborhoods around many rail systems are particularly attractive to seniors because they enable access to cultural and sports events, shopping malls, and other destinations that appeal to retirees. This is only the case, however, if TODs are perceived to be safe and secure. The many public policies devoted to smart growth in general and TOD specifically (reviewed in the previous chapter) have, of course, further strengthened the market for TOD. Policies that seek to increase supplies of affordable housing have been 84

particularly important. In many parts of the United States, redevelopment agencies require a set percentage of new units built within redevelopment districts to be below market rates. Many rail stations built on disused railroad corridors, former industrial corridors, or transitional neighborhoods, where land is cheap, happen to fall within redevelopment districts. As noted in Chapter 4, redevelopment agencies bring a powerful kit bag of tools to the table such as TIF. Other means of financing affordable units used by redevelopment authorities include tax-exempt bonds, low-interest loans, loan guarantees, grants, and direct equity participation. Creating TODs, whether around Miami’s Overtown Station, Oakland’s Fruitvale Station, or Montgomery County’s Silver Spring Station, offers a chance to redress the “twin evils” of affordable housing shortages and travel congestion. A New Jersey developer interviewed during the course of this research confided that his firm has gotten out of the business of building residential subdivisions on suburban greenfields. Instead, the firm today concentrates solely on redeveloping brownfields and grayfield sites, particularly near commuter-rail stations and on the waterfront with ferry connections to Manhattan. These developments are targeted at professional-class workers. The state of New Jersey’s progressive brownfield program, which reduces some of the risks and instills greater certainty in remediating contaminated sites, was a decisive factor in this developer’s reorientation. While the market for TOD is largely considered to be “niche” in nature, even this could be changing. At the extreme, take the GW Terrain housing project, in Amsterdam, The Netherlands (see Photo 5.1). Served by several light-rail transit lines, this project is an “automobile-free” residence. Tenants are not allowed to keep private automobiles on the premises (automobile-sharing kiosks are available immediately adjacent to the project). While one might assume that environmental “greens” and other “progressives” largely inhabit the project, in truth, many tenants are traditional families with children. Many are drawn to the transit-oriented, automobile-free project because of its superb access to Amsterdam’s many cultural offerings and because the project interior is given over to gardens and playgrounds instead of asphalt parking. That is, the GW Terrain TOD is perceived as a safe haven for kids to play in and grow up in. Projects like the GW Terrain show that if site designs that instill a sense of security by providing “defensible spaces” and “eyes on the interior” are built near major transit stops, TOD can reach a more mainstream demographic, including traditional households with children. 85 Photo 5.1. Amsterdam’s GW Terrain “Automobile-Free” TOD.

The Decision to Develop What factors drive the decision to go forward with a TOD? While the presence of market demand is without question the overriding factor, the presence or absence of other factors, many outside the direct control of developers, can also have a bearing. Interviewed developers were asked about 13 factors thought to influence the willingness to go forward with a TOD project. These factors are ranked in Figure 5.1 in terms of their importance to the development decision. The presence of supportive land-use designations was rated as the most important factor affecting the decision to develop. This bodes well for local governments interested in attracting TOD to their communities; changes to zoning are squarely within the purview of local government and can be changed with relatively little expense. One developer indicated that supportive land- use designations are particularly important for small parcels of land, such as infill sites. She explained that the time and effort associated with seeking a change in zoning is only justified when there is a large potential return associated with a major development. Small projects need the proper zoning to be already in place. Another developer mentioned that supportive land-use designations are most important when they reflect clear community sentiment. He noted that the most important factor for his firm in deciding whether to undertake a project is whether the community has gone through a visioning or community-planning process that expresses the kind of development most desired. He feels that when such plans have been completed it makes his job much easier by creating a margin of certainty. In the best of worlds, land use ordinances reflect community sentiments; however, it is sometimes the case that neighborhood interests fight projects that threaten to add traffic even if they fully conform to local zoning. This was the case around the Pleasant Hill BART station. Development plans stalled in 1995 in the face of stiff community opposition, despite a proposal that fully complied with the area’s land- use plan. The addition of some 2,200 households to the Pleasant Hill Station area over the past two decades led to the formation of neighborhood associations that proceeded to fight all large-scale projects that threatened to draw regional traffic into the community. Not until the completion of a major community- planning process in 1999 did a new development proposal begin to find traction. With the completion of a successful charrette process in 2002, a second-generation TOD is presently moving through the approvals process. The second most important factor influencing willingness to develop, as expressed by interviewed developers, is the potential for rent premiums due to superior location. This is not surprising given the “location, location, location” cliché ingrained in the minds of most developers, and it reflects the more general comment, made repeatedly by those interviewed, that development decisions—including decisions to lend, invest, or build—are driven by the real- estate market fundamentals. Most developers interviewed also considered proximity to transit an important factor in the decision to develop. Admittedly, the group of 86

87 2.8 2.8 3.1 3.3 3.4 3.4 3.8 3.9 3.9 4.1 5.0 5.3 5.5 1 2 3 4 5 6 Majority of Tenants are Local/Non Credit Limited Developer Experience with Proposed Product Type Parking Below Local Standard for Product Type Brownfield Issues Unsubordinated Ground Lease with Public Agency Location in Emerging Real-Estate Market Public-Sector Participation Mixed-Use Development Extent of Real-Estate Investment Activity in Area or Near Site Availability of Tax Incentive Adjacent to Transit Station Potential Rent Premium for Superior Location/ Access Supportive Land-Use Designations Mean Rating of Importance to Decision to Develop (1 = miminal; 4 = moderate; 7 = significant) Figure 5.1. Importance of Factor in Willingness to Develop, as Rated by Interviewed Developers.

developers interviewed was selected because of their affinity for doing TOD. One developer noted that a high tide, or strong real-estate market, “floats all boats, but when the tide goes out it is the boats in the best position relative to transit that continue to float.” Other developers spoke of a competitive advantage for their TOD products, which are not easily duplicable because of the limited number of transit-accessible sites. Finally, one developer indicated that he was willing to undertake development at “marginal” sites with good access to transit. It is notable that the developers interviewed rated transit as among the most important factors affecting their willingness to develop, despite the fact (as noted later in this chapter) that many indicated that being near transit has little influence on their ability to secure a conventional loan. Other factors that influence decisions to develop included tax incentives, public- sector participation, whether or not a development is mixed use, and the use of unsubordinated ground leases. Overall, tax incentives were rated to be a moderately important inducement to development. Nonetheless, some developers discounted their importance, noting that tax breaks are not generally large enough to overcome a difficult market and are unnecessary (but still welcomed) in a strong real-estate market where growth happens regardless. Public-sector participation in development was regarded favorably by most developers, particularly when used to spur development in down markets or provide assistance in the entitlement phase. On the other hand, some developers were skeptical of public- sector involvement in development, noting that there may be “strings attached,” such as requirements that a certain percentage of housing units be affordable to low- or moderate-income households or requirements to pay union or prevailing wages. These developers felt that the public sector should not assume its involvement is necessarily helpful in the implementation of TOD unless it is backed by sufficiently large monetary incentives. Finally, while many of the developers surveyed believed that mixed-use projects work well in certain market contexts, many looked askance at planning doctrine that holds that buildings near transit stops must be vertically mixed. Vertical mixing of uses was perceived to increase insurance costs and to create potential conflicts between tenants. Developers strongly favor allowing the private sector to make decisions about when it is appropriate to mix uses within the same building. Unsubordinated ground leases, whereby private developers and their lenders absorb most of the risks should a real- estate venture fail, were not generally thought to significantly affect development decisions. Indeed, most developers had no experience in working with such leases. (Whether public agencies are required to use unsubordinated ground leases is something that varies across state and local jurisdictions.) Nonetheless, several developers spoke to the potential difficulties associated with building on land with an unsubordinated ground lease from a public agency. Some indicated that unsubordinated leases can be an enormously complicating factor, which has the potential to make some developments impossible to finance. Others indicated that such leases can be done, but they require greater equity 88

participation and reduce developer inclination to undertake the project. Interviewed lenders had a somewhat different take on unsubordinated leases and public-private partnerships more generally. Involving multiple parties introduces complexity in terms of understanding a project, its credit risks, and the nature and quality of the bank’s collateral. Five out of the eight lenders interviewed noted that public-sector involvement introduces additional challenges in financing a project. Unsubordinated leases are a particularly sticky point in the minds of lenders. One emphatically stated: “Unsubordinated ground leases make the project much more complicated due to the large number of parties and different motivations that they have.” To the degree that joint development produces social benefits like increased ridership and improved air quality, lenders generally believe that subordinated loans that protect the financial interests of private groups over those of the public sector are appropriate. One interviewee suggested: “When agencies do ground leases, they should look at the greater public benefit of TOD and joint development.” Ultimately this debate comes down to what degree the public sector is willing to absorb near-term risk for the purposes of reaping long-term benefits. Private Financing How does being near a major transit stop affect how developers fund projects? Interviewed developers felt it had no effect. A project’s status as a TOD generally has no bearing on the palette of financing tools used. For the most part, financing is governed by project size and type (whether residential, office, retail, or industrial) and the firm’s size and credit rating. As an example, affordable-housing developers7 who were interviewed indicated that they use a wide array of funding sources, including conventional debt, low-interest loans and grants from governmental agencies and community development organizations, and the sale of tax credits. Although this combination of funding sources is complex and involves considerable public participation, it is typical of affordable housing development regardless of whether it is undertaken as part of a TOD. In addition to standard financing products, a handful of developers indicated that they do tap into pools of funding specifically available for TOD. These sources of monies are generally small albeit important in some instances. Debt Finance What private funding sources have been used to bankroll TODs? Nearly all of the developers surveyed indicated that they used conventional construction and mortgage financing as the primary sources of TOD funding. The BellSouth Corporation, which has developed a number of office buildings along the MARTA rail line in Atlanta, was one exception; it normally self-funds its development activity. Developers consistently stated that whether or not projects are TODs does not affect lending standards in terms of interest rates, points for securing loans, loan-to-value requirements, or debt coverage ratios. Comments such as the following from a Bay Area residential developer were common: “I am not aware of any positive or negative impacts 89

on any of these lending standards on TOD. The only potential issue is if there is no perceived market for a product type, then a premium might be required.” By virtually all accounts, proximity to transit is a peripheral consideration in obtaining loans. Lending standards and the availability of financing are instead tied to conditions in the capital markets and whether the lending community believes that there is adequate market demand for a real-estate product. This view was echoed by all eight lenders who were surveyed. Underwriting decisions are based on a number of factors that need to be considered in the context of each individual project. None of the lenders interviewed was willing to say that TOD or joint development projects have factors (aside from unsubordinated ground leases and, in some cases, lower parking standards) that make them more difficult to finance than other types of projects. In large part, TODs were treated like any other form of urban development when subjected to banks’ financial litmus tests. Equity Finance Other owners of equity capital, such as pension and trust funds, also provide potential sources of TOD monies. Among the development firms surveyed, 14 indicated that they have used equity funds from outside their company to help finance TOD. Of this group, nine stated that they had used pension or insurance funds. This includes two developers from the Portland (Oregon)–Vancouver (Washington) metropolitan area, each of whom has used funds from the Oregon and Washington state retirement systems. Additionally, four developers indicated they have used REIT funds as an equity source for TOD. Firms using REIT equity were generally quite large. They included a developer in the Bay Area that has completed six residential TODs totaling approximately 1,500 units, a developer in Denver currently working on a residential project encompassing 15 city blocks, and mixed-use master developers from Atlanta and Boston. The Atlanta developer is currently working on a 4.8-million-square-foot mixed-use project, while the Boston developer has completed a mixed-use TOD in excess of 1 million square feet. A few developers indicated that they use outside equity sources such as investor pools and monies from large capital management funds for TOD. Finally, one developer, who works exclusively with brownfield sites, indicated that his firm uses a private equity fund targeted specifically at brownfield redevelopment to help finance TOD. While developers were not specifically asked about their own firms’ equity contributions toward TOD, a few were eager to speak to this issue, indicating that most of the equity in their projects is self-financed. This included one developer who noted that “a major obstacle to developing socially responsible infill is predevelopment equity and what we have to pay for it.” There was considerable agreement among developers that the availability of equity, as with debt, is primarily driven by capital market conditions and the marketplace, not a project’s status as a TOD. Nonetheless, when asked if there were any characteristics of TOD that help in obtaining equity funds, about half of the developers surveyed pointed to at least one characteristic of TOD that is helpful, a subject taken up in the next section. 90

Public-Sector and Foundation Finance While the developers surveyed generally relied on conventional sources of debt and equity finance for their TOD projects, 6 of the 35 indicated that they have developed projects with the assistance of public-sector grants or financing linked specifically to TOD or transportation. These funds were generally earmarked for the provision of infrastructure, transit, or parking improvements, as discussed in the previous chapter. The major source of grant assistance related to TOD was disbursement of federal TEA-21 funds. A Chicago area developer indicated that the Chicago Transit Authority used TEA-21 CMAQ funds to pay for a bridge connecting one of her firm’s developments to the “El,” the elevated municipal rail line that operates in Chicago. In the Bay Area, developers stressed the importance of “seed grants” provided by the Metropolitan Transportation Commission (MTC) under its Transportation for Livable Communities (TLC) Program.8 This program sets aside money for the planning, design, and construction of small-scale, “community-oriented transportation projects,” including streetscape improvements carried out in conjunction with real-estate development near transit.9 On an annual basis, the MTC channels $27.5 million dollars to this program, most of which comes from the region’s TEA-21 allocation. (See Chapter 18 for further discussion of this program.) A San Francisco–based non- profit housing developer who was interviewed indicated that TLC funds have been helpful in paying for infrastructure costs for two of her firm’s projects. In one instance, her firm received $425,000 to spend on streetscape improvements adjacent to a 93-unit, multifamily development in San Francisco, near a MUNI transit station. In another instance, the firm submitted a joint application for TLC funds along with the Contra Costa County Redevelopment Agency. MTC granted $231,000, which was used to pay for the creation of a pedestrian walkway adjacent to a high-density residential development that was then under construction near the Pleasant Hill BART station. A handful of developers indicated that public-sector tax-exempt bond financing has been used to finance infrastructure components of TODs. This was most often the case where projects were built on transit-agency land as part of joint development efforts. In addition to public-sector financial support earmarked specifically for TOD or transportation, five of the developers surveyed indicated that their TODs had benefited from public-sector support targeted at the provision of affordable housing, such as low-income housing tax credits or tax-exempt bond financing. Only two of the developers surveyed indicated that economic revitalization funds such as Enterprise Zone grants or Urban Development Action Grants had been used in financing a TOD. Finally, foundation support was a minor source of TOD funding among the developers interviewed. Only three indicated that they had received foundation assistance. These included community development corporations in the Bay Area and Chicago and a developer undertaking a complex reuse of a historic property in downtown Denver, which included retail, office, and affordable and market-rate housing. 91

For the most part, foundation funding is not on the radar screen of most developers of TOD and it has been reserved for a unique subset of TODs undertaken as part of community revitalization efforts. Availability and Terms of Finance Although a project’s status as a TOD was generally not considered to have a major impact on the ability to obtain debt or equity finance, a number of characteristics associated with individual TODs that have affected the availability and terms of finance were identified by surveyed developers. These are the proximity to transit, whether projects have sufficient comparables, whether projects are mixed use, whether reduced parking standards are applied, and whether there are environmental concerns. Around half of the interviewed developers indicated that there is at least one characteristic of TOD that has helped in obtaining equity funds from outside sources. Figure 5.2 presents the characteristics of TODs that, according to surveyed developers, aided them in obtaining equity funds. Each entry indicates that one of the interviewed developers identified the characteristic as helpful. 92 1 3 3 4 5 8 0 2 4 6 8 10 Mitigates Public Oposition to High Densities Supported Politically by Public Sector Requires Less Parking than Standard Development Supported Financially by Public Sector Good Location Within Metropolitan Area Located Near Transit TO D Ch ar ac te ris tic s Frequency of Response Figure 5.2. Characteristics of TOD that Enhance Ability to Obtain Equity Funds, Based on Developer Interviews.

Proximity to Transit Although most developers indicated that a project’s proximity to transit is not a significant factor affecting the ability to obtain conventional loans, 8 of the 35 developers surveyed indicated that it has been helpful in financing the debt for projects. Those believing that proximity to transit is helpful include office, retail, and residential developers. In general, their responses to interview questions demonstrated an ability to explain the benefits of development near transit in a sophisticated and realistic manner, a skill that they relied on during conversations with lenders. One office developer explained: All development financing is about demonstrating market support for a project. Transit access can help make the case for market support, especially for office uses in non- CBD [central business district] locations. If a development is in a pioneering location, then access to transit becomes a primary rationale for market support and financing. The developer explained that aside from these instances, when developments are in up-and-coming locations, access to transit is a marginal consideration. Another developer, involved primarily with mixed-use projects that include large retail components, noted that proximity to transit can be helpful in making the case to lenders because being near transit means “additional commuter traffic generation.” Another interviewee, a multifamily developer, indicated that while it is hard to “sell a project to lenders” based only on the TOD aspects of a project, knowledge of transit’s impacts on commute patterns is useful in talking with lenders. This developer explained that while homeowners are willing to travel longer distances to reach work, renters are known to travel only about half an hour to work. To the extent that transit places additional locations within a half-hour commuteshed of job centers, this developer believes it expands the market for multifamily development and potentially increases the geography in which lenders will make loans to build apartments. Among for-sale residential developers, three brought up the topic of LEMs. As noted in previous chapters, LEMs allow homebuyers in transit-accessible areas to borrow more money toward the purchase of a home than they would normally be able to borrow based on their incomes. While the developers who spoke about LEMs did so in fairly general terms, all of them felt that they improve the market for for-sale housing around transit. Lenders who were interviewed seemed indifferent to whether a project was near a transit stop or not. Adjacency to transit stations, increased real-estate investment in the area, and potential rent premiums for superior access did not influence lending decisions according to those interviewed. One interviewed lender did note, however, that “improved access to employment areas increases the value of TOD residential projects because of lower vacancies and better rents compared with non-TOD projects.” In order to make TODs more attractive to banks, one interviewee suggested implementing “programs or policies that strengthen creditworthiness, put additional money into projects, or create more publicity for them.” 93

Mixed Use A number of developers indicated that while TOD, per se, does not pose a challenge to obtaining debt financing, mixed-use development does. According to one developer, this was due to the lack of comparables in suburban locations, where single-use buildings predominate. Higher insurance costs associated with mixed uses also introduce risks. The challenge of doing mixed-use projects near transit stops is taken up in the next chapter, on barriers to TOD implementation. Lenders’ views on mixed uses and comparables were generally guarded, reflecting the uncertainties and challenges of intermixing activities like residences, shopping, and workplaces on a single parcel, whether near a train station or not. Those interviewed cited several factors that make lending for such projects more difficult, even if it does not result in different loan pricing or terms: (1) the mix of uses makes it more complicated to understand market support and thus estimate likely rates of return, (2) there are fewer permanent lenders willing to provide take-out financing for these types of projects, and (3) the underwriting process is generally more complex and takes more time. Permanent lender requirements may be more significant in determining the potential financing for a particular TOD or joint development project. Technical analyses that better reflect the benefits of mixed-use projects— such as evidence that they reduce vehicle trip generation rates that can in turn be used as credits against development-impact fees—would also aid in making mixed-use products “pencil out.” Despite these concerns, several lenders said they are beginning to have a more favorable view toward the financial viability and marketability of mixed-use products, especially in urban districts experiencing an economic renaissance and undergoing gentrification. It is likely the case (and four lenders acknowledged this) that many banks have lent on mixed-use projects near transit stations without ever realizing that the project represented a TOD. One interviewee stated, “TOD projects on private property would never be recognized as TOD.” TOD seems to be largely an irrelevant concept for these lenders, distinct from other financing issues. One lender surveyed, for example, was the account manager for the Ohlone-Chynoweth TOD (parking-lot infill) project in San Jose, and he did not even know what TOD meant until it was defined for him. For a couple of the interviewed lenders, TOD was a negative label in that it was associated with inner-city or community development type projects. One suggested dropping the TOD label altogether and casting these as mixed-use projects that have the added bonus of being near a transit stop. This suggestion indicates that what matters is the combination of mixed use and accessible transit, not the notion of government- planned TOD (and all the connotations this brings, such as lengthy entitlement and permit-review processes). More important than whether a project is mixed or not is developer experience, at least in the minds of lenders who were interviewed. One stated: “Mixed-use could be a plus or a negative; it depends on a particular project.” Seven out of the eight lenders cited limited developer experience with proposed project type as a highly significant factor in deciding to 94

invest. This suggests that a TOD project with an experienced developer of mixed- use areas will be more likely to have financial backing than an inexperienced TOD developer. Comparables Having comparable projects from which lenders can assess market performance can sway financing decisions according to several interviewed developers. Of course, whether the decision is a “go” hinges on TODs exhibiting superior financial performance, a topic addressed in Chapter 9 of this report. The absence of similar projects, particularly mixed- use projects that have sold near transit stations, can be a stumbling block to financing, especially in smaller urban settings where TOD is still a novel concept. Several surveyed lenders remarked that the views and opinions of real-estate appraisers are particularly important in establishing value for lending decisions. Appraisers normally weigh standard features of “comps,” like building square footage and on-site amenities, in arriving at an estimated property value. Few think about or seriously consider benefits that might be associated with proximity to transit. The idea of capitalization benefits, whereby the accessibility advantages conferred by transit get absorbed into land prices, is not something that usually registers among most real-estate appraisers. Appraisals do not separately attribute value to transit orientation or location. One lender suggested that this is partially because TOD is not an established market for premium rents or valuation. Technical training of real-estate appraisers would help in this regard, according to the interviewee. What also might help is if more and better transit capitalization studies, based ideally on matched-pair comparisons (the tried- and-true method of appraisers), are published in professional journals read by appraisers. Parking Below-code parking standards are another trait of TOD that some developers believe affects their ability to secure financing. Sentiment on this issue was mixed among the developers interviewed. While a few indicated that building projects with lowered parking ratios harms their ability to get conventional debt financing, a similar number indicated that the lowered need for parking, particularly structured parking, helps the viability of projects, making it easy to obtain loans. One developer stated that a decade or so ago developers had to make a forceful case to banks and city agencies as to why a TOD project with reduced parking was a good idea. Now, he feels that virtually all local planning departments are very familiar with TOD and that the public sector is happy to prioritize it and support it with public funds. The private-lending sector, he mentioned, has been slower to come around. As recently as 6 years ago, he took a completed TOD retail project, leased to a credit tenant, to 50 different lenders before finding a lender who would provide permanent financing for the project. A couple of lenders initially committed to the project but pulled out when they found that there was no parking lot. According to the developer, lenders would not fund a retail project that had no parking, even though the developer had an operational project and 95

could prove that all of the customers were walking in off the street or arriving by transit. He feels that most lenders continue to hold suburban development up as their model and are reluctant to lend to projects with parking ratios below industry standards. Several developers noted that national associations whose views carry a lot of clout, including the Urban Land Institute and the National Association of Homebuilders, continue to praise the value of ample, convenient parking as a means of gaining a marketing edge over other competitors almost regardless of location. Not all the surveyed developers bought into this logic. One noted that reduced parking ratios for a TOD saved on the cost of building structured parking. As a result, he improved the bottom line of his project, which he believes made it more attractive to lenders, who understood the rationale for providing fewer parking spaces. Fighting opposition to reduced parking, whether from neighborhood groups or traffic- engineering departments, however, can add costs and uncertainties that some developers would just as soon avoid. Environmental Concerns A couple of the developers surveyed indicated that environmental issues have affected their firms’ abilities to obtain debt financing for TODs. A developer affiliated with a large residential development company indicated that her company normally likes to tackle complex deals because experience has given the company a competitive advantage in this area. Due to her firm’s size and credit rating, she indicated that it almost never has to pay a premium on the interest rates or points for securing a loan, even in complex deals. Nonetheless, she noted that lending standards tighten when brownfield issues are involved. Several lenders who were interviewed echoed this sentiment, noting that brownfield sites are riskier and more complex. Summary and Lessons Ultimately, TOD is an outcome of one or more developers putting up their hard- earned money, or the money of lenders and investors, to create a new form of urbanism around transit stations. To a large degree, interviews reveal that developers have a positive view of TOD as a viable and growing market niche. When asked to rate the overall financial record of TOD, interviewed developers on average scored it as a 5 on a scale of 1 to 7, indicating that they think it performs better than most products. Developers were especially optimistic about the prospects of TOD in areas where traffic congestion continues to worsen and there is a pro-TOD political sentiment. While there were substantial areas of agreement among developers who were interviewed, a number held conflicting views of certain elements of TOD. One example is parking. On the one hand, many developers relate to the idea that parking standards should be lowered to the degree that significant numbers of residents, shoppers, and workers ride transit. On the other hand, many have been reared on the principle that parking is an effective marking tool and can sometimes make or break a project. Regardless, most favor leaving the decision of how much parking to provide to the private sector. Developers feel that they know the market best and will take advantage of cost savings when justified. 96

On balance, many developers feel that being near major transit stops is advantageous to the degree that it provides rent premiums. Some also feel that being close to transit can improve the ability to secure equity finance, particularly for certain product types in pioneering locations (e.g., office development in suburban locations). Most developers realize that more is needed than spatial proximity, however. Making sure that the walk between a project and a station portal is safe and reasonably attractive matters to many. Putting in complementary land uses, like convenience shops and service retailers, is particularly important to TOD homebuilders. Nonetheless, developers realize that regardless of what they think, access to funds is often dependent upon the views of lenders. While many developers embrace TOD as a concept, when it comes to securing conventional debt financing, there was a general agreement that TOD offers little help. Loan decisions, they noted, are governed by fundamentals, not urban-planning concepts. Interviewed lenders echoed this sentiment. Most of the interviewed lenders had difficulty pinpointing the positive and negative factors that influence whether they invest in a TOD because banks, they contend, look at each project based on its individual merits. Dealing with the innate market characteristics of TOD— notably, mixed-use projects with the advantage of being near transit—is generally viewed as the best way to market the TOD product to the lending community. Factors that enhance the connection of a parcel to a rail station— such as direct and attractive pathways, well-lighted and secure portals, and a strong degree of public commitment backed by infrastructure improvements like undergrounding utilities and upgrading road access—are likely to make TODs all the more attractive to lending institutions. Interviews suggest that joint development projects are more difficult to finance than neighborhood-scale TODs. This is partly due to guilt by association—the fact that a project is directly tied, symbolically and figuratively, to a transit facility seems to detract from its value. The bureaucratic component of joint development projects, involving government institutions that are not always driven by the profit motive, makes some lenders uneasy as well. Of course, had lenders from the Washington (D.C.) Metropolitan Area been interviewed, where well- publicized joint development projects like Bethesda and Ballston are known to be hugely profitable, the reactions might have been different. Clearly, the transit industry would benefit from well-designed and financially remunerative joint development projects outside the Washington (D.C.) Metropolitan Area. As transit properties like Miami-Dade, MARTA, and BART continue to make headway on joint development deals, perhaps the cumulative experiences will eventually cast these public-private partnerships in a more positive light. Notes 1 The largest TODs undertaken by developers surveyed were Lindbergh Station in Atlanta and the Northpoint Project in Boston. Each of these projects covers nearly 50 acres and represents approximately 5 million square feet of space in a mix of uses. On the other end of the spectrum, six developers surveyed 97

indicated that their standard projects consist of fewer than 100 residential units. 2 Following residential, the next most common product type was retail; 27 of the developers indicated that their firms are involved in at least some amount of retail development. Of this group, only two firms indicated that retail development accounts for more than half of their overall development activity. In total, 10 firms indicated that they have developed retail projects in excess of 100,000 square feet. The remaining 17 firms that have done retail development indicated that it is usually a small component in mixed-use developments. Nineteen developers indicated that their firms develop office space, including five developers whose firms are primarily involved with office development. A few developers indicated involvement in projects with institutional and industrial uses. 3 In some cases, where developers preferred to answer questions in writing rather than over the phone, mail-in questionnaires were sent that solicited the same information as was being collected through the interviews. 4 The profile of those surveyed was as follows: all work for large banks providing construction or short-term financing (i.e., no permanent lenders); two lenders interviewed are affordable-housing loan officers; and the others are involved in market-rate lending. The large banks where the surveyed lenders work all have functional distinctions between “market-rate” lending offices that serve a region and “community development lending” offices that are involved in affordable housing or other projects oriented to community development. 5 U.S. Census Bureau, Profile of General Demographic Characteristics: 2000 Census of Population and Housing (Washington, D.C.: U.S. Printing Office, May, 2001). 6 See http://www.census.gov/population/ www/socdemo/age.html. 7 The term “affordable housing” is used here to describe housing that is built with government assistance using federal income tax credits. In order to qualify for such funding, developers have to agree to maintain specified affordability levels over long periods of time, typically 55 years. 8 MTC is the Bay Area MPO, responsible for programming federal transportation dollars allocated through TEA-21. 9 Metropolitan Transportation Commission, Transportation for Livable Communities Program Overview (Oakland, California: 2002). 98

99 Chapter 6 Barriers to TOD: What They Are and How to Overcome Them Types of Barriers The literature cites many obstacles to TOD, just as it does to most forms of compact, mixed-use development.1 Some barriers are financial in nature (e.g., lender skepticism), while others are quintessentially political and institutional (e.g., zoning restrictions due to opposition). While some barriers can be overcome through local actions and policies (e.g., restrictive zoning), others (e.g., automobile-oriented development patterns) are largely outside the sphere of local influence (e.g., cheap gasoline prices set through the global marketplace encourages automobile dependence), at least in a direct sense. This chapter discusses these and other barriers to TOD implementation. Initiatives that might help overcome impediments are also discussed. A combination of literature reviews, developer interviews, and survey results of stakeholder groups informed the discussion of this chapter. The literature sorts barriers to TOD into three basic categories: fiscal (factors that detract from the financial feasibility of TOD projects, such as questionable market viability and lack of conventional financing); organizational (structural impediments lodged in the institutional fabric of transit agencies and other governmental entities responsible for projects); and political (land-use policies and NIMBY forces that impede multifamily housing and infill development more generally). Of course, many barriers are interrelated—for example, the higher densities of TOD might prompt politicians to downzone, unleash citizen opposition, and prompt lenders to reject loan requests. Others are embedded in these larger categories— automobile-oriented development patterns form barriers to TOD in large part because overcoming them (i.e., creating denser, more transit-friendly environs) raises costs and political flak. The barriers reviewed in this chapter and discussed in the literature explain, in part, why projects are not built, but, as some observers note, they are less useful for explaining why many of the projects billed as TOD fall short of expectations. In a recent Brookings Institution white paper on TOD, Dena Belzer and Gerald Autler note: “The barriers people associate with TOD tend to parallel the barriers associated with building types of high-density infill projects, regardless of proximity to transit.”2 While this is true, unless the factors discussed in this chapter are dealt with at some level, TOD will remain more of an exception than the rule in most U.S. rail-served cities. Regardless, barriers that are particularly unique to transit station settings are also given attention in this chapter. Fiscal Barriers The higher construction costs, development fees, and risks that accompany dense, nodal development like TOD form significant financial

obstacles. Mid-rise, multistory structures require strong foundations and footings, steel-frame construction, elevators, and lobby areas, all adding cost and cutting down on net leasable space. Infill development might incur expenses for site clearance, environmental remediation, and infrastructure upgrading. Many developers weigh such risks and costs against building single- story structures on greenfields or the suburban edge where neighborhoods are stable and crime rates are low. In California, a series of lawsuits holding condominium builders liable for faulty construction up to 10 years after units were sold has frightened some developers from the high-density housing market altogether. Perhaps the trickiest part of high-density TOD is the pricey structured parking that accompanies it. A real-estate economist involved with TOD planning along the T-REX corridor in Denver has remarked: You have to get the land values up to support structured parking. That costs at least $15,000 a parking space, but add special features like a ‘retail wrap’ to the garage and streetscape improvements, and you’re looking at $23,000 to $25,000 a space. Development interests will be there as long as there are partnerships with the city. But it’s not instantaneous. It can take 10 to 15 years to evolve.3 Lining up financing for TODs in economically stagnant areas can be particularly challenging. While a host of public and private programs exist for financing affordable residential units, similar programs for commercial development are rare. In the case of San Diego’s Barrio Logan neighborhood, efforts to create a mixed-use development have been successful on the residential side, but the project managers have struggled to find financing for the commercial development that will agree to a TOD plan (see Photo 6.1). The absence of an anchor tenant for the project hampered the developer’s ability to obtain financing. As long as the developer is able to provide loan guarantees, banks typically loan up to 70% of the money for a shopping center development.4 The anchor tenant typically provides the loan guarantees for the project, promising to continue paying rent even if the business at that site fails. Without an anchor tenant, banks are usually unwilling to provide loans.5 Similar difficulties have been encountered among non-profit/affordable housing groups trying to build TOD projects on transit-agency land in the San Francisco Bay Area.6 Since lenders often require ownership of the land being built on to be put up as collateral to secure the project loan, financially strapped nonprofit housing builders must often make concessions to lenders in terms of 100 Photo 6.1. Barrio Logan, Mercardo Apartments, Near San Diego Trolley Station.

project design. In the process, the delicate details of good transit-oriented design may be sacrificed in order to satisfy the lending institution. While projects like Barrio Logan in San Diego have been successful at building residences near transit, Atlanta has had some difficulties attracting residential development near its MARTA stations because of the high demand for office development there. Consequently, while there is a great deal of dense development around MARTA stations, it is mostly suburban-style office towers with lots of parking and poor pedestrian connectivity to nearby stations. This “dysfunctional density” is in part a result of density entitlements provided by the zoning code, which have increased property values in station areas. Since property values are so high, only high-value office and retail developments are financially feasible. These fiscal pressures result in monocultures of high- end office or retail that must draw on large market areas that are not easily served by transit, placing automobile site access above transit accessibility. From the public-sector side, financial considerations also influence the likelihood that TOD will take form. Many recent-generation light-rail transit systems have followed the path of least resistance, seeking out disused freight lines, power transmission easements, and freeway medians where right-of-way acquisition and disruption costs are minimal. Such cost minimization also means development minimization. A station tucked in a freeway median largely precludes TOD. Fiscal realities might prod some local governments to zone land for uses that promise to generate the most sales and property-tax revenues, even if property lies within a walkable distance of a rail station. Fiscal zoning has been particularly rampant in states like California that have imposed ceilings on local property-tax rates. In a study of 232 southern California rail stations with commuter-rail and light-rail services, Boarnet and Crane found that fiscal zoning thwarted efforts to build affordable units around rail stations. California municipalities that rely heavily on sales-tax and property-tax proceeds were found to have high shares of citywide commercially zoned land within 1⁄4-mile rings of rail stops.7 Many other barriers to TOD might be put under this fiscal category, such as automobile-oriented development patterns (which cost money to overcome), mixed-use TOD designations (which might not have a market base of support), and the process of permitting and entitlement (which increases “transactive” costs). Many of the developers interviewed for this study were critical of what they viewed as the unnecessarily cumbersome and fickle process of entitlement and permit review, even with TOD. Uncertainty and red tape add risks and costs. Some developers simply move on, almost literally, to greener pastures. Developers and, perhaps more importantly, those who often bankroll projects—lenders— know that they can make a nice profit building single-family tract housing and sprawling subdivisions oriented to highways. They have been doing it quite successfully over much of the post–World War II period. TOD, on the other hand, has a spotty track record, and in some parts of the country, it is virtually nonexistent. 101

Political Barriers Many residents equate transit-based housing and infill office development with more traffic, crowded schools, and longer lines at grocery stores. Less often voiced but still in the minds of some is the prospect of people with lower incomes moving into the neighborhood. NIMBY opposition has stopped mixed- use, infill development near rail stations in Oakland, Miami, Atlanta, and most likely every U.S. city that has built rail systems over the past century. Frightened by the prospect of additional traffic generated by the planned mixed- use development at Atlanta’s Lindbergh Station, a neighborhood group filed multiple suits against MARTA to block construction. While the project is moving forward, these suits have put it behind schedule. Because of community pressures, the 512 housing units recently built near Santa Clara County’s Whisman light-rail station—“representing the biggest housing development Mountain View has seen in at least 20 years”— contained no rental units and were built at less than half the density originally proposed.8 While the addition of more than 500 units near the Whisman Station might be considered a success by many, Inam views it as a promising TOD co- opted by NIMBY resistance: The developers proposed a high density project because they perceived that there was a demand for that number of units on this site. Now, the 500 families who might have been housed through the original density have not only had their residential choices further reduced, they do not even realize that they have reduced choices because their units were never built. Furthermore, the component of rental housing was eliminated, such that individuals and families who cannot yet afford to purchase a house or prefer the flexibility and convenience of rental housing have no option to do so, especially along a transit line. So, the demand for alternative development continues unmet thanks to projects like Whitman Station.9 Organizational Barriers The difficulty of coordinating TOD among many actors and stakeholders is often a stumbling block to success. By one account: In today’s typical TOD project, the public sector builds the transit (often with the involvement of multiple agencies), local governments try to control development, and developers look for opportunities to make profits. Transit agencies also become involved as property owners in joint development projects. All of these entities—not to mention transit riders, neighbors, and the public at large—have different ideas about what the project should accomplish. . . . Too often, projects are implemented without a clear vision of desired outcomes, the different goals of the actors, and the ways in which those goals may work at cross-purposes and lead to a project that, while perhaps superior to traditional development, falls short of the potential of TOD.10 TOD coordination between transit agencies and localities can be especially difficult in areas with strong traditions of small, independent governments, like greater Philadelphia, where several 102

hundred municipalities govern land-use matters via local zoning. Similarly, successful TOD projects often require changes in thinking and organization within the government agencies involved in the process. Struggles over turf and resistance to change within public agencies are legendary and present major obstacles to effective project implementation. The classic conflict is between city architects and planners who argue for traffic-calming and neotraditional design standards (e.g., “skinny streets,” and intersection bulb-outs) and fire marshals and police chiefs who insist on generous and unrestricted road geometries for emergency vehicles. For liability reasons alone, the interests of protective services many times win out. Lack of technical expertise within the public sector is sometimes cited as another barrier to TOD. This can be the case particularly with jointly developed public-private projects. In Miami, Atlanta, and other rail cities, transit agencies have “gotten the short end of the stick” when dealing with business-savvy, seasoned developers who know how to negotiate a favorable deal.11 Bad experiences have at times turned transit board members against potentially lucrative joint development deals when opportunities have arisen. One analyst recommends that transit properties entering into lease agreements insist on contractual language that ensures a percentage of gross revenues from the development, not net revenues (profit). Since accountants have a number of “creative” ways to calculate costs so that a venture never shows a profit on paper, the public entity needs to protect itself and its revenue stream with contractual language that has very little “wiggle room.”12 In the case of WMATA, years of joint development experience has resulted in lease agreements that provide the agency with legal and financial protections. WMATA’s initial lease terms vary from 50 to 60 years, with an option renewal to a 99-year term. Rent is guaranteed, even if the developer declares bankruptcy. The rents also “bump up” when surrounding properties increase in value. Consequently, WMATA stands to benefit from increases in land values that may occur after a lease with the developer is invoked. Sometimes it is the private side that feels alienated by the process. The structure of the land development agreement for Miami-Dade Transit’s Dadeland South project proved problematic from the developer’s perspective. Since the land for the project was leased to the developer and the county retained the property’s rights of ownership, the developer needed to comply with government equal-opportunity laws, adding to costs.13 The process of putting together a standard lease following the Disadvantaged Business Enterprise Program and other government requirements can also be time- consuming. Barriers Unique to TOD As mentioned earlier, many of the barriers outlined above are generic to any form of higher-density development. This section builds on the previous ones by focusing on four areas that are particularly troublesome when trying to move forward with a TOD: (1) the congestion conundrum, (2) logistical dilemmas (caused by the conflict between “node” and “place”), (3) the parking puzzle, and (4) getting the 103

mixed-use formula right, particularly in relation to retail components. The Congestion Conundrum In creating TODs, planners face a paradox. Development concentrated in one area invariably adds more traffic and lowers levels of service. The threat of traffic build-up can unleash a community backlash against TODs with the very best of intentions. Thus, while TODs are presumed to increase transit ridership, they are also equated with more traffic congestion. There are no easy solutions to this dilemma; higher densities in a concentrated land area invariably bring more spot congestions, particularly at key intersections. Planners often plead that these short-term “disbenefits” must be weighed against the longer-term “benefit” of less regional traffic. While the levels of service might deteriorate in and around a station as a result of TOD, overall regional vehicle miles traveled (VMT) and congestion levels will fall with time. Some planners also make the case that added traffic is a sign of an active, rejuvenated community. They distinguish between “good” and “bad” congestion (a distinction like that between good and bad cholesterol). Traffic, in the form of both people and automobiles, characterizes all vibrant places with stellar transit services, (e.g., 42nd Street in Manhattan, Leicester Square in London, or Tokyo’s Shinkansen district). The “good congestion” of TOD helps to reduce the “bad congestion” elsewhere. Such logic does not always resonate with local residents, however. Doing what is within the broader good of the region is fine as long as it does not infringe on peoples’ jealously guarded property rights. TOD that threatens to add traffic to local streets (not to mention more kids in public schools, shoppers at outlets, and so on) does not fall in this category in the minds of most suburbanites. Elected officials who are beholden to their constituents do not always have the patience to wait until the longer-term benefits of TOD reveal themselves. Downzoning or building moratoria are easier ways of heading off traffic problems. Logistical Dilemmas: the Conflict Between “Node” and “Place” Transit stations are “messy places.” They are expected to accommodate the interface of feeder buses, park-and-ride, walk-on traffic, cyclists, passenger drop- off, taxicabs, paratransit vans, goods delivery, and other access functions. Movement conflicts, circuitous travel paths, and less-than-optimal usage of space are inevitable. Creating a comfortable human-scale environment that transforms a station into the centerpiece of a community can be next to impossible. At a more basic level, Belzer and Autler call this a conflict between the role of a transit station as a “node” and its role as a “place.”14 Transit officials think in terms of nodes—points on the network where customers can access trains and buses. Function takes precedence over form (e.g., parking is sited as close to a station as possible even if it means creating a dreadful walking environment). City planners, New Urbanists, and TOD advocates tend to view a station as a place—a focal point for marshalling community resources so as to create an attractive, vibrant neighborhood that promotes sustainability, social interaction, 104

economic development, affordable housing construction, and other ideals. Transit managers judge any projects that take place on their property on the basis of whether they are financially self- supporting, increase ridership and farebox receipts, and help keep trains and buses on schedule. Neighborhood activists look at joint development as an opportunity for “place making.” To ensure that transit managers “keep their eye on the ball,” some transit boards have banned their agencies from the business of property development, all but ensuring that a station is treated as a node, not a place. While it can own and reserve land, the DART authority cannot develop agency-owned property. This is considered outside of, and potentially distracting to, the agency’s central mission of running a transit business. Dallas’s much-heralded Mockingbird Station TOD would not have happened had the developer not been able to purchase property from DART. Another type of logistical challenge facing many station areas is land assemblage. This is partly because many rail lines are built in older parts of the city and occupy former streetcar corridors or disused tracks. Land plots tend to be small in such settings. A lack of developable parcels was cited by many of the developers interviewed for this study as a major obstacle to TOD, particularly parcels of sufficient size to attract large development firms with significant financial resources. One developer indicated that his firm needs parcels that are at least 5 acres in size to make infill development worthwhile. Developers indicated that the cost and risk of negotiating to assemble land is ordinarily too great to justify the reward; they believe that much more TOD would happen if the public sector could deliver preassembled parcels. The Parking Puzzle If there is any spot on the map where it makes sense to revamp parking standards, it is neighborhoods in and around transit stops. Many station-area residents buy into neighborhoods near rail stops because they want to shed one or more automobiles, thus freeing up money for other purposes, such as buying a nicer house or traveling more often. At the Alma Place housing project in upscale Palo Alto, just two blocks from the Caltrain commuter rail station, peak-hour parking demand is just four- tenths of a parking space per unit, even though parking is free.15 Nonetheless, lenders and local planners often insist on two parking spaces per residential unit (this is what lenders’ financial spreadsheets tell them is necessary, and most planners follow time-honored parking codes that say this is what is needed). In dense areas, podium or tuck- under parking spaces can add $20,000 or more to the cost of a unit. Rigid parking standards can make TOD financially infeasible. For some developers, the problem is not excessive parking minimums but rather insufficient parking caps. They complain that jurisdictions that are particularly sympathetic to TOD can impose maximum parking limits that fall below market demand. Getting lenders to invest in such projects is virtually impossible. One way to get the parking ratios right is to replace regulatory codes with market prices. This can most easily be done by decoupling, or unbundling, the price of housing from the price of parking 105

spaces. Most ownership housing and apartments have parking included in the base price of a unit. Those who do not own or need an automobile must pay for a space anyway, driving up the cost of housing. Unbundling parking can thus promote affordable-housing objectives and create a more walking-friendly environment. Below-grade parking nearly sunk the Pentagon Row mixed- use TOD in Arlington County, Virginia, because of cost inflation; the project continues to struggle financially despite high occupancy levels. Arlington County planners learned their lesson, decoupling parking and housing codes for the Market Common mixed-use project at the Clarendon Station. The project’s site design was changed to make extensive use of surface and curbside parking and in so doing improved the project’s “bottom line.” (See Photo 6.2.) Parking dilemmas also surface within the boundaries of a station, again reflecting a clash between a station’s role as a node versus a place. Across the United States, suburban rail stations are enveloped by huge surface parking lots, catering to riders with automobile access rather than the desire of some to create an attractive civic space (as found around many suburban European rail stations) and serve the needs of walk-on users and cyclists. Park-and-ride patrons often have staunch supporters within transit agencies, creating barriers to the transformation of park-and-ride lots into transit-supportive developments. Some board members of U.S. rail-transit agencies have been voted into office largely on the platform of working to increase parking supplies. These political fault lines have both fiscal and physical consequences. In the San Francisco Bay Area, BART’s policies protect the park-and-ride patrons by requiring “one-to-one” replacement of any surface parking removed for the purposes of development on BART land. Consequently, only those projects able to produce sufficient revenues to cover replacement-parking costs are permitted to proceed. In practical terms, this means that ground-lease income must equal or 106 Photo 6.2. Contrasting Approaches to Mixed-Use TOD Parking in Arlington County, Virginia. Pentagon Row, in the top photo, relied heavily on below-surface podium parking, inflating construction costs. Market Common, in the bottom photo, put parking on the street, complemented by nice landscaping, to save costs, even though its building profile is similar.

exceed the debt-service costs for a parking structure. This is rarely the case. The hard line taken on parking deters TODs by creating a built form that is hardly conducive to pedestrian access. Broad expanses of surface parking separate stations from surrounding neighborhoods and create an urban landscape that encourages people to flee transit stations as quickly as possible. Shared parking between transit agencies and adjoining development is often seen as one way to shrink the footprint of TOD parking. However, this does not always work in practice. Efforts were made to strike a shared-parking arrangement between the Mockingbird Station TOD and DART; however, the deal fell through when it became clear that the agency’s generous parking standards did not square with the developer’s more restrained views on parking. John Gosling, a designer of mixed-use TODs, says “shared-parking reductions in mixed-use settings are not what they are cracked up to be.” He cautiously recommends 3% to 5% for housing and office mixes, 7% to 9% for housing and retail mixes, and 9% to 12% for housing, office, and retail mixes.16 All sides agree that sorting out the parking puzzle is crucial to forming TOD. In the words of one rail planner, “If the parking requirement doesn’t reflect the transit resource, it’s not TOD; it’s just development close to a transit station.”17 Getting the Mixed-Use Formula Right Mixed land uses are a defining trait of TOD. Yet, mixed uses can be difficult to realize. Often, each real-estate type has different lenders, investors, contractors, and financing parameters. Bundling projects together on a single parcel can create confusion. Few financiers understand mixed-use development. John Gosling cautions that “mixed-use development has many moving parts, making it geometrically more difficult to finance, which translates directly into higher costs; recognize that there is no such thing as a mixed-use development industry—very few players have deep enough pockets.”18 Further complicating the mixed-use challenge is the lack of comparables. The “comps” that do exist do not always have distinguished track records. Mixed- use TODs, such as Palm Court near the Blue light-rail transit line in Long Beach, California, fell into arrears, forcing banks to take over. Often it has been the ground-floor retail component of TODs that have suffered the most. (See Text Box 6.1). Developers interviewed for this study took a fairly cautious stance toward mixed-use TODs. One developer indicated that because insurance costs are higher when uses are vertically mixed, it affects the bottom line and harms the ability to get financing. Still another developer noted that it is extremely difficult to do vertically mixed-use development when ownership components are involved. Multiple-use structures are also hard to build. Developers are generally more comfortable with a mix of uses in close proximity but on separate lots (i.e., “horizontal” versus “vertical” mixed uses). Expressing this preference for horizontal mixed-use development, one developer said he hoped he was beginning to see a slow shift in thinking on the part of city 107

Getting the Retail Component of a Mixed-Use TOD Right Pacific Court, Long Beach, on MTA’s Blue Light-Rail Line The piece of mixed-use TODs that has often struggled the most is retail. TOD retail is market driven, not transit driven (i.e., it is nearby residents, workers, and passersby who generally support the retail portion of a TOD, not transit riders). Retail is successful because of fundamentals—location, market, and design. Being near transit is secondary. In its recent publication, Ten Principles for Successful Development Around Transit, the Urban Land Institute warns: “It is misguided to believe that just because there is transit, if you build retail ‘they will come.’” (See Note 19 at the end of this chapter.) TOD designer John Gosling offers the following advice on the retail component of mixed-use TODs, based on years of experience: determine retail mix, critical mass, and merchandizing strategies early, and design the project accordingly. Understand that retail tenants need good “presentation” and snazzy environmental graphics and keep the retail layout simple with a singular, continuous design that maximizes visual impact and invites foot traffic. Try to get it right because failing retail stigmatizes an entire development. Part of getting it right is making sure that ground-floor retail opens onto the street, clearly within the viewshed of passing motorists and that sufficient short-term parking within easy reach of the front entrance (a must for convenience retail) is available. Many TOD retail shops are inwardly focused in their designs, buffered from the street. This minimizes drive-by shopping and impulse- buying, both of which make up a growing part of the retail marketplace. If not designed properly, retail gets associated, visually and symbolically, with the “turf” of the upper-floor office and residential tenants.19 The Pacific Court mixed-use transit village in Long Beach, California, is a textbook example of a retail component that went awry. Pacific Court, with nearly 100,000 square feet of ground-floor retail and 142 above-ground apartments, opened in 1992 as a joint venture between the Long Beach Redevelopment Agency and a private developer. Many of the small retail shops are situated on the project’s exterior, away from the interior courtyard where the biggest draw, a 16-screen movie multiplex, is located. Moreover, there is no short-term parking next to the shops, meaning they depend entirely on walk-in traffic. Retailers complain that the layout also prevents movie-goers from passing by. As a result, many storefronts are empty. According to some observers, high retail vacancies may have pushed the project into foreclosure. In 1993, Pacific Court was valued at $53 million. After foreclosure in 2000, the developer sold the project for $13.5 million. Text Box 6.1

planners to be more willing to recognize single-use infill development in mixed- use neighborhoods as a desirable way to strengthen pedestrian-oriented neighborhoods. This developer focuses on multifamily infill housing and argues that developers should not be forced to do mixed uses if it will only serve to “dilute” the market for commercial real estate in an area sufficiently served by retail. Instead, he argues that single-use residential buildings bring new patrons to existing commercial activities and should be encouraged. Public-Sector Perspective on TOD Barriers The many barriers cited in this chapter form a veritable laundry list of hurdles to overcome. Which barriers are most serious? The national survey of five public-sector stakeholder groups shed some light on this question, at least from a government perspective. Survey respondents from transit agencies, local governments, redevelopment agencies, MPOs, and state DOTs were asked: “To what degree has each of the following factors been an impediment to transit joint development in your agency’s service area?” Respondents rated the factors on a scale of 1 (minimal) to 7 (major). Figure 6.1 summarizes the responses for the five stakeholder groups combined. Stakeholders consistently ranked the automobile-dependent landscapes of many U.S. rail cities as the biggest obstacle to TOD. Automobile dependency was the largest factor in deterring TOD in the minds of those working in the public sector. This presents a “chicken-and-egg” problem or a “Catch-22,” wherein TOD is needed to increase transit usage and reduce traffic congestion—two products of automobile-oriented land uses—and yet TOD is impeded by the same automobile-dependent forces. Ranked next as obstacles to TOD were a series of “lacks”—minimal lender and developer interest, limited local expertise in planning and implementing TOD, and questionable market demand. In the views of higher levels of government, MPOs and state DOTs, local zoning restrictions are also to blame. (Predictably, respondents from local government did not see this as a problem, just as they discounted the view that limited local expertise thwarted TODs.) Factors like community opposition, local skepticism over the value of TOD, inadequate transit services, and location of transit stations were generally rated as moderate barriers. (Again, higher levels of government were harsher in their criticism of factors that fall largely under the purview of local governments and transit agencies.) Legal barriers and replacement parking requirements were mostly viewed as having minimal effects on whether TODs take form. It bears noting that many of these cited obstacles fall within the public sector’s sphere of influence. Some require institutional strengthening (e.g., better interagency coordination) and resource reallocations (e.g., enhanced transit services). Tackling other problems, notably automobile-dependent landscapes, is a much tougher challenge. While compact, mixed-use zoning and automobile-restraint programs will help in this regard, market realities will be far stronger determinants of whether America’s future built environments become relatively more transit or automobile dependent. Public policies 109

like zoning affect market realities to some degree; however, exogenous factors like rising affluence and gasoline prices exert far stronger influences. While not an insurmountable barrier, the prevalence of automobile-oriented development makes the enterprise of TOD more difficult in the United States than anywhere else in the world. Overcoming Barriers: The Development Community’s Perspective Despite the many hurdles to TOD, developers interviewed for this study generally had a positive outlook about the TOD enterprise and the role of the public sector in shepherding this effort. Most view public agencies as supportive and possibly even important partners in advancing TOD. Few are of the opinion that planners should “get out of the way.” Figure 6.2 shows the percentage of developers interviewed who view various public agencies as either partners, supporters, indifferent or obstacles when it comes to advancing TOD. As might be expected, developers see the appropriate role of the public sector as incentivizing private development. Most believe they can make money in the TOD marketplace as long as they can avoid 110 2 3 4 5 6 7 Legal Barriers Replacement Parking Mandates Location of Transit Stations Lack of Govt. Collaboration Inadequate Transit Services Community Opposition Skepticism in Local Govts. Lack of Political Support Local Zoning Restrictions Lack of Developer Interest Lack of Market Demand Lack of Local Expertise Lack of Lender Interest Automobile-Oriented Land Uses Mean Rating (1=minimal; 4=moderate; 7=significant) Transit Agencies Local Governments Redevelopment Agencies MPOs State DOTs Figure 6.1. Rating of Impediments to TOD Among Five Stakeholder Groups.

excessive red tape and minimize uncertainties. What often bothers them most is when governments “change the rules of the game” at the last moment. Accordingly, developers support good planning that provides a more predictable environment for development. Without a good station-area plan, there are no guarantees that neighbors and public officials will accept a real-estate proposal, nor is there a good handle on what a neighborhood is apt to look like 10 years down the road. Good plans increase the odds of good returns on investments. The developers interviewed eagerly offered a number of suggestions for improving the practice of TOD in the United States. For purposes of discussion, their recommendations can be grouped broadly into four categories: land assembly and infrastructure, the regulatory environment for TOD, public- sector financing of TOD, and public- private partnerships. Land Assembly and Infrastructure In general, developers were interested in seeing a more active role played by the public sector in completing activities that “lay the groundwork” for TOD. They were particularly enthusiastic about seeing public authorities such as 111 10% 0% 10% 4% 10% 59% 32% 13% 24% 11% 10% 21% 61% 58% 41% 68% 53% 10% 4% 29% 24% 27% 4% 18% 0% 20% 40% 60% 80% State Department of Transportation Metropolitan Planning Organization Redevelopment Agency Transit Agency Local Planning Department Local Elected Officials Partner Supporter Indifferent Obstacle Figure 6.2. Developer Views of Public Agency TOD Roles, Based on Developer Interviews.

transit agencies and redevelopment agencies assemble land. Help with land assembly is particularly important for large-scale mixed-use projects in big, built-out cities, where land prices are high and developable parcels are few and far between. In addition to assistance with land assembly, some developers were also eager to see public-sector investments in infrastructure around transit stations, including installation of parks and roads in greenfield locations and implementation of streetscape improvements in existing urban locales. These investments were seen as being particularly effective at attracting development. Most developers who were interviewed felt that the public sector should concentrate on investing in good, workable mass transit systems. Running clean and modern trains on time and expanding transit systems to grow the network of transit-accessible locations are things they actively support. In the minds of many, neighborhoods around stations that enjoy world-class transit services create their own markets for TOD, with little government intervention necessary beyond permissive zoning. The Regulatory Environment While in some respects developers welcomed additional public-sector involvement, not surprisingly, many of those interviewed equated this with more red tape. To a developer, the clock starts ticking once land is acquired and financing costs begin to accrue. Two things critical to the developer’s schedule are certainty and timeliness.20 The most commonly heard policy recommendation from developers was to streamline the development review processes, particularly for fast-track projects near transit stations. Interestingly, developers more often cited streamlining regulatory processes as a needed policy reform than increasing subsidies or tax incentives. This stands in contrast to the views of public-sector stakeholders, who generally thought streamlining measures were ineffective at promoting TOD (as noted in Chapter 4). Some developers drew a distinction between development review and planning processes, questioning the efficacy of the former while expressing enthusiasm for increased public-sector efforts to create community plans for areas around transit stations. Developers explained this apparent paradox by asserting that a carefully crafted community plan adds certainty to development review by establishing a lucid vision for development around a transit node. Having broad-based community buy-in is also essential. In addition to a desire to see increased community planning, some developers were interested in seeing the public sector complete environmental impact reports (EIRs) focused on areas around transit stations. Examples provided included the focused EIRs done for rail- served portions of downtown Oakland and San Diego, California. These EIRs served to expedite the environmental review process for developers building in areas where a city agency had already completed preliminary environmental impact assessment work. Although California’s Transit Village Act exempts TODs from “level-of-service” standards under the state’s Congestion Management Act (see Chapter 3 for more on this), none of the 10 interviewed developers from California were aware of any 112

projects that took advantage of this provision. Public-Sector Financing Some developers were interested in seeing more public-sector financial support for TOD in the form of subsidies, tax incentives, and below-market-rate loans. A developer at a nonprofit community development organization believes that additional subsidies are needed for the retail components of mixed-use projects in order to attract retail outlets as a community revitalization strategy. A for-profit developer feels that the public sector needs to be ready with subsidies when it requires vertically mixed uses in places where market forces do not justify them. A brownfield developer believes that the public sector should step forward with money to pay the insurance premiums on environmental insurance policies, which would indemnify developers for cleanup costs in excess of an agreed-on dollar figure. While developers were certainly willing to accept public-sector financial incentives when they were available, they were not usually the factor driving decisions to develop. In instances where subsidizes or the lack thereof drove development decisions, there was a sentiment that the public sector should “put its money where its mouth is,” so to speak, by paying to support policy goals such as community revitalization or to offset disincentives to development created by policies that run counter to market forces. Of course, in highly depressed inner-city neighborhoods, real-estate developers expect (and usually insist on) direct financial assistance from the public sector in building TOD projects. Land write- downs, assistance with land assembly, and equity partnerships are among the expected “perks.” Many developers also insist on loan subordination to protect them against potential creditors should TOD projects fail. Still, developers generally view the challenge of creating TODs in less attractive urban settings as a partnership, with both risks and rewards shared among public and private interests. Defining exactly how much of the risk gets shifted to the public sector, of course, is often a bone of contention. Most TOD developers believe a substantial share of the burden should fall on the shoulders of local agencies since the developers are taking unnecessary risks as long as opportunities for automobile-oriented development on greenfields exist. One mechanism to offset risk that was advocated by a developer was for the public sector to make equity funds for predevelopment activities available for developers working on risky infill sites where development serves a public purpose. Public-Private Partnerships The sentiment of developers toward public-private partnerships can best be summarized by the following comments from one interviewee: As a private developer, my first preference is a project near [the local subway] totally controlled by us with no public entity partner. The public entity partner makes a project longer, more complicated, and more management intensive . . . unless the public relationship brings an economic advantage. While developers favored more involvement from the public sector in certain activities, like land assembly, 113

they, not surprisingly, prefer that land be turned over to private control before development begins. Reasons for reticence toward public-private partnerships generally hinge on the slow pace of decision making within the public realm. Public agencies, many feel, are too bureaucratic to make good development partners. Also, developers are leery of public counterparts because of their general lack of real-estate expertise, particularly in the case of transit agencies and their governing boards. One interviewee suggested that the real-estate operations of transit agencies might be outsourced to a private entity with more real-estate knowledge. Some developers did, however, recognize the economic advantage of partnerships, including one developer who works almost exclusively with public-private partnerships, often relying on the public sector to pay for parking construction. In theory, these arrangements lower overall development costs by allowing public facilities such as a parking garage to be built concomitantly with privately owned buildings. Construction staging areas can be shared, and efficiencies of scale can be achieved. While it is possible that such cost-sharing benefits exist, few developers seemed to believe that they adequately offset the red tape involved in partnering with a public agency. From a developer perspective, arguably the most bothersome elements of working in public-private partnerships are requirements that land be leased rather than sold. Developers felt that financing would be easier and therefore more TOD would happen if land were available fee-simple rather than through a ground lease. FTA’s new joint development rulings, which enable land (for projects such as parking lots) to be sold to private developers for TOD without returning proceeds to the federal treasury, has opened the way for fee- simple transactions in the Washington, (D.C.) Metropolitan Area, the San Francisco Bay Area, and other regions actively seeking to infill surface park- and-ride lots. Summary and Lessons Many roadblocks stand in the way of TOD, just as they do with most forms of compact, mixed-use development. Some barriers are fiscal in nature, such as the higher costs and risks of dense, infill development, the alignment of rail lines along low-cost corridors that have minimal development potential, and fiscal/exclusionary zoning policies that restrict housing production. Others are in the form of political roadblocks, like NIMBY opposition to infill. Still others are institutional and organizational in character, such as the difficulty of coordinating TOD activities among multiple actors and stakeholder groups with divergent interests. While many of these barriers are generic to all forms of dense, infill development, some are unique to TODs. One is the “congestion conundrum”: the fact that nodal development around a transit station increases spot congestion, prompting some jurisdictions to downzone. Another is the logistical dilemma of accommodating multi-modal access needs, which often results in station road designs and parking layouts that detract from the quality of walking. More fundamentally, this represents a conflict between the role of a station as a functional “node” (particularly in the minds of transit managers) and a 114

desirable “place” (particularly in the minds of urban planners). Still another stumbling block unique to TODs is the rationalization of parking. By their very nature, transit stations offer “location efficiency,” enabling residents to get by with fewer automobiles than they might otherwise own. Yet lenders and planners often insist that code-standard parking be provided in station areas regardless. One mediating approach is to unbundle the price of housing and parking, creating separate markets for each. Within transit station boundaries, clashes are also found between the preferences of professional- class suburbanites who park-and-ride and other groups who would prefer more human-scale station designs. Many transit officials side with automobile-using patrons, invoking one-to-one replacement policies to ensure parking is in ample supply. Lastly, mixed land uses, which are a characteristic trait of TODs, pose difficulties in lining up funding, investors, and contractors. Vertical mixing is particularly problematic; most developers call for horizontal mixing instead. Quite often, the ground-level retail component of mixed-use TODs suffer the most, in part because they are poorly laid out. The national survey of public-sector stakeholders shed light on what barriers are perceived to be the most onerous and difficult to overcome. Most problematic, according to survey respondents, are automobile-oriented development patterns. The lack of lender and developer interest in TOD, along with limited local expertise in planning for TOD and questionable market demand, are also generally seen as significant stumbling blocks. Factors like NIMBY opposition, inadequate transit services, and poor siting of transit stations were generally rated as moderate barriers. While the developers interviewed for this study were enthusiastic about TOD, their views on what is “transit oriented” did not always square with urban design principles that call for mixed-use buildings clustered in close proximity to a transit station. Notably, a handful of developers felt strongly that TOD design guidelines should not overemphasize vertically mixed uses, such as ground- floor retail and upper-level residential. They explained that outside of dense urban locations, building mixed-use products in today’s marketplace can be a complex and risky proposition; few believe that being near a train station fundamentally changes this market reality. Those interviewed did welcome certain public-sector efforts to incentivize development including land assembly, infrastructure provision, strategic investments to improve neighborhood image, and expedited development review processes. In general, developers cautioned against over-regulation and identified actions that could be taken well in advance of development that would reduce risks and encourage more TOD. Nothing will do more to surmount the obstacles to TOD than success stories. A developer active in north Dallas’s TOD scene remarked: “Density used to be a dirty word, but now that there are built examples on the ground of TOD and higher density, everybody is getting on the bandwagon.”21 Notes 1 See R. Cervero, M. Bernick, and G. Gilbert, Market Opportunities and Barriers to Transit- Based Development in California, Working Paper 621 (Berkeley: Institute of Urban and Regional Development, University of California, 1994); E. Deakin, T. Chang, and 115

M. Bernick, Implementation of Residential Development at Rail Transit Stations in California: Case Studies and Policy Options, Working Paper 736 (Berkeley: University of California, Institute of Transportation Studies, 1992); M. Boarnet and R. Crane, Travel by Design: The Influence of Urban Form on Travel, New York, Oxford University Press, 2001); and D. Belzer and G. Autler, Transit Oriented Development: Moving from Rhetoric to Reality (Washington, D.C.: The Brookings Institution Center on Urban and Metropolitan Policy, 2002). 2 Belzer and Autler, 2002, op. cit. 3 M. Leccese, “Will T-REX Meet TOD?” Urban Land, Vol. 62, No. 5 (2003): 87. 4 G. Ohland, Barrio Logan: Natural-Born Transit Village (Santa Fe, New Mexico, The Great American Station Foundation, 2001). 5 Since the retail portion of the Barrio Logan project qualified the lender for Community Redevelopment Act credits toward state- mandated minimum investments in economically depressed communities, the bank was willing to provide the loan without an anchor tenant willing to guarantee the loan. The character of the Barrio Logan shopping center will be decidedly suburban in design, making it more of a “transit-adjacent” than a “transit-oriented” development. Due to the eagerness of the lending institution and the redevelopment agency to begin construction and start receiving the sales-tax revenues, the city’s TOD planning guidelines are being overlooked in favor of suburban strip-mall development. The community and the developer have compromised at 3.5 parking spaces for every 1,000 feet of retail space, well above the 2 spaces recommended by the city’s TOD guidelines but well below the suburban standard of 5 spaces, which is what the developer wants. While the site currently has a street running through its center—a feature that could be useful as a conduit for pedestrian site access—the current plans call for its removal. Current designs also call for the rear of the grocery store to face a main street adjacent to the site and the truck delivery bays to face the trolley station. Consequently, it seems that fiscal pressures not only cause private institutions to press for suburban, automobile-oriented development, but they also place pressures on public institutions to do the same. 6 G. Ohland, Transit-Oriented Development in Four Cities (Santa Fe, New Mexico, The Great American Station Foundation, 2001). 7 M. Boarnet and R. Crane, “Public Finance and Transit-Oriented Planning: New Evidence from Southern California,” Journal of Planning Education and Research, Vol. 17 (1998): 206–219. 8 Inam, A., “Who Is Responsible for Alternative Development ?” (paper presented at the 43rd Annual Conference of the American Collegiate Schools of Planning, Cleveland, Ohio, 2001), 24. 9 Inam, 2001, op. cit., pp. 26–27. 10 Belzer and Autler, 2002, op. cit, pp. 19–20. 11 Price Waterhouse LLP, TCRP Report 31: Funding Strategies for Public Transportation—Volume 2: Casebook (Washington D.C.: Transportation Research Board, National Research Council, 1998). 12 Cushman, K., “Joint Development at Transit Stations,” in Transit, Land Use & Urban Form, ed. W. Attoe (Austin, Texas, Center for the Study of American Architecture, 1988). 13 Price Waterhouse LLP, 1998, op. cit. 14 Belzer and Autler, 2002 op. cit, p. 24. 15 M. Tumlin and A. Millard-Ball, “How to Make Transit-Oriented Development Work,” Planning, Vol. 69, No. 5 (2003): 14–19. 16 J. Gosling, “Development Around Transit: Bringing Community Back to the City,” mimeo (Baltimore, Maryland: RTKL Associates, Inc., 2003). 17 Tumlin and Millard-Ball, 2003, op. cit. 18 Gosling, 2003, op. cit. 19 Gosling, 2003, op. cit. 20 R. Dunphy, D. Myerson, and M. Pawlukiewicz, Ten Principles for Successful Development Around Transit (Washington, D.C.: The Urban Land Institute, 2003). 21 S. Newberg, “TOD in Dallas,” Urban Land, Vol. 62, No. 5 (2003): 105. 116