Transit-Oriented and Joint Development: Case Studies and Legal Issues (2011)

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34 tion for the site was strong, which allowed NJ Transit to choose among five developers. The selection criteria not only included cost, but 60 percent of the criteria were based on other factors, such as project creativity.286 Rosewood Lafayette Commons LLC, a spin-off of Roseland Properties, developed the Highlands at Mor- ristown in 2008. As of 2007, the future site of the High- lands consisted of 460 parking spaces at Morristown’s commuter parking lot. Out of the 460, 124 were permit- ted spots and the rest were daily parking spots for resi- dents and nonresidents, with 600 on the waiting list. Each space at the Morristown station was earning $700 per space with a 2 percent vacancy, considerably high in comparison to neighboring stations on the line. In 2007, NJ Transit and Rosewood signed a Pur- chase, Sale, and Development Agreement that created two condominium units, one for transit parking and one for residential, commercial, and associated parking. NJ Transit retained the commuter parking condominium and the developer retained the other unit. Moreover, Rosewood agreed to build the parking structure for NJ Transit. The agreement calls for a personal completion guaranty and a $10 million irrevocable letter of credit in case of default by the developer. It also contains easements to ensure that NJ Transit could maintain ongoing transportation operations on the site. The agreement also contains a management agreement for interim parking during the construction phase of the project.287 After developing the commuter lot, the site now has 722 parking spaces; NJ Transit owns 422 spaces with the balance of parking dedicated to the residences of the Highlands. The five-story parking structure was pri- marily financed by the developer, who contributed $7 million to the $8.75 million project, with the balance paid by NJ Transit.288 NJ Transit’s benefits are twofold. The agency gains riders due to the immediate proximity of dense devel- opment to the station, thus earning more farebox reve- nues. In turn, the developer shares a portion of its commercial rental income with NJ Transit and pays the property taxes. “New Jersey Transit will receive at least $230,000 a year in rent plus additional rent from retail properties, parking proceeds, and a percentage of the residential income,” according to NJ Transit.289 Development of the Highlands has not been without delay. According to the local press, the 2008 ground- 286 Next Stop: Transit Villages, BUSINESS NEWS, at 28 (Oct. 16, 2001), retrievable from LEXISNEXIS Academic. 287 See App. G for Purchase, Sale and Development Agree- ment between NJ Transit and Rosewood Lafayette Commons, LLC. 288 Transit Village Update, TRANSIT-FRIENDLY DEVELOPMENT NEWSLETTER, Dec. 2008, available at http://policy.rutgers.edu/vtc/tod/newsletter/vol4-num3/ tran_village_update.html#Morristown. 289 Christine Krelying, Walking Is Good for You and It’s Good for Your Community, PLANNING 5-9 (Jan. 2001), http://www.friedmanco.com/Planning%20Mag%20TOD%202. pdf. breaking290 of the project occurred 6 years after its esti- mated completion.291 In fact, though the zoning for the site was approved in 1999, the site plan did not receive final approvals by Morristown until 2005. The lengthy development process may have resulted from the first- of-its-kind joint development between NJ Transit and a private developer, who then had to get approvals from the municipal government with respect to a number of issues including design. VI. CONCLUSIONS TOD and TJD emerged as distinct planning concepts in the last quarter of the 20th century. As outlined above, the concepts have now been enshrined in numer- ous government regulations and policies and provided the focus for a growing academic and professional lit- erature. Much of the motivation driving the develop- ment of those policies, and much of the focus in the lit- erature, has been on the use of TOD and TJD as strategies for increasing transit ridership, reducing emissions of air pollutants, easing traffic congestion, and decreasing energy consumption. While those bene- fits are still at the heart of TOD initiatives, the case studies above show that TOD’s positive role in stimulat- ing the investment of private and nonprofit capital into real estate development markets is as important to lo- cal citizens and decision-makers as the presumed transportation benefits. Whatever the motivation for pursuing TOD/TJD, successful projects do not happen on their own, or just because government has invested public money into transit and other infrastructure. TOD and joint devel- opment projects succeed, most fundamentally, because there is a market for those types of development. Though market analyses from just 10 years ago indi- cated modest support for TOD-style development, there is evidence that market support for TOD is growing and will continue to grow in coming decades,292 current eco- nomic conditions notwithstanding.293 In addition to supportive market conditions, the case studies reported here show that being able to leverage those conditions into actual TOD/TJD projects depends, 290 Evelyn Lee, Morristown Transit Village Moves Ahead, NJBIZ, Mar. 24, 2008, http://ads.njbiz.com/industry_ article.asp?cID=2&aID=88521712.1317.959218.7327498.79819 16.433&aID2=73777. 291 Bill Swayze, Remaking Morristown as Transit Village, THE STAR-LEDGER, Oct. 19, 2000, at 25, retrievable through LEXISNEXIS Academic. 292 Susan Handy, Is Support for Traditionally Designed Communities Growing?, J. AM. PLAN. ASS’N 74(2), 209–221 (2008), pdf download available at http://www. informaworld.com/smpp/content~db=all~content=a792286419~ frm=titlelink. 293 Joe Cortright, Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs (2008), http://www.ceosforcities.org/files/Driven%20to%20the%20Brink %20FINAL.pdf.

35 to a large degree, on the structures of both public and private law. On the public law side, recent developments in fed- eral, state, and regional laws and programs are making it easier to plan, zone, permit, and fund TOD/TJD. The laws and programs outlined in Section III of this digest cover eight primary areas of public law, many of which were highlighted in TCRP LRD 12: • Transit agency authority to engage in TOD and joint development. • Direction to local government to plan and regulate for TOD and joint development. • Federal involvement in TOD and joint development. • TOD and joint development as part of local and re- gional visioning processes. • TOD planning and incentive grant programs. • Infrastructure investment programs that support or prioritize TOD. • Infrastructure concurrency or adequate public fa- cilities requirements. • Funding programs that cover construction costs or provide incentives for the location of housing and other development in TOD areas. On the private law side, one of the trends observed through this research was the growth in frequency and sophistication of developer agreements between public agencies and private real estate interests. For projects constructed 10 years ago or more, agency/developer agreements covering TOD-based design and land-use issues were rare. As stated by a CTA staff member in- volved in the Bethel New Life project: “Ten-plus years ago, it really was a big deal of a TOD project. It seems like just the fact that we were building this direct con- nection between a private development and a public station, in an underinvested area of Chicago drew a lot of attention. It probably didn't even occur to us or to Bethel New Life to get into a more sophisticated agree- ment.” Compare that approach to the 2007 purchase agreement from the Portland Metro TOD and Centers Program (see Appendix C). That agreement incorpo- rates as conditions precedent to closing 1) the comple- tion of a formal agency design review to ensure the in- clusion of transit-supportive design elements, and 2) the recording of a deed restriction limiting current and future uses of the subject property to transit-supportive uses. As stated in the purpose section of the agreement, these contractual requirements are central to support- ing the public policy rationale for using public money for a private development project: The purpose of this Agreement is to bring about the in- clusion of certain design features into a private develop- ment project that will support higher density and mixed- use in close proximity to a transit station. Said design features will increase the efficiency of the transportation system and the modal share of non-auto trips, ease re- gional congestion, and help improve regional air quality. Because the inclusion of these design features imposes extraordinary financial burdens on the development pro- ject and to ensure the project retains these features for at least thirty (30) years, this Agreement provides for the acquisition and recording of a TOD/Urban Centers Ease- ment.294 TCRP LRD 12 concludes with the assessment that TOD is a promising concept that, with proper attention to important legal principles, can be effectively pursued “to bolster transit ridership while producing affordable housing and economic development opportunities.” Col- lectively, the body of laws, programs, case law, and case studies reviewed in this digest confirm TRCP LRD 12’s assessment and demonstrate more completely how the promised benefits of TOD/TJD can be realized. 294 See App. C, § 1.1.