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29 The property value premium that transit generates cannot be realized unless there are supportive public policies in place that are targeted toward leveraging transitâs added value through measures such as density bonuses, reduced parking requirements, and incentives for TOD. Good planning and supportive policies can help to maximize the overall value of property within a station area (Fogarty and America, 2008). Public policy that is enabling and supportive sets the stage for effective value capture. Effective regulations related to land use, such as zoning and development, along with enabling statutory authority, can allow, support, and incentivize value capture. However, some regulations can also serve as barriers to value capture. Assessment of existing and new regulations or changes in regulations should include careful examination of policies and regulations affecting transit development. This chapter introduces policies to be considered due to their ability to affect the effectiveness of value capture. 4.1 Zoning, Land Development Regulations, and TOD Design Standards Realizing the value creation potential of development near transit requires that local planning, zoning, and development entities adopt rules that allow for and encourage optimization of the real estate opportunity. Options include: â¢ Replacing density maximums with minimums; â¢ Eliminating rules requiring segregation of various land uses or tenancies; â¢ Eliminating, reducing, or altering minimum parking requirements; â¢ Replacing building setback lines (establishing how far a building must be located from the street) with build-to lines (requirements that frame the street, creating a more inviting urban fabric); and â¢ Requiring new roadway cross-section standards and typologies. One illustration of how to use zoning as an incentive for development is the Portland street- car project. For this project, the developer of a major property along the new streetcar line was allowed to increase density incrementally as a major viaduct was torn down, the streetcar became operational, and a new park was developed (see the case study in Appendix F for more information). TOD success can hinge on rewarding developers with measures that grant more latitude in designing projects; allow mixing of uses; increase density envelopes; and offer certainty, clarity, and built-in assur- ances that the public sector will follow through on planning commitments. Because of the risks some- times encountered in building near transit stations, especially with infill and redevelopment projects, and because of the public good conferred by TOD, âbusiness as usualâ should not apply to TOD developers. Zoning must often be revised to allow higher-than-average densities and a land-use program and mix that satisfy market demands (Cervero et al., 2004). C h a p t e r 4 Regulatory Considerations
30 Guide to Value Capture Financing for public transportation projects In the Dulles Metrorail project, the Phase 1 Transportation Improvement District (TID) that provided much of the local special assessment district funding underwent a zoning and land use change with significant up-zoning. This allowed for higher buildings and greater densities around transit stations. Furthermore, parking requirements were reduced (as shown in Table 7). For instance, whereas developers had to provide at least 2.6 parking spaces per 1,000 ft2 of office space in the previous plan, they did not have to provide any spaces if their building was within a half-mile of one of the four Dulles Metrorail stations. This represented a significant shift in land use policy for a typical suburban office development. 4.2 Statutory Authority for Value Capture Mechanisms Statutory authority for specific value capture mechanisms and for rules controlling their application and implementation varies from state to state (Orrick and Datch, 2008). In some jurisdictions, authorization is governed at the local level. In other jurisdictions, state-level autho- rization is required. Specific statutory authority or local authorization may be required for the application of value capture mechanisms such as TIF, special assessment districts, impact fees, and joint development. 4.3 Municipality Fiscal, Political, and Regulatory Characteristics The fiscal condition and political setting of the local government may inform the choice of value capture mechanism in any particular time period and jurisdiction. Alternative value cap- ture solutions may present both fiscal and political challenges and opportunities. Adjoining transit stations may be subject to different political and regulatory jurisdictions requiring differ- ent value capture solutions, creating varied development and multi-station opportunities. For example, TIF revenues may be limited by requirements that tax revenues flow to school districts or other municipal functions. 4.4 Compliance with Federal Regulations Transit projects in the United States that use federal funds must comply with federal regula- tions. Such compliance may impose additional risks and costs for transit projects, regardless of whether value capture is used. For example, if a project includes federal involvement, then all Table 7. Parking ratios for Phase 1 TID that supported Dulles Metrorail. Use Previous* < 1/8 Mile to Metro Station** 1/8â1/4 Mile to Metro Station** 1/4â1/2 Mile to Metro Station** Non- TOD** Townhouse 2.75 1.75â2.2 1.75â2.2 2.0â2.5 2.0â2.7 Multifamily (MF) 0â1 bedroom 1.6 1.0â1.3 1.0â1.3 1.1â1.4 1.1â1.4 MF 2 bedroom 1.6 1.0â1.6 1.0â1.6 1.35â1.7 1.35â1.7 MF 3+ bedroom 1.6 1.0â1.9 1.0â1.9 1.6â2.0 1.6â2.0 Hotel 1.08 Noneâ1.0 Noneâ1.0 Noneâ1.05 0.85â1.08 Office 2.6 Noneâ1.6 Noneâ2.0 Noneâ2.2 2.0â2.4 *Per unit or 1,000 ft2. **MinimumâMaximum. Source: Fairfax County, 2014.
regulatory Considerations 31 parties must carefully consider the impact that the environmental clearance process can have on projects that use value capture. The federal environmental clearance process, as mandated by the National Environmental Policy Act (NEPA), prohibits certain project-related activities prior to completion of the environmental clearance process. Prohibited activities include acquisition of right-of-way and parcels of land that may prejudice the required analysis of transportation alternatives. Therefore, the combination of some value capture mechanisms, such as TIF, and projects that require federal environmental clearance can prove to be problematic for ensuring that development rights are secured within an adequate (or appropriate) timeframe so that additional value needed for value capture can be generated from the development. However, implementation of other value capture mechanisms, such as special assessment districts, actually benefits from the NEPA process. Obtaining NEPA clearance for a project sends a strong signal to the private development community that a public project sponsor is committed to project completion. This level of demonstrated commitment to a project can bolster private-sector con- fidence and raise support for implementation of a special assessment district because the private sector has a level of assurance that the project will proceed and that the resulting market value increases will be realized. 4.5 Regulatory Influences on Transit Project Design and Execution âSuccessful TODs emphasize âplacemakingâ: creating attractive, memorable, human-scale environs with an accent on quality-of-life and civic spacesâ (Cervero et al., 2004). In the example of the Dulles Metrorail project, the Fairfax Comprehensive Plan Amendment showed the intent to create a walkable, bikeable, urban-like community with attractive streetscapes, outdoor eat- ing, and parks, among other amenities (Fairfax County, 2014). These amenities require invest- ments that are largely borne by developers through additional assessments. While this is not the topic of this guide, these additional costs could theoretically make the transit-influenced development less competitive with other districts. However, if the benefits of transit and other street-level improvements are reflected in higher property values, then the added costs for devel- opers can be offset.