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Appendix C Survey of Private Sector Companies C-3 provided in Appendix A of this memorandum. The dataset represented by the completed questionnaires consists of over 300 responses, counting answers to multi-part questions.39 The interview process also established relationships that will enable the research team to follow up later in the project, when the Guide is being developed. Rather than addressing the questions one-by-one in the order that they appear in the survey, the discussion is grouped into a series of topical themes. The content of these thematic areas, and the survey questions associated with each, are outlined in Table C-2. The remainder of this Part C memorandum follows this structure; for convenience, Table C-2 previews the section and subsection numbers that correspond to this outline. Table C-2: Outline of the Findings Section 2.0 The TOD/JD Practice: Whoâs Doing What 2.1 Extent and Variety of JD Activity (Question 9) 2.2 Perception of the TOD/JD Market: Attractors, Hurdles, Requirements (Questions 1-3) 2.3 Community Response (Question 8) Section 3.0 Specific TOD/JD Issues: the Developer Perspective 3.1 Parking (Question 4) 3.2 Affordable Housing (Question 5) 3.3 Economic Development Incentives (Questions 6, 7) Section 4.0 JD Implementation 4.1 Transit Agency Capacity and Outlook (Questions 10, 14) 4.2 Developer Selection (Question 11) 4.3 Zoning and Entitlement (Question 12) 4.4 Land Value and Business Terms (Question 13) 2.0 The Joint Development Practice: Whoâs Doing What The first topical theme is the scope and diversity of joint development activity among the companies we interviewed, their reasons for undertaking such projects, and the extent to which their work is welcomed in the affected communities. To this end, the survey asked each respondent if they are or have been involved in JD and, if so, to identify key projects (Question 9, with which this summary begins). Respondents were asked what factors, in their view, attract developer interest and investment capital to TOD settings in general and JD opportunities in particular, and what hurdles have to be overcome (Questions 1-3). In Question 8, they were asked whether neighborhood groups have raised concerns about their TOD/JD projects. 39 The completed questionnaires will be archived in the project files. As indicated to the respondents, these actual questionnaire documents were produced for internal use only and will not be included in the Guide. While the entities that participated in the survey are listed in this Appendix, in reporting the data individual respondents are never identified, and their agencies or corporations are identified by name only with respect to factual information readily available on-line, such as published policies or the names and key features of joint development projects.
Appendix C Survey of Private Sector Companies C-4 2.1 Extent and Variety of JD Activity Table C-3 (next page) lists the joint development projects identified by interviewees in response to Question 9 and/or described on their respective company websites. While many companies have been involved in only one or two JD projects (as defined in this study), some have undertaken or are contemplating several projects, not all of which are necessarily captured in the table. The variety of project types in which the interviewees are involved is striking. Table C-3 includes several JD projects that, while highly complex, are âtraditionalâ in the sense that they are located on transit agency property. These include BARTâs MacArthur and San Leandro Stations (Bridge Housing); MARTAâs Avondale and Edgewood Park Stations (Columbia Ventures); LA Metroâs Taylor Yard (McCormack Baron Salazar); the MBTAâs Ashmont Station (Trinity Financial); Amtrakâs 30th Street Station (Brandywine); Sound Transitâs Capitol Hill Station (Gerding Edlen); DARTâs Trinity Mills Station (Integral Group); WMATAâs White Flint Station (LCOR); and others. But other transactional models are represented as well, which can reasonably be considered joint development projects or, at least, projects on the definitional boundary of joint development: â¢ There are two examples (both in the MBTA system) of new stations built and funded, in whole or in part, by an adjacent developer that needs the station to unlock its land value. These are Assembly Row (Federal Realty Investment Trust) and Boston Landing (HYM Investments).40 â¢ There are two examples of agreements in which an adjacent developer funds and builds direct connections to a station, benefitting not only the affected development but station users in general: Gerding Edlenâs Fenway Center (building new connections to the MBTAâs Lansdowne Station) and the New Brunswick Gateway Transit Village (Pennrose and its development partners connected to NJ Transitâs New Brunswick Station).41 â¢ A jurisdictional partner may contribute station improvements to support a development opportunity. One example is Montgomery Countyâs proposal to fund a new WMATA White Flint Station entrance to support the Pike & Rose multi-phase development program, which is not located on WMATA property (Federal Realty Investment Trust).42 Another is the Massachusetts Port Authorityâs contribution, two decades ago, of the MBTAâs World Trade Station right-of-way, creating the site of the Waterside Place project (HYM Investments). 40 HYM Investments developed several components of the Boston Landing/New Balance mixed-use project; a different development team member delivered the station. 41 The master developer is the non-profit New Brunswick Development Corporation (DEVCO). The pedestrian bridge links the public streetscape and the development to the station platform. (http://devco.org/page/18/gateway-transit-village) 42 https://urbanland.uli.org/economy-markets-trends/place-making-pike/; https://bethesdamagazine.com/bethesda-beat/transportation/council-restores-partial-funding-for-white-flint- metro-station-improvements/
Appendix C Survey of Private Sector Companies C-5 Table C-3: Summary of JD Activity (Question 9) Entity Website JD or Related Activity 43 Primarily Residential Bridge Housing Corporation https://bridgehousing.com/ â¢ BART JD at MacArthur Park Station, Oakland * â¢ BART JD at San Leandro Station * Columbia Ventures LLCD http://columbiaven.com/ â¢ Decatur East (MARTA Avondale Station) * â¢ Spoke Atlanta (MARTA Edgewood Park Station) * McCormack Baron Salazar https://www.mccormackbaron.com/ â¢ LA Metro: Taylor Yard and MacArthur Park JD projects â¢ Atlanta Centennial Hope VI (TOD with Housing Auth.) * Pennrose https://www.pennrose.com/ â¢ Gateway Transit Villageâmixed-use at New Brunswick NJ station (NJT, DevCo, direct ped-bridge access) * Related California http://www.relatedcalifornia.com/ â¢ The Avery, within the Transbay Plan District â¢ No affordable JD projects to date Trinity Financial http://www.trinityfinancial.com/ â¢ The Carruth (MBTA Ashmont Station, Dorchester) * â¢ Avenir and One Canal (MBTA North Station, Haymarket) * â¢ 425 Grand Concourse, Bronx (MTA 3 and 4 subway) * Primarily Mixed-Use Brandywine Realty Trust https://www.brandywinerealty.com/ â¢ 30th Street Station: CIRA Center/FMC Tower (Amtrak) * â¢ 30th Street District Plan Principal with Amtrak, SEPTA Federal Realty Investment Trust http://www.federalrealty.com/ â¢ Boston/Somerville: Assembly Row (MBTA) * â¢ Bethesda, MD: Pike & Rose (WMATA White Flint Station) * Gerding Edlen https://www.gerdingedlen.com/ â¢ Seattle: Capitol Hill (Sound Transit LRT station) * â¢ Boston: Fenway Center (MBTA Lansdowne Station) * HYM Investment Group, LLC https://www.hyminvestments.com/ â¢ Boston: Bullfinch Crossing, Boston Landing, Waterside Pl.* â¢ Boston/Revere: Suffolk Downs (MBTA, Blue Line) * â¢ Cambridge: North Point (MBTA Lechmere LRT station) * Integral Group, LLC http://www.integral-online.com/ â¢ Atlanta: Assembly Yards (GM, MARTA Doraville Station) * â¢ Carrollton, TX: Trinity Mills (DART station) * LCOR https://www.lcor.com/ â¢ North Bethesda Center (WMATA White Flint Station) * â¢ White Plains, 55 Bank Street (MTA Metro North Station) * â¢ Hoboken Terminal master developer Lowe Enterprises https://lowe-re.com/ â¢ Culver City: Ivy Center mixed-use (LA Metro LRT station) * â¢ Seattle: Northgate (King Co. Metro, Sound Transit) * RMS Investment Corporation http://thevanakendistrict.com/ â¢ Shaker Heights: Van Aken District (mixed-use ânew downtownâ enabled by RTA station improvements) * Advisors, Lenders, Other AIMCO http://www.aimco.com/ â¢ Boston: lead investor in One Canal (MBTA/Trinity) * â¢ Several other TOD projects in West Enterprise Com- munity Partners https://www.enterprisecommunity.org/ â¢ National portfolio of regional Enterprise Funds â¢ Many individual JD projects and TOD/JD housing funds JLL, Inc. (former Jones Lang LaSalle) https://www.us.jll.com/ â¢ National portfolio of transit agency RE advisory clients â¢ National portfolio of JD property mgmt contracts 43 Projects mentioned in interview (*) or highlighted on the company website. Some lack a direct transactional connection to the transit agency but are included because they immediately adjoin a station and have involved the developer in transit issues.
Appendix C Survey of Private Sector Companies C-6 â¢ A station-centered value capture district that directly funds the catalytic transit facility might be considered a form of joint development. The Avery (Related California), located within the Transbay Tax Increment Finance District, is in such a setting.44 â¢ The largest proposed TOD project in the northeastern United States, the redevelopment of the 161-acre Suffolk Downs racetrack in Boston (HYM Investments), is framed by, and dependent on, two immediately adjacent MBTA Blue Line stations. This multi-phase project, while not using any MBTA land, will likely involve developer-funded improvements to the station grounds and facilities. Similarly, Assembly YardsâIntegral Groupâs planned redevelopment of the 160-acre former General Motors plant in Doraville, GA, next to MARTAâs Doraville Stationâwill include new project-funded access to the station. â¢ The creation of the Van Aken Districtâthe ânew downtownâ of Shaker Heights, OH (RMS Investment Corporation)âwas enabled by a program of public street, sidewalk, and station improvements undertaken by the City of Shaker Heights and the Greater Cleveland RTA.45 2.2 Perception of the TOD/JD Market: Attractors, Hurdles, Requirements (Questions 1-3) Market attractors. Interviewees were asked what attracts developers and capital to the TOD/JD arenaâ first with respect to TOD in general (Question 1a) and then with respect to JD in particular (Question 2a). We were interested not only in the overall content of the responses, but in two potential distinctions: â¢ Do developers that specialize in affordable or mixed-income housing answer differently from those who do mixed-use projects with commercial and placemaking components? â¢ Do these private sector actors find joint development more challenging than TOD in general because of the integral involvement of a transit agency? As for the general reasons the real estate market is attracted to TOD, four principal themes emerged: i. A major shift in the real estate market toward cities, transit, and walkability was cited by many respondents, several identifying it as at least in part a generational change spearheaded by millennials. This market shift was described as âa compelling ideaâ, âa life-style changeâ, and âa sea changeâ; recognizing it was seen by several respondents as âgoing where the market wants to goâ. Some developers said that access to transit is now essential in metropolitan real estate marketsâthat TOD âmay be the only game in townâ, or that in the densest, most transit-rich markets, âeverything is TOD anywayâ. Two developers added that the market attraction to TOD applies not only to the choice of locations within regions, but to the choice among regions at the national levelâthat the first-tier regional markets for debt and equity all have robust transit systems, where any well-served location is competitive. Two mixed-use developers whose projects include significant retail components noted that TOD provides a walkable fabric conducive to placemaking. One noted that in todayâs retail market (with brick-and-mortar opportunities constrained by on-line shopping), retail other than the big- 44 https://www.transportation.gov/tifia/financed-projects/transbay-transit-center 45 cleveland.com.rta.vanaken.2015
Appendix C Survey of Private Sector Companies C-7 box or local convenience formats âhas to be great retail, integrated into the ground plain of a well-known mixed-use destinationâ; for them, such opportunities are associated with TOD. ii. The second principal theme is that TOD helps lower the cost of mobility for people who are able to both live and work near transit. This theme of more affordable job access and labor market connectivity was articulated by all of the affordable housing developers, and by several general and mixed-use developers as well. For affordable housing specialists, the emphasis tended to be on the societal and public policy value of reducing overall housing and transportation costs for low-and moderate-income people; the affordable housing dollar has a greater impact if a householdâs commuting costs are also low.46 For market-rate and mixed-use developers, the reduced commuting cost associated with TODâ particularly the ability to avoid automobile ownershipâenables households to shift some of their income into housing, creating added value. As one developer explained, âin a dense, high- value metro area, itâs hard for people to live next door to their job.â A well-connected TOD location âcan shift $1,000 a month from a car into rent.â iii. Developers and investors of all kinds observed that key public policy differentiators tend to favor TOD. Funding and financing programs for both affordable housing and economic development often prioritize TOD, as do the portfolio requirements of many social investors. Several respondents also noted that zoning, to the extent that it favors density anywhere, tends to do so in TOD locations, both in threshold height and FAR allowances and in density bonuses. iv. TOD typically requires less parking construction than non-transit-oriented development. This reduces unit costs, allows greater program density, and generates added land value. The opportunity to lower parking ratios and to share parking among uses was attributed both to jurisdictional policy and to market recognition. While a subsequent question in the survey asked specifically about parking (see section 3.1 below), it is noteworthy that multiple interviewees raised it on their own, in response to an introductory, open-ended question about why they are attracted to TOD in the first place. All of these factors apply to joint development as well as to TOD in general. However, several respondents offered additional reasons for seeking out JD opportunities. These fell in two principal categories: i. The first reflects the institutional and commercial advantages that some developers identify in dealing with a transit agency as land holder. Transit agencies (as public landlords) are able to hold onto a site, shield it from speculation, and advance its entitlement process before putting it on the market. From a developerâs perspective, this creates higher value relative to land cost. A public landlord, moreover, can discount its land price to enable a developer to build public amenities, which raise value for all concerned. While working with a public agency âcreates more work and costs moreâ, two developers argued that it enables shared costs, shared risks, and more âwin-winâ opportunities. (At the same time, as discussed below, many developers 46 Although none of the respondents specifically mentioned it, this observation mirrors the Housing and Transportation Affordability Index developed by the Center for Neighborhood Technology (https://htaindex.cnt.org/).
Appendix C Survey of Private Sector Companies C-8 identified as a particular hurdle to JD the difficulty some transit agencies have in approaching transactions this way.) For affordable housing developers, as several pointed out, joint development creates an opportunity âto access sites youâd never be able to afford otherwise.â This observation assumes that agencies are prepared to discount their land values, explicitly or implicitly, to facilitate affordable housing (as some but not all are in fact prepared to do).47 ii. The second category involves the competitive edge that several developers cited in pursuing joint development projects. They described joint development as a specialized skill set that once formed and used is self-fulfilling. They see themselves operating in a âsmaller competitive spaceâ with fewer rivals; âothers are scared off, but not usâ, one said. Because many JD sites enjoy immediate proximity to transit stations, with the route of access controlled by the agency itself, the value proposition may be even stronger. As one developer said, âItâs not that we specifically want to work with a transit agency; itâs that these may be the best sites in the market.â Market hurdles. In addition to asking about market attractors, respondents were asked about market hurdlesâwhether TOD in general, or joint development in particular, presents specific obstacles not found in conventional, non-transit-oriented settings (Questions 1b and 2b, respectively). In the case of JD, are there extra costs, risks, or complexities involved when undertaking development on transit agency land or in partnership with a transit agency? Most responses were clearly formulated with JD in mind, with two overarching themes: â¢ The complexity of the multi-jurisdictional, multi-stakeholder environment characteristic of joint development. While many TOD projects can be described in similar terms, it is clear that some developers see an extra layer of complexity in JD, through the integral role of a transit agency with multiple board approval steps and the involvement, where applicable, of the Federal Transit Administration. Several respondents believe that this added complexity translates into a longer and less predictable project timeline, higher transaction costs, and more costly financing; â¢ The perceived lack of development-savvy staff in some transit agencies. As one respondent said, âTransit agencies are focused on three things: the rail line, the station and the parking; development is secondary.â This perception appears in sharp contrast with the efforts of many transit agencies to build a more sophisticated TOD/JD capacity through a combination of in- house staff and specialized consultants.48 On the other hand, those efforts reflect an understanding on the agenciesâ part that they need such a capacity and have not traditionally had it. It should also be noted that many of the developers did not respond this way, either expressing satisfaction with their transit agency counterparts or emphasizing their own ability to navigate the process. Respondents also identified more specific obstacles to joint development. These observations were made by developers and investors who have undertaken JD by choice, often for the reasons described in 47 These respondents may also have in mind the TOD/affordable housing funds that have been formed in various regional markets to assemble land and make it available at below-market, speculation-protected prices. These projects may or may not constitute joint development. 48 See Appendix B (the Transit Agency report), pp. B-8 â B-9.
Appendix C Survey of Private Sector Companies C-9 the preceding pages as market attractors. The issues outlined here can thus be understood as challenges that experienced JD participants have had to overcome, and that potential new market entrants may decide to avoid. i. Transit costs borne by the developer. Some developers noted from experience that when JD projects are directly in contact with station facilitiesâor built over themâthe cost premium in dollars and time can become âmonumentalâ, involving pedestrian circulation, noise and vibration isolation, ventilation, and egress requirements. In addition to costs associated with these types of technical requirements, several developers pointed to station improvements that are expected to be âpart of the dealâ. Beyond nuts-and-bolts cost premiums, several respondents cited the expectations that transit agencies (and particularly their boards) may have about lease or sale prices. Agencies may have an explicit policy of maximizing the monetary proceeds of a transaction rather than evaluating its full package of benefits. They may overestimate the ripeness of a specific location, or the ability of their JD program to raise revenues. As one interviewee said, âYou canât just create a market;â in the words of another, âJoint development wonât fill the agency funding gap.â49 ii. Parking. Among the cost premiums cited by developers, park & ride replacement was singled out often enough to be treated as a distinct response. To varying degrees, transit agencies were seen as requiring more replacement capacity than is needed, imposing at least some of the costs on the developer. The Federal Transit Administration (âFTAâ) was understood in turn (but contrary to actual FTA policy) to impose this requirement on its grantees. In addition to the cost allocation issue, some developers recognized large-scale replacement garages as a physical constraint on program density.50 A few also mentioned excessive development parking ratios as a cost premium and a drag on density. Two developers explained how high program density, combined with even modest parking ratios, force a choiceâwith complex economic and design tradeoffsâamong underground parking, podium parking, and the âTexas wrapâ model (in which an above-ground garage is surrounded by multi-story development). Here again, as in the discussion of market attractors, parking issues were brought up in an open-ended inquiry about the economic underpinnings of TOD/JD. iii. Ground lease versus fee sale. Several interviewees expressed concerns about the long-term ground lease method of conveying joint development rights. Many transit agencies strongly favor, but do not inflexibly require, ground leases in preference to outright sales. The concerns expressed were two-fold: lender preference for fee ownership of certain project sites, especially 49 See the extensive discussion of these economic issues from the transit agency perspective in Appendix B, pp. B- 19 ff. Transit agencies see tension with the developer over land priceâhow to optimize it, and in some cases how to define itâas a fundamental issue. Most transit agencies report that they do not select developers based on âhigh bidâ, but rather use a multi-criterion âbest valueâ approach. Nonetheless, most agencies must receive fair market value for their property, and within an agency (often at the board level), there may be expectations of value that do not reflect, from a developer perspective, the reality of residual land value once premiums like replacement parking, transit improvements, or affordable housing are taken into account. 50 Many transit agencies have adopted case-by-case evaluation policies in which 1:1 replacement is not presumed as an outcome. See Appendix B, pp. B-24 ff.
Appendix C Survey of Private Sector Companies C-10 where condominiums are to be built; and a belief that transit agency staffs are more likely to seek unrealistic terms in the downstream years of a lease than in a sale. Ingredients for success. Questions 2c and 2d asked, with respect to joint development, what factors need to be present for projects to turn out successfully, and what special skills and capacities a development team may need in order to navigate JD projects. The responses fell in several categories, each cited by multiple respondents. Developers said that transit agencies need: â¢ development-savvy TOD/JD staff; â¢ greater outcome clarity and predictability, especially with regard to entitlements; â¢ maintaining and enhancing the transit service itself, so that it can absorb the new TOD/JD- generated ridership. They said that they and other developers need: â¢ patient capital; â¢ a leadership culture that emphasizes vision, patience, and, in the words of one, âcritical thinking and unorthodox deal-makingâ; â¢ staff and consultants who understand the transit agency process and, where applicable, the FTA process; â¢ technical skills not typically required on other projects, including public funding and financing, specialized legal capacities in contract and real estate, and the ability to work with the transit agency in design review and construction oversight. Site readiness. Finally, the inquiry turned from the market as a whole to specific sites. Are there factors unique to TOD/JD that a developer takes into account in assessing whether a location is market-ready; or are the usual factors of market activity, surrounding land values, transportation access, and regulatory support assessed with a different emphasis (Question 3)? The most common answers once again fell in a few categories: â¢ As expected, most respondents cited close proximity to transit as a defining criterion of site readiness. In the case of new or improved transit services, the transit should be in place, under construction, or at least reliably funded. â¢ There were important nuances with respect to location within the transit system. Some developers pointed to locations near the core of the system (where network connectivity is strongest) as ideal. However, several developers said they look for locations that one of them called âedge marketsââinner-ring locations with a combination of transit and highway access. â¢ The other most common response involved the transit agencyâs level of commitment to the site and project in question, including its willingness to pursue early entitlements and reduce uncertainty early in the life cycle of the project. One developer advised avoiding sites where the transit agencyâs clock âcould extend over two whole development cyclesâ. â¢ Several respondents also prioritized the developerâs own due diligence in understanding the regulatory process. They try to identify sites that are positioned to receive entitlements that are timely, relative to the real estate cycle and to competing locations. Density and reduced TOD parking requirements were cited as the key factors.
Appendix C Survey of Private Sector Companies C-11 2.3 Community Response (Question 8) The interviewees were asked whether, in their own TOD/JD experience, community groups had raised objections around common TOD issues, such as density, affordable housing, spillover parking, and, if so, whether these objections wound up impacting the project outcome. Virtually all agreed that there has been community pushback on their projects, but none reported a project being stopped or fatally compromised by such objections. With respect to the content of community issues, those suggested in the questionâdensity, affordable housing, and parkingâwere all cited. Some projects are affected by all three, some by one or two. Among the interesting observations are the following: â¢ Several developers reported that single-family residential neighborhoods are most prone to object along the traditional lines of density, parking, and affordable housing. Traffic is often cited as a corollary to either density or spillover parking. â¢ There is a nexus of social equity issues that may arise in urban and inner-ring neighborhoods concerned about gentrification or the equitable sharing of benefits. The demand for more affordable housing, community hiring, and affordable space for neighborhood businesses or community facilities is associated with these concerns. â¢ Place-specific planning and community character issues arise in many projects. A well-known example is Assembly Square in Somerville, MA, where community groups advocated for greater density compatible with the projectâs waterfront setting and its location in the cityâs emerging ped-bike network. â¢ Several interviewees described local processes in which the municipality (and sometimes the transit agency) work with community groups to pre-negotiate the development program before the JD process begins. While not eliminating the underlying community concerns, this practice seeks to resolve them before they become the developerâs responsibility. Most interviewees agreed that their projects have changed in response to neighborhood objections. The changes range from âpar for the courseâ and ânot unique to TODâ in most cases to more material in others. The negotiated outcome may include modifications to the project itself as well as a set of community benefits. 3.0 Specific TOD/JD Issues: the Developer Perspective In Questions 4-7, respondents were asked their perspective on how three specific areas of public policyâparking requirements, affordable housing requirements, and targeted financial incentivesâhave affected their TOD/JD projects or others of which they are aware. 3.1 Parking (Question 4) As noted earlier, in the open-ended part of the interview several respondents brought up parking as a core issue in their view of TOD/JDâboth park & ride replacement and the parking ratios required for the development itself. In Question 4, they were asked specifically whether, in their experience, local zoning requires too much parking for TOD/JD and whether developers and transit agencies are generally in accord on the parking issue.
Appendix C Survey of Private Sector Companies C-12 The responses were roughly split between those who see zoning as âabout rightâ or âchanging in the right directionâ and those who see parking requirements as still generally too high. Several developers who work in multiple regions and jurisdictions said that there is not one generally applicable answer. Among the interesting observations: â¢ The issue in building excess parking is two-fold: cost (which is often non-recoupable in the parking marketplace) and the physical conflict between parking and program on a spatially finite site. â¢ Actual zoning has not always caught up with evolving policy. It is fairly common for projects to achieve parking ratios below current zoning through relief, or through Master Plan or Planned Unit Development overlays. â¢ Several respondents stated that their lenders and investors âget itâ (i.e., recognize that actual parking demand falls short of historic requirements) more than local zoning authorities. (In the research teamâs experience, this observation is certainly not universal.) â¢ Two developers cautioned that while it is important to avoid over-parking transit-rich sites, it is also important to avoid under-parking sites that, although served by transit, are on the periphery of the system and less well-connected to regional destinations. â¢ It is increasingly common for actual, stabilized parking demand to fall short of the built supply. This may occur because too much parking was required by zoning, or because the developer erred on the side of caution and âover-parkedâ the project. In multi-phase projects, the emerging strategy is to absorb the Phase 1 excess capacity in support of the later phases. As for the developer and the transit agency being on the same page, several answered in the negative (âof course notâ, said one). Their answers reflected both parking ratios for the development component and the touchstone issue of park & ride replacement. An important observation offered by two respondents was that transit agencies can mitigate the problem of excess parking construction not only by reducing their park & ride replacement goals, but by allowing park & ride and JD parking to be shared, in those cases where the program of uses lends itself to this solution. 3.2 Affordable Housing (Question 5) Question 5 asks whether the respondentâs projects have included inclusionary requirements or goals for affordable housing (whether imposed by the local jurisdiction, the transit agency, or both), and, if so, whether the affordable housing was supported through incentives such as density bonuses, tax credits, or other subsidies. All the respondents indicated that they have undertaken projects with explicit inclusionary requirements or goals; depending on the markets in which they work, such requirements are either typical or occasional. Some mentioned that the inclusionary targets may be met by providing the affordable units on-site, developing them off-site, or making an in-lieu payment into an affordable housing fund. In most of the projects referenced in these interviews, the affordable units were built on-site. Some affordable housing developers suggested that their TOD projects were feasible only as affordable or mixed-income housing, given high construction costs, land values enhanced by proximity to transit, and rent levels in locations that are still emerging.
Appendix C Survey of Private Sector Companies C-13 As for public subsidies, a couple of developers reported projects in which the affordable unitsâ representing 10% to 30% of the total countâdid not receive any assistance and had to be cross- subsidized entirely within the pro forma of the development. In most of the cases reported here, however, one or more incentive or subsidy programs were available. TOD/JD projects that are largely or entirely affordable access the normal menu of public subsidy programs, including the federal Low- Income Housing Tax Credit. Also cited were: â¢ state and local housing trust funds; â¢ agency land write-downs, whether implicit or, as in the case of Sound Transitâs statutory Equitable TOD program, explicit; â¢ parking reduction bonuses; â¢ density bonuses. While such bonuses often accompany local inclusionary requirements, an experienced housing developer cautioned that this is not always a successful strategy. The extra density may provoke community opposition, or it may drive a projectâs built form from âstick over podiumâ to taller buildings requiring steel construction. 3.3 Economic Development Incentives (Questions 6-7) In addition to affordable housing subsidies, state, local, and some regional governments offer a variety of targeted incentives for economic development. These include, among others, grants for place-specific infrastructure improvements; tax-exempt and taxable special revenue bonds; grants and loans for brownfield remediation; and tax increment financing. Many jurisdictions target these incentives at least in part for TOD or for priorities like downtown revitalization that tend to be associated with TOD. Question 6 asks our private sector interviewees if such incentives are commonly needed and available. Question 7 asks the respondentsâ view on the efficacy of two federal tax credit incentives expressly targeted to disadvantaged areas: â¢ the New Market Tax Credit (NMTC), enacted by Congress in 2000 and well established in community and economic development practice (at least three of developers in this survey are affiliated with their own NMTC-eligible Community Development Finance Institution); â¢ the Opportunity Zone capital gains tax credit enacted as part of the 2017 Tax Cut and Jobs Act. All but two of the interviewees agreed that TOD/JD projects frequently require development subsidies in order to feasibly overcome infrastructure or cleanup costs or to close pro forma gaps. Most also felt that such incentives are reasonably available when needed.51 With respect to the federal tax credit incentives: â¢ About half the respondents (including those with CDFI affiliates) reported having used New Market Tax Credits in projects of their own or being aware of NMTC as a significant factor in other projects. â¢ Most respondents indicated a âwait and seeâ attitude toward the new Opportunity Zone program; some expressed general interest or optimism, but none reported having used it or seen it used in a TOD/JD project. 51 As noted in Appendix B, p. B-22, some transit agencies actively help their JD partners pursue such incentives.
Appendix C Survey of Private Sector Companies C-14 4.0 Joint Development Implementation The final topical grouping addresses implementation questions specific to joint development. These include, from the private sector perspective: the transit agencyâs overall capacity and outlook; the developer selection process; the management of zoning and entitlement; and the issues associated with negotiating business terms and land value. 4.1 Transit Agency Capacity and Outlook (Questions 10, 14) In Question 10, respondents were asked to characterize the capacity of transit agencies to successfully undertake joint development; they were prompted to respond in terms of economic understanding, negotiating skill, design and construction oversight, or other factors. They were also asked whether they think transit agencies are able to speak with one voice during the JD process, given the multiplicity of agency departments and interests typically involved in a JD project. In Question 14 (the concluding question of the survey), respondents were asked, open-endedly, what steps transit agencies might take to improve their JD undertakings. The answers overlapped considerably. Responses to the skill and capacity question were mixed, reflecting the respondentsâ particular experiences. Only two developers indicated that transit agencies generally have JD-ready skills, capacities, and understandings. Consistent with the concerns outlined earlier in section 2.2, the rest either answered in the negative or said that their answer would vary among the transit agencies with whom they have dealt. Most respondents did not see transit agencies as readily speaking with one voice. Among the interesting observations were these: â¢ In a strong regional real estate market, most of the available talent is hired by the private sector. â¢ The perceived deficiencies, as one would expect, are primarily in the areas of real estate negotiation and economic understanding. Agency staff is often concerned about setting a precedent âthat every subsequent developer would want.â â¢ The concern about speaking with one voice applies both to inter-departmental issues within the agency staff and to clarity of policy between the staff and the board. As to the question of how transit agencies could improve their joint development outcomes, several responses turned again to the theme of building a stronger JD capacityâa dedicated staff with a sounder understanding of development issues and the ability to oversee specialized consultants; and to the need for greater policy clarity on the part of the board.52 Also mentioned by respondents (and not unrelated to building a more sophisticated JD capacity) were these suggestions: â¢ provide stronger support to their development partners with respect to entitlements and third- party funding; 52 Many transit agencies have published board-adopted TOD/JD policies, including 17 of the 32 interviewed for this study (see Appendix B, p. B-7). See Appendix I for a review of ten such policies, including transit agencies with which several of the private sector interviewees have undertaken JD projects.
Appendix C Survey of Private Sector Companies C-15 â¢ recognize the increased farebox revenue attributable to joint development as part of the agencyâs monetary return (rather than focusing on the lease or sale proceeds only);53 â¢ work with other land-owners to expand the footprint of JD sites. 4.2 Developer Selection (Question 11) In the research teamâs experience, developers have a wide range of views about the competitive process by which transit agencies solicit developers for JD projects. The process can take several forms: â¢ Two-stage RFQ/RFP: a Request for Qualifications (RFQ) is issued to the development community at large; based on the evaluation of these submittals, a detailed Request for Proposals (RFP) is then issued to a selected short list. â¢ One-stage RFQ: the sole solicitation issued is an RFQ, which may also include a request for preliminary concepts. A preliminary developer selection is made on the basis of the RFQ; the details of the project are then proposed and negotiated once the developer is on board. â¢ One-stage RFP: the sole solicitation issued is an RFP, calling for a full detailed project proposal. (This one-stage submittal may include a statement of basic qualifications that is read first, with any proponent falling short of basic qualification requirements discarded before the technical proposal is read.)54 Competitive procurements for major, complex joint development projects can be âhugely costly and time-consumingâ, with an unknown likelihood of success. Developers are motivated to contain both the cash cost and the opportunity cost associated with such procurements, so as to reasonably align risk and reward. To that end, the private sector interviewees were asked which of the formats they prefer.55 â¢ Seven respondents chose a format that uses an RFQ to attract and screen the pool of interested developers, deferring the bulk of the proposal time and expenditure until oneâs chances are better understood. Two of these respondents preferred the one-stage RFQ format; two others chose the two-stage RFQ/RFP. Three said that either format is acceptableâin contrast to a one- stage RFP, which forces any developer who chooses to participate to invest, up-front, the full time and resource commitment associated with a complex proposal. â¢ Nonetheless, three other interviewees stated that they strongly prefer a one-stage RFP procurement. While recognizing the up-front cost, they see an advantage in the fact that the overall processâfrom initial solicitation to selectionâis generally shorter in an RFP-only format. 53 Many of the transit agencies surveyed for this study indicated that they do recognize increased ridership and farebox revenue as an explicit joint development goal, along with (or in some cases ahead of) the value of the real estate proceeds. See Appendix B, pp. B-18 â B-19. 54 Either of the one-stage formats may include a short-listing step with interviews. There are many other hybrids and variations. 55 The transit agencies surveyed for this study were asked a parallel question about their choice of solicitation formats (see Appendix B, p. B-30). The agencies were roughly split between those that prefer one of the RFQ- based models (one-stage RFQ or two-stage RFQ/RFP) and those that prefer one-stage RFPs. Thus, both transit agencies and developers have diverse views about which format is preferable (or whether any one format is preferable in all cases). There is a potential alignment of interests in that transit agencies need a solicitation process that attracts a robust pool of developers that are genuinely interested in a project and believe that investing in the competition presents a reasonable balance of risk and reward.
Appendix C Survey of Private Sector Companies C-16 Compared to a one-stage RFQ, a one-stage RFP allows the key aspects of the proposal to be known and evaluated before selection. â¢ Three other respondents said they have no blanket preferenceâthat what matters is not the format per se but sufficient clarity for the bidders to feel confident that their proposals are consistent with agency priorities and they are not wasting time and resources on an off-target approach. â¢ Two respondents said that this question has thus far not applied to their work, because they have either developed adjacent property they already owned or bought into projects for which developers were already in place. Respondents were also asked if they have made one or more unsolicited JD proposals to transit agencies. The answers were split between those who have and those who have not. Two of those who answered in the affirmative have submitted unsolicited proposals to agencies whose policies require that if they wish to advance the proposal, they must issue an RFP to determine if there are competing bids before entering into negotiations. The two affected respondents saw this common policy requirement as a disincentive to make such submittals. 4.3 Zoning and Entitlement (Question 12) Joint development projects tend to be complex from a zoning and entitlement point of view because of their contentâthey are often taller and more dense than their surroundings; they may be mixed-use projects in jurisdictions where mixed-use âas of rightâ is not the prevailing model; they may be designed with minimal or zero lot-line setbacks; and they are likely to provide less parking than projects of similar size and use in non-transit settings. An important consideration for developer and transit agency alike is whether JD projects face more complex and challenging zoning processes than other projects (Question 12a). Our private sector interviewees saw this question both ways, with slightly more of our small, non-scientific sample saying that in their experience, JD zoning is not more complex (although it was clear from some of the responses that ânot more complexâ does not mean âsimpleâ). For those who did find the JD zoning process more complicated, the stated reasons included not only the intrinsic issues outlined above, but the involvement of multiple agencies and jurisdictions. Respondents were also asked whether, in their joint development experience, zoning suitable for the projects in question was already in place when the sites were made available for development, or whether the projects needed zoning relief or rezoning in order to go forward (Question 12c). In roughly equal parts, the answers were generally yes (suitable zoning was in place), generally no (it was not, requiring significant zoning change or relief), or âit varies by circumstanceâ.56 56 One of those who said that it varies pointed, within his companyâs portfolio, to an exceptionally easy zoning and entitlement project and an exceptionally difficult one. In the former, the transit authority and the city had collaborated on a TOD master plan that was converted into new zoning prior to developer procurement. In the latter, the transit authority, the developer, and community activists agreed on what to build, but this consensus was not aligned with the archaic zoning.
Appendix C Survey of Private Sector Companies C-17 Respondents were asked, for their JD projects, who had the lead role in getting the project permitted and whether that division of labor had proven effective and appropriate (Question 12b). All but one respondent reported that, by the transit agencyâs choice, it was the developer that took the lead; all but one indicated that this was their preference as well and, in several cases, that they felt better equipped to do this.57 4.4 Land Value and Business Terms (Question 13) Finally, respondents were asked about a series of four factors that typically affect the business terms of on-site joint development projectsâthat is, projects on transit agency land to be leased or sold to the developer. In particular, each of these factors, if applicable, would be expected to impact the present value of the price paid to the transit agency for the project site.58 Affordable housing. When a JD project features affordable housing, the developerâs return on investment is likely to be reduced. In projects that are entirely or largely affordable, the applicable federal or state subsidy programs (including the widely used federal Low Income Housing Tax Credit) usually specify maximum rents. In a mixed-income project with an inclusionary percentage of affordable units, those units are often cross-subsidized, in whole or in part, by the market-rate units. A critical question for any affected developer is whether the transit agencyâs land price ultimately reflects these limitations (Question 13a). Most of the respondents reported that, in their experience, the land price generally does reflect the affordable housing requirement. This may occur because the agency explicitly writes down the land cost, or because its fair market value appraisal takes the affordability requirement into account. However, two of the respondents that specialize in affordable housing indicated that this is often not the case, making agreement on land price difficult. Converging on a land price. Respondents were asked how difficult it is for transit agencies and JD partners to converge on a mutually feasible land cost, and what the complicating factors are (Question 13b). The answers varied, but a plurality of respondents said they found this process difficult. The underlying issue, from the developer standpoint, is whether affordable housing, station improvements, and other public benefits are factored into the land price in a reasonable way.59 Among the observations on this critical question: â¢ The parameters of the land price calculation are prone to change after developer selection and during the negotiating period, for several reasons: cost increases in station improvements 57 The transit agency survey included a series of questions on relationships with zoning jurisdictions, management of the entitlement process (including any rezoning or zoning relief), and the division of labor between the transit agency and the developer with respect to the entitlement process. See Appendix B, pp. B-11 â B-13. 58 The corresponding set of questions asked in the transit agency survey, and the associated findings, are summarized in Appendix B, pp. B-20 â B-22. 59 Respondents were asked (Question 13c) how common it is it for the transit agency and the developer to have diverging expectations about who will pay for infrastructure and site improvements. Most said this tension is a significant but routine part of any JD negotiation. Two, by contract, reported that the question is generally resolved by the transit agency prior to issuing the RFP.
Appendix C Survey of Private Sector Companies C-18 assigned to the developer, changes in what the transit agency wants, and community pushback against the originally planned density. â¢ Some developers (including the two affordable housing specialists who reported JD land prices misaligned with affordability requirements) characterized transit agency staffs as failing to understand the concept of residual land valueâwhat the deal can support, on a pro forma basis, once affordable housing, station improvements, and other public benefits are recognized. If the transit agency relies solely on an appraisal, and if the appraisal does not reflect these extra costs, expectations will diverge substantially. Rate of return. The private sector interviewees were asked if the extra complexity and risk associated with joint development leads them (and others in the market) to seek a higher rate of return (Question 13d). Most said noâthat is, acceptable rates of return for JD are generally the same, all other things being equal, as for any other complex project in the same regional market. .
APPENDIX D REPORT ON SURVEY OF LOCAL AND REGIONAL GOVERNMENTS
Appendix D Survey of Local and Regional Governments i TABLE OF CONTENTS 1.0 Introduction and Overview D-1 2.0 TOD Policies and Outcomes D-4 2.1 TOD as a Jurisdictional Priority ...................................................................................................... D-4 2.2 TOD-Friendly Zoning ...................................................................................................................... D-5 3.0 Working with the Transit Agency â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦..D-7 3.1 Transit Agency Role in TOD ............................................................................................................ D-7 3.2 Joint Development ......................................................................................................................... D-7 3.3 Land Assembly for TOD/JD ............................................................................................................. D-8 4.0 TOD/JD Economics D-10 4.1 Parking Requirements .................................................................................................................. D-10 4.2 Affordable Housing ...................................................................................................................... D-11 4.3 Economic Development Incentives .............................................................................................. D-12 4.4 District Value Capture .................................................................................................................. D-12 5.0 Community Response to TOD/JD D-14 LIST OF TABLES Table D-1: Summary of Local Government Jurisdictions Interviewed ...................................................... D-2 Table D-2: Outline of Findings ................................................................................................................... D-4 Table D-3: Examples of Local Jurisdiction TOD Initiatives ........................................................................ D-6 Table D-4: Local Jurisdiction Role in Station Area Real Property .............................................................. D-9 Table D-5: Types of Economic Development Incentives ......................................................................... D-12 Table D-6: Value Capture Districts Reported by Jurisdictions ................................................................ D-14
Appendix D Survey of Local and Regional Governments D-1 SURVEY OF LOCAL AND REGIONAL GOVERNMENTS 1.0 Introduction and Overview The research team for TCRP H-57: A Guide to Joint Development for Public Transportation Agencies (âthe Guideâ) undertook a targeted stakeholder outreach program. Three distinct outreach efforts were conducted in the period of March through July 2019, and they are reported in three separate appendices: â¢ Appendix B: Transit Agencies; â¢ Appendix C: Private Sector Companies; â¢ Appendix D: Local and Regional Governments (this document); The research team interviewed 18 local and regional jurisdictions. They are listed in Table D-1 (next page), which summarizes some of their salient characteristics. The choice of local government jurisdictions reflected a number of objectives. In addition to geographic diversity, it was important to interview jurisdictions that could be seen as peers by a wide range of local governments and as recognizable examples by a wide range of transit agencies. This suggested a mix of large cities, smaller cities, and counties. Another important goal was to identify tools, best practices, and institutional relationships that a variety of jurisdictions can use to advance TOD/JD.60 This suggested a mix not only of larger and smaller jurisdictions, but of jurisdictional typesâmunicipal and regional, general and specialized. In all: â¢ Eleven of the 18 respondents are municipal planning and/or community development departments. Seven of these represent the major central city of their transit market (Charlotte, Kansas City, Phoenix, Denver, Los Angeles, San JosÃ©, San Diego). â¢ Four are smaller cities: Carrollton, TX, representing the DART system; Hayward, CA, representing BART; and in two major transit markets, the inclusion of both the central city and an inner-ring transit suburb (Quincy, MA, and Pasadena, CA). 60 The use of abbreviations in this Appendix is as follows: JD (joint development); TOD (transit-oriented development); TOD/JD (activities involving joint development and/or transit-oriented development); FTA: Federal Transit Administration; FTA/JD (FTA-assisted joint development projects, as defined by FTA).
Appendix D Survey of Local and Regional Governments D-2 Table D-1: Summary of Local Government Jurisdictions Interviewed Jurisdiction Comments Interviewed (All dates 2019) Northeast Boston (MA) Planning & Development Agency â¢ Urban renewal, economic development, planning, development finance. â¢ Extensive collaboration with MBTA on JD projects and TOD zoning. May 31 Montgomery County, MD â¢ JDâs at White Flint and other WMATA stations; future JD on Purple Line. â¢ Long-standing inclusionary housing requirement applies to JD. June 24 (in writing) Pittsburgh (PA) Urban Redevelopment Authority â¢ Works with transit agency (PAAC); major JD at East Liberty BRT station. â¢ Full toolkit of land assembly, property disposition, financial incentives. May 31 Quincy, MA (City) â¢ City of 90,000 near Boston with Red Line, commuter rail, bus service. â¢ Two major MBTA JD projects, incl. downtown centerpiece; City involved. June 7 Midwest Hennepin County, MN â¢ Funding partner for Metro Transit projects; involved in TOD planning. â¢ County arm is lead agency for transit corridor planning and right-of-way. April 4 Kansas City, MO (City) â¢ Transit includes bus, BRT, and streetcar, City works closely with KCATA. June 17 NW Indiana Regional Development Authority â¢ TOD partner and funding partner agency for two commuter rail projects. â¢ New station TOD districts; potential JD at relocated stations. June 10 Southeast Atlanta Regional Commission (MPO) â¢ Large MPO with extensive TOD activity, working closely with MARTA. â¢ Livable Centers Initiative helps fund TOD planning and strategic infrastructure including at JD sites. May 23 Charlotte, NC (City) â¢ City Planning in process of creating new TOD zoning in station areas. â¢ Works closely with CATS, which is part of City government. April 9 Mountain and Southwest Carrollton, TX (City) â¢ City of 119,000 with three DARTâs stations. â¢ Carrollton and DART collaborating on major JD project at Trinity Mills. April 10 Denver, CO (City/County) â¢ City was a major player in Denver Union Station. â¢ One of the first comprehensive City TOD plans in US; works with RTD. April 8 Phoenix, AZ (City) â¢ Works closely with Valley Metro, which cannot own developable land. â¢ City assembles land along LRT line and has strong TOD zoning. May 10 Pacific Coast Hayward, CA (City) â¢ Good TOD zoning, potentially modified by AB2923 within Â½ mile. â¢ Works closely with BART. Completed a civic center mixed-use JD project in 1998. No JD in recent years but substantial land at both stations. July 10 Los Angeles, CA (City) â¢ Involved in âTOCâ through zoning and incentives; robust program. â¢ Several Metro JD projects in LA, incl. Regional Connector, Union Station. April 25 Oregon Metro (Greater Portland, OR) â¢ An elected MPO and regional service provider (unique in US). â¢ Not affiliated with TriMet but has a TOD program with ~50 built projects. May 24 Pasadena, CA (City) â¢ City of 143,000 next to LA. TOD zoning, works closely with LA Metro.LA â¢ Metro Gold Line. JD projects at Del Mar, Sierra Madre Villa. April 8 San Diego, CA (City) â¢ City of Villages framework is a TOD planning framework. â¢ MTS does JD (several projects); SANDAG does TOD planning in general. April 23 and 25 San JosÃ©, CA (City) â¢ BART, Caltrain, VTA converge; Diridon/Google and BART Extension JD. â¢ VTA LRT system has other JD opportunities out on the corridors. April 8