Guide to Joint Development for Public Transportation Agencies: Appendices (2021)

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APPENDIX F FTA JOINT DEVELOPMENT POLICY AND ITS EVOLUTION

Appendix F FTA Joint Development Policy i TABLE OF CONTENTS 1.0 FTA Joint Development Policy Documents ........................................................................................ F-1 2.0 Background ........................................................................................................................................ F-2 3.0 Features of FTA Policy that Have Remained Constant ....................................................................... F-3 4.0 Features of FTA Policy that Have Changed Materially ....................................................................... F-7 LIST OF TABLES Table F-1: FTA Joint Development Policy Documents Published Since 1997 ...................................................... F-1

Appendix F FTA Joint Development Policy F-1 FTA JOINT DEVELOPMENT POLICY AND ITS EVOLUTION 1.0 FTA Joint Development Policy Documents Joint development falls within the jurisdiction of the Federal Transit Administration (FTA) only if it involves new FTA funding or the use of FTA-assisted real estate. Such cases represent an important subset—but by no means the entirety—of joint development in the US. The purpose of FTA’s joint development policy is to set forth the rules for determining if a proposed project constitutes FTA-assisted joint development, and if so, the conditions under which FTA will approve the use of FTA funding or FTA-assisted property. FTA issued its first joint development policy in 1997 and has periodically updated and modified it through a series of subsequent publications. The policy in effect as of this writing was published in 2020. The joint development policy documents issued by FTA over the last two decades (and addressed in this review) include the following: Table F-1: FTA Joint Development Policy Documents Published Since 1997 1997 Policy on Transit Joint Development (Federal Register Notice) https://www.govinfo.gov/content/pkg/FR-1997-03-14/pdf/97-6462.pdf Hereinafter cited as “1997 FTA Policy”. 1998 Appendix B (“Joint Development Projects”) to the FTA Circular on the Capital Program: Grant Application Instructions (Circular FTA 9300.1A) http://libraryarchives.metro.net/dpgtl/FTA/1998-FTA-Circular-9300.1A.pdf Hereinafter cited as “1998 FTA Appendix”. 2007 Notice of Final Agency Guidance on the Eligibility of Joint Development Improvements under Federal Transit Law (Federal Register Notice) https://www.govinfo.gov/content/pkg/FR-2007-02-07/pdf/E7-1977.pdf Hereinafter cited as “2007 FTA Guidance”. 2014 2014: Federal Transit Administration Guidance on Joint Development (Circular FTA 7050.1) https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/FTA_C_7050_1_Guidance_on_Joint_ Development_Circular.pdf Hereinafter cited as “2014 FTA Circular 7050.1”. 2016 2016: Federal Transit Administration Guidance on Joint Development (Circular FTA 7050.1A) https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/FTA-161221- 001%20Joint%20Development%20Circular.pdf Hereinafter cited as “2016 FTA Circular 7050.1A”. 2020 2020: Federal Transit Administration Guidance on Joint Development (Circular FTA 7050.1B) https://www.transit.dot.gov/sites/fta.dot.gov/files/2020-08/Joint-Development-Circular-C- 7050-1B.pdf Hereinafter cited as “2020 FTA Circular 7050.1B”. These six documents represent, in effect, three successive policy approaches on FTA’s part:

Appendix F FTA Joint Development Policy F-2 • The 1997 FTA Policy addressed a threshold inconsistency between FTA’s intended support of joint development and the operation of various statutory and regulatory provisions which tended to have the opposite effect. The 1998 FTA Appendix codified the 1997 FTA Policy and captured statutory changes enacted in TEA-21 (1998).91 • The 2007 FTA Guidance updated and recodified FTA’s joint development process. Among other things, it reflected statutory changes enacted in TEA-21 (1998) and SAFETEA-LU (2005). • The 2014 FTA Circular 7050.1 was a comprehensive restatement and modification, reflecting statutory changes enacted in MAP-21 (2012). It also implemented FTA’s desire to convert its joint development guidance into a self-contained, stand-alone circular. This circular was slightly amended by 2016 FTA Circular 7050.1A (reflecting statutory changes enacted in the FAST Act of 2015). The circular was further amended by 2020 FTA Circular 7050.1B, which adopted changes originally posted for public comment in April 2019. In the pages that follow, the salient points of FTA’s Joint Development Policy are summarized, and key issues identified. Material changes that have evolved across successive iterations of the policy are highlighted in the narrative. 2.0 Background Starting with the National Mass Transportation Assistance Act of 1974, transit agencies receiving FTA capital grants have been allowed, with FTA approval, to apply grant funds for projects that we would recognize today as joint development. In the 1970s, FTA’s predecessor, the Urban Mass Transportation Administration (UMTA), operated a discretionary program known as “Urban Initiatives” that assisted local grantees in acquiring property for joint development and in building joint development components like shared foundations, air rights decks, or the shells of joint-use facilities. Notable projects were undertaken in Washington, Baltimore, Philadelphia, Denver, and Santa Ana, California; these were documented in Joint Development: a Handbook for Local Officials, published by UMTA in 1983.92 However, appropriations for the Urban Initiatives Program ended in 1981. Since then UMTA and subsequently FTA have not had a dedicated funding program for joint development. With FTA approval, any of several FTA capital programs can be used for eligible joint development costs, although as a practical matter, for reasons explained below, such funding can be difficult to access and use. A more serious threshold problem was that until 1996, joint development on land acquired or improved with FTA funds was subject to the then-prevalent understanding of the Common Grant Rule. This body 91 The multi-year Surface Transportation Authorization Bills enacted since 1991 are commonly known by acronyms, which are used for convenience in this memorandum. They are: (i) 1991: Intermodal Surface Transportation Efficiency Act (Public Law 102-240, “ISTEA”); (ii) 1998: Transportation Equity Act for the 21st Century (Public Law 105-178, “TEA-21”); (iii) 2005: Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (Public Law 109–59, “SAFETEA-LU”; (iv) 2009: Moving Ahead for Progress in the 21st Century Act (Public Law 112-141, “MAP-21”); (v) 2015: Fixing America's Surface Transportation Act (Public Law 114-94, “FAST Act”). 92 See Joint Development: a Handbook for Local Government Officials (1983). Prepared by Public Technology, Inc., for the Office of Planning Assistance, Urban Mass Transportation Administration, in cooperation with the Technology Sharing Program, Office of the Secretary of Transportation. https://babel.hathitrust.org/cgi/pt?id=uc1.c100889882;view=1up;seq=24

Appendix F FTA Joint Development Policy F-3 of federal law and regulation limits the use of federally-assisted real property to its originally authorized purpose; it requires that when such land is disposed of or encumbered for any other purpose, the “federal interest” must be repaid to the affected federal agency.93 In the case of land acquired as part of an FTA-funded capital project, the federal interest is the percentage of the current fair market value corresponding to FTA’s original share of project costs. Since the sale or lease of FTA-assisted property for joint development was understood to be a disposition, FTA’s intended support of joint development was frustrated. The 1997 FTA Policy and 1998 FTA Appendix established a framework that resolved the Common Grant Rule issue and has been in place ever since. Any joint development project that meets the statutory definition of an FTA capital project (see section 3.0 below) and is approved by FTA is deemed to be per se a transit capital project, consistent by definition with the originally authorized purpose of the underlying FTA grant. As long as the transit agency maintains “satisfactory continuing control” of the site (which it can do through a variety of legal arrangements), conveying the joint development premises, by lease or even by sale, does not constitute a disposition of property or its conversion to another use. The FTA interest is maintained rather than extinguished, and the sale or lease proceeds received by the transit agency are treated as “program income”, which by law is retained by the transit agency for its own capital or operating purposes.94 Notwithstanding this formulation, transit agencies pursuing joint development projects do not always seek approval to advance them as FTA-assisted joint development. That is because an alternative is available—to declare the development site surplus and request FTA’s permission to dispose of it outright, but without necessarily having to repay the full FTA interest. This alternative arose from statutory language enacted in 1998 (in TEA-21) and has been reflected since then in the applicable FTA capital Award Management Circular (currently C 5010.1E).95 The latter establishes that while dispositions of FTA-assisted property still require that the FTA interest be settled, this can be achieved either by repaying FTA its share of the site’s value or by crediting that same amount to a subsequent FTA-eligible capital project. Under some circumstances, the proceeds can also be credited to the same capital project.96 Because outright disposition is often seen as a simpler 93 49 C.F.R. 18.31(b) 94 See the 1997 FTA Policy and longer discussions in the 1998 FTA Appendix, pp. 10-11 and the 2016 FTA Circular 7050.1A, pp. IV-1 ff. FTA had already begun moving in this direction in 1996, when the Master Agreement covering all FTA capital grants was changed to make joint development an explicit part of the original authorized purpose (1997 FTA Policy). 95 FTA Grant Management Circular C 5010.1E at https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/regulations-and-guidance/fta-circulars/58051/5010-1e- circular-award-management-requirements-7-16-18.pdf. This circular was formerly issued as C 5010.1C in 1998 and as C 5010.1D in 2008. 96 See the 2018 Award Management Circular (ibid.). Its section on Real Estate Disposition (pp. IV-17 ff) describes several alternative formulations for disposing of excess FTA-assisted real estate and settling the FTA interest. If there is no applicable alternative, the “default” option remains to sell the property and repay the FTA interest. All of these options are distinct from a joint development conveyance. For the citation of the TEA-21 alternative disposition language, see FTA Circular 9300.1B (1998; superseded). http://libraryarchives.metro.net/dpgtl/FTA/1998-FTA-Circular-9300.1A.pdf.

Appendix F FTA Joint Development Policy F-4 bureaucratic process than FTA joint development approval, and the incentive of FTA funding for eligible joint development costs may not be realistically available, transit agencies sometimes seek FTA permission to dispose of the development site as excess property and transfer the proceeds to another project, rather than seeking approval as an FTA-assisted joint development project. (With respect to using new FTA funds for joint development, between 2014 and 2019, 16 FTA-assisted joint development projects were approved. All were triggered by the use of real property previously acquired with FTA assistance; none requested new FTA capital assistance for eligible joint development expenses.97) 3.0 Features of FTA Policy that Have Remained Constant The foundational aspects of FTA’s joint development policy were articulated in the 1997 FTA Policy and/or the 1998 FTA Appendix and have remained in place through the current 2020 FTA Circular 7050.1B—with enhanced clarity of presentation but only minor changes in substance. These features are summarized below. a. General definition of joint development. FTA has attempted to articulate an informal definition of joint development that captures the range of activities represented by the common use of the term. The 1997 FTA Policy defined joint development as: “…commercial, residential, industrial, or mixed-use developments that are undertaken in concert with transit facilities. They may include private and non-profit development activities usually associated with fixed guideway (rail or busway) transit systems that are new or being modernized or extended. Joint development projects may also be associated with bus facilities, intermodal transfer facilities (e.g., bus to rail), [or] transit malls...”98 In the 2020 FTA Circular 7050.1B (and its 2016 predecessor, Circular 7050.1A), the definition is stated thus: “A public transportation project that integrally relates to, and often co-locates with commercial, residential, mixed-use, or other non-transit development. Joint development may include partnerships for public or private development associated with any mode of transit system that is being improved through new construction, renovation, or extension. Joint development may also include intermodal facilities, intercity bus and rail facilities, transit malls, or historic transportation facilities.”99 The 2016/2020 definition is amplified by an extensive narrative that seeks to clarify how joint development differs from related terms and concepts. In particular, joint development is distinguished from transit-oriented development, which is broader in scope. In joint development, the transit agency is not only a TOD stakeholder but an active participant, typically contributing either funding or property and obtaining a negotiated benefit In return. While encouraging TOD across the board, FTA can only apply its funding, property, or regulatory requirements to joint development.100 97 FTA communication, May 2019. 98 1997 FTA Policy. 99 2020 FTA Circular 7050.1B. 100 Ibid., pp. II-1 - II-2. Joint development is also usefully distinguished from ped-bike projects (which may be undertaken by a transit agency as stand-alone capital projects) and from public-private partnerships (which are an

Appendix F FTA Joint Development Policy F-5 b. FTA jurisdiction and FTA property interest. As noted previously, a proposed joint development project falls within FTA jurisdiction only if: (i) elements of the joint development would be funded with FTA dollars; or (ii) the joint development would occur on property acquired or improved with FTA funds. If neither of these conditions applies, then there is no FTA jurisdiction. Even if the project meets the everyday definition of joint development, it is not FTA-assisted joint development, and no FTA requirements come into play. Where FTA jurisdiction does exist, there are distinct criteria for FTA approval. If FTA funding is proposed for any joint development project components, FTA reviews and approves these uses. If the only trigger of FTA jurisdiction is the use of property that was acquired or improved in the past with FTA funds, then FTA and the transit agency determines, through consultation, whether to process the transaction as: (i) an FTA-assisted joint development project, in which FTA’s interest in the property is maintained through satisfactory continuing control (see below) and the real estate proceeds are retained by the transit agency as program income; or (ii) a disposition of property “no longer needed for any transit purpose”, in which case FTA’s interest in the property must be either repaid outright or transferred, with FTA approval, to another eligible capital project to be undertaken by the transit agency or, if the grant is still open, to other costs on the same capital project. While such a disposition and the development enabled by it may be commonly understood as a joint development, FTA by definition does not recognize it as such; (iii) an “incidental use” of the property; this term, whose definition partially overlaps that of joint development, addresses uses that generate a stream of lease or license payments, do not involve new FTA capital funds, and do not interfere with the transit use of the property. The examples given include temporary uses, shared parking, retail concessions, and other relatively minor joint development activities.101 c. Statutory definition of joint development as a capital project and corresponding eligibility criteria. Federal law has long included a list of eligible activities that together constitute the statutory definition of a “capital project” on which FTA funds can be spent. Each successive version of this complex definition is captured in 49 CFR 53, where FTA authorizing legislation is codified and updated. As of 2020, this definition, reflecting all reauthorizations through the FAST Act of 2015, reads as follows: (G) a joint development improvement that— (i) enhances economic development or incorporates private investment, such as commercial and residential development; (ii) (I) alternative method of procuring and operating transit facilities). Ped-bike projects and P3s may be combined with joint development in particular projects, but they are separate and distinct concepts. 101 Ibid., pp. IV-5 ff; 1998 FTA Appendix, p. 11. There is also a construct known as “shared use”, in which a non- transit partner occupies part of an FTA-funded facility and pays its pro rata share of the construction, maintenance, and operation costs. Under certain circumstances, a joint development use might be approved as either an “incidental use” or a “shared use”. However, since a “shared use” must be approved by FTA at the time of the original capital grant, it would not apply to a project in which the FTA interest arises solely from the previous use of FTA funds to acquire or improve the property. (For the discussion of “shared use”, see FTA Circular C 5010.1E at https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/Grant%20Management%20Requirements%20Circular_50 10-1E.pdf, pp. IV-16 ff.)

Appendix F FTA Joint Development Policy F-6 enhances the effectiveness of public transportation and is related physically or functionally to public transportation; or (II) establishes new or enhanced coordination between public transportation and other transportation; (iii) provides a fair share of revenue that will be used for public transportation; (iv) provides that a person making an agreement to occupy space in a facility constructed under this paragraph shall pay a fair share of the costs of the facility through rental payments and other means[.] 102 This definition is reflected in project eligibility criteria set forth in the FTA Joint Development Policy. The 2020 FTA Circular 7050.1B (and its 20216 predecessor) explain with particular clarity, in both narrative and tabular form: (i) the economic benefit criterion; (ii) the public transit benefit criterion, including the definition and applicability of the “physically or functionally related” construct; (iii) the fair share of revenue criterion (see section 4.0, paragraph [a] below); and, when applicable, (iv) the tenant contribution criterion.103 These criteria need to be satisfied for any joint development use of FTA capital funds, and generally for the use of FTA-assisted real property as well, since the joint development project becomes part of the originally authorized purpose of the grant. d. FTA funding sources for joint development. Since the Urban Initiatives Program lapsed in 1981, there has been no specific FTA program dedicated to joint development. The 1997 FTA Policy, 1998 FTA Appendix, 2007 FTA Guidance, 2016 FTA Circular 7050.1A, and 2020 FTA Circular 7050.1B all make clear that the discussion of FTA funding for eligible projects and uses is directed to existing FTA capital programs. Under current authorizations, the following menu of programs is available with FTA approval:104 (i) the various capital grant programs authorized under Chapter 53 of Title 49: Sections 5307 (urbanized area formula grants), 5309 (New Starts/Small Starts/Core Capacity), 5311 (rural formula grants), 5337 (state of good repair), and 5339 (bus and bus facility formula grants); (ii) Flex Funds (Surface Transportation Block Grant, National Highway Performance Program, Congestion Mitigation & Air Quality), which originate in the Federal Highway Administration and can be transferred or “flexed” by Metropolitan Planning Organizations and state departments of transportation into transit use. Such funds take on the requirements and eligibility of the FTA program to which they are transferred; (iii) program income derived from other joint development projects. A barrier to the use of the formula grant programs is that they typically represent a “bread and butter” funding source for the agencies in question, with far greater demand than supply in each 102 49 CFR 53, Section 5302(3)(G), “Definitions”. The second part of this definition, which lists the specific elements of an eligible joint development project on which FTA funds can be spent, has changed materially since 1997 and is discussed in section 4.0 below. 103 2020 FTA Circular 7050.1, pp. III-2 ff. The interpretation of “physically or functionally related” has evolved somewhat since the 1998 FTA Appendix, where these terms were defined for the first time. The original 1998 provision generally limited functional relationships to a distance of 1500 feet. This has been replaced with a criterion that aligns joint development with both walking and bicycling. In essence, a joint development may be “functionally related” to transit if it lies is within the distance a person can reasonably be expected to walk or bike to the transit facility (ibid, pp. III-4 – III-5). 104 Ibid., pp. III-1 - III-2.

Appendix F FTA Joint Development Policy F-7 agency’s capital program. Section 5309 discretionary grants for New Starts and Small Starts projects offer the opportunity to incorporate joint development into corridor planning and station location, but, by definition, only for projects that ultimately receive funding.105 e. Satisfactory continuing control. It is a statutory requirement that an FTA grant recipient maintain “satisfactory continuing control” over any property covered by the grant. In the case of FTA-assisted joint development, the demonstration of such control is the linchpin of the argument that land leased or even sold to a developer nonetheless remains within the grantee’s control for transit purposes. The FTA policy documents going back to 1997 affirm that satisfactory continuing control can be achieved through a variety of legally enforceable lease, deed, or easement provisions that run with the property if they assure that the joint development project occurs in a timely manner and in the form agreed to by the parties and approved by FTA, and that the grantee retains rights of access necessary to operate and maintain the transit uses on the site.106 f. Cross-cutting federal requirements. An important question for transit agencies and developers is the extent to which advancing a project as an FTA-assisted joint development would subject it to the array of statutory and regulatory requirements that normally apply to federally-funded transportation projects. The 1998 FTA Appendix, the 2007 FTA Guidance, and the 2014, 2016, and 2020 FTA Circulars address cross-cutting requirements in detail. There is a threshold distinction between cases in which new FTA capital assistance is proposed and those in which jurisdiction arises only through the use of property previously acquired or improved with FTA funds.107 (i) In the case of new FTA capital assistance, a full array of federal requirements potentially applies, including, among others, the federal transportation planning process, NEPA, Section 4(f) provisions on parkland and historic places, Section 106 historic review, Buy America, and Davis Bacon. (The circumstances in which NEPA review is likely to be required, and at what level, are outlined in an informative table in the 2020 FTA Circular 7050.1B.)108 Depending on the circumstances, these requirements may constitute a significant disincentive to the potential use of FTA funds for joint development. 105 Although outside the scope of the Joint Development Circular, two FAST Act changes should be noted. The eligible uses of the Transportation Infrastructure Finance and Innovation Act (TIFIA) were expanded to cover TOD and joint development, including the FTA-eligible uses established in the statutory definition of a capital project. This could extend the reach of New Starts, Small Starts, and other FTA grant programs. (See https://www.transportation.gov/buildamerica/programs-services/tifia/faqs.) Also, FTA’s Pilot Program for TOD Planning, a competitive program in existence since 2015, is dedicated to corridors in the New Starts or Small Starts pipeline and can readily be used for joint development-related planning. (See https://www.transit.dot.gov/TODPilot.) 106 2020 FTA Circular 7050.1B, esp. pp. IV-4 - IV-5. In the 1997 FTA Policy, the language was “effective continuing control”. 107 The applicability of cross-cutting federal requirements is a key issue for agencies and developers. This brief discussion is meant to provide a simplified overview of a complex and nuanced section of the 2020 FTA Circular (ibid., pp. V-1 ff). 108 Ibid., pp. V-1 ff.

Appendix F FTA Joint Development Policy F-8 (ii) If no new FTA capital assistance is proposed, the cross-cutting requirements are generally limited to the non-discrimination and non-disbarment provisions applicable by law to all federal programs. 4.0 Features of FTA Policy that Have Changed Materially Minor technical details that have changed across the sequence of FTA Joint Development Policy documents are not addressed in this review. However, four areas are identified in which policy changes are more material in nature and may influence whether a grantee uses the FTA-assisted joint development process in cases in cases where the excess disposition alternative is also available. The four policy areas are as follows. a. Fair share of revenue: constraints on the financial terms of the joint development transaction. Among the stated goals of FTA policy are to encourage opportunities for value capture and revenue generation by maximizing the utility of FTA-assisted assets, and, to that end, to afford grantees the maximum flexibility to negotiate the terms of a joint development transaction. The transit agency, which often engages local real estate consultants, is assumed to have a better understanding of the market than FTA, as well as a better appreciation of the tradeoffs associated with non-monetary policy goals such as affordable housing and sustainable design. That said, in applying the statutory requirement that an FTA-assisted joint development project provide “a fair share of revenue” for transit use, FTA has sometimes imposed threshold criteria on the transit agency’s compensation for joint development rights. 1997 FTA Policy/1998 FTA Appendix. A project was required to generate either a one-time payment or a revenue stream, with a present value at least equal to the current fair market value or appraised value of the property. To encourage development that was transit- oriented rather than merely transit-adjacent, the value could be based on the specialized concept of “highest and best transit use” rather than the normal concept of highest and best use. This allowed the grantee to choose a transit-supportive program rather than an automobile-dependent program that might pay more for the land. The grantee was required to make a “convincing case” to justify the value trade-off.109 2007 FTA Guidance. After considering more prescriptive requirements, FTA determined in 2007 that it would impose no definition or threshold criterion for “fair share of revenue”. The sole requirement was that the grantee’s governing board determine that the terms were commercially reasonable and fair to the grantee, and that the revenues would be used for public transportation.110 2014 FTA Circular 7050.1. In the 2014 Circular, FTA returned to the concept of a threshold requirement for “fair share of revenue”. The threshold was not the current fair market value, but the value (presumably lower) of FTA’s original investment in the property—i.e., the original cost of the property multiplied by FTA’s percentage share of project costs. 109 1997 FTA Policy, pp. 12267-12268 (Federal Register) and 1998 FTA Appendix, pp. 8-9. In the case of a program of multiple joint development projects at a corridor or system level, the revenue requirement could be met on a portfolio basis rather than for each individual project. 110 2007 FTA Guidance, p. 5791 (Federal Register).

Appendix F FTA Joint Development Policy F-9 However, the grantee’s chief executive was required to certify not only that this threshold was met but that the negotiated revenue was commercially reasonable and fair to the grantee, thus requiring a market analysis or appraisal. The Circular recognized that a joint development project consisting largely of publicly owned facilities or community services might be unable to generate sufficient rent to match the original FTA investment and consequently allowed an exception for such projects.111 2016 FTA Circular 7050.1A. The 2016 revision of the Circular left the 2014 “fair share of revenue” criterion intact, as described in the prior paragraph. However, it added affordable housing to the exception previously allowed for publicly owned facilities or community services.112 Because many joint development projects now seek to include affordable housing (or require it under inclusionary provisions imposed by local zoning or by the transit agency itself), the ability to accept a lesser revenue stream in exchange for affordable housing was a significant adjustment. 2020 FTA Circular 7050.1B. The amendments proposed by FTA for public comment in 2019 and adopted in the 2020 Circular address a single key point. The threshold definition of a “fair share of revenue” is eliminated entirely; the real estate proceeds no longer have to match either fair market value or the original FTA investment in the property. This simplifying change effectively returns FTA’s treatment of this issue to the terms of the 2007 FTA Guidance.113 b. Documentation required for FTA application. The type and amount of documentation required for FTA’s joint development approval process reflects, among other things, how the “fair share of revenue” criterion is addressed. (It should be noted for comparison that under the alternative scenario, in which a grantee requests an outright disposition and transfer of the proceeds to a future project, FTA requires documentation of fair market value, since that is the basis of determining the FTA interest.) 1997 FTA Policy/1998 FTA Appendix. In addition to demonstrating effective continuing control of the site, the 1997 FTA Policy required the grantee to submit the proposed Joint Development Agreement, a market and financial assessment of the joint development project and its impact on the transit system, the projected benefits for the transit system, and a statement of the outcome of planning and coordination between the joint development and the transit facility.114 2007 FTA Guidance. The grantee was required to submit either a blanket Certificate of Compliance (indicating conformity will all applicable FTA requirements) or an “alternate 111 2014 FTA Circular 7050.1, pp. III-6 - III-7. 112 2016 FTA Circular 7050.1A, p. VI-5. 113 2020 FTA Circular 7050.1B, p III-6. 114 1997 FTA Policy, p. 12268 (Federal Register Notice). A separate statutory requirement is that the tenant of any facility built with FTA assistance (such as a retail concession or another transit operator) “pay a fair share of the costs of the facility through rental payments and other means”. The 2007 Guidance established that FTA will leave this negotiation entirely to the grantee, with no prescribed valuation methodology or threshold. This provision has remained basically unchanged, although the 2014 Circular added a requirement that the rental costs, however determined, at least cover the operation and maintenance costs of the premises in question.

Appendix F FTA Joint Development Policy F-10 certification” documenting any exceptions; the Joint Development Agreement; and a completed Joint Development Checklist (a standard exhibit included in the Guidance). Because the 2007 FTA Guidance imposed no threshold definition of “fair share of revenue”, no market or financial assessment was required.115 2014 FTA Circular 7050.1/2016 FTA Circular 7050.1A. Under the current policy (except for the 2020 change noted below), the grantee applies to FTA by filing a Joint Development Request Form (which replaced the earlier Joint Development Checklist); the proposed Joint Development Agreement and its exhibits; and a Certificate of Compliance pertaining mostly to the documentation of fair market value and appraised value.116 The new Joint Development Request Form is a spreadsheet document more in the nature of an application form than the earlier Joint Development Checklist. The circular also strongly encourages transit agencies to pre-apply by filing a Joint Development Request Form marked “preliminary”. This initiates a structured conversation with the FTA Region prior to key features of the project becoming locked in. 2020 FTA Circular 7070.1B. With the proposed elimination of the “fair share of revenue” threshold, the associated Certificate of Compliance has been eliminated as well.117 c. Eligible cost items. As explained previously, a grantee can seek FTA approval to use one of FTA’s existing capital programs to support a joint development project. In such cases, the federal funds can be applied to a range of development-related costs which has grown more inclusive over time. 1997 FTA Policy/1998 FTA Appendix. While the 1997 FTA Policy was silent on this question, the 1998 FTA Appendix addressed it in detail. A wide range of joint development cost items were listed as eligible for FTA funding, including land acquisition, demolition, and site work; design, engineering, environmental work, real estate packaging, and other professional services; shared foundations, including substructures for air rights decks; open space, walkways, and lighting; pedestrian and bicycle connections; other infrastructure “needed to induce private investment and improve access between…development and transit facilities”; and, on a case-by-case basis, shared utilities or parking. Facilities that incorporate community services such as daycare or health clinics were specifically included.118 2007 FTA Guidance. The 2007 listing of eligible cost items was expanded to include three types of transportation facilities that had been added, by law, in TEA-21 (1998) or SAFETEA- LU (2005): the renovation of historic transportation facilities; the construction of intermodal transportation facilities and transportation malls; and the construction, renovation, or improvement of intercity bus or rail stations and terminals. Intercity bus and rail facilities—even if they are owned by private entities and thus do not meet the statutory definition of public transportation—became eligible to have all of their capital costs funded by FTA as a form of joint development, and were exempted from the 115 2007 FTA Guidance, p. 5794 (Federal Register). 116 2016 FTA Circular 7050.1A, pp. VI-1 ff. 117 2020 FTA Circular 7050.1B, pp. VI-1 ff. 118 1998 FTA Appendix, pp. 4-5.

Appendix F FTA Joint Development Policy F-11 requirement that tenants of FTA-funded buildings pay their fair share of operating costs through their lease agreements. The 2007 FTA Guidance made an explicit distinction between the long list of eligible costs, on the one hand, and two specific exclusions, on the other. While FTA funds could be used to build shared infrastructure and foundations and even the core and shell of space to be occupied by joint development, FTA funds could not be used to design and build out the interior of commercial revenue-producing space or to outfit such space with furnishings and equipment. Nor could FTA funds be used to design, build out, and furnish the interior of public uses not related to transportation.119 2014 FTA Circular 7050.1/2016 FTA Circular 7050.1A/2020 FTA Circular 7050.1B. The FAST Act, enacted in 2015, eliminated the long-standing exclusions described in the preceding paragraph. Consequently, the 2020 FTA Circular 7050.1B—the joint development policy currently in effect—includes “construction of space for commercial uses” as an eligible item for FTA funding.120 d. Conversion of park & ride lots to joint development. This common practice may raise regulatory questions if the parking lot in question is FTA-assisted real property. Some grantees are uncertain as to whether, and with what limitations, FTA will approve such conversions. Of particular concern is whether FTA-assisted spaces must be replaced on a 1:1 basis. Prior to 2014, this issue was addressed only indirectly.121 2014 FTA Circular 7050.1/2016 FTA Circular 7050.1A/2020 FTA Circular 7050.1B. The current circular states explicitly, in the body of the document, that FTA does not require 1:1 replacement, provided that the change in use can be shown to benefit public transportation through enhanced ridership or better coordination. This flexible, case-by-case approach to park & ride replacement is consistent with policies adopted by several large transit agencies as part of their joint development programs.122 The circular directs grantees to two potential considerations which may have to be addressed in the course of FTA approval: (i) whether the surface parking improvement has any remaining useful life, in which case FTA’s remaining interest is calculated and taken into account; and (ii) whether the original FTA funding grant relied on the parking capacity in question to achieve a particular ridership level, in which case FTA would have to concur that the grant conditions would not be breached. These considerations apply regardless of 119 2007 FTA Guidance, p. 5792 (Federal Register). For private intercity rail or bus facilities, the prohibition on FTA funding of interior building and furnishings did not apply. 120 2020 FTA Circular 7050.1B, p. III-7. 121 The 1998 FTA Appendix includes, in its Frequently Asked Questions section, an example of a joint development transfer in which part of an FTA-assisted park & ride lot is leased to the developer. Because the joint development will generate more transit trips and non-fare revenue than the affected park & ride spaces, the project is approved. The 2007 FTA Guidance, in a Response to Comments, states that FTA will not require 1:1 replacement, as long as “those spaces are used for joint development purposes and [such use] will not reduce the number of public transportation trips to and from that station.” 2007 FTA Guidance, p. 5798 (Federal Register) 122 2020 FTA Circular 7050.1B, pp. IV-7 - IV-8.

Appendix F FTA Joint Development Policy F-12 whether the development rights to the parking lot are to be structured as an FTA joint development conveyance or an outright disposition of excess property.123 In summary, since 2014 three significant changes to FTA Joint Development Policy have been adopted. As a result of these changes, FTA policy: • allows the widest eligibility to date in the use of FTA capital funds to support joint development projects, including for the construction of commercial space; • expressly allows the conversion of FTA-assisted park & ride lots into joint development sites with less than 1:1 replacement, with the conditions for such approval clearly stated; • imposes no threshold revenue parameter on the terms of a joint development transaction and requires no extensive documentation of market value. 123 Ibid.