Developers and property owners — as well as local transit agencies and businesses — can support and benefit from the development of new transit stations.
In ST. LOUIS, a group of executives, universities and BJC Healthcare have created a 200-acre innovation hub and technology district, branded as the Cortex Innovation Community, which has completed or broken ground on 1 million square feet of new and renovated space. Plans call for another 3.5 million square feet of mixed-use development; at full buildout, the district will offer 13,000 technology-related jobs. What the district doesn’t have, though, is a major transit link, and this has cramped some of the group’s efforts to attract businesses to Cortex.
“We’ve learned that to attract companies to the district, especially European firms whose executives and workforces are used to first-class transit, we need to offer rail transit connections,” says John Nations, president and CEO of the Bi-State Development Agency, which runs St. Louis’ light rail transit service, MetroLink.
MetroLink, which runs through Cortex, doesn’t have enough funds to build a new station there. Major Cortex employers have, however, offered to fund the part of the station (and expansion of a nearby station) not covered by a federal contribution. “We expect to enter into an MOU [memorandum of understanding] for a public-private partnership to accomplish this,” added Nations. “The city has also been very helpful to this process, long providing for denser zoning and helping us get our federal grant.”
The station is a good example of how a business community can create public and private benefits by helping to finance a new transit stop. The private benefits are the increases in land and property values in the surrounding neighborhood. More specifically, a new transit station can jump-start dense mixed-use development nearby. With sound planning and zoning, a new station can enhance the safety, vibrancy and walkability of adjacent neighborhoods, enable transit to serve more riders and prevent additional traffic congestion.
To attract the kind of development that will best complement an infill transit station, the transit agency and city must accomplish as many of the following key goals as possible. City officials should commit to intensive mixed-use development surrounding the new station. The station should be linked to its neighborhood by a fine-grained grid of retail-rich shaded streets. Ideally, the station design should encourage street-level walking to transit, and the rail line should not create a barrier that divides one half of the community from the other. In addition, the area plan should allow for reductions in or elimination of parking requirements, a parking management district, transportation demand management and protections for surrounding neighborhoods with less-dense development.
Existing Infill Stations
The leading example of an infill station built with support from property owners is the NoMa-Gallaudet University Station on Metrorail’s Red Line in Washington, D.C. Property owners donated land worth $10 million to the project and pledged $25 million in add-on property taxes, totaling about 30 percent of the construction costs. The District of Columbia, with the agreement of property owners, created a special assessment district (SAD) for the area around the station, imposing a slightly higher tax rate on property tax value.
It is easy to appreciate this station’s effects on its neighborhood. When it opened in 2004, the 24 blocks around the station had no residents, business headquarters, hotels or retail stores. From 2004 through 2014, the area saw the delivery of 8 million square feet of mixed-use development, including 4,000 residences, and the creation of 15,000 new permanent jobs. The District has enjoyed $330 million in tax revenues from the area through 2014, including $75 million in income and sales taxes, rising from a base of zero. It expects additional revenues in 2015-2019 of nearly $700 million.
More in the Works
Examples also exist of just one or two businesses paying for all or part of a new station. In Brighton, Massachusetts, near Boston, New Balance Development Group, the real estate arm of the athletic shoe and apparel company, is completing construction of Boston Landing, a $500 million, 1.45 million-square-foot mixed-use development at its headquarters site. The project ultimately will include a sports complex with a Boston Bruins practice facility, a hotel, Class A office, residential, restaurant and retail space. It will also include a new commuter rail station that will be designed, financed and maintained for at least the first 10 years by New Balance. Company and public officials held a groundbreaking ceremony for the $20 million station in May 2015 and plan to finish the station, which will serve the Allston and Brighton communities, in 2016.
In Virginia, private developer SunCal is planning to pay the entire $20 million cost of an infill commuter rail station at its Potomac Shores development south of Washington, D.C. The vision for the new community calls for 3,800 homes and 3.7 million square feet of commercial space, including a resort, a marina and a golf course. “SunCal developed the station plan as part of a public-private partnership with the rail authorities,” explains Edward Byrne, a well-known Virginia real estate executive who is leading the project management work for SunCal. “We expect to start construction of the station this year and to have it in service by 2017.” The station, set alongside a new town center, will offer frequent Virginia Rail Express morning and evening weekday service to and from Washington.
As these examples show, the initiative for developing a new station with some private funding may come from a transit agency in need of capital or from members of the development community who see an opportunity to create value. For property owners, offering to pay higher property taxes on value that wouldn’t be there without the transit station is a win-win situation. These arrangements place no burden on developers’ up-front or baseline cash flows.
In addition to these examples, new infill transit stations have been proposed in Chicago, Los Angeles and San Francisco, and the transit industry believes there are more cities where infill stations can work. These are all prospects for development activity and opportunities for developers and property owners to add value.