Public Transportation
Federal Role in Value Capture Strategies for Transit Is Limited, but Additional Guidance Could Help Clarify Policies
Gao ID: GAO-10-781 July 29, 2010
State and local governments are looking for alternative strategies to help fund transit systems. Value capture strategies--joint development, special assessment districts, tax increment financing, and development impact fees--are designed to dedicate to transit either a portion of increased tax revenue or additional revenue through assessments, fees, or rents based on value expected to accrue as a result of transit investments. GAO was asked to review (1) the extent to which transit agencies and local governments use joint development and other value capture strategies to fund or finance transit; (2) what stakeholders have identified as facilitators of, or hindrances to, the use of these; and (3) what stakeholders have said about the effects of federal policies and programs on the use of these strategies. GAO analyzed data from 55 of the 71 transit agencies that responded to its information request; reviewed literature, and statutes and regulations; and interviewed transit agency, local government, and Federal Transit Administration (FTA) officials; developers; and experts.
More than half of the transit agencies from which GAO collected data (32 of 55) reported that joint development--in which a transit agency and a private entity partner to create development at a transit station--has been used as a source of funding for transit, while about a third (19 of 55) reported that special assessment districts, tax increment financing, and development impact fees have been used. Transit agencies that have extensively used joint development typically share characteristics, such as having formal joint development policies and in-house real estate expertise. Financial data collected from several transit agencies indicate that revenue generated annually through joint development is generally small when compared with an agency's annual operating expenses. Revenue generated by the other three value capture strategies has varied, but in some cases has been critical to the financial feasibility of the transit project or to improvements that support transit-oriented development. Several factors can facilitate or hinder transit agencies' and state and local governments' use of value capture strategies, such as coordination and support from public- and private-sector entities, transit project location and design, and state laws. For example, transit agencies, which generally do not have taxing authority, often have to coordinate with local taxing authorities to help establish a tax increment financing district. Also, according to several stakeholders, value capture strategies have the potential to generate more revenue when a project is designed with land-use zoning that allows for high-density development. However, some states do not authorize the use of certain strategies or may limit their use. For example, tax increment financing is currently not authorized under Arizona state law. Several transit agency officials told GAO that FTA's joint development guidance is confusing, which can hinder their use of joint development when federal funding is involved. For example, transit agencies are sometimes unclear about which types of developments and structures are eligible for joint development sites and the extent to which FTA requires replacement of parking spaces when surface parking lots are converted to structured parking garages that support transit-oriented development. This confusion can delay final federal approval of a project. Transit agency officials also told GAO that federal requirements, such as limitations on the use of joint development revenue for operations, maintenance, or acquisition of land for future joint development, can be burdensome. Transit agency officials also said the strict cost-effectiveness requirement for federal New Starts funding limited the competitiveness of some transit projects designed to use value capture strategies. Recent changes to the New Starts program, including amending the current cost-effectiveness measure and increasing the significance of economic development along with other factors, may affect transit projects, yet it is unclear how these changes will ultimately affect the use of value capture strategies. The FTA should issue additional guidance on federal joint development requirements to clarify the types of developments eligible under current law, and requirements and conditions for parking replacement. FTA agreed to consider GAO's recommendations.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director:
David J. Wise
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GAO-10-781, Public Transportation: Federal Role in Value Capture Strategies for Transit Is Limited, but Additional Guidance Could Help Clarify Policies
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Strategies for Transit Is Limited, but Additional Guidance Could Help
Clarify Policies' which was released on July 29, 2010.
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
July 2010:
Public Transportation:
Federal Role in Value Capture Strategies for Transit Is Limited, but
Additional Guidance Could Help Clarify Policies:
GAO-10-781:
GAO Highlights:
Highlights of GAO-10-781, a report to congressional committees.
Why GAO Did This Study:
State and local governments are looking for alternative strategies to
help fund transit systems. Value capture strategies”joint development,
special assessment districts, tax increment financing, and development
impact fees”are designed to dedicate to transit either a portion of
increased tax revenue or additional revenue through assessments, fees,
or rents based on value expected to accrue as a result of transit
investments. GAO was asked to review (1) the extent to which transit
agencies and local governments use joint development and other value
capture strategies to fund or finance transit; (2) what stakeholders
have identified as facilitators of, or hindrances to, the use of
these; and (3) what stakeholders have said about the effects of
federal policies and programs on the use of these strategies. GAO
analyzed data from 55 of the 71 transit agencies that responded to its
information request; reviewed literature, and statutes and
regulations; and interviewed transit agency, local government, and
Federal Transit Administration (FTA) officials; developers; and
experts.
What GAO Found:
More than half of the transit agencies from which GAO collected data
(32 of 55) reported that joint development”in which a transit agency
and a private entity partner to create development at a transit
station”has been used as a source of funding for transit, while about
a third (19 of 55) reported that special assessment districts, tax
increment financing, and development impact fees have been used.
Transit agencies that have extensively used joint development
typically share characteristics, such as having formal joint
development policies and in-house real estate expertise. Financial
data collected from several transit agencies indicate that revenue
generated annually through joint development is generally small when
compared with an agency‘s annual operating expenses. Revenue generated
by the other three value capture strategies has varied, but in some
cases has been critical to the financial feasibility of the transit
project or to improvements that support transit-oriented development.
Several factors can facilitate or hinder transit agencies‘ and state
and local governments‘ use of value capture strategies, such as
coordination and support from public- and private-sector entities,
transit project location and design, and state laws. For example,
transit agencies, which generally do not have taxing authority, often
have to coordinate with local taxing authorities to help establish a
tax increment financing district. Also, according to several
stakeholders, value capture strategies have the potential to generate
more revenue when a project is designed with land-use zoning that
allows for high-density development. However, some states do not
authorize the use of certain strategies or may limit their use. For
example, tax increment financing is currently not authorized under
Arizona state law.
Several transit agency officials told GAO that FTA‘s joint development
guidance is confusing, which can hinder their use of joint development
when federal funding is involved. For example, transit agencies are
sometimes unclear about which types of developments and structures are
eligible for joint development sites and the extent to which FTA
requires replacement of parking spaces when surface parking lots are
converted to structured parking garages that support transit-oriented
development. This confusion can delay final federal approval of a
project. Transit agency officials also told GAO that federal
requirements, such as limitations on the use of joint development
revenue for operations, maintenance, or acquisition of land for future
joint development, can be burdensome. Transit agency officials also
said the strict cost-effectiveness requirement for federal New Starts
funding limited the competitiveness of some transit projects designed
to use value capture strategies. Recent changes to the New Starts
program, including amending the current cost-effectiveness measure and
increasing the significance of economic development along with other
factors, may affect transit projects, yet it is unclear how these
changes will ultimately affect the use of value capture strategies.
What GAO Recommends:
The FTA should issue additional guidance on federal joint development
requirements to clarify the types of developments eligible under
current law, and requirements and conditions for parking replacement.
FTA agreed to consider GAO‘s recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-781] or key
components. For more information, contact David Wise at (202) 512-2834
or wised@gao.gov.
[End of section]
Contents:
Letter:
Background:
Use of Joint Development and Other Value Capture Strategies Has Been
Limited but Is Sometimes Critical in Funding and Financing Transit:
Several Factors Can Facilitate or Hinder the Use of Joint Development
and Other Value Capture Strategies to Fund or Finance Transit:
Stakeholders Report That Uncertainty over FTA Policy Can Hinder the
Use of Joint Development:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Descriptions of Select Transit Projects or Developments:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Joint Development Revenue Relative to Total Operating
Expenses Fiscal Year 2008:
Table 2: Use of Special Assessment Districts, Tax Increment Financing,
and Development Impact Fees to Fund Transit:
Table 3: Summary of Select Major Transit Infrastructure Projects
Funded in Part Using Other Value Capture Strategies (Dollars in
Millions):
Table 4: Summary of Transit-Oriented Development Infrastructure
Improvements Funded in Part Using Other Value Capture Strategies:
Figures:
Figure 1: Example of a Joint Development:
Figure 2: Example of a Special Assessment District Used to Fund Part
of a Transit Project:
Figure 3: Example of a Tax Increment Financing District Used to Fund
Part of a Transit Project:
Figure 4: Example of Development Impact Fees Used to Fund Part of a
Transit Project:
Abbreviations:
DOT: Department of Transportation:
FHWA: Federal Highway Administration:
FTA: Federal Transit Administration:
MDOT: Maryland Department of Transportation:
RRIF: Railroad Rehabilitation and Improvement Financing:
SAFETEA-LU: Safe, Accountable, Flexible, Efficient, Transportation
Equity Act: A Legacy for Users:
TIFIA: Transportation Infrastructure Finance and Innovation Act of
1998:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 29, 2010:
The Honorable James L. Oberstar:
Chairman:
The Honorable John L. Mica:
Ranking Member:
Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable Peter A. DeFazio:
Chairman:
The Honorable John J. Duncan, Jr.
Ranking Member:
Subcommittee on Highways and Transit:
Committee on Transportation and Infrastructure:
House of Representatives:
State and local governments across the country are increasingly
looking to build new transit systems to help alleviate the adverse
effects of traffic congestion and support growth and redevelopment in
the urban cores of metropolitan areas. However, the desire for
increased investment in transit infrastructure coincides with
increasing strains on traditional sources of funding for these
projects. Fixed-guideway transit projects are costly to build, and
limited funding for transit projects at the state and local level has
created intense competition for federal transit funds.[Footnote 1]
Moreover, in addition to facing challenges in obtaining funds to
construct new transit systems, many transit agencies are struggling to
keep up with mounting operations and maintenance costs of existing
transit systems. Facing budget shortfalls, transit agencies are forced
to raise fares or cut service, either of which can drive transit users
away, potentially reducing ridership and exacerbating funding issues.
Furthermore, the sales tax receipts and other funding sources that
many transit agencies rely on to fund capital projects and agency
operations have significantly declined during the recent economic
downturn. Given this economic environment, transit project sponsors
are increasingly looking for alternative mechanisms to help finance
and deliver new, large-scale transit projects.
There is a well-established relationship between public transit
investments and nearby property values. We have previously reported
that plans for transit stations and amenities commonly found in
transit-oriented developments generally increase nearby land and
housing values, but the magnitude of the increase varies greatly
depending upon several characteristics.[Footnote 2] Value capture
strategies--mechanisms designed to harness increases in value for
properties surrounding transit to help fund investments in public
transit infrastructure or related improvements--are designed to take
advantage of this increase to create beneficial outcomes for both the
public and the private sectors, as well as link funding to the
beneficiaries of a transit system. Value capture strategies used to
fund transit vary in form; however each typically involves a private
sector contribution through an assessment or fee, or a public sector
contribution drawn from increased property tax revenue. One value
capture strategy, joint development, often generates revenue for the
transit agency through a lease or sale of publicly-owned land through
partnerships with private or nonprofit developers, or other public
sector partners to create a portion of a transit-oriented development.
Value capture strategies are administered at the state, regional, or
local level. As a result, the federal government does not play a
direct role in implementing value capture strategies--its role is
primarily limited to providing the federal share of capital
construction and land acquisition costs. However, federal policies and
programs can affect the cost, design, and routing of transit systems--
characteristics vital to the viability of value capture strategies.
Recently, the federal government has increased its focus on creating
"livable" communities by better linking transportation, housing, and
environmental programs and policies. Part of this focus reflects the
federal government's recognition of the increasing demand for transit-
oriented developments. Recent policy changes by the Department of
Transportation (DOT) are designed to provide more flexibility for
transit agencies and local governments to accommodate transit-oriented
development near stations and multi-modal transportation sites. For
example, in 2007, the Federal Transit Administration (FTA) issued
joint development guidance, which is intended to provide flexibility
for transit agencies interested in pursuing transit-oriented
development on lands purchased with federal funding.[Footnote 3] In
addition, over the past year, FTA has proposed and implemented several
changes to how cost effectiveness, economic development effects, and
other factors are considered in the evaluation and rating process for
FTA's New Starts grant program.[Footnote 4]
You asked us to provide information on the experiences of transit
agencies and local governments in using value capture strategies for
transit. More specifically, this report addresses the following
questions:
1. To what extent do transit agencies and state and local governments
use joint development and other value capture strategies to fund or
finance transit?
2. What have selected stakeholders and literature identified as
facilitators of, or hindrances to, the use of joint development and
other value capture strategies to fund or finance transit?
3. What have stakeholders said about the effects of federal policies
and programs on the use of joint development and other value capture
strategies to fund or finance transit?
To address these questions, we reviewed relevant literature to
determine the most commonly used value capture strategies and to help
identify facilitators of, and hindrances to, using value capture
strategies. We requested data from the 71 transit agencies that we
identified as operating a fixed-guideway or large bus system on the
extent to which value capture strategies were used to fund or finance
transit on their system. We analyzed data from the 55 transit agencies
that provided data to us in response to our request. We conducted site
visits to the Washington/Baltimore metropolitan area; Atlanta,
Georgia; Los Angeles, Sacramento, San Jose, and the San Francisco Bay
metropolitan area in California; Portland, Oregon; and Seattle,
Washington. We selected this nongeneralizable sample of cities and
metropolitan areas based on criteria we established, including
locations where value capture strategies had been used or were under
formal consideration for use, and geographical diversity. During our
site visits, we interviewed transit agency, state, and local
government officials, and private developers about selected transit
projects, as well as individuals with expertise in the area of value
capture strategies, to determine the extent to which value capture
strategies are used to fund or finance transit and to identify
facilitators of, and hindrances to, using value capture strategies. We
also interviewed federal, state, and local transit officials to
identify ways federal policies and programs affect the use of value
capture strategies. Finally, we reviewed applicable state
constitutions, statutes, and regulations to identify facilitators of,
and hindrances to, using value capture strategies, and relevant
federal statutes and regulations to determine federal requirements and
program implications for joint development and other value capture
strategies. We conducted this performance audit from August 2009 to
July 2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. See
appendix I for more information about our scope and methodology.
Background:
Numerous local communities are seeking to expand housing opportunities
and other amenities located near transit by promoting transit-oriented
development--commonly defined as compact, mixed-use, walkable
neighborhoods located near rail stations or other permanent transit
facilities.[Footnote 5] Many transit agencies view such development as
a way to accomplish multiple goals, including promoting transit-
supportive land use near stations and increasing ridership. In
addition, research generally shows that land and housing values tend
to increase with proximity to a transit station. While the magnitude
of these increases can vary, residents place a premium on living near
public transportation, retail development, and other amenities such as
parks and sidewalks commonly found in transit-oriented developments.
[Footnote 6]
Both the private and public sector entities benefit financially from
these increases in value; private parties through increased land
values and rents and public-sector agencies through increased revenue
from property or other taxes. For the purposes of this report, the
term "value capture" generally refers to strategies that allow local
governments or transit agencies to dedicate to transit either a
portion of the increased tax revenue, or additional revenue through
assessments or fees based on value expected to accrue as a result of
public improvements or investments. While many of these strategies are
used in the United States to fund or finance infrastructure
improvements, such as water, sewer, and other utility systems, this
report focuses on the use of these strategies specifically to fund or
finance transit or transit-related facilities or improvements. The
four strategies that are the focus of this report are as follows:
* Joint development is generally defined as a real estate development
project that involves a cooperative arrangement between public and
private sector partners, often as part of a transit-oriented
development.[Footnote 7] Joint development arrangements can take a
number of forms, including a lease of land, air rights, or space to a
developer; sale of land for specific types of development; joint
construction of a transit facility and private development; and
others.[Footnote 8] Public and private partners can share costs,
revenues, or financial risk depending on the particular arrangement.
Any joint development using federal funds to make capital improvements
must follow FTA's joint development guidance and meet the statutory
definition of an eligible capital project.[Footnote 9] See figure 1.
Figure 1: Example of a Joint Development:
[Refer to PDF for image: illustration]
Before:
Station:
Publicly owned surface park-and-ride lot;
Public entity sells or leases parcel with surface park-and-ride lot to
private developer.
After:
Station:
Mixed-use and mixed-income development that is part of a larger
transit-oriented development;
Structured parking garage.
Source: GAO.
[End of figure]
* Special assessment districts designate a formal boundary in which
taxes or fees are assessed on properties expected to see a projected
benefit due to the geographic proximity of a new transit facility or
other unique amenity. The revenue collected is then used to help pay
for such facility or amenity.[Footnote 10] See figure 2.
Figure 2: Example of a Special Assessment District Used to Fund Part
of a Transit Project:
[Refer to PDF for image: illustration]
Before:
Special assessment district boundary:
No transit service.
Property owners voluntarily form district and pay fee to help fund new
transit system. Fees collected from properties based on relative
proximity to transit line (i.e. closer properties receive more benefit
and are assessed higher fee).
After:
Special assessment district boundary:
Transit station;
Transit system line.
Property values enhanced by access to new transit system.
Redevelopment occurs.
Source: GAO.
[End of figure]
* Tax increment financing is a public financing technique used by
local entities to encourage economic development.[Footnote 11]
Typically, a public-sector agency issues a special bond to finance the
infrastructure necessary to support new development and then uses the
incremental increase in property value within a formally designated
tax increment financing district to fund repayment of the bonds for
the development-related costs, including the costs of transit
infrastructure improvements. See figure 3.
Figure 3: Example of a Tax Increment Financing District Used to Fund
Part of a Transit Project:
[Refer to PDF for image: illustration]
Tax increment financing boundary:
Transit system line.
Property tax is plotted in a graph versus time:
Base tax rate: Local tax revenue;
Tax increment: Tax increment financing revenue:
Transit;
Schools;
Affordable housing;
Other.
Tax increment is collected from properties within tax increment
financing boundary and used to pay for redevelopment activities,
including transit.
Source: GAO.
[End of figure]
* Development impact fees are one-time charges collected by local
governments from developers to help defray the cost of new or expanded
infrastructure and services associated with new development, including
capacity-increasing transit projects. See figure 4.
Figure 4: Example of Development Impact Fees Used to Fund Part of a
Transit Project:
[Refer to PDF for image: illustration]
Jurisdictional boundary:
Urban center;
New development: Fees collected on new development within a
jurisdiction are used toward capacity-increasing transit projects such
as bus rapid transit to connect new development to urban center;
Bus rapid transit line.
Source: GAO.
[End of figure]
The use of value capture strategies may be authorized by the state,
and can be limited or restricted by state governments. For instance,
state legislatures generally provide the authority to public entities
to establish special assessment districts or tax increment financing
districts and to use the revenue generated from the districts for
specific purposes. State and local governments also play a role in
creating the environment needed to optimize the value created by
transit projects or improvements. For example, local governments
create the zoning environment, which may, for example, allow
developers to build mixed-use developments at higher densities. The
implementation of any of the above strategies requires coordination
among a number of key public and private sector entities. Their
principal roles are summarized as follows.
* Local transit agencies, such as transit authorities or transit
operators, are responsible for building, maintaining, and operating
transit systems. These transit systems can include fixed-guideway
transit systems--such as light or heavy rail, streetcars, ferry
systems, and some bus rapid transit--and local bus service. Transit
agencies may be direct recipients of federal transit funds,
particularly in major urban areas.
* State and local departments of transportation and metropolitan
planning organizations develop transportation plans and improvement
programs; build, maintain, and operate transportation infrastructure
and services; and distribute federal funds to local entities for
specific projects.[Footnote 12]
* Local county and city governments are typically responsible for
assessing and collecting property taxes, development impact fees, or
special assessments. In addition, local governments, through agencies
such as county or city planning departments or redevelopment agencies,
have control over land use planning, which includes zoning and growth
management policies.
* Private developers decide on and create developments and build and
manage housing units and commercial developments. In some cases,
private developers enter into sale or lease agreements with transit
agencies or other public-sector entities when undertaking joint
developments.
* Property owners, in addition to paying property taxes, sometimes
agree to enter into formally established districts and pay assessments
to local public-sector entities for the purpose of funding new transit
projects, other infrastructure (e.g., sidewalks, utilities), or
improvements to existing transit services.
In general, FTA plays no role in the direct implementation of most
value capture strategies. However, transit agencies must follow a
number of federal requirements if, for example, a joint development
includes land that was purchased as part of a federally funded transit
project or receives federal funds. In 2007, FTA issued guidance on
joint development requirements that clarified the eligibility of joint
development activities for federal capital funding.[Footnote 13]
Transit agencies must receive FTA concurrence to sell or lease
federally funded property for joint development purposes.[Footnote 14]
To use program income or FTA grant funds for a joint development
improvement, a local transit agency must demonstrate that the
improvement provides economic and public transportation benefits,
raises revenue for public transportation, and covers a reasonable
share of costs (if applicable).
While FTA does not have formal policies or programs related to forms
of value capture for transit other than joint development, FTA
programs fund capital transit projects--a key step in creating a
transit-oriented development and of creating value. FTA's New Starts
program--its major capital investment program for new, and extensions
to, existing fixed-guideway transit systems--awards funds to
individual projects through a competitive selection process, which
applies ratings to potential projects based on local financial
commitment and project justification criteria, including cost
effectiveness, land use, operating efficiencies, environmental
benefits, economic development effects, and mobility improvements.
[Footnote 15] FTA also provides funding to state and local
governments, and metropolitan planning organizations through a number
of other programs, that may be used for transit, including:
* Transit Capital Assistance (Recovery Act):
* the Surface Transportation Program;
* the Congestion Mitigation and Air Quality Improvement Program
[Footnote 16];
* Transportation Investment Generating Economic Recovery Discretionary
Grant Program[Footnote 17];
* Transportation Planning Funds;
* Transit Formula and Discretionary Programs.
In addition, the federal government also currently has two programs
designed to offer credit assistance to states for surface
transportation projects. The Transportation Equity Act for the 21st
Century[Footnote 18] established the Transportation Infrastructure
Finance and Innovation Act of 1998 (TIFIA), which authorized DOT, who
later delegated this authority to the Federal Highway Administration
(FHWA),[Footnote 19] to provide credit assistance, in the form of
direct loans, loan guarantees, and standby lines of credit, for
projects of national significance.[Footnote 20] A similar program, the
Railroad Rehabilitation and Improvement Financing (RRIF) program,
offers loans to acquire, improve, develop, or rehabilitate intermodal
or rail equipment or facilities.[Footnote 21]
DOT has recently begun to emphasize livable communities. For example,
DOT has refocused the goals of some existing programs and entered into
the Sustainable Communities Partnership with the Department of Housing
and Urban Development and the Environmental Protection Agency. This
partnership is intended to help American families gain better access
to affordable housing, more transportation options, and lower
transportation costs by coordinating and leveraging federal programs.
FTA also introduced funding opportunities for fiscal year 2010 for
urban circulator and bus-related livability projects that promote
livability, sustainability, economic development, and the leveraging
of public and private investments. In addition, FTA grant program
funds can promote livability by funding eligible expenses, such as
joint developments, bicycle and pedestrian access, and other amenities
near transit stations.
Use of Joint Development and Other Value Capture Strategies Has Been
Limited but Is Sometimes Critical in Funding and Financing Transit:
The Few Transit Agencies with Extensive Joint Development Experience
Have Common Characteristics:
According to data collected from 55 transit agencies, experience with
joint development varies widely, both in quantity and type. More than
half of the transit agencies we collected data from (32 of 55) have
used joint development, while one-fifth (11 of 55) have used joint
development extensively (6 or more joint developments). Moreover, the
11 agencies with extensive joint development experience were
responsible for 115 of the 166 reported developments, and just 3
agencies (Los Angeles Metro, Washington Metro, and Metropolitan
Atlanta Rapid Transit) were responsible for 58 of the 166 reported
developments. These developments varied greatly in size and type. For
example, while joint developments are often small and on a single
parcel of land near a transit station, a few transit agencies have
completed neighborhood-scale transit-oriented joint developments. For
instance, Atlanta's Lindbergh City Center will eventually encompass 47
acres of mixed-use development near a Metropolitan Atlanta Rapid
Transit station. Joint developments also varied in the types of uses;
while many joint developments include housing, offices, and retail
space, they sometimes include hotels, youth services, clinics, or
other civic uses.
We found that transit agencies that have used joint development
extensively typically share certain characteristics. Specifically,
these transit agencies generally:
* operate older, larger fixed-guideway systems;[Footnote 22]
* have formal joint development or transit-oriented development
policies;
* have in-house real estate expertise; and:
* have developable land holdings on which to build joint developments.
According to state and local transit officials we spoke with, the
permanency of stations along fixed-guideway systems makes station
areas on these systems more attractive for joint development than
station areas along bus lines or other non-fixed-guideway systems.
Although joint development is more often undertaken on fixed-guideway
systems, King County Metro in Seattle has implemented a number of
joint developments at permanent intermodal transit centers and park-
and-ride lots along its bus routes.
Most transit agencies with extensive joint development experience also
have formal joint development or transit-oriented development policies
and in-house real estate expertise. State and local transit officials
we spoke with told us that formal policies allow transit agencies to
prioritize joint developments and align them with broader agency and
community goals. Based on our review of transit agencies' joint
development policies, we found that these policies often have common
goals, which include increasing transit ridership; reducing automobile
dependency; generating revenue to support transit operations; and
partnering with local communities to achieve intensive, high-quality
development near transit stations.
In addition, state and local transit officials we spoke with
emphasized the importance of having an in-house real estate office,
along with outside consultants, dedicated to managing their agency's
real estate assets, including its joint developments.[Footnote 23] For
instance, Maryland Department of Transportation (MDOT) officials told
us the department's Office of Real Estate has a $3 million bi-annual
budget and several in-house staff dedicated to transit-oriented
development. The officials further estimated that the Office of Real
Estate spends about $300,000 a year on outside real estate consultants
to assist its in-house staff in managing MDOT-owned property.
According to MDOT officials, transit-oriented joint development is
unlikely to take place unless state and local transit agencies have an
office dedicated to managing agency-owned properties in ways that
promote transit-oriented development.
Also, transit agencies with extensive joint development experience are
also likely to have developable land holdings on which to build joint
developments and transit-oriented developments. Many state and local
transit officials we spoke with told us their agency made land
available for joint development by converting expansive, underutilized
surface park-and-ride lots at their stations into transit-oriented
developments with structured parking garages. Several of these transit
agencies have also constructed a number of joint developments on land
holdings they originally acquired for construction staging purposes
during their system's initial construction and subsequent expansions.
Joint Development Revenue Is Generally Small Relative to a Transit
Agency's Annual Operating Expenses:
Although several transit agencies have generated millions of dollars
in annual revenue from joint development, this annual revenue is
generally small when compared with an agency's annual operating
expenses.[Footnote 24] For example, the three transit agencies with
the most joint development experience--Los Angeles Metro, Washington
Metro, and Metropolitan Atlanta Rapid Transit--generated between
$184,000 and $8.8 million in revenue from their joint developments in
fiscal year 2008, while their total operating expenses for fiscal year
2008 ranged from $374 million to $1.3 billion. Specifically, each
agency's fiscal year 2008 annual joint development revenue--when
compared with the agency's total annual operating expenses--amounts to
no more than 1 percent. See table 1.
Table 1: Joint Development Revenue Relative to Total Operating
Expenses Fiscal Year 2008:
Transit agencies: Los Angeles Metro;
Revenue from joint development (FY 2008): $184,000;
Total operating expenses (FY 2008): $1.2 billion;
Joint development revenue relative to total operating expenses for FY
2008 (as a percentage): 0.02%.
Transit agencies: Washington Metro;
Revenue from joint development (FY 2008): $8.8 million;
Total operating expenses (FY 2008): $1.3 billion;
Joint development revenue relative to total operating expenses for FY
2008 (as a percentage): 0.7%.
Transit agencies: Metropolitan Atlanta Rapid Transit;
Revenue from joint development (FY 2008): $3.95 million (projected);
Total operating expenses (FY 2008): $374 million;
Joint development revenue relative to total operating expenses for FY
2008 (as a percentage): 1.0%.
Source: GAO analysis of transit-agency-reported data.
[End of table]
State and local transit officials we spoke with told us that joint
development revenue goes into either a set-aside joint development
fund or the agency's general fund. Whereas general fund revenue is
used by transit agencies for operations and maintenance as well as
capital projects--including joint developments--set-aside funds target
funds for specific purposes. For example, Santa Clara Valley
Transportation Authority officials told us that revenue from the
agency's joint developments is placed in a set-aside fund, rather than
its general fund, and used to fund the continued operation and
development of the agency. Moreover, revenue from one phase of a joint
development can also be used to fund a later phase of the same
development. For example, MDOT transferred approximately 10.2 acres of
state-owned land adjacent to one of its commuter rail stations to a
developer for a transit-oriented development at the station. The
developer considered this land contribution (valued at $3.3 million) a
credit toward the construction of a commuter garage on the transit-
oriented development site.
A majority of transit agency officials we spoke with told us that, for
a variety of reasons, they prefer to lease agency-owned land rather
than selling it when entering into joint development agreements.
Agencies often favor leasing because it allows them to maintain direct
control over land use and receive an ongoing revenue stream. For
instance, Los Angeles Metro officials told us that leasing land
generates significant revenue for the transit agency, and allows the
agency to require "attractive" developments and hold developers
accountable if they walk away from a failed development. But several
transit agencies told us that, in some cases, selling land makes
sense. For example, Washington Metro officials told us that although
the transit agency's board members prefer to lease agency-owned
parcels, the agency may sell the parcel if it needs upfront money to
build a parking structure on the development site. Furthermore, if a
planned joint development includes for-sale condominiums, Washington
Metro officials stated they may sell the parcel rather than lease it
because the agency does not have the authority to own land where
condominiums are sold.
Other Value Capture Strategies Have Not Been Widely Used to Fund or
Finance Transit:
According to transit agencies that we collected data from and relevant
literature that we reviewed, special assessments, tax increment
financing, and development impact fees (other value capture
strategies) have not been widely used as a source of funding for
transit. Nineteen of the 55 transit agencies that we collected data
from reported that one or more of these strategies was used to fund
transit projects on their system. Five of the 55 reported that at
least two of the three other value capture strategies had been used to
fund transit projects on their system. These transit agencies reported
that special assessment districts had been used in 17 instances, tax
increment financing in 13 instances, and development impact fees in 22
instances. See table 2.
Table 2: Use of Special Assessment Districts, Tax Increment Financing,
and Development Impact Fees to Fund Transit:
Number of transit agencies out of 55 reporting use;
Special assessment district for transit: 10;
Tax increment financing district for transit: 6;
Development impact fee for transit: 10.
Total number of uses of each strategy;
Special assessment district for transit: 17;
Tax increment financing district for transit: 13;
Development impact fee for transit: 22.
Source: GAO analysis of transit agency-reported data.
[End of table]
In addition, according to literature on value capture strategies that
we reviewed, public entities more often use special assessment
districts, tax increment financing, and development impact fees to
fund public infrastructure improvements--such as water and sewer
systems, roads, schools, or parks--than they do to fund transit or
transit-related projects. However, state and local transit officials
we spoke with told us about several major transit infrastructure
projects funded by one or more other value capture strategies. For
example:
* Local governments in the Washington, D.C., region have generated
revenue for two major projects on Washington Metro's system through
special assessment districts: the Dulles Corridor Metrorail Project,
which is extending the Washington Metro system 23 miles, including a
station at Dulles International Airport, and the New York Avenue Metro
Station project, which is the agency's first infill station built
without discontinuing passenger service.[Footnote 25]
* The cities of Seattle and Portland have constructed several new
streetcar lines using value capture strategies. Seattle's South Lake
Union streetcar capital costs were funded in part through a special
assessment district, and Portland has funded portions of its 4-mile
streetcar line using special assessment districts and tax increment
financing.
* Sacramento County is planning to dedicate a portion of a development
impact fee to fund three proposed bus rapid transit lines in the
county.
* The Transbay Joint Powers Authority (TJPA) in San Francisco is using
tax increment financing revenue to fund repayment of a TIFIA loan it
received for the construction of a planned new multimodal transit
center in the city's downtown.
* The city of Atlanta established a tax increment financing district
to pay for a majority of the costs associated with the proposed
Atlanta Beltline project, a 22-mile transit loop that will run along
existing underused rail corridors.[Footnote 26]
In addition, transit agency and local government officials we spoke
with informed us that other value capture strategies are being used to
fund basic infrastructure and streetscape and station improvements at
several transit-oriented developments. Several of these transit-
oriented developments also include a parcel (or parcels) that is being
jointly developed by a transit agency and a private sector partner:
* Contra Costa County, California, is using combined revenue from
special assessments and tax increment financing to construct a variety
of public infrastructure improvements at the Pleasant Hill transit-
oriented development. These improvements include backbone
infrastructure, such as roads and drainage systems; place-making
infrastructure, such as parks and plazas; and a new structured parking
garage to replace the station's existing surface parking lot.
* The city of Dallas, Texas, has recently established a transit-
oriented development tax increment financing district that includes
seven station areas along Dallas Area Rapid Transit's light rail
system. According to Dallas Area Rapid Transit officials, funds
generated by this tax increment financing district can be used to help
pay for basic infrastructure improvements--such as streets, water and
sewer systems, and a portion of structured parking garages--at the
transit-oriented developments.
* In Baltimore County, Maryland, locally administered tax increment
financing revenue will be used to pay for two state-owned structured
parking garages at the planned Owings Mills transit-oriented
development. MDOT officials told us that a special assessment district
will also be established to help fund operation and maintenance of the
state-owned structured parking garages, roads, and other on-site
improvements. In addition, revenue generated through the special
assessment district may be used to help pay bond debt if the tax
increment financing district is unable to generate sufficient revenue
to cover debt service payments.[Footnote 27]
Revenue Generated by Other Value Capture Strategies Has Varied, and in
Some Cases Has Been Critical to Projects' Feasibility:
Based on our review of financial data for several major transit
infrastructure projects and transit-oriented developments that have
been (or are being) funded in part by other value capture strategies,
these strategies have generated--or are projected to generate--between:
* $20 million and $1.7 billion--or between 4 percent and 61 percent of
the total project costs--for nine major transit infrastructure
projects; and:
* between $14 million and $750 million for the construction of parking
garages, parks, and other place-making and basic infrastructure at
five transit-oriented developments.[Footnote 28]
Tables 3 and 4 provide additional information about these projects and
developments, including their status and the types of value capture
strategies used.
Table 3: Summary of Select Major Transit Infrastructure Projects
Funded in Part Using Other Value Capture Strategies:
Dollars in millions:
Project name (status): Atlanta Beltline (planned);
Value capture strategy: Tax increment financing;
Amount of revenue generated through use of value capture strategy:
$1,700;
Total project cost: $2,800;
Value capture revenue as a percentage of project costs: 61%.
Project name (status): Seattle South Lake Union streetcar (completed);
Value capture strategy: Special assessment district;
Amount of revenue generated through use of value capture strategy: $25;
Total project cost: $53;
Value capture revenue as a percentage of project costs: 47%.
Project name (status): Portland streetcar (completed);
Value capture strategies: Tax increment financing and special
assessment district;
Amount of revenue generated through use of value capture strategies:
$41;
Total project cost: $103;
Value capture revenue as a percentage of project costs: 40%.
Project name (status): San Francisco Transbay Transit Center (in
progress);
Value capture strategy: Tax increment financing and special assessment
district;
Amount of revenue generated through use of value capture strategy:
$1,400;
Total project cost: $4,185;
Value capture revenue as a percentage of project costs: 33%.
Project name (status): Washington Metro's NY Avenue Station
(completed);
Value capture strategy: Special assessment district;
Amount of revenue generated through use of value capture strategy: $25;
Total project cost: $110;
Value capture revenue as a percentage of project costs: 23%.
Project name (status): Dulles Corridor extension (in progress);
Value capture strategy: Special assessment districts;
Amount of revenue generated through use of value capture strategy:
$730;
Total project cost: $5,250;
Value capture revenue as a percentage of project costs: 14%.
Project name (status): Los Angeles Metro Red Line, Segment One
(completed);
Value capture strategy: Special assessment districts;
Amount of revenue generated through use of value capture strategy:
$130;
Total project cost: $1,420;
Value capture revenue as a percentage of project costs: 9%.
Project name (status): Seattle Bus Tunnel (completed);
Value capture strategy: Special assessment district;
Amount of revenue generated through use of value capture strategy: $20;
Total project cost: $500;
Value capture revenue as a percentage of project costs: 4%.
Source: GAO analysis of transit agency-reported data.
Note: See appendix II for additional information about these transit
projects and others that transit officials informed us about during
our site visits, but did not provide complete financial data for.
[End of table]
Table 4: Summary of Transit-Oriented Development Infrastructure
Improvements Funded in Part Using Other Value Capture Strategies:
Dollars in millions:
Transit-oriented development (status): BART Pleasant Hill transit-
oriented development (in progress);
Value capture strategies: Tax increment financing and special
assessment district;
Amount of revenue generated through the use of value capture
strategies: $750;
Onsite infrastructure improvements funded through the use of value
capture strategies: Backbone infrastructure, such as roads and
drainage systems; place-making infrastructure, such as parks and
plazas; and a new structured parking garage to replace the station's
existing surface parking lot.
Transit-oriented development (status): Dallas Area Rapid Transit
transit-oriented development tax increment financing district
(established);
Value capture strategy: Tax increment financing;
Amount of revenue generated through the use of value capture strategy:
$182;
Onsite infrastructure improvements funded through the use of value
capture strategy: Basic infrastructure improvements, including parking
garages and water and sewer systems.
Transit-oriented development (status): MDOT State Center transit-
oriented development (in progress);
Value capture strategy: Tax increment financing (backed by a special
assessment district);
Amount of revenue generated through the use of value capture strategy:
$100;
Onsite infrastructure improvements funded through the use of value
capture strategy: Structured parking, station amenities, affordable
housing, and other infrastructure improvements, in combination with
other local bonds.
Transit-oriented development (status): MDOT Owings Mills transit-
oriented development (in progress);
Value capture strategies: Tax increment financing and special
assessment district;
Amount of revenue generated through the use of value capture
strategies: $60;
Onsite infrastructure improvements funded through the use of value
capture strategies: Tax increment funds to pay for the construction of
two state-owned parking garages and special assessment funds to pay
for the operation of state-owned garages, roads, and other
improvements.
Transit-oriented development (status): MDOT Savage transit-oriented
development (in progress);
Value capture strategy: Tax increment financing (backed by a special
assessment district);
Amount of revenue generated through the use of value capture strategy:
$14;
Onsite infrastructure improvements funded through the use of value
capture strategy: Structured parking garage to replace the commuter
rail station's surface parking lot.
Source: GAO analysis of transit agency-reported data.
Note: See appendix II for additional information about these
developments and others that transit officials informed us about
during our site visits, but did not provide complete financial data
for.
[End of table]
Although revenue generated from other value capture strategies varies--
and typically represents one of multiple sources used to fund a
transit project or the infrastructure supporting a transit-oriented
development--this revenue can be critical to the financial feasibility
of these projects and developments. Several state and local transit
officials we spoke with told us that the use of one or more other
value capture strategies was critical to the feasibility of their
project or development, typically because it filled a funding gap. For
instance:
* Washington Metro officials told us that the New York Avenue Metro
station project would not have happened without nearby property
owners' financial support through a special assessment district.
According to a key private sector partner for the project, the local
government's financial situation at the time prevented it from funding
the entire nonfederal share of the station's construction costs. As a
result, nearby property owners voluntarily agreed to provide the
remaining $25 million needed for the station's construction through a
special assessment district.
* Seattle Department of Transportation officials explained that a
special assessment district was critical to funding the city's South
Lake Union streetcar line because the city of Seattle does not have a
stream of money dedicated to large capital transit projects.
* Local transit officials in Portland explained that special
assessment districts and tax increment financing have played a major
role in funding the city's streetcar system because, unlike many other
cities, Portland does not have a sales tax dedicated to transit. An
official from one local government also noted that Portland's lack of
a sales tax may explain why residents are more supportive of tax
increment financing than residents of other cities.
* MDOT officials told us that tax increment financing is being used to
pay for the construction of structured parking garages at several new
transit-oriented developments throughout the state. According to MDOT
officials, finding a way to pay for the construction of structured
parking garages represents the biggest hurdle for all jurisdictions
undertaking transit-oriented developments.
Several Factors Can Facilitate or Hinder the Use of Joint Development
and Other Value Capture Strategies to Fund or Finance Transit:
Public-Sector Coordination and Private-Sector Support Can Facilitate
Implementation of Transit Projects Using Value Capture Strategies:
Coordination among public-sector entities can facilitate the
implementation of projects using value capture strategies because such
projects generally require the involvement of multiple public entities
with different authorities. Specifically, transit agencies are
responsible for building, maintaining, and operating transit, but need
to coordinate with local and state governments that generally have
authority over taxation, land use, and development. For instance, when
tax increment financing is involved, transit agencies--which generally
do not have taxing authority--often have to coordinate with local
taxing authorities to help establish a tax increment financing
district and dedicate a portion of the tax increment toward a transit
project. In addition, because high-density zoning around transit
stations helps optimize the value available for capture, transit
agencies often work with local zoning authorities to modify zoning
regulations to allow for higher-density development. Zoning
regulations may also need to be modified to allow for mixed-use
development, particularly in joint developments.
Some transit agency officials told us that they have successfully
coordinated with local governments when using value capture
strategies, while others have faced challenges. For example, officials
told us that transit projects have been successful because of
effective coordination with local governments to rezone areas
surrounding the transit project to allow for more dense development,
while effective coordination with redevelopment agencies helped
dedicate some of the tax increment collected from the urban renewal
area to transit projects and transit-oriented developments. Moreover,
some transit agencies in California have created joint powers
authorities--partnerships with local jurisdictions, which allow
multiple public entities to operate collectively. Through such
authorities, officials told us that the partners can collaborate to
establish common goals and ensure that the design for the transit
project is integrated with the surrounding development. Conversely,
officials from other transit agencies said it was challenging to
convince local governments to allow for higher-density development
near transit and they are working to improve their relationships with
local governments. An official from one transit agency that operates a
transit system through a large metropolitan area told us the agency
has not yet been able to capitalize on some joint development
opportunities because of disagreements between the transit agency and
some local governments about the level of density a new development
should have.
Transit agency and local government officials told us that support
from private developers advances the implementation of projects that
incorporate the use of value capture strategies. For instance, private
or nonprofit developers or other public sector partners must have an
interest in partnering with a transit agency to develop the area
around a transit station for joint developments to occur. Several
officials from transit agencies and local governments that we spoke
with emphasized that the support of private developers, typically
financial support, was critical to implementing their projects or
developments. For example, officials from a few transit agencies said
that the upfront funds provided by the private developer for one of
its joint developments helped fund the transit infrastructure,
including the parking structure and other transit station
improvements.[Footnote 29] Another official from a different transit
agency said that in-kind land contributions (paid in lieu of a
monetary development impact fee) will be critical to implementing a
planned transit project. Furthermore, an official from one county
government noted that substantial interest from developers has allowed
the county to be more selective about which transit projects it
undertakes because it can focus on projects with the highest priority
and revenue generation potential. Some officials stressed that the
private developer's long-term support was critical to the success of
their joint developments because publicly funded infrastructure
projects may take longer than a typical developer is accustomed to.
According to several transit agency and local government officials,
the support of private property owners in the vicinity of their
transit project was critical to the establishment of a special
assessment district, which in turn was critical to the financial
feasibility of the project. In one instance, the special assessment
district--which was established while the transit project was still in
the planning stage--could have dissolved at two points because of
delays in acquiring other funding. However, the property owners
petitioned to maintain the district and the fees. Without this
support, a sizeable funding source for the project would have been
eliminated. Another local agency official told us that the support of
one property owner, who was a majority owner in a proposed special
assessment district, was critical to bringing a project to fruition.
In contrast, officials from another transit agency told us that
opposition from property owners surrounding a planned transit station
prevented the establishment of a special assessment district. The
transit agency then had to downsize the project because the available
funding was less than anticipated.
Transit Project Location and Design Influence How Much Value Can Be
Captured:
Transit project location and design--including zoning and parking
requirements--affect the feasibility of using value capture strategies
and the amount of revenue that can be generated. Based on our review
of literature and the views of transit officials, we found that some
metropolitan areas--and locations within these areas--have the
potential to raise more revenue than others through value capture
strategies. For example, officials from one transit agency told us
their agency cannot generate as much revenue from its joint
developments as other metropolitan areas in the country, such as the
Washington D.C., metropolitan area or San Francisco, California,
because ridership and density are not comparable. Furthermore, an
individual with expertise on value capture strategies told us that
land in locations that are deemed regionally significant--areas that
are important to a region's economy, and include employment,
commercial, and residential areas--as opposed to locations that are
mostly residential in nature, can generate more value, or revenue,
through new transit infrastructure or improvements to existing transit
service. Also, as previously discussed, the extent to which land and
housing values increase[Footnote 30] depends on several project
characteristics. The quality of transit service and the project's
proximity to neighborhood amenities, such as retail services, parks,
and schools can generate larger increases while lower relative incomes
and higher crime rates have been found to negatively affect the
increase in property values.[Footnote 31] One transit agency official
added that a good transit system with a lifestyle level of service--
beyond simple commuting--is essential for successful use of value
capture strategies and transit-oriented development.
In addition, several officials, as well as an individual with
expertise in the area of value capture strategies that we spoke with
stated that for value capture strategies to be useful, it is critical
that the project be designed with land use zoning that allows for high-
density development. High-density zoning is needed around transit
infrastructure because it encourages private development--particularly
joint development--by increasing the project's revenue potential,
which in turn helps optimize the value available for capture by the
public sector. On the other hand, the need to replace parking in joint
developments can limit the benefits of using joint development.
Commonly, joint developments involve replacing surface parking with
structured parking on a portion of the former surface lot to allow
space for new development. Several officials and experts that we spoke
with acknowledged a need to replace at least a portion of the existing
parking spaces, but emphasized that the construction of structured
parking--needed to maintain parking capacity and to free up space on
the parcel for new development--can limit the amount of value that can
be captured because such construction can substantially increase a
project's cost, thereby reducing the revenue raised through the use of
the value capture strategy.
Unfavorable Economic Conditions Can Hinder the Use of Joint
Development and Other Value Capture Strategies:
Unfavorable economic conditions can hinder the implementation of
transit projects that incorporate the use of value capture strategies,
as well as the ability of value capture strategies to raise revenue.
Most transit agency, state and local government, and FTA officials
that we spoke with told us that the current economic downturn has
negatively affected the use of value capture strategies to fund
transit.[Footnote 32] For instance:
* Several joint developments have been recently stalled or terminated
because of the current weak economy. For example, an official from one
transit agency told us that one joint development project is on hold
until the developer can obtain financing for construction of the
development. In addition, this agency has identified other parcels
that it would like to use in joint developments, but the head of the
agency's economic development department said the agency is currently
waiting until the economy improves before issuing requests for
proposals for projects.
* The use of tax increment financing is hindered by difficulty in
selling bonds on the market at a favorable interest rate due to a weak
local economy. Specifically, officials from several governments told
us their transit projects are (or were) delayed or postponed until the
agency is able to issue bonds at a favorable interest rate.[Footnote
33]
* Revenue raised through development impact fees is directly dependent
on new development projects. Because new development generally slows
down during a weak economy, development impact fees may yield little
or no revenue. For example, officials from one county government told
us their timetable for collecting the total revenue needed to fund
their transit project will likely be longer than originally expected
because of the weak economy and lack of new development.
* Special assessment districts are more difficult to establish, and
the assessments are more difficult to collect during a weak economy.
Property owners in the vicinity of transit may be less likely to
voluntarily contribute fees toward a project if they see a decline in
their property value. On the other hand, another official told us that
the strong economic conditions that preceded the current downturn
helped facilitate implementation of a project that was funded in part
by a special assessment district.
State Laws Can Authorize but May Also Limit Use of Value Capture
Strategies:
Some state laws specifically authorize the use of value capture
strategies for transit purposes. For example, a California law passed
in 1968 specifically allows the board of directors of any rapid
transit district to establish special assessment districts for the
purpose of raising revenue for transit.[Footnote 34] In Maryland,
legislation passed in 2009 allows revenue generated from special
assessment districts to fund infrastructure improvements, and related
operations and maintenance, located in or supporting a transit-
oriented development.[Footnote 35] By contrast, some states do not
have laws authorizing the use of certain value capture strategies,
which effectively precludes their use of these strategies. For
example, Arizona does not have a law authorizing the use of tax
increment financing.
Furthermore, in some states, revenue generated through special
assessment districts or tax increment financing districts cannot be
used for funding operations and maintenance of the transit system. For
example, in California, a state statute permits the Southern
California Rapid Transit District to establish a special assessment
for financing a rail transit station or related facility. However, the
statute specifically limits the revenue generated from that assessment
to the financing of the facility for which it was levied--the revenue
cannot be used for any other purpose, including transit,
transportation, or operating expenses.[Footnote 36] Additionally, in
Maryland, state statutes authorize the use of tax increment financing
for development projects, including transit-oriented developments, but
do not allow revenue from bond proceeds to be used to operate and
maintain projects.[Footnote 37]
Some officials we spoke with also reported that state laws have
sometimes indirectly hindered the use of value capture strategies.
Some states limit the amount of revenue that can be raised or the
locations from which it can be raised. For example, California's
Proposition 13, which amended the Constitution of California, caps
local property tax increases by limiting the annual real estate tax to
1 percent of a parcel of property's assessed value (which can only be
increased by 2 percent annually absent a change in ownership).
[Footnote 38] An official in California told us that this cap can
limit the amount of revenue that can be raised through tax increment
financing until or unless a property changes ownership. Also, in both
California and Oregon, tax increment financing can be used only in
areas that are "blighted" and are designated as redevelopment or urban
renewal areas, respectively.[Footnote 39] Moreover, in Oregon, the
amount of land that can be established as an urban renewal area is
capped by state law--as little as 15 percent of the total land area or
15 percent of the total assessed property value for municipalities
with a population over 50,000 and 25 percent of each for
municipalities with a population under 50,000.[Footnote 40]
Stakeholders Report That Uncertainty over FTA Policy Can Hinder the
Use of Joint Development:
Transit Agencies Say FTA's Joint Development Policy Is Confusing and
Impedes Joint Development:
A number of transit agency officials told us that following FTA's
joint development guidance and requirements is confusing, burdensome,
and time consuming, which can impede the transit agency's use of joint
development. These agencies are required to follow the FTA guidance
when joint development revenue is collected using land purchased as
part of a federally funded transit project, or improvements are being
built as part of the development using federal funds. Transit agency
or local government officials identified specific FTA joint
development guidelines they find confusing or burdensome. For example:
* These officials have had difficulty understanding FTA guidance on
which types of developments are eligible to become joint developments
and which types of structures can be constructed using federal transit
funds. Some officials told us that, in their view, confusion partially
exists because the flexibility provided by FTA's joint development
guidance does not necessarily seem consistent with federal statutes
cited in the guidance. Specifically, these officials told us that the
flexibility in FTA's joint development guidance that allows for
ancillary development to support the overall vision of a transit
project is not consistent with the law that prohibits the use of
federal transit funds for private use or benefit.[Footnote 41] Both
transit agency officials and FTA regional officials told us that as a
result of confusion over eligibility of certain uses and developments,
increased interaction between FTA officials and transit agency
officials is often necessary, which lengthens the approval process.
These officials told us that the guidance seeks to allow the maximum
flexibility under the law, and they are working internally to clarify
which uses are eligible and whether statutory changes are necessary
for certain developments to be eligible. FTA regional officials noted
that interaction between FTA and transit agencies earlier in
negotiations could help ease the joint development approval process.
Sometimes transit agencies first contact FTA about a potential joint
development when negotiations between the transit agency and the
private developer are already too far along to allow changes to the
design without significantly disrupting or delaying the development's
implementation. In 2007, FTA helped clarify certain uses that are
eligible by eliminating a requirement for transit agencies to find the
"highest and best transit use" for a joint development--a requirement
that transit agencies told us was challenging for transit agencies
because appraisers could not properly define projects in these terms.
[Footnote 42]
* These officials are unclear to what extent FTA requires parking
replacement in joint developments, particularly when they plan to
convert existing surface park-and-ride lots into transit-oriented
developments. FTA's joint development guidance does not provide
examples of shared parking, but does address parking replacement. In
response to a concern raised by a commenter, FTA stated that "FTA does
not require [transit agencies] to replace parking spaces on a one-to-
one basis if those spaces are used for joint development purposes and
using them for such purposes will not decrease public transportation
trips to and from the station."[Footnote 43] In addition, FTA
officials told us that shared parking arrangements are allowed with
complementary uses such as theaters, so long as there is an agreement
in place that spaces will be available primarily for transit purposes--
which typically involves transit riders using park and ride lots
between mornings and afternoons, Monday through Friday. However,
several local government officials told us that FTA required that the
agency replace all existing parking spaces, and did not allow shared
use even though arranging a shared parking agreement with the new
development, or reducing the total number of spaces, was preferable to
replacing all existing surface parking with parking garages at great
cost. Another agency interested in constructing a joint development on
an underutilized surface park-and-ride lot told us the joint
development guidance is unclear as to whether FTA would allow the
agency to replace all the current parking spaces or whether FTA would
ask for the agency to return the funds invested by FTA to purchase the
land for the park-and-ride lot because the parking spaces were not
used to support transit--the original intent of the FTA investment.
[Footnote 44]
* Transit agency officials told us that federal laws require they
receive highest possible return value for the sale of property through
a competitive bidding process and these requirements can be burdensome
in certain circumstances. FTA requires transit agencies to receive the
highest possible return from the sale of property purchased using
federal grant funds.[Footnote 45] Transit agency officials told us
this requirement can stall negotiations with developers and limit
flexibility, which transit agencies need to create incentives for
investment in transit-oriented joint developments because these
developments can be more expensive to build than traditional
developments.[Footnote 46] One agency cited competitive bidding
requirements[Footnote 47] as an obstacle to a proposed joint
development in which the developer plans to develop transit-agency-
owned-land as part of a larger adjacent development--an arrangement
that would give this developer a competitive advantage. Transit agency
officials told us that in this case, when the outcome is likely
predetermined, the requirement could add time and cost to the efforts
of both the public and the private sector. FTA officials highlighted
that there are established procedures to potentially grant a waiver
from this requirement. In addition, such requirements promote full and
open competition.
* One transit agency official told us that federal requirements to
maintain continuing control over property purchased with federal funds
can be confusing and burdensome. Specifically, if a property purchased
with federal transit funds is sold for joint development, FTA requires
that the grant recipient maintain effective continuing control of the
use of the project property.[Footnote 48] The transit agency official
told us that although the joint development guidance describes several
methods of maintaining effective continuing control, FTA regional
officials require a deed restriction--and monitoring of the property
indefinitely to ensure the land is being used as specified in the deed
restriction is a long-term burden for the agency and an impediment to
creating a transit-oriented development. FTA officials told us these
requirements reflect governmentwide procurement or excess land
disposal requirements, and FTA regional officials said they do their
best to help transit agencies solve these types of issues within the
law.
* Transit agency officials noted that federal restrictions on the use
of revenues generated by joint developments can be a hindrance for
transit agencies. Per statute, the proceeds of a sale or lease of land
purchased with federal dollars must go back to FTA or be applied
toward other eligible capital transit projects.[Footnote 49] Some
transit agency officials stated that FTA's requirement to use joint
development revenue for capital transit purposes precludes the use of
these funds for operations or maintenance, or to acquire land for
future transit-oriented joint development. FTA has stated, however,
that transit agencies are permitted to use joint development revenues
for these purposes in certain circumstances.[Footnote 50] At one
agency, officials told us they would like to see their agency's joint
development revenue (for projects with a federal interest) go into a
transit-oriented development fund. In this official's view, FTA's
requirements prioritize earning revenue from joint developments rather
than as a catalyst for transit-oriented development and livable
communities.
While FTA guidance is confusing or burdensome to many transit agency
officials, a few others with extensive joint development told us their
experience using the guidance has helped clarify the process and
lessen the burden. Officials from one transit agency told us that
although the requirements are initially confusing, they have learned
through experience to anticipate and work through significant issues.
According to officials at these agencies, joint development guidance
issued by FTA in 2007 is an improvement over past versions, and FTA
regional officials have been helpful in clarifying FTA's requirements.
However, according to some of these officials, additional
clarification and guidance on which types of developments and
structures are eligible for joint development, particularly given
recent policy changes due to DOT's livability initiative, could help
ease the process and potentially entice more private developers.
FTA officials told us they are aware of ongoing confusion, and noted
that additional issues have arisen because of recent policy changes
due to the current administration's livability initiative. These
officials also told us that a task force is clarifying activities that
are eligible for support through the provisions and applications of
FTA's joint development requirements, including whether transit funds
can be used to purchase land and how to dispose of land or release it
to other government entities, such as housing authorities or regional
governments. In addition, FTA's 2007 joint development guidance
indicates that FTA intends to consolidate guidance on the eligibility
of joint development improvements currently appended to three
circulars (guidance for new Major Capital Investments, Grants
Management, and Formula Capital Grants), as a stand-alone FTA Circular
titled The Eligibility of Joint Development Improvements under Federal
Transit Law. As of July 2010 this Circular has not been issued.
FTA Is Not Directly Involved in the Use of Other Value Capture
Strategies, but Some Federal Programs Can Affect the Use of These
Strategies:
According to FTA officials, FTA has no authority on the use of other
value capture strategies because they are administered by local
governments. FTA's role is primarily to provide the federal share of
capital construction and land acquisition costs when a local share is
funded through a value capture strategy. FTA officials told us that if
a transit agency proposes a value capture strategy as a source of
local funding for a transit project, they evaluate the viability of
the revenue source and the likelihood that revenue projections will be
met in the future the same as they would for any other proposed local
funding source.[Footnote 51]
However, transit agency officials told us that past New Starts project
selection criteria and program requirements limited the
competitiveness of some transit projects that promote economic
development--an important element to the successful use of value
capture strategies. For example:
* Several transit agency officials told us that the New Starts
program's past emphasis on cost effectiveness favored less expensive
routes over routes that better incentivize economic development. For
example, the cost-effectiveness criterion favors travel time savings,
which puts streetcar or light rail projects at a disadvantage because
they are often designed with frequent stops to promote economic
development and create value for property owners.[Footnote 52]
Furthermore, features of a transit-oriented development such as parks,
bike access, and pedestrian amenities add costs and potentially make
them less competitive. Several officials representing potential
project sponsors with a planned contribution from a value capture
strategy, told us their projects will not be competitive for New
Starts funding because frequently stopping trains, designed to
generate economic development, do not necessarily generate the travel
time savings needed to meet federal cost-effectiveness requirements.
* Similarly, transit officials told us that the New Starts cost-
effectiveness criterion limits the potential for joint development by
deterring land acquisition near transit stations because costs for
extra land purchases potentially reduce the cost effectiveness and
competitiveness of a potential New Starts project. According to
several transit agency officials, this requirement in effect allows
transit agencies to acquire land to attract riders through surface
parking lots, but not through transit-oriented joint developments.
Other New Starts program requirements can also limit transit agencies'
use of joint development and other value capture strategies.
* Some transit agency and local government officials told us that
ridership forecasting models generally used to determine cost-
effectiveness for New Starts projects limit longer-term transit-
oriented development opportunities by creating unrealistic
requirements for parking spaces near stations. For instance, officials
at one transit agency told us the results of their forecasting models
require that they purchase land to construct park-and-ride lots near
six proposed stations, even though they expect to attract riders
through high-density transit-oriented developments around the transit
stations once construction of the transit system is completed.
However, according to these officials, the New Starts process does not
effectively take into account the effects of future high-density
transit-oriented developments (which are in-line with FTA's livability
goals) on parking when seeking funds for transit capital projects. In
effect, the need to purchase land for the park-and-ride lots
significantly increases a project's cost, which reduces the project's
cost-effectiveness. Moreover, if the transit agency pursues transit-
oriented joint development in the future, parking replacement
requirements--in this case imposed by other local governments--could
create a challenge to constructing transit-oriented joint developments
on the sites of the parking lots built for the new line. FTA officials
explained that FTA does not have parking requirements in the New Start
program and that project sponsors assume a number of parking spaces in
their ridership models based on the design of their proposed project.
FTA requires that the ridership estimates for the project be
consistent with the number of parking spaces the project sponsor
intends to build. However, without accounting for future high-density
development around the station in the forecasting model--which a
transit agency cannot do until these effects are taken into account in
metropolitan planning organization travel forecasts--the results of
the model would likely include a ridership level that does not
generate enough benefits to make the proposed system competitive in
the New Starts grant evaluation process.[Footnote 53]
* According to officials at a few transit agencies and local
governments, the length of the New Starts grant approval process can
erode the effectiveness of value capture strategies. For example, one
local government official told us that during the multiyear review of
a proposed New Starts project, construction costs for the project more
than doubled, while the contribution from a special assessment
district remained fixed through an agreement with affected property
owners.[Footnote 54] As a result, the proportion of the local share of
the project paid for using special assessment district revenue was
significantly lower than anticipated, forcing the local government to
draw from other local revenue sources to complete funding for the
project. In addition, another transit agency official noted that
private developers often work with narrow timelines in an effort to
open the development during favorable market conditions. Developers
calculate the feasibility of a development over about 12 months,
whereas transit projects can take several years to plan and develop.
FTA noted that the New Starts process includes multiple steps that are
required by law, and shortening the process would require legislative
changes. In addition, FTA officials cited a number of reasons that a
project could be delayed during preliminary engineering or final
design that are outside FTA's control such as changes to a project's
scope, changes in local political leadership, or the loss of local
financial commitment.[Footnote 55]
DOT and FTA have recently implemented and proposed several changes to
the New Starts program and procedures. In 2009, FTA revised the
weights given to each of the project justification criteria in
accordance with direction in the Safe, Accountable, Flexible,
Efficient, Transportation Equity Act: A Legacy for Users (SAFETEA-LU)
Technical Corrections Act of 2008 that they be "...comparable, but not
necessarily equal..."[Footnote 56] As part of this, according to FTA,
the weight given to cost effectiveness was lessened and the land use
and economic development criteria were split apart and each assigned
specific weights rather than being considered together as had
previously been the case. In January 2010, the Secretary of
Transportation announced that transit agencies are no longer required
to have at least a "medium" cost-effectiveness rating for their
project to be recommended in the President's budget for New Starts
funding.[Footnote 57] In addition, FTA issued a request for comments
in an Advance Notice of Proposed Rulemaking in June 2010 to seek input
on how to improve its calculation of ''cost effectiveness'' and input
on how FTA should evaluate economic development effects and
environmental benefits in the evaluation and rating process for the
New Starts grant program, among other things.[Footnote 58] This
rulemaking follows FTA's change to consider economic development
separate from land use.[Footnote 59] Prior to July 2009, the project
justification rating was split evenly between cost effectiveness and
land use. These changes have encouraged some transit agencies that are
considering the use of value capture strategies, however the overall
effect is still unclear. For some transit agencies officials, the
removal of the medium cost-effectiveness rating requirement may affect
planned transit projects, but one transit agency official noted that
regardless of the change, the routes will still need to be cost
effective because finding funds for the local match will always limit
how much additional land or other user-friendly amenities the agency
can buy. One agency official told us that planned transit routes would
be aligned differently if spurring economic development becomes a
heavily weighted criterion in the New Starts process. Another agency
official said that changes are not going to alter where the agency
plans new projects; however, the elimination of a minimum cost-
effectiveness rating certainly might influence agency plans to acquire
additional land in station areas. FTA officials told us they are not
sure how the recent and proposed changes to New Starts project
evaluation criteria will affect the number or cost of projects seeking
funding under the program. Transit agencies could have more
flexibility to purchase land for joint development, or additional
parking to help meet ridership projections, which has been a challenge
in the past. However, FTA also noted that local transit agencies will
still need to fund the local match, which can also be a challenge.
Stakeholders See an Expanded Federal Role in Supporting the Use of
Value Capture Strategies through Potential and Existing Federal Loan
Programs:
Some stakeholders and transit agency officials we spoke with told us
that the federal government could further support the use of value
capture strategies by providing financing options for projects with a
value capture revenue stream. Some project sponsors and experts
believe federal loans, loan guarantees, or credit enhancements could
help bridge a financing gap. Several agency officials noted that the
federal government could better promote livable communities and
transit-oriented development if it could help agencies overcome
parking replacement challenges through targeted grants or loans.
Currently, DOT provides loans for major capital infrastructure
projects through the TIFIA and RRIF loan programs. However, most TIFIA
projects have been used to finance highway projects, typically with
user charges or another revenue source to repay loans. Transit systems
farebox revenue rarely covers capital and operations expenses, so
another revenue stream is necessary to repay loans. Value capture
strategies are one way to create a revenue stream from a transit
project to repay the loan.[Footnote 60] Two specific projects--
Denver's Union Station and San Francisco's Transbay Transit Center--
are planning to use tax increment financing to repay TIFIA and RRIF
loans.
In recent years, proposals to expand federal financing for
infrastructure projects have surfaced from stakeholders, including the
current administration and Congress. Proposals have included creating
a National Infrastructure Bank, other forms of a national
infrastructure loan fund, and expanding TIFIA's allocation limits.
[Footnote 61] DOT recently announced that demand for the TIFIA program
now exceeds budgetary resources, and as a result, DOT will now, among
other changes, evaluate projects against criteria including livability
and economic competitiveness.[Footnote 62]
Conclusions:
Value capture strategies can be an effective means for the direct
users and beneficiaries of a transit system to contribute to its
funding, although past use of these strategies to fund and finance
transit is limited. Because these strategies largely involve funding
sources administered by local governments, the federal role in the use
of value capture strategies is likely to remain relatively limited.
However, federal transportation policies can affect local governments'
ability to use some value capture strategies, particularly when a
federal grant is part of the funding for a transit project. DOT's
proposal to change how it evaluates economic development effects in
the New Starts evaluation and rating process, and the removal of the
requirement that projects receive a medium cost-effectiveness rating
or better to be recommended in the President's budget could enhance
federal funding prospects for transit projects with contribution from
a value capture strategy, as well as transit agencies' ability to
pursue joint development. However, value capture strategies are not a
panacea. Funds generated through the use of value capture strategies
are typically only a limited portion of the total funding needed to
complete a transit project. Additionally, states may preclude or limit
the use of these strategies or support may not be forthcoming from all
the private-and public-sector parties whose concurrence is needed to
implement the strategies.
Moreover, transit agencies' confusion about aspects of FTA's joint
development policy hinders the use of this value capture strategy.
This confusion--despite the 2007 guidance from FTA--about which types
of developments and structures are eligible for joint development and
how many surface parking spaces must be replaced with structured
parking has contributed to project delays and potentially limited
transit agencies' ability to facilitate transit-oriented development
and "livable" communities along transit corridors. Clarifying early in
a project's design phase which types of structures are eligible for
joint development could streamline negotiations with developers and
FTA and produce more cost-effective results for all parties. In
addition, clarifying FTA's requirements and conditions for parking
replacement would reduce the potential for transit agencies to design
projects with more parking than is actually needed or required and to
invest money in costly structured parking that could be put toward
enhancing other aspects of the project's design, including economic
development components.
Recommendation for Executive Action:
To facilitate transit agencies use of joint development, we recommend
that the Secretary of Transportation direct the Administrator of the
Federal Transit Administration to issue additional guidance on federal
joint development requirements including at a minimum,
* further clarification on the types of developments and structures
that are eligible under current law, and:
* further clarification on any requirements or conditions for parking
replacement.
Agency Comments:
We provided a draft of this report to the Department of Transportation
for its review and comment. DOT agreed to consider the recommendations
in this report, and provided technical comments, which we
incorporated, as appropriate.
We are also sending copies of this report to interested congressional
committees, the Secretary of Transportation, and other interested
parties. In addition, the report will be available at no charge on the
GAO Web site at [hyperlink, http://www.gao.gov.
If you or your staffs have any questions about this report, please
contact David Wise at (202) 512-2834 or wised@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. Individuals making key
contributions to this report are listed in appendix III.
Signed by:
David Wise:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To address the use of value capture strategies to fund or finance
transit, we reviewed (1) the extent to which transit agencies and
state and local governments use joint development and other value
capture strategies to fund or finance transit; (2) what selected
stakeholders and literature identified as facilitators of, or
hindrances to, the use of joint development and other value capture
strategies to fund or finance transit; and (3) stakeholders' views
about the effects of federal policies and programs on the use of joint
development and other value capture strategies to fund or finance
transit.
We addressed four value capture strategies: (1) joint development; (2)
special assessment districts; (3) tax increment financing; and (4)
development impact fees. We chose to focus on these strategies because
our review of relevant literature on value capture strategies and
interviews with relevant stakeholders found that these four strategies
were the most commonly used value capture strategies by transit
agencies and state and local governments to fund or finance transit.
To determine the extent to which transit agencies and state and local
governments use joint development and other value capture strategies
to fund or finance transit, we requested information from the 71
transit agencies that we identified as operating a fixed-guideway
system--commuter rail, heavy rail, light rail, streetcar,[Footnote 63]
and bus rapid transit--and the 30 largest U.S. bus agencies.[Footnote
64] We requested information on the use of each type of value capture
strategy in projects on or around any of their transit stations,
including the number of projects and the lead agency of the project.
In response to our request, we obtained information from 55 of the 71
transit agencies contacted. We then analyzed the information reported
by the transit agencies. To ensure the reliability of the information
provided, we interviewed stakeholders about the design of our
information collection instrument, reviewed responses to ensure that
the value capture strategies reported met our definitions of each
value capture strategy, and when possible corroborated the reliability
of the information through interviews or other agency documents
obtained. The information we collected was deemed reliable for our
purposes.
We also conducted site visits to, or interviewed officials from,
transit agencies, state and local governments, and private developers
in Atlanta, Georgia; Dallas, Texas; Portland, Oregon; Los Angeles,
Sacramento, the San Francisco Bay metropolitan area, and San Jose,
California; Seattle, Washington; and the Washington/Baltimore
metropolitan area on selected transit or transit-related projects
incorporating the use of value capture strategies.[Footnote 65] Using
information from literature that we reviewed and information we
collected from the 55 transit agencies, we selected this
nongeneralizable sample of cities and metropolitan areas based on
criteria we established, including locations where value capture
strategies had been used or were under formal consideration for future
use and geographical diversity. Where available, we collected and
reviewed information obtained from transit agencies on the costs and
value capture revenue for projects that used value capture strategies.
To identify facilitators of, and hindrances to, the use of joint
development and other value capture strategies, we reviewed relevant
literature on value capture strategies. We also interviewed transit
agency, state and local government, and FTA headquarters and regional
officials, as well as representatives from private developers and
individuals with expertise in the area of value capture strategies. In
addition, we reviewed applicable state statutes and regulations.
To identify stakeholders' views about the effects of federal policies
and programs on the use of joint development and other value capture
strategies to finance transit, we interviewed federal, state, and
local officials to identify ways federal policies and programs affect
the use of value capture strategies. We also reviewed applicable
federal regulations and statutes to determine federal requirements and
program implications for joint development and other value capture
strategies.
We conducted this performance audit from August 2009 to July 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Descriptions of Select Transit Projects or Developments:
Major Transit Infrastructure Projects (by Percentage of Revenue
Contributed by Value Capture):
Atlanta BeltLine:
Project Description:
The Atlanta BeltLine is a proposed 22-mile transit loop along
underused railroad corridors in Atlanta. The proposed project also
includes mixed-use transit-oriented developments, 1,300 acres of new
parks and green space, and 33 miles of walking and biking trails.
Project sponsors plan to use tax increment financing to help fund
project components, including transit, parks and green space, and
trails;
Project Status: Planned;
Value Capture Strategies: Tax increment financing:
Lead Agency: Atlanta BeltLine, Inc.
Value Capture Revenue: $1,700 billion (projected):
Total Project Cost: $2,800 billion (projected);
Percentage Value Capture: 61%;
Type of Transit: To be determined: streetcar or light rail.
Seattle South Lake Union Streetcar:
Project Description:
The South Lake Union Streetcar is a 2.6 mile streetcar line that
connects Seattle's South Lake Union neighborhood to the Westlake Hub.
This project cost $53 million to complete, half of which was paid for
using revenue from a special assessment district (locally referred to
as a local improvement district) which generally surrounds the line by
approximately four blocks. The city of Seattle issued bonds for the
project, which will be repaid using the stream of payments from the
property owners;
Project Status: Completed;
Value Capture Strategies: Special assessment district;
Lead Agency: City of Seattle, Department of Transportation;
Value Capture Revenue: $25 million (approximate);
Total Project Cost: $53 million (approximate);
Percentage Value Capture: 47%;
Type of Transit: Streetcar.
City of Portland Streetcar:
Project Description:
The Portland streetcar runs on an 8.0-mile continuous loop (4.0-mile
in each direction) through multiple neighborhoods in Portland, OR. The
multi-phased streetcar project cost approximately $103 million with
about $19.4 million raised through a special assessment district
(locally referred to as a local improvement district) and $21.5
million bonded through tax increment financing from the City's urban
renewal agency, Portland Development Commission. The Portland
Streetcar is owned and operated by the City of Portland;
Project Status: Completed;
Value Capture Strategies: Tax increment financing; Special assessment
district;
Lead Agency: City of Portland; Portland Streetcar, Inc.
Value Capture Revenue: $41 million (actual);
Total Project Cost: $103 million (actual);
Percentage Value Capture: 40%;
Type of Transit: Streetcar.
San Francisco Transbay Transit Center:
Project Description:
A new multi-modal transit center in downtown San Francisco that will
serve ten transportation systems, including high speed intercity
passenger rail. Project also includes the creation of a new mixed-use,
transit-oriented neighborhood with residential towers, shops, parks,
and office buildings on surrounding land. Tax increment financing will
be used to repay a $171 million federal TIFIA loan used for
construction of the new transit terminal. A planned special assessment
district will be used to fund a portion of the construction and
maintenance of public infrastructure and facilities needed for the new
development;
Project Status: In progress;
Value Capture Strategies: Tax increment financing; Special assessment
district;
Lead Agency: Transbay Joint Powers Authority;
Value Capture Revenue: $1,400 million (tax increment - projected);
Total Project Cost: $4,185 million (projected);
Percentage Value Capture: 33%;
Type of Transit: Multimodal.
Washington Metro New York Avenue Station:
Project Description:
The New York Avenue station was built between two existing stations on
Washington Metro's Red Line. The station was deigned to be a catalyst
for transit-oriented economic development in Washington's NoMa
neighborhood. The $110 million station was built using a unique
private-public partnership between adjacent property owners, the
District of Columbia, and the federal government. Local property
owners agreed to pay $25 million towards the projects through a
special assessment district (locally referred to as a Metro Benefit
Assessment Fee);
Project Status: Completed;
Value Capture Strategies: Special assessment district;
Lead Agency: Washington Metro;
Value Capture Revenue: $25 million (actual);
Total Project Cost: $110 million (actual);
Percentage Value Capture: 23%;
Type of Transit: Heavy rail.
Washington Metro Dulles Corridor Extension:
Project Description:
The Metropolitan Washington Airports Authority (MWAA) is constructing
a 23-mile extension of the existing Metrorail system, which will be
operated by the Washington Metropolitan Area Transit Authority. The
two-phased extension commences at the East Falls Church station on the
existing orange line and runs to Washington Dulles International
Airport and west to Ashburn. The cost estimate for the two phases of
the project is $5.25 billion, with about $400 million raised through a
special assessment district for phase I. An additional special
assessment district is in place to contribute approximately $330
million of phase II capital construction costs;
Project Status: In progress;
Value Capture Strategies: Two special assessment districts;
Lead Agency: Metropolitan Washington Airports Authority (construction)
and Fairfax County (special assessment district);
Value Capture Revenue: $730 million (projected);
Total Project Cost: $5.25 billion (estimated);
Percentage Value Capture: 14%;
Type of Transit: Heavy rail.
Los Angeles Metro Red Line, segment 1:
Project Description:
Segment 1 of the Metro Red Line consists of 5 underground heavy rail
stations in downtown Los Angeles. In 1986, Metro formed two special
assessment districts (locally referred to as benefit assessment
districts) to pay for a portion of the construction costs of the Metro
Red Line Segment 1;
Project Status: Completed;
Value Capture Strategies: Two special assessment districts;
Lead Agency: Los Angeles Metro;
Value Capture Revenue: $130 million (actual);
Total Project Cost: $1,420 million (actual;
Percentage Value Capture: 9%;
Type of Transit: Heavy rail.
Seattle Downtown Transit Tunnel:
Project Description:
The five-station, 1.3 mile downtown transit tunnel opened in 1990,
costing approximately $469 million. King County established a special
assessment district (locally referred to as a benefit assessment
district) to help finance the tunnel under the downtown area. The
assessment provided approximately $20 million dollars toward the
project. In 2009, Sound Transit's Link Light Rail line began service--
sharing the downtown tunnel with existing bus service;
Project Status: Completed;
Value Capture Strategies: Special assessment district;
Lead Agency: King County Metro;
Value Capture Revenue: $20 million (approximate);
Total Project Cost: $469 million;
Percentage Value Capture: 4%;
Type of Transit: Bus and light rail.
Sacramento County Bus Rapid Transit Lines:
Project Description:
Sacramento County currently collects a development impact fee, part of
which is dedicated to transit. Specifically, the County plans on using
the fee's dedicated transit funds to establish bus rapid transit
routes on three major congested corridors. County officials told us
that they expect funds to be raised over 22-25 years;
Project Status: Planned;
Value Capture Strategies: Development impact fee;
Lead Agency: Sacramento County;
Value Capture Revenue: Not available:
Total Project Cost: Not available;
Percentage Value Capture: Not available;
Type of Transit: Bus rapid transit.
Transit-oriented Development Infrastructure Improvements (by Total
Value Capture Revenue):
Pleasant Hill Transit-Oriented Development:
Project Description:
Bay Area Rapid Transit (BART), Contra Costa County, CA, and the County
Redevelopment Agency have created a joint powers authority to
construct one portion of a multiple property transit-oriented
development at the Pleasant Hill BART Station. Revenue from special
assessments and tax increment financing is being used to pay for a
variety of public infrastructure improvements at the transit-oriented
development site, including the BART patron replacement parking
garage, backbone infrastructure (roads, drainage, etc.) and place
making infrastructure (parks, plazas, and street furniture);
Project Status: In progress (90% complete);
Value Capture Strategies: Joint development: Special assessment
district; Tax increment financing;
Lead Agency: Joint Powers Authority between Bay Area Rapid Transit,
Contra Costa County, and the County Redevelopment Agency;
Value Capture Revenue: $750 million (projected)
Type of Transit: Heavy rail.
Dallas' Transit-Oriented Developments:
Project Description:
Transit-oriented developments at 7 light rail stations in Dallas, TX
are included in one tax increment financing district. Tax increment
financing will be used to pay for basic infrastructure improvements--
including water and sewer systems and parking garages--at the transit-
oriented developments. A portion of the increment generated on the
more developed, north end of the district will be used to fund project
elements on the south end of the district, where development is not
expected to occur for several years;
Project Status: District established;
Value Capture Strategies: Tax increment financing;
Lead Agency: Dallas Area Rapid Transit and the city of Dallas;
Value Capture Revenue: $182 million (projected - net present value);
Type of Transit: Light rail.
State Center Transit-Oriented Development:
Project Description:
Maryland Department of General Services is planning to lease state-
owned land adjacent to Baltimore's Cultural Center Light Rail Station
and State Center Metro Station to a developer for construction of a
mixed-use, mixed-income transit-oriented development. Project sponsors
plan to use tax increment financing backed by a special assessment to
repay bond debt. Revenue from the special assessment will be used to
pay bond debt in the event that the tax increment financing revenues
are insufficient. In addition, the state of Maryland will receive 7
percent of all project profits as a form of additional ground rents
above base rent. The present value of these rents over 50 years is $25
million for a $2 million parcel of land;
Project Status: Groundbreaking expected in 2010;
Value Capture Strategies: Tax increment financing (backed by special
assessment district);
Lead Agency: Maryland Department of General Services;
Value Capture Revenue: $100 million (projected);
Type of Transit: Heavy rail and light rail.
Owings Mill Transit-Oriented Development:
Project Description:
Maryland Department of Transportation is planning to lease state-owned
land to a developer to construct a transit-oriented development at the
Owings Mills Metro Station in Baltimore County, MD. Project sponsors
plan to use tax increment financing to help pay for the construction
of two state-owned parking garages at the transit-oriented
development. According to State officials, revenue generated from a
special assessment will be used to pay for operations of the state-
owned garages, roads, and other improvements; however it may also be
used to help pay bond debt in the event that the tax increment
financing revenues are insufficient;
Project Status: Groundbreaking expected in 2011;
Value Capture Strategies: Tax increment financing; Special assessment
district;
Lead Agency: Maryland Department of Transportation;
Value Capture Revenue: $60 million (projected - tax increment
financing);
Type of Transit: Heavy rail.
MacArthur Station Transit-Oriented Development:
Project Description:
The City of Oakland Redevelopment Agency has partnered with Bay Area
Rapid Transit and the private developer MacArthur Transit Community
Partners, LLC to design and build the mixed-use MacArthur Transit
Village adjacent to Bay Area Rapid Transit's MacArthur Station in
Oakland, CA. The transit-oriented development will include residential
units, commercial and neighborhood-serving retail, a new structured
replacement parking structure, new public roads, and various other
improvements to the transit station;
Project Status: Planned;
Value Capture Strategies: Tax increment financing;
Lead Agency: City of Oakland Redevelopment Agency;
Value Capture Revenue: $16.8 million (projected non-housing tax
increment financing, $17.2 million projected affordable housing tax
increment financing);
Type of Transit: Heavy rail.
Savage Town Center Transit-Oriented Development:
Project Description:
Maryland Department of Transportation is planning to transfer property
to a developer to construct a transit-oriented development at the
Savage Commuter Rail Station in Howard County, MD. Tax increment
financing will help pay for the construction of a parking garage at
the transit-oriented development site. According to Howard County
officials, revenue generated from a special assessment district will
be used to pay bond debt in the event that the tax increment financing
revenues are insufficient. Revenue generated through the special
assessment district that is not used will be credited back to its
contributors annually;
Project Status: Planned;
Value Capture Strategies: Tax increment financing (backed by special
assessment district;
Lead Agency: Maryland Department of Transportation;
Value Capture Revenue: $14 million (projected);
Type of Transit: Commuter rail.
Source: GAO analysis of information provided by transit agencies or
local governments.
[End of table]
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
David Wise at (202) 512-2834 or wised@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Raymond Sendejas, Assistant
Director; Lauren Calhoun; Elizabeth Eisenstadt; Terence Lam; Matthew
LaTour; Amanda Miller, Sara Ann Moessbauer; Jaclyn Nidoh; Josh Ormond;
and Gretchen Snoey made key contributions to this report.
[End of section]
Footnotes:
[1] Fixed-guideway systems are permanent public transportation
facilities that use and occupy a separate right-of-way or rail for the
exclusive use of public transportation and other high-occupancy
vehicles, or use a fixed catenary system and a right-of-way usable by
other forms of transportation. Fixed-guideway systems include all
forms of rail transit (light, heavy, commuter, and streetcar),
ferryboats, exclusive busways (for bus rapid transit), and HOV lanes
constructed for the exclusive use of public transportation and other
high-occupancy vehicles.
[2] GAO, Affordable Housing in Transit-oriented Development: Key
Practices Could Enhance Recent Collaboration Efforts between DOT-FTA
and HUD, [hyperlink, http://www.gao.gov/products/GAO-09-871]
(Washington, D.C.: Sept. 9, 2009).
[3] See Notice of Final Agency Guidance on the Eligibility of Joint
Development Improvements Under Federal Transit Law 72 Fed. Reg. 5788,
5789 (Feb. 7, 2007).
[4] New Starts is FTA's major capital investment program for new, and
extensions to existing, fixed-guideway transit systems.
[5] A mixed-use development includes residential, commercial,
cultural, or institutional uses on the same site, which can allow for
greater housing density, encourage more compact development, and
promote pedestrian-friendly environments.
[6] [hyperlink, http://www.gao.gov/products/GAO-09-871].
[7] Joint development and transit-oriented development have several
common characteristics, however in most cases joint development takes
place on or above property owned by a transit agency or other public
entity. In addition, while transit-oriented developments generally are
envisioned to encompass multiple city blocks and are similar to a
neighborhood in size and character, joint development tends to be
project-specific, often occurring within a city block and tied to a
specific real estate development.
[8] Joint developments can also be arranged through construction cost
sharing, station connection fees, and negotiated private contributions.
[9] Federal transit law defines a ''capital project'' for joint
development as follows: A public transportation improvement that
enhances economic development or incorporates private investment,
including commercial and residential development, pedestrian and
bicycle access to a public transportation facility, construction,
renovation, and improvement of intercity bus and intercity rail
stations and terminals, and the renovation and improvement of historic
transportation facilities, because the improvement enhances the
effectiveness of a public transportation project and is related
physically or functionally to that public transportation project, or
establishes new or enhanced coordination between public transportation
and other transportation, and provides a fair share of revenue for
public transportation that will be used for public transportation. In
addition, a person making an agreement to occupy space in a facility
under this subparagraph shall pay a reasonable share of the costs of
the facility through rental payments and other means. 49 U.S.C. §
5302(a)(1)(G). Joint development improvements shall be eligible for
FTA funding if they satisfy the criteria set forth above, and do not
fall within the exclusion detailed at 49 U.S.C. 5302(a)(1)(G)(ii),
which excludes the construction of a commercial revenue-producing
facility (other than an intercity bus station or terminal) or a part
of a public facility not related to public transportation.
[10] Special assessment districts are also sometimes referred to as
business improvement districts, local improvement districts, benefit
assessment districts, community facilities districts, and others.
[11] Economic development is broadly defined to include activities to
promote business growth, workforce development, entrepreneurship,
community economic development, and quality-of-life issues. Public
transit investments are one of many important factors determining a
locale's economic development.
[12] Metropolitan planning organizations are federally mandated
regional organizations responsible for comprehensive transportation
planning and programming in urbanized areas with a population of more
than 50,000 and are required by federal law to develop long-range
regional transportation plans and transportation improvement programs.
23 U.S.C. § 134. The current framework for federal participation in
surface transportation is set forth in authorizing legislation, most
recently amended by the Safe, Accountable, Flexible, Efficient,
Transportation Equity Act: A Legacy for Users (SAFETEA-LU), Pub. L No.
109-59, 119 Stat. 1144 (2005). These pieces of legislation have
established an overall approach for surface transportation planning
and decision making that generally gives local and state governments
significant responsibilities for these activities in their own
regions. For example, 23 U.S.C. § 134 establishes specific planning
task requirements that metropolitan planning organizations, in
conjunction with states, public transportation operators, and other
stakeholders, must perform, which include (1) developing long-range
transportation plans and transportation improvement programs for
metropolitan planning areas of the state, (2) specifying financing for
the transportation plan and transportation improvement program, and
(3) involving a wide range of stakeholders in the process which
emphasizes consultation and coordination.
[13] Notice of Final Agency Guidance on the Eligibility of Joint
Development Improvements Under Federal Transit Law 72 Fed. Reg. 5788
(Feb. 7, 2007).
[14] See Common Grant Rule, 49 C.F.R. part 18.
[15] 49 U.S.C. § 5309(d)(2). In addition to New Starts, SAFETEA-LU
established the Small Starts program for lower-cost capital projects,
which may include non-fixed-guideway corridor-based bus capital
projects. Small Starts projects are defined as those capital
investment grants with a request for less than $75 million and a total
estimated net capital cost of less than $250 million. 49 U.S.C. §
5309(e). FTA also subsequently introduced a subset of the Small Starts
program, called Very Small Starts, for projects with a total capital
cost of less than $50 million.
[16] Several programs administered by the Federal Highway
Administration (FHWA) have transit eligibility, in particular, the
Surface Transportation Program and the Congestion Mitigation and Air
Quality Program. These two programs are eligible for use on both
highway and transit projects. When these FHWA funds are used for
transit projects, states have the authority to request transfer of the
funds from FHWA to the FTA, up to a certain amount, to be administered
as FTA grants.
[17] Transportation Investment Generating Economic Recovery (TIGER)
and Transit Capital Assistance grants were provided appropriations by
the American Recovery and Reinvestment Act of 2009. DOT announced
TIGER grantees on February 17, 2010. An Interim Notice of Funding
Availability for a similar program referred to as TIGER II
Discretionary Grants was issued on June 1, 2010. 75 Fed. Reg. 30460.
[18] Pub. L. No. 105-178, 112 Stat. 107, 241 (1998).
[19] 65 Fed. Reg. 2827 (Jan. 5, 2001).
[20] Pub. L. No. 105-178, §§ 1501-1504, 112 Stat.107, 241-255 (1998),
codified as amended at 23 U.S.C. chapter 6.
[21] Pub. L. No. 105-178, § 7203, 112 Stat. 107, 473-475 (1998),
codified as amended at 45 U.S.C. §§ 822, 823.
[22] Ten of these transit agencies operate fixed-guideway systems that
opened during or before 1990. Seven of these transit agencies have a
service area of least 500 square miles, and eight had at least
100,000,000 annual trips.
[23] A transit agency's real estate department is typically
responsible for managing the agency's acquisition and disposition of
land, lease and rental agreements, and station area development.
[24] Generally, transit agencies generate joint development revenue by
selling or leasing agency-owned land.
[25] An infill station is a new station built between two existing
stations along a transit line.
[26] The Beltline project will be funded using a tax allocation
district, which is similar in form to a tax increment financing
district. In addition to funding the transit portion of the project,
funds generated by the tax allocation district will be used to pay for
other project components, including 1,300 acres of new parks and green
space and 33 miles of trails.
[27] In Maryland, special assessments are often established along with
tax increment financing districts and may be used to repay the tax
increment financing bonds in the event that the revenue from the tax
increment financing district is not sufficient to service the debt in
a given year. The assessments are refunded if the tax increment
financing district generates sufficient revenue to cover the debt
service on its own.
[28] During our site visits, state and local transit officials
identified and provided us with financial data for several major
transit infrastructure projects and transit-oriented developments that
have been (or are being) funded in part by other value capture
strategies. In some cases, revenue generated through the use of value
capture strategies was projected, not actual. We included these
transit projects and transit-oriented developments in our analysis
because (1) the developers and local governments have agreements in
place, or (2) the tax increment financing or special assessment
districts have already been formally established and a portion of
expected taxes and fees are already being collected.
[29] In some cases, the upfront funds for the transit infrastructure
were repaid to the private developer through credits toward lease
payments.
[30] Value capture strategies often rely on the actual or projected
increase in property values to generate revenue to help fund transit
or transit-related projects. Consequently, transit project
characteristics and project designs that positively affect property
values help to optimize the use of value capture strategies.
[31] [hyperlink, http://www.gao.gov/products/GAO-09-871].
[32] In addition, literature that we reviewed reported that the risk
in using value capture strategies increases during poor economic times.
[33] One official told us that as of June 2010, the market for selling
tax increment bonds has improved, and that some projects that were on
hold because of the weak economy are now being pursued.
[34] The Mills Act, codified at Cal. Pub. Util. Code § 99000 et seq.
In addition, in 1983, the California State Legislature specifically
authorized the Southern California Rapid Transit District to levy
special benefit assessments upon parcels of land and corresponding
improvements that surround the Metro Rail rapid transit stations. Cal.
Pub. Util. Code § 33000 et seq.
[35] Md. Code Ann., Corporations-Municipal, art. 23A, §44A(b). See
2009 Md. Laws HB300.
[36] Cal. Pub. Util. § 33002(d)(2009).
[37] Md. Code Ann., Economic Development, art. EC §§ 12-204, 12-207;
§§ 12-208-210 (2010). Senate Bill 63, introduced in the 2010 Maryland
General Assembly, would authorize counties and municipal corporations
to directly fund the costs of the operation and maintenance of certain
improvements for transit-oriented development from the levy of tax
increment revenues.
[38] Cal. Const. art XIIIA. California's Proposition 13 amended the
California Constitution in this regard.
[39] Cal. Const. art XVI,§ 16; Cal. Health & Safety Code § 33030 et
seq. Or. Rev. Stat. chapter 457.
[40] Or. Rev. Stat. § 457.420.
[41] 49 U.S.C. § 5302(a)(1)(G)(ii), which defines "capital project for
joint development, excludes the construction of a commercial revenue-
producing facility (other than an intercity bus station or terminal)
or a part of a public facility not related to public transportation.
[42] See Notice of Final Agency Guidance on the Eligibility of Joint
Development Improvements Under Federal Transit Law 72 Fed. Reg. 5788,
5800 (Feb. 7, 2007).
[43] See Notice of Final Agency Guidance on the Eligibility of Joint
Development Improvements Under Federal Transit Law 72 Fed. Reg. 5788,
5798 (Feb. 7, 2007).
[44] At the time of our meeting, this official had not yet contacted
FTA regarding the proposed joint development. Transit agency officials
told us that park and ride users were directed to other parking lots
at nearby stations, alleviating the need for the parking spaces.
[45] 49 C.F.R. § 18.31(c)(2).
[46] Transit-oriented developments can be more expensive because they
(1) often include structured parking, (2) require expensive firewalls
to separate retail and residential uses if they are mixed-use
developments, and (3) incorporate pedestrian-oriented design to
provide connections to transit.
[47] See FTA Circular 4220.1E, Third Party Contracting Requirements,
June 19, 2003. See also 49 U.S.C. § 5302(a)(1)(G), making third party
contracting requirements applicable for joint development
improvements, as applied by FTA through 72 Fed. Reg. 5788 (Feb. 7,
2007).
[48] FTA Master Agreements, Section 19.a, October 1, 2009. According
to FTA, a fee simple sale would require the grantee to remit the
proceeds to the federal government. Other transfers would require the
grantee to protect the "federal interest" in the use and control of
the real property for a public transportation purpose.
[49] 49 U.S.C. § 5334(h)(4).
[50] 49 C.F.R. § 18.25(g)(5) allows FTA grantees to retain program
income for allowable capital or operating expenses. According to FTA,
program income can include income generated by a lease. In addition,
according to these officials, FTA policy considers joint development
revenues as program income, which can be used for either capital or
operating expenses.
[51] A standard grant requirement for FTA funds is that the transit
agency demonstrate financial capacity (as well as legal and technical
capacity) to carry out the program, including development of a transit
investment. See FTA Circular 5010.1D, Chapter II.
[52] One project sponsor told us that although the Small Starts
program was designed to provide funding for less expensive projects,
such as streetcars, the program has the same requirements as larger
projects and the program has not been supportive of streetcar
projects. The first streetcar project funded through Small Starts was
approved in October 2009.
[53] FTA officials explained that the New Starts process requires
project sponsors to use the future population and employment forecasts
officially adopted by the Metropolitan Planning Organization (MPO) as
inputs to the travel forecasting model. Thus, to the extent these
forecasts take into account future high-density development, they are
considered in the New Starts process. FTA does not allow project
sponsors to assume growth beyond that officially adopted in the MPO
forecasts because there would be no basis on which FTA could verify
the legitimacy of the projections.
[54] The transit agency told us that during this period of time,
construction costs increased in part due to increasing world-wide
demand for materials needed for the rail project.
[55] GAO, Public Transportation: Better Data Needed to Assess Length
of New Starts Process, and Options Exist to Expedite Project
Development, [hyperlink, http://www.gao.gov/products/GAO-09-784]
(Washington, D.C.: Aug. 6, 2009). FTA noted it has taken several steps
in the last year to streamline the New Starts process to the extent
possible under the existing statutory and regulatory framework. FTA
has also undertaken the rulemaking process to help improve the process
further.
[56] Pub. L. No. 110-244, § 201(b)(1)(d), 122 Stat. 1572, 1610.
[57] To evaluate cost effectiveness for New Starts projects, FTA
establishes five breakpoints, each of which reflects a dollar range
for different ratings of a project's cost effectiveness (i.e., high,
medium-high, medium, medium-low, and low). FTA assigns a cost-
effectiveness rating to each project, and annually updates these
breakpoints to reflect inflation.
[58] See Advance Notice of Proposed Rulemaking (ANPRM), Major Capital
Investment Projects, 75 Fed. Reg. 31383 (June 3, 2010).
[59] FTA issued final policy guidance in July 2009, which among other
things weighted economic development separate from land use. 74 Fed.
Reg. 37763 (July 2009).
[60] Other taxes, such as sales taxes, fuel taxes, or other vehicle-
related taxes could be used as a source of repayment. For instance, a
TIFIA loan for the Tren Urbano transit project was issued based on a
pledge of fuel taxes, tire taxes, and vehicle registration fees.
[61] SAFETEA-LU authorized $122 million in TIFIA financing for fiscal
years 2005 through 2009. Pub. L. No. 109-59, § 1601, 119 Stat. 1144,
1242. In addition, TIFIA is limited to financing one-third of a
project's reasonably anticipated eligible total cost. Pub. L. No. 109-
59, § 1601, 119 Stat. 1144, 1241.
[62] 74 Fed. Reg. 63498 (Dec. 3, 2009).
[63] Small-scale streetcar systems were excluded because a review of
systems in this category determined that most were trolley museums or
intended primarily for tourists, rather than a form of public
transportation.
[64] Twenty-two bus agencies operated a fixed-guideway system and were
also identified as one of the 30 largest bus agencies (based on
average weekday ridership).
[65] We contacted operators of fixed-guideway systems because we
believe based on prior work that the permanency of stations along
these systems is more likely to encourage nearby private development,
and therefore the use of value capture strategies, than systems with
less permanent facilities. However, we contacted the largest 30 U.S.
bus agencies to ensure that the information we collected was robust,
and to get a sense of whether bus agencies are finding ways to
implement value capture strategies despite the lack of a fixed
guideway.
[End of section]
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