Regional PlanningTransportation/TransitUrban Development

Governance strategies to achieve transit-oriented development

By December 12, 2017 3 Comments

The GTHA must harness opportunities to achieve transit-oriented development and value capture, writes guest blogger Robert Yaro. (Photo: Dominic Ali/CBI)

By Robert Yaro (CBI guest policy blog)

The Greater Toronto Hamilton Area (GTHA) faces several transit governance challenges. But they are not insurmountable. With smart polices and creative approaches, practical solutions could usher in a Golden Age of regional transit. In this guest blog, U.S. urban planning expert Robert Yaro provides specific recommendations and examples from other global cities on ways to integrate and optimise the GTHA’s transit systems for the future.

Yaro, president emeritus of the New York-based Regional Plan Association, is a professor of practice at the University of Pennsylvania, and has consulted on city and regional planning issues around the world. He recently participated in the Ryerson City Building Institute’s discussion devoted to breaking the GTHA’s transit governance gridlock.

Integrating regional transit and growth planning

Metrolinx’s long-term Big Move investment strategy provides a blueprint of the transit investments needed to accommodate mobility needs around an expanded high-performance regional transit network. However, the agency currently lacks the funding and revenue tools to complete these investments, as well as the powers to coordinate the region’s growth and land use around an expanded system.

Solutions are within our grasp. Empowering Metrolinx to coordinate and leverage transit oriented development would address several interrelated issues, such as:

  • Achieving the necessary densities around transit to boost ridership and mode shift beyond projected status quo and reducing highway congestion;
  • Building complete communities that are mixed-use, walkable, and provide a range of housing types and affordability as well as employment that is transit accessible; and
  • Capturing a larger quantum of development-related revenue beyond development charges and other one-time payments.

This Port Credit GO station is an example of transit-oriented development in Toronto’s suburbs. (Photo: Dominic Ali/CBI)

Transforming station areas with joint development projects

With these goals in mind, one option is to transform surface and structured parking areas at stations into high-density, mixed-use sites through joint developments. Partnerships with private developers are one of the most promising ways to create and capture value. The value created by intensive development could be shared by private companies and by Metrolinx, which could then dedicate the proceeds to financing its capital program.

Joint developments may also help regional transportation adapt to the future. Automated vehicles and shared vehicle technologies are quickly maturing, and now is the time to plan for a time when station-area commuter parking can be dramatically reduced or entirely eliminated. In the New York region, the Regional Plan Association’s new 4th regional plan calculated that a significant share of the area’s growth can be accommodated in transformed station areas.

Asia already provides a model for others regions to follow. Hong Kong’s MTR is the world’s best example of a transit operator with extensive joint development projects around stations that subsidize its capital and operating expenses. In many ways, MTR has become an urban development company with a transit subsidiary. It is one of world’s only profit-making transit agencies, and is even listed as a private company on the HK Stock Exchange. (Albeit with the HK government maintaining a large stake.)

Singapore’s MRT transit agency has also pursued similar joint developments. The Singapore and Hong Kong projects were feasible because the governments own much of the land involved, and have used their planning and zoning authority to advance them.

NYC’s landmark Grand Central Terminal is a historic example of a joint development project. (Photo: Kwan Cheung Ho/Flickr)

Joint development in New York—past and present

New York City is now making intensive use of joint development projects. There are several examples of land above or adjoining a transportation hub being redeveloped as joint ventures. In a way, it is a return to the past. There are wonderful historic precedents in New York. Perhaps North America’s oldest joint development project is New York’s Grand Central Terminal and the adjoining Park Avenue district bounded by 42nd and 53rd Streets, and Madison and Lexington Avenues.

This part of the city was transformed from an unsavory collection of slaughterhouses and warehouses into the city’s premium office district when the New York Central Railroad under-grounded its 4th Avenue railyards in the first decade of the 20th century. The railroad transformed 4th Avenue into Park Avenue, and cross-town streets were rebuilt on bridges over the yards. The interstitial spaces and their air rights (known in Britain as “flying freehold”) above the tunnel and yards were sold and leased to commercial and hotel developers. The proceeds financed the railroad’s magnificent Grand Central Terminal. Millions of square meters of commercial and hotel space were built in this area following completion of the Terminal in 1912. This bold vision led to the expansion of NY’s central business district from Lower Manhattan into what became Midtown, the city’s largest employment center.

In recent years, New York’s Metropolitan Transportation Authority (MTA) and the City have rediscovered joint development to finance the transit agency’s capital program while promoting regeneration of bypassed districts. A recent example is 1 Vanderbilt Place, a new 57-storey mixed-use tower being built over the new Long Island Rail Road (LIRR) terminal adjoining Grand Central Terminal. The project is a partnership involving the MTA and City with the SL Green Company. In return for the City’s upzoning, the developer will invest $220 million in improvements to Grand Central and the LIRR terminal.

Hudson Yards station is a recent example of a jointly developed transit-oriented development. (Photo: Nick Normal/Flickr)

New York’s largest development in the past generation is Manhattan’s Hudson Yards, which is being constructed on air rights over the MTA’s LIRR West Side Yards. The MTA entered into a long-term lease arrangement with Related Companies and Toronto’s Oxford Properties to develop over a million square meters of office, retail, and residential space along with a new Culture Barn cultural facility.

On a nearby air rights site, Toronto’s Brookfield is developing Manhattan West, a new complex of three high-rises and renovation of an existing commercial building over the Northeast Rail Corridor west of Penn Station.

In Brooklyn, the nine-hectare Pacific Park is being developed on air rights over the MTA’s Atlantic Rail Yards and a major subway interchange. The Barclay’s Center sports arena, completed in 2012, is part of this development that will eventually contain 6400 residential units, several hundred square meters of commercial and retail space, and 3.4 hectares of open space. The MTA has entered into a long-term lease with the Forest City development company to build this complex over a major transportation hub in downtown Brooklyn.

The new World Trade Center is a 1.2 million square meter development with commercial, retail and other activities being built over the Port Authority’s PATH (Port Authority Trans Hudson) transit terminal. It will replace the former WTC that was destroyed in the 9/11 terrorist attacks.

Denver Union Station is the city’s main railway station and central transportation hub. The station was transformed in 2012 as a joint development project into a transit-oriented mixed-use development built on the site’s former railyards. (Photo: Ken Lane/Flickr)

Joint developments work for all types of cities

There are other prominent U.S. examples of joint developments that could help inform future Metrolinx plans. Denver Union Station established a special-purpose corporation (Denver Union Station Partners or DUSP) to develop the area around the expanded regional rail, light rail, and bus terminal. In San Francisco, a mixed-use air rights development is being constructed over the new Transbay terminal transit hub, which will house transit, bus, regional rail, and high-speed rail terminals.

Companies are also making headway with their own developments. Amtrak is advancing mixed-use air rights developments over its railyards in Baltimore, Philadelphia, and Washington, DC. In Philadelphia, three towers have been built in the Schuykill Yards air rights development adjoining Amtrak’s 30th Street station. The project’s next phase is being jointly pursued with Brandywine Realty and Drexel University, and is being advanced as a proposed university-related innovation district along with the University of Pennsylvania campus.

In Miami, the New York-based private equity firm Fortress Investment Group purchased the Florida East Coast Railroad and proposed building the “Brightline” high-speed rail route from Miami to Orlando, largely financed with proceeds from major developments in Miami, Fort Lauderdale, and other station locations. Although the real estate part of this project is underway, the rail project is still not fully financed.

The exterior of a train that will run on the new Elizabeth line (formerly Crossrail) in London, England. The new line is expected to be completed in 2018. (Photo: Transport for London)

What’s happening across the pond

In London, England, several joint development projects are taking place around the new Crossrail (now called the Elizabeth) regional rail line, which will open in 2018. One of the largest is the new Canary Wharf station in Docklands. Canary Wharf Ltd. is developing a large retail mall on top of the new station, which it is also building at no cost to the project. Another large development is Old Oak Common in West London, where the Greater London Authority is planning a massive mixed-use development around its Crossrail station and the adjoining planned HS2 high-speed rail station. This project will be West London’s equivalent of Canary Wharf.

Other major joint developments are being completed around London’s St. Pancras and King’s Cross stations, where a former warehouse district is being transformed into a vital mixed-use development. The site will include an art school, housing, and office space, as well as the UK headquarters of BNP Paribas bank and Google’s European headquarters.

Construction at Hudson Yards in New York City. (Photo: MTAPhotos/Flickr)

Maximizing returns on joint development opportunities

All of these projects mentioned involve the sale or lease of air rights or land by transit agencies, producing revenues that can be used for capital investments. Many transit agencies have gone to extraordinary lengths to avoid acquiring more land than necessary for transit stations. But to make the most of joint development opportunities, they should take the opposite approach: acquiring as much land as possible around station areas.

Many agencies don’t always cut the best deals with developers, often because they are under enormous political pressure to advance these big projects. In many cases, they also lack in-house legal and real estate experts to successfully negotiate with large developers and their high-priced legal talent. This makes it critical for a public agency like Metrolinx to bring in the best legal and real estate advisors to get the best deals when structuring joint developments.

When structuring these deals, transit agencies are often unsure whether to sell or lease their land. My opinion is that public agencies should never sell land or development rights, but instead insist on long-term leases that return a portion of sales, profits, or rents on completed projects to the agencies. This way, the agency gets a share of the wealth it created that can go towards transit expansion or to fund other priorities, such as affordable housing, while building mixed-use communities and generating ridership and mode shift. Also, as property values and rents increase due to improved transit services, this wealth can be captured by both parties.

To this effect, city and regional governments should collaborate with transit agencies to maximize the value created around transit stations. The City of New York, for example, worked with the MTA to provide zoning density increases and other incentives to maximize the development potential of these sites. This cooperation is essential for many of these projects to work, given the high construction costs for decks and other infrastructure on most overbuild sites. Metrolinx should work with municipalities to achieve similar outcomes.

Finally, Metrolinx could consider creation of a region-wide land value capture system, in which a small portion of the uplift in property values across the metropolitan area would be dedicated to investments by transit operators such as Metrolinx, TTC and others.

Transit investments are needed to modernize regional transit systems for the future. (Photo: Steve Chou/Flickr)

Creating a collaborative governance system

Promoting coordinated transit investment and transit-oriented urban and suburban development won’t happen on its own. To achieve these goals Metrolinx should consider initiating a better collaboration with regional mayors, such as a “Metro Mayor’s Conference.” This group could convene up to four times each year with Metrolinx board and staff, and perhaps business and civic leaders. This process will create consensus around strategies to finance Metrolinx’s capital investment program and promote transit-friendly developments around this modernized and expanded high-performance regional rail system.

The new TTC station at Vaughan Metropolitan Centre. Toronto’s suburbs are ideal locations to implement transit-oriented developments that enhance the places where people live, work, and play. (Photo: Toronto Transit Commission)

Promoting TOD in surrounding districts

In addition to joint developments, several measures could be taken to promote transit-oriented development (TOD) in districts surrounding station areas:

  • Metrolinx could provide municipal planning grants that encourage regulations promoting walkable, mixed-use districts within a 3 to 5 km radius of transit stations, and embrace land value uplift/value capture techniques. In the New York metro region, New Jersey Transit has had a long-term partnership with the non-profit Regional Plan Association to assist communities in creating similar TOD plans.
  • Transit service improvements and capital investments should be targeted to communities that adopt transit-oriented development and uplift and value capture strategies.
  • Metrolinx should require communities to compete for new transit stops and services by committing to TOD/value capture plans and regulations.
  • Metrolinx should work with municipalities to manage emerging technologies and services such as autonomous and shared vehicles that improve access to transit stations and reduce parking demand. If properly managed, these strategies could transform current parking spaces and travel lanes into expanded pedestrian areas and an improved public realm in regional stations and reduce the “last mile” commuting challenge.
  • In addition to joint developments at station areas, Metrolinx should work with the Mayor’s Conference and regional municipalities to capture a share of the land value uplift from transit investments and improved services. This can be achieved by requiring developers to purchase development rights in TOD districts (as in NY’s Hudson Yards); establishing tax-increment financing (TIF) districts where a portion of the “uplift” in property values is returned to Metrolinx (California recently created statewide authorization for individual municipalities or groups of cities to establish TIF districts; similar legislation may be needed in Ontario); and creating or expanding real estate transfer taxes in station areas or across the region to acquire a portion of the capital appreciation.

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