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July 2013

Rail News: Rail Industry Trends

Transit-oriented development in Atlanta, Portland, Charlotte and Phoenix


— by Angela Cotey, associate editor

Concentrating development near transit stations is hardly a novel concept. At the turn of the 20th century, streetcar systems drove the development of new neighborhoods and business districts along various routes in nearly every large U.S. city.

The modern-day version of the concept — transit-oriented development (TOD) — isn't much different. Beginning in the mid-1990s, some agency planners began thinking about how they could develop land near station sites to help drive ridership and boost revenue. Agencies such as the Metropolitan Atlanta Rapid Transit Authority (MARTA), Tri-County Metropolitan Transportation District of Oregon (TriMet) and Washington Metropolitan Area Transit Authority were among the first in the United States to consider how they could better encourage development of station-area land.

Other U.S. transit agencies since have followed suit and are working with their city partners to incorporate TOD into station-area planning efforts. As a result, the land surrounding many urban transit stations has become a magnet for shops, restaurants, entertainment venues, apartments and condominiums.

"We're in the business to move people and move them as efficiently as we can, but a great secondary benefit is the development attached to a rail program," says Hillary Foose, spokesperson for Phoenix's Valley Metro.

More cities and residents are embracing that benefit. An increasing number of people are moving closer to city centers to be near restaurants, entertainment venues and offices. City planners welcome the shift; if metropolitan areas are to accommodate a growing population, cities will need more dense development and a stronger reliance on public transportation.

"The regulatory environment has become a bit better for TOD," says Jeff Wood, new media director and chief cartographer for Reconnecting America, a nonprofit organization that helps communities address development challenges. "Before, a lot of dense development and smart growth was seen as illegal based on zoning codes. That's now changing as some cities make the proper regulatory changes."

Transit agencies' level of involvement with station-area development varies. Some leave it entirely up to the city. Others actively pursue developers to purchase or lease property the agency owns to build mixed-use developments. And some work with city planners and development teams to encourage the right mix of commercial, office and residential property near stations. But whatever their role in the development itself, agencies' primary charge is the same: to make sure the "T" in TOD is as efficient and reliable as possible.

"Transit-oriented development requires a quality of service that makes transit a convenient and attractive choice — you can't rely solely on people who are willing to be car-free," says TriMet Director of Real Estate Jillian Detweiler. "Agencies are trying to focus their service around a lifestyle as opposed to just a commute."

Here are the TOD experiences of a cross-section of U.S. transit agencies that have helped foster a transit-centric lifestyle by attracting developments near their stations.

MARTA: Poised For A Comeback

The Metropolitan Atlanta Rapid Transit Authority (MARTA) has been involved with TOD since the late 1990s, when BellSouth Corp. — now part of AT&T — constructed a 1 million-square-foot office building that incorporated an entrance to MARTA's adjacent Lindbergh Center.

In the years that followed, MARTA had a "very active" TOD program that led to more development at Lindbergh, as well as at the Medical Center station and a number of other sites, says Director of Development and Regional Coordination John Crocker. But when financing began to dry up in 2008 as the recession took hold, development halted.

MARTA real estate and development officials used the downtime to create TOD guidelines and policies that would provide the agency with a framework for projects going forward. MARTA owns about 200 acres around its stations that it can sell or lease to developers. By being more strategic about how it exploits that land, the agency can capitalize on potential revenue opportunities.

"We wanted to take a more formal, deliberate approach [to TOD]," says Assistant General Manager of Planning Cheryl King. "We have our budget issues, so there is very much an emphasis on return on investment. We want to bring some revenue to the bottom line and increase ridership."

MARTA planners have identified 10 sites they would like to see developed during the next several years and set a goal to have five actively under development in the next two years.

TOD guidelines include a policy stating that 20 percent of any housing developments would be affordable housing. MARTA also specifies that it prefers to sign a ground lease with developers rather than sell property.

"With a ground lease, we can use the money for operations. If we sell land, all the money goes toward our capital budget," says King, adding that MARTA has a budget mandate that requires it to split sales tax revenue 50/50 between operating expenses and capital improvements.

Station Stats

Along with the TOD policies, MARTA planners created profiles for each station area that includes information on demographics, land use, local population and station use. The profiles also include an aerial view of the area and pinpoint where the agency owns land. The station-area profiles are posted on MARTA's website along with the TOD policies.

"The idea was to offer one place where developers could go to get good, basic information," says King.

MARTA has been reaching out to the development community, as well. The agency held a "development day" in March so developers, community activists, city officials and financial institutions could view sites MARTA hopes to generate interest in. And, Crocker recently attended an International Conference of Shopping Centers event to speak with potential developers, explain the opportunities MARTA has available and help build the agency's developer database.

"We want to be more friendly and inviting," says King. "That way, we can have better competition for the project sites we want to develop."

The agency plans to issue a request for qualifications to develop land near the King Memorial Station just east of downtown Atlanta by the end of summer.


TRIMET: Contributing To A Portable Portland

TriMet became a poster child for TOD in the late 1990s, when it was nearing completion of the MAX light-rail extension to Portland's west side. The agency owned construction staging sites it no longer needed, but TriMet officials didn't simply want to sell the property to the highest bidder; they wanted to encourage more dense growth.

TriMet's proposal prompted the Federal Transit Administration (FTA) to issue a policy on joint development in 1997, says TriMet's Detweiler. Joint development enables a transit agency to maintain control of land purchased with federal dollars even after the agency no longer needs it. Then, the agency can determine the type of development that would best suit a location.

In the early 2000s, TriMet oversaw two joint development projects: a condominium project with structured parking and a mixed-use affordable housing project, both located on former construction staging sites for the Westside MAX Blue Line.

In the years since, TriMet has completed a number of joint development projects. The agency partnered with Portland Community College, which built a workforce training center on an under used transit park-and-ride lot next to a light-rail station on the MAX Blue Line.

"What's great about this building is it's active from early morning to late in the evening, and it's made a lonely transit center a much more vibrant place," says Detweiler.

TriMet also entered into an agreement with Portland State University, which recruited a developer to build a 16-story student housing complex on a site on the Portland transit mall, along with two new light-rail stations.

As part of its Portland-Milwaukie light-rail extension currently under construction, TriMet is working with a development team that wants to build a workshop on a small, narrow site that would be used to repurpose cargo shipping containers.

The agency also is giving up the site of an employee parking lot near a future light-rail station for a proposed three-story apartment building. And, near Orenco Station, a mixed-use development has been proposed on a TriMet park-and-ride lot.

But the agency has had a hand only in a small percentage of the billions of dollars worth of private development that has occurred near TriMet stations during the past 15 years. Officials wouldn't want it any other way; TriMet's mission is to operate transit service that meets the growing needs of the Portland metropolitan area and supports the city's growth plan.

"TOD without the "T" is just odd," Detweiler jokes.

CATS: Smart-Growth Strategy

From the 1970s to 1990s, Charlotte, N.C.'s population grew exponentially as it became the second-largest U.S. banking sector. The city's population grew 35 percent from 1990 to 2000 alone, and city officials project it will grow another 23 percent by 2030, says Charlotte Area Transit System (CATS) Transit-Oriented Development Specialist Tina Votaw.

The rapid population jump caused congestion and environmental concerns to mount. City and county officials began developing a smart-growth strategy that included building a light-rail network and encouraging dense development around the proposed lines.

"We've taken a multi-pronged approach as a city to build transit, with complementary land-use policies, rather than just letting it happen organically," says Votaw.

Although the recession sidelined many developers' TOD plans, a handful of projects now are being proposed or brought back to life. There are 1,600 apartment units under construction within a one-mile stretch of the LYNX system and another 900 to 1,200 units are scheduled to be built in the next two years, Votaw says.

"The downtown market, from a residential perspective, has very little rental property," she says. "These apartments are capturing professionals that are working uptown but don't want the ownership commitment of a condo or town home."

Development prospects are particularly strong in Charlotte's South End historic district, where a Publix supermarket is being built, along with additional space for shops and restaurants. The development will be within walking distance of the East/West Boulevard and New Bern light-rail stations.

The South End developments that are sprouting up along the Blue Line are helping to open up the downtown market to a larger demographic, says Reconnecting America's Wood.

"Charlotte built that line and the South End blew up because it gave people a short trip into downtown," he says. "We're seeing that all over the place — in Portland, Seattle, Houston, Phoenix, Minneapolis — markets are being extended by transit lines."

In the coming years, Charlotte-area TOD is expected to spread to other areas as CATS constructs a 9.3-mile Blue Line extension from uptown to the University of North Carolina-Charlotte campus. The TOD trend will continue for some time, Votaw believes.

"Back when developers were building suburban communities, they had to differentiate their projects somehow. They would rely on architecture, or an open space or a park," she says. "Now that the tides have turned toward more of an urban market, it looks to me that developers are using transit as one of the distinguishing factors to differentiate their product from another suburban development."

VALLEY METRO: 'A Place To Land'

After Valley Metro signed a Full Funding Grant Agreement with the FTA in 2004 for a 20-mile light-rail line serving Phoenix, Tempe and Mesa, Ariz., agency officials were unprepared for how quickly development would spring up near light-rail stations that weren't even yet built. Since the system opened in late 2008, it has attracted about $7 billion in economic development near rail stations.

One of the prime examples? CityScape, a mixed-use development located in the core of downtown Phoenix that features 1.8 million square feet of office and retail space with a mix of specialty stores, boutiques, restaurants and entertainment venues.

"Downtown Phoenix has historically been a business district. People would come to work and then leave afterwards," says Valley Metro's Foose. "The light-rail system has made it less intimidating to get downtown, and developments like CityScape give people a place to land."

In Tempe, home of Arizona State University (ASU), developments along Apache Boulevard are geared toward students and a younger demographic. For example, Campus Suites on the Rail features 12,000 square feet of retail space and 299 residential units. Located near the McClintock/Apache Boulevard Station, the suites are a five-minute trip to the ASU campus via light rail.

"It has really expanded opportunities for students to live in nice accommodations and live a little bit more independently, and still have a seamless transportation connection to the campus," says Foose.

Valley Metro is planning a handful of light-rail extensions, and agency officials plan to be more involved in the station-area planning process. Although development planning is largely a city initiative, with city officials establishing zoning regulations, Valley Metro leaders are working with city planners to develop form-based codes that help outline the type of development they'd like to see occur near stations.

Agency officials also are determining how they could establish a public-private partnership of sorts with local cities and developers, under which Valley Metro would receive a portion of the TOD-generated revenue to reinvest in the system and maintain a state of good repair, says Foose.

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