The Utah Transit Authority (UTA), which was constantly starved for tax revenue by Utah lawmakers, had few opportunities to generate revenue beyond the tariff.
UTA’s somewhat new TOD program is trying to change this. The strategy approved by the legislature is to achieve a return on investment on the railway lines built by the agency.
Since 2014, UTA has been converting leftover land acquired during the construction of the train station and lines into revenue-generating investments.
These are “joint development ventures” with private developers who have the blessings of local communities.
UTA’s TOD program appears to be paving a new way for an important “valuation” in Utah. Here, companies paying for transportation investments can get taxpayer money back by collecting some of the new income generated by the investment.
In the past, UTA and local authorities had too few tools and not enough willpower or creativity to win back public investment. However, the current financing realities seem to demand this.
UTA Common Development TODs
UTA’s TOD strategy appears to be an important part of UTA’s future business model. When it was first launched in 2010, the agency had high hopes that TOD revenue would largely offset operating costs, Paul Drake, Director of Real Estate and TOD at UTA, told Building Salt Lake.
The program started in 2014 with the goal of working with five cities to create station area maps and attract development partners for the locations. In 2020 (SB150), lawmakers lifted the five location limit for the number of TODs in which the agency could participate. Since then, the interest of cities and developers has risen sharply, and another five locations are in the works.
By bringing in land that UTA had already acquired during the construction of its railway lines, UTA can claim a significant share in their typical common development. If these buildings are fully let with office, retail and apartment tenants, the agency will be given a promising cash flow.
Of the four projects UTA built, three generated $ 24 million in three years of operation (2017-19). This type of return is due to the value of UTA’s equity investment and the terms negotiated with the private development partner.
The South Jordan Station consists mainly of office and hotel (with 15,000 SF retail), the Sandy Civic Center (“East Village”) consists mainly of residential and office buildings and the Jordan Valley Station is a large residential area (477 units) with nominal retail (5000 SF). . All are rental products.
So far, the common parking conditions of UTA have been between 0.5 and 1.5 per unit. With 2.5 to 4.5 stands per 1,000 sf, the parking conditions in the office are just as high as in conventional ones. In the case of the development of the South Jordan FrontRunner station, these stands will be shared with the hotel, which is essentially parked at 0, Drake notes.
At the TRAX Meadowbrook station in 3900 S., the “Hub of Opportunity” project has classified over 50% of its units as affordable and is designed for residents with disabilities. A training facility for autistic students will be located on the ground floor of the project, said Drake from UTA.
“No new track” … unless you are leading the dance?
The agency’s current mantra is: “We have no money for capital projects.” She still has over $ 2 billion in debt for the service from the 2010-15 Front Lines expansion project (70 miles of light rail and local rail).
This is due in part to the fact that the communities in UTA and Utah that contributed to the transit construction have done poorly in the past in valuing. Missed opportunities like the S-Line and TRAX trams in the southern city center along the 400 South and North Temple come to my mind.
Bumps in property tax receipts for new growth or increasing sales tax numbers are estimated. However, they do little to ensure that the financiers pay off and should not be counted as a value entry.
In Utah, however, two new instruments can make real value recording possible: 1) UTA’s strategy of real estate investment and participation in joint development projects and 2) Transport Investment Zones (TRZ), which were made possible and further developed by the legislature in 2018 (SB136) in 2019 (SB72).
A transportation reinvestment zone is a new type of tax hike financing tool available to transportation agencies and local tax authorities who are serious about valuing. According to sources, Salt Lake City, Clearfield and American Fork are currently considering TRZ options. UDOT should also offer opportunities.
TRZs can offer municipalities like Salt Lake City, whose master plans include an expansion of the tram, an opportunity to become a major financing partner of UTA for rail investments.
While the transit agency makes it clear that it will not initiate new rail construction, UTA welcomes partnerships such as the S-Line tram project, in which Salt Lake City played a leading role.
Transport investment, real estate investment
The value of transport infrastructure for real estate investments is invaluable. A current example from our time of car nomination: suburban development was dependent on roads that were built over large areas of open land.
When critics complain that “the suburbs are subsidized by the state,” they point out that DOTs have not captured the value of building roads and highways outside of the city center. America appeared to be wealthy enough to have DOTs paid for on streets and reap only peripheral tax benefits, such as higher gas tax revenues.
Since government DOTs are only interested in roads, transit builders had to look elsewhere for investment funds. Successful value creation projects have combined a bond that is secured by various location-specific property taxes + fees and federal grants.
Value recording for transit: what works in other places?
According to a comprehensive study by the National Academy of Sciences’ Transportation Cooperative Research Program (2016), only one U.S. transit expansion program has successfully covered costs to cover costs – the Portland Streetcar.
The downtown Portland tram was built in five phases and currently spans 7.35 miles at a cost of $ 251 million. It is considered an example of the light rail system, which has achieved both the goals of transport mobility and real estate development.
Portland Streetcar Corporation combined several bond issues funded from three sources: a local improvement district, a TIF district, and a parking fee district, and was able to leverage significant funds from the Federal Transportation Administration (FTA). No participation in properties adjacent to transit lines was mentioned.
The Bronx-Queens Connector (BQX) in New York City suggests using similar mechanisms to fund its investment, a $ 2.7 billion 16-mile project that is slated to begin construction in 2024 .
From the forecast cost of capital of $ 2.7 billion, NYC expects property tax to increase by $ 1.3 to 4 billion. This direct cost recovery is expected to be part of the $ 30 billion gross economic impact over the next 40 years.
Portland Streetcar claims to have contributed to the $ 8.4 billion property value in the 20 years between 1998 and 2017. Almost half of all of the city’s residential units during this period were created within a quarter of a mile of the line.
Hong Kong, Tokyo and Singapore are also considered successful in the TCRP study to achieve significant value in transit investments. Close integration of property and transit development – and operations – is key. There, the income from leasing and property management is an important donor for transit operations.
Paul Drake of UTA is convinced that “we have the potential to generate significantly more sales for the company through TOD investments.”
The obstacle is that the agency only works with land that has already been acquired. “It is a finite resource and we will assume if we don’t reinvest in new real estate.”
Will the opportunity for cities and UTA to gain value through shared development and TRZs will inspire them to dance the next dance together? In places where an increase is possible, it can be difficult to reduce the increase in property tax revenues – especially if these are recorded and used for future transient development.
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