Transit Oriented Development (TOD) is a strategy that focuses high-density development around bus or rail transit systems, capitalizing on transit investments by bringing activities and potential riders closer to transit and increasing ridership. TOD encourages walkable, compact and infill development around transit, and successful TOD will reinforce both the community and the transit system. For developers, TOD, through its association with transit, makes developments less expensive and more accessible, and therefore, more desirable, valuable and profitable.

An extension of TOD is Joint Development, where a municipality or transit agency partners with a developer in a joint project that includes a transit and non-transit component. TOD funding programs are designed to cover a variety of planning and infrastructure costs for developers who participate in Joint Development projects related to transit. Depending on the size and scope of the Joint Development, these benefits can be quite significant to a developer. Following are typical questions developers ask:


Does my project qualify?

The Federal Transit Administration (FTA) has defined in their regulations what constitutes a “fundable” Joint Development project. As you can imagine, these are fairly extensive. FTA has established three basic requirements for Joint Development projects. The project must:

1. Meet the statutory definition of a capital project
   
   Essentially, the development needs to be “physically connected” to transit…..that means located in, adjacent to or above in the air rights of a transit facility……or “functionally related” to transit…… that means its activity and use are linked to transit; it benefits the transit public or enhances use of or access to transit; and it is within approximately one-quarter mile of the transit facility.
   


2. Provide a reasonable financial return to the transit partner
   
   The FTA grant is essentially an investment by FTA in the transit system. Additionally, the transit agency many times is providing some or all of the land for the development. Accordingly, for anyone contributing assets to a venture, there needs to be a “fair and equitable” return. As in any Joint Venture, the partners need to work out an acceptable arrangement for all. This is documented in the Joint Development Agreement under FTA guidelines.
   


3. Employ the transit partner’s land in its “highest and best transit use”
   
   Here, we have a valuation exercise that addresses the best use of the transit agency’s real estate contributed and requires reasonable appraised market values to be employed. Essentially, this requirement asks the question……Is the proposed combination of residential, commercial, retail, public space, parking facilities and other amenities in the Joint Development going to produce the greatest level of social, economic and financial benefit to the transit system and the community it serves?
   

The above information is intended to provide developers with the “spirit” of the FTA guidance on Joint Development. Clearly, there are many detailed requirements, as well as gray areas, that need to be addressed including “functionally related”, “fair market value”, “greatest level of benefit”, etc. However, Urban Innovations is well-equipped to mold your project with the regulations, maximizing the short and long term financial benefits to you. Urban Innovations will work with all Joint Development partners, coordinating discussions with all stakeholders, including FTA, to prepare acceptable financial projections and analyses, as well as an equitable Joint Development Agreement that maximizes the available grant funding for your project.


How much does my project qualify for?

The size and scope of your project and how well its various elements fit into the requirements discussed above will dictate the extent of the grant funding that can be obtained. In just the FTA programs at the Federal level, there are a variety of “funding pots” that are available and defined by the type of transit component in the project. Project costs for TOD Joint Development that may be eligible for Federal funding include, but are not limited to, the following:

• Design, engineering, and environmental analyses


• Real estate packaging including preliminary design and engineering; estimates of operating income and expenses and capital costs; and negotiations to secure financing, developers, and prime tenants.


• Land acquisition, relocation, demolition of existing improvements, and site preparation (including brownfield reclamation)


• Foundations and substructure improvements for buildings over transit facilities.


• Open space and pedestrian connections and access links between transit services and related development.


• Other facilities and infrastructure investments needed to induce significant private investment and to improve access between new or existing development and transit facilities.


• Utility work.  Eligibility of costs of utility work associated with private investment will be considered on a case-by-case basis.  FTA grant funds will pay for costs of utility work that are attributable to non-FTA project purposes only when—(1.) The utility services a joint private and transit use; or (2.) The utility lines will be located under a co-located street or sidewalk or within other common elements so that it would benefit the project to provide adequate capacity at the outset of the project.


• Safety and security equipment and facilities (including lighting, surveillance and related intelligent transportation system applications).


• Facilities that incorporate community services such as daycare or health care.


• Parking elements.  All FTA participation in financing parking improvements must have a public transit justification and use.  Parking elements of joint development projects which meet this general rule will be considered on a case-by-case basis.


• Professional Services Contracting Costs. Grantees may incur reasonable and necessary costs for consultants to prepare or perform items listed above, or assist the grantee in reviewing the same. This includes the fees charged by Urban Innovations.

To qualify for this funding, depending on the circumstances, the project may need to comply with various “government contracting” requirements like the National Environmental Policy Act (NEPA), the Davis-Bacon Act, third party procurement requirements, and Buy America……these are evaluated on a case by case basis. Also, other basic clauses may need to be incorporated into project agreements such as non-discrimination, compliance with Americans with Disabilities Act, etc., depending on who owns the Joint Development land, how it was acquired, etc.

Beyond the basic FTA funding programs, a wide variety of other programs are available at the Federal, state and local levels that can bring additional grant funds to your project, as well as provide elements like low-interest financing for mortgages and tax credits. Urban Innovations will work with you to maximize the availability of these additional programs to your project. All of the possibilities are evaluated throughout the Urban Innovations’ Five Phase Process.


How does the timing of TOD Joint Development funding coincide with my project timetable?

Typically, even for relatively small Joint Development projects in the $5-20 million range, there is considerable lead time and planning that occurs. Although the FTA funding process takes some time and your project must get in the funding queue, it typically is not a delaying factor in a project. When Urban Innovations initially evaluates your project in Phase 1 of our approach, a key element to determining the feasibility will be how the available grant funding timing meshes with your project timetable. The sooner you have Urban Innovations make the initial evaluation, the better.


What are the benefits provided and the challenges to overcome?

The major benefits that TOD provides to your development are lower construction costs and higher property values:

• Obviously, reducing the cost of your development through TOD grant funding is a major benefit of participating in TOD Joint Development. As described above, these cost savings can be quite substantial for developers.


• The ability to access your development with transit makes your development more easily accessible by more people and therefore, more attractive and more valuable.


• TOD developments are safe. By their design, they focus on pedestrian comfort and safety and because they create continuous activity, they create a safer environment for everyone. Safety makes your development attractive and valuable.


• TOD developments provide a convenience to the public and reduce costly automobile usage. Convenience and economy make your development attractive and valuable.


• TOD developments will allow you to put more income earning assets into less space. More efficient land use and higher density development are corner stones of TOD.


• Higher density projects provide two additional major benefits that will make your development more attractive…..overall infrastructure costs are significantly reduced compared to traditional urban sprawl development and if residential housing is included, it can be made much more affordable.

Like any development project, there are risks and challenges with TOD Joint Development. Numerous stakeholders need to be coordinated……the transit agency and its transit facility needs must be met, the local government needs to understand the benefits the project will bring to the community, zoning needs to be modified to accommodate the development, financing needs to be arranged, etc. These are not unlike the challenges faced in any development project.

How do I get started?

It’s easy to get started. Just contact us to arrange for a review of your project for TOD potential. There is no cost to you for this initial evaluation. From this discussion, we should be able to determine if it makes sense to schedule an appointment to review your project with you in greater detail.