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.

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. The Federal Transit Administration (FTA) encourages Joint Development by providing funding that not only covers the cost of transit projects, but additionally covers many of the planning and infrastructure costs a developer would typically incur……these can be quite significant, depending on the size and scope of the project.

In some instances, your municipality may be served by a transit agency. Working together with them to maximize the benefits of TOD Joint Development in your urban planning is critically important.

In other cases, the local transit service may be a division of your local municipal government. Here, you may have significant control of exploring TOD Joint Development opportunities as part of any transit or urban development project.

In not considering TOD Joint Development, you could be missing out on significant long term income streams for your municipality. Additionally, Joint Development typically results in more comprehensive development that further benefits a community in numerous ways.

TOD Joint Development should be considered by all municipalities because:

• TOD provides additional program revenues from increased ridership


• Joint Development may provide additional long-term shared benefits from the partnership with the developer in the non-transit component.


• TOD Joint Development promotes Public/Private partnerships for economic development through land use planning and transit

Following are typical questions municipalities ask:

Why should I consider TOD and Joint Development in my projects?

The FTA has specifically designed these funding programs to provide additional benefits for municipalities that manage their own transit assets. If your municipality is serviced by a transit agency, it is in your best interest to coordinate their transit projects and your urban development planning. If you do not consider TOD and Joint Development in every project, you are very likely passing-up significant additional benefits that TOD and Joint Development can provide to your municipality.

A transit project is the centerpiece of TOD and Joint Development. Each transit project provides a variety of development opportunities beyond the transit project itself. By incorporating mixed-use development above, adjacent to or surrounding a transit project and partnering with the developer of those components, you can increase transit ridership, make the development more appealing and receive long-term income streams from the development project. Additionally, TOD and Joint Development are excellent vehicles to community economic revitalization and incorporating these concepts will only enhance and protect the value of the transit project and your community.


How do I know if my project qualifies?

To qualify, your project must involve both a transit and non-transit component. To what degree the various components qualify for FTA funding is dependent on how well the non-transit development components are intertwined with the transit project. This is where Urban Innovations’ assistance is invaluable. We are aware of the many and varied Federal, state and local funding programs and their requirements. Urban Innovations will work with you, the developer and the transit agency, if applicable, to integrate the transit project and the development to maximize the funding benefits to the project.

In order for a TOD or Joint Development project to be “fundable” under FTA guidelines, certain criteria must be met. 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 partnering transit agency or municipality
   
   The FTA grant is essentially an investment by FTA in the transit system. Additionally, many times you or your transit agency are 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 land in its “highest and best transit use”
   
   Here, we have a valuation exercise that addresses the best use of the 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 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 guidance, 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 benefits to your municipality.


What benefits can I receive and how substantial are they?

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 components in the project.

The greater the grant funding provided to your project and the more valuable the land contributed to the Joint Development, the greater the long-term Joint Development benefits for your municipality…….in essence, you have contributed significantly to the project and should receive greater long-term income streams.

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.

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. 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.


Will TOD Joint Development grant funding interfere with other funding we currently receive?

Absolutely not……these programs were developed by Federal, state and local governments to encourage TOD and provide a return on investments in transit projects. There should be no conflicts with your current funding levels and sources.


How does the timing of TOD Joint Development funding coincide with my project timetable? Will it really happen?

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 needs to 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.

Yes, TOD Joint Development projects really do happen. Since FTA started to encourage this development strategy in the early 1990s, more and more developers, transit agencies and municipalities are embracing this efficient, lower cost approach and partnering together to everyone’s mutual benefit. Over 100 Joint Development projects have been completed since 1994. More and more funding programs are becoming available at all levels and clearly we are entering the TOD era.


What are the benefits provided and the challenges to overcome?

The major benefits that TOD provides to your transit agency and municipality are increased program revenues from increased ridership, additional long-term shared benefits and enhanced urban development.

• By partnering with developers and providing FTA funding for your Joint Development project and contributing significantly to the project with land or other assets, you are ensuring new, long-term revenue streams from the development. As described above, these cost savings to developers can be quite substantial and this translates into benefits for you.


• With the surroundings of the transit facility being more attractive and comprehensive, it is natural for ridership to increase.


• A Joint Development project will create an enhanced transit facility with amenities and attributes that only a Joint Development approach can bring. The TOD approach may also make possible additions to the transit facility otherwise not considered……like the addition of a maintenance section, etc. This new or improved facility and the surrounding development also provide tremendous economic benefits to the community at large, generating higher property and sales tax revenues and possibly increasing the employment base.


• TOD developments create a safer environment. By their design, they focus on pedestrian comfort and safety. And, because they create continuous activity, they create a safer environment for everyone.

Like any development project, there are risks and challenges with TOD Joint Development:

• Within your organization you must have internal support…..your organizational cooperation is key to a TOD Joint Development project happening.


• Coordination among local government, the transit agency and the developer is essential. Everyone must be informed about the major benefits that a TOD Joint Development project will bring to their community. It is critical to modifying zoning requirements and taking other steps to facilitate the project.


• Decision makers and persons of influence in all stakeholders need to be educated about TOD Joint Development and kept well-informed as the project progresses through the various planning and funding stages prior to construction.


• Financing is always important to major development projects. While TOD Joint Development funding is one source, many other public and private sources need to be explored and coordinated.

How do I get started?

It’s easy to get started. Just contact us to arrange for Urban Innovations to review your project for TOD potential. If you have a developer already involved that is fine. If not, we can help you find the right partner through our numerous developer relationships. There is no cost for our initial evaluation and we should then be able to determine if it makes sense to schedule an appointment to discuss your project in greater detail.