Mass transit agencies developing land to generate revenues

The actions of New York’s MTA – Metropolitan Transportation Authority – suggest a way American mass transit agencies can generate money: through partnering on transit-oriented development.

That is what inspired Harrison’s Halstead Avenue project, a $76.8 million mixed-use real estate development built in collaboration between the Metropolitan Transportation Authority (MTA), which oversees the Metro-North, and developer AvalonBay Communities. It is the first time ever that the Metro-North will sell a parcel of its land for transit-oriented development (TOD); in this case: 143 apartments, 27,000 square feet of retail space, two pedestrian plazas, and a 598-space parking garage, most of which is reserved for the public and commuters…

The New York MTA, the largest transit agency in the U.S., is becoming more familiar with this type of construction. The Hudson Yards project—where the MTA decked over its train yards, and sold the rights to developers for $1 billion to build an entire Manhattan neighborhood on top, with a new subway line extension beneath—is perhaps the largest TOD project in American history. At One Vanderbilt Avenue, an office building being constructed across from Grand Central Terminal, developer fees to the MTA will pay for interior improvements throughout the huge hub.

But the Harrison project marks a new direction for the cash-strapped MTA, which is on the hunt for new revenue: Decades of underinvestment and recent ridership declines have left the MTA with a projected $433 million budget shortfall, a gap that a recession could worsen. Meanwhile, critics agree that Manhattan’s soon-to-come congestion pricing scheme cannot alone cover the cost of the subway system’s badly needed overhaul. Capturing revenues from transit-oriented development on MTA-owned lots could help. So the agency is eyeing projects in suburban communities outside of Manhattan, with the hopes that the prospect of economic development will prod smaller towns to plot their futures near its train stations…

Transit agencies in Europe and Asia are much more likely use development as a revenue tool much more commonly than their U.S. counterparts. David King, a professor at Arizona State University who has studied transit-oriented development, said that this is largely due to the fragmented (and car-centric) nature of land and transit planning, capital investment and operation in the United States. For example, as a state-regulated public authority, with a variety of funding pots for capital and operating costs, the MTA has to comply with home rule for a housing project.

Private transportation firms in the United States have promoted and/or participated in development for years. It was good business for transportation providers to promote travel and now more accessible properties. Railroad and streetcar lines made special trips to the end of their lines where they would then sell riders on new properties.

What could make this more complicated in the United States is that transit agencies could be drawing on public funds and the United States has a history of concern about how public funds are used for development. If public money helps support traditional suburban life – think the single-family homes and highways the federal government and others groups helped make possible before and after World War II – then there may be limited outcry. Try using such monies for affordable housing, particularly for poorer residents, and opposition will arise.

Thus, this project in suburban Harrison, New York fits existing patterns. Transit-oriented development along rail lines in suburban downtowns is very common and desired by many suburbs. The project is not too big. It sounds like the suburb wants some denser downtown development. It does not involve housing considered too cheap by the community. But, whether this tactic could expand across metropolitan regions remains to be seen.

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