Pleasanton Economic Outlook

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Pleasanton Economic Outlook

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Refurbishes historic ('heritage') trolley cars. Total system now 7 route miles. ... Further allocate residential by ownership vs. for-sale, product type ... – PowerPoint PPT presentation

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Title: Pleasanton Economic Outlook


1
Streetcar Economic Development Study PRELIMINARY
FINDINGS Presentation December 10, 2008
2
Overview of Scope
  • Background Review, Corridor Tour
  • Team BAE Warren Associates Integra Realty
    Resources
  • Assess value premium for system financing
  • Interview stakeholders (property owners,
    developers, CDCs, institutions)
  • Literature review
  • Limited literature on streetcars
  • Need to borrow from light rail studies
  • Case studies (both quantitative and qualitative)
  • Little Rock, AR
  • Seattle, WA
  • Memphis, TN
  • Portland, OR

3
Overview of Scope
  • Estimate amount and location of new development
    in Charlotte along streetcar route
  • Four segments to reflect local markets
  • Improvement-to-land ratio (I/L) as first-cut to
    identify underutilized land
  • Identify development potential (current zoning)
    and prototype projects
  • Result - summary of location, type, and timing of
    development in 5 year increments, 2010 to 2035
  • Estimate increased tax revenues
  • Estimate amount of system potentially paid
    through value capture
  • One-time capital costs
  • Assessment districts, Tax increment financing
    (TIF), etc.
  • Report

4
Streetcar Corridor and Segments
5
Overview of Streetcar Financing Tools
  • Federal Small Starts strict cost rules have led
    to only 3 approvals. May be revised with
    SAFETEA-LU reauthorization
  • Proposals to consider economic development
    benefits when reviewing
  • Approved extension to date Portland (after
    multiple tries)
  • Approved new systems to date Fort Lauderdale,
    FL Tucson, AZ
  • State and regional capital improvement programs
    funded through various sources
  • Most common are gasoline and sales taxes
  • Multiple local sources typical taxes, parking,
    surcharges
  • General funds, sales taxes parking meters,
    parking garages, surcharges at served public
    arenas and venues (Portland, Ore 8 sources)
  • Institutional or private donations because of
    benefits received
  • Ohio State contributing 12.5 million to Columbus
    streetcar. Cincinnati raising 30 million in
    donations Grand Rapids 50 million

6
Value Capture Literature Review
  • Numerous studies on property value increase close
    to transit
  • Most studies about light or heavy rail
  • Limited literature about streetcar value capture
  • Findings
  • In US, value can increase 5 to 20 for housing
    units within ¼ mile of transit station
    (light/heavy rail)
  • In US, office rents can increase 5 (confirm)
  • Depends on business cycle, noise and nuisance
    from trains
  • New Center for TOD study emphasizing tax
    increment over TOD premium
  • Financing based on value capture
  • Idea is that property values will go up, and
    property taxes will go up too
  • Value capture translates into higher property
    taxes to support Tax Increment Financing (TIF)
  • TIF captures increment (growth) in taxes above a
    baseline amount. Can be pledged for repayment of
    bonds
  • Has been used only on limited basis so far
    Portland, Seattle

7
Overview of Streetcar Financing Tools
  • Local land-value based sources to capture
    transits enhancement to real estate value
  • Tax Increment financing (TIF) capture increment
    (growth) in taxes above a baseline amount. Can be
    pledged for repayment of bonds
  • Assessment Districts, e.g., Local Improvement
    District (LID), Municipal Service District (MSD)
    etc. direct tax assessment on area receiving
    benefit bondable
  • Can be based on benefit by lineal foot of
    frontage, sq. ft. in walkable zone (LID) or as
    added rate onto property tax rate (MSD)
  • Development Impact Fee or Service District Charge
    broadly used, typically require nexus study
    linking fee to benefit received
  • Charlotte has transportation impact fees. Equity
    issue for those who pay vs. those who dont but
    still get benefits
  • Joint Development publicly owned developed to
    benefit from increased land value. Streetcars
    typically have less land available for this
  • North Carolina law only provides for TIF, MSD,
    TAD, impact fees. Legislative approval likely
    needed for additional tools

8
Value Capture Primary Research
  • Portland
  • Opened in 2001
  • Extensive development along line (e.g., Pearl
    District)
  • More than 9,000 riders average (weekday)
  • Managed by unique non-profit on contract with
    City (Portland Streetcar Inc.)
  • Capital Funding

9
Value Capture Primary Research
  • Portland, contd
  • Extensive analysis of impact on amount and timing
    of development, not land value increases
  • 2005 report for Portland Streetcar, Inc. analyzed
    new development patterns as a result of downtown
    Westside streetcar
  • Most of the downtown area has FAR more than
    double long-term market potential
  • Between 1997 and 2004, density of new development
    was greatly increased total of 4.6 million sq.
    ft. near streetcar
  • Density greatest within 1 block of streetcar
    built to 90 of FAR post-1997 pre-1997 existing
    development only at 34 of FAR
  • Sites within 1-block had 19 of neighborhood
    development pre-1997 captured 55 of all new
    development in their neighborhoods post-1997
  • Net result less intensively developed area was
    built up to average density elsewhere in the
    downtown area

10
Value Capture Primary Research
  • Seattle
  • 1.3 miles through South Lake Union (bio-tech
    corridor near downtown)
  • Part of larger initiative to develop South Lake
    Union neighborhood (substantial recent investment
    in Fred Kettering Cancer Research Center, lofts,
    retail, office, R D)
  • Opened in Dec 2007
  • Ridership has surpassed projections ( 350,000 a
    year, need full year of operations to get to
    average)
  • Total cost 50.5 M
  • 25 M funded by Local Improvement District (LID)
  • Balance from public sources (local, state,
    federal)
  • Funding works well due to major property owners
    (U of W, Vulcan)
  • Value capture analysis not feasible due to recent
    opening (one year)
  • Appraiser study to calculate LID benefit
    effectively assumes transit value premium that is
    created is 1.3 of baseline assessed value

11
Value Capture Primary Research
  • Memphis
  • Original line opened in 1993 along riverfront as
    part of riverfront redevelopment
  • Expanded in late 1990s, and again in 2003
    (Madison Street line, runs perpendicular to
    river, through downtown). Refurbishes historic
    (heritage) trolley cars
  • Total system now 7 route miles. Ridership more
    than 3,200 per day
  • Frequent headways are key to high use (peak hour
    headways - 10-12 minutes)
  • Most recent extension serves growing
    medical/bio-tech corridor
  • 1 B development by 5 hospitals, U of TN research
    facilities, U of Memphis Law School
  • 450 new housing units nearby more in area
    (related to strong real estate market as well)
  • Transit Authority believes streetcar established
    Class A amenity due to development pattern with
    bio-tech R D at/near streetcar, creating
    vibrant urban environment
  • Multiple funding sources
  • BAE looked at 2002, 2008 tax appraisal data for
    Madison Street line. Land value for commercial
    land increased 70 in value
  • Residential properties increased 780 due to
    condo building boom (vs 24 City-wide however,
    existing commercial buildings decreased in value
    (vs. City-wide 17 increase)

12
Value Capture Primary Research
  • Little Rock
  • Opened in late 2004
  • 2.5 miles, half is bridge across Arkansas River
  • Financing relied mostly on FTA Smart Starts
  • Limited ridership primarily tourists, 300
    riders per day
  • Most new development along line is non-taxable
    (Clinton library, parks, baseball stadium)
  • Quantitative analysis of value capture not
    feasible due to timing of assessments (properties
    reassessed 9 months after opening, next
    reassessment in 2009)

13
Charlottes Light Rail Experience
  • Special analysis by Integra to study value
    increases along LYNX Blue Line
  • Approx. 9.5 mile route with 15 stations
  • Total of 65 land sales along corridor between
    2002, 2008, including 11 paired land sales
  • Reflects land with, without TOD zoning
  • Annualized change (per year) ranged from 37 to
    143for parcels with TOD zoning
  • Annualized change ranged from 5 to 17 for
    parcels without TOD zoning

14
Charlotte Stakeholder Interviews
  • Local developers, property owners, brokers,
    community members on interest in streetcar, link
    to economic development
  • Blue Line has convinced people of transit
    benefits and value that accrues to land
  • Transit entitlements for greater density
    attractive to developers. However, developers
    caution transit is an amenity, not a demand
    generator
  • Amenities can enhance project success, developer
    returns
  • Streetcar seen as critical to east/west corridor
    economic development, so competes with NoDa and
    South End
  • Developers have acquired sites and paid prices
    that have a streetcar premium built-in up to
    50 per sq. ft. of land
  • Affects ability to do redevelopment, attract
    equity and debt investment
  • Support for both TIF and MSD institutions
    opposed to LID
  • Expect Gold Rush line replacement by streetcar
    continues fare-free zone

15
Streetcar Corridor Overview
  • Most of the corridor is subject to an Area or
    other plan completed since 2000
  • Downtown segment has same zoning controls as rest
    of downtown, allowing tall, dense development
  • PED zoning overlay applied to many parcels
    outside Downtown allows moderate density
    mixed-use development
  • More flexible on mix of uses, other requirements
  • Starts with 40 base height, allows height
    increases at ration of 1 height for each 10
    distance from adjacent residential
  • Maximum height limit of 100
  • Reduced parking requirements, flexibility in how
    can be met a key factor for enhancing
    development feasibility

16
PED Zoning Overlay Outside Downtown
17
Infill Development Potential
  • Streetcar corridor is fully developed, so new
    projects are either redevelopment or infill
    development
  • These types of projects can face numerous
    challenges
  • Finding or assembling large enough parcels
  • New development can create enough additional
    value to justify risks, giving up existing income
    from property, etc.
  • Potential complex issues infrastructure,
    environmental remediation
  • Challenges of neighbor and other public
    acceptance
  • A big plus is increasing premium by residents and
    businesses on convenient locations closer to
    downtown areas
  • Particularly older nearby areas with high quality
    or historic building stock, unique character,
    etc.
  • Increasing emphasis on quality of place and
    experience

18
Estimating Development Capacity
  • Evaluated entire corridor to identify
    underimproved properties most likely to redevelop
    or have infill development
  • Based on PED, other applicable zoning, calculated
    development potential for opportunity sites
  • Corridor sites with greatest potential in next 25
    years could support 10,000 20,000 new dwelling
    units in all segments 500,000 - 1 million sq.
    ft. commercial outside Downtown
  • Sites with longer-term potential (25 years)
    could accommodate 5,000 10,000 new dwelling
    units, 200,000 400,00 sq. ft. commercial
  • New development does not include renovation of
    existing buildings
  • Residential range affected by rate Charlotte
    supports future development at greater densities
    compared to lower density past, present

19
Market Support for Development
  • Infill site analysis answers question of how much
    development might fit in the streetcar corridor
  • Market analysis seeks to answer the question of
    how much development activity is likely to occur
  • Challenge in looking at market potential is,
    except Downtown, historical trends show modest
    development activity
  • Midtown area, esp. Elizabeth Avenue, now showing
    strong development interest, proposed projects.
    Initial phases being constructed
  • Can look to experience of other cities, including
    Charlotte, on how transit has helped accelerate
    development
  • While not market-based, can look to future
    regional growth projections to think about how to
    capture a larger share

20
Projecting Market Support
  • Work with Warren Associates to consider
    alternatives
  • Started with Centralina COG projections for
    growth 2010 2035 for local areas around
    streetcar corridor segments
  • Used this to define a baseline scenario
  • Aside from Downtown, higher growth than
    historical and recent trends based on supportive
    policies, public investment, etc.
  • Assess portion of local area potential each
    segment captures
  • Further allocate residential by ownership vs.
    for-sale, product type
  • Office space based on employment growth, adjusted
    for proportion of office employment in various
    economic sectors
  • Retail based on household growth, spending
    patterns
  • Also created an accelerated scenario assuming
    corridor captures .5 more of growth in 9-County
    region
  • Rapid growth, multiple corridors limit share
    growth
  • Likely upper limit for region 1 - 2 chose more
    modest figure to not overestimate TIF and MSD
    potential

21
Market Projections
  • Figures are preliminary, for 2010 2035, subject
    to revision based on staff and other technical
    review
  • For residential, based on growth in one household
    generates one new housing unit
  • Baseline scenario Streetcar corridor captures 6
    of all household growth in 9 county region
  • Accelerated scenario Streetcar corridor
    captures 6.5 of all household growth in 9 county
    region
  • Retail calculated based on number of households,
    household expenditure patterns
  • Figures show more buildable capacity available
    than potential demand to absorb sites
  • i.e. development capacity is not constrained by
    current zoning

22
Market Projections
  • Share of development by segment for each product
    type (baseline, accelerated scenario is similar
    /- 1 - 2)

Segment For-Sale Residential Rental Residential Retail Office

West 16 14 5 4
Downtown 53 54 59 78
Midtown 19 19 28 10
East 13 13 8 8
23
Funding Sources for Value Analysis
  • NC Constitution recently amended to allow
    district-based Tax Increment Finance (TIF),
    limited state-wide experience
  • Previously limited to synthetic TIF --
    essentially repayment of developer-advanced
    funding for public improvements
  • Once district is okd, baseline assessed
    valuation is set, City collects its share,
    .46/100 on increases in valuation (excludes
    County share)
  • Does not provide funding for increased public
    service costs
  • Municipal Service District (MSD)
  • Collected as additional rate on property tax. For
    4 existing Downtown MSDs, rates vary from .017
    to .056 (latter is South End)
  • For Downtown MSDs in streetcar corridor, added
    MSD rate of approx..04 combined with existing
    MSD would match South End rate
  • No other sources modeled not allowed / no
    policy direction
  • Critical Infrastructure Needs Assessment District
    legislation would include exempt properties

24
Scenarios for Modeling
  • Three scenarios created that combine multiple
    variables for development, TOD premium,
    appreciation, other investment
  • Low baseline growth, low appreciation, no TOD
    premium
  • Medium baseline growth, historic
    appreciation, modest residential reinvestment, 5
    TOD premium
  • High accelerated growth, historic
    appreciation, modest residential reinvestment,
    10 TOD premium
  • Existing assessed value for corridor properties
    used to set assessed value
  • TIF is increment, next reassessment cycle
    expected before setting base value, so doesnt
    affect calculation of increment
  • To identify MSD rate to calculate receipts,
    assumed three potential rates based on current
    Downtown MSD rates
  • Modeled .02, .04, .06
  • Only .06 rate would set a new peak rate for
    Downtown MSDs

25
Model
  • Created year-by-year cash flow model for 2010
    2035 to calculate annual and cumulative increase
    in TIF, MSD
  • Model is linked to parcel database, assumptions
    to allow modeling of multiple scenarios
  • Assumes no TIF, MSD collected from tax-exempt
    properties (CPCC, Presbyterian, Johnson C. Smith
    University, Johnson Wales, churches)
  • Incorporates market projections, current market
    values
  • Calculated in constant 2008 dollars
  • Answer provides input to consideration of
    potential bonding or other financing tools
  • Have not attempted to estimate potential bonding
  • Needs depend on project timing and cost. May
    require interim borrowing from other City
    accounts, or credit guarantees
  • Bonding costs, underwriting requirements will
    mean that total increment is not available for
    bonding, financing improvements

26
Modeling Results
  • Potential streetcar capital cost of up to 400
    million. Potential 25-year receipts per
    preliminary model, for City share only
  • Does not include existing synthetic TIF repayment
    agreements
  • Relative to other cities, this is a much higher
    potential proportion of funding due to
    Charlottes higher growth rate
  • Changes in assumptions can significantly change
    findings
  • Development assumptions based on proactive public
    policy and supporting actions to stimulate
    revitalization

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Next Steps
  • Submit draft report for review
  • Technical, policy, other review by City staff
  • Following submittal of consolidated comments,
    revise report and model runs as needed
  • Final report produced in January for
    consideration by Advisory Committee, City Council

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