Title: Pleasanton Economic Outlook
1Streetcar Economic Development Study PRELIMINARY
FINDINGS Presentation December 10, 2008
2Overview 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
-
3Overview 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
4Streetcar Corridor and Segments
5Overview 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
6Value 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
7Overview 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
8Value 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
9Value 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
10Value 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
11Value 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)
12Value 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)
13Charlottes 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
14Charlotte 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
15Streetcar 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
16PED Zoning Overlay Outside Downtown
17Infill 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
18Estimating 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
19Market 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
20Projecting 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
21Market 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
22Market 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
23Funding 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
24Scenarios 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
25Model
- 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
26Modeling 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
27Next 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
28Discussion