Transit-Owned Development

Summary: New York’s Metropolitan Transportation Authority (MTA) is constantly running trains, but it is also constantly running a deficit. Unlike profitable transportation companies, such as the Hong Kong Mass Transit Railway (MTR),this is the biggest public transport network that serves Hong Kong. MTR Corporation Limited or in short MTRCL is the corporation that operates MTR. MTR consists of different types of public transports like, heavy rail, light rail and feeder bus. These services are in the centre of network that is an 11-line rapid transit kind. Get More Information about trading robots here. the MTA has few valuable real estate assets which could be adequately transformed into transit-oriented and transit-owned joint development hubs. Similar to other U.S. public transportation agencies, space for pragmatic and profitable commercial activities – including shops and offices operating on agency-owned land – is limited to a few select stations, yards, concourses, and passageways, because most profitable assets from private predecessors were sold decades ago. However, while the MTA’s ability to remain revenue-positive or self-sufficient through real estate development is stymied, the MTA has been capitalizing upon its few existing assets for additional revenue. This process, however, in coordination with the City of New York in order to develop value capture mechanisms, is lengthy and cumbersome. The MTA has not developed the resources needed to develop property. But the MTA can overcome organizational barriers in order to contextually ‘transport’ the MTA’s limited portfolio of assets into ‘transformation hubs’, and in order to do so, advocate for a privatized, profitable, and independent real estate development division of the MTA, chartered for real estate development. While there is ‘room’ for improvement, institutional barriers ranging from NIMBYism and a fear of density to antiquated zoning laws, financing requirements, and a lack of communication among the City, State, MTA, and developers would need to be transcended through coordinated reformation efforts. The MTA’s collective mindset must be renewed for a 21st century narrative, in which the MTA also considers itself a top tier real estate developer.


Can the New York MTA take steps towards greater efficiency? Towards market principles? Can we move from transit-oriented development to “transit-owned development”, as coined by Dan Peterson, Former Arup Senior Transportation Engineer? Then, how can we implement policies, and get them to actually be carried out?

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The MTA has limited real estate assets, but they’ve managed to build multiple ventilation structures along Second Avenue and at the Hudson Yards (officially the John D. Caemmerer West Side Yard). As such, I was disappointed that they did not work with a developer to build offices and/or housing atop the ventilation infrastructure, in order to gain revenue. It’s unfortunate that even after using eminent domain and spending so much money and so much time to buy land, the MTA still couldn’t build taller along Second Avenue, in Manhattan. If taller buildings were not built here (or atop the Fulton Center), in one of the most robust real estate markets in the world, imagine how hard it would be to up-zone outer borough corridors (i.e., Utica Avenue to Floyd Bennett Field). The MTA is controlled by politicians who respond to NIMBYism, and many New Yorkers wouldn’t approve of the MTA building tall structures, even though they’d be along a future subway corridor. The MTA also does not have the resources or expertise to develop property.

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Second Avenue Subway (Riel, 2015)

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Yet the MTA has been working to develop property – such as the Hudson Yards and Atlantic Yards – and it has been receiving arguably good deals, with developers (i.e., Related) paying approximately 1 million per month simply to reimburse the MTA for moving infrastructure out of the way of their decking process, so they can turn the yard into raw land. And since it is difficult to develop a value capture mechanism, the MTA is working with the Department of City Planning (DCP) and the NYC Economic Development Corporation (NYCEDC) to up-zone subway corridors, so that T.O.D. can fuel more ridership and revenue. Albany is not involved.

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Hudson Yards. Source: http://nyti.ms/1HIvqR0

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Hudson Yards. Source: http://nyti.ms/1HIvqR0

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Atlantic Yards Decking in Brooklyn (Riel, 2014)

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How do we build more momentum? Many people will oppose increasing density. Meanwhile, the MTA does not have the money to buy land, which is a timely process, coming lot, by lot, by lot. Plus, if land is up-zoned, then it is more expensive, making it even more costly for the MTA. How would the media, the public, and the politicians be convinced that this will not be wasteful? It will take years to pay off, which is difficult for politicians to accept, since they want to be re-elected in the short-term. Politics gets in the way of opportunities. These professionals work extremely hard every day but change is a slow, slow process. Government agencies are not good at speculative development for a variety of legal and labor reasons.

Many observers will note that the MTA has quite a lot of property. But most of this is needed for operations, and if it’s not, it’s expensive to overbuild and transform into raw land. Considering most of the MTA’s yards and bus depots are in far-flung locations, the costs still outweigh the benefits for most developers. These are depots, and not stations, so there would not be people fueling T.O.D. retail and fare revenue; Hudson Yards and Atlantic Yards are exceptions because they will be interconnected with transit. This is why the MTA focuses on selling air rights. They do not have the resources that a developer has, and even if they did, they would not want to be in the real estate business, let alone the decking (i.e., overbuild) business. Developers need to be experts in quite a few fields, from law (environmental, land use, zoning) and negotiation, to politics, design, engineering, geology, climate, and so on and so forth…

Mott Haven Rail Yard (Melrose Yard), built by the New York Central Railroad in 1873, was situated in the South Bronx. In the 1960s, while still being used by the railroad, development began atop the yard. After decades of phases of construction, “4,000 people, six public school buildings serving nearly 4,000 children, about 235,000 square feet of office space and 77,700 more coming soon, a supermarket, neighborhood stores, a food court, and at least 1,806 parking spaces” were developed. Stalled at various times due to divestment (white flight, redlining, and neglect), the first phase of “tower-in-the-park(ing lot)” housing was completed just as Jane Jacobs was about to publish Death and Life of Great American Cities and criticize this typology. As pointed out by Aaron Donovan, most are aware of the Hudson Yards, Atlantic Yards, and Terminal City atop Grand Central Terminal, but few know about this decking process in the South Bronx…

It is located south of East 161st Street between Morris Avenue to the east and Sheridan Avenue to the west, and as far south as the wye where Metro-North’s Harlem Line and the Hudson Line converge. The railroad graded the land to fit the nearby rail lines, making it 15 to 40 feet below the adjacent streets, a fact that greatly influenced the future development.

The yard helped support the New York Central’s mighty regional transportation network, with rail lines throughout the Northeast and deep into the Midwest. However, the yard was effectively a barrier between the Melrose neighborhood to the east and what today is the Grand Concourse area to the west, save for one bridge spanning the yard at 153rd Street. Starting in 1961 and continuing to today, five waves of development have thoroughly transformed this site, helping to weave together the previously sundered urban fabric. Today no trace of the rail yard remains, except for the outline it left behind in the form of the buildings that have replaced it, and the railroad’s Melrose Central Building at the southwest corner of Morris Avenue and East 161st Street, now occupied by city-run social service offices.

The first development to take place above the rail yard was a middle-income housing development known as Concourse Village. An early report indicated that the railroad leased its air rights for $750,000 per year for 60 years, although later reports indicated that it was paid $7 million, presumably up front, by the project’s sponsor, the Amalgamated Meat Cutters and Butcher Workmen of North America. Either way, most of the construction financing came from the New York State Housing Finance Agency, which issued a $30 million loan (later rising to $36.2 million), at that time the state’s largest loan ever for housing restricted to middle-income households. The brick-and-mortar results of the ambitious transaction outlived either the railroad underneath, which merged out of existence a few years after the towers were complete, or the union, which merged in 1979 with another union to form the United Food and Commercial Workers International Union, and has long since gotten out of the housing business. The first phase of the housing, the only one to be built, was approved by the City Planning Commission in October 1960 and was projected to cost $31 million.

The buildings started out as “integrated” housing – mixing white, black and Hispanic families. When it was first built, the Grand Concourse to the west was largely a white neighborhood, while Melrose to the east was African-American and Puerto Rican. As of 1967, the buildings were 68 percent white. But the buildings were built just at the moment that large scale white flight from the Bronx was beginning, including along the nearby Grand Concourse. By 2000, the buildings were 82% black, according to census data. Even from the beginning, whites’ allegiance to the buildings was tenuous, with some early depositors backing out when learning they’d be living in “integrated housing.” After the initial nervousness and slow co-op sales, the State declined to finance the second residential phase of the project.

There was also some early grumbling about lack of schools, which was soon to be remedied. One factor that helped fill out the buildings was the promise of new adjacent schools, completed in 1972

…In December 2004, Mayor Bloomberg announced a plan to build the four new schools to serving 2,000 students at the southern end of the former rail yard. The goal was to reduce overcrowding in Bronx schools. Whereas the first three waves of development were elevated above the former rail yards through steel and concrete stilts, this is the first wave of development to be built directly on the former rail yards. The city pledged $30 million to remediate the soil to eliminate toxins left by the former use as a rail yard. Together, these schools are providing space for 1,938 students. They are the largest project ever undertaken by the New York City School Construction Authority.

To get a glimpse at the complicated decking process…

Any gardener will understand the challenges faced by the designers of the Public Square at Hudson Yards: Ensuring there is abundant water. Providing nutrient-rich soil. Finding a balance between sunlight and shade. Insulating the bottom of the planting beds from blasts of 150-degree heat rising out of an active train yard directly below. Wait a minute. What was that last?

Much of the Hudson Yards project, between West 30th and West 34th Streets in Manhattan, is being constructed over the 26-acre John D. Caemmerer West Side Storage Yard, where hundreds of Long Island Rail Road cars may be marshaled at any time, waiting to go into service. Though the 4.5-acre Public Square will look like a garden when it is finished in late 2018 (according to the current timetable), it will actually be the roof of a working rail yard — not the greatest place for plants.

The soil and roots, the cooling system for the roots, the water supply and storage, storm drainage, ventilation for the rail yard and the utilities and sewage lines needed by the buildings around the square must be compacted into a layer of the roof ranging from 18 inches to seven feet. Over 20 years of false starts, it was to have been a site for Madison Square Garden, for Yankee Stadium and for an Olympic stadium that would later be used by the Jets. In 2005, legislative leaders in Albany killed the stadium plan. After that, Far West Side redevelopment came unglued before the Related Companies signed a deal in 2008 with the Metropolitan Transportation Authority to build a $20 billion commercial and residential complex.

Construction began in 2012. Today, 10 Hudson Yards, a 52-story office tower at 10th Avenue and 30th Street, is nearing completion. An abutting shopping mall, anchored by Neiman Marcus, is well underway. And a 92-story skyscraper, 30 Hudson Yards, is starting to emerge at 33rd Street. Four other towers, a retail pavilion, an information kiosk and a performance space called the Culture Shed are to complete the 11-million-square-foot project on and around the east half of the Caemmerer yard. The yard is being spanned by a $750 million, 10-acre, steel-and-concrete platform, which was designed and engineered by Kohn Pedersen Fox Associates and Thornton Tomasetti, as were 10 and 30 Hudson Yards.

The first layer of the platform will be a six-foot-high empty space known as a plenum, through which fresh air will be propelled by 15 powerful fans at 45 miles an hour to ventilate and cool the rail yard. Hot-air exhaust stacks will be built into the retail pavilion and information kiosk. Above the plenum, in some areas, will be a two-and-a-half-foot-deep, 60,000-gallon collection tank to store rainwater. This, in turn, will be used to irrigate 225 trees and 28,000 plants. The trees and plants will sit in beds that are 18 inches to four feet deep, isolated from the heat below by concrete slabs threaded with conduits carrying glycol coolant, not unlike the base of an ice-skating rink. The chief material under the paving will be what is called sand-based structural soil. Around the plantings, it will be supplemented with nutrients, compost, mulch and a biological crust, including lichen, fungi and algae.

The Public Square might be likened, in small scale, to Riverside Park and Park Avenue, both of which span active railroad lines. Noting the similarities, Michael M. Samuelian, a vice president of Related who is overseeing the creation of the square, said, “We’re providing intensive engineering for what will be invisible to the public.”

Unlike the MTR, which operates profitable subways in Hong Kong while developing property, the MTA is not privatized, and it operates in an entirely different legal environment. China does not have to deal with community opposition; they’ll just plow forward. In Hong Kong, the central government willingly gives the MTR land to develop, and the government technically owns all land under a lease-hold system. Thankfully, the government does not own all land here. But voters are largely ignorant of transportation issues and politicians are merely doing what they can get away with, so skyrocketing costs and dysfunctionality continue. Eminent domain is a difficult process and NIMBYists are powerful. The relationship between the City and State is tenuous.

The MTA faces many stringent rules and regulations governing public authorities. All construction needs to be 100% union, raising costs, and the MTA cannot necessarily use capital money for development. There are strings attached to all money received, inhibiting real estate finance for a public authority. The government cannot do a good job with speculative development. They can’t even do feasibility, engineering, and budgeting studies; they need to contract these services to the experts. After all, the Fulton Center has been complete for a year now, and retail has still not arrived; once it does, it’ll be competing with the WTC and WFC (Brookfield Place) retail.

However, retail should arrive soon…

When the Fulton Transit Center opened last November, glowing reviews celebrated its 53-foot-wide oculus while lamenting its $1.4 billion price tag, which had doubled since the project’s inception several years before. Some fears about the cost were assuaged by the fact that the MTA had turned the central hub at Fulton into a 180,000-square-foot mall, with retail encircling a four-story atrium.

Nine months have passed, and the Fulton Center’s glassy storefronts remain empty. Retail giant Westfield manages the leasing for 3 World Center, 4 World Trade Center and the Fulton Transit hub. There’s 365,000 square feet of retail across all three projects, and 65,000 square feet occupies the upper floors of the Fulton Center and office space in the 19th century Corbin Building next door at 13 John Street. (Of those 65,000 square feet, two-thirds will be retail, and one third office space.)

Now, spokespeople from Westfield and the MTA tell YIMBY that the Fulton Center retail will begin opening in the fall and continue through 2016. There will be about 20 stores ranging from retail and service providers to eateries and full service restaurants.

While they couldn’t offer any details, we hope that the retailers “benefit the neighborhood,” as a Westfield VP promised the local community board last year. About 150 businesses were evicted before the MTA began construction on the Fulton Center in 2005, according to Community Board 1 chairperson Catherine McVay Hughes and the Downtown Express.

Westfield has been claiming for months that 90% of its WTC retail is leased, but they’ve refused to release a full list of tenants. However, they announced several upscale retailers for 3 and 4 WTC last year, including Eataly, Michael Kors, L’Occitane, La Colombe coffee, Breitling, Kiehl’s, and a gourmet grocery store.

Westfield signed their lease with the MTA at the end of 2013, and at the same time, they paid the Port Authority $800 million for full control of the WTC retail. The lease with the MTA lasts 20 years after the second anniversary of Fulton Center’s opening or 20 years after the date when 80% of the commercial space is occupied—whichever is sooner, according to MTA financial documents. After that, Westfield will be able to extend the lease for two successive 10 year periods.

“Westfield is not yet paying rent to the MTA, but is covering the substantial operating expenses that would otherwise fall to us,” MTA spokesman Adam Lisberg wrote in an email to YIMBY. “Thus, Westfield has quite a motivation to start generating positive cash flow as soon as possible for our mutual benefit.”

And Lisberg assured us that “Westfield is in advanced stages of leasing activity, subtenant design and fitout work.”

In the meantime, commercial real estate around the Fulton Center is booming. Last week, Crown Acquisitions shelled out more than $25 million for a little souvenir shop next door at 144 Fulton Street. And across the street at 143 Fulton, Tribeca Associates is planning a 26-story, 228-key hotel.

For better or worse, the Port Authority is definitely in the real estate business, and they must fund their expensive projects (PA Bus Terminal, ‘Calastrossus’) entirely. The Port Authority, legally self-sufficient, cannot receive taxpayer dollars. It relies on real estate revenue from the World Trade Center as well as retail revenue (and transportation fees) from New York’s three major airports and two major bus terminals. The PA also charges hefty tolls on its bridges and tunnels, as well as fees at its many ports. While the PA must be self-sufficient, and while it is supposed to be independent of the whims of politicians, only the former holds true. Controlled by both New Jersey and New York, politicians routinely send their expensive legacy projects to the Port Authority, because they know that taxpayers will not foot the bill directly. Instead, users of the PA’s bridges and tunnels foot the bill, with ever-increasing tolls.

Nevertheless, the MTA could learn about real estate development from the Port Authority, even though the PA has ample more assets than the MTA, from retail and commercial properties at the WTC to ports, airports, and other capital initiatives. Indeed, “the Port Authority manages an extensive real estate portfolio containing more than 12,000 acres of land and 45 million square feet of office, industrial, retail and technical space to support its trade, transportation and economic development mission”. For instance…
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PATH Hub, WTC 3, WTC 4 (Riel, 2015)

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The ‘Calastrossus’ (Riel, 2015)

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WTC Hub Retail (Riel, 2015)

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WTC PATH Terminal (Riel, 2015)

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WTC PATH Terminal (Riel, 2015)

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WTC PATH Terminal (Riel, 2015)

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One World Trade Center (Riel, 2015)

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Port Authority Bus Terminal Opportunities… (Riel, 2015)

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JFK Retail (Riel, 2015)

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While the original World Trade Center is the predecessor to today’s reconstruction, the original World Trade Center was itself based on the design of the Hudson Terminal, which it replaced. The Hudson & Manhattan (H&M) Railroad, which built subways into Lower Manhattan and Midtown Manhattan that are now operated by the Port Authority’s PATH, also developed real estate atop its terminal in Downtown Manhattan. Hudson Terminal was an engineering marvel at the time, and H&M touted it proudly in its annual reports to shareholders:
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Today, the MTA’s Fulton Center, built one block away from the transit-owned development (World Trade Center) and the former Hudson Terminal site, is only a few stories tall. There are no offices to lease. The shops have not even been opened yet, and it has been an entire year. If the H&M leadership were alive today, I am confident that they would be saddened by how far we’ve fallen.
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According to the Tri-State Transportation Campaign, the MTA spends approximately 11 billion dollars on operational costs yearly, with an additional 5 billion dollars spent on maintenance and improvement. While fares and tolls provide a significant amount of revenue for the public authority, it is far from enough for self-sufficiency, let alone profitability. Akin to all public transportation agencies in the U.S., the MTA needs subsidies and support from local, state, and federal sources. Moreover, because the state agency operates New York City’s subways, funding is constantly being negotiated between the City and State, especially for capital plans. The M.T.A. already owes $34 billion. This is more debt than that of many countries!
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However, the MTA is wary of these fluctuations, and is not planning on using the increased funds to restore eliminated subway and bus routes, because a new downturn could leave the agency without the resources needed to sustain operations. In 2005 and 2006, the urban tax surged, resulting in $900 million in 2007, which was nearly twice the amount anticipated by the MTA. Then, after the economy collapsed, annual revenue plunged by more than $1 billion and the urban tax received $149.7 million in 2009. Clearly, this system is unstable and even in good times, the MTA needs additional funds to continue operations and expansion. Still, today, the City has been enjoying unprecedented job growth and tax revenue, yet the MTA remains sidestepped.

Transportation should not be separated from real estate and economic development, but for some reason, leaders don’t seem to share this idea. How can we change this mindset? Perhaps, if people were more aware of transportation issues in New York, Sam Schwartz’s MoveNY plan would have already been passed. Or the MTA would have money to clean its stations, in the wealthiest city in America. Now, it seems, the City is actually considering Gridlock Sam’s plan!

New York’s real estate market is strong, and the MTA is receiving additional funding as a result:

The city’s exploding real estate market has been a boon for the Metropolitan Transportation Authority. The authority has received $732.4 million this year from mortgage and property-sale taxes, which is 40% more than the MTA budgeted for, according to a report presented to the agency’s board Monday.

The extra $211.8 million, however, is minuscule compared with the agency’s major problem: a $14 billion capital-plan deficit.

The MTA collects two types of taxes from property sales in the city: the mortgage-recording tax (consisting of two separate taxes on mortgages recorded in the MTA’s 12-county service area) and the urban tax (imposed on commercial-property and apartment-building transactions in the five boroughs). Those taxes, in addition to an array of other state, regional and local taxes, subsidies and fees, as well as fare and toll collection, comprise the MTA’s revenues.

However, the MTA is wary of these fluctuations, and is not planning on using the increased funds to restore eliminated subway and bus routes, because a new downturn could leave the agency without the resources needed to sustain operations. In 2005 and 2006, the urban tax surged, resulting in $900 million in 2007, which was nearly twice the amount anticipated by the MTA. Then, after the economy collapsed, annual revenue plunged by more than $1 billion and the urban tax received $149.7 million in 2009. Clearly, this system is unstable and even in good times, the MTA needs additional funds to continue operations and expansion..

I recently learned that the MTA also has limited real estate expertise. They need to work with developers, engineers, architects, and the EDC, DCP, and DOT. The EDC acts as an agent for disposition of City property interest in NYCT master lease parcels; the DCP needs to rezone the property to allow residential and issue special permits required for transit overbuilds; and the DOT determines the need for street bridges or de-mappings. Clearly, the MTA needs to know the zoning and land use, as well as property and air rights information (i.e., the City may lease NYCT property to the MTA). The MTA, therefore, works with EDC, DCP, and DOT to analyze existing conditions, from land use, zoning, and community needs, to market prospects and demographic trends, and eventually, they underwrite and release RFPs. ULURP becomes the MTA’s best friend.

The MTA is working on exciting projects. In their new ESA Queens Yard, they’re building the tracks far enough from each other to eventually support decking at Sunnyside. Clearly, this area has immense potential for T.O.D. and growth, with ample transit access opportunities. However, there is a complex land title situation, with the MTA owning land and air space up to 22 feet measured from the top of rail, with the City owning air above 22 feet. There are also private individuals that have a stake in some of the air rights. Along with varying elevations and zoning (see LIC Core Rezoning). The Mayor and the Governor need to work together, which hasn’t been happening, so that the City and MTA can cooperate. (The Governor and the Mayor continue to debate funding the MTA). The Mayor noted that…

Amtrak, the largest landowner at the 200-acre site, is supportive of decking over the rail yards and building affordable housing on top, and that the city owns air rights on 44 of the acres owned by the state-controlled MTA. Yet nothing will happen soon. Amtrak has said it doesn’t expect to conduct a feasibility study until 2016. And the cost of decking over the site could be enormous. Constructing a platform over a portion of the much smaller 26-acre Hudson Yards in western Manhattan is expected to cost upward of $700 million. Community opposition, much like that which stalled the Atlantic Yards project for years, is anticipated.

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(Top: Riel, 2015; Bottom: MTA Real Estate Department, 2011)

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Another exciting project is in Brooklyn, on the Bay Ridge/Sea Beach 61st Street Corridor (the N Line), where NYCT runs adjacent to the LIRR’s freight line, contracted to the New York & Atlantic Railway. Mainly zoned M1-1, the MTA has been working with DCP and EDC to explore zoning changes and decking costs. Since the freight trains run less frequently, it may be quicker (and cheaper) to deck the LIRR portions. With increasing ridership along the N Line, developers may be interested in fronting the decking costs, even though it’s still quite expensiveIt all depends on the value of the land. I can’t share specifics, but all of this joint development not only would provide some cash for the MTA, but would also provide economic development opportunities in the surrounding communities. The profitable railroads of the 19th and early 20th century fueled urbanization and economic growth, centralized by their lavish terminals, complete with offices and retail opportunities: Grand Central’s Terminal City, Penn Station’s Hotel Pennsylvania…

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Source: http://nyti.ms/1KHmfEx

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Back in 1970, Penn Central went bankrupt, the largest bankruptcy in U.S. history at the time, when even the merger between Pennsylvania Railroad and New York Central (and New York, New Haven & Hartford Railroad) could not salvage the private railroad. Yet from this disarray came Donald Trump, buying the railroad’s property. He bought Penn Yards to build Trump Place on the West Side (Riverside South). He also bought the Commodore Hotel, built as part of Terminal City, turning it into the Grand Hyatt New York. The structure itself was developed as part of Terminal City, a complex of palatial hotels and offices connected to Grand Central Terminal and all owned by The New York State Realty and Terminal Company, a division of the NY Central Railroad.

Trump built his empire as railroads went bankrupt, and as Terminal City was swept into the background, crushed by the weight of the Pan Am Building (MetLife Building) atop Grand Central, and overshadowed by the Chrysler Building. Literally, the age of automobiles and jets had arrived.  New York Airways, after all, could fly you on a helicopter from the top of the Pan Am Building to JFK. If you want to explore the era, simply read the airline ads next to the NYT article about Trump. The glamor of the railroads was gone.

But now, times have changed again. With an urban rebound in many cities, transportation agencies are again seeking to capitalize upon their assets. Be it at 30th Street Rail Yards in Philadelphia, Inwood, Manhattan, Jamaica, Queens, Burnham Place in D.C., or South Station in Boston, transportation agencies and developers are on the move. They must deal with outdated zoning laws and a lack of streamlining across balkanized jurisdictions. In Atlanta, MARTA has been practicing TOD since the 80s, finding various ways to finance PPP development so that they can continue with their exciting projects.

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Atlanta’s MARTA (Riel, 2015)

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Georgia State Station MARTA Joint Development (Riel, 2015)

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Atlanta is a sprawled city with many open parking lots, and MARTA has been developing them. MARTA has been creative with its funding sources because it receives little funding from red state Georgia, just as D.C.’s WMATA has been practicing joint development partly because Maryland, Virginia, and D.C. all try to fund the Metro as little as possible, and put the burden on the other stakeholders. Plus, D.C., the capital of the free world, is taxed without even being represented, so advocating for WMATA funding is extremely difficult. Washingtonians live in the capital of America and cannot control their own taxes.

But MARTA, like the MTA, also faces a battle with NIMBYists, who are strangely progressive, yet stand in the way of change. While the preservationist movement was arguably founded due to the demolition of the old New York Penn Station, today’s cities are different. Public transit ridership is surging again. People are moving back to many urban areas.

Now, NIMBYists block development, diminishing the supply of housing (and other amenities), raising the costs, and pushing out the people that they’re trying to protect. They are preserving buildings but not necessarily the cultural dynamism that surrounds them, because neighborhoods always change.  Parisians used to hate the Eiffel Tower and they wanted it destroyed, but now they won’t let any other tall buildings nearby, hampering progress. In Brooklyn, preservationists are trying to block the construction of new housing in expensive Park Slope and Windsor Terrace, fearing it won’t fit into the surrounding neighborhood. I understand that sometimes, buildings are ugly, and that grassroots movements can create productive change, such as bringing back a grocery store, but sometimes, this politically correct mindset can be ironically destructive. (They are proceeding with the construction after going through BSA).

North America used to build grand structures, but now, it is difficult to get anything done…

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Baltimore Penn Station (Riel, 2015)

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Reading Terminal in Philadelphia (Riel, 2015)

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Reading Terminal in Philadelphia (Riel, 2015)

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Suburban Station in Philadelphia (Riel, 2015)

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30th Street Station in Philadelphia (Riel, 2015)

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SEPTA Real Estate Opportunities? (Riel, 2015)

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SEPTA Real Estate Opportunities? (Riel, 2015)

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SEPTA Real Estate Opportunities? (Riel, 2015)

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SEPTA Real Estate Opportunities? (Riel, 2015)

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Decking Opportunities in Seattle? (Riel, 2013)

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Decking Opportunities in Vancouver? (Riel, 2013)

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If New York does not solve its institutional barriers that starve the MTA and choke prosperity, it will be left in the dust by global competitors. China is building high-speed rail throughout the country, and European public transportation puts New York to shame. We must wake up and act, and elect leaders that care about public transit! If the MTA has limited assets now, then it must be allowed to dream big, with a revamped Real Estate Department that has more than three people doing T.O.D. for the entire agency. The MTA must buy property around stations, work with DCP to up-zone and propose design standards, and with EDC to develop, and use the funds to continue to operate and expand the system. It cannot be strangled by Albany.

Miami-Dade County, Florida, has created a Rapid Transit Zone in order to standardize zoning atop the Miami Metrorail’s assets. Moreover, All Aboard Florida (AAF), America’s first privately financed railroad in decades, is moving full steam ahead after tackling legislative hurdles in the state and federal government. AAF is planning on operating a profitable railroad by 2017 between Miami and Orlando. However, many are concerned that AAF will not be profitable, and will need to be maintained by taxpayers or subsumed under Amtrak. Brown University’s Professor John Friedman, for instance, concludes that AAF will perform worse than Amtrak’s Northeast Corridor, which operates in the black. Amtrak’s Northeast Regional and Acela routes have an operational surplus, but maintenance of way eats up that revenue. However, AAF will have only four stops compared to 30, and will link only two cities with a total of 9.4 million people, compared to four major cities with 48 million residents. Plus, neither Orlando nor Miami have strong public transit systems. This sprawl translates to a lack of job accessibility, and since rail transportation is fueled by high ridership, a lack of density means a lack of profit.

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Miami Station (Source: http://www.AllAboardFlorida.com)

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Unlike Amtrak, AAF plans to develop 4.2 million square feet of real estate. The coastline from Orlando to Florida contains half of Florida’s population, most of a former railroad’s right-of-way, and tens of millions of travelers on business and vacation. Indeed, Orlando is the most visited city in the United States, and AAF states that there are 500 million trips made every year between its destination cities. The relatively dense Atlantic coast of Florida is no accident; Henry Flagler, founder of AAF’s predecessor, Florida East Coast Railway, arguably built Miami. Akin to countless other American cities from Dallas to Atlanta, Miami began as a railroad transportation hub. Flagler built real estate in Miami, attracting crowds just as AAF will be doing in their “colossal station complex designed by Skidmore, Owings and Merrill that includes a half-dozen towers, over a million square feet of office space, 1,111 residential units, a hotel, car rental outlets, parking, and blocks of ground-floor retail facing the street”. If this value capture works in Florida, could it work in New York? The MTA has a lot more expenses, a 100 year old system, and limited assets, so it’s doubtful. Here, they’re building a brand new system, with brand new infrastructure, on a former series of parking lots now known as Miami Central.

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Miami Station (Source: http://www.AllAboardFlorida.com)

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Miami Metrorail (Riel, 2009)

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Yet as elucidated by the Urban Land Institute, this is not a new policy, but it has not been practiced for decades due to various factors, from antiquated zoning laws, onerous financial regulations, and a lack of communication between municipalities and developers, to NIMBYism, a fear of density, and a lack of a profit motive. From ULI New York:

It turns out that there is fairly little regional or national coordination around TOD advocacy. And despite the efforts of exceptional organizations like the Regional Planning Association and ULI to move the TOD agenda further, broad policy tools are very difficult to put in place at a macro scale. This may have a critical role to play in the relative lack of implemented new TOD projects despite the widespread acknowledgement of their benefits. Mr. Paley, Director of Transit Oriented Development for the MTA, noted that Federal policies and incentives can have a powerful trickle down effect on TOD, having the ability to influence a broad spectrum of municipalities to move towards broad TOD goals. The need for greater regional or federal coordination however, means that each locality usually follows its own agenda to promote or (as is often the case) paralyze TOD projects within its district.

Some of the many local factors that can affect a TOD project include antiquated zoning laws, non-contextual parking requirements, financing, lack of communication between municipalities and developers, NIMBYism and fear of density. 

Although the discussion began with an overview of the need for better national policy and regional initiatives, it was the overview of the Wynandach Rising redevelopment in the Town of Babylon that brought the challenges and opportunities at a local level into clearer focus.  The Town of Bablyon had decided that TOD was going to be cornerstone of its urban revitalization program for this particularly run-down district. Recognizing the tremendous potential of a particular connectivity node within Babylon around a local train station the town decided to take a proactive approach.

Using a combination of clear sighted, local planning efforts and a red tape machete, the Town of Babylon created a vision and a process to transform this blighted region of Babylon into one of the most widely talked about TOD projects in the country.  Going beyond the traditional advocacy approach, changing the zoning and waiting for the market to fill in the gaps, the Town of Babylon purchased all the buildings it could and partnered with the rest of the owners, explaining the long-term benefits of the redevelopment strategy. They created a streamlined approvals process and cultivated relationships with new developers they were eager to see come into the area.

It would seem in many cases with so many potential hurdles to TOD, this is the kind of proactive stance that’s needed. As panelist Daniel Hernandez noted, good leadership and a healthy dialogue between government and development entities lies at the heart of successful TOD implementation. Rather than simply allowing the typical tense showdown between developers, civic agencies and the community to unfold, an enlightened municipality can take the initiative to clean up inconsistencies in its zoning code, formulate a plan, consolidate key parcels and identify a dedicated agent internally to help with blocking and tackling on critical issues.

And some more good news…

Metro-North is forging ahead with plans to return rail travel to the pre-World War II era in some Hudson Valley communities by partnering with local governments to build housing so close to stations that commuters could just step out their doors and board a train. A proposal to develop housing and retail space at the Metro-North station in downtown Harrison is inching closer to a groundbreaking, possibly later this year, that has eluded town leaders for nearly three decades.

The Harrison project is the furthest along, following last month’s selection of Virginia-based Avalon Bay Communities as the developer, officials said. The plan calls for converting 3.3 acres of Metro-North commuter parking lots along Halstead Avenue into residential and retail space, while doubling the number of parking spaces available to commuters. Retail space for restaurants, flower shops and the like will serve as a facade to block a street view of a parking garage.

Metro-North has agreed to sell or lease its acreage to get the deal done. A price tag has not been decided. Metro-North executives said the project will not only allow its parent agency, the MTA, to collect money from the sale or lease of the property, it will produce hundreds of potential riders steps away from the station.

The Harrison project will include about 140 residential units and 35,000 square feet of retail space, according to Matthew Whalen, Avalon Bay’s senior vice president for development. Avalon Bay has developed similar proposals for rail agencies across the country, including one in San Francisco for Bay Area Rapid Transit, Whalen noted. Whalen, who said he worked with Paley many years ago, said Paley has correctly identified TOD’s as a means to generate revenue for cash-pinched transit agencies with real estate to sell. “It’s a successful model that we’ve used across the country,” Whalen said. “I’d like to think that this concept will add vibrancy to the area around the train station in downtown Harrison.”

In addition to rezoning the area, Harrison town officials must clear several hurdles before the development is approved, including a state environmental review and a traffic study. Whalen doesn’t foresee community opposition to a project, which has been in the town’s master plan for several years. “This isn’t or shouldn’t come as a surprise,” he said. Belmont is confident the Harrison proposal will come together before the year is out. “Hopefully, we’ll get it done,” he said. “It will be a first-class project. Everything takes time.”

It takes time. But it needs to get done. Three people in the TOD Group of the MTA Real Estate Department is not enough, at all. The MTA can be an assertive force in New York, developing green property around stations in order to spur economic development, create jobs, and create civic spaces, as well as dense, mixed-use retail, commercial, and housing.

NY must continue to increase density in order to fuel MTA ridership and foster dynamism; people are social creatures and, according to Edward Glaeser, cities allow for creativity and productivity. With a greater supply of housing, the price may, at least, not drastically increase. While it would be nice if Robert Moses had built subways instead of highways, the powers, identities, and ideologies of the day built cities for the automobile. Instead of building up, they built out. The city should stop proposing harmful regulations and it should make it easier to build. If someone wants to finance a system of gondolas, for instance, they should go for it! Zoning has a great purpose, but sometimes, it can be too much. Life, liberty, property.

Courtesy of Amanda Erickson at CityLab:

The story of American zoning is really the story of how Americans learned to legislate their NIMBY impulses.

Before zoning, cities mostly regulated what could be built through nuisance laws. If someone didn’t like how their neighbor was using their property, they could haul them to trial and let a judge decide what to do about it.

But in 20th century New York, the process had already become cumbersome. In Manhattan, new building techniques were pushing building heights higher, costing neighborhoods sunlight and air. And factories and warehouses were encroaching on fashionable shopping districts, much to the chagrin of said fashionable shoppers.

There were early efforts to temper New York’s building streak. A landmark 1885 law restricted tenement buildings to one-and-a-half times the street width (the Supreme Court ruled that height restrictions were legal in 1909, when builders challenged Boston’s decision to restrict buildings around Copley Square to 90 feet).

The building that broke the camel’s back was the 42-story Equitable Building. Built in 1915, the building’s height and heft were unprecedented. As NYC Zoning tells it:

Rising without setbacks to its full height of 538 feet, the Equitable Building cast a seven-acre shadow over neighboring buildings, affecting their value and setting the stage for the nation’s first comprehensive zoning resolution.

Neighbors demanded that the city regulate the building somehow. In 1916, the city responded by passing the country’s first comprehensive zoning code. That effort was largely spearheaded by lawyer Edward Bassett, who went on to invent the freeway and parkway.

According to Columbia University’s Andrew Dolkart, the law worked byregulating building shape rather than height. He writes:

The idea was that that light and air would reach the sidewalk; light and air were a major issue. So the law stated that you could build right up to the lot line on your building and you could rise up to a certain height and then once you reached that height, you had to step back, you had to set the bulk of the building back.

This, he explains, is why New York’s skyscrapers from the period have such a particular profile. The Heckscher Building on Fifth Avenue, for example, stacked smaller and smaller boxes on top of one another, with a crown on top. Other architects experimented with cascading setbacks and buttresses.

New York wasn’t the first place to divide the city up based on who was doing what, where. “The really big constraint of land use regulation was the inability of people to get very far within cities,” says William Fischel, a Dartmouth College professor who studies zoning. That changed with public transportation. “Once you got the street car you could separate residents from jobs,” he says.

The first city to experiment with this was San Francisco. In 1885, the city banned public laundries from most areas, a not-so-subtle attempt to zone the Chinese out. That law was invalidated by a 1886 Supreme Court case.

In 1909, Los Angeles experimented with a city-wide regulation that kept heavy industry and commerce out of certain neighborhoods.

Initially, officials were reluctant to do so, fearing that they’d lose businesses to neighboring cities. But land-owners were insistent, arguing that their property values had gone down thanks to brick-makers and smoky glue factories. “Zoning was seen as a way of assuring buyers that their neighborhood won’t change adversely,” Fischel says. “It was a dangerous tool in one sense, but also offered security.”

So it was that homeowners across the country changed the face of cities in America. As Fischel writes in a paper on this subject:

It seems unlikely, then, that zoning thus was the product of circumstances in one particular place. Nor, I submit, was it the product of planners who had embraced the ‘City Beautiful’ movement, progressives who supported scientific management of government or lawyers who argued for an expansive view of the police power. The roles of planners, progressives and lawyers were, I believe, supply responses to a popular demand for zoning. This popular demand did not manifest itself as direct democracy. It was filtered through housing developers, who, I shall demonstrate presently, found that they sell homes for more profit if the community had zoning.

NIMBYism has stalled a rail connection to LaGuardia Airport for decades. But now, Cuomo appears to be interested in rebuilding LGA, which is good, but funding the MTA should be a priority, instead of building legacy projects. Maintenance is not sexy, but it is important, even though this sounds more exciting:

Governor Cuomo was joined today by Vice President Joe Biden to unveil the vision for the comprehensive redesign of LaGuardia Airport. The airport will be transformed into a single, structurally unified main terminal with expanded transportation access, significantly increased taxiway space and best-in-class passenger amenities. Construction on the first half of the new unified terminal, expected to be a $4 billion project that creates 8,000 direct jobs and 10,000 indirect jobs, will be managed by LaGuardia Gateway Partners, a new public private partnership chosen by the Port Authority of New York and New Jersey to build the project.

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Transportation is the glue holding New York together. Subways allowed developers to expand the city. The IRT, BMT, and IND built one of the engineering marvels of the 20th century: subways, with 4 tracks for vast stretches, allowing for additional capacity and for tracks to be maintained while service remained. The subways were built near the surface in order to be efficiently ventilated. Pipes were all organized and replaced as the tracks were built. The IRT and BMT made money. Today, the MTA needs to return to this can-do mindset, working hand-in-hand with developers to renew, enhance, and expand. This is what the TOD Group is trying to do, with limited time and resources, at the MTA Real Estate Department, according to the NYT:

There are more than 600 miles of subway track and hundreds of stations in New York City, and zoning requires that developers in high-density areas like Midtown Manhattan, Union Square and Downtown Brooklyn move nearby subway entrances into their property lines and renovate them. As a result, private entities may be responsible for public services, a situation that some experts say is not always ideal.

“The M.T.A. has learned the hard way that it is one thing to ask a developer to make an upfront capital investment, and quite another one to maintain something on a day-to-day basis over the years,” said Juliette Michaelson , the director of strategic initiatives at the Regional Plan Association, a policy, research and advocacy group. “In 10 years, when that escalator fails, who fixes it? These details must be worked out.”

To improve its dealings with private developers, two years ago the transit authority quietly opened a three-person Office of Transit-Oriented Development. It hired Robert Paley, a real estate expert who spent time in the private sector — as an executive at AvalonBay Communities he helped develop Avalon Chrystie Place on East Houston Street — and also worked previously at the M.T.A. on projects like the Atlantic Terminal Mall in Brooklyn.

Mr. Paley’s first big deal in New York City has been an agreement with Vornado Realty Trust to develop 15 Penn Plaza, a proposed office tower that would replace the Hotel Pennsylvania on Seventh Avenue between 32nd and 33rd streets. Vornado is hoping to construct a 2.05 million-square-foot office building, exceeding what is allowed under the current zoning.

In exchange, Vornado agreed to build and maintain transit improvements, including reopening the Gimbels Passageway that connects Herald Square and Penn Station. Under the proposed plans, it would transform the passageway, which was closed in the 1980s, into an 800-foot pedestrian concourse to rival Rockefeller Center.

Vornado has said it would not begin construction on the project until it secured an anchor tenant. Still, it wants to have all of its approvals in place in expectation of finding that tenant, and so last summer it negotiated a deal with the transit authority and the city. Known as a restrictive declaration, the agreement, which is recorded against the property and enforceable by the city, includes several clauses meant to prevent a repeat of the problems with the escalators at Zeckendorf Towers.

Among the requirements is that the transit improvements must be designed and agreed upon before the city will grant Vornado building permits. “Otherwise, if the construction starts, and the building moves quickly, there is a risk that the public improvements that were promised will get left behind,” Mr. Paley said.

To ensure that Vornado maintains the improvements, and in the event that 15 Penn Plaza changes ownership, Vornado must provide financing security, possibly in the form of a letter of credit. The developer also will be unable to get a temporary certificate of occupancy until the transit improvements are substantially completed.

While 15 Penn Plaza may be the latest development to involve the M.T.A., the relationship between the agency and builders goes back nearly a century. One of the first buildings to have direct subway access was the Municipal Building at One Centre Street, designed by McKim, Mead & White. Completed in 1913, the building features subway lines that are directly connected to its base, with riders exiting through a covered entranceway featuring white Guastavino tiles. “The building was one of the first to be totally intermodal, with a big archway that allowed for vehicular traffic as well,” said Fredric Bell, the executive director of the American Institute of Architects New York Chapter.

Given the high rates of street crime in the 1970s and 1980s, developers began shunning direct access to the subway, and many passages, including the Gimbels Passageway, were closed. More recently, fears of terrorism have compounded these concerns. Other difficulties for landlords of buildings with direct subway access include insurance concerns related to slip-and-fall accidents among riders.

Subways are also highly trafficked areas, so the construction materials used are often more functional than attractive, like industrial light fixtures and simple ceramic tile. “Very rarely, if ever, does a subway station make your building look better — even if you upgrade it, it will never be equal to the finishes you are putting in elsewhere in the lobby,” said John Krush, an executive managing director at Newmark Knight Frank Project & Development Management, who advises tenants and developers.

“Most developers feel that the ideal option is for the subway entrance to be directly outside the building,” Mr. Krush said. “This makes brokers happy because they can market the building as ‘adjacent’ to subway transit.”

Still, many experts in the real estate industry say that dealing with the M.T.A. can be a headache. There are strict engineering requirements for building around the subway system, and the approval process can be slow. Now, with the advent of Mr. Paley’s office and the effort to increase transparency, the hope is that this process will improve. “Any time a public agency decides to have an advocate, a person that can help developers make their way through the complexities of the process, the better it will be,” Mr. Krush said.

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Comments or opinions expressed on this blog are those of the author only. The views expressed on this blog do not necessarily represent the views of the MTA, its management, or employees, and absolutely no confidential information was disclosed.