Transit-Oriented Development as the New Money Tree

Fruitvale TOD: One of several BART transit villages

Fruitvale TOD: One of several BART transit villages

Transit-oriented development is sold by its promoters as the answer to the housing crisis and to sustainability. The reason for TODs, supporters say, is to build dense mixed-use villages along transit lines that can accommodate more housing, including affordable housing, and to reduce vehicle miles travelled.

Bay Area residents heard a lot about TODs along city transit lines with the advent and demise of California Senate Bill 827, a proposal that proved a bill too far and died in committee. Residents have also heard about transit villages popping up on BART-owned land, not only because of well-designed publicity, but also because of residents’ fears of unchecked expansion of BART TODs as exemplified by the recent Assembly Bill 2923. However, there are other less visible TOD projects in the planning stage, such as those being pursued by Caltrain and by the Santa Clara Valley Transportation Authority. Also, Bay Area cities operating under the mandates of Plan Bay Area are developing within their borders dense projects in Priority Development Areas along their transit corridors.

Given such enthusiasm for transit-oriented development, often in the face of opposition from neighborhood residents concerned about either gentrification or a fall in the value of their homes, one question is in order: Are government agencies, especially those whose function is to provide safe and efficient transportation services, really that concerned about the housing shortage and climate change?

Caltrain’s TOD Plans

Let’s take a quick look into Caltrain’s strategic plan.

To consistently deliver excellent services and projects, Caltrain needs financial stability. To achieve this, Caltrain strives to control its own costs and operate as efficiently as possible. The agency can bolster its finances by maximizing the revenues it generates through operations and by exploring new sources of income. In particular, while it may require complex land assembly and can be challenging to execute, transit-oriented development has great potential as a source of revenue for the Caltrain system. Caltrain Strategic Plan: FY 2015 – 2024, published September 2014.

As a note of observation, Caltrain has been plagued with a structural deficit going back several years. It has survived by the skin of its teeth mostly from the annual contributions of San Francisco, San Mateo and Santa Clara counties. Governor Brown has approved placing a sales tax measure on the ballot that would provide a dedicated source of funds for Caltrain, but would not be enough to solve the agency’s fiscal woes. Caltrain has decided that housing on Caltrain-owned land is a solution.

To take advantage of revenue generated by housing, Caltrain developed specific objectives, two of which are particularly interesting. Note: JPB is the Joint Powers Board that governs Caltrain, and is comprised of representatives from San Francisco, San Mateo and Santa Clara counties.

Establish broad “property use” zones based on current, planned, and potential future needs for railroad uses.

Analyze the tradeoffs between preserving JPB property for potential future railroad needs and allowing potential commercial leases and joint-development projects on the property.

What exactly are “property use” zones, and who might be allowed to decide on such zones? At present Caltrain talks about working with local jurisdictions for mutually beneficial results. But in the future, Caltrain might come to the same conclusion as BART – local zoning must be ignored.

Thankfully, Caltrain is aware there is a tradeoff between developing a current revenue source through housing and preserving assets for future railroad needs. Other tradeoffs not clearly listed by Caltrain are those between allocating funds to housing vs. allocating funds to current capital needs; and between choosing a lower level of risk by stick to rail transportation vs. choosing a higher level of risk by embarking in housing development when the market is at the top and perhaps ready for correction.

VTA’s TOD Plans

Santa Clara Valley Transportation Authority (VTA) has similar objectives in entering the housing market as Caltrain.

With an extensive portfolio of real estate assets located throughout Santa Clara County, VTA has updated its Joint Development Policy to reflect the changing needs of Silicon Valley.

The goals of the policy are to generate revenue; to carry out transit-oriented development; and to increase ridership on VTA's multi-modal transit system. Encouraging the development of affordable housing is a priority VTA can accomplish during the process of developing those real estate assets. VTA Joint Development Program.

Again, revenue generation is a significant objective. VTA hopes for new revenues from housing and increased revenue from folks living near the train tracks.

TODs are the New Normal

The California legislature writes bills that alter the zoning laws of cities, including charter cities, by citing housing shortage and climate change as matters of statewide concern. State laws addressing either subject reign supreme over city or county laws. Conversely, agencies’ need for revenue generation would probably not pass muster as a matter of statewide concern.

As housing and climate change dominate the news and legislation, transit-oriented development moves toward becoming a way of life. Cities will increasingly lose their autonomy. Therefore, taxpayers and voters will need to pay more attention at the ballot box as to what they are gaining or loosing with each expansion of TODs.