Financing Transit-Oriented Development
Since its inception in 1997, MTC’s TLC Program has achieved tangible transportation improvements that support regional livability in the Bay Area. The recent evaluation of the TLC program recommended “continuing to strengthen the land use connection within the TLC Program” by supporting transit-oriented development (TOD) and infill projects. TOD and infill are both critical to the continued healthy growth of the Bay Area, by reducing Vehicle Miles of Travel (VMT), reducing the combined costs of housing and transportation, and making more efficient use of transportation infrastructure.
There are, however, real challenges to TOD and infill development. Even after station area or downtown plans are adopted, TOD and infill development projects still face significant financial and regulatory barriers that impede construction. The financial barriers include higher land costs around transit stations, infrastructure upgrades needed to support increased density, the need to assemble small parcels of land to reach a critical mass, and the need to replace existing surface parking reservoirs with structured parking. Project implementation is often delayed because these barriers cannot easily be addressed through traditional funding and financing mechanisms available to local jurisdictions and developers.
MTC commissioned Strategic Economics and the Center for Transit-Oriented Development to explore various options for establishing a more flexible funding mechanism that includes the core strengths of the existing TLC Program, but does more to facilitate actual development. The intention of an expanded TLC Program would be to respond to changing regional demographics, provide needed affordable and accessible housing, reduce greenhouse gas emissions, and create local centers for community, through a collaborative program working together with regional and local agencies.
This White Paper has produced several key findings, including:
- There are many potential program approaches (outlined in the table on page 5) that would support TOD and infill implementation in the region, and there are some key questions that will help determine which approach or approaches are most appropriate for the Bay Area.
- Portland METRO and the Met Council in the Twin Cities both have successful model programs that address TOD and infill funding needs in different ways. Both incorporate involvement from a broad base of stakeholders coupled with professional expertise in evaluating grant proposals.
- There are critical funding needs in both urban and suburban communities, but the tools to overcome specific barriers may be different. Funding through the program should thus be flexible to respond to local needs and communities with different market dynamics.
- The stated goals of an expanded TLC Program will need to be linked to evaluation criteria that explicitly assess the ability of projects to address these goals.
- There are still issues that must be addressed and resolved in the design of an expanded TLC Program, including the source of funds, the eligibility of projects as well as their size and location, and how TLC Program funding can be used to augment existing and future local funding sources, rather than replace them.
This White Paper recommends several key actions to enhance the TLC Program:
- Create a flexible TOD financing program that responds to different market conditions within the region and provides funding for a range of uses that help achieve regional goals for livability, efficient transportation, and improved environmental quality.
- Create a hybrid structure with both grant and loan funding.
- Identify local or regional funding sources so that the program can be more flexible than if it were to rely solely on federal funding.
- Create a transparent evaluation system that builds on the current TLC/HIP evaluation system.
- Clearly define eligible uses and expectations.
- Establish minimum thresholds for funding allocation, as well as utilizing a more detailed evaluation of outcomes.
- Cap individual project awards but allow projects to receive funding in multiple years.
- Do not cap awards for geographic subareas.
- Continue to implement a regular funding cycle, ideally on an annual, or even semi annual basis.
WHITE PAPER OUTLINE
The findings and recommendations in this report are intended to aid MTC staff and commissioners, as well as the Association of Bay Area Governments (ABAG) and other interested stakeholders in the consideration of additional approaches and strategies that could provide direct support for specific projects that further regional goals for transportation and land use over and above what the TLC Program is currently able to provide. This White Paper has three parts:
- A definition of the funding needs and the barriers to infill and transit-oriented development in the Bay Area with several case studies of ongoing development projects in the region;
- A review of existing similar programs implemented by other regional planning agencies to understand lessons learned and potential options for structuring such a program; and
- An evaluation of the potential effectiveness and possible challenges of different approaches for MTC and ABAG to support transit-oriented development and infill development projects taking into account the Bay Area regional planning and development context.