Since the early 20th century, California has forged its identity as a car-based culture, especially in the southern regions of the state. However, concerns about the impact of climate change, commute times, and the costs associated with owning a vehicle have triggered interest in alternatives to the combustion engine as the prime mover of the California economy. These options include enhancing access to one of the largest rail systems in the nation.
Rail and the California Economy, a recent report published by the University of California, Berkeley, examines the dynamic role passenger and freight rail play in shaping cities and influencing where jobs are located. California has almost 4,000 miles of track owned by Union Pacific and BNSF, with an additional 800 miles operated by short-line regional railroads. This network circulates through our main metropolitan areas (Sacramento, San Francisco, San Jose, Los Angeles, San Diego, and Fresno) and connects coastal communities with those further inland, moving over 38 million passengers to their destinations each year.
The clustering of people, firms, housing, goods, and services – called “agglomeration” or transit-oriented development – within transportation corridors adds an exciting dimension to housing development. After years of debating the environmentally-friendly concept of “smart growth,” regional planning and transportation agencies now view the underutilized land surrounding transit hubs or stations as fertile sites for increased density and vibrant employment centers.
One benefit of clustering arises from a public financing tool called “value capture,” which occurs when a transit agency leverages a station’s created value by actively seeking to develop land it owns around that station for housing, retail, and other commercial uses. San Francisco’s new Transbay Terminal is one such project. The Transbay Transit Center Project transforms downtown San Francisco and the San Francisco Bay Area’s regional transportation system by creating a “Grand Central Station of the West,” and has anchored a resurgence of the transit-friendly neighborhood. The approximately $6 billion project replaces the former Transbay Terminal at First and Mission Streets in San Francisco with a modern regional transit hub connecting eight Bay Area counties and the State of California through 11 transit systems: AC Transit, BART, Caltrain, Golden Gate Transit, Greyhound, SF Muni, SamTrans, WestCAT, Amtrak, and future high speed rail from San Francisco to Los Angeles/Anaheim.
The San Francisco Redevelopment Agency, in collaboration with the Transbay Joint Powers Authority, is developing the Transbay project through competitive bid by private developers. Financing consists of a Transportation Infrastructure Finance and Innovation Act (TIFIA) direct loan of $171 million from the U.S. Department of Transportation. The TIFIA loan is secured by a senior lien on project revenues, which include dedicated tax increment revenues from land sold and developed in the state-owned parcels surrounding the transit center (98% of revenues), and a commitment of passenger facilities charges from the transit center’s initial primary tenant, AC Transit (2% of revenues). This is the first TIFIA loan secured by value capture revenues from real estate taxes on surrounding transit-oriented development.
The study also features Redwood City as an excellent example of how transit-oriented development can generate the benefits of an agglomeration economy. By implementing a comprehensive, high-density development plan anchored by its Caltrain station, Redwood City has experienced explosive growth in the neighborhood surrounding the train station.
As a target for value capture, the land surrounding urban rail is a primary focus of new development. However, to overcome the constraints of investing in TOD areas without existing markets, financial incentives are typically required. Joint land use and leveraged funding among transit agencies, cities, and foundations are laying the groundwork for a high level of economic stimulus and return on investment in underutilized neighborhoods.
For more information about AHSC grants and technical assistance opportunities, please contact Autumn Bernstein, Principal, at email@example.com.
Autumn Bernstein, Principal, Estolano LeSar Perez (ELP) Advisors, is an expert in urban planning, transportation, housing, and environmental policy. She has 15 years of experience as a policy advocate, strategic advisor, non-profit executive, and facilitator in communities across California. Autumn is a native of the San Francisco Bay Area and lives in El Cerrito.