Changing Sound Transit Policies on Transit Oriented Development

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Sound Transit Link Light Rail train

The Sound Transit Board will engage in a policy discussion about integrating and valuing transit oriented development (TOD) at a Board retreat scheduled for early April.  Sound Transit (ST) has focused on building and operating transit systems, and has been especially cautious to maintain this focus with strong financial oversight since the financial problems that ST ran into a decade ago that caused the scaling back of the original ST light rail plan.

However, I have asked the Board to reconsider how TOD fits into the ST mission, as we begin thinking in a more sophisticated way about attracting and serving ridership.  Transit is, after all, about moving people, and land use and transit are not just linked, but two sides of the same coin.  Sound Transit has not hesitated to build park and rides — and operate them at no charge to drivers – in order to attract and serve riders.  ST investments in TOD will bring riders into the system who will not have to drive to get to transit lines, and it is time that we recognized that this is an investment worth making.

ST’s mission is to support and implement the voter approved transit plan.  Legally, ST has the ability to design stations and invest in TOD to achieve the number of riders projected in the documents presented to the voters.  The problem is that current financial policies consider the actual finances of the transportation system as the primary criterion for evaluating costs and benefits of a transaction.  They do not consider transit oriented development (TOD) as a factor in evaluating the financial return from property sales and investments around station areas.   

Thus, in a recent discussion evaluating the possibility of overbuilding the Roosevelt station and creating additional units of housing, ST staff assessed overbuilding costs as approximately $3.3 million, and anticipated revenues from the sale of the overbuilding rights as $1.6 million, leaving a $1.7 million gap.  The project was considered not to be cost effective, even though it would result in 48 housing units right over the station – the closest thing to guaranteed ridership one can imagine.

One way to change the evaluation of such projects would be to include revenues based on anticipated ridership.  A 48 unit development located adjacent to a station is likely to generate strong ridership.  Assume only about 1 regular rider for every two units, or 100 rides per day (to and from).  Assuming $3/ride in 2020, and 250 days a year of travel, yields 100 rides x 250 days x $3 = $75,000 annually.  ST could evaluate the investment based on this revenue as a rate of return on capital.  In Roosevelt, investing $1.7 million with a return of $75,000 annually is a 4.4% ROI.  This will increase over time as fares rise.

Of course, transit systems do not plan to fully fund their operating expenses from fare collections, so it would be anomalous to require 100% recovery from a TOD investment.  Multiplying the fare return by 2 would reflect collecting a conservative 50% of operating expenses, and would better reflect the value of these riders.  2 x 4.4 = 8.8%, a pretty good rate of return.

The Federal Transit Agency has begun using such tools to evaluate the financial actions of transit agencies, and would likely welcome engaging in a dialogue about valuing transit oriented development in this kind of approach.

The Board decided not to pursue the Roosevelt station overbuild, which has other complications, but did decide to review policy.  Decisions about the Northgate station will be made in the near future, and there is a much greater opportunity to shape these decisions towards TOD.  ST is considering a 500 car garage at Northgate as part of a range of options to cover required mitigation for lost parking places.  I think developing a serious strategy around TOD, in partnership with King County, Seattle, and private property owners, is a better direction for ST to focus on, partly using money that could be saved by reducing the replacement parking plan to the minimum requirement.

Seattle has now realized how important it is to develop housing around transit stations, and to include affordable housing in the mix.  We did not have a strong policy in place when the line was constructed in the Rainier Valley, and that has left us scrambling to catch up, rezone, and attract investments to those stations.  We have developed a great partnership on Capitol Hill, where the community has a visionary housing proposal that includes a major commitment to affordable housing.  Sound Transit and the City have been negotiating to ensure that ST’s surplusing policy on Capitol Hill is consistent with that vision, and we are close to concluding an agreement.

That makes me optimistic that we can change ST policy to be more focused on TOD on the lines currently in construction and planning.  I think the Board is ready for that discussion, and hope that the April retreat will result in giving that policy direction to the staff.