Alternative Financing for Urban Transportation
Click HERE for graphic.
NOTE: This report is a review of alternative and innovative
approaches to financing urban transportation. Several of
the techniques are made possible by unique state or local
laws or conditions. Some of the material deals with
conceptual approaches which have not yet been implemented.
Readers should carefully consider their own local conditions
in evaluating specific techniques for implementation.
Alternative Financing
for Urban Transportation
The State of the Practice
Final Report
July 1986
Prepared by
Rice Center
Nine Greenway Plaza
Suite 1900
Houston, Texas 77046
Prepared for
Federal Highway Administration and
Urban Mass Transportation Administration
U.S. Department of Transportation
Washington, D.C. 20590
Distributed in Cooperation with
Technology Sharing Program
Office of the Secretary of Transportation
DOT-1-86-30
Table of Contents
Introduction i
Case Study Locations v
Matrix of Financing Techniques by Mode and Private
Involvement Applicability vii
I. Taxes 1
State Sales Tax and Sales Tax On Fuel
State of California 3
Motor Vehicle Excise Tax
State of Washington 6
Local Option Transportation Taxes
State of Florida 8
Sales Tax
Maricopa County, Arizona 10
Beer Tax
Birmingham, Alabama 12
Payroll Tax
Portland, Oregon 13
Tax Increment Financing
Prince George's County, Maryland 15
Lottery
State of Pennsylvania 17
II. Assessments 21
Metropolitan Districts
Arapahoe County, Colorado 23
Improvement District
Pleasanton, California 25
Transit Assessment District
Denver, Colorado 28
Special Benefit Assessment District
Los Angeles, California 30
Special Benefit Assessment District
Miami, Florida 32
III. Fees 35
Fair Share Contribution Ordinance
Palm Beach County, Florida 37
Highway/Traffic Improvement Fee
Upper Merion Township, Pennsylvania 39
Coastal Transportation Corridor Ordinance
Los Angeles, California 41
Development Impact Fees
Orange County, California 43
Facilities Benefit Assessment Program
San Diego, California 45
Capital Improvement Fee
Farmer's Branch, Texas 48
Transportation Utility Fee
Fort Collins, Colorado 50
Transit Impact Fee
San Francisco, California 52
IV. Negotiated Investments 55
Development Bonuses
New York, New York 57
System Interface Program
Washington, D.C 59
Transfer Center Investment
Portland, Oregon 61
Proffer System
Fairfax County, Virginia 62
Negotiated Investment
Dallas, Texas 65
V. Private Donations and Initiatives 69
Local Match Donation
Grand Rapids, Michigan 71
Private Initiative for Highway Construction
Houston, Texas 73
Private Initiative for Interchange Development
The Woodlands, Texas 75
Private Initiative for Downtown Improvement
Pittsburgh, Pennsylvania 77
Merchant Subsidy
Cedar Rapids, Iowa 79
Bus Shelter Development
St. Louis, Missouri 80
Texas Transportation Corporations
State of Texas 81
Rail Station Construction
Secaucus, New Jersey 83
Vl. Use of Property and Property Rights 85
Leasing Highway Air Rights
Boston, Massachusetts 87
Joint Development Program
Washington, D.C 9O
Leasing Highway Air Rights
State of California 92
Joint Development of Transportation Center
Cedar Rapids, Iowa 94
Leasing Highway Air Rights
Sparks, Nevada 97
Negotiated Land Lease
Tacoma, Washington 98
Leasing Facilities
Santa Cruz, California 100
VII. Private Development and Provision of Facilities and
Services 103
Privately Financed People Mover
Tampa, Florida 105
Privately Financed People Mover
Las Vegas, Nevada 107
Privately Financed People Mover
Las Colinas, Irving, Texas 109
Road Utility Districts
State of Texas 111
Private Toll Bridge
Detroit, Michigan 113
Contracted Bus Service and Maintenance
Johnson County, Kansas 115
Contracted Transit Service
Snohomish County, Washington 117
Contracted Taxi Service
Kankakee, Illinois 119
Contracted Taxi Service
Ann Arbor, Michigan 121
Transportation Zones
San Gabriel Valley, Los Angeles County,
California 123
VIII. Toll Financing 125
Dulles Toll Road
Fairfax County, Virginia 127
County Toll Road Authority
Harris County, Texas 129
State and Local Toll Financing
Tampa, Florida 131
IX. A New Approach to Developing Rapid Transit 133
Public Private Partnership in Rapid Transit Corridor
Development
Fairfax County, Virginia 135
Introduction
Alternative Financing Urban Transportation:
State-of-the-Practice is a summary of the use, by 52
agencies, of non-traditional techniques for funding
transit and urban highway services. This report is
designed to introduce public officials at the State and
local levels to a range of available funding sources and
to facilitate their efforts in determining whether these
sources will be useful in meeting their transportation
needs.
The 55 case analyses included in the report reflect the
variety of efforts being made by large and small
transportation agencies to cope with shortfalls in
funding. These efforts were selected for inclusion
because they entailed one or more of the following
characteristics:
o use of non-traditional sources of revenue
o strong involvement of the private sector
o use for the first time in the transportation
field (although there may have been previous
non-transportation applications)
o creative examples of public/private cooperation.
Overview
Alternative Financing Urban Transportation is divided
into nine sections:
I. Taxes
II. Assessments
III. Fees
IV. Negotiated Investments
V. Private Donations and Initiatives
VI. Use of Property and Property Rights
VII. Private Development and Provision of
Facilities and Services
VIII. Toll Financing.
IX. A New Approach to Developing Rapid
Transit
Taxes are the primary sources for local and State funding
of transportation. All of the taxes examined in this
section are dedicated for transportation uses.
Assessments ate taxes or fees on all properties within a
special district which pay for all or a part of specific
improvements made within that district. Assessments are
levied as one-time or recurring liens by city councils or
special districts.
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Fees are distinguished from taxes in that taxes are, for
the most part, levied on the general populace while fees
are used to segment a portion of the population that is
causing a significant impact on transportation, or that
particularly benefitting from transportation
improvements. Impact fees imposed on developers to
mitigate the impact of their projects on roads and
transit services are becoming increasingly popular.
Negotiated Investments include private sector
contributions or improvements exchanged for zoning
changes, building permits, or other public requirements.
The public sector often provides significant initiative
in negotiating for these improvements.
Private Donations and Initiatives result when a private
developer or individual wants an improvement in
facilities or services that may not be a high public
priority, or perceives that there is a benefit to be
obtained from participating in provision of a public
sector service.
Use Or Property and Property Rights to
generate additional revenues for the public sector
usually involves airspace, land, or facilities leases.
Leasing or selling development rights, also known as
joint development, is a method of capturing the full or
partial value of land holdings or unused space.
Private Development and Provision of Facilities and
Services focuses on the recent reintroduction of the
private sector into the public transportation industry,
which is part of a larger movement towards privatizing a
variety of public sector services. Privatization often
results in substantial public sector savings due to
creation of a competitive environment for service
provision.
Toll Financing has substantial historical precedent in
transportation, but has not been widely used for new
facilities in recent years. However, toll financing is
regaining popularity as an effective and efficient
technique for financing, building, and operating a
specific roadway that might otherwise be infeasible for
the public sector to construct.
A New Approach to Developing Rapid Transit examines
innovative public/private partnerships to finance
fixed-guideway rapid transit systems.
These categories are used to present the case studies as
logically as possible. A brief introduction precedes each
section, defining the technique and summarizing the
salient points of each case included. Not all of the
cases are easily classified; the rationales for these
decisions are explained as needed in the section
introductions.
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Case Analyses
Each case analysis of the 55 experiences with creative
financing techniques is divided into eight sections.
Overview Description of the experience and the conditions
under which a financing technique was used.*
Results The direct or indirect benefit to the transportation
agency and other parties participating in the
implementation of the technique.
Legal Any legislative or legal requirements
associated with use of the technique Issues and any
legal problems encountered.
Political Political events that helped or hindered successful
Issues use of the technique.
Timing The amount of time needed to implement the
technique.
Contact Name, address, and telephone number of the local
official(s) and/or private sector individual(s) to
contact for further information.
References Published documentation containing more detailed
information on the technique or experience.
Related Brief description of other experience compared or
contrasted to the Experience main case analysis.
*The Overview also contains population figures for each
area. Most figures are drawn from 1984 U.S. Census
updates, but in some cases other figures are used where
1984 numbers were not available or where more recent
information was obtained.
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Case Study Locations
Click HERE for graphic.
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Matrix of Financing Techniques by
Mode and Private Involvement
Applicability*
Click HERE for graphic.
*Numbers used in this table refer to pages in the report.
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I. Taxes
Taxes are the primary source for local and State funding
of transportation. Traditional taxing techniques for
transportation may be dedicated or non-dedicated, and
include ad valorem property taxes, registration fees and
motor fuel taxes. Cases included in this report do not
re-examine these techniques except where the example
demonstrates an unusual aspect of the mechanism or where
a program has an important effect on transportation
funding. All of the taxes examined in this section are
dedicated for transportation uses
The State of California Transportation Development
Act uses State fuel and sales tax funds to provide 20
percent of transit revenues in the State.
The motor vehicle excise tax in the State of
Washington provides 25 percent transit revenues
statewide.
While local option motor fuel taxes are enabled in 14
States, the State of Florida has made extensive use
of the tax; 56 of 67 counties have adopted it. Florida
law also authorizes three other local option
transportation taxing mechanisms.
The local option sales tax that has recently been
established in Maricopa County, Arizona is unusual
in that it is dedicated primarily to freeway construction.
The use of beer tax revenues in Birmingham, Alabama
for transit represents the first time these
funds have been dedicated for a transportation use.
The payroll tax to date has been authorized only in
the State of Oregon. The technique is being used
in Portland and Eugene.
The tax increment financing mechanism (TIF) resembles
assessments in the creation of special districts,
but property owners' taxes do not rise as a
direct result of TIF implementation. The ten TIF
districts in Prince George’s County, Maryland have
funded over 72 projects worth $14 million.
Although a lottery is not usually considered a taxing
mechanism, it has been included in this section because
the State "taxes" each chance purchased by earmarking a
percentage of lottery sales revenues for specific State
programs. It is rare for lottery funds to be dedicated
for transportation programs, as they are in the State
of Pennsylvania and the State of Arizona.
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State Sales Tax and Sales Tax On Fuel
Overview
State of California (1984pop. 25,622,497) - California
has developed a local transportation funding program
which encourages local support of public transportation
needs and provides municipalities and transit agencies
with a substantial funding source. The Transportation
Development Act (TDA)provides funding for public
transportation through two sources, the Local
Transportation Fund and the regional State Transit
Assistance Fund (STAF).
The Local Transportation Fund (LTF) receives revenues
from 1/4 percent of the 6 percent State sales tax (the
loss in General Fund revenues was offset by extending the
sales tax to gasoline). The LTF funds are turned back to
me county of origin and are apportioned within the county
to the incorporated area of each city and the
unincorporated area of the county on the basis of
population. Where a county has a transit district,
separate apportionments are made to areas within and
outside the district.
In general, LTF funds may be used in the following
manner. Counties with populations larger than 500,000
must use LTF funds for transit needs. Counties with fewer
than 500,000 may use LTF funds for local roads and
streets, once the local Transportation Planning Agency
(TPA), usually the Metropolitan Planning Organization
(MPO), has determined that all transit needs which
can reasonably be met have been met. Funds are allocated
from the county treasury to specific recipients for
specific purposes.
Before apportioning, the local TPA may reserve up to 2
percent of LTF revenues for pedestrian and bicycle facilities.
Up to 5 percent of remaining funds may be used for service for
the elderly and disabled.
Revenues for the State Transit Assistance Fund (STAF) are
derived from the State gasoline sales tax. Legislation
provided that revenues attributable to gasoline sales over
and above replacement of LTF to the General Fund, would be placed
in the Transportation Planning and Development Account;
these are known as spillover funds. The STAF represents
60 percent of the TPDA. Thirty percent of STAF funds are
allocated on the basis of operator revenues. A region
receives that portion of the 30 percent which equals the
ratio of its operator revenues to the statewide total of
operator revenues. The same process is used to calculate
the individual operator's portion of the funding within a
region. Operator revenue may include fares, discretionary
allocations from local governments, and revenues from a
local sales tax dedicated to transit - - consistent with
the State's view that local support includes all local
contribution to transit service.
Seventy percent of the STAF funds are allocated to the
regions on the basis of regional population. In counties
larger than 500,000, operators may only use STAF funds
for transit purposes. In counties under 500,000, the
funds may be used for transit or streets and roads where
no unmet transit needs exist.
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In order to qualify for funding under either program, a
transit claimant must maintain a ratio of fare revenues
to operating cost equal to the ratio it had during
1978-79 and equal to 20 percent if the claimant is in an
urbanized area, or 10 percent if the claimant is in a
non-urbanized area. In addition, the claimant must
maintain a ratio of fare revenues plus local support to
operating cost greater than the ratio it had during
1978-79 if its ratio was greater than 20 percent in an
urbanized area or 10 percent in a non-urbanized area
Determination of compliance with these requirements is
the responsibility of the local Transportation Planning
Agency.
Results The State is able to fund local public transportation
while controlling by statute the level of State subsidy. In
FY 1986 STAF funds totaled about $69.3 million, and the LTF
about $535 million. Together the funds account for nearly
23 percent of total transit revenue in the State as compared
to about 20 percent for farebox revenue.
Legal There have been no major challenges to the LTF
funding program. Issues However, several problems have arisen
with the farebox recovery requirements. In rural areas which have
been reclassified as urban since TDA was passed, meeting
the 20 percent farebox requirement has sometimes proven
difficult. Some operators have also protested that the
base year, 1978-79, was exceptionally good, and that they
are actually having to recover closer to 25-30 percent. A
bill currently under consideration by the State
legislature would allow TPAs in counties under 500,000 to
reduce the 20 farebox recovery requirement to between 15
and 20 percent, and would remove the cumulative effect of
penalties related to farebox recovery ratios. A
recommendation to eliminate the base year requirement
from the Act was deleted from the bill. Another bill
amending the TDA would allow operators to exclude
insurance costs in determination of their recovery ratio,
which would have the effect of raising their recovery
rate or decreasing the requirements. A second provision
of this bill would make ridesharing programs eligible for
TDA funds.
Political The State legislature is opposed to changing the
essential outlines of the Issues TDA. This year, however,
despite legislative efforts, the governor has moved STAF
funds to the general fund. Decreasing oil prices have made
the amount of spillover revenues decrease substantially.
Timing The Transportation Development Act was passed in
1971. In 1972 the Local Transportation Fund was created,
and in 1980 the State Transit Assistance Fund was
established. A Unified Transportation Fund was
established by law in 1981, but no funds have been
appropriated into the account, and the UTF legislation
was repealed in 1985. Both the STAF and UTF were subject
to appropriation by the legislature and inclusion in the
State budget, unlike the LTF.
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Contact Lee Deter
Chief, Mass Transportation Office
California Department of Transportation
1130 K Street
Sacramento, California 95814
(916) 423-0742
Helen Mullally
Administrative Officer
Southern California Association of
Governments
600 South Commonwealth Avenue
Los Angeles, California 90005
213) 385-1000
References State and Local Governmental Responses to Increased
Financial Responsibility for Public Transit Systems,
prepared by Erskine Walther, Transportation Institute,
North Carolina A & T State University, November, 1983.
Transportation Development Act: Statutes and
Administrative Code for 1984,State of California Business
Transportation and Housing Agency, Department of
Transportation, Division of Mass Transportation,
September, 1984.
Public Transit Farebox Ratio Requirements Report, Report
to the California Legislature, State of California
Business, Transportation and Housing Agency, Department
of Transportation, l:)Division of Mass Transportation,
December, 1985.
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Motor Vehicle Excise Tax
Overview
State of Washington (1984 pop. 4,349,002) -
Washington provides a dedicated source of funding for transit
which emphasizes local commitment to support transit.
Washington's Motor Vehicle Excise Tax (MVET) rate is 2.354
percent and is an
annual State excise tax on the fair market value of motor
vehicles. Cities and counties are permitted by the State
to direct nearly half (1 percent) of the MVET for local
public transportation needs. The remainder goes to the
State ferry system, (0.2 percent) and to the State
general fund (1.154 percent).
Any entity or municipality is eligible to collect the
MVET levy except for city systems with a sales tax
dedicated to transit where the system provides service to
an area greater than the units of the municipality. Only
funds generated within a transit system's service
area may be used. The MVET funds must also be matched
dollar-for-dollar using a local tax source from within a
transit system's service area, or local general service fund
revenues. Local tax sources may be a sales tax, or household or
business tax.
Systems using MVET funding submit budgets each year
to the State Department of License which projects tax
revenues. Actual tax receipts are submitted in April of
the following year, and compared with MVET disbursements.
The Department of License then adjusts current year MVET
funding as needed. The MVET funds are collected by the State
and disbursed quarterly with a six month lag.
The MVET funding for local public transportation may be
used for operating or capital expenses.
Results
MVET funds provide about 25 percent of transit revenues
in Washington State. In the 1983-85 biennium, $169
million was available from the municipal levy. Only about
$108 million was used, or matched, by municipalities and
transit agencies. Remaining revenues go to the State
general fund.
Legal
Issues
any municipality is eligible to collect the 1 percent
MVET, known as
the municipal levy. State courts have ruled that the 1
percent MVET municipal levy is a local tax and is not
subject to appropriation by the State legislature.
Political
Issues
No political issues were reported.
Timing
The municipal levy was first used in 1971.
Contact
Jim Slakey
Manager of Public Transportation Office
Washington Department of Transportation
KF01 Olympia, Washington 98504 (206) 753-2931
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References
State and Local Governmental Responses to
Increased Financial Responsibility for Public Transit
Systems, prepared by Ersldne Walther, Transportation
Institute, North Carolina A & T State University,
November, 1983.
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Local Option Transportation Taxes
Overview
State of Florida (1984 pop. 10, 975, 748) - Florida has
two types of local motor fuel taxes for transportation.
The first, the voted gas tax, was approved by the State
legislature in the early 1970s. This tax is limited to 1
percent per gallon and is subject to voter approval via
county-wide referendum. Twelve counties have exercised the
voted gas tax.
The second tax, the local option gas tax, was approved by
the State legislature in 1983. The tax rate is limited to
not more than 6 percent per gallon (in whole pennies).
Implementation requires a simple majority vote of a
county commission.
The State's Department of Revenue is responsible for
collection of local fuel taxes from retailers. For the
local option tax, 91.5 percent of the funds collected are
distributed, on a monthly basis, back to the
counties/cities according to a distribution formula
established in an Interlocal Agreement. The State
keeps 6 percent of the revenues collected to cover
administrative and overhead costs. A retail collection
fee of about 2.5 percent is also applied to revenues
from the local option and the voted gas tax.
Funds can be dedicated for any transportation need,
either highway-or transit-related.
Results
Twelve counties have passed a voted gas tax, and 56
counties now have a local option gas tax, 31 of which
have imposed the maximum amount. Each penny of the
Hillsborough County (Tampa) gas tax generated about $4.3
million in gross revenues in FY 1986. In Dade County
(Miami), each penny generated about $7.7 million in gross
revenues.
Legal Both the voted gas tax and the local option gas tax were
legislated by Issues the State to be carried out at the county
level. Both are optional taxes. The voted tax requires a referendum,
while the local option tax is implemented by a county
governing board.
Recent changes in the State legislation governing the
local option tax make it possible for a county commission
to impose the tax by a simple majority; a tax of 3 cents
or more formerly required approval by a majority plus
one. In addition, any number of gas tax pennies may now
be bonded, and any county which has imposed 5 cents may
participate in a program to match State funds in the
ratio of 80 to 20, percent for projects on the State
highway or county systems or on local roads which would
alleviate congestion on State highways.
Political
The voted gas tax has been more difficult to impose as it
requires Issues electoral approval. Most of the counties which have
adopted this tax successfully are geographically
concentrated along a major interstate highway. Therefore,
the tax has been largely passed on to tourists.
In the case of Hillsborough County, which has both types
of local fuel taxes, the voted gas tax failed the first
time it was put before the voters. The
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second time it was put on the ballot, a well-funded
and highly publicized campaign was mounted to
promote and advertise the tax.
Timing
Legislation for the voted gas tax was approved in the
early 1970s. It was first utilized in 1980. Local option
gas tax legislation was passed in April 1983.
Related
Experience
The State of Florida also has two other local transportation
taxes. The Charter County Transit System Surtax was authorized
in 1976 as a means to help fund Metro-rail in Dade
County. It is a discretionary sales surtax that may be
levied at 20 percent of the general sales tax rate by any
of five charter counties which adopted their charter
before June 1976. A referendum on the surtax failed in
Dade County and as of September, 1986 no county had
adopted the tax. The revenues would be used for costs
associated with a fixed guideway system.
The Metropolitan Transportation Authority (MTA) tax was
enabled in 1985. An MTA may be created in any urbanized
area with over 200,000 residents which is comprised of
counties which have levied at least 6 cents of the local
option gas tax. Nine areas in the State, comprising 14
counties, met these requirements as of September, 1986.
An MTA has the power to levy gasoline or property taxes
to fund arterial highway needs within its area Before a
county may levy taxes through an MTA, a plan for revenue
expenditure must be approved by countywide referendums in
each participating county. In the three counties
comprising the Orlando area, referendums on the MTA tax
were recently rejected four to one.
The charter county transit system surtax also requires
countywide approval.
Contact
Ron McGuire
Florida Department of Transportation
Office of Transportation Policy
Mail Stop 28605 Suwannee Street
Burns Building, Room 337
Tallahassee, Florida 32301 (904)
407-4102
References
Financing Urban Transportation Improvements, Report
3. A Guide to Alternative Financing Mechanisms for Urban
Highways, by Rice Center, June, 1984.
Florida's Transportation Revenue Sources, by the Florida
Department of Transportation, Division of Planning and
Programming, Bureau of Policy Planning, July, 1986.
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Sales Tax
Overview
Maricopa County, Arizona (1984 pop. 1, 714,809J - A new
V2 cent sales (transportation excise) tax has been
established in the county, the revenues of which will be
used to provide additional funding for the construction
of freeways, expressways, and parkways and the continued
development of public transportation.
The Phoenix metropolitan area greatly needs to expand its
freeway system. The area now ranks 61st in freeway
miles-per-capita of 62 metropolitan areas with more than
400,000 people. Compared to 18 metropolitan areas with
one to two million people, the area is last in freeway
miles, freeways per-capita, and the percentage of traffic
moved on freeways. Other existing sources of funding for
needed construction were insufficient to address the
problem.
Under a new law passed by the Arizona legislature in
1985, a referendum was held to establish an additional
1/2 percent sales tax-in Maricopa County which could only
be used to:
o Accumulate funds to be held in trust to design,
acquire rights-of- way, and to construct
controlled-access highways ($5.8 billion over 20
years).
O Service bonds issued to design, to finance
acquisition of rights-of way, and to construct
controlled-access highways identified in the Regional
Mobility Plan.
O Develop a regional public transportation system
plan for Maricopa County ($8 million).
O Increase funding to operate a regional bus system,
dial-a-ride, and other special transportation services
for Maricopa County ($5 million per year, increased
with inflation).
Results
The new tax was approved by the voters. The Transportation
Excise Tax took effect on January 1, 1986
and shall be in effect for a period of 20 years after
that date.
The tax is projected to generate $5.8 billion over
20 years. In 1986, $99 million will be generated. With
tax revenues increasing over the years due to population
and economic growth and inflation this figure is expected
to increase to $618 million by 2005.
When the planned construction is completed, there
will be 233.5 new freeway miles and expressway corridors
added to the existing 70.5 miles and 16 miles presently
under construction. A new regional transit authority has
been established to oversee rapid transit planning and to
oversee expenditure of the $5 million yearly allocation
to augment existing public transportation service.
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Legal
Issues
state legislation was required to establish the new tax.
The new law required in turn that the tax be approved by the voters
of each county in which it is to be collected.
The transportation excise tax money is collected by the
State Department of Revenue, placed in a new fund to be
held by the State Treasurer, and called the Maricopa
County Regional Area Road Fund. It may be used only for
the specified transportation purposes enumerated in the
enabling legislation. Food and medicine are exempted from
the sales tax.
Construction of the freeways, expressways, and parkways
will be supervised by the Arizona Department of
Transportation.
Political
Issues
A pro-freeway attitude and the willingness to pay for
roadways developed over the years as a reaction to increasing
frustration with worsening traffic congestion. Support for an
additional tax originated in the local business community which
was instrumental in securing State enabling legislation.
A coalition made up of citizens and community
leaders with support from the regional planning agency
and local governmental leaders, led the campaign for the
tax. Two groups opposed the initiative, one opposing any
form of new taxation and denying the need for such, the
other supporting new freeways but opposing the tax.
The proposal passed in the election with approximately 72
percent in favor.
Timing
The enabling legislation for the new tax was passed in
May of 1985. The Maricopa Association of Governments
(MAG) adopted the Regional Transportation Plan for
Maricopa County in July 1985. A resolution calling
for the election was passed by the Board of Supervisors
of Maricopa County, Arizona in August, 1985. The election
was held on October 8, 1985. The new tax went into effect
on January 1, 1986.
Contact
Jack Debolske, Secretary
Maricopa Association of Governments
1820 West Washington
Phoenix, Arizona 85007
(602) 254-6308
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Beer Tax
Overview
Birmingham, Alabama (Jefferson County 1984 pop. 671, 786)
- In April, 1982 a statewide beer tax was established in
Alabama. Prior to the bill, each county had set its
own beer tax; under the bill, the tax was levied at 1.625
cents for each four fluid ounces of beer. It is collected by
the assessing authority of the county or municipality. Each
county divides its portion of revenues from this tax differently,
according to the recommendations of the county delegation to the
State house and senate. In Jefferson County, three funds were
established to receive different portions of the revenues. The
third fund (Fund C), which represents 3/9ths of the tax received
(after 2 percent is removed for county administrative costs), is
distributed in part to the Birmingham-Jefferson County Transit
Authority. The Authority receives 50 percent of Fund C or $2
million dollars annually, whichever is greater.
Results
Revenues from the tax represent 17.8 percent of the
Authority's budget in each of the years since the tax was
dedicated to transit. Funds have been used for capital
expenditures.
Legal
Issues
Subsequent to the bill's passage, several counties
with beer taxes that Issues had been higher than
1.625 cents brought a lawsuit in State supreme court.
Other cities have challenged the beer tax as
unconstitutional but it has withstood this challenge
in court.
Political
Issues
No political issues were reported.
Timing The bill was proposed in the fall of 1981 as
an add-on, and passed in April, 1982.
Contact
Janet Dignazio
Birmingham-Jefferson Transit Authority
P.O. Box 10212 Birmingham, AL 35202
(205) 322-7701
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Payroll Tax
Overview
Portland, Oregon (1984 pop. 1,340,940) - The State of
Oregon has authorized local transit agencies to use a payroll
tax to generate revenue. Since 1970, the Tri-County Metropolitan
Transportation Authority has imposed a tax on employer
payrolls, and since 1982, a tax on the earnings of
self-employed people within the district. The State
government pays an amount in lieu of the tax on the
payroll of its employees working in the district. The
State legislature permits the district to adjust the tax
rate as long as the rate does not exceed the statutory
ceiling of 0.6 percent.
Taxes are paid quarterly, by employers within the transit
districts. The State Department of Revenues collects and
administers the tax. All revenues, after handling costs
incurred by the State are deducted are forwarded to the
transit district.
Results
In FY 1985, the tax generated a net of $41.1 million or
60 percent of the system's operating budget. In FY 1986,
the tax generated $44 million, or 65 percent of the
system's operating budget. The State government
contribution in lieu of a payroll tax on government
employees generated $1.2 million in 1986, while the
payroll tax on self-employed individuals yielded $3.4
million.
Legal
Issues
The Oregon legislature enacted a State statute, ORS
#267, in January, Issues 1970 which enabled the
creation of the Tri-County Metropolitan Transportation Authority.
The legislation also granted taxing authority to Tri-Met, including
the option for Tri-Met to impose a payroll tax of up to 0.6
percent. By law, government organizations are exempt from paying
the tax.
Political
Issues
After the tax became law, it was challenged in
court, but was found to be unconstitutional.
Timing
Tri-Met has used the tax since its authorization by
the State in 1970, and since 1982 Tri-Met has also
taxed the earnings of self-employed people within its
area.
Contact
Janet Jones
Manager of Financial Forecasting
Tri-County Metropolitan Transportation District
4012 S. E. 17th Avenue Portland, Oregon 97202
(503) 239-6401
Related
Eugene, Oregon (1984 pop. 101,602) - This
jurisdiction has also taken Experience advantage of Oregon's
payroll tax to support public transportation. Lane County Mass
Transit District imposes a 0.50 percent tax on the total payroll
of local businesses. Every year the tax rate is evaluated to meet
budgetary requirements. In FY 1985-86, Eugene received
$4.84 million, or 62 percent of its general fund
revenues.
-13-
Contact
Karen Rivenburg
Lane County Mass Transit District
P. O. Box 2710 Eugene, Oregon 97402
(503) 687-5581
References
Financing Transit: Alternatives for local
Government, prepared by the Institute of Public
Administration for the U. S. Department of
Transportation, Urban Mass Transportation Administration,
Office of the Secretary, Washington,
D.C., 1979.
-14-
Tax Increment Financing
Overview
Prince George's County, Maryland (1984 pop. 675,571) -
Since 1979, ten Tax Increment Districts have been formed
in Prince George's County, Maryland. The districts were
established for the purpose of funding public
improvements within each district. A base year assessed
property value was determined, and taxes collected on any
increases in property values above the base year value
are dedicated to the needed improvements. The additional
real property taxes received from the non-residential
property in these districts was exempt from a local
property tax cap imposed from 1980 through 1985.
The ten districts consist of industrial, commercial
or residential areas expected to undergo a large amount
of development or redevelopment. The benefit of TIF is
that funds can be earmarked for particular improvements
such as transportation, to assure that needed
infrastructure expansion takes place.
Seven capital projects are underway in Prince
George's County for FY 1987, worth a total of $1.1
million. The current year's levy is estimated at $8
million, and there is an $11.5 million balance from prior
years. The majority of the TIF fund, or $16.2 million,
will be transferred to the general fund out of which debt
payments will be made for current and future capital
projects.
Results
The Districts have benefited from the $14 million in
revenues generated. Some of the 72 completed projects
include Amtrak and Metro parking garages, a pedestrian
overpass, traffic signals, and various road projects.
Revenues from each district ranged from $36,675 to
$2.5 million from 1981 to 1984. Districts with steady
growth will continue to benefit from TIF expenditures.
However, districts with slow growth and small TIF
contributions will probably be dropped.
Legal
Issues
The Tax Increment Financing Act was passed during the
1980 Session of the State General Assembly. The Act allows local
governments to designate certain areas of the county as
Tax Increment Districts. In Prince George's County the
effect of TIF was to allow capital projects to be
financed at a time when other funding sources were
unavailable. Now that funding limitations have been
modified, there will be a return of general fund
borrowing as a financing method. It is easier to float
government funding bonds because they have fewer
restrictions.
The enabling legislation spells out two methods for
financing.
1. The annual increment of increased tax revenues is set
aside in a special fund for improvements in the tax
increment district.
2. The anticipated amount of tax increase is pledged to
repay bonds sold by the public body to finance
improvements.
Political
Issues
No political problems were reported.
-15-
Timing
The first TIFD's were created in 1979. Selected TIF funds
will be reviewed during F Y 1987 for viability.
Contact
Janet W. Everette
Management Specialist
The Prince George's County Government
County Administration Building
Upper Marlboro, Maryland 20772
(301) 952-3300
-16-
Lottery
Overview
State of Pennsylvania (1984 pop. 11,900,222) - In 1972,
the Pennsylvania legislature authorized a statewide
lottery to benefit senior citizens. The lottery revenues
were dedicated to programs by the State Department of
Aging, the Department of Transportation, and the
Department of Revenue.
The lottery law stipulates that 50-percent of the
proceeds be returned to the players in the form of
prizes. The remaining funds are to be appropriated
annually to two transit and two nontransit programs, all
for senior citizens. Funding which actually goes to
transit represents 8 to 12 percent of not proceeds from
the lottery. The Department of Transportation also offers
a 75 percent discount to senior citizens participating in
a shared ride, advance reservation service provided
through private taxicab contractors. The advance
reservation (24 hours) requirement allows for
multi-person scheduling and the use of vans and small
buses. The service is directed primarily to rural
customers.
Programs offered through the Department of Revenue
include "Property Tax and Rent Rebate" and a "Senior
Citizen Inflation Dividend." Lottery funds are also used
by the Department of Aging as matching funds for federal
grants. In addition, the Department uses lottery funds to
subsidize drug prescriptions. Operating the Pennsylvania
lottery is a complex business which includes marketing;
security, printing, packaging and distributing tickets;
sales; and developing rules and regulations to conduct
each game; and payment of prizes. Two functions are
considered to be essential to the success of the lottery:
(1) given the potential for fraudulent practices,
extensive security procedures and measures are needed to
guarantee the integrity of all lottery games; (2)
marketing efforts are needed to increase the number of
licensed sales locations and to promote ticket sales.
Total costs of running a lottery have run as high as $35
million in fiscal year 1984-85.
Results
The lottery has generated significant revenues for the
State of Pennsylvania. In 1985-86, gross ticket sales
were $1.32 billion, of which $733 million were net
proceeds. Transit programs for senior citizens received
$106 million of these funds. The remaining net proceeds
were used for other specific programs for senior
citizens, such as property tax, rent rebates, and
inflation.
Legal
In 1971, the State legislature passed a law (Act No. 91,
the Laws of Issues Pennsylvania, Session of 1971),
authorizing the establishment of a statewide lottery. The
law created a Division of the State Lottery within the
Department of Revenue and gave it a $1 million budget to
establish the lottery. The law specified that the lottery receipts
would pay for payment of prizes, for payment of costs of
operation and administration of the lottery, and for
subsidy of the senior citizen programs. The law was
amended in 1980 and 1981.
-17-
Political
In general, lotteries are controversial sources of revenue. In
Issues Pennsylvania, the law was enacted after a long period of
debate. Critics of the lottery pointed to the sins of
gambling, the opportunities for corruption and the high
rate of participation by the poor. The compromise was to
use lottery proceeds to subsidize senior citizens
programs.
Timing
After the lottery law was passed in 1971, it took the
Bureau of State Lotteries approximately six months to
establish the procedures for the games, the rewards, and
the distribution network of retailers who sell lottery
tickets. The senior citizen programs first received
lottery funds in FY 1972-73.
Over the past ten years, as the public has become more
familiar with the lottery, proceeds allocated to the
programs have increased significantly.
Contact
Richard Boyajian
State of Pennsylvania Budget Office
Strawberry Square, Room 733
Harrisburg, Pennsylvania 17120
(717) 787-5442
References
The Pennsylvania Lottery Annual Report, 1980-1981, by the
Commonwealth of Pennsylvania, Department of Revenue,
Harrisburg, Pennsylvania, 1981.
Related Experience
State of Arizona (1984 pop. 3,052,983) - The Arizona
lottery was established as a result of a citizen's
initiative, passed on November 4, 1980. The proceeds of
the lottery were originally slated to be placed in the
General Revenue Fund. However, in July, 1981, the
legislature earmarked $190 million of lottery revenues
over the next ten years for the Local Transportation
Assistance Fund. In 1991, the legislature will reconsider
the issue of allocation of lottery funds.
The funds are allocated to each incorporated city and
town in the State on the basis of population. The
legislature has committed itself to appropriate
sufficient funds out of other revenues if necessary, to
meet a target distribution of $23 million a year, but
this has not been necessary. For cities over 300,000,
namely Tucson and Phoenix, the funds must be spent on
mass transit, as capital or operating assistance. Cities
and towns under 300,000 may use their funds for any
transportation purpose, including road maintenance. Each
city or town is guaranteed to receive a minimum of
$10,000 a year.
Results
In FY 1984-85, a total of $72 million was generated by
lottery sales; the required $23 million was distributed.
In 1986, the target of $23 million was
-18-
also reached. The city of Tucson received $3.6 million
and the city of Phoenix, $8.4 million.
Contact
Tom Robinson
Marketing Research Manager
Arizona Lottery Commission
301 E. Virginia Street, #1200
Phoenix, Arizona 85004
(602) 255-1470
-19-
II. Assessments
A special benefit assessment district is a fee on
properties within a district to pay for all or a part of
specific improvements made within that district. The
boundaries of the district are defined to include all
properties benefitting from the improvement. With special
assessments benefit from the development of improvements
pay for those improvements commensurate with the value of
the benefits to be realized. Assessments are levied as
one-time or recurring liens by city councils or special
districts. Revenues are typically used to retire bonds
issued to finance construction of capital improvements;
but may also be used to fund maintenance or operating
costs.
Special State enabling legislation usually is required to
levy special assessments.
Assessment districts have been used for highway
improvements in Arapahoe County, Colorado and
Plessanton, California.
Maintenance funds for a transit mall in Denver, and
a portion of the construction funds for the Los
Angeles Metro Rail system and the Miami Metromover
system were also raised by assessment districts.
-21-
Metropolitan Districts
Overview
Arapahoe County, Colorado (1984 pop. 361, 744) -
The first major, privately funded highway project in the
Denver region, the Yosemite Street overpass, was financed
by a coalition of metropolitan districts.
Metro districts are quasi-public entities that may issue
bonds for capital improvements supported by property tax
levies. This funding is considered to be from the private
sector, because these metro districts consist almost
entirely of commercial property. The Joint Southeast
Public Improvement Association (JSPIA), includes eight
metro districts and 2,663 acres and will ultimately
include over 50 million square feet of office, research,
and commercial development.
When the JSPIA was formed in 1982, a list of six highway
construction projects and four improvement projects were
adopted. The total cost of these improvements is being
shared by JSPIA, the County, and the State Department of
Highways.
Funds for the JSPIA portion ($20.5 million) are collected
from an ad valorem tax levied above and beyond the
County's taxes, at a rate of 22 to 45 mils. Each district
shares the total JSPIA portion of the projects according
to the proportion of the districts assessed valuation to
the total valuation of all the member districts. This
proportion is adjusted annually. The part of these
revenues not used for JSPIA projects is spent by each
district on internal improvements such as drainage
facilities and local roads.
Results
All of JSPIA's projects have been completed or are
under construction. One particular project, the Yosemite
Street overpass, serves the Greenwood Plaza South
development, and its construction was made a condition of
zoning approval for the development. The developer formed
the Greenwood South Metro district, and in cooperation
with the Greenwood District, constructed the overpass at
an estimated cost of $4.5 million.
The Colorado Department of Highways obtained
completion of projects that had long remained
dormant, at a cost of only $2.9 million to the
department. Completion of the overpass is estimated to
divert 8,000 vehicles per day from an overloaded
interchange.
The developers involved obtained approval to continue
medium-to-high density development and helped to
relieve a major traffic bottleneck. The JSPIA also
wished to establish credibility with the State and to lay
the groundwork for future jointly-funded projects in
the corridor which benefit both developers and the
general public.
Because the metro districts can use property taxes to
fund bond issues, front-end costs required by the
private sector to implement infrastructure improvements
are reduced, and low-interest long-term payments are
provided for.
-23-
Legal
Issues
Metropolitan districts are authorized under Colorado's
Special District Act, Title 32, adopted as a general
statute in 1981. They provide various infrastructure
services.
In order to form a special district, petitioners must
first submit a service plan to the board of county
commissioners. After the plan is approved and a petition
is presented to the district court, the court holds a
public hearing and an election. Consolidation of
districts is also processed through the court.
Metro districts have many of the same powers as
municipalities, such as issuing bonds, setting rates, and
acquiring property; they also have special powers of
eminent domain, providing public transportation, levying
and collecting ad valorem taxes, issuing negotiable
coupon bonds, and issuing tax-exempt revenue bonds.
While the funds used for improvements are from tax
receipts, the taxes are levied by the private sector on
the private sector.
Political.
Issues
No political problems were reported
Timing
In January 1981, the Greenwood Plaza South rezoning plan
was submitted, and in June it was approved. The formation
of JSPIA was announced in April, 1982. Two months later
the construction contract was awarded and the final
design approved by the Federal Highway Administration.
Projects are ongoing.
Contact
Phil Sieber, Planning Director
Arapahoe County
5334 South Prince Street
Littleton, Colorado 80166
(303) 795-4450
References
The Use of Private Funds for Highway Improvements,
prepared by KimleyHorn and Associates, Inc., May 1983.
-24-
Improvement District
Overview
Pleasanton, California (1984 pop. 38,394) - An
improvement district has been formed in Pleasanton,
California, to finance major traffic improvements in the
northern portion of the city. Created with the support
and consent of area developers, the district assesses a
fee based on benefit from improvements. Only commercial
and industrial properties are included in the assessment
area, which is bounded on two sides by interstate
highways. The District includes about 949 (net) acres
located in North Pleasanton. Land parcels with
improvements are receiving approximately 20 percent of
the total assessment.
Pleasanton, near San Francisco, is experiencing
significant office, commercial, high technology, and
light industrial development, creating a need for new
and/or improved freeway interchanges, ramps, additional
lanes, and major thoroughfare access roads.
The property in the North Pleasanton Improvement District
(NPID) and surrounding areas is also subject to
additional assessments for other public improvements
required for the development of the property. Nearly all
of the undeveloped property in the District is proposed
to be developed over the next ten years.
There are several business parks and commercial
centers at varying stages of development located
within the boundaries of the District. Hacienda Business
Park, the largest development in the City, is a mixed-use
park which is being co-developed by The Prudential
Insurance Company of America and Callahan Pentz
Properties, Pleasanton. Hacienda includes approximately
695 (net) acres of land. Upon completion in about 20
years, it is expected to provide approximately 12
million gross square feet of office, commercial, and
industrial space, and to have a daytime population in
2010 of 35,000. Other major business parks include the
Meyer Center, the Pleasanton Park, the Stoneridge
Corporate Plaza, and the Stoneridge Regional Shopping
Center.
The total amount being raised by the NPID for
transportation improvements is about $142 million, which
includes $49 million for local roadways, and $93 million for
highways. An additional $9 million will be raised for
fire protection and water supply improvements. Prudential
and Callahan Pentz will be responsible for the largest
portion of the assessments. Prudential will receive an
assessment of about $88 million, or 58 percent of the
total, and Callahan Pentz will receive an assessment of
about S21 million, or 14 percent of the total. The
assessments are calculated on the basis of net acres;
both developed and undeveloped land will be assessed
for approximately $150,000 per acre.
The District's projects are in three phases, the first of
which are roadway improvements costing about $49
million. Prior to the establishment of the NPID,
Prudential, Callahan Pentz, and other developers had
already spent over $25 million on roadway improvements,
for which they were credited through a redistribution of
assessments for the $24 million bond issue which
-25-
funded the remainder of Phase I. Nearly one-third of the
current 53 signals in Pleasanton have been funded by the
NPID; and through NPID, North Pleasanton developers paid
for the installation of a master computer at City Hall,
the expansion of the building to accommodate it, a direct
wire connection for 13.3 miles of interconnect throughout
the City, and provided capacity in the master computer to
control 128 intersections. Traffic engineers and
consultants for the developers provided the feasibility
study, specifications, design, initial timing, and
ongoing signal timing at no cost to the City.
During Phases II and III, the NPID plans to fund 100
percent of the cost of improvements on two interchanges
and a majority percent of the costs of two other
interchanges. The NPID will also fund the construction of
auxiliary lanes on both I-580 and I-680 adjacent to
development in north Pleasanton. Auxiliary lanes will be
provided on both sides of the freeways for approximately
eight lane-miles.
Results
The city of Pleasanton is now undertaking the preparation
of a project report and an Environmental Assessment (EA)
for the interchanges and auxiliary lanes. As a result of
local efforts spearheaded by the City and agreed to by
the California Department of Transportation (Caltrans)
and the Federal Highway Administration, the usual four-
to five-year lead time from the beginning of an EA to the
beginning of construction of a project is expected to be
reduced to three years.
Proceeds from the initial sale of $24 million in
Assessment District bonds were used to complete the
financing of Phase I, which is nearly complete. It is
expected that additional improvement bonds will be issued
on a phased basis over the next ten years to finance the
freeway improvements. These bonds create a lien against
each property within the District for that property's
proportionate share of the improvements.
Legal
Issues
A State statute dating from 1913 allows cities to
establish special districts to support infrastructure
improvements by issuing tax exempt bonds. To establish
the District, property owners petitioned the City, which
performed a preliminary engineering study and calculated
assessments. At a public hearing only one company protested its
assessment.
Political
Issues
No political problems were reported during the first
phase of the NPID. Area developers supported the District as
a fair method of assessing for the. local impact of new
development. However, in developing Phases II and III,
problems have been encountered in determining the source of the
remaining funds needed to construct two interchange
improvements. Caltrans has decided not to commit State
funds for these projects, and is encouraging several of
the communities surrounding the District to contribute to
the improvements because the benefits are regional in
scope. Coordination with these communities is slowing the
funding and planning processes on the projects.
Timing
The first bonds were issued in October, 1985. The
remainder will be issued in at least two stages over the
next ten years. Phase I of the District,
-26-
including the signalization projects, is nearly complete.
Phase II, which includes design and engineering for the
highway projects, and Phase m, which is the construction
portion of those improvements, will extend over the next
ten years.
Contact
John Crawford
Assistant Civil Engineer
City of Pleasanton
City Hall, P. O. Box 520
Pleasanton, California 94566
(415) 847-8040
Joseph Elliot
Director of Public Works and Utilities
City of Pleasanton
City Hall, P.O. Box 520
Pleasanton, California 94566
(415) 847-8040
-27-
Transit Assessment District
Overview
Denver, Colorado (1984 pop. 504,588) - In October, 1982,
the Rapid Transit District in Denver, Colorado opened a
downtown transit mall which is located on 16th Street and
covers a 14-block area from Broadway to Blake Street. The
mall runs through the center of Denver and is bordered by
a mix of retail, high-rise office, and some residential
development. The mall offers continuous free transit
service via specially built shuttle vehicles.
Maintenance of the 14-block mall is being funded through
a special assessment charged to property owners
immediately adjacent to the mall corridor. The Assessment
District and its funding mechanism are unusual in that:
Assessments are based on the amount of land
area included in the individual property, rather than on
the square feet of improvements made to the land.
Assessment rates vary according to distance from
the mall and land use. There are ten categories of
properties that take into account differences in
distance from the mall and zoning limitations. Rates
vary from a high of 45 cents per square foot for land
adjacent to the mall to a low of 5 cents per square foot.
Funds raised by the District are not used for
construction costs, which is more common, but rather
for operations.
Results
The assessment and maintenance is being supervised by
Downtown Denver, Inc. (DDI), which represents a group of
downtown businesses. The assessment covers maintenance
services including administration; clean-up and snow
removal; maintenance of plants and flowers;
electrical/plumbing repair and replacement; capital
repair and maintenance; security; and supplemental water
and electrical service.
The DDI collected $1.67 million in 1984 through special
assessments for maintenance of the Denver transit mall.
The first formula, which assessed property owners on the
basis of expected increases in property values
attributable to the mall, proved to be unworkable. Under
the current formula, rates are adjusted annually as
needed to cover the District's budget. In 1984, the
assessment rates were increased by 6 percent.
Legal
Issues
Enabling legislation for the creation of the
special assessment district was passed by the Denver voters
in 1978. The legislation (1978 Charter Revisions, Section A2.29)
provides two methods through which a district can be
legally constituted: (1) if 35 percent of the property
owners agree to its creation or, (2) if the Denver
Director of Public Works establishes the district by
mandate. The latter was the approach actually used. DDI
had difficulty with the first approach due to its
inability to locate an adequate number of "property
owners," defined by the enabling legislation as those who
have authority to sell land within the district.
-28-
The enabling legislation which provides the authority for
the creation of the special district and assessment
collection expires ten years after its establishment.
Accordingly, DDI has signed a ten-year contract with the
City of Denver and the "Transit Mall Maintenance
District" to oversee the maintenance of the mall. The
contract will be reviewed annually to determine both the
adequacy of revenues derived from the special assessment
for covering maintenance requirements, and the fairness
of the formula utilized to derive income.
Political
Issues
The implementation of the assessment district
required skill in negotiation backed up by the ability to
follow through on the terms agreed upon in the negotiation
process. DDI was in a favorable position because of its
stature as a widely supported business organization, its
ability to hire consultants to provide needed technical material,
and its desire to gain control over mall maintenance,
management, and development.
Negotiations by DDI were conducted with three different
groups: the downtown property owners, to agree on the
boundaries of the assessment district; the city, to agree
on the maintenance contract; and the RTD, to arrange
provision of bus service and to agree on the final design
of the mall.
The greatest conflict occurred over the definition of the
district boundaries by the original independent
appraiser. In the original concept, two blocks on each
side of the mall were to be included in the District.
However, the appraiser recommended that benefits would
extend for only one block In each direction, and so the
District was redefined. A majority of property owners
within the one block District objected to the smaller
district, complaining that benefits actually would be
more widespread and that the limited district would place
the financial burden unfairly on a small number of
property owners. Fearing the assessment district plan
would fall through, DDI persuaded 7 percent of the
dissenting property owners to reverse their decision,
allowing the District to be defined as originally planned.
In return for the support, DDI agreed to redefine the
district's boundaries for the second year to include three
blocks northeast and two blocks southwest of the mall. The
new, broader district increased the base from about 200
property owners to over 850 property owners; the new district
was supported by 98 percent of the property owners.
Timing
After Denver voters approved the ballot measure, it took
one and a half years to complete the hearings required
to establish the District. During that time, the District
was contested by property owners as mentioned above.
Construction of the mall was completed in October, 1982,
at which time DDI began to provide maintenance service.
Contact
Richard C. D. Fleming
President & Chief Executive Officer
of the Demer Partnership, Inc.
511 16th Street, Suite 200
Denver, Colorado 80202
(303) 534-6161
-29-
Special Benefit Assessment District
Overview
Los Angeles, California (1984 pop. 7,901,220) -
California legislation (S.B. 1238) which allows special
benefit assessment districts to be set up around planned
Metro Rail rapid transit stations was enacted in 1983.
The bill amends the Public Utilities Code to allow
assessment districts for the construction, maintenance,
and operation of transit. (The Code already allows
benefit assessment districts for other types of
infrastructure, such as fire protection districts and
water districts.) Undeveloped land will be assessed
according to parcel size and improved land according to
total floor area.
The law allows Southern California Rapid Transit District
(SCRTD) to levy assessments on property owners within
these districts in direct proportion to the benefit their
property derives from proximity to Metro Rail. One of the
key aspects of the law is that it enables the District to
consider issuing bonds based on anticipated revenue to
help pay for the project's construction, operation, and
maintenance costs.
In January, 1985, the Benefit Assessment Task Force
established by SCRTD formally recommended that two
benefit assessment districts be established for the
initial segment of 4.4 miles (MOS-1): one for the
Wilshire/Alvarado station area and one for the Central
Business District (CBD) station area.
The district boundaries will be established based on
walking distances of 1/2 mile for the CBD and
approximately 1/3 mile for the Wilshire District.
Assessment rates will be applied uniformly through an
entire district. Offices and other commercial
improvements; retail stores, hotels; apartment hotels;
motels; labor-intensive, light industrial areas; and
income producing residences will be assessed. The initial
assessment rate will be set at 30 cents per square foot,
with a maximum allowable rate of 42 cents. The SCRTD will
review the rates at least every two years to determine
whether they should be adjusted as required by cash flow
needs or for changes in the amount of assessable square
feet in the District.
The assessment structure assesses either the improvement or
the parcel of land on which the improvement is sited.
Improvements such as offices, commercial, retail stores,
hotels, and motels are to be assessed for the square footage
of the improvements or the square footage of the parcel whichever
is greater.
Results
The first phase of Metro Rail will cost $1.25 billion to
construct. The Federal government is being asked to pay
$695.9 million, or 56 percent, and has signed its
commitment to MOS-1. The State of California will provide
$213.1 million, or 17 percent. The V2 cent sales tax in
Los Angeles County dedicated for transit will contribute
$176.6 million, or lA1 percent; and the City of Los
Angeles will provide $34 million, or 2.7 percent. When
these contributions are totaled, some $130.3 million in
additional funds
-30-
(approximately 10.4 percent of the MOS-1 construction
cost) are needed for the initial 4.4 mile segment, and
also to demonstrate to the Federal government that there
is strong local commitment to Metro Rail. Assessment
revenues will be used to pay for and finance these $130.3
million in construction costs.
A new task force will be formed to consider benefit
assessment districts for future segments of the Metro
Rail system, which are planned for each of the system's
18 to 20 stations.
Legal
Issues
Senate Bill 1238 amends the California Public Utilities
Code to allow special benefit assessment districts to be used
for mass transit. Public hearings were held by the SCRTD board and
the City Council before the resolutions were passed by
both bodies.
Political
Issues
At the SCRTD public hearing there was considerable
discussion of whether residential properties should be assessed.
The Task Force had recommended that income-producing residential
properties be assessed. However, the City Council decided
to not assess properties with residential improvements
except for hotels and motels.
Timing
S.B. 1238 became law in October, 1983. The Benefit
Assessment Task Force was formed in July, 1984, and made
its recommendations to the SCRTD board in January, 1985.
After a public hearing, the SCRTD Board approved a
resolution to proceed with the establishment of the two
benefit assessment districts, in February, 1985. The Los
Angeles City Council amended and approved the SCRTD
resolution on May 31, 1985. On July 11, 1985, the SCRTD
board adopted the resolution creating the two districts.
Contact
John A. Dyer, General Manager
Southern California Rapid Transit District
425 South Main Street
Los Angeles, California 90013
(213) 972-6474
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Special Benefit Assessment District
Overview
Miami, Florida (1984 pop. 1, 705, 983) - A special
assessment district has been formed in downtown Miami.
Its purpose is to generate $20 million, which was
established as the contribution from the private sector
toward the capital costs of implementing Miami's
Metromover project. The project will cost approximately
$148.2 million. The assessment district will replenish
the General Fund for an amount equivalent to a pro-rata
share of debt service on bonds at a fixed rate over a 15
year period. Bonds were backed by county utility service
tax revenues. Property owners being assessed in the area
are expected to benefit from the increased accessibility
to their properties increased sales and rents.
Results On November 1, 1984, Metropolitan Dade County began
levying and collecting this special assessment on
approximately 700 properties within the service area of
the Metromover. Based on net leasable square footage, the
special assessment is adjusted annually to account for
new development. The rate for the first year was 18 cents
per net leasable square foot, based on the January, 1984
property tax rate. At the end of 15 years, levies on
properties will have raised an amount sufficient to repay
approximately $7 million of debt service plus the $20
million of capital contributed toward the funding of
Metromover by the private sector. Churches and Federal
buildings are exempt from this charge. The district
included over 16.78 million square feet of net leasable
space when assessments were first levied.
Legal
Issues
The Dade County Manager commissioned a group of
representatives from private and public agencies to study
the Metromover's financing. They recommended the assessment
district to the Board of County Commissioners, which passed an
enabling ordinance in 1983. As the assessment basis is
not ad valorem, no referendum was required. The Dade
County Code limits the term of the special assessment district
to 15 years. The County Board will approve the assessment ratio
yearly, based on annual property appraisals. Assessments are
billed and collected as part of the tax collection process.
Tax certificates are sold on properties whose assessments are
delinquent.
Political
Issues
During the public hearings, some opposition arose from
property owners with under-leased buildings and owners who could
not pass on increased taxes to their tenants because of terms of
their contracts.
Timing
The Metromover project was initiated in September, 1982.
Enabling legislation for the assessment district was
passed in July, 1983. Bonds were issued in September,
1984 and will be fully retired 15 years later.
The Metromover opened in 1986.
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Contact
James Moreno, P.E.
Manager, Metromover Project
Dade County Transportation Administration
Metro-Dade Center
111 N.W. 1st Street, Suite 500
Miami, FL 33143
(303) 375-5902
Marc Samet
Citizens and Southern National Bank
P.O. Box 5367
1 Financial Plaza
Ft. Lauderdale, FL 33340-5367
(305) 765-2009
References
Financing and Implementing Special Assignments, by Mark
Samet, in Automated People Movers: Proceedings of an ASCE
Conference, Miami Florida, March 1985.
"Joint Use Right-of-Way Agreements for the Miami
Metromover System," by S. Zweighaft and J. Moreno, in
Automated People Movers: Proceedings of an ASCE
Conference, Miami, Florida; March, 1985.
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III. Fees
Fees are distinguished from taxes in that taxes are
usually levied on the general population, while fees are
used to segment a portion of the population which is
causing a significant impact on transportation
infrastructure, or which is particularly benefitting from
transportation improvements. Fees are becoming
increasingly popular and are receiving growing attention,
especially those imposed on developers to mitigate the
impact of new projects on roads and transit services.
These impact fees have been justified on grounds that new
development exacerbates peak-hour traffic or transit
problems and thus, developers should help to mitigate
actual and potential problems. The impact fees fall into
two general categories. The requirements may be
specifically set forth in local ordinances as a condition
for obtaining building or occupancy permits. Requirements
may also be negotiated by the developer and the local
zoning authority when a rezoning request is made. In the
case of negotiated requirements, local governments
withhold permits or approvals until commitments,
payments, or in-kind improvements have been made. Cases
examining the latter technique are found in Chapter IV.
Fees may be assessed on the basis of square feet of
development, units being constructed, or peak hour
vehicle trips generated. They may apply to a whole city
or county, or only a specific area, and may raise funds
for either road or transit improvements. Revenues are
usually spent for improvements in the area in which they
were generated. Fees require a high degree of
public/private cooperation. In some cases, the private
sector fully supports the use of impact fees as an
equitable method of financing necessary improvements. In
others, however, legal challenges to impact fee
ordinances have affected the ability of these ordinances
to mitigate transportation or mobility problems.
The examples of impact fees contained in this section
explore six highway-related projects and one involving
transit facilities.
Of particular interest is the ordinance in Palm Beach
County, Florida, which assesses a fee for impacts on
road facilities based on trips generated by the
development. The ordinance has served as a model
for other areas in Florida.
Upper Merion Township, Pennsylvania, Los Angeles, and
Orange County, California have adopted impact fee
programs allocating capital improvement costs by peak
period traffic generation.
San Diego adopted a facilities benefit assessment program
charging developers a fee for expanding the city's
infrastructure based on the number of forecasted building
units.
The city of Farmer's Branch, north of Dallas, established
a capital improvement fee per square foot based on a
comprehensive city capital improvement plan.
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Fort Collins, Colorado has instituted a Transportation
Utility Fee which raises funds citywide for road
maintenance. The fee is based on street frontage and
traffic generation.
The San Francisco case is an example of a fee ordinance
that dedicates revenues for transit facilities and
services.
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Fair Share Contribution Ordinance
Overview
Palm Beach County, Florida (1984 pop. 692,217)- In 1985,
Palm Beach County updated its Fair Share Contribution for
Road Improvements Ordinance (Ordinance #85-10) which
requires new land development activity to pay a fair
share fee for reasonably anticipated costs of new roads
needed by the development. However, the ordinance
clearly states that the impact fees are not to exceed the
activity’s pro rata share of the actual cost to make the
necessary improvements.
The ordinance sets forth a schedule of impact fees which
are based on trip generation by type of land use activity,
the cost of constructing additional lanes, and the lane capacity.
The collected funds are deposited in the trust fund of the
designated impact zone, 40 of which are created by the ordinance.
The zones are approximately three miles on a side. The funds
can be spent only for the following purposes in a particular
impact zone: design and construction plan preparation; right
of way acquisition; construction of new through lanes, turn
lanes, bridges, and drainage facilities; purchase and
installation of traffic signalization; construction of
new curbs and medians; and relocation of utilities to
accommodate new roadway construction. The main goal of
the ordinance is to raise funds to increase the capacity
of roads in the county.
The impact fees are levied at the time the building
permit is issued for any new land development activity
within the county and municipalities that have adopted
the ordinance.
Results
Under this ordinance, each of the 1,000 units of single
family houses under 2,000 square feet generates $804, and
each unit over 2,000 generates $1,045. A shopping center
of 20,000 square feet would generate $53,580 or $2.70 per
square foot. A general office building generates 48 cents
per square foot or $48,200 for a 100,000 square foot
building. The fee schedule is based on the following
formulas:
Residential Fair Share Fee: One-half external trips per
one lane capacity, multiplied by the cost of constructing
one lane for three miles.
Non-residential Fair Share Fee: One half external trips
per one lane capacity, multiplied by the cost of
constructing one lane for one mile.
Since collection began in FY 1985, approximately $18
million has been raised for improvements. Over $10
million has been obligated for expenditure in FY 1986.
The ordinance includes different formulas for residential
and non-residential traffic generators, because many non-
residential trips are captured or diverted from
traffic already on the road. Therefore, the formula for
non-residential development requires a fee sufficient to
replace capacity of fewer lane-miles than that for a
residential development.
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The ordinance is reviewed annually by the Board of
Commissioners to analyze the effects of inflation on the
actual costs of roadway construction and to ensure that
the fee charged will not exceed the pro rata share for
the reasonably anticipated costs.
Legal
Issues
Palm Beach County was very careful about designing an
ordinance that would be legally defensible. Its legal counsel
advised that the following criteria be incorporated in the
ordinance to withstand judicial scrutiny: (1) The growth
rate of the area must be such that the roads will have to
improve in the near future, if the existing level of
service is to be maintained; (2) There must be a rational
relationship between the traffic impact of the new user
on the roads and the necessity to improve the roads
because of the impact; (3) A reasonable and definable area
of impact must be established and fees earmarked for use
within the area; (4) The cost of providing the road improvements
must be determined; (5) The money available to provide the needed
road improvements must be taken into account; (6) The new
users may be required to pay the cost of road
improvements only to the extent that their presence
necessitates such improvements; (7) The fee cannot exceed
the pro rata share of the anticipated costs; (8) The new
and old users must share equally in maintaining the
original roads.
Despite the effort to design the ordinance in a fair and
equitable manner, the ordinance has been challenged
twice by the Home Builders Association. Both times,
the ordinance was upheld, but fee collection was slowed
as a result of the challenges. In addition, some
revenues were lost because some original owners liable
for the fee have sold their properties and moved away.
Political
Issues
The ordinance applies only to developments within
unincorporated areas of the county or within incorporated
municipalities that have adopted the fair share ordinance.
About one-quarter of the municipalities in the county have
adopted the fee. Others have not adopted the ordinance for
fear that developers will not accept both the county impact
fee and the municipality's existing road improvement
requirements. To overcome this concern, the County
has agreed to reduce the impact fee by the cost of road
improvements required of the developer by the
municipality.
Timing Proposals for the ordinance were under consideration as
early as 1978. The original ordinance was adopted in
1979, and was amended in 1981 and 1985. Because of legal
challenges, collection was delayed until FY 1985.
Contact
Andrew S. Hertel
Traffic Division, Palm Beach County
P.O. Box 2429 West Palm Beach, Florida 33401
(305) 684-4000
References
Infrastructure Task Force Summary Report, by the Palm
Beach County Department of Engineering and Public Works, 1984.
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Highway/Traffic Improvement Fee
Overview
Upper Merion Township, Pennsylvania (1984pop. 26,101) -
Upper Merion Township, a suburb northwest of
Philadelphia, has adopted a Highway Traffic Capital
Improvement Program to raise funds for needed
improvements resulting from increased development. The
Capital Improvement Program establishes a mechanism to
obtain funds necessary to provide and coordinate roadway
and intersection improvements within the Township. In
addition, the program identifies current highway and
intersection flow problems, establishes a baseline for
projected improvements, and provides a continuing
generation of funds necessary for the Township to
initiate and complete improvement on an "as needed" basis
and to accommodate new developments and contributions.
The key feature of the Capital Improvement program
is a funding fee formula which uses the total
improvement costs and benefits to calculate a "fair
share" cost allocation. The costs of constructing needed
improvements -- $33.2 million -- was divided by the
projected improved peak capacity, yielding a unit
cost per peak vehicle trip. The unit cost was divided in
half to allow for traffic already on the roads and for
other revenue sources. The final unit cost is $933 per
peak hour vehicle trip. The fees imposed by the ordinance
are calculated by applying the unit improvement cost to
the peak hour traffic generated by a project. Traffic
generation figures are drawn from the Institute of
Transportation Engineers Trip Generation Manual. Fees for
a single family residential of 1,000 units will total
$93,300 or $933 per dwelling unit, while the fee for a
150,000 square foot office building will be $298,094
or $1.99 per square foot. The fee for a light industrial
development of 100,000 square feet would be $111,960 or
$1.12 per square foot. The Capital Improvement Fund controlled
by the Upper Merion Township Highway/Traffic Authority funds
improvements.
Credits or reductions in the fee may be attributed to
localized traffic generators which serve a limited area
or which draw from traffic already on adjacent streets.
The program allows the fee to be updated annually, but
changes are not expected aside from adjustments for
inflation. Additional projects can be added to the
program needed. In essence, a Township-wide improvement
district was created so that the fees could be
collected in all areas of new development.
Results
The Township expects to raise the entire $33.2 million
needed for improvements caused by new development. Since
the fund was established, about $4 million has been
collected, and contracts have been signed for about $0.5
million.
-39-
Legal
Issues
Local ordinances were required to establish the fee
and the Fund. The Township created the program and passed
the necessary ordinances using existing authority. State
legislation followed, using the Township's program as a model.
Pennsylvania Senate Bill No. 825 provides for
transportation development projects by municipalities and
municipal authorities, and allows these entities to
create districts for the purposes of planning, financing,
and improving transportation facilities. The State
legislation has since been amended, changing the review
process for the community traffic study and fee
structure.
Political
Issues
The Township was careful to hold meetings with citizens,
members of the business community, and developers while
developing the Capital Improvement Program. After the initial
State legislation was passed, developers, bankers, and other
individuals pressed for changes which would require a
more stringent review of such fees and programs.
Timing
The Township-wide Traffic Study was begun in mid-1984 and
completed near the end of the year. The original
Highway/Traffic Capital Improvement ordinance was passed
in December, 1984, and collections began soon after. The
State legislation was passed in August, 1985.
Contact
Ronald G. Wagenmann
Township Manager
Upper Merion Township
175 West Valley Forge Road
P.O. Box H
King of Prussia, Pennsylvania 19406-0139
(215)265-2600
-40-
Coastal Transportation Corridor Ordinance
Overview
Los Angeles, California (1984 pop. 7,901,220) - As a
result of massive development planned near the Los Angeles
International Airport (LAX) by the Howard Hughes Corporation
and other large developers, the City of Los Angeles has
established the Coastal Transportation Corridor Specific Plan
ordinance No. 160394 which regulates development and
provides a funding mechanism for implementation of
road improvements in the LAX Corridor area Exemptions
to this ordinance include developments which serve
neighborhoods such as restaurants.
The LAX Corridor area encompasses 34 square miles in the
general South Bay area of Los Angeles County. Within the
next ten years, 41 million square feet of new office,
commercial, industrial, and residential development has
been proposed. Early in 1984, the Southern California
Association of Governments (SCAG) established policy
advisory and technical advisory committees to study the
situation and prepare alternative recommendations. In
November, 1984, the L A. City Council adopted a motion to
initiate a Coastal Transportation Corridor Specific Plan.
During the plan's preparation, the council imposed
interim restrictions prohibiting issuance of building
permits for commercial and industrial development within
the project area unless traffic impacts could be
mitigated. Area residents, developers, and governmental
agencies were involved in the process which created the
ordinance.
The Coastal Transportation Coalition (CTC), is an
alliance of business and development interests, and the
Coalition for Concerned Communities (CCC) is made up of
area residents. The charter members of CTC are Garrett
Corporation, Continental Development Corporation, Howard
Hughes Development Corporation, the Koll Company, Hughes
Aircraft Company, and Playa Vista Corporation. Each has a
vested interest in the total development of the corridor.
The Playa Vista mixed-use project alone is estimated at
build-out to cost $1 billion. According to L A. DOT, more
than $190 million will be committed to public transportation
improvements within the corridor. It is expected that the entire
amount will be paid for by private developers. The CTC became
directly involved with review and comment on the drafting of
the ordinance through cooperation with a consulting firm hired by
the City of Los Angeles.
The Coastal Corridor ordinance is intended to:
regulate land use development and transportation in the
area;
establish a transportation trust fund to cover costs
directly associated with construction of public
transportation facilities;
provide a funding mechanism for the plan to address
transportation needs;
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establish an impact assessment fee based on the number of
trips generated by the development. A one-time fee of
$2,010 per p.m. peak hour trip, or the equivalent of $5
per square foot has been levied on development to pay for
required transportation facilities in the corridor; and
provide developers with opportunities to reduce fees to
be paid if they institute trip reduction measures. The
rates are derived from trip tables developed in the
planning process by the LA. DOT.
Results
Off-site improvements to be paid just by the developer of
the 2.7 million square foot Howard Hughes Center will
total $13.5 million. These improvements include a $5.4
million freeway ramp, a $2 million park buffer zone with
approximately $1 million for expansion of an existing
ramp, road widening, and a transit center. An additional
$50 million are estimated for on-site infrastructure
costs.
In other areas $32,000 in Impact Assessment Fees have
been collected along with $1.2 million in letters of
credit.
Legal
Issues
A majority of the fees collected are being appealed to
the city council by the developers. The status of these appeals is
unknown at this time.
Political
Issues
Coordination between developers, the Coastal
Transportation Coalition,the Coalition of Concerned Communities,
and the city council was considered important in the establishment
of the ordinance.
Timing
The Coastal Transportation Corridor Specific Plan
Ordinance No. 160394
was passed into law on October, 1985.
Contact
Peter White Transportation Engineering Associate
L A. Department of Transportation
City Hall
Los Angeles, CA 90012
(213) 485-2286
-42-
Development Impact Fees
Overview
Orange County, California (1984 pop. 3075,7) - In Orange
County, California, the Irvine Company, a major
development corporation, has offered to make a number of
significant local transportation improvements. The
improvements are part of the company's efforts to improve
access to its land holdings which amount to 70,000 acres.
Projects include improvements on two interstate routes,
three new major thoroughfares, and various traffic
management improvements on local arterials.
The Irvine Company, together with other area developers,
is participating in a recently established development
fee program in the southern part of the county. The
program is expected to be able to finance about half of
the cost of designing and constructing three
thoroughfares in new transportation corridors --
Foothill, Eastern, and San Joaquin Hills. The total
estimated costs for the three freeways is $857 million.
The County and the area developers have reached an
agreement for payment of a one-time fee at the time of
issuance of building permits, ranging from $1.05 to $1.80
per square foot of office and commercial development and
$535 to S1,305 per residential unit. The Orange County
Transportation Commission was asked to serve as a
facilitator to encourage the affected cities to
participate in the program.
Results
Joint Power Agencies (JPAs) consisting of city and county
members have been formed in order to implement the fee
program on a regional basis and to develop a shared
decision-making process to finance, design, and construct
the thoroughfares.
Legal
Two out of the 12 cities within the proposed areas of
benefit for the
Issues three transportation corridors have not joined the newly
formed JPAs. These are the city of Laguna Beach and the
city of Irvine. Laguna Beach decided not to participate
in the program since it is opposed to building the San
Joaquin Hills freeway for environmental reasons. The city
of Irvine's decision has been delayed due to litigation.
An anti-growth group initiative for a city
election in Irvine on the fee was challenged in
court by the Builders Industry Association, the
Orange County Chamber of Commerce, and the Irvine
Chamber of Commerce, on the grounds that the
transportation facilities serve regional needs
and that such an issue could not be resolved in a
local ballot. An appeal to the State Supreme
Court is still pending.
Political
Issues
Orange County may adopt a fee program only within the
unincorporated areas. City and County cooperation is required for
successful regional program implementation.
Timing
On April, 1982, the Orange County Board of Supervisors
initiated a study of areas of benefit for a potential
developer fee program to assist in the financing of
the three major thoroughfares. In January, 1984 the
Orange County Planning Commission adopted a specific
Major Thoroughfare and Bridge Fee Program. In October,
1984 the County Board of Supervisors
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adopted a fee program for unincorporated county
territory. On June, 1985 representatives of ten cities
and the county agreed to support a revised two zone fee
program based on the location of the properties in
relation to the transportation facilities and a Joint
Powers Agreement. By early spring of 1986 only Laguna
Beach had not approved the fee program in the proposed
areas of benefit and two JPAs had been formed. The city
of Irvine approved the program but is restricted by the
pending court action. Irvine is collecting fees from new
development but is impounding the funds until the State
Supreme Court determines if the initiative is valid.
Contacts
Ron Cole Director of Planning and Programming
Orange County Transportation Commission
1055 N. Main, Suite 516
Santa Ana, California 92701
(714) 834-4333
John Boslet
Director of Regional Transportation
Irvine Company
550 Newport Center Drive, P. O. Box 1
Newport Beach, California 92652-8904
(714) 72~2361
Reference
Revised Major 7horoughfare and Bridge Fee Program
and Joint Powers Agreements, Orange County
Transportation, July, 1985.
-44-
Facilities Benefit Assessment Program
Overview
San Diego, California (1984 pop. 960,452) - Two
developers in North City West, a new community in
suburban San Diego, have paid the city of San Diego
$3.5 million for realignment and construction of a new
bridge that will improve access to I-5 in the
vicinity of their projects.
Baldwin and Company and Pardee Development Corporation
are in the process of developing 600 commercial
acres and 15,000 residential units in the relatively
undeveloped area of North City West. The $3.5 million
assessment is based on a formula adopted under the
Facilities Benefits Assessment program (FBA) described
below. Funds from the FBA are used for offsite
community improvements such as transportation, parks,
water, and sewer systems. FBAs are collected in
addition to the conventional subdivision requirements for
on-site improvements.
The FBA program provides San Diego with a technique for
charging developers a one-time fee for expanding the
city's infrastructure to accommodate new growth The FBA
places a fee on all new developers in 14 area
communities, small assessment districts with estimated
populations of 5,000 to 40,000 which are referred to as
"areas of benefit." The communities are defined as the
geographic regions in which new construction is likely to
occur over the next ten years. The developers in these
areas of benefit pay a predetermined fee for each unit
they plan to build when they apply for building permits.
The fee varies according to the number of units per lot,
the type of unit, and the cost of providing the
infrastructure deemed necessary to support the
development.
The fee schedule is based on a long-range financial
plan for each of the 14 communities, relating capital
needs and cost. This Infrastructure Development
Forecast is completed and updated annually by the city
engineering department with the cooperation of the
developer. It includes two components: the Development
Schedule forecasts the number and type of units to be constructed
for each of the next ten years or more, as well as the absorption
rate for commercial/industrial land; the Capital Schedule
estimates the cost of providing services to these
developments in a timely manner. These cost estimates
are allocated by a formula relating the number of units that
can or could be built on commercial or industrial land at the
maximum density for residential land, the level of public services
needed by the new population, and the capital expenditures
necessary to provide an adequate level of service. With this
information, the City can estimate the amount of money
that will be needed over the next 10 to 20 years to have
the infrastructure in place as the new growth occurs.
Each area of benefit has its funds deposited in a separate
account managed by the city manager. Because the funds of the
various districts cannot be combined, developers are assured
that the fees will be spent on improvements listed in the Capital
Schedule. Each year, the City reviews the development
schedules to see if construction is taking place as predicted,
and evaluates costs, whether there are an adequate number of
projects, interest, inflation, rezonings, and park development.
If no growth
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has occurred, no money will have been collected, and the
Capital Schedule will be postponed.
Once infrastructure needs and costs are determined for
each category of development -- single or multi-family
residential, commercial, or industrial - fees are
assigned to each development as building permits are
requested. Because the city of San Diego determines needs
and costs for each community separately actual fees vary
from place to place. Overall, however, fees of
$1,500-$2,500 have been assessed for a single family
residential unit, $1,000-$1,800 for each unit of a
multi-family residential development, $18,000-$27,000 per
acre for commercial development, and $5,000 to $11,000
per acre for industrial development.
Results
The City of San Diego has now collected $15 million
in assessments from two developers for transportation
improvements needed to support those new developments.
When all development is completed in North City West,
approximately $40 million will have been collected for
transportation and recreation-related improvements in the
area.
Legal
Issues
The home-rule city council passed the Procedural
Ordinance for Financing Public Facilities in Planned Urbanizing
Areas (Ordinance No. 0-15318) in 1981. The FBA programs for the
three areas of benefit have been challenged in court by a few
developers on two grounds: that the FBA is a tax, not an
assessment, and therefore is in violation of Proposition 13
the State initiative restricting property tax rates; and that
the FBA is unequitable, unfairly requiring new developers to pay
for improvements needed by older developments. The City
argued that the FBA program has been carefully designed
to relate the cost of the fee to the special benefits of
improvements provided to the new development, so that
FBAs are assessments for special benefits received, not
general taxes. The City also designed the ordinance to be
as equitable as possible by applying FBAs only to residential,
commercial, and industrial areas that were undeveloped at the
time the ordinance was adopted, and by designing the fee formula
to ensure that all new developments pay their pro rata shares
of the infrastructure cost. The City is currently using the FBA
schedule as the basis for individual agreements between
developers and the City as a condition of map approval
for new subdivisions in the areas of benefit. The
development agreement, authorized by the State, requires
the City to provide the improvements listed in the
Capital Schedule in a timely fashion. The FBA has been
validated by the California courts as of November, 1984.
The State Supreme Court ruled not to hear an appeal from
developers and, ipso facto, validated FBA at that level.
-46-
Political
The FBA program is the result of several developers' concern that
Issues Proposition 13 would severely limit the City's ability to
provide the infrastructure needed to support new projects.
Recognizing that they would have to assume greater financial
responsibility for these costs, they became concerned about
fair sharing. Consequently, the developers worked closely with
the engineering department on the preparation of the development
and capital schedules and the calculation of the FBA. The City
estimates that the FBA program has the support of 80 to 90 percent
of the developers in the two areas of benefit for which the program
has been established (North City West and North University City). A
few developers have challenged the program in court, however.
Timing
The ordinance was approved in 1981 after two years of preparation.
It takes at least a year to prepare and approve the development
and capital schedules.
There is an inherent lag factor in the FBA program,
since the funds are not collected until the building
permit is issued. Consequently, infrastructure
improvements often will not be completed until after the
development has been finished. The lag may be even longer
if completion rates are lower than were assumed in the
development schedule. This possibility is one reason the
development and capital schedules are reviewed annually.
In addition, the fees are adjusted annually for inflation
in order to maintain the purchasing power of the funds,
or to account for newly added or deleted projects.
Contact
James Fawcett Engineering & Development Department
City Operations Building 1222 First Avenue, M.S. 406
San Diego, California 92101-4154
(619) 236-6936
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Capital Improvement Fee
Overview
Farmer’s Branch, Texas (1984 pop. 26,464) - The City of
Farmer's Branch north of Dallas, adopted two ordinances
establishing a ten year capital improvement plan and a
Capital Improvement Fee of 50 cents per square foot to be
levied against all building areas at or above ground, in
the area of the designated "Improvement Area No. 1." The
fee went into effect in October, 1984.
The City developed a comprehensive ten year capital
improvement plan, including the expansion, maintenance,
and upgrading of streets, alleys, traffic control
signals, bridges, storm sewers, and drainage facilities
and other transportation facilities, in response to the
rapid growth experienced in the improvement area This
growth was responsible for an altered pattern of land use
that was significantly higher in overall density than the
previously planned land uses. The transportation
infrastructure was unable to adequately handle increased
use and to accommodate proposed additional growth.
As a result of a detailed engineering study, the City’s
Public Works Department determined the estimated total
cost of Capital Improvements over the next ten years at
$2 million. With the passing of Ordinance No. 1526, the
city council adopted the Capital Improvement Fee of 50
cents per square foot. This fee was the result of
dividing the $2 million in capital improvement costs by a
projected 4 million square feet of new development and
construction over the next ten years.
Payment of the Capital Improvement Fee, either in full or
over a ten-year period, must be made prior to issuance of
the building permit by the city. Because an earlier
ordinance, still in force, requires developers to finance
and construct all road improvements needed as a result of
new development, a pro rata refunding mechanism exists to
recover capital improvement costs that may be greater
than the assessed Capital Improvement Fee.
The ordinance calls for a yearly review of the Capital
Improvement Plan by the Director of Public Works to
determine whether the projected cost of Capital
Improvements and the projected total development within
the designated area is accurately reflected. A report
must be given to city council which may include a
recommended adjustment to the Capital Improvement Fee.
Results
Since the enactment of these ordinances there has
been no new development. Most developers seem to agree that the
ordinances are a fair method for financing road improvements.
Several developers would like to see a credit system for roadways
considering a similar ordinance for a larger section of land on
the east side of town which would include a slightly higher Capital
Improvement Fee along with a larger list of capital improvements.
This new ordinance might include Improvement Area No. 1 and address
several new issues including a credit system.
-48-
Legal
Both ordinances carry a penalty, not to exceed $200, for each day
a Issues violation exists. Both ordinances clearly state that the
policy established in Ordinance No. 1430, which required a
developer to construct, have constructed, or finance 100 percent
of the cost of all required public improvements that are located
within or contiguous to the property, will remain in force and
unaffected by these new ordinances.
Political
Issues
No political problems were reported.
Timing
Ordinances 1526 and 1528 were passed by the city
council of the city of Farmer’s Branch, Texas, on October
8,1984.
Contact
Larry Cenenka
Traffic Engineer
City of Farmer's Branch
Farmer's Branch, Texas 75234
(214) 247-3131
-49-
Transportation Utility Fee
Overview
Fort Collins, Colorado (1984 pop. 70,721) - Fort Collins is a
fast growing city about 60 miles north of Denver. The city
instituted a Transportation Utility Fee in 1984, to cover the
rising costs of road maintenance. The funds generated by the fee
are used for crack sealing, patching, surface treatment, and
overlay of residential streets. The fee assigns the cost of
maintenance to the property that creates the need for
street maintenance and benefits from it. This is done on
a sliding scale based upon the use of the property,
street frontage, and traffic generation.
In 1982, City staff began to examine the specific relationships
between street use, cost, and benefit. Variables used in allocating
costs to each property include traffic generation and front footage.
Street maintenance program costs were first analyzed. These costs
were divided by the total assessable front footage, yielding a base
rate per front foot. The fee was then proportioned on the basis of
traffic generation as determined by developed use of the property,
and front footage per property. The result is the following
formula:
Front Footage x Base Rate x Traffic Generation Factor =
Monthly Fee
Results
The fee is tied to the City's utility billing system, and is billed
so that the occupant of the property pays the fee, whether owner or
renter, although the owner remains ultimately responsible for
payment of the fee. A minimum of 75 cents per month is charged to
all properties. The total yield of this assessment is approximately
$450,000 each year. The Public Works Department can increase the
amount by raising the base rate, subject to the approval of the
city council. The Transportation Utility Fee represents a one
percent increase in the total utility bill paid by the average
resident.
Legal
In April, 1985, a group of churches filed suit against the City
claiming that Issues the fee is a tax, and that it was enacted
without exemptions for churches and other tax exempt organizations.
The plaintiff's complaint also challenges the validity of the fee
on various constitutional grounds. The case is still pending.
An appeals process was established for unusual situations
or where an error has been made in calculating the fee. A
rebate program also exists for people meeting certain age
and income guidelines to reduce the impact of utility
costs. This is an extension of programs already provided
by the City for other utilities.
Political
Issues
No political problems were reported.
-50-
Timing
The enabling ordinance for the Transportation Utility Fee
was passed in January, 1984, with the first billing in
May, 1984.
Contact
Jay M. Kole
Special Projects Administrator
City of Fort Collins
P.O. Box 580, Fort Collins, CO 80522
(303) 221-6605
-51-
Transit Impact Fee
Overview
San Francisco, California (1984pop. 712,753) - The San
Francisco City and County Board of Supervisors in 1981
enacted the Transit Impact Development Fee Ordinance which
authorizes the city to collect a one-time fee of $5 per square
foot from owners or developers of new downtown office space. The
fee must be paid as a condition of obtaining a certificate
of occupancy. The proceeds from this fee can be used to pay for
the capital and operating costs of additional peak-period public
transit services.
The rationale for the fee has been that downtown office development
brings additional people into the city whose demand for service
creates additional costs for the transit system. For example, the
additional peak-period traffic may require San Francisco's
Municipal Railway System (MUNI) to acquire new buses, to install
new lines, and to hire more personnel to operate and maintain
the system. Therefore, it is argued, the new development should
pay for the incremental costs of expanding MUNI's capacity to carry
passengers generated by additional office use.
The fee is set annually by the Board of Supervisors and is
computed at a level so that the proceeds will be sufficient to
pay for all capital and operating costs incurred in providing
the additional peak-hour services. The fee is expressed in terms
of a sum per gross square foot using the following general formula:
annual peak-period MUNI person-trips per gross square foot
multiplied by the current cost per additional peak-period
MUNI person-trip. By ordinance, the fee presently cannot exceed
$5.00 per square foot. The proceeds from the fee are held in trust
by the city treasurer and distributed according to San Francisco's
budgetary process.
The Finance Bureau of the Public Utilities Commission
administers the program. It is informed of planned construction
or conversion work by the city's Bureau of Building Inspection when
a developer files for a building permit. After the developer is
notified of the development fee, the Bureau of Finance and the
developer agree on the amount of square footage that is subject to
the fee. Sometimes this agreement requires detailed review of the
architectural plans to ensure that common space is allocated
fairly.
Results Fees are being collected from developers and placed in
escrow until current litigation (see below) is settled.
As of July, 1986, the Bureau of Finance estimated that
149 applicable projects which have received permits since
May, 1981 will produce $75 million in fees for MUNI if
the legality of the fee is upheld by the courts.
Developers will benefit as well as MUNI. In the highly dense
and desirable downtown district of San Francisco, mobility is
essential to the success of any new office development. Expansion
of MUNI, financed by development fees, will improve access to
the downtown area, where the City Planning Department for several
years has been denying developers permission to construct
new parking spaces.
-52-
Legal
The San Francisco County Board of Supervisors approved
the ordinance Issues in May, 1981. The City successfully argued
that office development creates more congestion at peak-periods
than any other type of development. The ordinance defines the
boundaries of the downtown district and requires that the
$5 per square foot fee be assessed on "all accessible
office space plus ancillary space," such as elevators,
lobbies, and other "common space." Hotels, restaurants,
and other non-office uses are exempt from the fee. In
buildings where hotels and restaurants are mixed with
office space, the fee is based on the square footage of
the office space plus a proportionate share of the common
space that can be assigned to office use.
Litigation has been filed challenging the legality
of the Transit Development Fee. The case was heard in
State Superior Court in mid-1984 and was decided in
the City's favor. This decision was appealed in the
Appellate Court in early 1985. Further appeal to the
California Supreme Court is anticipated.
Political
Issues
The May 1981 ordinance was approved amid political
controversy. Opponents of the ordinance objected on the grounds
that the fee was a mechanism to control growth and therefore
was not in the city's economic interest. Some developers whose
projects already were under construction protested that their
projects would be taxed unfairly in a retroactive manner.
Timing
The political controversy surrounding the fee proposal
delayed approval of the ordinance establishing the
$5.00 maximum per square foot development fee in downtown
San Francisco. The legal issues are not expected to be
settled until 1986 or 1987.
Contact
Leonard Tom
Public Utilities Commission
Finance Bureau
425 Mason Street, 4th Floor
San Francisco, California 94102
(415) 558-2075
References
A Guide to Innovative Financing Mechanisms for
Mass Transportation: An Update, prepared by Rice Center,
December, 1985.
-53-
IV. Negotiated Investments
Negotiated investments include private sector cash
contributions or improvements fulfilling public sector
requirements, and proffered in return for zoning changes
or building permits; and those projects initiated and
financed by the private sector which tend to benefit them
but are given low public priority. Under the first
category, requirements imposed on developers are intended
to help mitigate the impact of new projects on traffic
levels and roads.
Contributions that result from this technique are often
substantial. Four of the cases in this section report
transit related improvements and three cases are
primarily related to highway projects.
In New York City and Washington, D.C. zoning ordinances
provide developers an incentive to build functional
improvements to transit stations.
In Portland, Oregon the Planning Commission requires that
a developer participate in the construction of a
transfer station and a park-and-ride lot, in return for a
permit for a shopping center.
Fairfax County, Virginia and Orange County, California
provide two examples where developers have offered to
build highway improvements at their own expense in an
effort to improve access to their properties, or in order
to gain needed zoning changes.
In Dallas, Texas, a developer had to make a variety of
significant contributions including highway, transit, and
transportation system management improvements in exchange
for the City's approval of a planned development
district.
-55-
Development Bonuses
Overview
New York, New York (1984 pop. 7,163, 702) - The Midtown
Special Zoning Section No. 81-00 et seq of the Zoning
Resolution of the City of New York established the
Midtown Special District which required developers, as a
condition to development, to relocate subway sidewalk
entrances inside property lines within the Midtown area
The owner or developer is required to provide an easement
to the New York City Transit Authority for transit
patrons who will enter/leave the subway station through
the building. In addition, the Zoning Resolution gives
developers an incentive to build a functional improvement
to a nearby or adjoining station. A developer receives up
to a 20-floor-to-area ratio bonus if the proposed
improvement is accepted by the City Planning Commission.
The City plays no role in actual construction of the
improvements; it is the responsibility of the developer.
The Metropolitan Transportation Authority (MTA) is the
State agency responsible for overseeing the improvements
made by developers. The MTA and the City Planning
Department review the conceptual plans. Working drawings
are submitted to MTA for final approval by appropriate
departments.
In the past few years, about 50 percent of the eligible
developers have taken advantage of the bonus, improving
passenger/pedestrian circulation, access for the elderly
and disabled, and aesthetics within subway stations.
At one major development, located at 599 Lexington Ave.,
between 52nd and 53rd, Boston Properties is creating a new
transfer connection facility between two adjoining subway
stations, one block apart, on Lexington Ave. This
facility will connect the IND Lexington Ave. Station with
the 51st Street IRT Station. The transfer passageway
traverses the building site and will be maintained by the
developer for the life of the building. MTA will put in a
new mezzanine at the 52nd Street end of the Interborough
Rapid Transit (IRT) Station, construct new platforms, and
undertake a modernization program for both stations. The
building will be completed in September of 1986 with the
transit connections being completed one year later. The
developer has committed to work valued at $3.3 million
toward the transit connections. The MTA will spend $8.4
million in the development of the 51st Street Station
mezzanine connection. At another site at 53rd Street and
3rd Avenue, developer Gerald Hines is constructing an
office building and will add an escalator from the
Lexington Ave. Station platform to street level at 3rd
Ave. The work will be completed in September of 1986 at a
cost of $5.25 million.
Results
The MTA estimates that over $125 million in improvements
to stations through the zoning resolution have been committed.
The requirement that owners/developers move the station entrance
inside their property lines has improved pedestrian circulation,
increased accessibility, and improved overall aesthetics.
Legal
Issues
No legal issues were reported.
-57-
Political
Issues
While there has been some reluctance by developers who
must participate in the subway stairs relocation and who do
not elect to quality for the FAR bonus, the development
community appears to heartily approve of the subway bonus
concept as an appropriate incentive.
Timing
The relevant portions of the Zoning Resolution of
the City of New York were enacted in May, 1982.
Contact
Donald Bloomfield
Senior Project Coordinator
New York Metropolitan Transportation Authority
347 Madison Ave.
New York, NY 10017
(212) 878-7205
-58-
System Interface Program
Overview
Washington, D.C. (1984 pop. 3,429,613) - In 1969,
Washington Metropolitan Area Transit Authority (WMATA)
officials adopted a policy entitled Commercial Tie-In
with Metro Stations, also referred to as system
interface. This program allowed a framework for
negotiating the amount of compensation provided by
owner/developers whose property values increased due to
tie-ins with the Metro system. The WMATA Board policy
regarding system interface provides that:
Businesses construct entrances at their expense into
Metro "free areas" (areas through which a passenger walks
before fare),
Negotiations occur on a case-by-case basis,
Compensation to WMATA occurs where possible,
Each request for a connection is submitted to the Board
for authorization to negotiate and execute a contract.
The WMATA Board of Directors created a step-by-step
procedure controlling system interface projects. The main
elements include:
Identifying system interface prospects,
Undertaking design and financial feasibility
studies,
Project review by the local jurisdiction,
Review of project plan report by the Board of
Directors,
Board authorization for negotiations,
Review and coordination with local jurisdiction,
and
Final report and recommendation to Board.
Results
Since 1969, seven system-interface projects have
been negotiated. WMATA has been successful in trading
access rights for capital improvements. In addition,
WMATA has been granted property easements which have
reduced potential costs.
The Metro Center Station, which was negotiated in July,
1984, resulted in construction and equipment benefits to
WMATA in return for two direct pedestrian entrances to
Metro mezzanines from Hecht's department store. The total
project cost $1.6 million. In 1972, the Woodward and
Lothrop Department store saved WMATA $250,000 in design
and construction costs for a passageway between the METRO
concourse and the store. WMATA provided easements 50% of
fair market value, saving an additional $265,000.
-59-
Legal
Issues
The WMATA Board is empowered to negotiate with developers
for projects. No arrangement is made by WMATA without final
coordination and endorsement of local officials, who must
review the project from the standpoint of its impacts on
circulation patterns, utilities, and the like.
Political
Issues
In 1982 the WMATA Board re-evaluated the system interface
policy, in response to requests that they restructure the interface
charges so that they would be paid to local jurisdictions instead
of being paid into a fund for system-wide operations. The Board
decided to retain the policy in its original form, while requiring
a procedure to be followed in future projects.
Timing
The Interface policy was started in 1969, and the first
agreement was negotiated in 1970. There is considerable
variance in the length of time between negotiation and
completion of the projects.
Contact
Richard Miller
Joint Development Section
Washington Metropolitan Area Transit Authority
600 5th St. NW
Washington, D.C 20001
(202) 962-1593
-60-
Transfer Center Investment
Overview
Portland, Oregon (1984 pop. 1,340,940) - A private
developer is being required to work with Tri-Met in its
construction of a transfer center in return for a
conditional use permit.
The developer had planned a mixed-use development along
the edge of a proposed light rail line which exceeded the
permitted building size for its zoning category. At the request
of Tri-Met, the County Planning Commission required that the
developer participate in the construction of a transfer center
and a park-and-ride lot. In return, the developer would receive
a conditional use permit for the development.
The developer and property owners had agreed to provide
the local match for the 80 percent UMTA grant through a
dedication of land.
Results
Tri-Met is receiving a substantial land donation toward
the local match for its bus transfer center and park-and-ride
lot. The project is being designed to accommodate a future
light rail right-of-way.
Legal
Issues
The Planning Commission has the authority toward a
conditional use permit to a "separate and unique" case which generally is
acceptable but fails to meet a particular specification
for a zoning category.
Political
Issues
Tri-Met requested that the Planning Commission require a
dedication of land and other specific aids to construction.
However, the commission required only unspecified cooperation
and participation. This opened the door for certain disagreements
over site plans and the disposition of prime access-road footage
between Tri-Met and the developer. If agreement proves impossible,
the two parties will have to return to the County Commission to
clarify its requirements as to the developer's participation.
Timing
Negotiations are continuing.
Contact
Ms. Lee Hames
Tri-Met 4012 Southeast 17th Avenue
Portland, Oregon 97202
(503) 238-4923
-61-
Proffer System
Overview
Fairfax County, Virginia (1984 pop. 672,937) - A major
activity center in the county of Fairfax, Virginia, near
Washington, D.C., is undergoing massive and rapid expansion.
In response to growing traffic congestion, county officials
have negotiated several agreements with developers under which
developers have offered road improvements in return for zoning
changes and occupancy permits.
Tysons Corner accounts for one-quarter of Fairfax County's real
estate taxes, and one-third of the County's workers are employed
there. Thirteen million square feet of office and retail space
has already been built, and three million more are proposed for
the next three years.
One of the proposed developments, Tysons II, is a $500
million shopping center and 11-building office park.
The developers of Tyson's II, Homart Development Co. and
Theodore N. Lerner, have proffered $16 million of road improvements
to the County in exchange for zoning changes. The Tysons II
location was originally zoned as a shopping center. Homart
Development, in order to have the zoning changed to that for a
planned commercial development, negotiated with the County to
determine what road improvements would be needed to mitigate the
development's impact. All improvements will be made by the
developers including the construction of a six-lane road known as
International Drive to connect two major arterials (estimated cost:
$4.5 million); widening Route 123 between interchanges with other
highways (estimated cost: $2.6 million); reconstruction of the
interchange at Route 123 and I-495 (the Capital Beltway; estimated
cost: $1.26 million); construction of a four-lane road known as
Tyson's Boulevard to connect International Drive and Route 123
(estimated cost: $3.2 million); and several other improvements. The
developers further agreed that improvements will be completed and
the roads taken over by the State system, before occupancy permits
will be issued.
A special group of local business executives has also been formed
to monitor and advise on transportation issues in Tyson's Corner.
The Tyson's Transportation Association represents major employers
in the area. The Association has been consulted by the County for
input on local mobility issues.
Results Road improvements to mitigate the impact of major new
developments will be constructed at no cost to the county. The
Tysons II development is only one of 15 major developments with
whom similar agreements have been negotiated in the last five
years.
-62-
Legal
Issues
The County negotiates and accepts proffers from developers pursuant
to enabling legislation contained in the State statutes. These
statutes provide for the developer, prior to the public hearing
on the rezoning, submitting a signed proffer statement which
contains all the conditions that the developer will comply in
exchange for receiving the zoning change. Once proffered and
accepted by the County, such conditions continue to be in full
force and effect until a subsequent amendment changes the zoning
on the property. Also, if the property changes hands, the proffered
conditions require the developer to go through a formal public
hearing process similar to that conducted for any request for
zoning changes. The County also requires the submission of a
development plan which fixes the level and type of development
throughout the property covered by the proffer.
Political
Issues
At public hearings local citizens protested the increased
developments. The County feels that impacts will be mitigated by
the improvements and that the County has been successful in
negotiating with developers for proffers.
Timing
It took about ten months for the zoning changes to be completed
in 1984. Road improvements are nearly complete, and building
construction will begin in 1987.
Contact
Shiva K Pant
Director
Office of Transportation
County of Fairfax
4100 Chain Bridge Road
Fairfax, Virginia 22030
(703) 691-3311
Related Orange County, California (1984 pop. 2,075,758) - In
Orange County, Experience the Irvine Company has offered to make
local transportation improvements in an effort to improve
access to Irvine Center which is a portion of Spectrum,
one of the company's major developments. The 480-acre
Irvine Center complex is located in the triangle formed
by the Santa Ana (I-5), the San Diego (I-405), and the
Laguna (SR 133) Freeways. As part of the interstate
highway improvements the company has offered to:
improve existing interchanges in order to upgrade
substandard facilities, construct new interchanges
and over-crossings to mitigate traffic impacts at
nearby existing interchanges, dedicate right-of-way
for the upgraded existing and new interchanges,
cover the costs of engineering and environmental impact
studies.
The total cost of the improvements made by the Irvine
Company has been estimated to be between $60 and $100
million.
-63-
One political issue that has been raised regarding the
company’s active participation in transportation projects
is the degree of influence the company's interests have
over State transportation prioritization.
Contact
John Boslet
Director of Regional Transportation
Irvine Company
550 Newport Center Drive, P. O. Box 1
Newport Beach, California 92652-8904
(714) 720-2361
Ron Cole
Director of Planning and Programming
Orange County Transportation Commission
1055 N. Main, Suite 516
Santa Ana, California 92701
(714) 834-4333
-64-
Negotiated Investment
Overview
Dallas, Texas (1984 pop. 1,723,423) - On September 29,
1984 the Southland Corporation, founder of the 7-eleven
retail store outlets, announced the acquisition of 140
acres two miles from downtown Dallas. The corporation
intended to develop "CityPlace" over a long term, with 18
million square feet, including 4,500 housing units, and about
12 million square feet of office space.
Southland Corporation announced the intent to file for a
planned development district, which would incorporate 24
acres of this recent acquisition. The first phase would
include: 3.9 million square feet of office and retail
space, two 50-story buildings requiring a height variance,
and a variance seeking a reduction in required parking from
11,000 to 8,000 spaces.
The project was reviewed by a City development team which
established some basic parameters for the negotiations.
The development team established the following:
that every phase should include some housing,
the open space should be accessible to the public and
maintained by the developer,
requested building heights could be supported if the
edges of the development are subject to height
restrictions,
contributions will be made to N. Central Expressway
construction,
assistance will be provided to the Dallas Area Rapid
Transit Light Rail program, and
the inclusion of a Transportation System Management
(TSM) Program.
The building height issue was studied by the U.S. Federal
Aviation Administration which stated that the development
could build up to a maximum of 43 stories if a new $1
million instrument landing system was installed at Love
Field.
Results
The City staff and the developer, along with the constant
consultation of the City People coalition, negotiated the
final set of conditions before submittal. The set of conditions
were approved intact by the City Planning Commission and the City
Council.
The approved agreement reduced public costs from the
usual percentage of 64.5 to 19.5 percent, resulting in a
cost sharing of $12.8 million public and $52.3 million
private. These cost figures include:
-65-
ANALYSIS OF COSTS
City/State "City Place"
Roadway $3,250,000 $28,150,000
Highway 9,050,000 13,950,000
Transit -- 1,300,000
Parkland -- 5,000,000
Public Utilities 500,000 2,900,000
Inst. Landing System -- 1,000,000
$12,800,000 $52,300,000
The developer agreed to deed restrict the building height
at the edges of the project to ensure a proper transition
from this development to the surrounding low density
neighborhoods. A transportation systems management
program will be established in return for parking reductions.
The TSM will include ridesharing, van pooling, contract busing,
and public bus system subsidies. The developer will also construct
600 housing units during the Phase I commercial construction and
will maintain the open space in perpetuity with public access.
Legal
Issues
No legal issues were reported.
Political
Issues
Neighborhood reaction to the proposed planned development
district led to establishment of a coalition of organizations
called "CityPeople." The concern of this group was over the
issues of building height, increased traffic, and how the
development would interface with the existing lower density
residential neighborhoods. City staff was supportive to the
neighborhood group and added concerns regarding the timing of
housing, open space, and who will pay for infrastructure
development. This neighborhood group maintained a constant dialogue
with the City staff and the developer throughout the development
review process.
This review generated so much interest and local involvement
that the City Planning Commission delayed for 60 days the final
ruling to allow City staff more time to define and clarify the
conditions in the agreement.
Timing
On September 29, 1984 the Southland Corporation announced the
intent to file for a planned development district.
Approval of the planned development district occurred in
February, 1985.
-66-
Construction of Phase I began in July of 1985 and
includes two 42-story office buildings and six low-rise
buildings.
Contact
Jim Reid
Assistant City Manager
Planning & Development
City of Dallas
1200 Marilla
Dallas, Texas 75201
(214) 670-4188
-67-
V. Private Donations and Initiatives
A private donation or initiative results when a private
developer or individual wants an improvement in facilities or
service that may not be a high priority for the public agency,
or perceives that there is a benefit to be obtained from
participating in provision of a public sector service. Seeking a
particular change, the private sector assumes responsibility for
financing it in whole or in part.
One issue that may arise regarding these initiatives is:
to what degree should specific private interests be able
to influence public priorities?
The cases included in this section describe a number of
private donations or initiatives.
In Grand Rapids, Michigan, a wealthy individual was able
to provide a local match for a downtown circulator
system, in return for the lengthening of one of the
system's routes.
In Houston and The Woodlands, Texas, private developers
made significant contributions for highway access improvements
which helped fund and spur construction by the State highway
department.
In Pittsburgh, Pennsylvania a private, non-profit
organization helped to raise funds and provided the
impetus for renovation of a deteriorated downtown street.
A merchant is subsidizing transit service in Cedar
Rapids, Iowa.
An advertising agency has provided bus shelters in St.
Louis, Missouri at no cost to the public sector.
The State of Texas has passed legislation which enables
the private sector to assemble all rights-of-way and
raise contributions to cover engineering and design costs
for a 155-mile scenic parkway in Houston.
In Secaucus, New Jersey, the developer of a residential
community built a commuter rail station to provide
residents with access to NJ Transit trains.
-69-
Local Match Donation
Overview
Grand Rapids, Michigan (1984 pop. 626,376) - A donation
of the local match for a downtown bus system was made
in return for the lengthening of one of the system's
routes.
The Grand Rapids Area Transit Authority (GRATA)
wanted to create a bus system downtown to complement the main
bus route passing through the central business district. Several
activity centers have been added or expanded in the downtown area
in the past few years, such as the Gerald R.Ford museum, an art
museum, and a performing arts center; thus, a system to connect
them was needed. However, GRATA receives no general local funding;
its services are supported by Federal and State funding and by
contracts with the city and various social service and educational
organizations. A wealthy individual who supports the downtown zoo
and who had pledged $1,000,000 for its improvement was approached
for a donation. The individual agreed to donate the $100,000
local match for the five buses, if the system were expanded to
include a stop at the zoo.
Results
The new shuttle services cost $239,000 yearly. Some
service on a park-and ride shuttle and on a main bus
route was replaced by the CBD shuttle for a savings of
$94,800 yearly. Farebox revenues were projected to
provide $45,000, advertising revenues $60,000, charter
revenues $4,000, and State operating assistance $35,000.
The "old-fashioned trolley" appearance of the buses and
the density of downtown population during the day were
expected to be attractive to advertisers. A net increase
in ridership is projected at 350,000 to 420,000 annually,
due to the convenience and low cost (no fare from
park-and-ride lots, 10 cents within the CBD, and a half
fare of 25 cents to the zoo). Also, the increased transit
service within the downtown area was expected to spur
further development.
Legal
Issues
Although GRATA has the legal power to accept contributions,
the bus purchase money was donated to the City of Grand
Rapids. GRATA signed an agreement with the City to accept
the money.
Political
Issues
GRATA was made aware of the potential donor only because of an
informal discussion between the general manager of
GRATA and the director of Grand Rapids Leisure Time
Activities (whose jurisdiction includes the zoo).Objections to
the downtown bus system were raised by wheelchair advocates.
However, as no State capital funds were involved, there was no
legal requirement that the buses have lifts. The cost of ramped
buses would have been prohibitive; only one potential bus supplier
offered them, and he withdrew his offer before bidding began.
Timing
The donor was approached in late 1981. The trolley system began
operations in July, 1983, but ceased operation about a year later.
There is
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still a bus route connecting downtown to the zoo.
Contact
Don Edmondson, General Manager
Grand Rapids Area Transit Authority
333 Wealthy, S. W.
Grand Rapids, Michigan 49503
(616) 456-7514
References
CBD Shuttles Service Plan, November 8, 1982.
CBD Shuttles Services Operational Plan, June 1983.
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Private Initiative for Highway Construction
Overview
Houston, Texas (1984 pop. 2,747,341) - A development
company has contributed to the cost of constructing
a portion of highway fronting its mixed-use development
in order to speed completion of the project.
Beltway 8 is a highway which will circle the outer portions
of Houston when it is completed, although only a few sections
are now constructed. Friendswood Development Company (FDC)
wanted to ensure that a 1.2 mile portion fronting the southern
boundary of its Green's Crossing project was completed. This
roadway, for which State funds had not been previously appropriated,
would connect the Friendswood commercial and residential
development to an interstate highway (IH 45).
Therefore, in 1981, Friendswood Development offered
to donate right-of-way, to design the roadway, and to contribute
toward construction costs. The State Department of Highways and
Public Transportation (SDHPI) quickly accepted, and agreed to
fund construction.
Friendswood Development Company's participation was as follows:
Component Total EDC %EDC
Right-of-way $5,508,000 $277,000 5%
Utility adjustments 757,000 - -
Design 360,000 360,000 100
Construction 4,875,000 313,000 6.4
TOTAL $11,500,000 $950,000 8.3
Results The State Department of Highways and Public Transportation
received $950,000 in private sector aid to build a section of
highway which will facilitate access to Houston's Intercontinental
Airport. Friendswood Development Company received speedy completion
of a convenient access route to its 600-acre mixed-use project.
Legal
Issues
No legal problems were reported.
Political
Issues
No political problems were encountered.
Timing
Friendswood Development purchased the Green's Crossing
acreage in February,1980. In early 1981, SDHPT accepted
the developer's offer of a private contribution. SDHPT
changed the right-of-way requirements twice, extending
the design process and delaying the project for about a
year. Bids were accepted in March, 1983 and a construction
contract was awarded in
-73-
April. This portion of Beltway 8 opened in March, 1986.
Contact A. C Burkhalter
Operations Manager, Commercial Projects
Friendswood Development Company
P.O. Box 2567
Houston, Texas 77252
(713) 875-7656
References
Planning and Financing Urban Mobility in Texas, prepared
by Rice Center, September 1983.
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Private Initiative for Interchange Development
Overview
The Woodlands, Texas (1986 pop. 20,000) - The Woodlands Corporation
(TWC) has been active financially and politically in expediting
highway improvements to increase access to The Woodlands, a new
town development 27 miles north of downtown Houston. TWC has
participated directly in three projects on I-45, the major access
route to downtown Houston.
The so called "northeast connector" project will provide
a much needed final piece of a currently incomplete
interchange between I-45 and Woodlands Parkway and thus
relieve a major congestion point. The entire project cost
$930,000, of which about 68 percent was for right-of-way
acquisition. TWC contributed $164,000 in cash to the
State Department of Highways and Public Transportation
(SDHPI ) for the project, representing nearly 18 percent
of its total cost.
At the same interchange, a right turn from Woodlands
Parkway onto the southbound freeway frontage road is
currently controlled by a stop sign. A merge lane has
been built to allow free flow for this turning movement.
Although not finalized, TWC provided the construction
materials for this project in exchange for design and
labor by SDHPT. This arrangement facilitated completion
of the project. The total cost of this project was about
$75,000. TWC's offer amounted to between $15,000 and
$20,000.
TWC also agreed to commit S2.2 million dollars to a
series of interchange improvements along the portion of
I-45 adjacent to The Woodlands. This portion of I-45 is
projected to continue to be the most congested in
Montgomery County, and by the year 1990, it is estimated
that, without capacity improvements, congestion in the
area will reach a severe level similar to that currently
experienced in parts of central Houston. TWC hopes to
raise the priority of these freeway improvements through
its contribution.
Results
The SDHPT has been offered a total of almost $2.4 million
from the private sector to complete projects already
planned. The Woodlands Corporation will receive speedy
completion of access routes vital to the growth of the
development.
The $2.2 million contribution is being matched by
Montgomery County, and TWC is applying to the Federal
Highway Administration for a 90 percent reimbursement of
the S4.4 million. If this application is accepted, it is
possible that TWC could leverage other improvements
needed on I-45; private funds and Federal reimbursements
would finance the construction, with State monies used
only for front-end investment.
Legal
Issues
State legislation may be needed to direct any Federal funds
directly to I-45 rather than into the State's general highway fund.
- 75 -
Political
No political problems were reported. Local funding from
Montgomery Issues County was provided by a bond election and
formation of a road district with separate taxing authority.
Timing
The improvement plan for I-45 grew out of a 1982 mobility
plan for the area which TWC underwrote.
Contact
Randall Wood
Vice President of Public Relations and Advertising
The Woodlands Corporation
2201 Timberloch Place
The Woodlands, Texas 77380
(713) 363-6817
References
Planning and Financing Urban Mobility in Texas, prepared
by Rice Center, September, 1983.
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Private Initiative for Downtown Improvement
Overview
Pittsburgh, Pennsylvania (1984 pop. 2,371,955) - A
private, non-profit economic development organization
provided the impetus and some of the funds for the
renovation of a deteriorated downtown street.
The Allegheny Conference on Community Development saw a
need for improvements to major downtown streets. A
study for which it raised private funds indicated that
Grant Street, a downtown street connecting State
highways, would be the best road with which to begin.
Twenty-three major buildings front Grant Street,
including U.S. Steel, Rockwell, and Gulf Oil office
buildings, and various city, county, and Federal
buildings.
After commissioning a report estimating design and
engineering costs for the renovation of Grant
Street, the Allegheny Conference joined with
representatives of the area's buildings to work
with the Mayor of Pittsburgh and the City's Planning
Department and Department of Public Works. The City
accepted the plan to widen and improve sidewalks, plant
trees, replace cobblestone with brick paving, bury
overhead wires, and eliminate streetcars.
Grant Street, as an urban road connecting State highways,
is eligible for 75 percent Federal funding through FHWA's
Urban System program. The renovations will cost $13 to
$14 million; the City will finance the 25 percent local
match by issuing six-year capital improvement general
obligation bonds. Improvements which go beyond City
standards will be financed by the Allegheny Conference,
which is in the process of raising $500,000. The
Allegheny Conference will attempt to organize a
maintenance association of property owners to maintain
the extra amenities.
Results
The Federal grant was approved and construction
began in the Spring of 1984. This is a four-phase
project, each phase taking approximately one year to
complete, with Phase One completed. Construction was
stopped after Phase One was completed due to the
enactment of the Gramm/Rudmanl/Hollings balanced budget
legislation. Federal funds from FHWA's Federal Urban
Highway Program, which contributes 75 percent of the
total funding, were impounded until the new legislation
was in place. Through the efforts of the mayor of
Pittsburgh the funds were eventually released.
Construction on Phase Two will begin in the Fall of 1986.
The Allegheny Conference decided on using linear front
footage as the basis for determining what contributions
will be solicited from Grant Street property owners.
The Conference, whose board members include many
prominent Pittsburgh business leaders, hopes that this
project will provide the impetus for city government to
renovate other downtown streets using the high standards
developed for Grant Street.
-77-
Legal
Issues
The Allegheny Conference is a private, non-profit
organization which is soliciting contributions, not making
assessments. The money they collect is then given to the City
for the improvements.
Political
Issues
Grant Street property owners and the Mayor of Pittsburgh
were very enthusiastic about the idea from the start. The
Department of Public Works was skeptical, but persuasion
from the Mayor's office, combined with a change in the
department's administration, overcame that.
The Allegheny Conference, formed in 1943, had the
advantage of a long history of cooperation with and trust
from the community. This, plus the assumption by the
Conference that the public sector is responsible for
making decisions and that the private sector can only
persuade and not force, ensured the success of the Grant
Street project.
Timing Members of the Allegheny Conference had been discussing
renovating downtown streets for several years. About 18
months elapsed between the first study of the area and
the final report to the mayor. Construction began in
the Spring of 1984 with four phases. Each phase will take
approximately one year to complete. The initial starting date
was delayed by the construction of a new subway system which
crosses Grant Street. This subway system replaces the old
streetcars which will be completely removed.
Contact
Mr. Robert B. Pease, Executive Director
The Allegheny Conference on Community Development
600 Grant Street, Room 4444
Pittsburgh, Pennsylvania 15219
(412) 281-1890
-78-
Merchant Subsidy
Overview
Cedar Rapids, Iowa (1984 pop. 169,535) - Cedar Rapids Bus
Department markets Ride-and-Shop cards through area
merchants, who discount them for customers. The retailers
receive the cards from the transit department and pass
them on to customers with a purchase. When the bus
drivers turn in the collected discount passes, marked
with the store name, the merchant is billed for the
balance of the fares. The coupons provide discounts of
either one-half or the full bus fare.
Results In the last fiscal year, $21,350 was collected from
participating merchants, with about 70 percent of that
from the sole surviving large downtown department
store, Armstrong's. Over 150 businesses are approached
yearly, and about 186 now participate. Businesses in
suburban shopping malls, which are increasing at the
expense of downtown stores, seem now more inclined to
market the Ride-and-Shop program. The number of cards
marketed each year has not appreciably increased, but the
Cedar Rapids Bus Department plans to continue the
service.
The merchant subsidy amounts to about 3.1 percent
of total annual revenue, which is approximately
$670,000. Total annual operating costs for the transit
system are $2.2 million a year, the bulk of which are
covered by municipal and Federal funding. State
funding is negligible.
Legal
Issues
The Cedar Rapids Bus Department is operated by the
City of Cedar Issues Rapids.
Political
Issues
No political issues were reported
Timing
The program was begun in 1965.
Contact
William Hoekstra, Transit Manager
City Bus Department
427 Eighth Street, N.W.
Cedar Rapids, Iowa 52405
(319) 365-0455
-79-
Bus Shelter Development
Overview
St. Louis, Missouri (1984 pop. 2,398,39) - A
private advertising agency provided bus shelters at no
cost to the St. Louis bus system.
The Bi-State Development Agency wished to have bus
shelters but did not consider them a high enough priority
to apply for Federal grant money. Therefore, a request
for proposals was written and bids were taken for private
provision. The accepted contractor provided 121 shelters,
costing $5,000 to $7,000 each, and installed and
maintains them, all at no cost to Bi-State. In addition,
Bi-State is to receive 12 percent of the advertising
revenue, which had been estimated at $50,000 annually.
Results
Bi-State received 121 installed and maintained
shelters worth over $600,000 at no cost. However,
advertising revenues may be lower than projected as sales
have been fairly slow so far. (As with any new industry,
bus shelter advertising initially requires aggressive
marketing for it to gain widespread acceptance.)
Legal
Issues
A city permit was required to build the shelters.
Political
Issues
There was some opposition by local store owners
regarding the sites of individual shelters but there is little or
no opposition now.
Timing
The request for proposals was written in early
1982. All shelters were erected by mid-1983.
Contact
Richard Hodel
Manager of Design and Engineering Services
Bi-State Development Agency
707 North First Street
St. Louis, Missouri 63102
(314) 289-2014
-80-
Texas Transportation Corporations
Overview
State of Texas (1984 pop. 15,988,538) - State legislation
in Texas created a mechanism by which rights-of-way may
be donated for a public road and its value claimed as an
income tax deduction. The stated purpose of the Texas
Transportation Corporation Act (TTC), passed in 1984, is
the "promotion and development of public transportation
facilities and systems by new and alternative means."
Transportation corporations are authorized to act on
behalf of the State Highway Commission "to secure and
obtain rights-of-way for urgently needed transportation
systems and to assist in the planning and design of such
systems." The legislation will enable the State Highway
Commission to more effectively use funds available to it,
and encourages private sector participation in large
scale projects from which developers and landowners
benefit extensively. Under the act, a non-profit,
non-stock transportation corporation which acts on behalf
of the commission in a designated area may be formed by
three or more persons after authorization and approval by
the commission. The corporation may perform alignment
studies, receive (and return, if necessary) contributions
of land or cash for rights-of-way; retain administrative,
legal, public relations, and engineering services;
prepare exhibits, documents, and engineering plans, and
incur debt.
The Act also states that a corporation handles both
contributions of land for rights-of-way and cash
contributions. Land titles are held in escrow by the
corporation and given to the State Department of Highways
and Public Transportation (SDHPT) if the land is used. If
the land is not used, title is returned to the owner by
the corporation.
Several TTCs have been established in Texas. The largest
project undertaken by a TTC is the Grand Parkway, a
155-mile scenic parkway around Houston which passes
through five counties. The Grand Parkway Association is
collecting all of the rights-of-way for the parkway, as
well as cash contributions which will cover engineering
and design costs. The Association must coordinate with
and obtain approval- from SDHPT for matters concerning
the direct development of the project, including
environmental impacts, segment termini, typical sections,
rights-of-way determinations, landscaping, and
construction plans and specifications.
Results
Construction on at least one segment of the Parkway, which was
stalled because of lack of a sponsor, will begin in 1987. The
private sector will contribute $56 million for engineering,
design, and other "soft" costs. The value of rights-of-way being
donated by the private sector is estimated to be between $250 and
$500 million.
-81-
Legal
Issues
Although corporations to collect rights-of-way were legal
before passage of the TTC Act, there was no explicit
cooperation with the State Highway Commission and no
mechanism to return gifts made directly to the State in
case of project failure. Enacting legislation was required
to make possible the special relations between the Commission
and a TTC. The TTC legislation resolves these problems. The
Internal Revenue Service has ruled that the Grand Parkway
Association is an exempt organization to which tax deductible
contributions may be made, provided that all other requirements
for deductibility are met by the donor.
Political
Issues
Extensive media exposure of the fact that several members
of the Grand Parkway Associates Board of Directors owned
land on the Parkway's route, and local perception of
possible conflict of interest, forced a change in
Board rules. Landowners now may only serve as
advisory directors.
Timing The Grand Parkway was originally conceived in 1961 and
first appeared on preliminary Houston plans in 1968.
It was removed from planning maps in 1978 because of lack of
a sponsor. In November, 1983 an SDHPT minute order designated
31 miles of the proposed parkway as a proposed State freeway.
The TTC Act was passed in June, 1984, and the Grand Parkway
Association created in October, 1984. In December, 1984, the
SDHPT approved the first segment and committed to begin
construction within two years, pending submission of rights-of-way
and engineering. The Grand Parkway Corridor is shown on 1985
Houston Planning Maps.
Contact
Mr. Bob Foote
The Grand Parkway Association
5757 Woodway Drive, 140 East Wing
Houston, Texas 77057
(713) 782-9330
Mr. Bill McAdams
Chief Right-of-Way Attorney
Texas State Department of Highways and Public
Transportation
P. O. Box 5075
Austin, Texas 78763-5075
(512) 835-0811
-82-
Rail Station Construction
Overview
Secaucus, New Jersey (1984 pop. 14,990) - NJ. Transit,
funded by Hartz Mountain, Industries, Inc., has constructed
a rail station located along the Suffern, New York, and Hoboken,
New Jersey railroad line. The Harmon Cove development is located
within the town of Secaucus, south of New Jersey Route 3 and
bounded on the west by the Hackensack River. The 750-are
development was begun in 1969 and consists of 1,200 condominiums
and 15 million square feet of office space and warehouse
distribution facilities.
Prior to the construction of the rail station, the train
passed through the southern end of the development
without stopping. A rail station was proposed by Hartz
Mountain, Industries, Inc. and soon after, construction
began.
Results
Hartz Mountain, Industries Inc. funded the total
project amount of $300,000. Since rail station
completion, ridership has increased steadily. Overall,
the community seems to be pleased with the station. A
shuttle bus for the residents and employees of Harmon
Cove is available to provide transport to and from the
rail station. The cost of operating and maintaining the
shuttle bus is $55,000 per year. The shuttle has been
operable for eight years and has proven useful to the
community.
Legal
Issues
No legal issues were reported.
Political
Issues
Other than minor disagreements about the location
of the access road to the rail station, no political issues arose.
Timing Construction on Harmon Cove began in 1969. Construction
began on the rail station in early 1977 and was completed
late 1978. The shuttle bus began running shortly after
the opening of the rail station.
Contacts
Martin Gold
Hartz Mountain, Industries Inc.
400 Plaza Drive
Secaucus, New Jersey 07094
(201) 348-1200
Matt Greco
Meadowlands Development Commission
#1 de Korte Park
Lyndhurst, New Jersey 07071
(201) 460-1700
-83-
VI. Use of Property and Property Rights
Both highway and transit agencies have discovered means
of generating additional revenues by leasing air rights,
land, or facilities to the private sector. Once an agency
has full or partial interest in a property it can --
subject to legal restrictions -- use or dispose of any
portions not needed for the transportation purpose. The
uses of such property fall into three general categories.
By far the most popular is the leasing or selling of
development rights; negotiated land leases and leasing or
selling of existing facilities are also used.
Leasing/selling development rights, also known as joint
development, is a method of capturing the full or partial
value of land holdings. Space above, below, or adjacent
to transportation facilities has proven to be marketable
in a variety of ways. Joint development projects such as
air rights leases require a high level of public/private
cooperation. A negotiated land lease is an agreement
between private developers or land owners and a transit
agency, under which land is leased to the agency in
exchange for construction of a transit facility.
Typically, the agency obtains the facility site for a
nominal fee. Leasing facilities which have already been
constructed provides an opportunity to generate
additional, sometimes unanticipated, revenues.
Five cases examined in this section present joint
development projects. The project in Boston,
Massachusetts demonstrates how space over a major urban
highway can be adapted to mixed-use development and
generate a substantial income at no risk
to the public agency. Two air space leasing
programs, in Washington, D.C. and California,
demonstrate a large scale approach to joint development.
The program in Washington is transit-related; the
one in California is highway-related. The joint
development project in Cedar Rapids, Iowa was the
centerpiece of an urban redevelopment program, and
that in Sparks, Nevada demonstrates a private sector
initiative to produce a joint development.
One example of a negotiated land lease in Tacoma,
Washington involves establishment of transit transfer
centers on land belonging to a community college and a
school district.
In Santa Cruz, California, the transit agency is leasing
space in its intermodal transfer facility for office and
retail uses to offset operation and maintenance costs.
-85-
Leasing Highway Air Rights
Overview
Boston, Massachusetts (1984 pop. 570, 719) - A developer
has a 99-year lease for the air rights over a portion of
the Massachusetts Turnpike, which he used to construct a
mixed-use project.
The project, Copley Place, includes two hotels, an
office/retail area, and 900 parking spaces. Its 9.5 acres
are constructed over a railroad right-of-way as well as
over the turnpike, in a prime area of downtown Boston.
The Turnpike Authority negotiated with the Urban
Investment and Development Company to develop the site.
Both parties hired real estate appraisers to determine
the value of the air rights. The value agreed upon was
slightly less than the basic land costs of other sites in
the area, but land and reconstruction costs considered
together were roughly equivalent to nearby site values.
The developer financed the reconstruction and relocation
of infrastructure, including water, electrical and
telephone lines, rail right-of-way, and turnpike ramps
The value of the rights was agreed upon and set at $12
million. The Turnpike Authority and Urban Investment
agreed that the Authority should receive a 10 percent
annual return on this value for the remaining estimated
life of the Authority's bonds (after the bonds are
retired the Authority will cease to exist and the
Massachusetts Turnpike will become part of the State
highway system). Urban Investment wanted the lease
divisible to enhance its ability to finance the project
by separate leasehold mortgages, but the Turnpike
Authority was unwilling to do this. The Authority wanted
(if there were to be separate leases of portions of the
project) cross-default clauses so that default under any
one lease would be a default under the others. Any such
provision would take away benefits the developer hoped
for through separate leases.
The impasse was broken by Urban Investment agreeing to
purchase U.S. Treasury Bonds (at an interest rate and
maturity rate designated by the Authority and at a
maturity date subsequent to the estimated retirement date
of the Authority's bonds3 for an amount equal to the
agreed-upon value of the rights--$12 million. The bonds
were placed in escrow in a Boston bank, which pays the
interest every six months to the Authority. The Authority
or the Commonwealth, as its successor, may call for the
bonds to be sold and the proceeds paid to it at any time.
After such a sale, or upon the maturity of the bonds,
rent will be reduced to $1.00 per year.
Results
The 99-year lease for the turnpike air rights will
return $1.2 million per year to the Massachusetts
Turnpike Authority's general fund for the life of the
bonds, as well as place the $550 million property on the
City's tax rolls The lease provides built-in escalation
in that the face amount of the bonds which Urban
Investment was able to purchase was greater than the
amount which had to be paid for them by several million
dollars. When the bonds mature the Authority or the
Commonwealth will receive a form of delayed one time rent
escalation.
-87-
Because of this "balloon" payment upon maturity, and
because the Authority receives interest throughout the
life of the bonds, the lessor's income is greatly
enhanced over conventional lease income. While the lessor
does not share in profits from Copley Place, it is also
free of any risk associated with the development failure,
and will own all of the improvements constructed by the
lessee when the lease expires.
Legal
The Massachusetts Turnpike Authority, as a small
public agency, was Issues able to negotiate with the developer
as a sole source bidder for development of the site. While it is
independent of the Federal Highway Administration and the
Massachusetts Department of Public Works and their more stringent
requirements, the Authority's enabling legislation does prevent
it from selling development rights, or from entering into a lease
for more than 99 years. The lease had to be approved by the members
of the Turnpike Authority and by the Governor of the Commonwealth
of Massachusetts.
Once negotiations were complete and it became clear that
the Authority's rent would essentially be paid in advance,
the Authority was no longer concerned about rent; it could
therefore remove from the lease standard default clauses. In
the event of default, the Authority may only seek relief by
means other than termination. The Authority allowed the lease
to be divided, thus allowing Urban Investment to arrange separate
financing of major project components.
Political
Issues
A gubernatorial election in the midst of negotiations caused
a delay while new officials were brought into the process.
Over 80 community meetings were held to gain both
required official approval and unofficial community
approval of the project. An active community group
sponsored by the Authority and by the governor
participated in the design of the buildings in the
project.
Timing
The appraisal, evaluation, and negotiation process
between the two parties, involving real estate,
engineering, and legal consultants, took a year and a
half. Because other financial mechanisms were also
utilized, the entire development process took four years.
Copley Place was completed in 1984.
Contact
Edward M. King, Head of Public Relations
Massachusetts Turnpike Authority
State Transportation Building
Suite 5170
Boston, Massachusetts 02116
(617) 973-7300
Norman T. Byrnes
Chief Counsel
Massachusetts Turnpike Authority
Gaston, Snow & Ely Bartlett
One Federal Street
Boston, Massachusetts 02110
(617) 426-4600
-88-
Joint Development Program
Overview
Washington, D.C. (1984 pop. 3,429,613) - The Washington
Metropolitan Area Transit Authority (WMATA) has developed
formal procedures for identifying and implementing joint
development opportunities. Following these procedures,
WMATA has secured six joint development agreements
with private developers, and if all goes as planned, the
procedures will be used to realize joint development
opportunities at as many as 50 additional station sites over
the next ten to 20 years As of September, 1986, construction
had been completed at five of the six initial station sites.
One example of WMATA's joint development projects is
located at the Van Ness/University of District of
Columbia (UDC) station on Connecticut Avenue in northwest
Washington, D.C. Prudential Insurance Co. of America
leases 15 acres from WMATA for an initial term of 50
years on this site. Prudential has completed
construction of a 200,000-square foot, seven-story office
and retail building. The project incorporates an upgraded
level for a 24-space bus and ride facility, as well
as weather protected bus bays at the rear of the building.
The lease terms require that Prudential pays a guaranteed
annual rent of $260,000 plus a percentage of its net profits
(if any) to WMATA.
Results
The WMATA will realize a total of $3.8 million in
direct income from all joint development system interface
projects during F Y 1986, and will receive cumulative
revenues of approximately $10 million. This is based on
six joint development projects which are completed,
underway, or in the approval process, in addition to five
existing projects with some degree of system interface.
These figures do not include "additional" income, which
may result from improved financial performance of joint
development projects (in whose cash flows WMATA will
participate), or revenues generated by increased
ridership. Direct annual income from joint development is
expected to grow to $12 million in the next ten years.
Legal
When Prudential Insurance Co. was selected as the Van
Ness project Issues developer, an unsuccessful bidder
instituted a series of challenges against the decision,
eventually leading to a legal action that was resolved in
favor of WMATA. To assure rental income growth WMATA has
negotiated leases based upon gross project revenues in order
to avoid the extensive auditing responsibilities associated with
monitoring net profits.
Political
Issues
After many public meetings with local agencies and
neighborhood committees, the scale of planned development
at Van Ness had to be reduced in order to obtain necessary
land use permits. Residents believed that more intensive
development would increase traffic congestion in the
area.
Timing
The WMATA invested significant amounts of time and effort
in attracting the interest of developers and in obtaining
public acceptance of the project at the Van Ness/UDC
station. It conducted appraisals, prepared transit impact
studies and requested zoning changes permitting more intensive
development around the station which is expected to increase
ridership
-90-
levels. The WMATA first contacted the District of
Columbia Office of Planning and Development in 1977 about
joint development opportunities at the Van Ness/UDC
station. It issued a prospectus for the site in January,
1979 and selected the developer in 1979. Construction
began approximately two years later. The project was
dedicated in the spring of 1983. While Prudential is
paying WMATA its guaranteed annual rent of $250,000,
WMATA is not receiving any "additional" revenue from the
percentage of net profit clause in the contract. (By
1985, Prudential had leased only 60 percent of its space
due to unfavorable conditions in the real estate market.)
Contact
Richard Miller
Joint Development, Section
Washington Metropolitan Area
Transit Authority
600 5th St. NW
Washington, D.C. 20001
(202) 962-1593
-91-
Leasing Highway Air Rights
Overview
State of California (1984 pop. 25,622,497) - The
California Department of Transportation (Caltrans) has an
aggressive air rights leasing policy. Caltrans actively
markets sites it feels have potential to generate
revenues, based on location, existing zoning, and
adjacent development and it makes site availability known
through mailings to developers, through advertising in
local and national publications, and through the personal
contact of staff members with the development community.
The Airspace Development Program is a multi-faceted program that
benefits private and public sectors. Returns to the State are
placed into the Transportation Fund which generates
either direct payment of costs of operations or matching
funds for Federal monies which pay for new projects. The
private sector benefits by availability of land in areas
where development land is generally scarce or not
available. Proximity to transportation facilities offer
developers corporate exposure to thousands of travelers
daily, and easy access for goods, customers, and
employees. Airspace use also adds properties to the tax
rolls.
Because it has engaged in many leases over a long period
of time, Caltrans has been able to develop standard forms
and follow similar procedures for each lease. The staff
members who handle air rights leasing have developed
expertise in the negotiation and development processes.
Completed projects range from a two-and three-story
office complex in San Diego's Mission Valley, to an auto
sales and service facility in La Canada, to a mini-blind
manufacturing plant with corporate offices, and a Hilton
Hotel all located in downtown Los Angeles.
Results
In FY 1984-85, with 389 parcels under lease, the
Airspace Development program produced a gross return in excess
of $5.8 million, and a net income of $4.8 million. It is
anticipated that through inflation on existing lease
rates and new leases being developed, income will more
than double in a very short period. In addition, local
agencies will profit by more than $1 million a year in
use and personal property taxes and business licenses.
Lease income is placed in the State Highway Trust Fund.
Legal
Caltrans is required by law to request bids for all
parcels and sites. Issues Caltrans may directly negotiate a
lease only in cases where the prospectus lessee is the only
possible user or where it is clearly to the State's advantage to
do so. Clear justification must be made and the lease must be
unanimously approved by the California Transportation Commission
(CTC). Bid leases do not have to be approved by the CTC. Once an
option to lease has been purchased, the developer must meet local
requirements for zoning changes, receive building permits, and
complete other related processes. The cost of the option escalates
over time.
Political
Issues
Political problems have been encountered locally with citizen's
groups, environmentalists, or local officials objecting to specific
developments. Local governments or other State agencies have
occasionally argued that Caltrans should give up parcels for
other use.
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Timing
The program has existed for 18 years. Since 1979, leases
have become a more important source of revenue. Although
timing varies, it generally takes a year from the time an
option is purchased to the beginning of construction or
development.
Contact
Otto E. Kihm
Chief, Airspace Development Branch
State of California
Department of Transportation
Division of Right of Way
1120 N Street
Sacramento, CA 95814
(916) 445-5489
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Legal
Issues
In May, 1982 two general contract bids were submitted for
the public (transit) portion of the GTC. Rinderknecht
Associates, Inc. in association with a minority firm,
Newson Construction, submitted a bid of $6.4 million.
Newson's financial participation gave the package
over 10 percent of worth of business for minority firms.
The lower bid came from Knutson Construction, and
included only about 4 percent for minority firms The
City's MBE committee recommended, with UMTA concurrence,
that the City accept the higher bid. When the City
awarded the contract to Rinderknecht, Knutson threatened
a suit.
An agreement was reached that allowed the two
companies to share the contract. Rinderknecht
subcontracted about 80 percent of the award to Knutson,
and in return Knutson withdrew its bid and its threatened
court action. In the end, construction work on the public
portion of the GTC included about 8 percent minority
participation.
Political
Issues
The completion of the GTC joint development project was
possible only because of extensive cooperation between
local, State and Federal officials, private developers,
and community representatives. The original plan called
for a retail mall on the second level which was to be an
extension of the proposed second street mall, near the
center; an eight-to twelve-story office building; and a
ten-to twelve-story apartment complex. When the second
street mall was canceled, the retail component of the
center was no longer economically viable. The housing
developer also withdrew for economic reasons.
At that point the City began to hold meetings with other
developers and interested tenants, and finally reached
agreement with a developer to construct the apartment
tower, on the condition that he could also develop the
office building. The original office tower developer
transferred his rights to the new developer and was
allowed, in return, to retain ownership rights in one
floor of the building.
The new developer proposed to sell floors of the
office tower as condominiums, and after several floors
had buyer commitments the project was resumed.
Timing Feasibility studies began in August, 1977. UMTA approval
of the GTC grant came in December, 1979. There were only
17 months between groundbreaking in June, 1982 and
opening the inter-city bus terminals. The final project
close-out was in October, 1984.
Contact
Thomas L. Aller
Executive Assistant
Office of the Mayor
Third Floor, City Hall
Cedar Rapids, Iowa 52401
(319) 398-5012
-95-
References
"Joint Development in Cedar Rapids," prepared by B. D.
Lundberg and T. L Aller, in Planning, June 1984.
Cedar Rapids Ground Transportation Center: A
Public/Private Joint Development, by the City of Cedar
Rapids, 1985.
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Leasing Highway Air Rights
Overview
Sparks, Nevada (1984 pop. 47,896) - A Sparks casino
expanded its facility and entered into an air rights
lease with the State for property under and adjacent
to a new highway viaduct.
The owner of the Nugget Casino approached the
right-of-way division of the Nevada Department of
Transportation, which hired an independent appraiser to
determine the value of the property. The contract
negotiations were complicated by the fact that there
were not yet any State laws to regulate the procedure.
The Federal Highway Administration, which funds
90 percent of the construction costs of interstate highways,
had to approve the lease. The FHWA agreed initially only to
allow the leasing of air space under interstate Route 80 for
parking, which was regarded as an appropriate and easily
managed use of the property. Eventually, the lease was amended
to incorporate vacant ground within the highway right-of-way
which was used to expand the casino facility.
Results
The lease returns approximately $97,000 each year to the
highway department's general fund and places the
project's 154,000 square feet of commercial
development on the Sparks tax rolls.
Legal
Issues
Following the execution of the Nugget Casino lease, the
State legislature passed a requirement that, following
Highway Department receipt of a proposal to lease property,
notice must be published and 60 days allowed for interested
developers to submit alternative proposals. The Highway
Department felt this was a beneficial requirement since it
expands the range of potential lessors while opening the process
to public scrutiny, thus eliminating criticism and defusing
potential allegations that might arise as a result of sole-source
bidding.
Political
Issues
Because there were no State laws regulating the lease of
air rights at the time, the Nugget Casino negotiations
were particularly extensive.
Timing The I-80 viaduct was built in 1967-68. The lease was
entered into in 1968 for 50 years, and is adjusted every
five years in accordance with the evaluation of an
independent appraiser hired by the State.
Contact
John P. Crawford
Chief Right-of-Way Agent
Nevada Department of Transportation
1263 South Stewart
Carson City, Nevada 89712
(702) 885-5480
Frank Wilson
Supervisory Right-of-Way Agent
Nevada Department of Transportation
1263 South Stewart
Carson City, Nevada 89712
(702) 885-3239
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Negotiated Land Lease
Overview
Tacoma, Washington (1984 pop. 159,435) - Pierce Transit
is expanding its service by adding five (ultimately
six) transfer centers. These centers were intended to
be located on private land leased to Pierce at $1.00 per
year for 20 to 30 years. Three of five have been successfully
located, leased for one per year constructed. The next two are
still in planning stages though they are in interim operation.
Pierce Transit hired a consulting firm to suggest areas for the
transfer centers, requiring that each be located at regional or
community activity centers and be within at least 25 minutes
of another transfer point. After choosing three of the four areas,
the transit agency held public hearings on possible
sites, finally deciding on land belonging to a community
college, a school district, and a large shopping mall for
the facilities. While negotiations on leasing the chosen
sites were conducted, Pierce set up temporary centers
for less than $2,000 each (painted areas in parking
lots). Pierce has now constructed three facilities
with raised platforms and shelters. Funding came from an
UMTA grant (80 percent of cost) and from transit funds
derived from a 3/10-cent State sales tax (20 percent of
cost). The planning for the next center is now in
progress.
Results
Pierce Transit benefits from not having to condemn and
buy the needed land. The 3.3-acre parcel on a corner of
the Tacoma Community College parking lot is in an area of
$3.00 to $5.00 per square foot land values, which might give
it a comparable value of $430,000 to $720,000. The two-acre
parcel belonging to the Franklin Pierce School District might
be valued at $130,000 to $170,000 ($1.50 to $2.00 per square foot).
The one acre parcel on the Tacoma Mall parking lot might be valued
at $175,000 or more (over $5.00 per square foot).
The non-transit investors also benefit. The Tacoma Community
ollege has reversed a trend of falling enrollment by
promoting the convenience of the transit center. The
Franklin Pierce School District is leasing underutilized
land which commercial developers had been eyeing but which
the District preferred not to sell outright. Allied Stores,
owners of the regional shopping center, used its commitment
to a transfer facility as a bargaining chip with the city council
during negotiations to reduce the parking requirements at
the mall. Many of the workers who ride the bus have the
opportunity to shop at Tacoma Mall before transferring to
a final bus home. Riders are responding favorably to
the high quality of the new facilities, and the "guaranteed"
nature of the timed transfer, according to informal surveys
taken by Pierce.
Legal
Issues
Pierce Transit is designated as a municipal corporation
and a Issues public utility, and as such has the right to contract
with private property owners.
Allied Stores of Tacoma Mall, one of the largest malls in
the northwest (1.6 million square feet of retail space),
had to apply to a city commission, hold public hearings,
and gain final approval from city council for reduced
parking requirements (from 55 spaces per 1,000 square
feet to 5 spaces per
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1,000 square feet). This held up completion of final
lease arrangements with Pierce.
Political
Issues
The public hearings were fairly well attended, and three
of the four communities were very receptive. Pierce began
planning in 1980. The first lease, which took three months to
negotiate, was signed in 1983, the next two were signed
in 1984.
Timing
The Franklin Pierce facility opened in October of 1984;
the Tacoma Community College facility opened in November
of 1984 and the Tacoma Mall facility opened December
1985. The third and fourth centers are also planned
to be in activity centers, one in the southeast Tacoma
area on private land, the other on public property in
downtown Puyallup, as part of a future development for
a civic center complex. These latter two are now in
interim operation at those sites. There is a sixth
transfer center planned for the I-5, SR-512 Lakewood
area It will be a park-and-ride facility built in
conjunction with the Washington State Department of
Transportation using mostly interstate highway funds
and some UMTA funding. Final design for this sixth
facility will be completed early in 1987, and construction
will start during the summer of 1987 depending on Federal
Highway Administration interstate funding availability.
Contact
Mae Bassett
Pierce Transit Planning Office
P.O. Box 5738
Tacoma, Washington 98405
(206) 593-6260
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Leasing Facilities
Overview
Santa Cruz, California (1984 pop. 205,816) - The Santa
Cruz Metropolitan Transit District (SCMTD) is leasing
office and retail space in its new downtown Intermodal
Transfer Facility to offset operations and maintenance
costs.
The Metro Center is located south of downtown, next to an
outdoor shopping mall (the Pacific Garden Mall) and the
local Greyhound Bus terminal. It includes pedestrian,
bicycle, and bus facilities. Because of the facility's intermodal
nature, it was possible to finance it with California State
funds by means of a half-cent sales tax, rather than with
Federal funds. The total cost of the facility (land acquisition
and construction) was approximately $2.5 million.
The Metro Center offers 3,932 square feet of restaurant
and retail space to tenants in the ground floor lobby,
503 square feet of office space to tenants on the second
floor, and six 100-square foot concession booths in a
separate landscaped island area Total leased space is
4,435 square feet. The island is surrounded by parking
for 16 transit buses, with an estimated daily ridership of
10,000.
Results The deadline for lease proposals was October 31, 1983,
and final costs and revenue figures are available. Total
projected expenses for buildings and grounds maintenance,
management, utilities, and security are $200,000 yearly.
Total projected revenues are $100,000 yearly ($5,000 from
office space, $6,000 from pay telephone lease revenue, and
$89,000 from island booth space). This produces a total projected
deficit of $100,000 per year. Rent is based on a fixed rate
and/or a percentage of gross income.
The transfer facility increased ridership, and moved bus parking
off the street and loiterers out of the area Both the Pacific
Garden Mall and the new businesses have benefited greatly from
the new central bus terminal.
Legal
Issues
The Santa Cruz City Council passed a draft law to allow
SCMTD to purchase the land after it demonstrated a public need
for the terminal. The SCMTD and the individual businesses
bought the land.
Political
Issues
On the whole, there is public and official support for
the project. The design is innovative, and the surrounding
community is pleased with the center's presence.
Timing
Planning for the Metro Center began in 1979. Tenants were
selected in November, 1983 and the facility opened in
June, 1984.
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Contact
Kurt Knudsen, Program Development Officer
Santa Cruz Metropolitan Transit District
230 Walnut Avenue Santa Cruz, California 95060
(408) 426-6080
Ed van der Zande
Manager of Development and Engineering
Santa Cruz Metropolitan Transit District
230 Walnut Avenue
Santa Cruz, California 95060
(408) 426-6080
References
Report and Time Table on Concession Space Lease
Development, memorandum: Santa Cruz Metropolitan
Transit District (SCMTD), July 7, 1983.
Metro Center Leasing, SCMTD packet.
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VII. Private Development and Provision of
Facilities and Services
The recent re-introduction of the private sector into the
development and provision of transportation facilities
and services is part of a larger movement towards
privatizing public services. It often results in
substantial public sector savings due to creation of a
competitive environment for service provision, or creates
the opportunity for the private sector to wholly finance
infrastructure which would otherwise be funded publicly.
In Tampa, Florida, development of a people mover was a
private sector initiative with little or no role for the
public sector in funding or controlling the project.
Partial control was retained by the public sector over
the Las Vegas, Nevada people mover. Financing this
transit system will be a private responsibility.
In Las Colinas, Texas, a master-planned, multi-use
development, a people mover is part of the plan
conceived by the prime developer. Developers of
individual commercial buildings must include guideway
segments in their projects. Construction of linkages between
segments, rolling stock acquisition, operations and maintenance
are the responsibilities of a utility district funded by
assessments. The district will contract with a private company
to build the system.
New legislation in Texas allows private developers and
property owners to create special road utility districts,
issue tax-exempt bonds, and construct arterials and feeder roads.
In Detroit a private company owns and operates a toll
bridge connecting Detroit to Windsor, Ontario. The bridge
competes with a nearby toll tunnel for revenues.
The public sector retains control as to what fixed-route
transit service shall be provided and subsidizes the service
provided by private companies in Johnson County, Kansas and
Snehomish County, Washington, but at less cost than that of
public transit agencies in the region.
Similar arrangements and savings are effected by public
agencies contracting with private companies for dial-a-ride
and shared ride taxi services in Kankakee, Illinois, and Ann
Arbor, Michigan.
In San Gabriel Valley, California, withdrawal from the
Southern California Rapid Transit District and creation
of a special Transportation Zone, wherein a new public
agency would contract for services with a private company,
is expected to save taxpayers money and prevent service reductions.
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Privately Financed People Mover
Overview
Tampa, Florida (1984 pop. 724,454) - Harbour Island, a
177-acre, $1 billion development situated just off
downtown Tampa, Florida is being constructed as a
residential retail and office community. This includes
11,000 square feet of retail and 200,000 square
feet of office space, and a 300-room luxury hotel.
Further office construction and 4,500 dwelling units
are also planned. An elevated guideway, one-half-mile long
shuttle transit system connects Harbour Island with downtown
Tampa The system uses 100-passenger, air-cushion supported vehicles.
The Harbour Island People Mover developed by the Otis
Elevator Company was totally financed by Harbour Island Inc.
(a subsidiary of Beneficial Corporation), at a cost of about
$7.3 million.
Harbour Island Inc. expects the people mover to help sell the
development as well as provide a transportation service to and
from the island.
The Hillsborough Area Rapid Transit Authority (HART) agreed to
lease the right-of-way on one of the downtown streets to Harbor
Island Inc. for the construction of the guideway.
Building a 140-foot long span beam over the cross-town expressway
represented a great technical challenge for the contractor. The
expressway authority would not allow the contractor to put a
support column in the space between the elevated east and west
bound lanes of the expressway.
In addition to the people mover the developer also has constructed
two road bridges to the island costing $4.4 million. The City of
Tampa is currently undergoing a study for a larger people mover
network in the downtown area into which the Harbour Island shuttle
might tie.
Results
There is an agreement between the developer and the
transit authority that the developer will operate and maintain
the system for the next 15 years and then sell it to HART for
$1.00. Currently the shuttle operates under contract to the
developer. Annual operating costs have been estimated at $500,000.
The fare on the system is 25 cents. It is projected that the peak
hour patronage by the year 2000 will approach 5,200 passengers.
Legal
Issues
No legal problems were encountered.
Political
Issues
No political problems were reported.
Timing
Fast track design and close cooperation among government
officials made it possible to finish project construction in
eight months. The guideway was completed in the Fall of 1984
and the system went into operation in June,
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1985 in conjunction with the opening of Harbour Island.
Contact
Chris Salemi, Controller
Harbour Island Inc.
P. O. Box 497
Tampa, Florida 33601
(813) 229-5060
References
"Transit Pulse," Engineering News Record, July 19, 1984.
July/August, 1985.
"Status of Tampa's Downtown People Mover," by J. Marcuson
and S. Tindale, in Automated People Movers: Proceedings
of an ASCE Conference, Miami, Florida, March, 1985.
-106-
Privately Financed People Mover
Overview
Las Vegas, Nevada (1984 pop. 534473) - In September, 1984
the City of Las Vegas requested expressions of interest
from private companies interested in planning, financing,
building, and operating an automated people mover system.
After a pre-proposal conference in October, 1984, three
companies made presentations to the City, and the contract
was awarded to Magnetic Transit of America Details of the
actual guideway, alignment, and station locations delayed
progress but have since been selected, and final engineering
and design is now being completed.
Las Vegas People Mover Corporation, a subsidiary of Magnetic
Transit of America, will oversee construction and operate the
system once it is complete. The only costs incurred by the City
are for the right-of-way and a utility location study. If
utility obstacles are found the City will share the costs of
relocating the utility, but the City is taking steps to avoid
such expenditures.
Magnetic Transit of America oversees projects in the United
States and Canada involving the technology of the M-Bahn,
developed by Magnet- bahn GmbH of Starnburg, West Germany.
The Las Vegas People Mover will be the first installation of the
M-Bahn technology in the U.S. It will be an elevated magnetic
levitation, fixed guideway system.
The baseline route is approximately a mile-and-a-quarter long,
and will have four stations, including one located inside
the new Las Vegas library. Public operation will begin in 1988.
M-Bahn vehicles are magnetically propelled by linear induction
motors located in the guideway. The vehicles are levitated above
the guideway by permanent magnets located in the undercarriages.
Since both the weight and the friction are low, the system energy
requirements are small compared to conventional systems.
The estimated cost of constructing the system is $40 million.
Details of how to involve investors in the people mover system
are still being explored by Magnetic Transit.
Results
The City of Las Vegas will receive a people mover, a
valuable addition to its public transportation system. Design,
implementation, and operation will be without direct cost to the
City. The people mover is part of a three phase transportation
improvement program which also includes a new downtown
transportation center, and twelve new shuttle buses. The people
mover and shuttle buses will operate on different routes.
Legal
Issues
No legal issues were reported.
Political
Issues
Cooperation has been extensive between the City, local businesses,
and the Downtown Progress Association. There have been no political
problems.
Timing
The first request for expressions of interest was made in
September, 1984. After a pre-proposal conference in October,
1984, three companies made
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presentations in December, 1984. Magnetic Transit of
America was chosen in January, 1985, and the contract was
signed in August, 1985. Public operation will begin in
late 1988 or early 1989.
Contact
Ashley Hall
City Manager, City of Las Vegas
400 East Stewart Street
Las Vegas, Nevada 89101
(702) 386-6501
Tom Graham
Director of Design and Development
City of Las Vegas
400 East Stewart Street
Las Vegas, Nevada 89101
(702) 386-6535
John Bivens
Magnetic Transit of America
1095 East Indian School Road, Suite 140
Phoenix, Arizona 85014
(602) 266-7722
-109-
Privately Financed People Mover
Overview
Las Colinas, Irving, Texas (estimated 1986 Las Colinas daytime
pop. 50,000; resident pop. 20, 000) - The new 12,500-acre Las
Colinas master-planned community located midway between the
Dallas/Ft. Worth International Airport and downtown Dallas is
developing a unique internal transportation system, the Las
Colinas Area Personal Transit (API) System. The community is
expected to accommodate a total employment of 150,000 as well as
50,000 permanent residents Its urban center is expected to contain
about 20 million square feet of commercial space. In the urban
center only four or five million square feet are currently
completed with an occupancy rate of 78 percent. The system's
uniqueness lies in the fact that portions of the elevated-guideway
system are being built by the developers on whose site the guideway
passes. The transit system will eventually be ten to 15 miles in
length.
Las Colinas included the proposed transit system in its master
plan because the transportation system, which will be connected
with the Dallas Area Rapid Transit (DARI) rail network, will be
valuable as a marketing tool for the community. The transit
system will tie together the urban center of Las Colinas and
will eventually permit connection directly to the interior of
office buildings.
The connecting lengths of the guideway, the transit system, and
me operation of the system will be provided by the Dallas
County Utility and Reclamation District. This district is a
special water district that is enabled by Texas legislation
to levy an ad valorem tax subject to voter approval. The present
tax rate is 75 cents per $100 of property value in the district.
A combination of this tax and farebox revenue will be used to
pay the operational costs of the transit system.
Results
The APT system includes an initial procurement of nine
dual-lane miles of guideway that will be completed as a four-phase
project in ten years. Phase one includes 1.25 miles of elevated
guideway. Extensions to the system will eventually bring the system
up to 15 miles of dual-lane guideway. Design and construction of
the system started in 1978. The Westinghouse Electric Corporation
was chosen to provide the transit vehicles and operating system
which involves using the state-of-the-art C45 system. The C45 is
a successor to the C100 system that is used in Orlando and Miami,
Florida Approximately S,000 feet of guideway has been constructed.
Initial operation of the transit system will be June 1, 1989.
Legal
Issues
Four objectives were targeted in contract negotiations. The first
was to develop the initial phase of the project, 10,000 feet of
guideway, with a fixed price without an economic price adjustment.
The second was to include a five-year contract of operations and
maintenance with 99 percent reliability required. The third
objective provided that unit prices for expansion be guaranteed
for ten years without escalation. The fourth objective involved
the provision of shop drawings by the suppliers in the event of
discontinuation of contracted service. The establishment of
guaranteed unit prices is a product of pre-negotiation.
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Several meetings were held with contenders for the job to
pre-negotiate the contract and all terms and conditions.
Bidding occurred after the individual suppliers agreed to
the terms of the contract. Over 30 meetings were conducted
with each of the suppliers. Technical, special, and general
provisions and the invitations for the bids were negotiated
separately with all of the suppliers resulting in one set of
contract documents that accommodated all participants. This
procurement procedure tends to reduce the risk to suppliers.
Political
Issues
No political problems were reported.
Timing
Guideway construction began in 1978. The system is
expected to be operational by June 1, 1989. A bond issue
for $5.5 million occurred during January, 1986. An
additional bond issue will occur in January of 1987 for
$8.5 million. These bond issues are a regular part
of the District's procedures; only a portion of this
money goes directly to the transit system.
Contact
David Brune
President
Dallas County Utility and Reclamation District
3910 Leone Dr.
Irving, Texas 75016
(214) SS6-3842
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Road Utility Districts
Overview
State of Texas (l984 pop. 15,988,538) - Legislation passed in
Texas in 1984 allows property owners to build roads on their
properties, finance them with tax exempt bonds backed by ad
valorem assessments on the properties, and then to transfer them
to the State, County, or City. Developers have in the past
financed needed roads themselves, and passed the costs along
to the home or office buyer, or negotiated special agreements with
the State. The Road Utility District Act makes this process
faster and less expensive by allowing the creation of a road
utility district of area property owners for the purpose of
constructing, acquiring, and improving roads on their land. While
this is especially useful to developers who might otherwise face
costly delays in making their undeveloped property accessible, it
also benefits the purchaser, since the road utility district can
issue tax-exempt bonds which carry lower interest rates. A third
beneficiary is the governmental entity with jurisdiction over
the area: the City, County, or State receives the road free of
charge when construction is complete.
Property owners begin the process by devising a road improvement
plan for the combined property area and petitioning the SDHPT
and the City or County in which the land is located for approval
of a road utility district for that combined land. The plan must
meet certain criteria: the proposed facilities must be feasible,
practicable, and necessary; the land to be included in the proposed
district must be benefitted by the creation of the district; the
district must be able financially to issue and pay bonds of the
district; and the improvements must be to the specifications
of the appropriate government.
If, after a public hearing, the plan is found to meet the above
discussed criteria, and if the appropriate governmental entity
agrees that it will accept the road when finished, the petition
will be given preliminary approval. An election within the
boundaries of the proposed district is then held to confirm the
approval and to elect temporary directors of the district; a
majority of residents voting in the election must favor the plan
for the district to be formed.
Results
A district is now proposed in Denton County (Demon County
Road Utility District #1), which will finance $30 million
in arterial and feeder road construction in the city of
Lewisville, as well as making improvements to a State
farm-to-market road, and acquiring right-of-way and constructing
outer frontage roads for a spur of a designated State highway.
The District covers over 1,400 acres.
An application has also been filed for a district on the north
side of Houston.
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Legal
issue
A road utility district is empowered to accept gifts and
grants, Issues tax-free bonds and notes, assess ad valorem
taxes, levy additional taxes for the operation of the district,
and impose fees. Elections are required to approve bond issue
and the imposition of ad valorem taxes by which the bonds will
be backed, and to approve additional maintenance taxes used to
operate the district. The bond issue and ad valorem tax require
a two-thirds majority; the maintenance tax a simple majority.
The bonds, notes, anticipation notes, and other debt issued
may not exceed one-fourth of the assessed valuation of real
property within the district. While the City, County, or State
will be responsible for the road once it is completed, the
district remains responsible for all debt.
Political
Issues
No political problems were reported.
Timing
The Road Utility District Act (S.B. 33) was passed in the
Summer of 1984. Two districts have applied for State approval
in 1986.
Contact
Bill McAdams
Chief Right-of-Way Attorney
Texas State Department of Highways
and Public Transportation
P.O. Box 5075
Austin, Texas 78763-5075
(512) 835-0811
Max Fariss
Assistant State Right-of-Way Engineer
Texas State Department of Highways
and Public Transportation
P.O. Box 5075
Austin, Texas 78763-5075
(512) 835-0803
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Private Toll Bridge
Overview
Detroit, Michigan (1984 pop. 1,088,973) - The Ambassador
Bridge is a privately-owned toll bridge connecting
Detroit, Michigan and Windsor, Ontario. The steel-suspension
bridge spanning the Detroit River was opened in 1929 by the
Detroit International Bridge Company under the management of
financier Joseph A. Bower. The original tolls were 50 cents
per car and 1 cent per 100 pounds of truck. Central Cartage Co.,
a Michigan trucking firm that bought the bridge in 1979 for over
$30 million, currently charges $1.00 per car and $1.50 per 100
pounds of truck. The tolls are collected at the entrance. Commuters
may buy books of 40 toll coupons for $30, lowering the charge to
75 cents. The only other crossing in the area is the privately
operated Detroit-Windsor Tunnel, which charges identical tolls.
Results
Detroit and Windsor each receive approximately $800,000
per year in property taxes from the bridge, as well as
the benefit of a well-maintained facility which costs
them nothing.
Central Cartage earns gross revenues of about $10 million
per year, out of which its costs include $4 million per year
in interest payments on debt obligations and $3.5 million to
$4.5 million in capital improvements.
Legal
Issues
The Ambassador Bridge is under the jurisdiction of the
U.S. Department of Transportation and the Canadian Transport
Commission. When the bridge was sold in 1979, there were no
problems with the U.S. government, but the Canadian government
resisted the sale. However, inconsistent with the provisions of
the original charter, the Canadian Foreign Investment Review Agency
attempted to keep the Canadian half of the bridge from being sold.
While nothing could be done legally, Central Cartage had political
difficulties with the Canadian authorities.
Political
Issues
Central Cartage is still experiencing political problems
with the Canadian government.
Timing
The Ambassador Bridge was built in 1929. The financier
shortened the construction schedule by eight months by
offering his builder half of each day's tolls for each day he
finished ahead of schedule. Various firms began bidding to
acquire the bridge's owner, the Detroit International Bridge
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Company, in 1977, and Central Cartage bought it in 1979.
Contact
R.W. Lech, Executive Vice-President
Central Cartage Co.
P.O.Box80
Warren, Michigan 48090
(313) 939-7000
References
"Seeking the Shelter of a Detroit Bridge," in Business
Week, November 7, 1977.
"Bridges: Back to Private Enterprise?" in Technology,
January/February, 1982.
"Investment of the Future: Own Your Own Toll Bridge," in
Entrepreneur, June, 1982.
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Contracted Bus Service and Maintenance
Overview
Johnson County, Kansas (1984 pop. 296,435) - Johnson County is
a rapidly growing suburban area outside the Kansas City
metropolitan region. In 1982, Johnson County withdrew from
the Kansas City Area Transit Authority (KCATA) when it elected
to contract for commuter and circulator bus service with a
local private firm. The firm's $730,000 bid for the commuter
service was $470,000 less than KCATA's bid. Because the county
gave up around $486,000 in Federal subsidies when it moved to the
private provider, it is estimated that the county saved only about
$17,000 in its first year of contracting. However, the county
gained greater control over service and freedom from diminishing
Federal operating subsidies.
Beginning in January, 1986, Johnson County competitively procured
services from ATE Management and Services Co. of Cincinnati, Ohio.
ATE subcontracts with Ryder Truck Rental, Inc. to provide
vehicles, fuel, maintenance, and an operating garage. The Johnson
County contract provides for an expanded route system and new
equipment. The service is funded almost exclusively out of
farebox and general local tax revenues. The county generates some
revenues from an advertising contract and receives $45,500 in UMTA
Section 18 funding for a route which extends into a rural area.
Ryder's subcontract is about $750,000 annually or 55 percent of
the total contract cost. This includes vehicle depreciation and
interest of around $380,000, or 29 percent of the total contract
cost.
Results
Express service is provided between points in Johnson
County and the Kansas City Central Business District
(six routes; 12 peak vehicles; 1,025 vehicle-miles per day).
Intra-county circulator service is provided by high roof
mini-buses (four routes; eight peak vehicles; 1,160 vehicles-miles
perday). All service is provided on weekdays only. The
vehicles are clearly marked with the Johnson County logo.
The annual contract cost to Johnson County is $1.32
million. The commuter service costs approximately $3.08 per
vehicle-mile or $52 per vehicle-hour. The circulator service
costs approximately $1.75 per vehicle mile or $23 per vehicle-hour.
Legal
Issues
A distinguishing feature of the new contract is the
number of explicit performance standards. Repeated violation of a
performance standard without adequate remedy can lead to
penalties ranging from $2,000 to cancellation of the contract.
Political
Issues
No political problems were reported.
Timing
Johnson County first contracted for commuter and
circulator service in Services under ATE operation began
in January, 1986. The contract
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extends for three years with three one-year extensions.
Contacts
Steve Feigenbaum
Transportation Manager
Johnson County
P. O. Box 2260
Olathe, Kansas 66061
(913) 782-2640
Richard Clair
Vice President
ATE Management and Service Company
617 Vine Street, #800
Cincinnati, OH 45202
(513) 381-7424
References
"Contracted Bus Service and Maintenance: Johnson County,
Kansas," in Private Sector Briefs, prepared by Rice
Center, May, 1986.
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Contracted Transit Service
Overview
Snohomish County, Washington (1984 pop. 368,085) - Contracted
commuter service and maintenance will be provided for the
Snohomish County Public Transportation Benefit Area Corporation,
commonly known as Community Transit, by ATE Management and
Services Company starting in September, 1986.
This service was previously performed by Seattle Metro
which provided commuter park-and-ride and express service
from urbanized areas in southwest Snohomish county to
Seattle's Central Business District. Community Transit
elected to competitively-procure approximately 70 percent
of that service.
ATE will perform all operating functions on a turnkey
basis. Community Transit will continue to perform
planning, scheduling, and marketing functions. Vehicle
maintenance is contracted through two local firms. ATE
intends to hire drivers, store buses, and contract
for support services locally.
Results
The contract with ATE is for a fixed total price averaging
$2.95 million annually over five years The contract extends
for three years, with a one year or two-year renewal option
available to Community Transit at present prices The contract
allows for extensions to a maximum total of 15 years. Insurance
is not included in the contract price, and will be treated as a
pass through expense. The service to be contracted from ATE would
cost approximately $4 million annually (including insurance) if
procured from Seattle Metro at current costs.
The average annual operating cost (without insurance)
will be about $1.6 million for an expected 26,000 revenue-hours
of service per year. The operating cost in the first year will
be $59.22 per revenue-hour, rising at an average rate of 9
percent in subsequent years.
At the time of the bid, ATE submitted an insurance quotation
of $247,000 for the first year. Liability insurance rates were
actually as much as three times that bid. Insurance costs could
therefore raise the unit price by about 20 to 25 percent. The
possibility of self-insurance will be aggressively pursued once
the service is fully operational and running smoothly.
The annual cost of Community Transit's vehicle sublease
will be $1.43 million ($29,272 per vehicle per year). ATE
will amortize vehicle cost at a rate of around $23,000 per
vehicle per year, to a salvage value of about 20 percent of
original cost. At the termination of the five-year lease,
Community Transit will have a first right of refusal option to
buy the buses.
Legal
Issues
For changes in the level of service within 25 percent of
the total, the contract price is increased or decreased at
predetermined rates. The marginal adjustment rate for
the first year is $27,985 per revenue-hour required,
plus Q726 cents per revenue-mile required, plus a
negotiated charge if additional vehicles are required.
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Community Transit may cancel the contract at its
convenience; however, to cancel the contract without
cause, Community Transit must take over the bus leases,
buy ATE's supply inventory at cost, and buy out the ATE
contract at a predetermined maximum cost (about $300,000
during the first year, less in the following years).
Political
Issues
No political problems were encountered.
Timing
The Request for Proposal (RFP) was issued in September,
1985. Interviews with two nationally-recognized private firms
and awarding of me contract occurred in February, 1986. Services
will begin in September, 1986. The contract extends for three
years, with a one-year or two-year renewal option available to
Community Transit at preset prices.
Contact
William B. MacCully
Director of Transit Development
Community Transit
8905 Airport Road
Everett, Washington 98204
(206) 348-7111
Richard Clair
Vice President
ATE Management and Service Co.
617 Vine Street, Suite 800
Cincinnati, Ohio 45202
(513) 381-7424
Reference
"Contracted Commuter Service and Maintenance; Snohomish
County, Washington," in Private Sector Briefs, prepared
by Rice Center, June, 1986.
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Contracted Taxi Service
Overview
Kankskee, Illinois; Aroma Park, Illinois; and Bradley,
Illinois (1984 pop.100,146) - Contracted taxi service
is provided for the region's elderly and handicapped
in the Greater Kankakee area, funded by fares, the City
of Kankakee, and the Federal government.
A 1979 transit study of the greater Kankakee area
suggested, among other options, the implementation of
a taxi-van program for the elderly and handicapped.
In 198Q Kankakee began its taxi portion of the service. A
private cab company operates a total of 13 vehicles
24 hours a day, seven days a week. The City sells
$1.50 coupons to the elderly and handicapped for 50
cents; one coupon per trip may be used. The Federal
Highway Administration reimbursed one-half of the
operating deficit under Section 18 of the Urban Mass
Transportation Act until June 1982, when Kankakee was
reclassified as an urban area The City has since used
Section 5 funding through a newly-organized metropolitan
planning organization.
Results
In the first year of operation, over 20,000 trips were
taken for a total fare revenue of about $11,000.
Expenditures totalled approximately $35,000, so the
Federal Highway Administration granted some $12,000 to
match Kankakee's share of the deficit. The figures
for the following fiscal year are very similar. By
late 1985, there were over 1,600 persons registered for
the program.
Legal
Issues
The City of Kankakee contracts with the taxi company. The
service is coordinated through the City's Planning Office.
Political
Issues
A protest by the Community Action Program, which had
applied for the same funds, held up funds for eight months.
The Illinois Department of Transportation arranged to have the
complaint withdrawn.
Timing
The Transit Development Program was adopted by Kankakee
County in June, 1979. In June, 1980, Kankakee began its
taxi program, serving Kankakee and Aroma Park. In September,
1983, the Village of Bradley was added to the system.
Contact
Thomas E. Palzer, City Planner
City of Kankakee, Illinois
City Hall
Indiana Avenue and Oak Street
Kankakee, Illinois 60901
(815) 933-0489
References
Taxi/Van Program, brochure.
Taxi/Van Program, factsheet, July, 1983.
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Kankakee Area Transit Development Program, prepared by
H.W. Lochner, Inc. for the Kankakee County Regional
Planning Commission, June 1979.
City of Kankakee, Illinois Transportation Program: Report
on Examination of Financial Statements, prepared by
Topping, Gianotti, and Payne, CPAs, June, 1980, June,
1981, June, 1982.
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Contracted Taxi Service
Overview
Ann Arbor, Michigan (1984 pop. 107,673) - The Ann Arbor
Transportation Authority (AATA) subcontracts with a
local taxi company to operate a late night, shared ride
taxi service called Night Ride.
The AATA was unable to find any examples of contracted taxi
service being used for geneal transit purposes (rather
than special purposes such as transportation of the elderly
or handicapped), and so developed its own service criteria
The features AATA chose included costs which were determinable
in advance, fixed fares, and service that was simple to
administer. The original contract for the service was awarded
after a bid process. The latest bid was awarded after an RFP
advertisement.
Prior to beginning the Night Ride service, AATA offered weekday
evening dial-a-ride service until 11:15 p.m. A few fixed routes
also operated during the evening hours.
Four vehicles are operated from 10:00 p.m. to 12:00 am.,
three vehicles from 12:00 am. to 1:00 am., two vehicles from 1:00
am. to 2:00 am., and one vehicle from 2:00 am. to 6:00 am. The
vehicles are dedicated to the service by the cab company, which
provides the vehicles, drivers, fuel, maintenance, and dispatch
The AATA pays a fixed subsidy of $10.50 per vehicle hour, and each
passenger sharing the cab pays a fixed fare of $1.50 per ride.
Reservations for the service are made on the day service is needed.
The Urban Mass Transportation Administration funded the first
year of service (1982) under a demonstration grant. The AATA
Board of Directors has elected to continue Night Ride with local
revenue sources since that time. Results There were no specific
figures reported for the prohibitive cost of a comparable late
night bus service. Comparable taxicab prices are $1.00 per flag
drop and $1.10 per mile.
Between April, 1982 and March, 1983, 14,587 passenger trips were
taken on Night Ride, for an average of 3.3 passengers per vehicle
hour. Between April, 1983 and August, 1983, the average of
passengers per vehicle hour remained at 3.3. Passengers per
vehicle hour increased to 3.7 in FY 1984 and totaled 3.4 in FY
1985. The total subsidy in FY 1985 was $56,265 or $2.93 per
passenger.
Ridership is higher when the University of Michigan is in session,
on Fridays and Saturdays, before midnight, and just before 6:00
a.m. Surveys showed that more passengers were diverted from
automobiles than from taxis and walking combined. Since the main
attraction of Night Ride is its provision of personal safety
when traveling late at night, it may be that some drivers are
now more willing to use public transit during the day if they can
return safely at night.
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Legal
Issues
The municipal taxicab ordinance prohibited shared rides
and required that fares be based on the taximeter. However,
there was a provision exempting mass transportation service
from these regulations, and the AATA convinced the municipal
board which oversees taxi operations that this clause applied
to Night Ride.
Political
Issues
No political problems were reported. The AATA has decided
to continue the service.
Timing
During 1981, citizen groups approached the AATA
requesting service during late night hours. After two Ann
Arbor taxi companies failed to agree on a joint service
proposal, the AATA advertised for bids in February, 1982.
Operations began in March, 1982.
In the Summer of 1984, the service quality provided by
the cab company deteriorated. Upon contract expiration,
the AATA issued a request for proposals. The successful
proposal was by a different cab company which has a
higher quality of service at a higher cost.
Contact
G. Christopher White
Manager of Service Development
Ann Arbor Transportation Authority
2700 S. Industrial Hwy.
Ann Arbor, MI 48104
(313) 973-6500
References
Ann Arbor Transportation Authority Invitation for Bids:
Late Night Shared Ride Demand - Responsive Transit
Service, February, 1982.
Late-Night, Shared-Ride Taxi Service in Ann Arbor,
Michigan, prepared by G. Christopher White for the
Policy and Planning Committee of the American Public
Transit Association, October, 1983.
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Transportation Zones
Overview
San Gabriel Valley, Los Angeles County, California
(estimated 1986 Valley area pop. 1,300,000) - The San
Gabriel Valley area may separate from the Southern California
Rapid Transit District (SCRTD) and form its own transit service
or a "transportation zone" under the purview of the Los Angeles
County Transportation Commission (LACTC). The LACTC has adopted
special criteria for the formation of transportation zones, such
as conditions in setting transit zone boundaries, maintaining
levels of service, and a requirement to demonstrate a potential
25 percent savings over the first three years of operation.
The zone would independently set service policies and competitively
contract those services currently provided in the Valley by SCRTD.
The move to create a transportation zone resulted from SCRTD
fare increases following a period of specially subsidized low
fares, and projected service cuts in the Valley.
Approximately one-quarter of the routes in the SCRTD system
are contained within the San Gabriel Valley, which houses 29
separate municipalities, and service cuts to this area were
anticipated to be disproportionately high.
Results
Because of the successful competitive contracting
experiences of other cities and the knowledge that SCRTD incurs
some of the highest operating costs per unit of service in
the public transit industry, it is projected that the residents
of the San Gabriel Valley will get more service at a lower cost by
competitively contracting with private operators for service
provision. Approximately 450 SCRTD buses will be affected by
the change. The LACTC expects that the zone will take over about
60 to 70 percent of SCRTD's local service.
Legal
Issues
The LACTC is authorized under its State enabling legislation
to create local transportation zones where the SCRTD "cannot
otherwise provide adequate and responsive local transportation
services in a cost-effective manner."
Political
Issues
The LACTC requires the consensus approval of the cities
within the proposed zone in order to create the zone. There is
concern that operators in the area may try to keep other
operators from entering the market, as well as that labor
unions may protest the removal of such a large portion of
SCRTD's service from a public operator.
Timing
In December of 1984, a study was proposed to consider creation
of the separate transportation zone for the San Gabriel Valley.
The study received UMTA funding approval in December, 1985.
Parsons, Brinckerhoff, Quade & Douglas was selected by the county
to prepare a two-part transportation zone application to the
LACTC. Phase I considers relevant express service and its
application should be completed by the end of October, 1986.
Phase II examines the remaining service and its application is
expected to be completed in May, 1987. After LACI C approves
the applications, express
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service could begin as early as July, 1987, with regular
route service beginning in January, 1988.
Contacts
Mike Lewis
Chief Deputy Supervisor
First District
Los Angeles County
858 Hall of Administration
Los Angeles, California 90012
(213) 974-1018
Sharon Neely
Los Angeles County
Transportation Commission
403 W. 8th Street, Suite 500
Los Angeles, California 90014
(213) 626-0370
Reference
"Planning - Transportation Zones: San Gabriel Valley, Los
Angeles, California," in Private Sector Briefs, prepared
by Rice Center, May, 1986.
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VIII. Toll-Financing
Toll financing has substantial historical precedent in
transportation; a Virginia toll road connecting Alexandria to
Berryville was completed in 1785. Toll financing has not been
widely used in new facilities in recent years as most new limited
access (freeway) facilities were constructed as part of the
interstate or other Federal road systems. However, as public
funding appears more and more limited, toll financing is regaining
popularity as an effective technique for financing, building,
and operating a specific roadway which might otherwise not be
feasible for the public sector to construct. Toll roads tend to
be completed more rapidly than free highways; the sooner the road
is completed, the sooner revenue generation begins. Under
present law toll-financed roads must be completely independent
of Federal funding programs. Legislation now being considered
by Congress may make Federal funds available for construction of
toll facilities, subject to an agreement that any excess toll
revenues will be used for highway improvements. Revenues from
tolls would be used for maintenance, operating, debt service,
and necessary improvements on the toll-way before diversion
to construction on other public roads.
The Dulles Toll Road in Fairfax County, Virginia,
constructed within the same right-of-way as the
Dulles Airport Access Road, is immensely popular. Toll
revenues cover all facility-related costs.
Two toll roads are being constructed in Harris County,
Texas where the County itself is also the toll road
authority. Substantial savings in the cost of money have
been realized due to the County's excellent bond rating and
its support of the bond issue with the County's full faith
and credit.
The South Cross-town Expressway in Tampa, Florida is a
hybrid of a toll and publicly funded facility. Tolls
are being used to retire bonded indebtedness, however the
State will contribute to the operations and maintenance of
the facility throughout the life of the
bonds.
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Dulles Toll Road
Overview
Fairfax County, Virginia (1984 pop. 672,937) - The Dulles
Toll Road is a 13-mile facility linking Dulles
International Airport to highways leading to the
Washington, D.C metropolitan area Bonds financing the
toll road were backed by the full faith and credit of
the Commonwealth of Virginia, and the road became operational
October 1, 1984. Toll revenues cover all operating and debt
service costs of the facility. Fairfax County pledged to
contribute funds during the start-up period when toll revenues
were projected to be insufficient to cover costs. Also,
construction costs of the facility were substantially reduced,
because the facility is on land owned by the Federal government,
parallel to the existing Dulles Airport Access Road. Very little
right-of-way had to be acquired.
Results Fairfax County's commitment was for $5 million in
front-end costs, but actually only approximately S2
million was given since private donations of land, right-of-way,
and the like reduced the cost considerably. In addition, Fairfax
County contributed S1.5 million for design and engineering.
The minimum toll is 25 cents, and the maximum toll, for a full
length trip, is 85 cents. Capital costs are expected to be
recouped by 2004. Total receipts for the first year of operation
were $8.2 million, well in excess of the forecast first year
revenue of $6.4 million. A proposal to widen the road is
under consideration.
Legal
Issues
Fairfax County made a commitment to the State Department
of Highways and Transportation to put up $5 million in
front-end costs. The full faith and credit of the Commonwealth
of Virginia is offered under Section 9(C) of Article X of the
Constitution of Virginia which allows such a pledge if the
project is deemed to be self-supporting.
Political
Issues
An attitude survey done as part of the initial feasibility
study found that building the toll facility was favored by as many
residents as were opposed to it. Fairfax County perceived the
project as essential to its continued economic growth.
Timing The initial financial feasibility study for the Dulles
Toll Road was completed in 1979. An update of that study was
done in November, 1982 to assess the impact of a substantial
increase in interest rates, at which point higher toll rates
and the support offered by Faifax County resulted in a financially
feasible project. Bonds were issued in late 1982. Complex
negotiations with the Federal Aviation Administration about use
of its land were drawn out over nine to 12 months. The road
opened on October 1, 1984.
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Contact
Richard C. Lockwood
Virginia Department of Highways and Transportation
1221 E. Broad Street Richmond,
Virginia 23219
(804) 786~2964
Reference
Dulles Toll Road Study, prepared by JHK and Associates
for the Virginia
Department of Highways and Transportation, January,
1979, updated 1982.
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County Toll Road Authority
Overview
Harris County, Texas (19W pop. 2,747,341) - The Harris
County Toll Road authority (HCTRA) has been created to finance,
construct, and operate two toll roads in north and west Harris
County in Houston, Texas. A referendum on the bond issue was
The referendum authorized issuance of $900 million in general
obligation bonds In late September, 1983 the Harris County
Commissioners Court created the HCTRA and sits as its governing
board. The first bonds were issued in November, 1983.
The HCTRA is responsible for building the 21-mile Hardy Toll
Road and the 28-mile West Belt Toll Road. The Hardy Toll Road
will provide an additional corridor between two major north-south
freeways in Northern Harris County, as well as provide additional
access to Houston's Intercontinental Airport. The West Belt
Toll Road will connect US-59 south of Houston to IH-45 on the
north side. Funds for the roads are being provided by bonds,
half of which are revenue bonds backed solely by toll revenues,
and the other half of which are general obligation bonds backed
by toll revenues and the tax credit of the county. These bonds
lessen the risk to the investor, providing a major benefit to the
County toll road authority; the interest rates on county authority
bonds are significantly lower than on revenue bonds issued by the
Texas Turnpike Authority.
The establishment of HCTRA represented a local response to a
local mobility problem. Moreover, projects will be completed
more quickly by HCTRA than if constructed by the Texas State
Department of Highways and Public Transportation (SDHPT).
The HCTRA and SDHPT have cooperated extensively in the planning
of these projects. Construction, which began in September, 1984,
is proceeding rapidly on both roads and the northern portion of
the Hardy Toll Road will open in September, 1987, ten months
ahead of schedule. The HCTRA has received construction bids
on both projects resulting in a S27 million budget reduction,
and has been able to reduce its budget by another $20 million
through other factors. The low bids are due in part to a highly
competitive market in Houston and low inflation rates.
Results Harris County will have two major new highways in a much
shorter time frame than it might otherwise have had. The Hardy
Toll Road will be fully operational in 1988, just five years
after creation of the Authority. Only about $550 million of
the S900 million in bonds authorized by the bond referendum
have been issued; the remaining bonds are backed only by toll
revenues and have been issued separately. Therefore, the risk to
the County and its taxpayers is less than that originally
approved by the voters.
Legal
Issues
Enabling legislation had to be passed by the State legislature to
allow creation of a county toll road. Harris County officials
were instrumental in that effort. A voter referendum was also
required on the bond issue because the voters had to approve
issuance of bonds backed by the tax credit of the County.
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Political
Issues
Harris County has an AAA bond rating -- better than the
Texas Turnpike Authority, and its interest rates are therefore
lower. Voter concern over the bond issue was tested in the
bond referendum, which was approved by 70 percent of the
voters.
Timing
The enabling legislation was passed in 1983. The bond
referendum passed September, 1983, and HCTRA was
immediately created. The first bonds were issued in
November, 1983, and bond issues continue as needed.
Construction began on the Hardy Road in September,
1984 and will be completed in July, 1988. Construction
began on the West Belt in July, 1985 and will be completed
in 1990.
Contact
Jim Archer
Public Information Officer
Harris County Toll Road Authority
233 Benmar, Suite 620
Houston, Texas 77060
(713) 875-1400
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State and Local Toll Financing
Overview
Tampa, Florida (1984pop. L724,454) - The South Cross-town
Expressway, a 17.5-mile toll facility, was made feasible
by contributions from the State government which reduced the
total cost of the project. Bonds were issued on behalf of the
Tampa-Hillsborough County Expressway Authority, a local toll
road authority enabled by the State of Florida The bonds are
secured by the full faith and credit of the State of Florida,
on the condition that the county authority use 2 cents of its
"constitutional" State gas tax for debt service. The bonds are
also being serviced by toll revenues. The State has contributed
to the project by covering an initial shortfall ($18.8 million)
in bonds sales, and by paying all annual operating and maintenance
costs with the understanding that these will be repaid after the
bonds have been retired. The Tampa-Hillsborough County Expressway
Authority has a lease-purchase agreement with the State of Florida
whereby "rent" on the facility equals the toll and gas tax
receipts collected by DOT, and whereby DOT assumes ownership
after all debt has been retired.
Results
Toll revenues for F Y 1985-86 were $7.4 million (a 14
percent increase over the previous year). Long term
outstanding debt is approximately $30.4 million.
Legal
Issues
All agreements were authorized by the State Legislature.
The State of Florida created the Tampa-Hillsborough County
Expressway Authority and enabled it to construct and operate toll
facilities. The lease-purchase agreement is between the
Division of Bond Finance and the Tampa Hillsborough County
Expressway Authority. The full faith and credit of the State
is pledged pursuant to Section 9(c) of Article XII of the Florida
Constitution. Recent changes in State statutes allow tolls to continue
to be charged after the bonds have been retired. Toll revenues would
then be applied to expressway improvements.
Political
Issues
No political problems were encountered.
Timing
The State continues to contribute to operating and
maintenance costs throughout the life of the bonds.
Use of gas tax revenues was necessary during the early
years of operation until toll revenues were high enough
to support the facility. The expressway was opened in
two sections, in 1976 and in 1980.
Contact
Mr. Edward McCarron
Policy Planning
Florida Department of Transportation
Haydon Bums Building
605 Suwannee Street
Tallahassee, Florida 32301-8064
(904) 487-4101
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References
Preliminary Official Statement for $54,000,000 bond issue
for "1971 Project" of Tampa-Hillsborough County
Expressway Authority, April 24, 1972.
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IX. A New Approach to Developing Rapid
Transit
Demand for high-capital transit facilities far outweighs
the potential supply of Federal funding. Recently, UMTA
Administrator Ralph Stanley estimated that $19 billion in
Federal funding requests for planned fixed-guideway systems
have been made, and at most only a few billion dollars of
Federal funds will be available through the end of the decade.
In an effort to examine alternative methods of rapid
transit development, Congress mandated a study of the
feasibility of rapid transit development in the corridor
leading to Dulles International Airport in Virginia The
result is the Dulles Corridor Rapid Transit Feasibility
Report, which is examined below.
Also examined in this section is an attempt by Orange
County, Florida to fund a 35-mile people mover system
using a public/private partnership.
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Public Private Partnership in Rapid Transit
Corridor Development
Overview
Fairfax County, Virginia (1984 pop. 672,937) -
A congressionally-directed study which addressed the
feasibility of the development of rail transit between
Washington, D.C.'s Dulles International Airport and the
West Falls Church Metrorail station was completed in
1985. The study outlines a new approach to public/private
cooperation in the planning, financing, building, and
operating of a rapid transit system.
Because of the expressed interest of a number of private
groups in building a rail transit facility to the airport,
the study simultaneously examined how such a facility might be
developed as a cooperative venture between local governments
and the private sector, with no direct Federal support. The
study team identified light rail as a viable, low-cost rail
transit technology that could be used to examine the feasibility
of rail transit in the corridor. Capital and operating costs
were determined by further analysis. Projected ridership
and revenues were then determined using system performance
specifications, and local population and employment projections.
The study assumed that neither Federal transit capital or
operating assistance would be available. Two alternatives
were examined: (1) a cooperative venture between local
governments and the private sector, with no direct
Federal support, and (2) a purely public sector project
funded only by dedicated tax revenues.
The private sector financing option assumes creation of a
Transportation District comprised of Dulles Corridor
governmental jurisdictions. The District would pay a service
fee to the system's private owner. Payment would be conditioned
on delivery of transit service, and thus would not constitute a
debt obligation of the Transportation District.
The study also examined value capture of benefits
generated by the rapid transit service which accrue
to non-transit users. Non-user beneficiaries include
the airlines, property owners, developers, employers and
employees, and other travelers in the corridor who
chose to use their cars and thereby enjoy less traffic
congestion.
Results
A comparison was prepared of the actual expenditures
required to build the system under the two development
scenarios. Present value costs of the public/private
development would be $119.4 million, while a purely public
sector project would require $181.3 million. The private
sector approach leads to an aggregate present value savings
to local governments of slightly less than $62 million
(34.3 percent of the total public sector cost).
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Legal
A procurement approach was developed which would
implement the privateIssues sector development. The private
sector would satisfy itself that costs, ridership forecasts,
and other details were such that the venture would be profitable.
Sponsoring governments would assure themselves that the service
fee and other commitments required to secure the service were
justified. The result would reduce costs through competition while
contractually transferring risks of cost overruns and performance
to the private sector.
To implement the project, a Transportation District would
have to be created with taxing or assessment powers.
Political
Issues
The study was completed with the advice and assistance of
a group of community leaders and prominent citizens.
The study recognizes the unique role of local
governmental jurisdictions by acknowledging their lead
responsibility for system specification, selection of
value capture mechanisms, and the decision to pursue the
procurement approach developed in the study. The process
identified in the study should encourage other
communities to examine local and private financing
options.
Timing
The study was published in October, 1985.
Contact
Gary L Brosch, Director
Joint Center for Urban Mobility Research
Nine Greenway Plaza, Suite 1900
Houston, Texas 77046
(713) 965-0100
Reference
Dulles Corridor Rapid Transit Feasibility Report,
prepared by Rice Center, October, 1985.
Related Orange County, Florida (1984 pop. 532,558) - Orange
Experience County officials examined the feasibility of a
public/private partnership to finance a 35-mile, $350
million people mover system serving downtown Orlando, the
International Drive motel/tourism complex, and Disney World,
but decided not to proceed for reasons unrelated to the
private/public arrangement.
Under the franchise agreement negotiated with Matra, the French
company that built the VAL line in Lille, France, and Martin
Marietta for the system, approximately 30 to 35 percent of the
capital required would have been derived from turnkey sale of
the system to private investors. The remainder would have come
from the sale of tax exempt industrial development bonds (IDBs)
and taxable borrowings from commercial banks. The County would
have been responsible for an annual service fee.
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Contact
Lou Treadway, Commissioner
Orange County
P.O.Box 1393
Orlando, Florida 32802
(305)236-7350
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NOTICE
This document is disseminated under the sponsorship of
the Department of Transportation in the interest of
information exchange. The United States Government
assumes no liability for its contents or use thereof.
The United States Government does not endorse
manufacturers or products. Trade names appear in the
document only because they are essential to the content
of the report.
This report is being distributed through the U.S.
Department of Transportation's Technology Sharing
Program.
DOT-1-86-30
