Bacon's Rebellion

If Michigan Is Looking at Rapid Transit, Can Virginia Be Far Behind?

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by

James A. Bacon
in

The Michigan legislature is giving serious attention to Rapid Transit, not only as a transportation alternative but as a strategy for urban renewal. In the state that once was synonymous with the automobile, that’s a big deal. Argues Keith Schneider with the Michigan Land Use Institute:

Since 1981, when San Diego built the new light rail line that started its remarkable downtown resurgence, 39 cities have opened new street car, light rail, and commuter rail systems in the United States. Each time, jobs, housing, businesses, and economic opportunity blossomed along their routes.

In Virginia, the solution to financing light rail may be Community Development Authorities (CDAs) and Tax Increment Financing. A CDA would encompass the property around a proposed transit stop. The authority would issue bonds, which would defray the cost of building the rail line, erecting the station, if any, and making other improvements within the authority boundaries. The bonds would be repaid by added taxes levied on the property owners covered by the authority. Presumably, landowners would be willing to pay the taxes because the transit and other improvements would increase the value of their property.

A string of CDAs could be constructed along the light rail route, raising large sums for the project – conceivably enough, when combined with fares and federal funds, to pay for all ofit.

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18 responses to “If Michigan Is Looking at Rapid Transit, Can Virginia Be Far Behind?”

  1. Scott Avatar
    Scott

    Compare how wealthy NoVa is with Michigan, Jim.

  2. Ray Hyde Avatar
    Ray Hyde

    Since 1981, when San Diego built the new light rail line that started its remarkable downtown resurgence, 39 cities have opened new street car, light rail, and commuter rail systems in the United States. Each time, jobs, housing, businesses, and economic opportunity blossomed along their routes.

    What evidence of causality does he present? San Diego has done a lot more since 1981 than its rail line.

    For the other cities, the 80’s and 90’s, have been a period of unprecedented growth, with or without rail lines.

    Downtown development has been particularly impressive in Indianapolis, which is smaller than Portland, and has not built light rail. It would be as valid to attribute Indianapolis’ development to the lack of light rail as to attribute Portland’s to light rail. A number of other non-light rail cities have experienced greater development than Portland. The light rail development claims of St. Louis bear special scrutiny, where a major enclosed shopping center is faced with tax foreclosure due to insufficient business, and office vacancies are inordinately high. As transit agency commissioned report on the San Diego light rail system noted, the dynamics of urban development are so complex as to render transit improvements an insignificant factor.

    Urban Transport Fact Book

  3. Toomanytaxes Avatar
    Toomanytaxes

    The idea of a special tax district to fund transit is, on its face, reasonable, but, in reality, addresses only part of the problem. Adding more people to any location, be they located in condos or two-acre lots, puts added stress on the other public infrastructure. Who’s going to pay for the schools, parks, sewers, roads, etc. that the new development will use?

    Take schools, for example, Fairfax County, despite a relatively flat student population, must still build new classrooms because it is adding students in some areas of the county, even as it loses students in other areas. Since development in Fairfax County pays neither mandatory impact fees (by law) or adequate proffers (by campaign contributions), the need to build new classrooms and the sensible limits on bonding that the county follows, means schools in older areas of the county are not renovated for years.

    Theories are nice, but it’s the implementation that affects people.

  4. Ray Hyde Avatar
    Ray Hyde

    Wouldn’t it be nice, if Fairfax had the foresight to buy the parkland when it was still available? They could have used the purchased parkland to guide development to the “desired” areas. Of course, if they did that someone would be screaming about windfall profits.

    Nowhere, outside of New York, has transit come anywhere close to meeting its goals in ridership, cost recovery, traffic development, or development value. In the case of CDA’s you are reducing the development value even further.

    This is a boondoggle, and we should pull the plug.

    TMT: as usual, your argument is correct, and it reinforces the argument that people don’t want to live in the older areas. New infrastructure costs money and rehabilitating old areas costs even more money. Many of our two million new residents coming in are likely to be younger families starting out, and they don’t have any money yet.

    Where is it going to come from?

  5. Larry Gross Avatar
    Larry Gross

    I think the issue with respect to whether transit itself is a needed infrastructure component of urban and urbanizing areas is interesting in that it is treated as a separate and distinct issue that is judged quite differently than other similar and interlocking issues.

    For instance, expanding water and sewer infrastructure – not only the lines themselves but the capacity of the treatment infrastructure.

    Expanding water/sewer infrastructure is not without costs both direct financial but also collateral impacts associated with enabling more growth and more dense development.

    People accept the public need for water and sewer to serve existing development but expanding water/sewer also means that more dense development is enabled – and yes – with that additional growth comes other impacts to schools, libraries, even roads, etc.

    And yet, water/sewer is viewed as “necessary” but transit is viewed as not only not necessary but rather more of an “anemity” in some folks eyes – rather than a key element of comprehensive infrastructure necessary to serve increased growth and density.

    To give some perspective to this – what if NYC or Chicago were to decide that transit was not only ungodly expensive but also essentially an “amenity” and that they needed to abandon it as not only economically unjustified but an amenity with undesireable consequences that could bring on higher high-rises .. more people .. and the need for more schools, libraries, etc?

    So we have folks divided over whether transit is necessary infrastructure for urbanizing areas or that transit is an expensive, unjustified non-answer with major collateral impacts.

    What I find amusing is that most anti-transit folks don’t make the argument to dismantle Metro as a costly non-solution but rather argue against it’s expansion – on the same basis.

    So what is it?

    Is Metro needed?

    If Metro performs a vital public service then what is the argument against having more of it?

    and then to close – If expanding water/sewer can essentially accomplish the same thing that expanding Metro could do – then why not outlaw water/sewer expansions as a way to keep more growth/density from occuring?

  6. Jim Bacon Avatar
    Jim Bacon

    Too Many Taxes, When people move into a region, you have to build new schools, water, sewer, and other infrastructure for them whether they locate in Fairfax, in a neighboring county, in a densely built area or a low-density area. That’s a fact of life. The question is what pattern of settlement will allow us to provide that infrastructure — and other public services such as public safety — the most cost efficiently. I think you’ll find that compact development is more cost efficient than sprawling development.

  7. Toomanytaxes Avatar
    Toomanytaxes

    Jim,

    There may well be some benefits from more dense development. I’ve never argued to the contrary. My problem is that everyone wants to ignore the fundamental questions of who pays and who benefits? The answers, at least in Fairfax County, seems to be Fairfax County residents and someone else. That’s my problem.

  8. Larry Gross Avatar
    Larry Gross

    But Fairfax residents lose also if but deciding to NOT have density that, in effect, are inviting the growth to outlying jurisdictions but those moving there have jobs in NoVa and they commute everyday on NoVa roads to get to their jobs.

    An interesting study would be to determine how much of the traffic on NoVa roads is from outlying jurisdictions.

    Here’s a clue. I-95 in Stafford County is almost 200,000 vehicles per day – and.. hang on.. these folks are not commuting from NoVa to Stafford jobs! It’s the reverse! 🙂

    Fairfax and other NoVa jursidictions are in the unenviable position of having the jobs and then deciding, in effect, whether they want to house those folks in more dense housing and local commuting… or push them out to the exerburbs and deal with commuting traffic from the exurbs to NoVa.

  9. Jim Bacon Avatar
    Jim Bacon

    Larry, You say, “Fairfax and other NoVa jurisdictions are in the unenviable position of having the jobs…”

    There’s nothing unenviable about it. Fairfax has one of the largest and most effective economic development organizations in the country. Fairfax wants jobs becaues it wants the commercial development and high tax base that go with the jobs. What Fairfax doessn’t want is the responsibility of providing costly services for those workers.

    What this all points out is the unhealthy inbalance in the location of jobs and housing that’s at the root of our transportation problems.

  10. Ray Hyde Avatar
    Ray Hyde

    If it is more efficient to build in denser patterns, then why are the densest places also the most expensive, both in terms of housing and in terms of taxes. Why is it that the efficiency is not evident?

    My experience says that complexity is a major cost driver. Last week I saw a situation where a backhoe hit a telephone cable that put dozens of businesses out of operation for half a day.

    More densly populated areas are major energy sinks. I’m not sure I buy the efficiency argument.

    Then there is the question of where people want to live. And the question of whther we can have efficiency, fairness, and a free market.

  11. Jim Bacon Avatar
    Jim Bacon

    Ray, In answer to your first question: Why are the density places the most expensive. Answer: supply and demand. In the Post World War II era of scattered, disconnected, low-density development, Pre World War II urban design enjoys a real scarcity value. Combine that with enduring architectural style and more liavable urban fabric, and people are willing to pay a premium to live in those places.

    In answer to your second question: The complexity of maintaining infrastructure may well contribute to the cost of certain services — particularly for anything that has to be dug up. Just wait until low-density urban areas turn 100 years old, though, and let’s see how much it costs to maintain theirwater and sewer systems.

  12. Larry Gross Avatar
    Larry Gross

    The Reality Check exercise was done for the Wash Metro Area in February 2005.

    http://www.realitycheckwashington.org/

    A very diverse set of participants ranging from traditional hard-core environmentalists to strong pro-growth advocates.

    The result was an overwhelming “vote” for density not only in the Wash Metro area but for density along I-95 and other major road corridors in the outlying jurisdictions.

    The Fredericksburg Area’s Reality Check done in Nov 2005 replicated the results of the Wash Metro exercise. They voted for density – build up and more dense rather than spread out – but that did include greenfield development on land not yet developed but near I-95.

    http://www.fredericksburgchamber.org/

    The conventional wisdom seems to be that density is the right answer for population growth.

    (I’m not agreeing or disagreeing – only stating that across the spectrum – many environmentalists and many developers seems to agree on this).

    I don’t think the infrastructure argument has “legs” because the tools for accessing and collecting for infrastructure already exist in the form of CDAs and proffers and the like – AND are used in many jurisdictions.

    It IS up to the locality to ensure that a given development proposal accurately estimates the additional infrastructure impacts and costs and then, as a condition of approval, put in place the CDA taxing authority.

    For example, Prince William County employs Level of Service standards (LOSS) that specify the quality and quantity of infrastructure and services and require new developments, as a consequence of approval, to NOT degrade the LOSS.

    What I’m hearing in this blog – and I hear this also at hearings in the Fredericksburg Area is that folks essentially do not trust their local government to do the necessary due diligence to determine what level of infrastructure is needed and to ensure that it is brought online at the same time the new rooftops appear.

    This is especially true with transportation as most people fear that more growth means more traffic with no compensating infrastructure in their lifetime.

    What IS being proposed in the NoVa area in terms of transportation is not new roads but rather transit and developments tied to transit – transit oriented development.

    Not more roads.

    This is a big change – a sea change not only in terms of approach but in terms of people’s acceptance (or not) of this approach.

  13. Ray Hyde Avatar
    Ray Hyde

    Larry, give me a break.

    The reality check exercise was a set piece, a theatrical exercise designed from the outset to produce a certain result. When you read the website and compare it to what is actually happening, it is all you can do but laugh. If you ran that exercise and put a goal in place that said you may only shift current home type preferences by 20%, you would still have an unrealistic exercise, but the results would have been constrained buch differently. If that exercise was run as a neutral, unbiased experiment, rather than as a sales pitch, the reuslts may have been much different.

    Despite having spent billions on new transit over the past twenty years, ridership is down. No transit project has met its cost and ridership goals, and none are cost effective (profitable).

    After we build a few more TOD examples like Metro West, and after we determine with facts on the ground that a) thee is a sufficient market for them, and b) they provide the “desired” results, then we can decide if it is a sea change. We will still have to decide where to put everyone else.

    As for supply and demand, Jim is partially right, New York and Boston would be much less expensive if developers had a free hand. It might also be less livable, because the growth restirictions in place were put there for a reason, and sometimes paid for (“air rights”, rent control, historical districts and others). Just try to get permission to tear down a brownstone, or even build on a vacant lot, today.

    But supply and demand applies in rural areas also. Growth restrictions in rural areas were also put in place for a reason, but, because of the distribution of population, it is fairly easy to pass regulations based on the rosy, and self serving, beliefs of many that are ruinous to a few.

    Fauquier would also be less expensive if developers (the market) had a free hand, so would PW, Fairfax and transit friendly Arlington. As Bacon points out what we get is a result of the rules we have, we put those rules in place purposely, and now some people are unhappy with the results. After we spend billions promoting transit oriented development, and find out it works out no better than our previous plans have. Our chldren will be very unhappy when we send them the results and the bill.

    Even if EVERYONE agrees that TOD is the way we should plan, that we should impose this plan as a matter of law, and even if it turns out to be a huge success, where does that leave the people whose land we have “saved” from development? How do we include them in the megabillion windfall profits that are coming to a metro stop near you?

    We can’t argue that supply and demand is the answer and then turn around and mandate only the supply that “reality check” says is needed. That is going to be just as screwed up as the situation tha Jim points out we have today: excess and poorly written zoning.

    I’m convinced that complexity is a bigger cost driver than we recognize, partially because any individual problem is fairly easily solvable, like the phone cable result above.

    Jim’s remark about digging up our current infrastructure a hundred years from now is on the mark. Looking around the farm I can see old infrastructure that was replaced: the original gravity fed water supply, the old bath house and ice house. The privy locations are unknown to me, but I’m sure they were here somewhere. In some respects the older ones were more sustainable and more easily repaired than the current ones, but I don’t see us going back to them any time soon.

    All that Jim’s remark points out is that replacing hundred year old complex infrastructure is going to be far more expensive than replacing hundred year old extensive infrastructure. That is part of why we have so much problem rebuilding our cities and part of why almost all growth is occurring outside of them.

    You also have to interfere with a lot more peoples lives when you do it: there are many businesses that failed to survive the disruption caused by Metro construction. A broken ten thousand phone cable is harder to fix than a single phone wire.

    I don’t have any problem with TOD: if that is what people want, and if it pays, then fine. I think there is a place for TOD and some people will choose to live that way. But MWCOG thinks we can redirect, at most, 15% of new construction. We are going to have to deal with everybody else, too, so TOD is in addition to our other expenses, not in place of them.

    Finally, we should ask if we are really doing all of this just to subsidise (what have now become) poor location choices for clusters of business that coulod just as well operate elsewhere, whether through telecommuting or relocation.

    We are making a mistake if we dreamily plan everything based on the rosy “reality check” results. Orange line is jammed to the hilt (during rush hour) now, and the trains have congestion problems too. Is Metro west going to get stuck with the bill for fixing that or is it going to result in still higher subsidies paid by those that don’t use they system?

  14. Toomanytaxes Avatar
    Toomanytaxes

    Larry: “I don’t think the infrastructure argument has ‘legs’ because the tools for accessing and collecting for infrastructure already exist in the form of CDAs and proffers and the like – AND are used in many jurisdictions.” In theory, I agree with you. But in practice — at least in Fairfax County — this simply does not occur.

    A report from the Commonwealth reveals that Fairfax County, despite having a greater population than either Chesterfield, Prince William or Loudoun
    Counties, collected substantially less in cash proffers from developers than those
    counties during fiscal 2005 (the last reported year). Fairfax County collected only $5.455 M; Chesterfield County collected $6.575 M; Loudoun County collected $19.470 M; and Prince William collected $23.135 M.

    Meanwhile, we have 7th Graders eating lunch at 9:45 a.m. at Cooper Middle School because of inadequate facilities; no hot water at Longfellow Middle School because we don’t have the money for upgrades. But then the Fairfax County Board has set its target proffer for schools at $7500, including a discount because the schools use trailers.

    It gets even better (worse?). The proposed FY 2007 budget for Fairfax County includes a $10.4 M taxpayer subsidy for fees for land development services, building permits and zoning services set below cost. A penny on the real estate tax is worth $21.9 M now, so we are talking about almost one-half cent on the tax rate for this subsidy. If the BOS approves this budget, the running total for taxpayers subsidies in this area since FY 2003 will be more than $43 M. To put this in perspective, Fairfax County is escrowing $10.2 M this year to fund post-retirement health care benefits for its employees, to comply with GASB 45. Thus, the size of the tazpayer subsidy for development exceeds the amount of money taxpayers are prudently paying to cover the future health care benefits.

    If Fairfax County had a government that would balance the needs of its existing population with the needs and desires of those who would make the county even larger, we would not have the intense and growing citizen opposition to added density, TOD, mixed use, etc. But, we don’t have that kind of government.

  15. Ray Hyde Avatar
    Ray Hyde

    TMT’s comments, Fair Growth Fairfax, and other antigrowth sentiment indicate that supply and demand cuts both ways. What the participants in Reality check want and what other citizens and the market want may not be the same thing.

    TMT frequently asks, who pays and who benefits. That question cuts both ways, too. If anti growth constituencies get their way, then who pays and who benefits?

    As long as either side insists on implementation of their ideas without incurring or considering the costs to others, then what we have is a situtation that involves having others do as we please without paying them to do what we want done.

    This is hardly a free market concept, and either result fails that test. If we are going to make the infrastructure argument, then we need to make it fairly, not on the basis some 10X hypothesis. If we are going to make the free market argument, then we need to make that argument fairly as well.

    The fact that the results are always likely to be perceived as unfair is the reason land use issues are so political. But in the end, it is only strong property rights that allow us to properly assess land values, aned then, only in conjunction with a free market. The results of this approach may be messy, and unacceptable to some, but at least we won’t be looking back at unacceptable results and realizing that we “planned” them that way at great expense and inequity.

  16. Toomanytaxes Avatar
    Toomanytaxes

    Ray Hyde: I would agree with you that there are equities that favor the right to develop one’s property and that property rights are important for a successful society. Where I fall off the wagon is an idea that property rights in dirt are more important that property rights in intangibles. I’m not sure that you are implying this, but I think that it can be reasonably inferred from the context.

    Many people own stock in corporations, either directly or indirectly through mutual funds or retirement accounts. I think that it would be fair to say that the value of those investments would likely be greater in many instances if the underlying corporations were free to operate without the burdens of government regulation — federal, state and local. Yet, while most of us would likely disagree over the appropriateness of specific regulations, I suspect that most people would readily agree that some regulation of business serves the public interest. Most people probably believe that products should be manufactured safely so as to avoid maiming the manufacturer’s employees, or a bank should not be permitted to use software without paying license fees, or grocers should not be permitted to sell taintd meat. Moreover, most people accept the idea of taxing corporations on their income even though this amounts to double taxation. Etc.

    It seems clear to me that all of these regulations have the impact of reducing business earnings and, in turn, the value of their common stock. We hope that we will achieve balance in regulation so as to protect important public purposes, while permitting the basic free market to work. In sum, we accept the validity of reasonable regulations on business, even when they limit the business’ and owners’ profits.

    So why shouldn’t the same principles apply to property rights in real estate? Why should the owner of a plot of ground be permitted to develop it without regard to the impacts on the surrounding community? I have a hard time rationlizing the idea that A should be permitted to build 500 homes if that means B, C & D suffer more traffic congestion, crowded schools, and ever higher and higher taxes.

    Just as with the regulation of businesses, there needs to be balance in the regulation of real estate development.

  17. Ray Hyde Avatar
    Ray Hyde

    property rights in intangibles

    Larry, this may be one of those rare cases of a truly important insight on this blog. I never really considered it exactly that way. Let me see if I understand. You and I both own property in Fairfax, and we have been supporting Fairfax infrastructure and culture for many years. As a result we have an investment in intangible features that affect our lives there. (In my case, the lives of my tenants, which is a salable feature of my ability to rent.) Those features could be the local neighborhood watch, the annual neighborhood block party, Fairfax Symphony (a real and little known gem), the local oriental owned sandwich shop which has endured through changes thick and thin and is a minor icon continuity in a sea of constant change, and many other things.

    Am I somewhere close? As I see it you are saying that those that propose to super size Fairfax have no investment in the intangibles that make our lives livable, and sociable to boot. It is kind of a quality of life argument, but more concrete because it implies a real monetary and social commitment.

    Balance in regulation is where we agree. Surely, if someone proposes 500 homes, what he is really proposing is bulding a whole new community, and he should expect to bear the costs. Where Jim Bacon and I agree is that the regulations cause what we have.

    Suppose an owner only wants to build one home, but he is effectively prohibited by the rules from doing so? This is exactly my situation. I can sell out to a developer who may have the clout to fight the battle required to build 500 homes, but I can’t build one home myself.

    In Fairfax, it is even worse, because even if you had the land to build a home, you would be better of to build five townhomes. Now you have to have investors, etc. So we quickly come around to the argument that We hope that we will achieve balance in regulation so as to protect important public purposes, while permitting the basic free market to work.

    In a nutshell, that is the basic argument I have been having with EMR, lo these many months: his idea of balance in regulation amounts to socialism, as far as I’m concerned.

    I couldn’t agree more with your statement in italics above. Now we have to determine where is the balance between important public purposes and free market. Kelo is one current peg in the dirt, and Measure 37 in Oregon is another.

    Consider the guy who wants to build five hundred homes. He applies for a permit and the authorities tell him no, but they would consider a request for 400 homes, given certain conditions.

    He goes back, meats those conditions, and draws up a plan for 400 homes. It is denied, but with the caveat that the autorities would consider 250 homes, with caveats.

    Etc.

    This actually happened in California, and after 11 rounds with the authorities, and after the developer was finally denied the authority to build the last five homes, he sued and won. The court held that the authorities’ attempts to protect important public purposes was far from balanced.

    Now, behind the big bad developer, was an individual landowner. He is dealing with the developer on a contingency. Right away, that means his cut is small, but it is his only chance: for him it is all or nothing; but for B, C, D, and E it is only a decrement of part of their property rights in intangibles.

    I haven’t any idea how to resolve this. Property law says that unless you lose substantially all of your economic interest, you have no standing to make a claim. This would seem to imply that the rights of the guy who is facing an all-or-nothing condition would outweigh a partial and diffuse decrement of intangible rights.

    The problem is that there are many of those guys looking for their 500 hundred lot windfall. What this means is that the partial and diffuse decrement of property rights is a big deal because it applies to so many people.

    On the other hand, if all of those guys were permittd their windfall, then there wouldn’t be one because the market would adjust. The conditions we have are a result of the rules we made.

    In addition, those intangible rights accrue, only because others got there first. There is a political and self serving interest in defeating the new guy, yet the new guy also has an obvious requirement to make a contribution to the intangible rights, of his new residents.

    Now, my Alexandria home is in an old middle class subdivision of modest homes on large lots. The middle class has no hope of buying ahome there now. I couldn’t buy my own home there now. It is pretty much adjacent to the Braddock Road VRE, and it is surrounded by much more dense areas. Those 500 or so homes could be a prime takeover candidate for someone like Pulte trying to build the new Braddock West TOD.

    I don’t know where you live, but suppose you live in one of those other 500 homes, and Pulte comes to you with an offer thet is 1.5 to 3 times your present valuation, contingent on their obtaining approval for the project.

    How would you feel if some other TMT living outside the area went to the hearings to complain about intangible property rights?

    Today’s Post has an interesting editorial about growth and happiness. I said in a recent post that th problem with growth is that the more stuff you have, the more stuff you need to take care of what you have. In VDOT terms this means we will eventually consume all of our budget in maintenance.

    It turns out that there is an effective limit above which growth no longer leads to happiness. Furthermore, it may soon come to pass that happiness can be subjectively measured. We might actually be able to replace the Gross Domestic Product with the Gross Domestic Happiness, and I am willing to presume that intangible property rights would be a part of that.

    Where does that leave us in achieving balance in regulation? As far as Gross Domestic Happiness is concerned, I’m sure no one knows. If Pulte comes around and makes us an offer for Braddock West, will we be happy, or not? That won’t be a very big issue as far as open space is concerned, because the “open space” is already broken up, disjointed, and privvately owned. Presumably one of the intagible proffers the developer would make woul be an equivalentamount of publicly owned opened space.

    Out here on the farm, the balance between important public purposes and free market seems wholly out of whack. The farm has obvious advantages. Given those advantages, if the farm offered me half or three quarters of my off farm income, I might be able to live with that. The facts on the ground are more like 15% to 25%, if I’m lucky and astute. If the farm offered me 10% annually of what I could get by developing it, I might be happy. I point of fact it is more like 2%.

    The situation in Fairfax is different from Fauquier, but out here the regulations are way out of balance with respect to reality. That said, if everyone had the opportunities I think I would like to have, then the real value of those opportunities would be much smaller. And for everyone who availed themselves of those opportunities, the pressure on the intangible value of our Fairfax porperties would be less.

    That is the beauty of the free market.

  18. Ray Hyde Avatar
    Ray Hyde

    As far as open space is concerned, I think the right thing for PEC and others for whom it is a priority to do is to change their priorities. Spend the money they use supporting this blog and other wasteful activities, and use it to go buy what they think is valuable.

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