Innovative Financing Strategies

EXAMPLES OF INNOVATIVE FUNDING SOURCES FOR MASS TRANSIT PROJECTS

Joint development and transit-oriented development (TOD) allow mass transit authorities to realize benefits from their real property, such as construction staging areas, surplus rights-of-way, station areas and park-and-ride lots. These properties are prime candidates for innovative funding of mass transit projects, which can deliver benefits to private developers (profits) as well as transit officials (an ongoing revenue stream).

Industry observers frequently point to the Washington Metropolitan Area Transit Authority (WMATA) as a success in implementing joint development projects. Miami-Dade Transit Agency, the Santa Clara Valley Transportation Authority and San Francisco's Bay Area Rapid Transit (BART) also have entered into joint development agreements. Recent successful projects include:

• * The San Francisco Municipal Railway entered into a long-term ground lease for a former bus layover lot in downtown San Francisco. In exchange for the rights to build a boutique hotel on the parcel, the developer will pay the railway more than $300 million over the term of the lease.

Safeguards in the lease agreement ensure revenue to the transit agency in the event of a delay in construction and operation of the hotel.

• *The Los Angeles County Metropolitan Transportation Authority (MTA) has an active and ongoing joint development program adjacent to its Metro Rail stations. MTA's joint development projects included the Union Station Gateway project, Universal City MCI Metro Rail access and the Hollywood/Highland Metro Rail station development.

Rather than disposing of excess property, a transit agency may partner with a developer to enhance a parcel with a parking lot or a new mass transit station in exchange for the developer's right to build retail, commercial or residential property on the site, or to develop underground utilities for telecommunications or energy companies. Another model for such development envisions a ground or air rights lease with a developer that permits enhancement of a parcel or the air rights above it in exchange for revenues through a long-term lease. The greater density created by such joint developments creates a shared advantage for the transit authority as well as the developer and community.

Another option is integrated parcel development, which leverages existing entertainment, shopping and dining, universities and sports venues with mass transit facilities. Project sponsors and developers can plan new and compatible commercial, residential and retail uses within a convenient walking distance of the facility to encourage the development of a community around mass transit.