Transit ‘corridors of opportunity’: Planning for real estate’s comeback

Hiawatha Line
MinnPost photo by Raoul Benavides
Planners hope to do even better than Hiawatha’s early success with future projects.

Just because a bad economy has all but halted the construction of new homes and businesses doesn’t mean that city builders are twiddling their thumbs. On the contrary, planners, engineers and elected officials are busy laying the groundwork so that, in the words of Minneapolis Public Works Director Steve Kotke, “When the money comes back, we’ll be ready to go.”

“Getting ready to go” with the roads, bridges, transit, streetscapes and other infrastructure needed to support a resumption of development was the theme of a gathering of real estate and planning professionals put together by the Urban Land Institute’s Twin Cities office.

ULI’s executive vice president, Maureen McAvey, offered an update on the prospects (not good) for a major infusion of federal infrastructure money. Then, county commissioners Peter McLaughlin (Hennepin) and Jim McDonough (Ramsey) explained how the metro region is fusing transportation and land development into “corridors of opportunity” designed to maximize the impact of public investments.

Here are the highlights from last Thursday’s session:

Don’t expect much leadership from the feds
Urbanists were giddy at the election of President Obama, figuring that a Chicago guy would understand the critical importance of infrastructure investment. He understands it, McAvey said, but he’s unwilling to place it on the front burner with health care, Afghanistan and the economy largely because the solution is so daunting. The American Society of Civil Engineers estimates the unfunded cost of repairing and updating the nation’s roads, bridges, railways, ports, water systems and other critical assets at $2.2 trillion. Finding the money is extremely difficult.

For example, taxing gasoline at current levels no longer works as a routine revenue source for roads and transit because people are driving less and cars are more fuel-efficient. Raising the federal gasoline tax to a level necessary — say, a dime or even a dollar per gallon — would be intellectually honest but politically suicidal. Even the $50 billion down payment that Obama recently proposed (financed by closing tax loopholes for oil companies) seems doomed, at least for the moment.

While Congress and the administration continue to explore a public/private infrastructure bank of the sort that has given an edge to China, Germany and other U.S. competitors, not much headway has been made. The upshot, McAvey said, is that metropolitan regions will have to find ways to maximize the impact of the scarce resources they have.

Perhaps the best way is to integrate transportation investment with development outcomes. If you build a light rail line, for example, make clear where the opportunities are for private investment along the route. Clean up polluted sites for housing, install streets and walkways, promote job creation and work force development, adjust zoning codes, engage neighbors and measure results.

The Obama administration has recognized this advantage by merging the missions of the federal housing, transportation and environmental agencies toward a central goal: livability. That’s a good way to think about laying the groundwork for future communities, McAvey said.

While the economy is slow, the markets are coming back, she said. ULI estimates that about $1.2 trillion in private real estate investment now on the sidelines will enter the game at some point. The money will go to the places that are most ready.

Shifting focus: More bang for the buck beyond the tracks
The metro region has made huge strides in the past decade on transportation choices and regional cooperation despite a skeptical state Legislature and often hostile administration. Passing a five-county quarter-cent sales tax increase to fund a network of rail and bus transit lines was a big step forward. Citizens now expect Central, Southwest, Bottineau, Gateway, Cedar Avenue and other corridors to move forward.

Now the focus has shifted to maximizing the impact “beyond the tracks,” of building not just a transportation system but communities along the way.

McLaughlin, considered the pivotal figure in building the metro’s first light rail line, Hiawatha, conceded that the project was such a political miracle that not much attention was paid to the corridor. Indeed, it has generated several thousand housing units but has done little to add jobs or commercial vitality to downtown Minneapolis — except, perhaps, for Target Field. Even in Hiawatha’s neighborhoods, station area redevelopment has been underwhelming, compared with redevelopment in other cities.

Learning from Hiawatha’s mistakes
Changing that is the main aim of the Central Corridor line scheduled to open in 2014. McDonough said that a $488 million local infrastructure investment would leverage a projected $6.3 billion in private investment along the corridor over the next 20 years.

The first projects are likely to be small rental housing developments of three to five stories, he said. The hottest markets initially are expected to be downtown Minneapolis, the West Midway area of St. Paul and near the east end of the University of Minnesota’s main campus in Minneapolis. (Plans were unveiled last week for a $750 million Minnesota Science Park adjacent to the line at the campus’ east end.)

All of that is good news for property taxpayers, McDonough said, because prosperity along the line will help defray the costs of city services for everyone, rich and poor. He showed projections that the pool of property tax revenues along the Central line may increase as much as 35 fold over the next 20 years, not so much because current property values will rise but because new private investments will be added.

In a hot market, infrastructure and amenities can be added after development comes in, McDonough said. But in the cool market of today, infrastructure and amenities must come in ahead of private development.

“It’s not just about laying tracks — it’s about putting seeds in the ground,” McLaughlin said in shifting the discussion to the Southwest Corridor planned between downtown Minneapolis and Eden Prairie. “We’re being very intentional in embedding transportation and land use from Day One,” he said, noting that transit engineers and economic development specialists are on the same team, located in the same office. Moreover, Southwest is following the template established by Central.

The ultimate aim is to get the biggest bang for the public dollar, not by building walls of apartment buildings along the tracks, but by building lively, attractive, mixed-use communities that will add character and value to existing neighborhoods and enhance the economic viability of the city and region.

“For 50 years, freeways have been a huge success in changing the face of America,” McLaughlin said. “This is about changing the face of America again.”

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Comments (8)

  1. Submitted by Gregory Lang on 09/20/2010 - 04:42 am.

    My house is less than half a mile from the 38th Street LRT station. My Longfellow neighborhood has always had a slow turnover and high ownership. The walking distance LRT is at most a minor plus. Housing values here are stable to 5% below the peak.

    The Hiawatha LRT was “set in stone” by 2003 so there were at least five “salad years” before the crash. As the article stated significant market rate housing but not much other development.

    I have specifically followed the Purina Mill site which is “kiddie corner” from the 38th Street station. (a primo development site) Before the machine was needed for a the 35W bridge collapse cleanup C. S. McCrossin parked a huge demolition crane on the corner for more than a year.

    Currently the Purina Mill complex is being demolished. This is positive progress. That said the “community agreement” reads like a giant “porkfest” with something larder on for every urban activist.

    The model for this is the California Coastal Commission and Aspen. In the case of the CCC there is an argument that the rent subsidized tenants had an equal right to an apartment with an ocean view!

    The California Coast and Aspen have wealth and scarcity that quite frankly, the Twin Cities market doesn’t have.

  2. Submitted by Richard Schulze on 09/20/2010 - 06:46 am.

    The problem of course is that with modern infrastructure and its complexity it is very difficult for it to work as stimulus, time lags are just too long. It’s one thing 70 years ago when you had guys with shovels digging a dirt road somewhere; today this is usually a more involved process. We need infrastructure but we need to understand this is long term spending, not short term. Framing it in stimulus terms obscures how much things have changed and the extent to which the shift needed is a long term one, not a single heroic effort.

    If I were to characterize America’s difficulties right now, I’d say that there’s too much second-guessing and retrospection, mostly by apocalyptic minorities in the libertarian and progressive camps. And it has been so since the 70’s. Elected politicians and the populace seem unified in their thirst for small accommodations (impeachment circuses here, earmarks there), not big plans. We have an electorate and a government which is used to 50% effort.

    My experience in business makes me think partisanship is the cause. I’ve seen boards split amongst themselves slowly wither their company’s value; and I see Rush Limbaugh publicly clamoring that he hoped Obama failed. In both cases, many applaud the dissension because they view a noble adherence to principles. What they fail to note is that our constitutionally mandated avenues for expressing dissent — i.e. the ballot box and public organization — need not preclude us from trying 100% to make the best out of the leadership and goals that we have. The companies that succeed make the same errors that failing companies do; but they put more effort into making the best of what they have.

    I don’t think America is going to learn this quickly enough to get behind broad infrastructure renewal projects, unfortunately. The kind of optimism and pragmatism that guided America to its post-war wealth now resides in the emerging world. Here in the states, too many have fallen to the belief that vindicating one’s ideology is more important than accomplishing practical goals. Too many believe, in essence, that our success is based on opposing ideas passionately, rather than by working, sweating, and achieving.

  3. Submitted by Ginny Martin on 09/20/2010 - 11:26 am.

    We do seem to have forgotten that progress in the United States has always been because of pragmatic, practical leaders who knew that investing (all the way back to the Louisiana Purchase) made for progress. I don’t know what will wake people up to our loss of stature and prosperity in the world because of this blindness. We see other countries doing it and apparently think we should not use their ideas or methods (they’re foreign; we have our own and their better; they’re too European).
    I do think this country is on its way down. There is no sense of optimism or of willingness to work together, or of the fact that we are all in this together.

  4. Submitted by Ray Schoch on 09/20/2010 - 01:37 pm.

    Good piece, Steve, and – at least #1 through #3 – good comments.

    When Colorado voters approved a massive, metro Denver-area-wide transit project (FasTracks) in 2004, the opportunity arose for at least some of the kind of thinking described at the ULI’s gathering here. When I was a planning commissioner in Lakewood, we (citizen representatives, neighborhood associations, planning staff, FasTracks staff, business associations) spent a lot of time devising and reexamining neighborhood plans, city master plans, and regional plans through the Denver Regional Council of Governments to try to approach very similar goals.

    Once FasTracks had been approved, communities wanted to figure out how best to make use of mass transit if they were going to have access to it through the voter-approved plan, as well as how to implement it in a way that was budget-friendly, while still accomplishing as much as possible of the endless list of “We’d like to have…” items that every community generates. The recent economic doldrums have put a real crimp in the original financing plan, and I’ve been in Minneapolis long enough to have lost touch with the details of recent decisions in Denver about what gets built when what was sufficient funding in 2004 is no longer sufficient in 2010, but even as the plan adapts to changing circumstance, communities through which light rail WILL be built have continued to be busy trying to implement more or less the same thing that the participants at the Twin Cities ULI gathering are trying to do.

    There will be development opportunities of many kinds as public investment in this sort of infrastructure is made once again, and it behooves both government and the private sector to be able to respond appropriately when they occur. The West Corridor line through Lakewood (a suburb of 145,000 where I was a planning commissioner) is the first FasTracks line to go operational, probably next year, and there are numerous plans in place for housing and commercial development along the transit corridor.

    Since it’s my bias that taxpayer dollars should not be spent exclusively for the convenience of the relatively affluent, among my concerns was that there be opportunities to develop housing for all income levels along the corridor, and not just a series of upscale condominium developments that only the affluent can afford. That’s a concern I would have here, as well. Lots of people LIKE public transit when it’s clean and comfortable (see Steve’s earlier piece on this area’s two-tiered bus system), but it’s those at the bottom of the economic ladder who really NEED public transit if the regional economy is going to be successful. People have to be able to get to and from work, and I’ve already seen enough horrendous traffic jams on I-35 and I-694 in the 16 months I’ve been here to know that encouraging auto travel, whether through locating businesses out in the hinterlands, or through misguided decisions like that of the Minneapolis School Board to develop a proposal for a nearly 600-car surface parking lot for their new headquarters, is simply not going to work in the long term.

    Getting the infrastructure and the plans ready so that, once the economy gets off its collective knees again, we can begin to relieve some of that transportation pressure seems like very important work to me. I think Richard Schulze (#2) is correct that rigid partisanship can derail the whole process, and is not helpful, and Ginny Martin (#3) is also correct – historically, this has been the land of pragmatism. We try a lot of things, inside the box and outside, and we have tended to use what works most effectively. That pragmatic attitude is one that needs to be reinvented or reinvigorated before we find ourselves not just in decline, but a third-world country.

  5. Submitted by dan buechler on 09/20/2010 - 02:57 pm.

    Americans were famous for pragmatic philosophers a century ago. I think it was William James who wrote about the moral equivalent of war. When President Carter used the same quote regarding energy policy he was smeared. I enjoyed this reading.

  6. Submitted by dan buechler on 09/20/2010 - 03:13 pm.

    Who would have thought, even John dewey was considered a pragmatic philosopher.

  7. Submitted by Chuck Leer on 09/20/2010 - 04:07 pm.

    Design also needs to be at the table at the earliest stages to transform the good ideas of transit engineers and economic development specialists into a three-dimensional, vital place to live and work.

  8. Submitted by Richard Schulze on 09/21/2010 - 07:23 pm.

    That was a good post Ray and I agree. Also, I think now is a better time for fiscal stimulus through infrastructure spending than the crisis was. When your goal is to maximize job creation, and jobs are in crisis, the likelihood is that shovel-readiness outweighs productivity. Now that we are in the middle of a long misery, we’re probably in a better position to choose infrastructure projects well.

    There’s another reason why infrastructure is better than pure macroeconomic fiscal stimulus. A big problem (to my thinking the overwhelming problem) with fiscal stimulus as stimulus is that it keeps people in jobs that are unsustainable without subsidy and delays necessary corrections. But the United States could probably maintain a productive 15-year campaign of infrastructure improvement, which means human capital created can pay off for the public and the taxpayers and the jobholders. I like it. I’d vote for it.

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