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.”