The Public Sector and Financing Transit-Oriented Development
A few months ago, a colleague — and friend to RenewLV — forwarded a great post from Streetsblog on a transit-oriented development case study from the Portland area. The story concerns the leadership of Metro (Portland’s regional metro government) in pushing for mixed-use, high-density development in a suburban area along Portland’s light-rail line. This was a development that, before Metro intervened, was slated for low-density retail amid a huge parking lot.
The major hurdle faced by Metro in pulling off this TOD project was arranging for financing. Lenders were slow to embrace the project, Streetsblog notes, because they were unfamiliar with the TOD concept and had little or no prior experience in financing similar developments.
Why do lenders balk at development that reduces car dependence? In a word, inertia. “The lending industry appears to be very conservative, if your definition of conservative is doing the same thing this year as you did five years ago,” said David Goldstein, the co-director of the Natural Resources Defense Council’s energy program and an expert on environmental real estate financing. Because banks have no institutional memory of lending to transit-oriented development, they are reluctant to do so going forward.
In addition to doing some education of lenders as to the fact that TOD can work, Metro placed a major emphasis on public/private partnerships (or so-called P3s), a concept that’s getting a lot of play in the debate on funding transportation here in Pennsylvania. For example, Metro provided upfront incentives for developers, a move that reduced lenders’ risk while also showing lenders and developers that Metro was committed to smart growth. Metro’s advocacy and financial support for this project — the Crossings at Gresham — resulted in an award-winning development (though, as Streetsblog notes, Metro continues to face the challenge of making lenders and developers comfortable with walkable, mixed-use projects).
In part, the case of the Crossings shows how public-sector support can foster private-sector involvement in walkable development. In addressing the need to adequately — and appropriately — fund transportation, Pennsylvania should look at how state and local policies can create these types of joint-financing arrangements. Too often here in Pennsylvania, the term “P3″ is used rather narrowly, to refer to privatization or leasing of toll roads. As our communities look at ways to support transportation projects, especially innovative approaches to linking transit and walkable development, it will be critical to consider the full range of ways that public-sector leadership can encourage innovative, forward-thinking projects.