Real-life financing solution

Infrastructure need: 650 to 850 stalls of structured parking, stormwater facilities, sidewalks, public space orientation to enhance walkability, streetscapes, and parks

Estimated cost: $8 million to build a parking structure, deemed the most difficult to fund or finance as it is for the greater community benefit, with no resulting revenue or tax benefit for the developer as the TOD area will have its own additional parking. Ongoing funding is also needed to help offset maintenance costs.

Where: Civic Center TRAX Station; Sandy City, Utah

Who: Utah Transit Authority (UTA), Salt Lake City and Sandy City, Utah

Property developer: Hamilton Partners, Chicago

California may grow as much over the next 20 years as it did during the 1950s, 1960s, and 1970s combined. Rather than create new suburbs, the state can reinvigorate existing population centers by making them easily navigable via various modes of transportation—walking and biking, as well as cars and buses.

This strategy of encouraging denser, more sustainable development that minimizes environmental impacts is called transit-oriented development (TOD). TOD is defined as development within a one-quarter to half-mile radius of a transit station that offers a mix of housing, employment, shopping, and transportation choices. The approach provides significant environmental benefits, but it also requires significant infrastructure improvements and expansions:

  • Increased road and water, sewer, and storm drain utility system capacity
  • New and/or improved sidewalks, crosswalks, bicycle lanes, and streetscapes
  • New and/or improved parks, plazas, and other open spaces
  • Building structured parking garages to maximize available land use in constrained areas for park-and-drive transit riders and new residents.

Making these changes poses unique challenges:

Cost. Designing and placing infill infrastructure often requires a greater investment than “first in” projects that justify their expense through future sales, property, and other tax revenues; and TOD shouldn’t be expected to increase growth beyond what was already expected for a given community or region. Figuring out how to spread costs among existing and future land uses can be a major barrier to new development centered around transit.

Timing and market considerations. Traditional financing mechanisms—taxes, user fees, even system development charges—are typically imposed with new development. TOD, however, requires improvements to be financed and developed up front, before “value capture” mechanisms can be deployed. The lag between when the investment must be made and development can occur can be many significant.

Multiple entities. More than a dozen local and regional public agencies may have to be involved to address water, sewer, stormwater, roads, and parking implications. Financing also may be needed from private developers to enable their properties to support planned levels of development.

30 tools, 11 case studies

“Developing new financing approaches is critical if more communities are to enjoy the sustainability and efficiency that TOD allows,” says Dena Belzer, president of the firm Strategic Economics and a lead consultant on U.S. EPA’s recently released “Infrastructure Financing Options for Transit-Oriented Development.” “This report helps communities learn from what their peers around the country are doing.”

Released as part of EPA’s Office of Sustainable Communities’ Smart Growth Implementation Assistance (SGIA) Program, the 250-page guide identifies 30 tools and related strategies. The tools fall into six broad categories:

  • Direct fees
  • Debt
  • Credit assistance
  • Value capture mechanisms
  • Grants and other philanthropic sources
  • Emerging tools

Some, like user fees and municipal revenue bonds, have been around for years. Others, such as structured funds, infrastructure investment funds, and redfield-to-greenfield programs, are new or becoming more common.

In addition, 11 case studies illustrate how these mechanisms can be mixed and matched to meet specific infrastructure needs and development/funding contexts (click here to see sidebar).

Finally, the report walks readers through how four SGIA program recipients addressed financing. One involves the Utah Transit Authority (UTA); Salt Lake City; and Sandy City, Utah.