The U.S. Environmental Protection Agency (“EPA”) has issued a report that details funding mechanisms and development strategies that communities can use to provide innovative financing options for transit-oriented development (“TOD”).
The report affirms the need for local and state transportation agencies to continue to think beyond traditional funding, procurement and contracting approaches to satisfy their burgeoning infrastructure needs.
Detailed in the report is an explanation of innovative financing mechanisms, which should be required reading for those interested in innovative P3 financing and transit development.
- Direct fees: user or utility fees and congestion pricing;
- Debt tools: private debt, bond financing and federal and state infrastructure debt mechanisms;
- Credit assistance: state and federal credit assistance tools, such as TIFIA;
- Equity: public-private partnerships and infrastructure investment funds;
- Value capture: developer fees and exactions, special district and tax increment financing and joint development;
- Grants and other philanthropic sources: federal transportation and community and economic development grants and foundation grants and investments; and
- Emerging tools: structured funds, land banks, redfields to greenfields, and a national infrastructure bank.
Four innovative models should also be considered when developing financing plans for TOD infrastructure, according to the report:
1. Anchor institution partnerships: partnering with nonprofit or private entities (such as universities, hospitals and corporations) that have a strong nexus with their location because of real estate holdings, capital investment, history or mission;
2. Corridor-level parking management: setting parking prices and managing parking demand across a transit corridor or system for parking structures and off-street spaces;
3. Land banking: land assembly and acquisition that makes it easier and more affordable to acquire right-of-way for TOD infrastructure; and
4. District energy systems: reducing energy use, encouraging renewable energy and facilitating compact development.
In addition to the clear benefit of providing local or state agencies with multiple funding sources and the ‘life cycle’ benefits from grouping projects together, the report also speaks to ‘softer’ community benefits. It notes that the use of integrated transportation and land use planning expands transportation choices and can reduce transportation costs, giving more freedom and mobility to low-income individuals, senior citizens, disabled persons and others who cannot or choose not to drive a car. Further, TOD development can help improve air quality and reduce greenhouse gasses.
The full text of the report is available on the EPA website.