Donjek Project: Commercial Land Trust Feasibility

“By facilitating participation in market activity, neighborhoods expand wealth creation…A healthy neighborhood is a neighborhood that performs its functions well, connecting its residents to larger economic, social and political systems.”
– Weissbourd, Bodini, and He, “Dynamic Neighborhoods,” 2009

Dating to the mid-19th century, St. Paul’s University Avenue has matched entrepreneurial people with available space, central location, ease of access, and proximity to employees and other businesses. Central location and a mix of new ideas and longstanding networks in the community continue to stimulate entrepreneurship and business development on University Avenue. Its position in the Minneapolis Saint Paul region also frames the largest public works project in the state’s history: Construction of light rail transit service that will extend from Union Depot in downtown Saint Paul, the State Capitol, down University Avenue to the Midway, to the University of Minnesota and downtown Minneapolis. Illustrated in comparable markets, LRT service is likely to elevate demand for space and increase foot traffic substantially on University Avenue. As development increases around University Avenue, opportunities arise for business owners operating there.

At the same time, increased real estate values on and near University pose a challenge to the small and emerging businesses that help give the street its character. This report summarizes an exploration of models that could create space on University Avenue for new and existing small businesses, led by the Greater Frogtown Community Development Corporation and the Rondo Community Land Trust, and made possible by funding from the McKnight Foundation. Informal survey data suggest that 10% of business owners on University own the property in which they operate. While ownership can provide long-term stability of building cost for business owners, ownership is not a uniformly high priority – or even a uniformly desirable outcome – for businesses.

The report concludes a feasibility analysis undertaken with Donjek coordination over the last year. The project set out to address three priorities:

  • Explore the need for and interest in long-term stable-price business property ownership and leasing;
  • Identify and evaluate models for accomplishing long-term cost stability for business operators; and
  • Chart a course for accomplishing these objectives without ongoing subsidy.

Innovative models that blend ownership and leasing, public with private, may have a role to play in supporting entrepreneurs on University Avenue after light rail transit is in place. The report highlights selected strategies that allow business owners to structure more stable real estate costs, either through ownership or leasing. These strategies and a more stable cost structure for small businesses allow entrepreneurs to build reserves and working capital, invest in future projects or products, and hire more employees.

Donjek Project: Glossary of Transit-Oriented Development Finance

Cover Access is valuable. In metro regions effective passenger transportation is a critical ingredient of continued competitiveness and quality of life. Due to a range of economic and political factors, rail transportation is expanding as a mode for moving freight and people alike.

Shared experience of regions in the U.S. and internationally suggests that rail transit infrastructure endows nearby property with a substantial value premium. Economist Joe Cortright analyzed 94,000 home sales in 15 metropolitan U.S. markets, and found that homes located within walking distance to varied amenities are valued more highly in the marketplace than comparable property situated elsewhere. Examining two neighborhoods in Charlotte, North Carolina, Cortright identified that a typical home in the Wilmore demands a premium of $34,000 or 12% of median value, compared to much less pedestrian-accessible Ashley Park. The experience of other metro areas including Jacksonville, Chicago, Sacramento and Austin reflect premium levels of $10,000 or more for homes of median value in neighborhoods with high levels of non-auto access.

Early evidence of light rail transit (LRT) lines in this region is consistent with Cortright’s findings. The University of Minnesota’s Center for Transportation Studies released preliminary results of a second-phase study of property appreciation near the Hiawatha LRT Line in Minneapolis.  The process, using residential sale data, has found positive impacts of roughly 25% on single- and multi-family housing located near station areas. Candidly, the Hiawatha Line has been a success in terms of ridership but isn’t particularly effective in stitching neighborhoods together with downtown. If effects are favorable here, they will be so for coming lines that connect Saint Paul and Minneapolis, and Minneapolis’ downtown to its south side and suburbs beyond.

It’s not just residential property values that are influenced by accessibility. Analyses undertaken for the Urban Land Institute and the National Association of Realtors found a 23% premium in California’s Santa Clara County land values within ¼ mile of light rail transit stops.  Another study of the San Diego LRT system found land value premiums as high as 72-91% for commercial land located near station areas on particular lines; the same study found that commercial land on other lines was discounted by the presence of the LRT stations. A 2007 study of the dense network of Dutch rail stations concluded that commercial property within ¼ mile of a rail station exhibited a land-value premium of over 12%.

Recently, Donjek was hired by a client in the Southeast U.S. to explore national models for financing development adjacent to LRT investments. We focused on multiple tools used to great effect nationally:

  • Transportation Development/Improvement Districts (TDDs, TIDs)
  • Special Assessment Districts (SADs)
  • Tax Increment Financing (TIF) / Project Development Financing Districts
  • Tax Abatement 
  • Joint Development 
  • Transportation Utility Fees (TUFs) 
  • Air Rights, Grants and Loans

Each region is distinct in its history, its disposition about public/private partnerships, its attitudes toward transit, and how high-impact regional decisions are formulated and implemented. These tools are applicable in degrees depending on these and other factors.

LRT and fixed-rail transit infrastructure doesn’t belong everywhere. And as the Federal Transit Administration has made clear in the last week, the federal government doesn’t intend to build systems that can’t be supported by ridership in the long term. 

One key element to making transit work – for the environmental and fiscal health of the country and its communities – is concentrating development and redevelopment potential where it will be most accessible. These public finance tools can be part of that equation.

Donjek Project: Picturing Value in Walkable Neighborhoods

Over the last several months, I have been working with developer and consultant Michael Lander (Lander Group) and urban designer Peter Musty (Peter Musty LLC) to develop a concise, visual statement about the prospective impact that transportation investments can stimulate. Hopefully, you’ll find the graphic product below clear and persuasive – and you can download a pdf version here if you prefer.