By Michael G. McGuinness
Legislation was enacted (P.L. 2018, c. 135) last November that requires NJ Transit to establish an office of real estate economic development and transit-oriented development to assess all its properties and annually recommend how best to increase NJT’s non-fare revenues. The goal is to enable NJT to have more funds to invest in its operations, maintenance and capital projects in order to improve performance for bus, rail and light rail passengers. Two annual reports are required. The first, due to the governor and Legislature on Oct. 31, must include a complete operating and financial statement covering operations and capital projects, along with reporting on the agency’s on-time performance. The second report is due Oct. 1 to the state Department of Transportation and the Legislature and must include a listing of each parcel of real property owned by NJT, along with its appraised value, purpose for holding the parcel and any revenue generated in past year.
Successful implementation of this strategy will require that NJT partner with developers and municipalities to create more dense mixed-use development adjacent to any number of its 166 rail stations and 62 light rail stations. Such compact development — a mix of residential, retail, office and public space — would result in vibrant, walkable communities with easy access to amenities and other rail-served destinations and would increase ridership and generate non-fare revenues that would help ensure a better rider experience and boost the fiscal health of NJT. Kudos to NJ Transit and public policymakers for proactively monetizing state assets instead of using them as storage lockers that waste taxpayer money.
Shifting land use patterns to encourage greater use of transit, including buses and passenger rail, by building more densely in these areas and reducing parking minimums makes perfect sense. It would help remedy traffic congestion while generating new revenues for replacing antiquated infrastructure, thereby ensuring more reliable and quality rail and bus service. Unfortunately, home rule is often a huge obstacle to getting the job done. Fear of more school-age children, higher education costs and taxes and increased traffic often block the creation of transit villages and transit-oriented development. Perhaps NJT should partner with the private sector and assemble a “transit package” that would inform the community about the financial and quality of life benefits that would accompany such land use changes. If that approach fails, then legislation may be needed to overlay (supersede) local zoning on rail-adjacent properties. Let’s face it, transportation and land use are intimately connected — land use patterns influence the distance traveled and mode of transportation used. These factors also affect whether a state will achieve its greenhouse gas emissions targets and other environmental goals.
California’s legislature is currently debating Senate Bill 50 (Wiener), which would require municipalities to relax standards for density, parking requirements and other matters aimed at boosting the supply of affordable rental housing near transit hubs and job centers. These “equitable communities incentives,” or ECI, would apply to a “jobs-rich housing project” or “transit-rich housing project.” The bill would require the California equivalent of our Department of Community Affairs and Office of State Planning to designate and produce maps of “jobs-rich” areas that are updated every five years. Criteria for jobs-rich areas include proximity to jobs, high area median income relative to the region and high-quality public schools, and it must also include tracts that are both high opportunity and jobs-rich, based on specified factors that ensure that residents are proximate to their jobs and reduced commute times. Transit-rich housing projects are those located within a half-mile radius of a rail station or a ferry terminal that is a major transit stop, as defined in existing law, or a quarter-mile radius of a stop on a high-quality bus corridor. In New Jersey, we are fortunate to have the North Jersey Transportation Planning Authority as a resource in this policy discussion, given its current involvement in mapping the state for “Accessibility to Major Employment Centers” that identifies municipalities that are most proximal to jobs in the seven major industry clusters as defined by the state Department of Labor.
The value of “rightsizing” parking should not be understated. A recently released report, “An Ecosystem Approach to Reducing Congestion” (Pricewaterhouse-Coopers, LLC), states that “although its congestion-fighting potential hasn’t always been recognized, parking is important to the smooth functioning of a city’s transportation ecosystem.” The report predicts that the reduction or elimination of parking minimums will promote development, spur urban renewal and drive more affordable real estate projects that will increase livability in U.S. cities. As the demand for mixed-use properties in walkable locations grows, jurisdictions should seek to adjust parking requirements in proportion.
Our state’s transportation system (especially NJ Transit) needs a long-range funding plan for infrastructure enhancement, operations and maintenance requirements for the next 50 years, and fare revenues are not part of the solution. With this new mandate, there is now some momentum to accelerate the use of ground leases and fee-simple sales of NJT assets. It is also time to explore the development of some form of “location value capture mechanism” that allows NJT to capture some economic value for economic development near rail and bus stations. Such a mechanism could work much like a special improvement district, whereby affected property owners are assessed a fee that helps pay for transportation infrastructure improvement services aimed at the economic enhancement of the area. Another option is for the municipality that directly benefits from the enhancements to contribute a meaningful percentage of the increased delta of their property taxes to NJ Transit. I could also vouch for several developers who would readily contribute to a direct investment in “run-down” rail stations due to the value-add that accrues to their nearby assets.
For those of us who are committed to seeing New Jersey succeed and surpass our neighboring states in attracting and retaining younger, talented and skilled workers and the employers who rely on them, we have no time to waste in improving the ridership experience for mass transit users. I would argue that, for the health of our state’s economic future and quality of life, the No. 1 priority right now should be investing in and deploying critical resources to our transportation and mass transit systems.
Michael McGuinness is CEO of NAIOP New Jersey and has led the commercial real estate development association since 1997. NAIOP represents developers, owners, asset managers and investors of commercial, industrial and mixed-use properties, with 830 members in New Jersey and over 19,000 members throughout North America.