Here’s the unedited text of my most recent column in Business in Vancouver:
News item: Metro Vancouver’s transportation authority is launching a real estate division that could produce up to $1.5 billion in revenue over the next 10 years, modelled on an agency that has reshaped Hong Kong. …TransLink will purchase land along new rapid transit routes and around stations and ramp up the value of the land through denser zoning and partnerships with land developers to create high-density commercial and residential developments.
There’s an intriguing idea. I wonder why no one thought of doing this before.
Let’s take a real-life example: the extension of the Millennium Line to UBC – a high priority in the Premier’s announced $14 billion transit plan.
Excuse me as I reach for the back of an envelope.
Now let’s see. The line will likely cost way over $2 billion, particularly if it’s tunnelled, but let’s be conservative: two billion it is.
Now, how much can TransLink make out of development along the line? Development cost charges are the way the City takes in the money to pay for public benefits. In the case of Downtown South, the levy was raised to $13 in 2007 to pay for parks, child care and affordable housing. Let’s deal the city out of this and take all the money for TransLink – and raise the charge to $15.
In order to capture $500 million – a quarter of the cost of the line – at $15 a square foot, we’re looking for 33 million square feet.
Floorplates of residential highrises range around 8,000 square feet – let’s round it up to 10,000 square feet per floor. Highrises tend to go from 20 to 30 storeys. So 33 million square feet translates into 132 25-storey towers. (Development levies normally apply to only a percentage of gross floor area, but let’s keep it simple.)
Let’s allocate the towers to each of the stations – there will be about a station per kilometre if we take the Canada Line ratio – or 13 stations from Commercial Drive to UBC.
Now let’s pause and imagine the reaction of those who live within spitting distance of 10th Avenue and Sasamat, the heart of West Point Grey’s commercial village, to the announcement that ten 25-storey higrises will be placed on the surrounding blocks, without any additional money for community amenities, park space or services. Or how they’ll react at a public meeting when told, “Hey, it works in Hong Kong!”
We’re talking transformative projects in neighbourhoods that get nervous at the prospect of rowhouses. “Highrise” is a fightin’ word. And that’s assuming the community is going to be all that welcoming of rapid transit in the first place. Remember the reaction to the B-Line on Granville Street? Neighbourhoods not dissimilar to Point Grey, when faced with the introduction of longer-than-average buses, not even any change to the zoning, fought the proposal at some of the ugliest and most protracted public meetings in my time on Council
Mind you, raising money from cost charges applied after the fact may not be needed – especially if the money can be raised before the fact. That is, TransLink secretly buys up land zoned single-family residential and hopes to make a killing when the City approves the rezoning for higher density – assuming the City has any say in the matter. (Actually, given the high land values on the west side, it will have to boost the densities much higher if it hopes to make very much at all. And the number of 33-foot lots needed? About 2,700 Also, acquisition has to be done before there’s even talk of approving the transit extension, especially the particulars of the route, to avoid speculators getting in beforehand. The only speculator initially will be TransLink.
Of course my fundamental premise is ridiculous: TransLink would never be able to assemble enough land in the first place – at least not without expropriation. And any elected official, at any level, supporting such a prospect would be committing political suicide.
People like, oh, Gordon Campbell, MLA for Vancouver Point Grey.
Because that’s who the community will turn to (or more likely, turn on). Not the local Mayor and Council. Most likely, they’ll be on the community’s side. Not the regional Mayor’s Council; it won’t be their decision. And not the TransLink Board, appointed and immune to public pressure.
Since it’s clear from experience that the Province repeatedly intervenes in TransLink decisions, rejecting vehicle levies and parking taxes, interfering in the choice of transit technologies, and ultimately determining who will pay and how, that’s who will have to take the heat. And just how hot do you think it will get?
Maybe there’s a reason why no other jurisdiction in North America tries to pay for transit lines through development charges and upzoning.
Nice argument, but premised on the idea that the development is adjacent to the transit it is funding, which may not be the case.
Based on the program’s stated goals ($1.5billion over ten years) and your working, Translink would need to develop the equivalent of 400 25-floor towers over the entire Metro Vancouver area over 10 years. However, those towers could as easily be along a relatively inexpensive new rapid bus route out in Surrey rather than at the 10th & Sasamat UBC-line station and still be primarily funding the UBC line.
So I would expect to see Translink’s property activities skewed towards the suburbs, and believe that there is rather more scope for political compromise in this scheme than you are suggesting.
..Mark..
When I heard the announcement, what first sprang to my mind was that TransLink would act as the developer and make developer profits, and not just get development cost levies.
Plus, I would think that TransLink may act as landlord in some of these properties. Many of the shopping centres surrounding newer stations of the Hong Kong MTR are operated by subsidiaries of MTR. I can’t confirm this, but MTR may be even playing the building management role in some of the residential towers attached to these shopping centres. I only suspect this because security to these towers uses the same smart card technology that allows people onto the MTR.
I am thinking the same way as Sungsu above. If TransLink, or its real estate arm, plays developer, there may be more money for TransLink.
I’m confused about a few of the concepts you propose here. First, pardon my ignorance, but does the new legislation allow TransLink to collect development charges in lieu of the city? Or does TransLink merely have the power to hold, manage, and dispose of land (paying the development charges to the city as a private developer would)? If so, how can we “deal the city out,” and ignore the possibilities of public amenities in return?
Second, where did you pull the $500 million figure from? TransLink has never financed projects with real estate revenue before, so the amount required from this source is unknown. The 25% figure seems arbitrary, so I’m curious to know if you’ve based it on any precedent.
Third, is there zoning in place near any of the Broadway stations that would allow for anything close to 25-storey towers? If not, that’s a lot of bylaw amendments and a lot of confrontations with residents. Might TransLink be smarter to pursue a less intensive development model?
Fourth, why do you expect the public to turn against the Province instead of TransLink? You and I, as keen readers of legislation, understand the responsibilities and powers granted to the authority by the Province. We know where to lay the blame. But in the past, the media and the public have been quick to point the finger squarely at TransLink for levying taxes or for planning a “real estate empire.” Why should things change?
I’m playing devil’s advocate a little, but I’m very curious to hear your feedback on these questions. Thanks.
Gordon, I too envision Translink generating its revenues by buying up land around the stations at current market values, and then rezoning, where appropriate, once the station locations have been determined. Translink could continue as the developer, or more likely joint venture with, or sell sites to developers who would pay the DCC’s to the city.
An important issue is whether the city would treat Translink like any other developer, and expect to receive approximately 75 % of the ‘lift’ in land value from rezoning, in community amenities or cash. If so, this would significantly limit the amount of money that could be earned from the process.
Notwithstanding this, over time, it is reasonable to expect that Translink could generate revenues from the increase in land values in strategic locations over time. The form of development, however, would have to be approved by city staff and Council. But then, you know all of this. Hey, you used to be on Council!
if i lost in a bidding war on a piece of real estate that i wanted, only to find out later that i lost to translink and that they had “inside” information about the future status of the property, i would be pissed. very pissed.
What I would like to see, is cities offer up density to Translink in exchange for service. This would eliminate Translink from actually buying up properties with insider info and would still raise money for expansion. Each city would be free to offer whatever density they saw fit so the cities still have control. Let me explain how it could work. IE City of Vancouver offers Translink a FSR of 2.0 withing 200m of a lrt line. City of Surrey might offer of FSR of 2.5 within 300m to try and encourage Translink to expand there instead etc etc. Lets assume Translink decides to build a line in each city. They now own this sellable density, kind of like the heritage bank. When the property owner within that area ~200m of the line wants to construct, he/she is still only allowed to construct up to the civic limit, but he/she then has the option of buying an additional 2.0/2.5/??? FSR from Translink. DCLs on the additional density would still be charged by the city. Translink wins w/o any risk. The city wins as they have control, if don’t want to give Translink the density bonus, then don’t but Translink would probably expand to cities that do. I’m sure this is too simplistic but I think it could form a better solution. There is even a check in place, say a city like Aldergrove got desperate and offered something like a FSR of 5.0 bonus at Translink to try and get a line. That 5.0 bonus in a existing low density area wouldn’t be worth nearly as much as a 2.0 in a dense neighborhood.
This assumes that a new rapid transit line is not a “community amenity”.
In the present application for the GM Place office tower, the City of Vancouver has requested that the developer extend the Stadium Skytrain platform eastwards as a walkway over Expo Boulevard to ease pedestrian flows before and after GM Place events. Undoubtedly, that walkway extension will morph into a platform extension.
Similarly, the Crossroads project at Broadway & Cambie was required to include a future access point for an underground connection to the Broadway City Hall Canada Line Station.
And in exchange for cooperating on the construction of the Vancouver City Centre Station, Cadillac Fairview is being allowed to fill in the two open plazas at Georgia & Howe and at Georgia & Granville with retail buildings (not to mention the filling-in of the arium at the north end of the mall for Holt Renfrew). Cadillac Fairview also owns the CP Station, the site of Waterfront Station.
Are those transit related elements community amenities provided in exchange for develomet rights?