Thursday, December 4, 2008

4. Ways and Means
White Paper continued...

The most frequent response to Wake Up Washtenaw's proposals is, “It’s a great idea but it will never work.” Though true ten years ago, conditions will be right for it to work soon. What’s needed to make it happen?
Providing information and education is the first step. Our problems are not unique to Michigan, and many creative solutions have been proposed and tried in the United States, Europe, and around the world. We need to find solutions that fit us, and use our Michigan creativity to make them better.

Building support among citizens and groups goes hand in hand with providing information. Many groups find these ideas desirable, but without working together progress is unacceptably slow.

Zoning authorities must support this type of land use. Because most zoning ordinances were developed to meet twentieth-century needs, they discourage land use that puts residences close to services and food supply. It has been said that sustainable development is actually illegal in most of the United States. There are well-thought-out models that can be used to update our zoning ordinances, but that can only happen if local zoning authorities are aware that the public needs and supports such changes.

Capital investment is a must for any type of development. Wake Up Washtenaw encourages private, rather than government investment in both sustainability and transit for a number of reasons:

  • Federal funding for transit is hard to get because of competition from other regions;
  • State funding in Michigan is extremely limited because of the economy;
  • Local funding is even more limited than state funding;
  • All government funding comes with “strings” attached, usually resulting in much slower and more costly implementation of plans;
  • Private funding is often more innovative and creative in the way it is applied;
  • Development can be a very profitable type of investment, especially when it is forward-looking and well thought out;
  • Those who make the investments, as well as the citizens, should reap the benefits.

What sources of capital would invest in sustainable, transit-oriented development? Given the financial crisis in which we find ourselves in late 2008, it is unlikely that funding will be available within the next year. That’s not really a problem, because major investment is not needed at the outset; what is needed is education, consensus-building, and zoning modifications. Economies are cyclical, and we can have reasonable confidence that investment will become available when it is appropriate.

There are development companies that specialize in “green” development. We support a model in which more than one developer is involved, because that would spread the financial risk, and because it would prevent any one entity from being able to overrule all others in important decisions.

A key element is engaging one or more transportation provider(s) willing to diversify in a way that increases their profitability (see further discussion below).

Other potential investors include retailers wanting to expand into new, “green” population centers that are attractive to young, talented people; future owners who would like to assure their place in a green home or apartment; investment funds, banks, and venture capitalists.

An important part of the process is to find these sources of capital and show them the opportunity.

The organizational structure of each community could take any of several forms. A company jointly owned by the investors is one possibility; another is a condominium; a consortium or cooperative structure might be an option. Infill developments built along a transit-way consist of individual buildings, which would most likely be built by different organizations, necessitating no overall organization apart from the city or township.

Transit for a greenfield development should be based on rail or other fixed guideway in order to insure adequate return on investment. This is because with fixed guideway systems such as rail, investors can have reasonable confidence that the transportation system will not be moved to another location. Also, such systems provide greater capacity to move large numbers of people, so that existing roadways will not be overwhelmed with traffic from new developments.

In addition to rail, there are a number of possible fixed-guideway systems under development. Rail has a number of advantages, however: the technology is well-proven; there are many available vehicle options; several power sources are available and time-tested; it is known to be one of the most energy-efficient technologies for moving large numbers of people; and systems are in place for using rail to transport heavy freight as well as passengers.

Transit for a brownfield development depends on the footprint of the development. If it is compact, it should be located over or adjacent to rail or other high-efficiency transit. Ideally, such developments can be associated with rail hubs, such as the crossing on North Main Street in Ann Arbor between the Ann Arbor Railway and Norfolk-Southern/Amtrak. For linear developments, frequent bus service is acceptable, though light rail provides a proven boost to land value, and newer forms such as Personal Rapid Transit (PRT) would probably provide a similar boost in value to adjacent properties once deployed and debugged.

Financing transit has become synonymous with government subsidies in the United States and much of the world. However, we do not believe this need be the case here any longer. There are several parts of the world where transit pays for itself. Most notable are two examples: Curitiba, Brazil,  and Japan.

  • In Curitiba the City constructed infrastructure for bus rapid transit (BRT), being in fact the first entity to develop the BRT concept. However, the buses themselves (both rapid and local) are owned and operated profitably by private companies under contract and in partnership with the city, which collects passenger revenue and distributes it to the operators.

  • In Japan there are at least twenty private companies that operate commuter and regional rail systems. In every case, the business model appears to take advantage of synergies between rail service and other corporate investments. For example:
    • Tobu owns a theme park and real estate, served by their railway;

    • Hankyu and Hanshin own department stores which also serve as the main terminals of their rail lines; these are actually across the street from each other in downtown Osaka;
    • Izu owns popular resorts not far south of Tokyo, with frequent access on their railway;
    • Tokyu owns a hotel chain with hotels built over several of their stations or adjacent to them;
    • Keisei owns bus lines that connect with their trains; they also own real estate, tourist attractions, retail stores, and hotels near their train and bus lines. (Keisei’s “SkyLiner” connects Tokyo’s remote Narita airport with the downtown area.)

From these examples, it appears that key to successful operation of private transit is the creative leveraging of other investments. In Curitiba, the investment was made by the city government, making it a “Public-Private Project” (PPP). The Japanese companies have invested their own funds in properties that enhance their rail business, and vice versa.

In the United States, the main synergy is the great increase in property value that accompanies fixed-guideway transit. This has been documented in city after city where rail transit has been installed. Property owners within about a half mile of a rail station reap tremendous gains in the value of their land – gains made possible in most cases by the taxpayers who have financed the transit system. Given that there are tremendous profits to be made from fixed transit systems, it makes sense, especially in the absence of government funding, for those who will profit most from transit to make the biggest initial investment in it.

Underutilized rail corridors are the biggest opportunities for investment, especially those in locations where little-used or abandoned rail lines parallel congested highways. These rights-of-way are extremely valuable resources in an age of diminishing fossil fuels and increasing population. When used most efficiently in commuter service, a single track has the potential of carrying about the same volume as four highway lanes – using far less energy in the process. This makes them ripe for investment, upgrading, and use for commuter or regional rail service. Forward-looking planning authorities will view these lines as potential growth magnets and zone the surrounding areas accordingly.

Careful analysis should be made before converting these rail lines to bike/hike trails. Though good in themselves, trails have much lower potential for curbing sprawl development, saving resources, and lowering carbon emissions. For any entity to re-create a similar right of way through land purchase or other means could be prohibitive. Thus, underutilized rail corridors should be viewed as regional transportation treasures and investment opportunities.

Fortunately, this has been realized in our area. The State of Michigan purchased the northern portion of the Ann Arbor Railway (the “Annie,” north of the Huron River bridge) when the Annie filed for sale or abandonment in 1986. More recently, Federated Financial has leased rights to operate the line, with the stated intention of eventually restoring passenger service. In 2006, a group from Washtenaw and Livingston County proposed to use the southern portion of the line to alleviate congestion on parallel US 23. The plan has received the necessary approvals, and the Ann Arbor Transportation Authority has agreed to take charge of the operation, with service possibly beginning in early 2010. Meanwhile, many millions of dollars (estimates vary up to 32.4 million) will be necessary to upgrade the line to passenger service levels. Though the funds required are considerably less than what would be needed to expand the capacity of US 23, Michigan’s economy makes even that investment difficult. Federated Financial has understandably not been willing to invest the necessary capital to upgrade the line without some way of getting a return on its investment. That is why it is necessary to work out a way for the transportation providers to reap the benefits of their investment by sharing in the community growth their services make possible.


So far (late 2008) plans are all very general. In the engineering, architectural, or business sense, there are actually no “plans” as yet: simply a vision and this “white paper”.

The first requirement is to update our local zoning codes, particularly in the townships of Washtenaw County. The mid-twentieth-century model on which most are based does not lend itself to sustainable development. We suggest basing revised codes on the SmartCode model.

Next, it is essential to craft possible financial structures that allow all investors – developers, retailers, transportation providers, and residents – to benefit from their investment and from the communities they foster, without any one entity or group gaining undue advantage over the others.

For each greenfield community, an engineering plan needs to be created detailing “life-support” systems for the community: food production, waste handling, energy generation, transportation.

The urban design for each community needs to be worked out, preferably using the “charette” approach, where urban planners and students are given the opportunity to submit competing designs. Likewise, the architectural style can be the subject of design competitions. In this way, the most creative minds are encouraged contribute to all aspects of the community.


SmartCode Version 9.0 (n.d.) Andrés Duany, Sandy Sorlien, and William Wright. The Town Paper Publisher.