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The Truth about Transit Oriented Development

Opinion Editorial
August 11, 2006

By  Kathleen Calongne

RTD is preparing to spend billions of dollars of taxpayers’ money building rail transit. The problem it faces now is how to get people onto trains when most people live miles from rail lines. Its solution: Jam people into high-density housing around each rail transit station. RTD calls this “transit oriented development,” or TOD.

Berkeley, California TOD proponent Dena Belzer claims rail transit in other cities has spurred billions of dollars worth of developments. She adds that many people are eager to live in high-density, mixed-use developments where they can walk downstairs to a coffee shop or grocery store instead of having to get in a car and drive.

First of all, the billions of dollars of development supposedly inspired by rail transit is simply a lie. To make this claim, rail supporters have included every downtown skyscraper and taxpayer-subsidized sports stadium that happened to be built near any rail line. They have even counted downtown parking garages: if rail transit works so well, why the need for new garages downtown?

Second, while some people prefer to live in a beehive of activity, they are definitely the minority. A poll conducted by National Family Opinion found that 82 percent of Americans say they aspire to live in a single-family home in the suburbs, and only 18 percent want to live in cities close to work, shopping and transit. Certainly, people do not move to Colorado’s wide-open spaces so they can live in Brooklyn-style neighborhoods.

Unfortunately for TOD enthusiasts like Belzer, the real-world experience with transit-oriented development in Portland, the San Francisco Bay Area and other cities is that TODs only work when they are subsidized and designed around the automobile, not transit.

When Portland, Oregon built its first light-rail line, it zoned every neighborhood along the line for high-density transit-oriented development. Not a single one was built for ten years and then the city started offering millions of dollars in tax breaks and subsidies. Even with the subsidies, only a few of the TODs are fully occupied, and many have high vacancy rates. Some have absolutely no businesses in the supposedly mixed-use developments. What makes some work and others fail? In a word, parking.

TODs are only marketable if they have plenty of parking for both businesses and residents. In other words, they are really automobile-oriented high-density developments, not transit-oriented at all. In fact, surveys of people living in Porland’s TOD’s show most drive to work.

Denver and its suburbs are already handing out subsidies to TODs near existing and proposed rail lines. The subsidy of choice in Colorado is known as “tax-increment financing” or TIF.

TIF uses most or all of the property taxes on a new development, and sometimes part of the sales taxes on retail sales, to cover much of the cost of building the development. That means that schools, police, fire protection and other services used by those developments must be paid for out of someone else’s property taxes — like yours. Typically, cities sell bonds, spend the money on the development and use future property taxes to repay the bonds.
To understand how much TIF subsidizes these developments, imagine being able to use your property taxes over the next 15 to 30 years for home improvements or to pay off your mortgage. This is enough to persuade developers to build high-density housing even though they know the vast majority of Coloradans prefer to live in single-family homes.

No politician would ask you to vote for higher taxes to subsidize people who shop at Whole Foods. Instead, they divert property taxes from city services to subsidize these lifestyles, and when schools run short of money, they ask you to raise taxes to keep them open. Portland has diverted so many property taxes from schools to transit-oriented TIF that its mayor recently proposed a city income tax to make up the shortfall.

Rail advocates purport that we must have expensive and heavily subsidized rail transit to attract transit riders. Then they say we need subsidized TODs to get more people to live along rail lines to get a few people out of cars. What we end up with is more congestion, higher taxes and declining urban services.