December 2012

Pub Perspective: Greater Opportunities for TOD

by Joshua L. Schank

Upon first glance, it might seem as if the new federal transportation law, Moving Ahead for Progress in the 21st Century (MAP-21), was a setback for transit oriented development (TOD). MAP-21 holds funding for surface transportation programs, overall, and public transit, in particular, relatively stagnant.

It makes no substantive changes to highway funding formulas that favor more driving and provides no serious new effort to mitigate greenhouse gas emissions or oil consumption by the transportation sector.

However, in part by default and in part on purpose, federal policy is becoming friendlier to TOD despite these flaws in MAP-21. First, because federal funding is stagnant or declining in real terms, metropolitan areas will need to find more independent sources of funding. Second, MAP-21 gives more flexibility to states and localities in how they spend their federal funds, while also introducing performance measurement.

This new paradigm is one in which TOD could potentially thrive. TOD has strong potential as a revenue-raising mechanism and could become more popular as federal funding becomes more limited. Giving states and localities more flexibility and narrowing the federal focus could free up more funds for projects that can accomplish national goals, and TOD can often be a part of those types of investments. But more changes are needed to maximize the potential for TOD and improve federal policy further. These include the following:

1.    Create a Multimodal Metropolitan Discretionary Grant Program. One goal that is glaringly missing from MAP-21 is metropolitan mobility and accessibility, despite the fact that more than 80% of Americans now live in metropolitan regions. While the word “metropolitan” often conjures up images of huge cities and skyscrapers, the fact is that many of these cities are small but still face important transportation challenges that TOD can be a valuable tool in confronting. A discretionary grant program that awarded federal dollars to metropolitan regions on a competitive, mode-neutral basis would likely incentivize TOD in cities big and small. Such a competitive program would give an edge to regions that could bring more of their own funding to the table, which is something TOD is capable of doing under the right circumstances. In many metropolitan regions, it is difficult to imagine how accessibility could be improved without more public transit as well as development along these new transit lines.

2.    Improve Existing Performance Measures. MAP-21 directs states and metropolitan regions to begin using performance measures to evaluate progress toward national goals. This is a substantial step forward for federal transportation policy and may also have the effect of encouraging more TOD. However, the measures that are actually used will have a major impact on the decision-making process. For example, the new National Highway Performance Program uses performance measures, such as pavement condition, to monitor investment decisions. While pavement condition is undoubtedly important, such a measure does not distinguish or prioritize on an economic, social or environmental basis between different investment tradeoffs. Instead, it emphasizes preserving an existing environment, even when changing the existing environment may be a more cost-effective option. The development of the best and most appropriate performance measures for federal programs will be a determining factor for how we make investment decisions in the years to come and will have an impact on to what extent TOD is part of the conversation. If we work to improve the measures to focus more on outcomes — particularly economic outcomes — rather than engineering, we stand a better chance of encouraging wiser investment and likely TOD.

3.    Tie Performance Measures to Funding. The inclusion of performance measures in MAP-21 is a great step in the right direction, but it will be rendered meaningless unless these measures are eventually tied directly to funding. At the moment, federal grantees merely have to report their performance with respect to targets that they themselves have set. While this may encourage more thoughtful planning and investment decisions, it is unlikely to be transformative. Performance measures must be tied to funding if they are to have a significant impact, and, this should be done in the next reauthorization bill. Once the measures are tied to funding, agencies receiving federal money will have to factor them into their investment decision-making processes. As part of a larger program of transportation investment, TOD can be an effective way to achieve many of these performance goals at a relatively low cost. For example, if the goal is to improve access within a metropolitan region, constructing a new rail transit line or adding lanes to an expressway could be very capital intensive and expensive. But in some regions, changing zoning laws and providing incentives for development near existing transit stations might prove a very cost-effective method of accomplishing the same thing. As it stands in current law, there is little reason for an agency to compare these two tradeoffs, as they are not held accountable for whether their investments are the most cost-effective way to accomplish national goals. Tying funding to performance would encourage such tradeoffs to be evaluated and likely promote TOD.

4.    Reward Self-Help. The federal program, even under MAP-21, often still operates as if it is intending to build the Interstate System. Funds are provided through formula, often to fund up to 80% of a project’s cost. This made sense when we were building the interstate, and when federal funds were plentiful, but MAP-21 is only two years long because Congress could not find a way to fund it past 2014. Given these scarce resources, Congress should reward states and localities that bring more of their own revenue sources to the table. This can be done through both formula and discretionary programs by giving preference to projects that have a greater degree of financial self-sufficiency. TOD, with its ability to use value capture and bring private funds to the table, would be in an excellent position to capitalize on such a concept.

Joshua L. Schank is president/CEO of the Eno Center for Transportation, a non-profit foundation with the mission of improving transportation policy and leadership.

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