You heard it here first folks!The Vancouver Sun ran a great editorial on Saturday endorsing Hong Kong’s real estate development model as a way to expand the Lower Mainland’s transit system without reaching into the pockets of taxpayers.
We’re particularly pleased about the Sun’s editorial because we’ve been pitching the Hong Kong approach for nearly two months. In fact, the Hong Kong model has been central to our last three press releases. Remember folks, you heard it from Get Moving BC first.
TransLink has to start milking its cash cows to pay for expanded service
Vancouver Sun - Published: Saturday, March 29, 2008
The notion that transit lines don't have to be bottomless pits for public dollars is a radical departure from past experience in Metro Vancouver.
In Hong Kong, however, the public transit system is not only run at a profit, new lines and stations are seen as cash cows, not just added costs.
Hong Kong's MTR Corporation started service in 1979. After aggressive expansion, it has a network of 211 kilometres of rail with 150 stations.
That expansion was financed by real estate development, which MTR regards as a primary business function.
MTR began as a government enterprise and was transformed into a publicly traded corporation. In 2007, it had a net profit of more than $1.1 billion Canadian.
We can't duplicate these results in the Lower Mainland. Hong Kong is a much more densely populated city with a more authoritarian government, but we can profit from the principle that makes the MTR so lucrative.
That principle is that while transit is expensive, it also creates value. Developers have long known this. They harvest that value by using proximity to transit as a selling point.
Now the recently reformed Metro Vancouver Transportation Authority, armed with new enabling legislation from the province, is finally getting serious about capturing some of that value to help pay for new transit.
It's a welcome move. Dale Parker, the chair of the new TransLink board, hopes to raise up to $1.5 billion through a real estate arm now under development.
The key to that success will involve persuading municipalities to go along with bidding for the routing of new transit lines with their willingness to assign added density around stations.
These are early days, but one obstacle that will have to be overcome is the possibility of speculators jumping in and tying up property around potential station sites.
Private developers can play an important role in creating both value and exciting urban neighbourhoods around transit stations. But this scheme will only work if municipalities make it clear from the start that much of the initial value for added density is going to be used to pay for construction of the transit line.
So if a developer, existing owner or speculator wants to build larger buildings with more units than allowed by the existing zoning, much of the windfall value of changing the zoning will go to TransLink, not into their pockets.
Such exchanges already occur when developers seek higher density for buildings. In return, municipalities extract benefits, such as parks, social housing, community centres, green space or land for schools. Those benefits typically eat up a significant portion of the value of the increased density.
In this case, municipalities will have to be persuaded to share with TransLink benefits they have until now taken as their own.
In return, TransLink may be able to deliver new transit lines more quickly.
So, for example, if the city of Vancouver wants the Broadway line extension to jump the queue, council will have to look at ways to create valuable density along the route and offer it up to pay a larger share of the construction cost.
No doubt there will be considerable difficulties in following this route, including some yet to be imagined. But we know where the traditional methods of financing take us -- straight to higher taxes, slow progress and continuing congestion.
This looks like a better route.
© The Vancouver Sun 2008