Commentary: The Truth about Transit-Oriented Development

August 18th, 2006 by Leave a Comment

By Kathleen Calongne

Across the nation and in Atlanta, policy-makers are preparing to spend billions of dollars of taxpayers’ money building rail transit. The problem they face now is how to get people onto trains when most people live miles from rail lines. The solution: Jam people into high-density housing around each rail transit station and call it “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 Atlanta’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, Oregon, 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 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 10 years. 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. They are really automobile-oriented high-density developments, not transit-oriented at all. In fact, surveys of people living in Portland’s TODs show most drive to work.

In Colorado, Denver and its suburbs are already handing out subsidies to TODs near existing and proposed rail lines. The subsidy of choice in Colorado is tax-increment financing (TIF), or as it’s referred to in Georgia, a Tax Allocation District.

TADs use 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 tax-increment financing 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 Americans 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 tax-increment financing 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.


Kathleen Calongne, a research assistant for the Center for the American Dream at the Independence Institute in Golden, Colo., wrote this commentary for the Georgia Public Policy Foundation. The Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (August 18, 2006). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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