Thursday, December 5, 2013

Smart Growth America’s state smart growth partners meet to discuss shared goals

Coalition members visited Winthrop, MA, pictured above, to learn about smart growth strategies in the small coastal town. Photo via Facebook.
Smart Growth America works with over 50 organizations from across the country as part of our coalition of allied non-profits. Many of these organizations work exclusively on smart growth issues in their respective states, and last month these partners came together to discuss shared challenges and goals.
Town officials give coalition members a guided tour of Winthrop, MA.
Our coalition partner the Massachusetts Area Planning Commission(MAPC) hosted this year’s meeting, which took place from November 21 to 23, 2013. MAPC staff kicked off the meeting at their offices in Boston with a discussion on ways to increase diversity within the smart growth movement. MAPC staff led the conversation and shared what their organization has done to diversify both their external partners and internal staff. Coalition partners highlighted the need to engage and collaborate with non-traditional partners outside of the smart growth field to make sure future projects are shaped by wide spectrum of residents and stakeholders.
Then, on November 22, coalition partners traveled to Winthrop, MA, an ocean-side community outside Boston. Town officials met with coalition members to give an overview of the town’s history, discuss how the town is working to protect itself from future natural disaster, and their strategies for attracting residents and businesses before leading a tour of the town.
providence-riProvidence, RI’s Riverwalk was part of the coalition’s tour.
On November 23, the group traveled to Providence, RI, for a tour of how Providence is restoring and revitalizing historic areas, and new initiatives being undertaken to continue those efforts. Leading the tour were coalition members Scott Wolf of Grow Smart Rhode Island and Dan Baudoin of The Providence Foundation.
After the tour of Providence, administrators from the New England regional offices of the U.S. Housing and Urban Development and the Environmental Protection Agencies joined the group for a presentation on historic preservation in Rhode Island by Scott Wolf and a presentation about the newly released report on infill housing by Matt Van der Sluis of California’s Greenbelt Alliance.
The next meeting of our state and regional smart growth coalition partners will be in the spring in Washington, DC. If your organization is dedicated to smart growth issues at the state or regional level, consider becoming a coalition member today.

Tuesday, December 3, 2013

LOCUS talks about new development in Somerville and state policy change at two events in Massachusetts

The Community Corridor Planning Collaborate (CCP) held multiple station area design sessions and community planning workshops in anticipation of the Green Line Extension in Somerville. Photo by Interactive Somerville via Flickr.
In November, LOCUS kicked off a series of events in Massachusetts that connected real estate developers with local and state officials to discuss new smart development opportunities and policy changes needed to facilitate walkable, sustainable development throughout Massachusetts.
First, on November 19, LOCUS brought together real estate developers and Mayor Joseph Curtatone of Somerville and his staff to discuss the new transit-oriented development opportunities created by Massachusetts Bay Transit Authority’s decision to extend its Green Line. City officials described the need for more economically, socially and environmentally responsible development in Somerville. LOCUS developers proposed development ideas that would meet those needs while also supporting Somerville’s economy. The ideas will join those of Somerville residents in informing the city’s plan for the new station areas. As the conversation continued, a call to action was placed on LOCUS and its members in Massachusetts to develop a series of policy and regulatory changes in conjunction with city and state officials that will support more walkable, sustainable places in Massachusetts and throughout the country.
Then, on November 20, LOCUS joined developers, advocates and elected officials from across the Commonwealth at theMassachusetts Smart Growth Conference. Hosted by Smart Growth America’s coalition partner the Massachusetts Smart Growth Alliance, the conference focused on how smart growth developments can save public and private dollars.
LOCUS coordinated a panel session for the conference, which included LOCUS Steering Committee Member Don Briggs, Senior Vice President of Development for Federal Realty Investment Trust; Chryse Gibson, Chief Administrative Officer of Oaktree Development; David Perry, Senior Vice President of the Hines Interest Group; and was moderated by Chris Leinberger, President of LOCUS. The panel discussed the barriers to market-driven smart growth in Massachusetts.
The conference panel cast new light on the previous day’s conversation by including state-level policies that affect smart growth development. Each panelist highlighted a major project that their company is working on as well as what the state could have done to speed up the project approval process and reduce construction delays. The presenters identified issues such as the lengthy environmental approval process and access to patient capital as limits to smart growth development, but cited the state’s current investments in transit and the strong market demand for walkable development as factors that will lead to more walkable places in Massachusetts.
Among the wide range of issues addressed at both events, strong local leadership came up again and again. Communities across the country have such visionary leaders, without whom many of these types of projects would not be built. On June 17 and 18, 2014, LOCUS will bring together many of these leaders at the 2014 LOCUS Leadership Summit. If you are a real estate developer or investor interesting in supporting walkable development in Massachusetts and across the country, we hope you’ll join us then.

Monday, June 17, 2013

Walking tour explores Fort Totten's present and future

Development at Fort Totten has been slow despite access to 3 Metro lines, its close proximity to both downtown DC and Silver Spring, its access to the Metropolitan Branch Trail, its green space and its affordability. But as demand increases for housing in the District, this previously-overlooked neighborhood could become a hot spot.

Photo by tracktwentynine on Flickr.
Last Saturday, the Coalition for Smarter Growth concluded their spring walking tour series with "Fort Totten: More than a Transfer Point," a look at future residential, retail and commercial development near the Fort Totten Metro station. Residents and visitors joined representatives from WMATA, DDOT and the Office of Planning on a tour of the area bounded by South Dakota Avenue, Riggs Road, and First Place NE.
Today, vacant properties and industrial sites surround the station and form a barrier between it and the surrounding area. Redeveloping them could improve connections to the Metro and make Fort Totten a more vibrant community.
There is a significant amount of new residential, retail and commercial development planned within walking distance of the Metro station. But Saturday's tour began with the only completed project, The Aventine at Fort Totten. Built by Clark Realty Group in 2007, the 3-building, garden-style apartment complex consists of over 300 rental units as well as ground-floor retail space.

The Aventine at Fort Totten, the newest apartment complex in Fort Totten. All photos by the author unless otherwise noted.
Visitors were ambivalent about the success of the Aventine due to its small amount of retail space and lack of connectivity to surrounding neighborhoods. While residents noted that it created more options to live close to Metro, representatives of the Lamond Riggs and North Michigan Park civic associations agreed the development differed from the original vision for the project.
They called it an example of the need to continually engage real estate developers and local government agencies to ensure that new development is of a high quality and responsive to the local context. Throughout the tour, residents said that future development proposals should adhere to DC's urban design guidelines, improve pedestrian access and have a plan to mitigate parking concerns.
Between South Dakota Avenue and the Metro station, the Cafritz Foundation will redevelop the old Riggs Plaza apartments to build ArtPlace at Fort Totten. When finished, the 16-acre project will contain 305,000 square feet of retail, 929 apartments, and 217,000 square feet of cultural and art spaces, including a children's museum. Deborah Crain, neighborhood planning coordinator for Ward 5, noted that ArtPlace will include rental units set aside for seniors and displaced Riggs Plaza residents.

An ad for ArtPlace at Fort Totten at its future home.
As one of the largest landowners near the Fort Totten Station, WMATA has a huge stake in future development around the station. They own approximately 3 acres of land immediately west of the station along First Place NE that is currently used as surface parking lot for commuters. Stan Wall, Director of Real Estate at WMATA, discussed the great potential for development on the current parking lot mentioned that the agency will solicit proposals for development of the area in the near future.

Parking lot at Fort Totten station.
Anna Chamberlain, a DDOT transportation planner, talked about how streetscape improvements could calm traffic, making streets around the Metro station more pedestrian- and bike-friendly. DDOT is also working to improve connections to the Metro, as some areas lack clearly defined walking paths. The agency will begin designing a path connecting the Metro to the Metropolitan Branch Trail within the next few months.

New sidewalks and street trees on Riggs Road.
The final stop on the tour was Fort Totten Square, a joint effort by the JBG Companies and Lowe Enterprises to build 350 apartments above a Walmart and structured parking at South Dakota Avenue and Riggs Road. DDOT has completelyrebuilt the adjacent intersection to make it safer for pedestrians and more suitable for an urban environment, replacing freeway-style ramps with sidewalks, benches, crosswalks and improved lighting.
Jaimie Weinbaum, development manager at JBG, says they're committed to working with the city and residents to make Fort Totten Square an asset to the community. They've promised to place Capital Bikeshare stations there and would like to have dedicated space for Car2go as well.
With help from the private sector and public agencies like DDOT and WMATA, Fort Totten could become a model for transit-oriented development, but much of the new construction won't happen for a long time. Until then, residents eagerly await the changes and continue to work with other stakeholders toward creating a vision that will benefit everyone.

Tuesday, April 9, 2013

Join us for the 2013 LOCUS Leadership Summit

Real estate developers, investors and professionals are invited to attend the 2013 LOCUS Leadership Summit, taking place on June 4 and 5, 2013 in Washington, DC.
This year’s Summit, themed “Bringing the Market to the Hill: Realigning the Federal Role in Real Estate,” will convene real estate professionals from across the country to connect with members of Congress and discuss how federal policies and investments can better support more walkable, sustainable developments and lead to a growing economy.
Participants will hear from industry leaders and chief policymakers on a variety of topics including programs such as the New Markets Tax Credit and TIFIA, best practices for developing smart growth, and the role of policy reform in sustainable development.
Participants will have the option of joining LOCUS for our annual Hill Day visits, to speak directly with members of Congress and their staff about policies that support walkable, sustainable development.
An optional walking tour of a local neighborhood with developers and public officials close to the project will provide in-depth insights about the interaction between policy and development.
The Summit will culminate at the 2013 Leadership Summit Congressional Reception, honoring members of Congress who have championed legislation that supports great neighborhoods and strong local economies across the country, as well as a real estate developer who is leading the field in creating walkable places.
Summit registration is $200. Registration includes a networking reception on Capitol Hill, two networking lunches and a chance to add to the discussion of future walkable, sustainable developments. Tickets for the walking tour of a local development are an additional $20.

Thursday, February 21, 2013

Rethink Real Estate: The Housing Credit

Trumbull Park Homes, a low-income housing development in Chicago, Illinois. Photo by Robert R. Gigliotti via Flickr.

Congress began the Low-Income Housing Tax Credit (Housing Credit) program in 1986 to incentivize the private sector to develop more affordable rental units for low-income households. Since its creation, the credit has created or preserved nearly two million affordable rental units across the country.
The program offsets investors’ federal income tax liabilities, but the responsibility for administering the program is delegated to the states. States designate housing credit agencies to distribute a pool of tax credits from the U.S. Department of Treasury based on their population. In 2010, the amount of credits agencies received was equal to the greater of $2.10 per capita or $2,430,000. For example, the population of Oklahoma in 2010 was about 3.6 million people, so the state received about $7.7 million in tax credits, or 3.6 million multiplied by $2.10.
Housing credit agencies allocate credits to projects that also meet certain criteria set forth in state qualified allocation plans and Section 42 of the Internal Revenue Service code. Both guidelines specify rules and scoring priorities for the competitive allocation process. Eligible projects must be a residential rental property and restrict rent to low-income tenants. A LIHTC property must also remain affordable for at least 30 years. Some states may require a longer affordability period for certain projects.
Developers are also required to choose between the 20-50 rule – which requires at least 20 percent of the units to be rent restricted and occupied by households with incomes at or below 50 percent of an area’s median income – or the 40-60 rule, which requires at least 40 percent of the units to be rent restricted and occupied by households with incomes at or below 60 percent of an area’s median income.
Developers may sell the credits they receive to investors or a syndicator, who assembles a group of investors and acts as their representative. Through a limited partnership, an investor acquires a 99.9% or 99.99% limited partner share, while the developer sponsor set up one or more general partners with a .1% or .01% share. Typically, a real estate developer can cover construction costs with investor equity. The sale of the credits further reduces the amount of debt a developer incurs when constructing a project. In return, the investor receives a dollar-for-dollar tax credit and other benefits for ten years. If the project were to stall or run into any difficulties, the most the limited partner can lose is the amount invested; however, the general partner can lose more than the amount invested.
However, partnerships are structured most often as limited liability companies (LLCs). A typical LLC consists of the developer managing the day-to-day operations of the project, and the credit purchaser as having a passive investor role. The developer still has a small percentage ownership interest (.1%), and the investor still has a large ownership interest (99.9%). All members of an LLC have liability that is limited to the amount invested. That is, if the project faces a setback, the most they can lose is the amount invested.
The housing credit provides many benefits for the federal government because the private sector takes most of the risk associated with building the projects. Investors may not reap the benefits from the credit unless the housing is built, maintained at a certain standard, and remains affordable throughout the compliance period. This model ensures that the program continues to fulfill its intended purpose of providing stable housing to low-income households, while developers and investors benefit from the return on their investments.
As members of Congress debate tax reform, they should consider protecting and preserving the housing credit.

Thursday, February 7, 2013

Rethink Real Estate: Qualified Energy Conservation Bonds

The Parker Ranch installation in Hawaii. Photo by the U.S. Department of Energy.
Qualified Energy Conservation Bonds (QECBs) give state and local governments a low-cost financing option to encourage energy conservation.
Funding from the program has been used to retrofit public buildings, to power buildings with renewable energy, and to improve public transit infrastructure. Authorized by Congress as part of the 2008 Energy Improvement and Extension Act, the original legislation allocated $800 million in federal funding to the effort and has since been increased to $3.2 billion as a result of the 2009 American Recovery and Reinvestment Act. As of July 2012, about $760 million in allocated funding had been spent. Because QECBs do not have to be spent within a certain time period, a great deal remains untapped.
QECBs were originally structured solely as a tax credit bond, in which the bond purchaser received a federal tax credit equal to 70 percent of the interest rate multiplied by the principle amount of the QECB. However, the Hiring Incentives to Restore Employment Act of 2010 (HIRE) allowed for a direct subsidy bond option due to a lack of investor interest in using the tax credit structure. Under the direct subsidy option, QECBs are among the lowest-cost public financing tools because the U.S. Department of Treasury subsidizes the issuer’s borrowing costs by offering a direct cash subsidy to the bond issuer.
The Treasury allocates QECBs to states based on population, and then states sub-allocate the bonds to municipalities with populations of 100,000 or more. The Treasury also sets the bond’s interest rate and maximum term. Though states choose which municipalities receive the bonds, they are required to formally accept the allocation through an agreed upon process or else the funding is returned to the state. Municipalities sell taxable QECBs to investors as a term-limited bullet bond. Because of the structure of the direct subsidy bond option, the municipality pays a taxable coupon to the investor and also repays the principle when the bond matures. The Treasury then pays the municipality the lesser of the taxable coupon rate or 70% of the tax credit rate as a rebate. Proceeds from the sale of the bonds are used to fund qualified projects and must be spent within three years of issuance.
Qualified projects must be used to either reduce energy consumption in publicly owned buildings by at least 20%; for rural development (including the production of renewable energy); for certain renewable energy facilities (such as wind, solar, and biomass); and to implement green community programs (including the use of grants, loans, or other repayment mechanisms to implement such programs). The Treasury also requires that at least 70% of a state’s allocation must be used for governmental purposes, but the other 30% can be used to improve privately owned buildings.
In 2012, the IRS issued additional guidance (Internal Revenue Code § 54D) to address questions surrounding the types of activities that can be financed with QECBs including what constitutes a “green community program.” The clarifying guidance is meant to allow municipalities and states to use a variety of energy-saving methods to lower fiscal cost and improve sustainability. For instance, transportation initiatives that conserve energy or support alternative infrastructure, such as improvements to bike paths or mass transit infrastructure, can use QECBs as a funding source.
By providing a needed financing mechanism for energy-efficiency projects, the QECB program can be a useful resource for municipalities that want to promote sustainability best practices by reducing energy consumption in public buildings or improved infrastructure.

Thursday, January 31, 2013

Rethink Real Estate: All about the New Markets Tax Credit

The Ely Walker building in St. Louis, MO was redeveloped with the help of the New Markets Tax Credit. Photo by Nick Findley via Flickr.
Earlier this month, Smart Growth America released Federal Involvement in Real Estate, a survey of over 50 federal programs that influence real estate in some way. This post is the first in a series taking a closer look at some of the programs included in that survey. Today’s post looks at the New Markets Tax Credit.
New Markets Tax Credit allows individual and corporate investors to receive a credit against their federal income tax return in exchange for making an investment in a specialized financial institution called a Community Development Entities (CDE). Congress created the credit in 2000 as a way to attract private capital to businesses in economically challenged communities. Authorized under the Community Renewal Tax Relief Act of 2000, the program has appropriated billions of taxpayer dollars to promote investment in these areas that are often overlooked by traditional financing sources.
New Markets Tax Credits are awarded to CDEs through a competitive process regulated by the Community Development Financial Institutions Fund, a program within the U.S. Department of the Treasury. To qualify as a CDE, an organization must demonstrate a primary a mission of serving, or providing investment capital for, low-income communities or low-income persons, and maintain accountability to residents of low-income communities through representation on a governing board of or advisory board to the entity. The Community Development Financial Institutions Fund is authorized to allocate $3.5 billion to CDEs nationwide.
Once a CDE receives its credit allocation, private investors who make qualified equity investments are eligible to claim the New Markets Tax Credit. Typical investors include banks, major corporations, venture capital firms and other investment funds. In order to claim the credit, a CDE must use at least 85 percent of an investor’s funds to make a qualified low-income community investment (QLICI) in an approved business for a seven-year period.
QLICIs must be invested in a qualified active low-income community business. In order to qualify, the business must be located in a low-income community; must generate a substantial portion of its revenue from activity in a low-income community; and services performed for the business by its employees must be performed in a low-income community. QLICIs can be used for commercial, industrial, and mixed-use projects, or to purchase loans from other CDEs in low-income communities.
The Community Development Financial Institutions Fund defines a low-income community as a U.S. Census tract with a poverty rate of at least 20 percent, or an area in which the median family income does not exceed 80 percent of the statewide median income. In 2010, approximately 39 percent of the nation’s Census tracts containing 36 percent of the population qualified for these investments.
The New Markets Tax Credit program benefits communities and investors alike. It allows investors to claim a tax credit equal to 39 percent of their investment for up to seven years. At that rate, an initial investment of $1 million could result in a total tax credit of $390,000 over seven years.
Since its creation, the New Markets Tax Credit has been used to finance charter schools, supermarkets, healthcare facilities and a variety of other businesses that have spurred economic development in underserved communities across the country. Many would not have been possible without the program.

Thursday, January 10, 2013

Exploring the economic benefits of walkable, sustainable development along the Keystone Corridor with PennDOT

Coatesville, PA is home to a station on the Amtrak Keystone Line. Photo by the Chester County Planning Commission.
The 104-mile long Keystone Rail Line that runs from Philadelphia to Harrisburg, PA, has played a significant role in shaping the towns around its 12 stations. Now, new investments in the line are creating opportunities for development along the corridor.

In 2006, the Pennsylvania Department of Transportation (PennDOT) and Amtrak completed a $145.5 million infrastructure improvement program to increase train frequency and service reliability along the Keystone Corridor. These improvements have the potential to attract new development – and new economic growth – to the areas around stations along the rail line.

On December 4, 2012, PennDOT invited a delegation of LOCUS members that included CEOs and senior executives from leading real estate firms in the northeast region to Coatesville, PA, to discuss best practices for leveraging transit-oriented development (TOD) to revitalize communities. Coatesville was an appropriate backdrop for the meeting because the city shares challenges in attracting new residents and businesses with other cities on the Keystone line. PennDOT and Coatesville leaders hope to address these challenges by investing in rail infrastructure.

David Sciocchetti, the Development Advisor for the Chester County Economic Development Council, acknowledged that investment in rail infrastructure isn’t the only tool needed to restore vibrancy in cities like Coatesville. His comments, which began the daylong meeting, emphasized that the best way to attract riders along the line is to plan for the entire area around stations, rather than just the station itself.

Consultant Rick Robyak, who is working with PennDOT to redevelop the stations on the Keystone line, also echoed the need to use a holistic approach in developing property around the stations. He encouraged meeting attendees to identify how municipalities and PennDOT could work with the private sector to produce the greatest return on the public’s investment. According to Robyak, PennDOT wants to give the private sector the opportunity to guide the redevelopment project in such a way that it creates economic opportunity for both the city and the developer.

The morning’s presentations were followed by an afternoon tour of the current Coatesville Amtrak station. The train station is located at the edge of the city’s commercial district, but lacks adequate pedestrian connections to the commercial core. The current station will likely be repurposed for an alternative use because it does not meet standards set by Amtrak or the American with Disabilities Act. Facilitators from the Coatesville Redevelopment Authority pointed out a possible site for a new station currently considered “blighted” under property codes. Despite the challenges to relocating the Coatesville station and redeveloping others along the line, the LOCUS delegation agreed that more walkable, sustainable development would be a key part of any plan to boost the local economy.

Overall, PennDOT and Coatesville leaders’ commitment to working with the private sector to see strong rail culture return to areas along the Keystone Corridor will undoubtedly help achieve their vision of bringing much-needed economic revitalization to the corridor.