Our traditional approach to public real estate, especially properties at our major transit stations, involves giving away huge amounts of value to private developers, while world leaders are working to master land-value capture.
By STEPHEN WICKENS
Imagine First Gulf controls the land surrounding Kennedy station, 25 publicly owned acres that for decades have been served by subway, SRT, GO trains and multiple bus routes. It’s a site whose potential value has soared recently, what with the Eglinton-Crosstown LRT to open in five or so years and a reasonable likelihood a Scarborough subway extension and the Mayor’s SmartTrack will roll too.
Add in tracts of nearby, largely undeveloped private lands, and the Kennedy site’s size rivals First Gulf’s Unilever, which sits behind various moats – river, highway, rail corridor, monolithic land uses and long blocks. Unilever might eventually get lots of transit, but even if Broadview is extended south and a bridge to the West Donlands is added, stitching it into the urban east-downtown fabric will be a challenge.
The comparison’s timely because one site needs urgent attention – and despite media coverage and city hall chatter, it isn’t Unilever. Transformation on several levels should be inevitable at Kennedy, but it’s a hub without a champion, institutional support or gainfully employed minds offering vision. Shame on us.
Aside from an opportunity for profitable development to partly offset infrastructure costs and boost ridership enough to justify costly rapid transit priority for low-density Scarborough, Kennedy could pay back for generations if it’s the place that finally gets GTA decision-makers to understand real estate in ways that underpin sustainable funding for the world’s urban transportation leaders (almost all of them in east Asia).
But time’s running out at this hub: Options disappear every time Metrolinx and the TTC award contracts. The greatest urgency stems from the fact plans still call for the Crosstown to dive underground at Ionview Road, nearly a kilometre west of Kennedy station. Tunneling made sense when the LRT was to swing north into the Scarborough Rapid Transit corridor and functionally replace the SRT as our de facto subway extension to Scarborough Town Centre – albeit with transfer. But although one-seat service to STC by subway now looks like a lock, station plans weren’t adjusted (at least as of a May planning meeting I attended at City Hall).
Short term, keeping the LRT on the surface and scrapping the tunnels saves us far more than the roughly $85-million the city owes Metrolinx for wasted work since council dumped the old LRT plan in 2013. Long-term, we’ll end up extending the Crosstown east to Guildwood and beyond (the Scarborough-Malvern line EA is already done); keeping the LRT on the surface from the west also eliminates the need for costly tunnels to the east. In fact, if we extend the LRT east, kill the tunnels and use SmartSpur to connect with STC, we’d be able to eventually use a shorter more efficient route than any subway option planners have studied recently – if or when we can honestly justify a subway extension.
But the biggest long-term benefit will come if Kennedy station’s real estate can catalyze a long-overdue revolution in North American transit funding and planning. Kennedy’s special: We own the land; we can be that developer reaping the profits. This is the basis of rail-plus-property, a business model that has played a huge role in making Hong Kong’s transit builder/operator a profitable company for 35-plus years (even if it isn’t perfect and people kvetch about transit there, too). Historically, in Toronto, we give away land-value premiums to those who own sites near stations (some of which is unavoidable); MTRC of Hong Kong, captures land-value through development and property management. Yes, we know Hong Kong is denser and the land-ownership regime is different, as are public consultation sensibilities. But the big lessons of MTRC’s model can apply here if we’re smart enough in how we adapt the governance.
A huge but largely overlooked hurdle in our planning process is our lack of a publicly controlled entity for managing our transit-related real estate, working within a private-sector set of precepts to maximize its worth. This entity needs an empowered seat at the table from the earliest planning discussions and must be free to operate at an arms length from politicians and even transit operators. Rail-plus-property cannot remedy all our process flaws, but in its basest form it would generate significant revenue to defray capital costs, help us expedite operating efficiencies and earn the goodwill needed to allow those with taxing powers the use of funding tools considered politically risky.
So if rail-plus-property is such a no-brainer, why haven’t we acted? We’re a riven town, trying to tame a political whipsaw. The right and some foolish mayors, going back at least a decade prior to amalgamation, have damaged the land-value-capture concept with laughable promises of free subways. The ideological left, apparently fearful of anything that smacks of public-private partnerships, willfully ignores how some competing international metropolises are getting things done. In 2003, the TTC was asked to study rail-plus-property (councillor David Miller got a motion passed at my urging, but the study was quietly ditched when he became mayor). Provincial and city reports on funding strategies in recent years have demonstrated a thin understanding of LVC, though an August 2013 discussion paper commissioned by Metrolinx was somewhat encouraging.
Recent off-the-record discussions with sources indicate some of our bureaucrats are waking up, though for now, we continue to rip ourselves off. We talk about transit being an investment, forgetting that real investors aggressively seek ROI.
Viewed through a rail-plus-property lens, current plans for Kennedy would have us asking:
– Why does the TTC cling to the quaint but costly notion that stations are costs when cities capable of continuous building increasingly view them as revenue properties with trains rolling through the basement? At Kennedy, our thinking manifests itself in an unsubstantiated assumption that there’s net benefit in retaining a big bus terminal, even though it’s an impediment to transit-oriented development on a site that needs TOD. It makes even less sense if you consider that when the LRT is extended east, we won’t need a bus terminal at all, and if we go with the likely but wasteful four-stop Eglinton-McCowan subway plan, most terminal needs shift to the Brimley/Danforth Road station.
– Why tie up swaths of valuable real estate for surface parking? The 1,000 or so spaces at Kennedy allow us to fill the equivalent of just one subway train for one trip per day. Parking can and will be replaced in other formats via redevelopment – if it makes economic sense within a mix of uses that may include offices, shops, condos, schools, public services and recreation facilities. We need destinations around and atop our stations, a doubly crucial lesson for land-rich Metrolinx to learn, especially now that it should be preparing to offset soaring operating costs from the all-day, two-way service promise.
– What thought is going into creating easy and pleasant pedestrian links between the station zone and the surrounding areas? We think a lot about bus connections, a very good thing, but subways work best when the pedestrian is king of the catchment zones.
– Why aren’t the surrounding private land holders prominent in discussions at this end of the transit planning? Has there even been a public Kennedy station precinct planning process? Given the right lattice of incentive and disincentive, private developers will eagerly help us earn returns on investments and assets.
So, where are our bureaucrats?
Actually, contrary to popular misconception, most are at least okay. In Year 4 of his term, I’m concluding Andy Byford was probably a good hire and he seems to understand much of what I usually prattle on about. But he’s rightly focused first on turning around the TTC’s operating culture. He has some good people working for him on the capital planning side, but the parameters on their thinking appear to be constricted by assumptions desperately in need of re-examination. They lack the tools and direction required re-earn the public’s confidence (some come across as chastened, bracing for further hits on the Spadina-York extension cost overruns and wasteful standalone stations).
People at city planning have been good to talk to in recent years and seem to be awakening to the fact that established approaches are inadequate for such issues of organized complexity. Some seem to see the need for an entity that can wisely manage public land assets in the quest to make good on some of the excellent aims of the official plan, now more than a decade old. Metrolinx has dipped a toe in the waters of sanity by auctioning off Crosstown station sites – prior to excavation, no less – and sources tell me rail-plus-property is actually on the radar.
That’s progress, and maybe the rapidly shrinking window for getting things right at Kennedy might just allow us to focus in a timely and productive way.
So, again, imagine that First Gulf owns this Kennedy site, which may one day rival Union Station for the best, rapid-transit-served location in the GTA. At Unilever, First Gulf talks of 50,000 jobs and development investments worth $6-biillion (and let’s hope they succeed). And it’s obvious that First Gulf has worked hard to get the ear of the mayor’s office; maybe we as a citizenry should try to do the same.