Potomac Yard Metrorail Station

The City of Alexandria, Virginia sought innovative strategies to finance a new rail station adjacent to a rapidly developing former rail yard. Improving accessibility to the Potomac Yard area and providing more transportation choices for current and future residents, employees and businesses, would establish a new access point to the regional Metrorail system. The city did not have the funds necessary to pay for a new station. However, the planned redevelopment of the 300-acre Potomac Yard area represented a rare opportunity for large-scale, mixed-use, infill development in the Washington, DC region. As such, there was potential to tap into the value created by this development, but the city needed to know how best to do that.

Identifying and Analyzing Value Capture Options

WSP analyzed the financial feasibility of using a combination of value capture mechanisms to finance a new Washington Metropolitan Area Transit Authority (WMATA) rail station at Potomac Yard. The study compared several station locations, development scenarios, value capture strategies, and financing options to support the development of a preferred public-private partnership development strategy.

The analysis included fiscal revenue from new residential, office, retail, and hospitality land uses, incorporating the city’s applicable taxes and fees. We structured our financial model to provide results for several different station locations, incorporating varying station costs and development scenarios in each. We worked closely with numerous stakeholders, including the city’s planning department and tax assessor’s office, WMATA, and private sector developers and nearby landowners to ensure assumptions and inputs to the financial analysis were based on realistic forecasts of land use and development planning and that the resulting revenue could be used to help pay for the station.

Implementing the Right Scheme to Fund the Project

Through a combination of two tiers of special district taxes, net new tax revenues from development, and developer contributions from construction within a quarter-mile from the station, our analysis showed the $320 million station could be financed solely on the revenue generated by the nearby development without any impact on the city’s existing tax base.

This investment-grade analysis was used to support negotiations of a memorandum of understanding with the landowner that resulted in an agreement by the developer for a $50 million contribution to the project. The resulting financial plan and developer agreement were approved by the City of Alexandria Planning Commission and City Council in 2010, laying the groundwork for the redevelopment of this former rail yard into a modern, mixed-use, transit-oriented urban center. 

As development plans became more defined over time, the WSP team periodically provided revised financial forecasts reflecting more specific development plans, actual commercial and residential development, changes in commercial and residential market values, updated station cost estimates, and actual station fund collections.

We also provided support for specific tasks upon request, including assistance with a Transportation Investment Generating Economic Recovery (TIGER) grant application, a federal discretionary grant program in the United States, and analysis to support the successful application for a $50 million loan from the Virginia Transportation Infrastructure Bank (VTIB). We also advised the city on securing a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan of approximately $88 million.

Lastly, we analyzed the impacts of various proposed changes to the financial plan and development agreement, including requests from residents to eliminate the second tier of special district taxes, and developer requests to modify terms in response to changing real estate market conditions. Our analysis of these modifications and resulting findings and recommendations helped the city make informed decisions and be responsive to the various public and private stakeholders involved in this complex project.

A Milestone in the Effort to Bring a New Transit Station to Alexandria

In 2018, WMATA and the City of Alexandra announced the selection of the contractor for the Potomac Yard Metrorail Station. The $213.7 million construction contract is the most recent milestone in the effort to bring a new transit station to Alexandra.

The new station will provide jobs, improve neighborhood walkability and expand transit options while reducing traffic congestion. Once complete, the station and surrounding development will create a thriving community, connected by transit, where people can enjoy seamless access to jobs, education, stores, restaurants and entertainment options – both on site and throughout the region.

The station, to be built on Metro's Yellow and Blue lines between the existing Braddock Road and Ronald Reagan Washington National Airport stations, will provide an extensive range of benefits for Alexandria and the surrounding community, including walkable access to regional transportation systems for neighborhoods in the Northeast area of the city. The station is also expected to generate billions of dollars in new private sector investment over the long term and eventually support 26,000 new jobs and 13,000 new residents. Construction of the station is expected to begin in spring 2019, with completion by late 2021 or early 2022.