Mark Briggs / director of development finance / WSP / US
California High Speed Rail is a perfect example of how we can use development as an economic catalyst. It’s the largest public infrastructure project ever to go ahead in the US, and it’s a socioeconomic as well as a transport programme that is going to change California forever.
The line will eventually run all the way from San Diego through Los Angeles to San Francisco and Sacramento. There are 25 stations and the high-speed rail authority has allocated US$7 million for several jurisdictions to make a station area plan, taking the area within roughly half a mile and looking at how they can best capitalize. The plans will vary tremendously from city to city, as California has very different economic areas. You’ve got LA, a city of 4 million in a region of 11 million. And then you’ve got Hanford in the Central Valley area, which has a population of 55,000.
We’ve been working on a bill that has just been introduced to the legislature, which will require that within a half-mile radius of the stations, the city and county property taxes, the local and state sales taxes and the hotel tax are committed to implementing the plan. Add up those five funding sources and all of a sudden you have a significant and sustainable annual revenue that could be used for anything from building the stations to gap financing for private projects, or to issue tax-exempt bonds that can be used to accelerate development. Of those funds, 20% will be set aside for affordable housing for the local workforce.
It’s one thing to develop a plan, but you need the resources to put it into action. To get the most value out of a transport investment, certainly you’ve got to start significant planning around the stations, understanding the benefits and drawbacks for each one. But people will be encouraged to pursue those plans vigorously if they know there’s a funding source to help implement them. There are a zillion plans sitting on shelves because there was never a finance plan.
Without money, nothing happens. Very often what the private sector can afford to pay for the land or air rights is less than what it costs for land acquisition, relocation, demolition, remediation, off-site improvements — all of those things that have to happen before the private sector can come in. So, the public sector needs to be in a position to be able to write down the land to make it economically viable.
The private sector can’t be expected to do everything, but it is stepping up in a huge way. In San Francisco, the publicly funded Salesforce Transit Center, which opens in June, is the length of a city block with four levels of transport connections, including tunnels ready for when high-speed rail arrives in 2027, and a 5.4 acre park on top. Next to it will be three huge buildings with ramps to feed into the transit centre. The recently opened Salesforce Tower has 61 storeys of offices; its future neighbour will have 170 housing units, a 220-room hotel, 251,000ft2 of offices and 9,000ft2 of retail. That’s 6 million ft2 of new development, all happening in advance.
In places like San Francisco, the private sector didn’t need any encouragement. It’s very different in the Central Valley, an area that has always been depressed. In our projections, we’ve assumed that not a lot is going to happen in advance. But we know from experience that as soon as everything is locked down and the rails are built and the testing has begun, and they know it’s a reality, the development community will want to start doing their projects. When you have something that’s as much of an incentive as high-speed rail, all the public sector has to do is say “we will be your partner”.