New generation of transit hubs redefining train stations’ place in communities

By Bill Holloway

Whereas the grand train stations of yesteryear were monuments to transportation with their soaring cathedral-like ceilings, huge open spaces, and rows of wooden benches – today’s transit hubs have both a new aesthetic and role in their communities. They often link multiple modes – heavy rail, light rail, buses, bikes, etc. – and act as central gathering spaces for their communities, with shops, restaurants, parks, space for performances, and public art. The changing role of transit stations was described recently in an article by Will Doig as “less a soaring monument to transportation than a celebration of urban life—and in the more ambitious efforts, a small city in itself.”

While some transit station renovation projects have generated objections from those who feel that available transit funds should be spent improving transit service rather than building nicer stations, transit hubs that become destinations in and of themselves may offer new opportunities to raise transit revenues through value capture from nearby properties and through the sale or lease of air rights.

Value capture techniques, such as tax increment financing (TIF), allow the public to benefit from the increased value of private properties located near new or improved public amenities, such as parks, roads, and transit stations. The use of value capture for transit revenue generation has been widely studied and, in fact, is the primary method through which Hong Kong supports its transit system, as noted in this recent report from VTPI.  As transit hubs expand to become community gathering areas with a variety of attractions in addition to transportation, the potential to generate revenue through value capture only increases.

The lease or sale of air rights over transit stations, the subject of a recent article by Pamela Friedman in Rail Magazine, presents both an opportunity to leverage private investment to create more dynamic transit hubs and, by increasing the benefits of the development to nearby property owners, increase potential value capture revenue generation. The sale of air rights above previously open rail yards was pioneered at New York’s Grand Central Station in the early 20th century, when the switch from steam to electric trains allowed for rail yards to be covered. Revenue generated from the sale of the air rights over the covered rail yard helped to offset project costs and boost development in the surrounding area. The lease and sale of air rights has been used recently for Boston’s South Station Transportation Center and the Dallas’s Arena Station. Both of these projects generated community-wide benefits through expanded housing, economic development, and job creation.

By opening up the unused air space above transit stations, which is often quite valuable, operators can increase ridership and generate revenue, developers gain access to valuable new space in neighborhoods that are usually already fully built out, and local governments gain new taxable property in areas already equipped with infrastructure. Use of TIF or similar value capture strategies for nearby properties in combination with the sale of air rights above transit stations could provide cities and transit operators with a way to spur economic development, grow transit ridership, and increase the tax base with only minimal public investment.

Bill Holloway is a Transportation Policy Analyst at SSTI.