Monday, June 30, 2014
New York's highest court holds local governments have power to regulate fracking under zoning authority
Today saw a major decision by New York's highest court regarding regulation of hydraulic fracturing, or fracking. Here is a brief summary Prof. John R. Nolon (Pace) has provided:
In one of the most anxiously awaited New York land use decisions in recent memory, the state’s highest court held today that local governments have the power to regulate hydrofracking under their authority to enact zoning ordinances. Both the towns of Dryden and Middlefield enacted zoning laws that entirely banned gas drilling and associated activities within their jurisdictions. The plaintiffs, a private gas company in one case and a private property owner in the other, claimed that a supersession clause in the State Oil, Gas, and Solution Mining Law (OGSML) preempted local authority. After reviewing the plain language of the OGSML, the statutory scheme, and its legislative history, the court concluded that the legislature did not expressly or by implication preempt the power of localities in New York to regulate land use. Preempted, under the OGSML, in the court’s view, was the power to regulate the details, procedures or operations of the oil and gas industry, not matters normally associated with land use regulation.
The Court of Appeals in Dryden and Middlefield rested its decision on both the Municipal Home Rule Law (MHRL) and the Town Law. The MHRL contains a seldom-cited provision granting authority to local governments, including towns, cities, and villages, to protect and enhance their physical and visual environments. The Town Law is New York’s version of the Standard Zoning Enabling Act, which was the model for most state statutes that delegate zoning authority to local governments. The court pointed to the breadth of municipal zoning powers to provide for the development of a balanced, cohesive community and to the notion that the regulation of land use through the adoption of zoning is one of the core powers of local governments.
This case, along with Robinson v. Township in Pennsylvania and others that support local regulation of hydrofracking are creating a demand for land use clinics to provide technical assistance to local governments regarding their regulatory options. The Land Use Law Center and the Yale Center for Environmental Law and Policy are conducting a long-term project that will engage industry representatives, regulators, scientists, and local leaders in a process of identifying unregulated local impacts and developing sound local planning, regulatory, and non-regulatory practices that localities can adopt. For more project information, visit http://envirocenter.yale.edu/programs/local-gas-impacts.
The cases, Nos. 130 and 131, are available on the Court of Appeals website, under today’s date. http://www.nycourts.gov/ctapps/Decisions/2014/Jun14/Jun14.htm.
Stephen R. Miller
Matt Festa is always preaching to his students (and the rest of us) that everything can be looked at as a land use issue. The World Cup is an amazingly easy example of that. A year or so ago I posted about what happens to old Olympic Villages and other facilities, and those same issues pop up with the World Cup. This year's World Cup in Brazil is such an egregious example of poor land use decisions, that no one needs much convincing that it is a land use issue. Even the New York Times has taken notice. Yet, like John Oliver, I just can't stop watching it.
Friday, June 27, 2014
Last week, I received in the mail a hard copy of the Touro Law Review's "The Taking Issue 40th Anniversary" symposium edition. The Fall, 2013 symposium used the 1973 publication of "The Taking Issue: A Study of the Constitutional Limits of Governmental Authority to Regulate the Use of Privately-Owned Land Without Paying Compensation to the Owners," by Fred Bosselman, David Callies and John Banta, as a starting point around which to gather leading scholars in takings. The collection is a great read on this moment in takings jurisprudence, with several retrospective and several prospective pieces. I was not able to find a link to the symposium edition online, but here is an image of the edition's cover page. I'm guessing TLR might send a copy to those interested or, of course, most of the articles will be on the legal databases soon.
Stephen R. Miller
Thursday, June 26, 2014
No one is more surprised than I with how much time I spend reading about tax law these days, but I wanted to alert folks to another case regarding the valuation of historic conservation easements. This time, we are talking about Maison Blanche - a fancy former department store now an even fancier Ritz Carlton on Canal Street in New Orleans.
In 1997, the Whitehouse Hotel Ltd. (owner of the property) donated an historic preservation conservation easement to protect the facade to the Preservation Resource Center. Whitehouse's appraiser estimated the value of the conservation easement at $7.445 million (not $7,445 million as the 5th Circuit opinion mistates). The IRS cried foul and valued the conservation easement at $1.15 million and also dinged Whitehouse for an extra 40% for underpaying by more than 400%.
Unsurprisingly, litigation ensued. Whitehouse v. CIR, 2014 WL 2609866 (5th Cir. 2014), decided on June 11th is the second time the case has made it up to the 5th Circuit. The disputes have generally been battles of appraisals and valuation methods. I am not going to express any opinion about the appraisal methods but thought I'd point out a few things.
What does the conservation easement allow?
There was a big dispute here as to whether the conservation easement actually had any value. One of the appraisers suggested that because the conservation easement would not actually prevent Ritz Carlton from building what it want to build, the value should be zero. The highest and best use of the property is unchanged by the conservation easement. This conclusion turned in part on the language of the conservation easement and whether it actually prohibited the potential building of 60 additional rooms on part of the hotel complex. The Tax Court agreed with the appraiser that the conservation easement did not have such a prohibition. Whitehouse I, 131 T.C. 112 (Tax Ct. 2010). The Fifth Circuit disagreed. Whitehouse II, 615 F.3d 321 (5th Cir. 2010). On remand to the same judge, the Tax Court reviewed Louisiana servitude law and again stated its belief that the conservation easement did not restrict the additional building and should not have value BUT the Tax Court acknowledged that it was bound by the 5th Circuit's precedent and estimated the conservation easement value based on that assumption (coming up with as the 5th Circuit said "merely $1,867,716"). Whitehouse III, 139 T.C. 304 (Tax Ct. 2012).
Undoubtedly feeling that it got a raw deal from an unbiased judge, Whitehouse appealed but the 5th Circuit upheld the Tax Court stating that even though the Tax Court went out of its way to voice its disagreement with the 5th Circuit that was allowed as long as it actually followed the 5th Circuit.
Can you rely on tax professionals' assessments of your conservation easements?
Well, at first blush the answer to this question looks like "no" because the appraiser was so wrong. But the key question to consider for this case is whether Whitehouse's reliance on its appraiser and other professional should protect it from the penalty for gross underpayment (the 400% thing I mention above). There is a reasonable cause exception that allows taxpayers to get out from under this rather steep penalty. This issue is important for people interested in conservation easements because we see over and over again how far apart the private appraisals can be from those the IRS calculates. How much should we penalize landowners for their underpayments made in reliance on qualified professionals? The Tax Court imposed a 40% gross underpayment penalty, holding that Whitehouse had not done enough to demonstrate that it had reasonable cause to believe the appraisal. The court may have been particularly persuaded by the fact that the appraisal of the conservation easement exceeded the price actually paid for the property. The 5th Circuit reversed on this issue because Whitehouse had consulted with more than one appraiser and consulted other tax professionals. The 5th Circuit found this to be adequate.
I am really torn on this one. We want landowners to be able to rely on qualified appraisers and to impose a 40% tax penalty could be particularly painful to small landowners. But there have been repeated examples of bad appraisals around and it seems like there has got to be some type of smell test. Where a conservation easement is valued so much higher than the purchase price of the property, I hesitate too. Of course, I understand that the purchase price doesn't really tell you the value of the property and the value of what an entity like Ritz Carlton can get out of a property, but at the end of the day as a taxpayer, I don't even like the fact that the landowners here got a $1.8 million dollar charitable tax credit to build a big fancy hotel and condo complex that will make them oodles of dollars. Arguing that they lost $1.8 million because they couldn't make it as absolutely big as they might have just leaves a bad taste in my mouth.
June 26, 2014 in Architecture, Caselaw, Conservation Easements, Development, Economic Development, Federal Government, Historic Preservation, Land Trust, Real Estate Transactions | Permalink | Comments (1)
Transportation is always a hot-bed of debate in land use planning, but I'm guessing few transportation planners in the U.S. have had to deal with the issue facing transportation planners in Iceland: elves. From the BBC:
Plans to build a new road in Iceland ran into trouble recently when campaigners warned that it would disturb elves living in its path. Construction work had to be stopped while a solution was found.
From his desk at the Icelandic highways department in Reykjavik, Petur Matthiasson smiles at me warmly from behind his glasses, but firmly.
"Let's get this straight before we start - I do not believe in elves," he says.
I raise my eyebrows slightly and incline my head towards his computer screen which is displaying the plans for a new road in a neighbouring town. There are two yellow circles marked on the plans, one that reads Elf Church and another that reads Elf Chapel. Petur sighs.
"Ok," he acknowledges wearily. "But it's not every day in Iceland that we divert roads for elves. It's just in this case we were warned that elves were living in some of the rocks in the path of the road - well, we have to respect that belief." He grins shyly and picks up his car keys.
"Come on, I'll show you where the elves live," he says indulgently.
Rest of the article here.
Hat tip to my friend John Ghazvinian, who, with this story, finally discovered how interesting land use law can be.
Wednesday, June 25, 2014
Prof. John R. Nolon (Pace) has an nice blog post on land use climate change bubbles that would likely interest readers of this blog. From the post:
In February, I posted a blog on Pace Law School’s GreenLaw site defining a land use climate change bubble. I noted that real estate prices in many parts of the country are beginning to fall due to the real and perceived effects of climate change on land use. What is happening indicates that a variety of climate bubbles are forming in vulnerable areas and that the evidence is visible on the land: a nation-wide profusion of “reverse land use climate change bubbles.” In the June 21st edition of the New York Times Sunday Review Section, Henry M. Paulson Jr., Secretary of the Treasury during the housing bubble era, wrote, “We’re making the same mistake today with climate change. We’re staring down a climate bubble that poses enormous risks to both our environment and economy. The warning signs are clear and growing more urgent as the risks go unchecked.” For more on this topic and about the Land Use Law Center’s “backyard bubble” project click here.
The post also details Pace's Backyard Bubble Project. More on that from the post:
The Backyard Bubble Project
As I have been discussing our land use climate change bubble investigations with professors and stakeholders in other parts of the country, several of them have mentioned evidence of local vulnerable areas in their own backyards where a bubble is forming; let’s call these “backyard bubbles.” If you are aware of a reverse land use climate bubble forming or collapsing in your backyard, here’s what you can do:
1. Send us a description of the area involved and what is happening that is causing concern about a potentially permanent decline in property values; and
2. Provide some evidence of disinvestment in the vulnerable area obtained from local leaders, real estate brokers, insurance providers, or real estate appraisers indicating that prices are trending downward.
Your reports can be sent to me at email@example.com.
Sounds like a great project. I'm sure Prof. Nolon would especially love to hear from the city attorneys and other practitioners out there who read this blog and may have "on the ground" knowledge to share.
Stephen R. Miller
Monday, June 23, 2014
As long-time readers know, I have an obsession with interest in conservation easements. In particular, I have been intrigued with a category I call "exacted conservation easements," which I view as any conservation easements that have been created in exchange for some type of land-use permit or development benefit.
Many conservation easements are donated to land trusts and government entities. Those landowners are then able to seek deductions for charitable contributions on their federal tax returns based on the fair market value of the conservation easement. Of course, calculating the fair market value of a conservation easement may not be a simple task, but we can leave that discussion for another day. Today, I want to talk about the potential for tax deductions on exacted conservation easements.
Exacted conservation easements exist because a landowner is seeking the right to develop or change her land in a way currently restricted by law. For example, where a landowner wants to convert endangered species habitat into a residential development, the landowner often agrees to burden other land with conservation easements in exchange for an incidental take permit. Now, in what I hope is an uncontroversial statement, I often assert that such conservation easements should not garner landowners any charitable tax benefits. Unfortunately, I heard many stories of landowners seeking and obtaining tax deductions for such properties.
In a recent tax court opinion, we see an example from Colorado. In Seventeen Seventy Sherman Street, LLC [SSSS] v. CIR, T.C. Memo 2014-124, the Tax Court examined the deductibility of historic facade and interior conservation easements. SSSS wanted to develop an historic site (the Mosque of the El Jebel Shrine of the Ancient Arabic Order of Nobles of the Mystic Shrine) in Denver into condos. Because the property is a designated landmark, the architect proposed building in the parking lot and preserving the shrine "as leverage to induce the city of Denver to modify the zoning restrictions governing the use and development of the [property,]" which at that time was not zoned for residential development (T.C. Memo at 5-6). SSSS then entered into negotiations with the city's Community Planning and Development Agency regarding changes to the Planned Unit Development (PUD) for the area, the conservation easements, height variance, etc. The Agency asserted that it would not recommend any changes to the PUD or granting of the height variances without the conservation easements.
Hopefully, you see quickly why I label these exacted conservation easements (or I sometimes call them "coerced conservation easements") and why they differ from the vision most folks have of conservation easements protecting the family homestead and helping farmers keep the property in the family. Here, we have a developer with no emotional connection to the property simply making a deal to obtain the development rights that the developer sets as its goal. This doesn't mean that the developer doesn't value the historic, scenic, and cultural benefits of this property. Indeed, a developer may purchase an important or beautiful site exactly because it believes those features are important, BUT we may not have the same ideas of freedom of contract or donative intent involved. We might want to view such conservation easements differently, more critically.
So what kind of tax break should SSSS be able to get here? My initial take on these has always just been zero. The conservation easements were exchanged for a varaince and favorable development measures; they are not donations. But as the Tax Court points out, we may be able to find some instances where some of an exacted conservation easement was done in exchange for a permit or some other benefit, but the value of the restriction actually exceeds the value of the permit. Frankly, while I agree generally with that sentiment, I have trouble picturing where that might occur. How do we calculate that? Without the conservation easements here, we know there would have been no permit. So can we really say that the value of the conservation easements exceeds the value of the permit? If so, are there ways to confine the conservation easement to bring it in line with the value of the permit? They have to be perpetual, so we could only change other characteristics. Suddenly I feel like we are immersed in some Dolan-like analysis of value and proportionality.
The conservation easements in this case were first valued at over $7 million. On its tax forms, SSSS did not indicate that it had received anything of value in exchange for the conveyance of the conservation easements (to Historic Denver). The IRS responded that SSSS had failed to meet some filing and appraisal requirements and asserted that the conservation easements should only be valued at a little over $2 million but claimed that the interior CEs were not deductible at all, leaving the potentially deductible amount at $400,000. Here, the Tax Court did not need to determine the value of the conservation easements or the value of the development benefits SSSS received in exchange for them because SSSS failed to identify that it received consideration for the CEs as required by the Tax Code. The court continued to explain that the exchange sure looked like a quid pro quo one with SSSS agreeing to the CEs (whatever their value) in exchange for the Planning Agency's support (whatever its value).
I am glad to see the IRS taking a careful look at these conservation easements. Generally, I think we should be wary of any conservation easements emerging from development schemes.
Thursday, June 19, 2014
The NYT had a nice piece about a Maine case regarding whether the state can require a business license from a farmer if purchases are made only directly from a farmer and the farmer does not advertise. See the article here.
I've followed this "food sovereignty" issue throughout this spring on the blog and through my clinic's project on agritourism. I've come to believe that we're on the cusp of significant regulatory change--and potentially significant litigation--as agritourism operations proliferate especially at the rural-urban interface.
Stephen R. Miller
Many of the exciting conservation easement cases (yes I did say "exciting conservation easement cases") come up in the context of facade easements. I think facade easements just sound sketchy questionable to many of us. Someone with a beautiful historic building gets a tax deduction for agreeing not to destroy the facade of that beautiful home. My gut reaction is to object that the landowners unlikely had any plan to mar one of the aspects that likely drew them to purchasing the building. In fact, I have heard more than one landowner brag that they just got a tax deduction for doing what they were already doing. On further consideration though, we can see that there might be value to the public here. This is particularly so in an area where (1) landowner are having trouble affording the upkeep on the homes or (2) where economic pressures or a lack of other protection mechanisms put the buildings at risk. Some have argued that such restrictions always have value. That is, even if we have a landowner who was already planning to protect the building and the home is in a district where local laws prevent destruction (or require upkeep), you never know what the future holds in terms of other landowners or changing government whims so a facade easement may end up saying the parcel one day. Personally, such speculative value doesn't seem the best use of public funds when we can confidently identify so many places where conservation yields immediate results.
Scheidelman v. C.I.R. (2014 WL 2748623) decided yesterday by the Second Circuit is the latest in a saga over the deduction of a Brooklyn townhouse. In 1997, Huda Scheidelman paid $255,000 for this house in the designated Fort Greene Historic District. The district is designated as a historic district by the National Park Service and by NYC's Landmarks Preservation Commission. Under these protections, it is illegal to alter the facade without the consent of the Landmarks Preservation Commission.
In 2003, Scheidelman donated a facade conservation easement to the National Arhcitectural Trust, now renamed the Trust for Architectural Easements. The Trust's recommended appraiser valued the conservation easement at $115,000 and Scheidelman claimed a charitable deduction for that amount on her 2004 tax return.
After an audit the IRS rejected her claimed deduction as not being accompanied by a "qualified appraisal" as required by statute. The Tax Court agreed, but the Second Circuit vacated and sent the case back for a de novo review of the fair market value of the conservation easement. After doing so, the Tax Court determined that the value of the conservation easement should be $0 because it did not diminish the property value of Scheidelman's townhouse. Using the standard before and after method of appraisal, this calculation makes sense. Because other laws already restrict the property, the presence of the conservation easement doesn't change the value of the property. Of course, some may argue that the before and after method isn't appropriate and perhaps instead we should do some calculation based on value to the public but well... that's a harder number to crunch and more open to abuse. The Second Circuit just upheld the tax court's finding that the deduction had no value.
My favorite line of the Second Circuit (per curiam) opinion is the statement that conservation easements do not represent a per se reduction in fair market value and in fact may even serve to enhance property value.
Tuesday, June 17, 2014
If you are like me, you have a humongous pile short stack of articles that you hope to one day find time to read. Summer is when I get my chance to make a dent in this continuously replenishing tower of fun.
Today, I delved into some 2013 articles by geographer Erle Ellis and was struck by how helpful they are for thinking about land use, particularly in the context of land conservation, working landscapes, and a changing world.
In Sustaining Biodiversity and People in the World's Anthropogenic Biomes, 5 Current Opinion in Env't Sustainability 368 (2013), Ellis introduces me to a new term: anthrome. A foreshortening of anthropogenic biome, anthromes are ecosystems characterized by human involvement. That is, these are landscapes shaped by humans. Building off of Crutzen's idea of the Anthropocene, Ellis explains that 3/4 of the terrestrial biosphere can now be described as anthromes. What is the implication of this? Well that is perhaps harder to pin down. If we are are shaping ecosystems, maybe we have a bigger role to play in ensuring the viability of the systems and protecting biodiversity. When anthromes replace wildlands, perhaps we need to shift some of our conservation efforts to such lands. Ellis' research suggests a promising message: that anthromes may actually still sustain native species and we can increase the benefits of these lands to humans while protecting for biodiversity. Sounds good to me, but sounds like a tough road ahead. This work ties into scholarly discussions of novel ecosystems, something I am finding increasingly helpful for think about land conservation. Novel ecosystems are new types of biomes that have no real precedent or previous corollary and therefore our approach to land conservation (and resiliency) must confront this concept when thinking about what is the world that we want to protect.
In Used Planet: A Global History, 110 PNAS 7978 (2013), Erle joins with a crew of folks from the Global Land Project to discuss patterns of land use change and land use intensification over time. Those land use history buffs among us might find this piece particularly intriguing as the authors describe land-use intensification as "adaptive processes by which human populations systematically adopt increasingly productive land-use technologies." Under this lens, the authors track two different models for global land-use history. Ending with a hopeful note, the authors suggest that the next stage of land use may be one where we become more efficient and may succeed in reversing environmental impacts of prior land use. Thus, both projects end with optimistic thoughts about the future (but calling on us to make tough decisions and do hard work). I look forward to continuing projects from this group.
Monday, June 16, 2014
A news story from Colorado today illustrates that fracking, and especially its relationship to exurban communities, continues to be a challenging issue. From a local Colorado newspaper:
In January, Geri and Steve Nelson moved from Aurora into a brand new home in Erie's Vista Ridge neighborhood, on a choice plot with a backyard overlooking a golf course and several acres of wide open fields.
Two weeks ago, Geri Nelson noticed three trucks and an unusual wire strung along the walking path behind her home. She asked around, and found out 13 oil and gas wells are slated for installation in the untouched greenery that her back porch overlooks.
Now the couple and some of their neighbors, most of whom also moved to Vista Ridge within the last year, are up in arms over a development they fear will dramatically change their quality of life, and which they said they never were warned of prior to buying their new homes.
"We moved into a house thinking we had nice quiet back there," Geri Nelson said. "If houses went in eventually, houses went in eventually. But we never imagined that there would be noise and drilling and lights 24 hours a day. That's a surprise to us."
Read the rest of the story here. Those interested in the issue will want to keep abreast of the Pace / Yale collaboration on local government and fracking that we highlighted earlier this month. Read the team's white paper on the subject here.
Stephen R. Miller
Wednesday, June 11, 2014
Last week, Buffalo hosted the 22nd Congress for New Urbanism. With a constrained conference budget, I was planning on just scoping out the (numerous) public events. Then conference funding came through from a surprising source. I actually won free conference registration via Yelp! (yes it pays to be elite). I am not sure what it says about academia when we have to look to social media to help with our research funding but I was happy to get in the door!
CNU 22 was a mixture of the inspirational and the mundane. It was amazing to see people from all over the country (and particularly so many from Buffalo) coming together to think about how to improve your communities. I bathed in the local pride (feeling the Buffalove as we say around here) and heard inspiring tales about efforts in Toronto, Minneapolis, DC, and Milwaukee. But nothing was actually radical. In some ways this is an encouraging story. It no longer seems crazy to argue that suburban sprawl is destroying community. I really didn't need convincing that we should have more walkable or bikable cities. There seems to be general agreement on what elements make for a thriving urban environment and largely agreement from the attendees on how to get there (community involvement, form based codes, economic development). Thus, while I enjoyed myself and met some fascinating folks I left the conference with an empty notebook. Maybe I just attended the wrong sessions, but I wonder what types of legal changes we might need, what type of property tools we can use, and of course who is gonna fund it all. Any suggestions?
June 11, 2014 in Community Design, Community Economic Development, Conferences, Downtown, Economic Development, Form-Based Codes, New Urbanism, Pedestrian, Planning, Smart Growth, Sprawl, Urbanism | Permalink | Comments (2)
Monday, June 9, 2014
From Mike Burger...
Thursday, June 5, 2014
The editors of the Land Use Prof Blog are excited to announce that we have changed the "comments" section of the blog to be "unmoderated." We are doing this because we realize that it has often taken us too long to discover comments that need to be posted and, we believe, this has likely stifled some discussion that would otherwise occur. And so, we are going "unmoderated" for a trial period. That means that as soon as you post a comment, it will now appear on the blog immediately.
Now for the legalese. We reserve the right to delete any comment for any reason, though we anticipate wielding such power only in the few cases where we receive spam or comments that are not befitting of the forum's expected collegiality and are beyond the realm of spirited debate.
So go ahead, comment away!
University of Florida Law seeks non-tenure track skills instructor focused on Environmental and Land Use Law
The University of Florida Fredric G. Levin College of Law seeks to fill a non-tenure track skills instructor lecturer position focused on Environmental and Land Use Law. Applicants for this position should hold a J.D. degree from an accredited law school, be a member in good standing of a state Bar, and have a minimum of three years of experience practicing environmental or land use law. Primary responsibilities will include developing and teaching skills courses on topics such as interviewing and counseling as well as skills and experiential courses, including field courses, in the College’s Environmental and Land Use program, and supervising externships and projects. Experience with Florida or federal environmental, water or land use law, current Florida Bar membership, and experience seeking grants are desirable. The anticipated starting date is January 2015. The salary range is $60,000 to $66,500 for a 12-month appointment. Members of groups under-represented in the legal profession including persons of color and women are particularly encouraged to apply. To apply go to: http://jobs.ufl.edu. Refer to requisition number 0905739. Please include CV, transcript(s), and the names of three references. The University of Florida is an equal opportunity employer. If accommodation due to disability is needed to apply for this position, please call (352)392-4621 or TDD (352)392-7734.
Monday, June 2, 2014
New GAO Report: Length of Development Process, Cost Estimates, and Ridership Forecasts for Capital-Investment Grant Projects
Overshadowed by the EPA's release of climate change regs today was a new GAO report that will be of interest to land use folks. The report, entitled Length of Development Process, Cost Estimates, and Ridership Forecasts for Capital-Investment Grant Projects, provides a look into the vagaries of transportation planning. From the report's abstract:
For the 32 New Starts, Small Starts, and Very Small Starts projects funded from 2005 to 2013 that GAO reviewed, the length of the development process varied substantially, from as little as 2 to as long as 14 years, based on GAO’s analysis of data from the Federal Transit Administration (FTA) and project-sponsors. GAO found that the development process took 3 to 14 years to complete for New Starts projects, 3 to 12 years for Small Starts projects, and 2 to 11 years for Very Small Starts projects. The length of the process is generally driven by factors that are often unique to each project, including (1) the extent of local-planning activities prior to formal approval for funding, (2) the extent and availability of local and financial support, and (3) the extent of FTA oversight activities. For example, sponsors of 17 of the 32 projects GAO reviewed stated that activities to secure local funding contributed to the length of the development process. FTA has taken some steps to streamline this process. For example, in January 2012, FTA eliminated the requirement for the development of a hypothetical alternative that served as a basis of comparison to evaluate a proposed project.
GAO found that capital cost estimates for New Starts, Small Starts, and Very Small Starts projects during the development process generally did not change substantially prior to the award of federal funding. For 23 of the 32 projects GAO reviewed, the final cost estimated prior to receiving federal funding was within 10 percent of the original cost estimates. The remaining 9 projects varied by as much as 41 percent lower and 55 percent higher than the estimates used at the end of the development process. Several project sponsors told us that, when changes did occur, it was a result of changing market conditions and FTA’s recommending that sponsors increase project costs to cover unforeseen events, among other factors. For example, officials at the Valley Transportation Authority, located in Santa Clara, California, stated that FTA recommended that it increase the project’s cost by $100 million to cover unforeseen events.
New and Small Starts project sponsors whom GAO interviewed generally forecast ridership using regional travel models prepared by metropolitan-planning organizations (MPO). Specifically, 8 out of the 9 New Starts project sponsors and 3 out of 4 Small Starts project sponsors GAO spoke with use these travel models. For example, for a Portland, Oregon, streetcar project, the project sponsor used travel forecasts prepared by the Portland MPO. The other New Starts and Small Starts project sponsors use actual transit-ridership data from surveys of regional transit riders; and a statewide travel model, respectively. On the other hand, FTA procedures permit sponsors of Very Small Starts projects to essentially demonstrate, through a detailed counting of riders of existing public transportation in the project’s corridor, that the proposed project will service at least 3,000 transit riders on an average weekday. FTA has taken a number of actions to support the development of ridership forecasts. These include, among other actions, providing funding to state agencies and MPOs to help them collect travel data and develop forecasting procedures and providing technical support, such as reviews of final forecasts. GAO interviewed 13 New Starts and Small Starts project sponsors and most said that FTA’s technical assistance, which includes reviewing the ridership forecasts, was generally helpful.
Stephen R. Miller