At a recent board workshop, VTA disclosed estimates that it might be able to raise $240 million for the BART-Silicon Valley project through “value capture”, including $170 million for development at the Downtown and Diridon stations.
VTA hired Ernst and Young to explore a variety of tools to raise money for the $4+ billion project. One of these tools is “value capture” – which means utilizing some of the increased value of station area real estate to help pay for the transportation infrastructure that causes the place to be worth more.
Most of the funding from value capture, according to Ernst and Young’s analysis, would come from the Downtown and Diridon station areas ($170 Million). Those station areas are encumbered by old redevelopment obligations. If the stations didn’t have redevelopment obligations, the total that could be raised by station area developments in the Downtown and Diridon areas would be ~$650 million. (The picture is an artists rendering of potential development at the Diridon station).
San Jose’s General Plan calls for adding millions of square feet of commercial space supporting tens of thousands of jobs and about 10,000 housing units in the greater downtown area including Diridon Station.
These value capture calculations are looking even more appealing this week, after the announcements that Adobe has sold its interest in land currently used as Diridon parking lots to a set of real estate developers interested in building nearly a million square feet of office space, 325 apartments, and 30,000 square feet of retail on land currently used for surface parking at the station area.
Plus, today’s news that the Supreme Court has rejected the City of San Jose’s appeal to bring the A’s to the Diridon Station Area, likely freeing up space slated for a ballpark for offices.
The information about the funding that San Jose’s station areas could contribute to the transit projects may also be of interest to other cities on the Caltrain corridor looking to raise money for infrastructure in their station areas.
Mountain View is exploring what to do with the area currently covered by surface parking lots at the downtown Caltrain station, and will be looking to fund major station area improvements, including grade separation (or blocking the Castro Street to cars and steering vehicles to Shoreline).
Palo Alto is interested in lowering the Caltrain tracks into a trench, which will cost $1Billion (or $500 Million if they can persuade HSR and freight to take slightly steeper grade).
Other recent examples of value capture funding, in the Bay Area and elsewhere include:
- San Francisco raised $400 Milliion from value capture at Transbay, with 4 million square feet of office space and over 4000 units of housing
- In San Francisco, over 6,000 market rate housing units on Treasure Island are expected to generate $460 million toward an additional 25% BMR units
- In New York City, a 63 story, 1.6 million square foot office building is generating $220 million toward improvements to Grand Central Station,
VTA analysis of value capture opportunities
Value Capture for San Jose Greater Downtown
|Infrastructure Finance District||$9||$25|
|Total not including RDA||$34||$143||$177|
|Total including RDA||$53||$595||$648|