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Phone: (905)546-2712

Fax: (905)546-2535

Web: TerryWhitehead.ca

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Hamilton LRT – Economic Uplift 2016-10-20T12:52:15+00:00

Hamilton LRT – Economic Uplift

Land Value Uplift

The LRT proposed for Hamilton has long been touted as an economic development play.  As many staff, Councillors, and even former Mayors have said, this is not a transit play, its an ec-dev play.  Proponents say that LRT will transform our downtown, raise revenues for the City through increased property values lower the tax burden on the outlying areas like the Mountain.

Rapid Transit is more than just moving people from place to place.  It is about providing a catalyst for the development of high quality, safe, sustainable and affordable transportation options for our citizens, connecting key destination points, stimulating economic development and revitalizing Hamilton.

Rapid Ready Report
City of Hamilton
February 2013

The Rapid Ready Report which was received by Council back in 2013 makes the case for what needs to be done to get Hamilton “Rapid Ready”.  It outlines the steps that need to take place to grow our transit system to a point where it requires, and can ultimately sustain a rapid transit system.

Many proponents however are suggesting that by skipping the early steps of Rapid Ready and moving directly to the implementation phase of an LRT we will jump start Hamilton’s economy and boost our economic fortunes by spurring development in our denser downtown.  This would be on top of the already incredible new development projects we’ve seen in our downtown already over the past several years and would be in addition to those already planned.

Population along the Route

One of the reasons the B-Line route was chosen was that it currently hosts the largest density of residents and employment of anywhere in the city.  This of course should come as no surprise as this is where the bulk of our largest multi-residential and commercial properties are located.  The potential economic uplift to the City of Hamilton was explored in a report commissioned by the City written by IBI.

“Approximately 17% of the City’s population and 20% of the City’s employment are within 800 m of the BLine corridor. Additionally, 80% of HSR’s current routes connect to the B-Line corridor. This means that the probability of Hamilton residents benefiting from rapid transit is high. These benefits include travel time savings, increased travel time predictability and potentially reduced auto ownership and operating costs.”

Economic Potential Study
IBI for the City of Hamilton 2009

The IBI report uses the study area as across the entire B-Line which runs from University Plaza in the West to Eastgate Square in the east.  With the shortening of the LRT from its originally proposed length my office requested updated figures to see what impact the shorter route would have on the proportion of residents and jobs along the line.    As this new shorter route runs through a smaller portion of the city, it would be expected that the percentage of the population that live along this new shortened corridor would be smaller.

Our office requested the updated number from staff and were startled to discover that this percentage has grown from 17% to 20%.   We have been trying to find out how this has happened, and to identify where the error took place.  To put this into context, a 3% increase in Hamilton’s population would be nearly 16,000 people or roughly half the population of Ancaster.  How numbers can be off by this much are concerning and lead to other questions about the accuracy of information that was previously presented.

Sources

City of Hamilton

Rapid Ready 2013

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IBI for the City of Hamilton

Economic Potential Study 2009

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Development Charges

IBI suggests the City would be able to generate significant revenue through new development charges.  While this sounds good it is important to note that a portion of our downtown receives an 85% exemption on development charges in order to encourage development in our downtown.

Further to that, development charges, as per the Planning Act can only be used to fund growth related projects.  These include the construction of new roads, parks, rec centres, etc that are growth related.  With Hamilton’s present $3.3 billion infrastructure debt and an infrastructure deficit of around $195 million a year there are those that are calling for these development charges to be spent to fix up our roads, sewers and also be spent on other projects to bring our infrastructure deficit under control.  The Planning Act however does not allow for this.

For the City to benefit from new development charges as a result of LRT construction, we would have to end this highly successful rebate program that has seen our downtown explode over recent years with new condo and rental apartment construction.

Businesses Grow Faster along LRT Lines than BRT Lines

IBI makes an important claim in their report and it is this claim that has been used to discourage BRT in favour of LRT.

During the initial years of service, LRT is also projected to be about more expensive to operate than BRT, about 30% more on a cost per passenger basis, but the difference will diminish over time as ridership levels increase. However, it is generally accepted that LRT has a greater impact on investment decisions and economic growth than BRT, and the long term capacity of LRT is greater.

Economic Potential Study
IBI for the City of Hamilton 2009

The implicit statement here is that: LRT will cause new construction to begin and new businesses to open.  The IBI report does not cite any empirical studies on this however.  It does point to statements made by LRT proponents as well as planners in cities that have LRT but there is no link to any empirical data.  A decision of this magnitude and importance should not be made on anecdotal stories and ideas, but on empirical evidence.  We need to employ an evidenced based policy going forward to ensure we get this right.

IBI for the City of Hamilton

Economic Potential Study 2009

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Looking Beyond the Tip of the Iceberg

The empirical data on Land Value Uplift as as result of rapid transit is now being looked at by some very accomplished transportation researchers and economists.  Christopher Higgins and Pavlos Kanaroglou from the McMaster Institute for Transportation & Logistics have written a terrific paper that was published back in April of 2016 that casts doubts on the idea that rapid transit brings a guaranteed land value uplift.

“…despite the general notion that rapid transit does confer positive LVU (land value uplift) benefits, our comprehensive and critical review of more than 40 years finds significant heterogeneity (diversity) in research outcomes, leaving many significant questions unanswered”

Christopher D Higgins, Mark R Ferguson and Pavlos S Kanaroglou
McMaster Institute of Transportation & Logistics
As Published in: Transport Reviews Volume 36 issue 5, 2016
April 22, 2016

Higgins et al throw open a vast question as to whether or not rapid transit does lead to land value uplift.  This is vital for the Hamilton project as it has already been shown that Hamilton does not have the ridership to support an LRT nor does it have the traffic congestion normally associated with the need to deploy higher order transit.

The report states that:

An argument is often made that rapid transit has generally produced a modest LVU impact of around 10% for homes close to stations, with the highest values seen for heavy rail transit (HRT) and commuter rail transit (CRT lines compared to light rail transit (LRT) and bus rapid transit (BRT)).

ibid

Obviously no one can see the future, to know whether or not there will be additional LVU caused by proximity to a transit station but what we do have is historical data.  In Hamilton we have a large condominium complex located directly adjacent to the Hunter St GO station.  Based on the above statement the condos located adjacent to, or within a reasonable walking distance (usually 400 – 800 meters as stated in other studies) properties located near the Hunter St GO Station should have experienced a higher increase in land values than similar properties not located next to the GO Station.

A 400 meter radius from the Hunter St GO Station

A 400 Meter radius from the Hunter St GO Station shows where the highest LVU in the City should be located

To calculate the land value uplift brought on by transit you must first take the growth an area is experiencing on its own and then compare that to the growth in values to the properties close the the rapid transit station.  Staff have so far been unable to show us these numbers but they are apparently working on them.  We will share them as soon as they are available so we can see if there has been any LVU as a result of the GO station at Hunter St.  This should give us an idea as to the kind of uplift we should expect for a lower order rapid transit system like an LRT.

GO currently provides 4 trains during the morning rush hours to Union Station in Toronto and provide express bus service roughly every half hour during the day dropping to hourly busses after 10pm.  There are also 4 return train trips during the evening rush hours and a similar express bus service.

We will continue to press for these numbers and will release them when they are finally provided.  These numbers while not definitive, would provide a window on to how much value homeowners place on the proximity of transit to their homes.  We will also be asking for a report on apartment rental rates within the catchment area of the station to be compared to similar apartments outside the catchment area to see what affect if any this higher order transit has on rental rates.

In regards to LVU studies that have taken place the report states:

“… we argue that previous research has suffered from a lack of empirical specificity that results in omitted variables related to drivers of LVU in station areas, such as relative accessibility and TOD.  Essentially, the research design of previous studies means they have only estimated LVU in aggregate, capturing just the tip of the complex iceberg of factors that inform LVU in rapid transit station areas.

ibid

Christopher Higgins and Pavlos Kanaroglou

Forty Years of Modelling Rapid Transit's Land Value Uplift in North America: Moving Beyond the Tip of the Iceberg

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Empirical Studies on Land Value Uplift

Looking at current empirical studies on Land Value Uplift as a result of rapid transit implementations has cast a shadow over the idea that simply building LRT in Hamilton will lead to economic uplift.

“…in theory, rapid transit can potentially have both a ‘generative’ and ‘redistributive’ impact on land use and development.  However, a growing body of scholarly research challenges the generative land use effects of rapid transit, arguing that rail transit on its own cannot generate new urban economic or population growth”

ibid

Higgins et al go on to point out that rapid transit can be used as a tool to guide growth that would have ocurred anyway along a particular corridor.  This suggests that the economic uplift along a transit corridor is simply shifting growth from one place to another making this a zero-sum game.  If the growth we are chasing is coming anyway, is it worth while spending a billion dollars to get it?

This has been referred to in other studies as well and was brought up again in a recent conference call that my office had with the economist Jenny Schuetz who studies transportation systems in the United States.

Christopher Higgins and Pavlos Kanaroglou

Forty Years of Modelling Rapid Transit's Land Value Uplift in North America: Moving Beyond the Tip of the Iceberg

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How much will LRT improve property values?

As has been pointed out the implementation of an LRT system is an economic development play.  Rapid Ready states:

Rapid Transit is more than just moving people from place to place.  It is about providing a catalyst for the development of high quality, safe, sustainable and affordable transportation options for our citizens, connecting key destination points, stimulating economic development and revitalizing Hamilton.

According to the Metrolinx produced King-Main Benefits Case report, the estimated premium of being within 500 meters of any new LRT station will be between 4 and 6 percent over properties that fall outside of the catchment area.  The estimated premium for BRT as a reference was between 1 and 7 percent within a 400 meter catchment area.

As numerous reports and studies are now coming out that show it is far harder to gauge potential increases (or decreases as the case can be)  in land values around a station, these numbers should also be looked at very carefully before moving forward.

Steer Davies Gleave for Metrolinx

Hamilton King-Main Benefits Case (2010)

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How much will LRT improve retail activity and jobs?

The report by Higgins et al raises red flags in terms of estimating a blanket percentage increase in land values as a result of implementing rapid transit, but their report isn’t the only one that looked at this.  Jenny Schuetz, an economist at the US Federal Reserve who studies Housing Markets and Urban and Regional Policy wrote a paper in 2014 entitled: Do Rail Transit Stations Encourage Neighborhood Retail Activity?  The study looked specifically at retail growth at four separate mass transit stations in California.

The study found that out of four stations studied, two stations experienced a significant loss of retail employment after the stations were opened.  A third station saw an increase but found the increase to be statistically insignificant.  The fourth station saw a growth in retail employment that was quite significant.

The study concluded that:

“In part, the difficulty lies in what the primary purpose of building transit stations and rail networks should be: is the goal of such investment to improve functioning of the transportation systems within a metropolitan area, or is it to spur economic development? Building rail stations in centrally located neighborhoods that already have a high density of residents or businesses seems likely to improve access to existing jobs, goods and services, but may not result in increased economic activity if these areas are congested or require costly redevelopment. By contrast, suburban stations will likely serve fewer potential passengers, but may offer greater potential for greenfields development projects, oriented around the station. The results raise questions about whether building new stations will be an effective economic development tool for underserved neighborhoods in central cities.”

Jenny Schuetz
Do Rail Transit Stations Encourage Neighbourhood Retail Activity?
Urban Studies volume 52 no. 14

Schuetz’s conclusions lend credence to the idea that building rapid transit out to more suburban areas to bring riders into a downtown maybe a better way to stimulate development as opposed to simply building a system in an urban setting to stimulate growth.

Jenny Schuetz

Do Rail Transit Stations Encourage Neighborhood Retail Activity? (2014)

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A Wide Variety of LVU Outcomes

In his PhD dissertation, the now Dr Christopher D. Higgins at the McMaster Institute for Transportation & Logistics demonstrates how difficult it can be to forecast LVU outcomes as a result of a rapid transit project.  He also points out how difficult it can be to determine the outcome even after a project has been completed.  His dissertation states that:

“In Dallas, Weinstein and Clower’s (1999) comparisons of single detached homes within one-quarter mile of different  stations ranged in value from +49% to -49%. In Phoenix, Kittrell (2012) found that prices of vacant land ranged from -12% to +1,639% at different METRO LRT stations. And in the case of Buffalo, Hess and Almeida (2007) found that across their sample of homes within one-half mile walk of any LRT station, prices increased by roughly $1 for every foot closer they were to a station. However, a separate model considering different stations individually found results ranged from +$27 to -$26 per foot. Even among four neighboring stations, the LVU impacts were determined to be -$26, +$5, -$23, and +$27 per foot closer to each respective station.

A Value Planning Framework for Predicting and Recapturing the Value of Rapid Transit Infrastructure (2015)
Christopher D. Higgins

This is deeply concerning as the primary purpose for the LRT system in Hamilton is to transform the city and grow the residential and nonresidential tax base by growing the value of properties along the line.  With such stark differences in outcomes in even the same LRT system in other cities we need to better understand what the expectation is and how we are going to achieve it.

Christopher D. Higgins

A Value Planning Framework for Predicting and Recapturing the Value of Rapid Transit Infrastructure (2015)

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