[Federal Register Volume 79, Number 164 (Monday, August 25, 2014)]
[Notices]
[Pages 50728-50733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20097]
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DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
[Docket No. FTA-2013-0013]
Notice of Issuance of Final Circular: Guidance on Joint
Development
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Notice--Issuance of Joint Development Circular.
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SUMMARY: The Federal Transit Administration (FTA) has issued and placed
in the docket and on its Web site final Agency guidance, in the form of
a circular, on joint development. This circular provides guidance to
recipients of FTA financial assistance on how to use FTA funds or FTA-
funded real property, for joint development. This circular: (1) Defines
the term ``joint development''; (2) explains how a joint development
project can qualify for FTA assistance; (3) describes the legal
requirements applicable to the acquisition, use, and disposition of
real property acquired with FTA assistance; (4) outlines the most
common crosscutting requirements applicable to FTA-assisted joint
developments; and (5) describes FTA's process for reviewing a joint
development project proposal. This circular incorporates provisions of
the Moving Ahead for Progress in the 21st Century Act (MAP-21), Public
Law 112-141 (2012), advances the goals of 49 U.S.C. 5315 by informing
FTA recipients of opportunities for private sector participation in
public transportation projects, and includes the most current guidance
for the Federal public transportation program. This final circular is
the result of the notice issued by FTA that appeared in the Federal
Register on March 6, 2013, entitled ``Joint Development: Proposed
Circular''.
DATES: The effective date of the circular is October 1, 2014. Projects
for which sponsors have executed joint development agreements with
third parties before October 1, 2014 will be considered according to
FTA's existing guidance and statements of policy.
FOR FURTHER INFORMATION CONTACT: For legal questions, contact
Christopher T. Hall, Office of Chief Counsel, Federal Transit
Administration, 1200 New Jersey Avenue Southeast, Room E54-413,
Washington, DC 20590-0001. For policy questions, contact Sharon Pugh,
Office of Budget and Policy, Federal Transit Administration, 1200 New
Jersey Avenue Southeast, Room E52-322, Washington, DC 20590-0001. For
program questions, contact the appropriate FTA Regional Office.
SUPPLEMENTARY INFORMATION: This notice does not contain a copy of the
final circular. A copy of the final circular and comments and material
received from the public, as well as any documents indicated in the
preamble as being available in the docket, are part of docket number
FTA-2013-0013. For
[[Page 50729]]
access to the DOT docket, please go to www.regulations.gov at any time
or to Docket Operations, M-30, U.S. Department of Transportation, 1200
New Jersey Avenue Southeast, Room W12-140, Washington, DC 20590-0001
between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal
holidays. The final circular is also available on the FTA Web site at
http://www.fta.dot.gov/about/13716.html.
This Notice is organized in the following sections:
I. Introduction
II. Chapter Summary
III. Response to Comments Received
I. Introduction
It is FTA's policy to maximize the utility of FTA-assisted projects
and to encourage recipients to generate program income through joint
development. One of the primary benefits of joint development is
revenue generation for the transit system, such as income derived from
rental or lease payments, as well as private-sector contributions to
public infrastructure. Other benefits include shared costs, efficient
land use, reduced distance between transportation and other activities,
economic development, increased transit ridership, and improved transit
connectivity. The revenue a recipient receives from an FTA-assisted
joint development project is treated as program income and may be used
towards eligible capital and operating expenses of providing transit
services.
This final circular is intended to guide interested parties through
the FTA program and policy requirements that must be considered when
pursuing a joint development project that is FTA-assisted or that will
make use of real property that was previously acquired with FTA
assistance. In the past, FTA has appended its guidance on joint
development to its circulars 5010.1D, 9030.1D, and 9300.1B, guidance
for Grant Management Requirements, Urbanized Area Formula Program, and
Capital Investment Program (New/Small Starts), respectively, and has
published Federal Register Notices of Final Agency Guidance on the
Eligibility of Joint Development Improvements Under Federal Transit Law
(72 FR 5788, Feb. 7, 2007) and Policy on Transit Joint Development (62
FR 12266, Mar. 14, 1997). FTA has decided to consolidate these
references into a single circular to provide guidance to its grantees
on how to use FTA assistance or FTA-assisted real property for joint
development.
A summary of the final circular follows. The final circular itself
is not included in this notice; an electronic version may be found on
FTA's Web site at www.fta.dot.gov/ or on the Docket at
www.regulations.gov as part of docket number FTA-2013-0013. Paper
copies of the final circular may be obtained by contacting FTA's
Administrative Services Help Desk at (202) 366-4865.
II. Chapter Summary
A. Chapter I--Introduction and Background
Chapter I is an introductory chapter. It defines terms used
throughout the circular, provides a brief background of FTA's
authorizing legislation, the effect of the circular, and instructions
for how to contact FTA.
B. Chapter II--Circular Overview
Chapter II introduces the substance of the circular. It describes
joint development as a concept and distinguishes between it and the
related concepts of transit-oriented development (TOD), pedestrian and
bicycle projects, and public private partnerships (PPP or P3). It also
lists several elements of a joint development capital project,
including the funding sources, project eligibility criteria,
crosscutting Federal requirements, and restrictions on the use of real
property acquired with Federal assistance.
C. Chapter III--FTA Assistance for Planning and Capital Projects
Chapter III describes the eligibility requirements for an FTA-
assisted joint development capital project or planning activity.
FTA planning grants are available to assist States, metropolitan
planning organizations, local governments, transit agencies, and others
to plan public transportation projects, including joint development.
FTA program funds may be used to support capital projects. MAP-21
provides the most recent authorization for FTA programs. MAP-21
explicitly includes joint development within the definition of capital
project. This circular describes the MAP-21 provisions on joint
development, and explains each element of the statutory eligibility
criteria, all of which must be satisfied. Chapter III is largely based
on previously published guidance on the eligibility of joint
development activities for FTA funding (72 FR 5788, Feb. 7, 2007).
D. Chapter IV--Real Property Considerations
Chapter IV reviews the requirements applicable to the acquisition,
use, and disposition of real property acquired with FTA assistance.
Chapter IV gives special attention to the circumstances that are most
likely to be part of an FTA-assisted joint development project,
including conveyance of real property for joint development purposes,
protection of the Federal government's interest in how the real
property is used, the maintenance of satisfactory continuing control of
real property in the context of a joint development project, and the
incidental use of real property for non-transit purposes. Chapter IV
also discusses considerations for the adaptation and/or reuse of FTA-
assisted parking facilities for joint development purposes.
E. Chapter V--Cross-Cutting Federal Requirements
Chapter V reviews Federal cross-cutting requirements that are not
unique to joint development projects, but which have application to all
FTA-assisted projects, including joint development projects funded by
FTA or using real property acquired with FTA assistance.
F. Chapter VI--Joint Development Project Review Process
Chapter VI describes FTA's process for reviewing a joint
development project proposal. This chapter documents and discusses the
framework FTA uses for analyzing a proposed joint development project,
including how it assesses the four eligibility criteria. The chapter
also discusses how and what the grantee should submit as a proposal to
FTA for review.
This chapter was not included in the proposed circular. Rather, FTA
stated its intent to include in the final circular a chapter on FTA's
review process and sought stakeholder input on the same in the notice
of availability of the proposed circular. FTA has considered that
stakeholder input in composing the final Chapter VI.
III. Response to Comments Received
On March 6, 2013, FTA published in the Federal Register a Notice of
Availability of Proposed Circular and Request for Comments (notice of
proposed joint development circular) (78 FR 14020). In its notice of
proposed joint development circular, FTA stated its intent to guide
interested parties through the FTA program and policy requirements that
must be considered when pursuing a joint development project using FTA
assistance or FTA-assisted real property. The notice itself included a
chapter summary of the proposed circular, as the proposed circular
itself was not included in the notice; instead, information on
[[Page 50730]]
obtaining an electronic version of the proposed circular was provided.
Twenty-four parties submitted comments in response to FTA's March
6, 2013, notice of proposed joint development circular. FTA hereby
responds to these comments by topic and in the following order: (a)
Notice of Proposed Circular Generally; (b) Fair Share of Revenue; and
(c) FTA Review Process.
(a) Notice of Proposed Circular Generally
The intended purpose of FTA's notice of proposed joint development
circular was to provide guidance to recipients of FTA financial
assistance on how to use FTA funds or FTA-assisted real property for
joint development. The circular: (1) defined the term ``joint
development''; (2) explained how a joint development project can
qualify for FTA funding; (3) described the legal requirements
applicable to the acquisition, use, and disposition of FTA-assisted
real property; and (4) outlined the most common crosscutting Federal
requirements.
FTA received twenty-one general comments covering a wide range of
subjects, including affordable housing, applicability, car sharing,
eligibility criteria, FTA policy, program income, real property, TOD,
and value capture. Several commenters addressed multiple and
overlapping subjects within the general category. Most commenters
requested clarification of subjects discussed or specific terminology
used in the circular. Across the board, commenters were receptive to
FTA providing consolidated and comprehensive guidance concerning joint
development.
Seventeen commenters addressed concerns regarding real property,
including disposition, incidental use, mandatory contractual
provisions, parking, satisfactory continuing control, shared use,
subordination, and transfers. Thirteen commenters sought clarification
on application of the eligibility criteria, and distinguishing between
activities eligible for FTA assistance as joint development and other
capital transit projects. Ten commenters asked FTA to clarify
application of the guidance concerning non-FTA-assisted property, joint
development application to all modes of public transportation rather
than just to rail, and application of the ``originally authorized
purpose''. Six commenters questioned the focus of FTA's stated joint
development policy. Six commenters addressed FTA's stated position on
the concept of value capture. Five commenters asked FTA to explicitly
designate affordable housing development as a type of joint
development, commensurate to the recognition given in the Capital
Investment Program (New/Small Starts). Three commenters sought
clarification on program income. Two commenters addressed
distinguishing between FTA's usage of the terms joint development and
TOD and the usage employed by the transit industry. One commenter
requested FTA to provide specific categorical exclusions for joint
development under the National Environmental Policy Act (NEPA). Another
commenter requested FTA to consider car-sharing as a transit mode
eligible for joint development. One commenter requested requiring more
safety training for commercial drivers.
FTA Response: FTA is pleased by the positive and supportive
responses provided by the majority of commenters to its proposed
circular. The questions and comments received identified several topics
for which FTA has provided additional clarification in the final
circular. Some comments, however, addressed subjects that are beyond
the scope of this circular, but will be useful in development of FTA
programs and guidance in the future. This circular consolidates all of
the existing FTA guidance on joint development, and supersedes any FTA
guidance on joint development contained in other sources. Thus, this
circular supersedes, in their entirety, discrete previously issued
guidance on joint development, including FTA's 2007 guidance and 1997
policy described above. This circular does not supersede in entirety
any existing FTA circulars that include guidance on joint development,
but rather only supersedes the specific joint development guidance
contained therein. Affected circulars will be amended according to
their regular update cycles.
Joint development may be undertaken in conjunction with any mode of
public transportation, e.g., bus, bus rapid transit, transit malls,
light rail, heavy rail, commuter rail, or ferry. Federal transit law
explicitly includes stations and terminals used by intercity bus and
intercity passenger rail systems, except that provided by Amtrak, for
joint development eligibility. Car sharing services, even if located in
close proximity to a transit facility, are not considered to be public
transportation as they are not open to the general public or a segment
of the general public defined by age, disability, or low income.
Joint development is an eligible capital transit project by
statute, and is considered to be within the scope of all capital grants
unless expressly prohibited by a specific term or condition of the
grant. Under the terms of FTA's Master Agreement, joint development is
considered an ``originally authorized purpose'' of prior grants made
for real property acquisition.
The terms ``joint development'' and ``transit-oriented
development'' (TOD) are often used interchangeably within the transit
industry. Whereas FTA distinguishes between them, FTA recognizes that
some recipients consider TOD as joint development and vice versa. FTA
considers a transit operator to be a direct partner or participant in
joint development projects. While a transit operator may be a
stakeholder in TOD, FTA considers TOD to have a broader, community-
sized scope. This circular is not applicable to all joint development
projects undertaken by FTA grantees. This circular applies only to
joint development projects that use either FTA-assisted real property
or FTA funds in the joint development project itself, and, therefore,
have a Federal interest. FTA realizes that its grantees may undertake
transit-oriented development or joint development without any Federal
interest. This final circular does not apply to such projects. FTA
reserves further discussion on TOD for a future document.
FTA's policy is to maximize the utility of FTA-assisted projects
and to encourage the generation of program income through joint
development. Benefits of joint development primarily include revenue
generation for transit, as well as efficient land use, economic
development, increased transit ridership, shared project costs, and
improved transit connectivity. The siting and development of transit
service adds to property values near transit stations, and that
colocation of residential, commercial, and retail establishments with
the transit system enhances social and economic returns for the
community. FTA's treatment of joint development revenues as program
income enables a grantee to apply such revenues to the operating or
capital costs of the transit system. Therefore, joint development
projects should be planned and undertaken to generate revenue for the
transit system from the added value it creates, and project sponsors
should negotiate project benefits, whenever possible, on the basis of
the value added to the property by the joint development. Joint
development is among the value capture strategies most commonly used to
fund and/or finance transit, although other value capture strategies
are also utilized.
[[Page 50731]]
Although joint development is intended to realize value capture
from transit, FTA acknowledges that many transit agencies have
incorporated affordable housing goals into their joint development
policies. FTA does not wish to interfere with local policy goals
relative to joint development. Accordingly, FTA does not designate the
types of joint development projects that a grantee may undertake or
give preference to any particular types of joint development projects.
Section 5302(3)(G) of title 49, United States Code, establishes the
following criteria for determining whether a joint development
improvement is eligible as an FTA-assisted project under Federal
transit law. An eligible joint development project must: (1) Either
enhance economic development or incorporate private investments, such
as commercial and residential development; (2) either enhance the
effectiveness of public transportation and be related physically or
functionally to public transportation, or establish new or enhanced
coordination between public transportation and other transportation;
(3) provide a fair share of revenue that will be used for public
transportation; and (4) provide that a person occupying space in a
joint development facility shall pay a fair share of the costs of the
facility through rental payments or other means. No new criteria have
been established, although this final circular imposes constraints on
the fair share of revenue criterion. All four criteria must be
satisfied for a joint development project to be eligible for FTA
assistance. The final circular provides additional information
concerning satisfying these criteria.
Grantees often undertake joint development, not as an FTA-assisted
activity, but as an incidental use of property that was previously
acquired using FTA assistance. FTA-assisted real property may be used
for joint development provided that the joint development is compatible
with the approved purposes of the property and the recipient will
retain satisfactory continuing control of the property to ensure that
the Federal interest is protected and the property continues to serve
its transit purpose. FTA must concur in any incidental uses of FTA-
assisted property.
Interests in real property that was acquired with FTA assistance
may be conveyed or encumbered for the purpose of joint development. The
final circular provides additional discussion of satisfactory
continuing control and mechanisms for preserving the use of FTA-
assisted real property for its transit purpose. The final circular also
clarifies the mandatory contractual provisions necessary to protect the
Federal interest when FTA-assisted real property is conveyed to a third
party for the purpose of joint development.
The final circular provides additional information to clearly
distinguish between a conveyance of real property for the purpose of
joint development and the disposition of excess real property no longer
needed for transit purposes. Once FTA-assisted real property is
disposed of, the Federal interest in the property is extinguished, and
that property may not be used in an FTA-assisted joint development
project. In contrast, FTA retains an interest in the use of real
property that has been conveyed for the purpose of joint development.
Additionally, the final circular clarifies the distinction between
incidental use and shared use, and considerations for the modification
of FTA-assisted parking facilities for joint development purposes.
FTA does not provide a specific funding program for joint
development. Rather, joint development is considered a kind of capital
project and may be funded by most FTA capital programs. Because the
joint development project may take a variety of forms and be funded by
multiple programs, the applicable Federal requirements will vary.
Requirements of the specific FTA funding program used must be adhered
to for FTA-assisted joint development.
NEPA categorical exclusions are a category of actions that, based
on past experience with similar actions, do not individually or
cumulatively have a significant effect on the environment. FTA's
categorical exclusions are set out at 23 CFR 771.118(c). The exclusion
at 23 CFR 771.118(c)(10) is often referred to as the joint development
exclusion and most FTA-assisted joint development projects should
qualify under this exclusion. However, even actions that would normally
be classified as categorically excluded may require environmental
review under certain circumstances, and a project sponsor should work
with its FTA regional office to determine what level of environmental
review is required for a project.
The comment regarding commercial driver's licenses is beyond the
scope of this circular.
(b) Fair Share of Revenue
In the notice of availability of the proposed joint development
circular, FTA invited comments specifically concerning the ``fair share
of revenue'' criterion. FTA did not expressly define the term ``fair
share of revenue'' or set a monetary threshold for the same. Instead,
FTA proposed to reserve the right to decline funding for a joint
development project if the project would not generate a meaningful
amount of revenue. FTA sought comment on how it should assess whether a
project will generate a ``fair share of revenue,'' including any
measures or criteria FTA should use.
FTA received sixteen comments, most of which were opposed to FTA's
proposal. Of particular concern was the change in policy regarding
FTA's deference to grantee decisions concerning the fair share of
revenue determination and FTA's right to decline funding for the joint
development if a meaningful amount of revenue is not generated,
expressed by ten commenters. Another major concern, raised by ten
commenters, was the lack of consideration for all benefits that accrue
to transit from a joint development project, beyond solely the revenue
generated by the joint development. Additional concerns raised regarded
FTA's proposal not to treat increased fare box receipts attributable to
the joint development as ``revenue'' for purposes of the ``fair share
of revenue'' criterion. Further, FTA's refusal to include fare box
receipts as ``revenue'' for this criterion was considered as a barrier
to partnerships in joint development and other transit infrastructure
development given the constrained financial environment in which local
match requirements are made.
A few commenters suggested that FTA should adopt standards, provide
financial criteria, and establish parameters and required documentation
for fair share of revenue determinations. Some commenters recommended
use of a cost-benefit analysis or a ratio of transit share relative to
project revenues, including careful examination of market conditions,
in determining a fair share of revenue. While no comments proffered
definitions for either ``fair share of revenue'' or ``meaningful,''
several commenters requested that FTA define these terms. One commenter
endorsed FTA's proposal, noting that FTA should consider maximizing
competition and ensuring a high return-on-investment in capturing the
value of transit improvements, and should actually determine the fair
share of revenue for projects at the Federal level.
FTA Response: The fair share of revenue criterion is not new for
joint development. Historically, FTA has taken the position that
questions, such as what is a fair share, and what form it should take,
would be negotiated between the parties involved in the joint
development. FTA's 2007 guidance on
[[Page 50732]]
joint development emphasized deference to the decisions of the project
sponsor, negotiating and contracting at arm's length with third
parties, to determine what constitutes a fair share of revenue.
However, constraints on the availability of transit funding at all
levels of government mandate that transit systems take advantage of
innovative funding strategies, including value capture. Accordingly,
FTA seeks to ensure that recipients are fairly remunerated for the use
of FTA assistance for joint development projects. The final circular
establishes as a minimum threshold for the amount of revenue that a
recipient cumulatively receives from a joint development project the
amount of the original Federal investment in the joint development
project. This is a minimum threshold for revenues received from an FTA-
assisted joint development project; it is anticipated that grantees
will generally negotiate at a higher level the amount of revenue they
will receive from the joint development.
There is no ``one-size-fits-all'' fair share of revenue
determination, just as there is no ``one-size-fits all'' joint
development project. Inherent to the negotiating process are
considerations for the type of project to be undertaken and priorities
that the transit agency and local government seek to advance through
the joint development project. Beyond the minimum threshold described
above, the fair share of revenue should reflect the respective goals
and priorities of the parties involved in the joint development. While
it is possible to project the potential revenue production from a joint
development project, it is difficult, from an economic perspective, for
FTA to determine the precise share any party should receive. This is
due to many factors that are difficult to quantify, such as market
power, local development priorities (social, economic, or a mix of
both), agglomeration effects, and other influences.
In determining the fair share of revenue it should receive, the
project sponsor must rely on market analyses and other due diligence
examinations. Although it is reasonable to presume that these types of
efforts are standard practice on the part of grantees, the final
circular makes conduct of such analyses a requirement. Appended to the
final circular are documentation to be completed by the grantee in
identifying pertinent project financial information and certifying
conduct of the required due diligence.
Some commenters proposed that FTA should consider a joint
development project's non-revenue benefits to transit in addition to
the potential for revenue generation. FTA does consider such benefits
to transit under the second criterion. The second criterion concerns
overall benefits to transit provided by the joint development,
including enhanced effectiveness and enhanced intermodal
transportation. FTA also gives consideration for increased fare box
receipts generated as a result of the joint development under this
transit benefit criterion rather than under the fair share of revenue
criterion. To be eligible for FTA's participation, a joint development
must satisfy each of the statutory criteria, and while non-revenue
benefits to transit are considered, they cannot satisfy the statutory
requirement for a fair share of revenue.
(c) FTA Review Process
The proposed circular did not include a chapter on the process FTA
will follow to review and approve a proposed joint development project.
FTA sought comments for consideration in preparing the chapter for
inclusion in the final circular.
Eleven commenters submitted to the docket on the FTA review
process. Six commenters requested FTA to modify the current checklist
approach to grant automatic approval if there is indication that the
criteria will be satisfied. Five commenters recommended that FTA
establish a mechanism to modify joint development agreements throughout
the grantee's negotiations with developers to reflect changes. Five
commenters raised concerns of the timeliness and consistency of FTA
reviews across its regions, and requested that the process be clear,
simple and flexible, and include graphics. One commenter requested FTA
to coordinate its review with the U.S. Department of Housing and Urban
Development for projects incorporating affordable housing. Another
commenter asked that FTA provide examples of approved projects and
their associated financial information. One commenter requested that
FTA make the new chapter available for public comment.
FTA Response: The majority of commenters acknowledge the ease of
using the current Joint Development Checklist for submitting joint
development proposals for FTA review. As a checklist, it is a rote
exercise by the grantee to indicate that statutory criteria have been
met. It is, therefore, understandable that FTA should be asked to
provide automatic approval when the grantee has indicated meeting all
of the criteria, with the grantee retaining supporting documentation
should FTA request it. Because it is merely a checklist, however, it
provides limited information to FTA on the substance and design of the
project. Therefore, FTA has broadened the checklist, including some
parameters, to identify pertinent information about the proposed joint
development project. The new document, Joint Development Project
Request Form, is intended to facilitate discussion between the grantee
and FTA concerning the joint development proposal by reflecting those
considerations that the grantee and its partners may find most useful
during the project development process. Additionally, this form
requires the grantee to identify documentation used to justify its
submission.
FTA recognizes that joint development negotiations require
considerable exchanges and deliberations between parties, and that
development of the joint development agreement undergoes a rigorous
process. Adding to this difficulty is the imposition of certain Federal
requirements on the grantee's joint development partners. To account
for changing circumstances over the course of the project's
development, FTA has established a tiered approach to reviewing joint
development proposals. Project sponsors may, and are strongly
encouraged to, submit a preliminary proposal for FTA review to frame
how eligibility criteria may be satisfied relative to specific elements
of the proposed joint development, and to identify explicit terms and
conditions to which the joint development partners must agree.
The final circular provides additional guidance to all stakeholders
to consider for a joint development proposal. A primary objective of
the circular is to clarify FTA joint development requirements and their
compliance. Accordingly, it is FTA's expectation that the circular will
improve the efficiency of the grantee's submission and of FTA's review.
Joint development is frequently used to provide or retain
affordable housing in local communities. As such, it promotes community
livability and sustainability by providing transportation options for
those served by the transit system. FTA has been an active participant
in the Administration's Partnership for Sustainable Communities, and
continues to strive to overcome barriers imposed by Federal
requirements. To the extent appropriate, FTA will coordinate joint
development with
[[Page 50733]]
Federal housing programs to achieve procedural efficiencies.
FTA sought examples of joint development projects that illustrate
the many issues that are encountered; none were received. While FTA
cannot include actual projects in its guidance, it does provide
illustrative examples of specific elements of joint development
projects in the final circular.
Therese W. McMillan,
Acting Administrator.
[FR Doc. 2014-20097 Filed 8-22-14; 8:45 am]
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