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DEPARTMENT OF TRANSPORTATION
FEDERAL HIGHWAY ADMINISTRATION
VALUE CAPTURE SERIES: DEVELOPMENT AGREEMENTS AND OTHER CONTRACT-BASED VALUE CAPTURE TECHNIQUES & CASE STUDIES
THURSDAY, SEPTEMBER 14, 2023
CART CAPTIONING*PROVIDED BY:
LINDA M. FROST
on behalf of
MID-ATLANTIC INTERPRETING GROUP, INC.
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This transcript is being provided in rough-draft format. Communication Access Realtime Translation (CART) is provided in order to facilitate communication accessibility and may not be a totally verbatim record of the proceedings. Due to the nature of a live event, terms or names that were not provided prior to the assignment will be spelled phonetically and may or may not represent the true spelling.
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>> OPERATOR: Ladies and gentlemen, thank you for standing by. Welcome to Development Agreements and Other Contract-Based Value Capture Techniques conference call. At this time, all participants in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. If you require assistance during today's call. Please press star zero. I would like to turn the call over to Pepper Santalucia.
>> PEPPER SANTALUCIA: Hi, this is Pepper Santalucia, at Volpe Center in Cambridge community. On behalf of the Federal Highway Administration, I would like to welcome you to today's webinar on development agreements and other Value Capture technique, this webinar is scheduled until to 3:00 p.m. We will also make the speaker slide available for download toward the end of the webinar, if you plan to use attendance for continuing education or other training requirement, you can request confirmation of your attendance at today's event, and we will provide information about how to do that toward the end of the webinar.
A quick orientation to the webinar room. In the top corner of the screen is a box or window called audio information, that is a phone number. The pass code, if you decide you want to listen to the webinar by phone instead of through your computer. If you do decide to listen by phone, you will have the opportunity to ask questions over the phone verbally.
Unfortunately, you won't be able to take questions verbally from those who listen through your computer, but you can use the audience chat window in the lower left corner to submit questions or comments during today's event.
We will field questions at the end of each presentation, and we also have time for additional Q&A toward the end of the webinar.
To view closed captioning during today's event, if you look toward the top of your screen, there's a CC icon. Click on that icon. The dropdown menu has an option that says show captions, and that will turn on closed captioning for the event. Now to introduce our first presenter, Dr. Rafael Aldrete is senior research scientist at Texas A&M institute known as TTI. He's a Texas A&M University system regional officer. He has two decades in research and management consulting. He collaborated with local, state, national and Federal agencies. His research revolves around infrastructure and economics, focusing on public private partnerships and Value Capture.
Dr. Aldrete offered multiple guideline, primers and other technical documents on Value Capture and access to transportation, he has done that through Texas dot and FHWA. Rafael's presentation is based on a prime theory FHWA released in 2020. We will be making that primer available for download toward the end of the webinar, with that, Rafael, I'll turn things over to you.
>> RAFAEL ALDRETE: Thank you, Pepper, good morning and afternoon, everyone. Welcome to this presentation on developing agreements and other contact-based Value Capture techniques. This presentation tracks the FHWA primer that we'll show later. Focusing on how these methods captures increased value that they create. Here's an outline of my presentation, we will start by discussing the history and key elements of the development agreements or DAs, as we call them. As well as processes for implementing them. Next, we're going to discuss community benefits agreements or CBAs which are another form of contract-based Value Capture. We will explore issues that arise when using DAs and CBAs. We will also cover other contract-based value cap our techniques such as developing various use agreements of public assets and right-of-way. Finally, we'll conclude on awe discussion how contracts can be used to establish land Value Capture strategy over time.
So, let's get started with what are DAs. DAs are defined as log-term contracts between local governments and developers that establish the terms and condition force development project. Local governments develop the property according to prove plans and conditions regardless of any changes in zoning or land use policy that is make take place afterwards. In exchange developers provide upfront contributions for public improvements yielded for the public, roads, utility, park, affordable housing. DAs have many advantages for both local governments and developers, and for local governments, DAs allow them to obtain large concession on the developer, giving more flexibility imposing project conditions and more latitude advancing new innovative planning policies. For developers, DAs offer stability for the project which results in financing, and if the local government failed to fulfill its obligation. DAs have three very important characteristic, first, they provide great flexibility. Second, they provide greater latitude, and they provide greater assurance, these are characteristics that make DAs, Value Capture for both private sector and public sector.
Now, vested rights are the most important legal aspect. Vested right is the property owner's irrevocable right to develop his or her property into accordance with plans regardless of any change in ordinances. Developers avoid uncertain and risk for the project as zones ordinances can be changed as well by the local government or people in the community. The developers will have confidential and stability. The key to the court when do the developers require vested right? This question was answered by a Court case in California in 1976 known as the Avco case. The Court ruled vested rights can be granted only after developers have been performed after having current financial disabilities. The Avco case was putting significant risk, and significant burden on them to obtain vested rights. As a result, the community passed the development agreement law in 1979 which allowed local governments and developers to enter in development agreements that would grant them vested rights to developers, upon the approval of the agreement as opposed to when substantial construction or expenses have been incurred.
Let's talk about the backdrop and their connection to development the purpose is to fund public enhancements or alleviate impact. They can be dedicating land or monetary instructions or in-kind instructions, fours. The justification for the local government's power for community health, safety, and welfare, but this local power is not infinite. It has to align with developers’ property rights. To ensure the balance, the U.S. Supreme Court put forth to test the first is nexus test and second is proportionality test which we discussed.
Turning to vested rights. As we discussed they shield developers from the shift. They the implementation of the development agreement law in California solidify the vested rights of developers, so that was a significant change that led to improvements how developer agreement was used and how effective they became. So, in essence, they list the rights and responsibilities for each party involved and offer pragmatic and cost-effective way of, for both local governments and developers to develop long-term development project.
So, for this reason, they are typically ideal for prolonged expansive market plan construction. That is and they are very different from comprehensive development. That focus on public private partnership. So, they are CDA, different from DAs. They are a different tool.
Now, let talk about the key elements of DAs. These may include the following. First, they develop a blew print, the type of property uses whether residential or commercial. I know specifics like density size and height of structures. Second, we have the public improvements or benefit, and this section establishes terms including affordable housing and parks and roads.
So, there's a timeline. They are long term. They typically span anywhere between 10 and 30 years. In this section, the agreement sets the duration of the agreement. For projects that are large and encompassing, it incorporates milestones during the implementation of the project.
Next is the local laws. Here's the laws this the DA adhere to even if the local regulations change. On the other hand, DA requires conformity with Federal mandates that take place post signing and requirement development after use.
The fifth key element is defaults, and this component basically elucidates what is breach of DA, such as performance bonds, et cetera. This component also lays out processing, for an amendment, and renegotiation, or determination.
Next, we have all of the processes, DAs may include annual review, stipulations for cost recovery and other guidelines in the event of legal disputes and finally the terms, like most contract, DA has clauses related to assignment and other formalities.
So, these seven elements, define the response acts and rights of each party involved in the development venture.
So, DAs are complex rets that require very careful planning and negotiation between the local government and developer, and the implementation generally involves seven steps.
The first one is establishing the purpose and findings of the DA. This involves setting a clear goal statement for the DA, such as promoting the community's needs and receiving greater community benefit, and the statement sets the tone for the negotiations and references. References the DA statute in the states available.
The second step is the application process, and this basically involved having an available application form that specifics the type of information needed to process the DA request.
No. 3 we have public hearing and notices. This involves following the DA statute that exists, or general local regulations that apply to public hearing and notices. So, there are three basic components of this step. The first one is the public input step. The public input part of the step and this involves engaging with the stakeholders on a regular basis to allow any issues that need aired.
Next is the public offing which involves holding a public hearing that complies with the state meeting laws and finally notices, this provides notices that are typically the same as required by the local planning and zoning law.
Next, No. 4, we have the decision maker input and review. This step involves the local planning commission, and providing an opportunity for them to weigh in.
Fifth, is the recordation and post approval steps, and this just involves the recording of publishing the DA within a pre-established time frame.
No. 6 is amending the DA, and this section involves -- talks about how the process is to modify or terminate the DA which can only be done by knew mutual agreement of the parties or upon violation of the obligations set forth.
And finally, it is DA accountability, and this is enforcing or monitoring the DA by either party. In California, the DA law requires local agencies to include at least one annual review of the developer's compliance with the terms and conditions of the DA.
Now, let's move on to talking about some examples. The table on the screen shows some examples of the DA in the state of Washington where many cities use DAs for the various purposes. The name, locate, size, public improvements and benefits provided by the DA and demonstrate the wide range of publications that it has. So, DAs, as I mentioned, they are especially effective for large scale project when they involve multiple developers and phases. Because DAs can help land use policies and achieve community goal, long-term community goals. For this reason, DAs are in growing areas where land uses have changed significantly.
For example, in California, DAs were the cornerstone of the foothills where 19 developers contributed $15 million for public improvements in exchange for vested right.
DAs can be linked to transportation infrastructure projects that increase development along corridors. This capital project in used DAs, because it encouraged development along the corridor or metro station, involved multiple jurisdictions.
In most cases, as you can see, DAs are driven by major real estate problems that are created by the developer, and they include provisions for additional structure that may be needed by these projects.
Now, let talk about specific example of developer agreement that was driven by a major real estate development probably, and this is the SoFi L.A. football stadium for the L.A. Rams and Chargers. This consists of a sports and entertainment complex and missed use retail center. The agreement is for 15 years and objection for five years regarding Santa dealt over a long period of time. The DA includes transportation development improvement, such as new access road, transportation systems at intersections and other public services.
Importantly, and this is the characteristics of developer agreement, it integrates other Value Capture techniques to ensure future funding of Amenities that may be needed subsequently to the developer agreement taking place.
This particular example is located in the L.A. international airport, and very close to three L.A. metro transit stations. So, the City of L.A. is going to be planning an automated people mover that will connect the stadium complex with one of the metro stations.
So, here in the slide, we can see, the implementation timeline of this project. So, the project started in 2006 with community engagement and took about two years to develop and finalize a specific plan that was linked to the development and DA. The approvals that were needed related to a specific plan to more or less another year, until mid-2009. And when the planning commission held a public hearing and recommended the DA in the summer of 2009. Once it was approved, post approval activities were conducted within a relatively short time frame.
Now, let move on to talk about CBAs. Community benefits agreement. CBAs are voluntary but legally binding contract between a developer and community representative. And CBAs, a developer commits to fulfilling a specific obligation for the benefit of the community in connection with a development project. In exchange, the community provides their support for the proposed project. So, CBAs help build sustained benefits to host communities with increased transparency and accountability. Also, CBAs are negotiated and signed by the representatives of the community, neighborhood association, labor union, environmental groups and social justice advocate organizations or NGOs.
On the other hand, developer commitments and CBAs can be monetary or non-monetary, such as involved in a community center, affordable housing fund, agreements to work as living wage or legal assistance. The problems of community support can be useful for developers to seek timely approvals and gaping some subsidy, where applicable. CBAs help the developers by demonstrating that there is community support and reduced risk, and this is because they -- in this type of arrangement. The developers can establish relationship, not only with community members, but with officials which can later on legal I dispute.
This are some features that make CBAs attractive for development.
Benefits within CBAs is found measurable commitments by developers, for community backing of the project and outline obligations of each party and retribution having non-compliance. Some examples include affordable housing, onsite and offsite funding for housing units, housing assistance funds, and all of the support related to affordable housing.
Next, we also talked about local hiring. Previously we talked about the use of affirmative action, and that's some of the examples.
Now, No. 3, we have -- No. 4, we have the right to organize, and these are provisions that target living wage goals, for example, affirmative action or worker retention programs.
Next, we have job training. In this category we have bend fits, such as skills training, job counseling, and more.
For local businesses now we move on to No. 6, we have open space and parks, this includes specific improvements to parks, playground, recreational facilities, or other facilities which may include transportation facilities.
No. 7, we already mentioned, and 8, education partnership, which involves the construction of new schools, the scholarship programs, and other donations to local schools.
So, now, let talk about some CBA examples. CBAs, we have, you know, we have seen in the definition. They are primarily tied to real estate development. So, the programs across the country have been outpacing the development developer agreements. They are more widely applied. You can find them in many states as opposed to developer agreement. So, CBAs are not as frequently found in transportation projects. Highways a case in point.
So, yet even though they -- we don't see them often in highway probably, we do see them in other models, for example development projects have delivered, not CBAs. As an example, we see Denver Gates-Cherokee, CBA, and Atlanta Beltline both tied to light rail transit. And we also mentioned the L.A. international airport, and the results of the developer CBA that is associated with that project.
Historically, CBAs have a platform where developers and communities to find common ground. Developing CBAs plays a role of a bridge connecting the two entities, however this has been evolving rapidly. Now we have Zees like Detroit that are stepping now in the foreground and becoming the signatories of CBAs and in some places, some locations are even charting new territories where CBAs are not just a choice for developers but a mandate for very significant projects.
Now, I'll be touching upon some of the DA and CBA issues. So, despite the slangs that we ask discussed, both DAs and CBAs have their own set of challenges that can affect their effectiveness on the use, the application.
Here on the slide, on the left hand, we have issues related to DAs and just as example, some of the key systems that DAs have -- have received, include the need for increased transparency, and increased participation. On the government side, there are concerns about the local government giving up right to change land use and zoning regulations in the development area.
On the other hand, on the developer side, there are also concerns about the missed use of DAs by the local government to force actions on developers.
Additionally, because the CBAs have a long Terp, the DAs are long term, and most of them are, developers in the course of the project, may try to sell the project before, in some case, before they are built. And this can bring new owners into the picture that may want to change and disrupt the agreed upon master planning and log-range planning goals.
DAs also sometimes lack basic framework for renegotiation which is significant limitation. On the other hand, we have issues that are related to CBAs on the left hand -- on the right-hand side. Compared to other Value Capture tools, CBAs are relatively new in the Value Capture cool pox, and we consider they are still in their infancy.
Compared to DAs, CBA performance outcomes have been much more mixed. For one, the CBA has yet to be tested in Court. And this is the reason CBAs are often combined with DAs to increase both the DA's enforceability and overall transparency.
So, what this really means, when you combine a DA with a CBA, you are bringing to the CBA, respective and participation of the local government, and on the other hand, when you bring -- when you combine these two tools, you bring the public participation aspect that is necessary for the CBA. So, when you use both, it gives for a more transparency, and more enforceability of the agreement, which has two benefits for both parties.
Now, let talk about some of the other contact-based Value Capture techniques. First, here we have joint development agreement, commonly known as JDAs, and these are partner hymns within landowners, and developers, in the very general -- at the very general level. However, in transportation, the agreements, the DAs are agreements which public entities participate directly in the development project. Partnering with the private developer. The contribution of the public agencies often includes public assets, such as land and development right, above, below, or next to public right-of-way. For example, the rights of -- the air rights over for example, and the FDA has a very specific definition for joint development. And it is directly tie into public development forums whether commercial or development. It is difficult to differentiate between JDAs and DAs. While DAs focus on public improvements. JDAs focus on the direct project involvement on the other hand, JDAs can be very diverse, because they offer revenue and cost sharing structures. There are situations where they cost share on the valve the structures that are built.
In projects that are important for development, local bodies may use Value Capture tools, like taxing and financing or special assessment, along with JDAs to boost the financial resources. So, you can have more than one Value Capture tool.
And let's just briefly talk about two notable JDA agreements that are sent around transit. First let's talk about the new balance development group. Which is associated with the company New Balance and Massachusetts Department of Transportation (MassDOT). They team up with and Massachusetts Bay Transportation Authority (MBTA) to create a computer rail station that was finished in 2017 and was named the Boston landing Station. This station was the keystone of a larger, $500 million project that -- that is essentially housing, New Balance headquarters. But the key landowner here, the key participant in New Balance landowner is MBTA.
The private developer took a lead by covering all of the construction costs for stations. And even shouldering part of the maintenance and operation expenses for the first. And this allowed MBTA to have, in a relatively short amount of time, a knew commuter station, while on the other hand, New Balance benefited from accessibility to the headquarters from the transportation system.
On the other hand, we have a plan that's MARTA partnership with real estate development and investment. The joint mission of JDA was to augment the existing Marta station in line with KDC's ambitious project to build an office complex for State Farm Insurance which is neighboring the Dunn Woody station. In this arrangement, KDC took the financing and construction of the expansion, and on the other hand, MARTA granted the easement and construction work.
Currently MARTA holds public segment and KDC holds publicly held expansion.
You can see there's significant sharing on the revenue, and on the expenses.
Now, let talk about public private right of way use agreements. So, public assets, notably the development rights above and adjacent public right-of-way, can be used in many different use agreements, and these agreements can either be stand-alone or part of a JDA.
And let's just put the spotlight on to two different highway projects. The first one is a relatively small project, the cap at Union Station in Columbus, Ohio. This is a small retail venture, commercial space that has an initial cost of a million dollars and include 25,500 square feet. This development is built atop interstate 70, on three concurrent bridges above the highway. This is a relatively small project that shows how this can be applied.
Conversely, we have also very large project, and one example of these is Capitol Crossing in Washington, D.C., which is a very expansive development covering 2.2 million square foot commercial area, commercial space, with 1.3 mixed use development. And it occupies seven acres, in Washington, D.C.
And just touching quickly on the right, Hudson Yard in New York City, is one example of this. Here, it was handed to a private developer for expansive development of a 28-acre plot, this resulted in what is called the Hudson Yard infrastructure corporation, which is dedicated to the -- to promoting economic growth when that happened. And some of the structures that have been used with this project, importantly, they are including all of the Value Capture tools, such as developing sections, special assessment districts and others.
Now, just very quickly touch on other public asset use agreement, this is first to the use of public asset spaces, such as buildings and highway, and they have -- you can recognize them, for example, by looking at the naming rights for even, you know, sports venue, such as like the AT&T stadium, basically to build a sport stadium. On the other hand, we have also seen them in transit. At transit stations, such as Pennsylvania Transportation Authority AT&T station which also highlights opportunities within the private sector, based on the opportunity for this in spaces with third-party franchise agreements, for example, and these are just concessions that -- where the public sector offers the developer -- sorry, private developer. And one example of this is the installations on public spaces, such as solar panels on public buildings and solar panels on public right-of-way.
And I'll close the presentation with this discussion, which is it is integrated on Value Capture strategy through contract, as we have seen Value Capture studies have evolved from being a supplementary funding mechanics, they have become a vital source of infrastructure funding. Now, for value capture it is integrated threw the stages. This include comprehensive evaluation of the product's value and making sure that it aligns with the stakeholder benefits that may be expected over the long run. Local communities often express hesitancy in dedicating Value Capture revenues to significant value Capture project, however, when we emphasize the but-for principle, we can help underline the benefits for local communities that result in initiatives. Particularly the benefit that result from economic development or land development, which in terms helps legitimize the contribution of the local government to the project. And those concerns of revenue to infrastructure project.
So, with having this in mind, our long-term strategic vision for Value Capture, will involve what we call a tiered approach. This will be about starting with techniques that have minimal stakeholder impact. For example, financing that don't apply new taxes and incorporating metal that introduce new charges such as special assessment districts or developer exception. Following the strategy, we ensure that stakeholders face the financial implications of Value Capture in a manner that is valuable to the risk bearing capacity.
The context of Value Capture framework, it includes not only one single Value Capture technique but multiple techniques and different phases of the project, helps us make sure the associated benefits and costs of the project, they are fairly adjusted for risk along the different stakeholders. And these type of structures not only offers more transparency and accountability from the beginning, but it does assist the local government in managing the local stakeholder expectation.
And one important part of this is, the discussion as it relates to the developer agreement, is that a long-term contract Value Capture method is highly critical to integrate all of the Value Capture strategies during the life of the project. And this is what we call integrating Value Capture strategy through context by using what involves looking at the project comprehensively over the life span and techniques used early on in the project.
Thank you. I apologize if I expended my time.
>> PEPPER SANTALUCIA: No problem. Rafael. Yes, thank you. We have a couple of questions, and perhaps we could address them later, but one quick question that I might ask is whether development agreements are allowed in all states, or if it is a more state by state basis?
>> RAFAEL ALDRETE: Some states have specific DA statutes. And in other places, where there are no dedicated DA statutes it is based on local government ordinance.
>> PEPPER SANTALUCIA: Okay. We have a question from Caitlyn about whether right and obligation that is are built into a development agreement could be waived if the developer is affected by economic recession. I believe Roxanne will talk to that point so we can defer the question until then.
>> RAFAEL ALDRETE: Maybe that's something we can touch upon later, but that's why the agreements also include provisions for, you know, renegotiation, or amendment. So, that's a mechanism to adjust the agreement.
>> PEPPER SANTALUCIA: Great. Thank you, Rafael. At this point, we're going to bring in our next presenter. Roxanne Tanemori Roxanne has been a planner with the City of Santa Monica since 2004 and currently serving as acting planning manager for the city. She served as probably manager for major development projects and worked on many facets of planning and development in Santa Monica, including management development agreement projects and leading the city's annual monitoring program for development agreements. So, with that, Roxanne, I'll turn things over to you.
>> ROXANNE TANEMORI: Thank you, Pepper. Thank you, Rafael, you really provided a wealth of information as a lead-in to my slides. I will try to condense some of the information that Rafael went into in much greater detail than I had planned.
Thank you, everybody, I'm going to present a little bit of a snapshot from the City of Santa Monica here in California. I want to talk about the Santa Monica conduct for development agreements. I did this presentation, a version of this a couple years ago, and since then, I've updated it to include some recent work that we've done. The City of Santa Monica development agreements are a tool that we've used since 1981. I believe we may have been the first one in the state. That agreement built a large project. It is still in operation, the DA is still in effect. We're still monitoring it. So, just to give you some context from 1981.
We have over 40DAs that we have approved. Most recently, we have approved a large project in March and July of 2022. I would say that in the early years, development agreements were used for really large-scale office campuses, those were our first, probably four, five major programs over a million square feet. Just for context, Santa Monica, we're about 90,000 in population. Our daytime population is several hundred thousand due to employment, but we're eight square mails, so a project like a million square foot office campus is large within our local context.
We've also used DAs over the years since then for a whole host of different kind of probably, some of them are quite small, actually, mixed use housing project, we worked with private schools, hotel, and office development. I will touch on hospital campus project that was approved last year, and we've done bio tech facilities. A whole range of programs.
In this presentation, I want to just give a quick overview about development agreements as a community development tool, and touch on the -- why a community might want to enter into a development agreement with a private party, who should be involved, how to start negotiation, particularly around community benefits, and some points to keep in mind. I'm going to go ahead and cover a few of those from a Santa Monica perspective.
Rafael really touched on a lot of this information established by California law, to what is a development agreement. I guess the point I want to emphasize from a Santa Monica perspective, is that of course these development agreements, they are voluntary, they are agreements that are entered into. Both parties have to agree. It's a negotiated contract, so, we take obviously a very legalistic approach to the review, coupled with the -- I 0 would say more land use planning community development side of the work. In particular, we like to really dig into the tailoring of community benefits to make sure that we are capturing value that really addresses community needs.
So, that question of why pursue a development agreement? It provides the city and decision makers the highest level of local control over development projects. This slide just talks, basically indicates there's so much discretion and flexibility in the development agreement within the context of needing to comply with the general plan, and obviously with state laws that are applicable. We have a lot of latitude in terms of exceeding the zoning development standards that are in place for a particular parcel or group of parcels, to look more comprehensively at how the project will address infrastructure, open space, and programmatic needs.
So, let talk about who should be involved, if a local city, or a local agency is thinking about embarking on a development agreement process. We certainly do have an ordinance that addresses the development agreement process, the findings that the decisionmaker will need to make. So, we have that in our local municipal code so, that sets the broad framework of the decision making, the process. When a local agency sits down and say, hey, we've approached by a developer, they would like to do a creative project, a different project, allowed by zoning and they are interested, who should be involved. I know all of the folks in this call, within their respective agencies and organizations, they are taking a moment to think who will lead the negotiations, who sets the direction from a policy standpoint, from a planning standpoint and who will manage that project, and you are negotiating on behalf of City Council and on proxy on behalf of the community, so making sure that project manager has technical expertise in terms of project review, and really understands the policy platform by which you will be negotiating. There will need to be some political awareness, good negotiating skills and also have the temperament to really dig into a long, what is often a lengthy and intense process.
In terms of the City of Santa Monica, we have a pretty big project team. The project manager is traditionally housed in city planning. For instance, I have managed three major development agreements, some of them took over ten years, so, I was the project manager for that whole length of time. We have a really strong city attorney representative that goes along every step of the way with us.
We also have our internal review group from the various operating departments, public works, our sustainability team, our Department of Transportation, our community services, where we start to talk about programmatic negotiations. We also have environmental consultant that the city retains to do an independent analysis of the project, and we have fiscal and economic consultant retained by the city and to do some analysis as well.
Our style in Santa Monica, is we have a very high level of interaction with the applicant team. It is not just pushing contracts back and forth across the table, so to speak, with term sheets. We do that, but it is also a planning exercise. It is also a community outreach exercise that we spend a lot of time with the applicants and with the community through this process.
How to start negotiations, I think Ralph gave a really good overview of how to start negotiations, through involvement through the first steps to take. I want to highlight a little bit of this. Really, he was right. I would echo, taking the time early on to have the internal city team come up with their own plan, but also work with the developers to talk about the project proposal, and reshaping that. The applicant will have a probably in mind, and we will, as the city will have our land use policies in mind, we will have our community needs in mind. So, we're going to be thinking about what makes the best sense and where. The developers looking at their private land, but we also have an interest in the negotiated contract.
In recent years, Santa Monica has been focused on the proposed development projects in terms of the overall density and building height, looking at how these programs fit into a smaller community, eight square miles.
Over time, I would say, a footnote to that, in more recent years, the community benefit negotiations have really started to, I would say toward looking at programmatic obligations that we would require from the developer to help find some unmet needs that we have seen amplified through the panel pained in particular.
So, really thinking about the project value and community benefit, not just member, not just dollar, but really how does the project fit into the community, how will it unfold, and be a part of the community over time, because these are long-term agreements force the most part.
Our agreements in the small probably, the DA is good for ten years, we have some that go on for 55 years. Thinking about that, how the project will give in your community, how the benefits unfold over time.
Also, to think about early community feedback at the beginning of the process. We have what is called a float-up process, where we put the proposal forward to the City Council and say, based on the conceptually being contemplated, do you want staff to negotiate on your behalf? That's a really early opportunity for the community to provide feedback, provide a wish list, so to speak of what community benefits would be important. It is really key for the applicant team, and staff for that matter, to make early adjustments to that project concept, based on the float-up conversation, based on community outreach that's done at the very beginning of the process.
Council does, in our case, does give us the authorization to provide with negotiations on their behalf, so we use that to float up community discussion at council, to gather that direction. And I would say, just expect both parties should be expecting intensive round of review, project redesign and negotiation.
In terms of thinking about how to develop a community benefits package for the program, I would recommend starting, and we do this in Santa Monica, really looking at just the baseline requirement that are already built into our code, looking at -- also looking at the priorities articulated in the general plan or specific plan. If you have an area of the city that, in your general plan, you're wanting to develop more housing to make it more of a mixed-use neighborhood, or wanting to focus on industry and bio tech, or whatever it may be, use that as your starting point. That will help you identify what you should be negotiating on. And we also look to our impact fees that are already codified. We use that as a baseline. If this were a regular development of project, not negotiated, what impact fees would you pay? We use that as a starting point for negotiation. However, I whale say in terms of impact fee, you will also need to be weighing the plus, minus, you may ask for more dollars in a particular impact fee, like transportation impact fee, we say we want to quad trouble that number, that you would be normally paying, however the developer will probably counter with that, and perhaps press a reduction in the parks and recs fee. There's always a give and take as you evaluate the community proposal.
We think in terms of identifying community priority us want to look at infrastructure improvements. We had light rail extension come 30 Santa Monica. We looked at negotiating -- we have three stations in town looking at negotiating those station, have enhancements for multi modal, bikes and peds, just enhancing those statement, that was something we didn't have the fund for, metro, in partnership with the city, didn't have that in the budget, so we negotiated extra funding. That would be an example. And we also negotiate for dollars to help augment what impact fees are not allowed to fund. For instance, we have a childcare impact fee. We are only allowed to use those impact fees for the construction of the facility. However, in the DA context, we may negotiate a child care trick to help sub size tuition subsidies for children attending local day care. That's the way we use community benefits and development agreements, support the work we're already doing in the city.
I will also know note, this is really important, in the most recent years since 2020, the committee has been focused on address homelessness and looking at ways to fund economic recovery.
This slide outlines a whole host of different kinds of community benefits that we have negotiated in those 40-plus development agreements that we have implements in the city. There's a whole wide range. I won't go through those, as you can take a look, because of sustainability, education and training, open space, cultural facilities, very big emphasize on affordable housing. We have a base requirement. We ask for more, we require more, and that's often looking at many congestions management tools and requirement that a developer would have to do for the life of the project.
And most recently, the last few development agreements I worked on, we negotiated with the applicant in response to their proposal, that we did secure a new cultural facility, a new room for arc track tour and implemented a project for community programming for the life of the probably. Never project, we focused on social service and health services, and I'll touch on that in a moment.
In terms of evaluating community benefit, I would just say, through the work with the applicant, your outreach with the community and your presentation to be really clear about what value the project creates overall, and this is not just the dollars I will talk about others, millions of dollars of community benefit value in this project, that's one men trick, but also looking at, do you have a bio tech facility. Are you really interested in those jobs? Those really high paying jobs, good quality jobs coming into the city. That's a benefit in and of itself. Not one we necessarily write down on our ledger, but it is something that we talk about from a policy standpoint as being quite important.
And I would say, having a realistic expectation, as you go through negotiation, making sure that you under what the benefits are, what can be requested, there's a discussion, you go back and forth with the applicant, recognizing that when DA doesn't set the precedent for another DA. What you negotiate in one is not an automatic requirement for another.
And then, also, what are the tools that we use to evaluate the overall value of community benefit, is economic analyses. This is something that we do spend a lot of time on, and it is fairly complex analysis, and you will spend a lot of time, vetting the assumptions in the metrics with the applicant team and with the financial consultant at the city you retain, and in this case, that we retained.
And speaking of economic analyses, we conduct fiscal impact analysis, economic impact analysis and we do a review of the applicant's financial feasibility analysis. These are really -- they are the tools that we use to provide a Fuller picture of the probably’ s economic value to the city, and fiscal impact. In some cases, can be both positive and negative impacts. We use this as information for decision makers and to assist in negotiation. We do not use the data as an absolute okay, there's a Value Capture for the developer, as -- you know, additional, you know, financial benefit to them, and so, therefore, we're going to capture 50 percent of that additional value add for the developer. We don't go at it quite in a numeric way, but we help -- we use analysis to help us understand what will be the cost and benefit to the city in terms of construction jobs, net new jobs with operation, what is the net annual economic output? That's what we do under the umbrella of economic impact analysis.
In terms of fiscal impact analysis, we are looking at what are the positive, or potentially negative impacts of the general fund? We usually look at a first year of stabilized operations for a project. The first two analyses that we do. And then we look at applicant's financial ability analysis. We looked it as a gauge to help us in negotiations.
So, in terms of -- excuse me. In terms of a case study for development agreement, I'm going to spend a few minutes talking about our Providence saint John's health center development agreement which did encompass a face 2 master plan. This particular project, we spent -- as part of the process in 2015, and certainly the pandemic interrupted some of the work we did. But we did carry on through that time period. A little background, Providence Saint John's Health Center is an important health care institution in our community, as been here since the '40s. They did have a development agreement that we entered into in 1998, that was to help rebuild their main health center after the earthquake that occurred in 1994. That DA from 1998 encompassed two phases of development. They did complete the first phase of development. It is up and built for a while now, however it did also contemplate a phase 2. That particular phase 2 master plan requirement was subject to a master plan that would be reviewed and approved later. However, as Rafael noted, having this process for amendment established in your original development plan is really important. In this particular case, there was an outline in the parameter for phase 2 both in terms of overall development envelope and process that was established in 1998. We decided in 2015, both parties, saint John's came to us and said we would like to make changes how phase 2 will be crafted. So, we looked at a development agreement, and then to go along with the phase 2 master plan.
So, phase 2 master plan contemplated actually over 750,000 square feet of development, that would be secured with vested rights to unfold really over a, approximately, 20-year period.
This was particularly key, as you can see on the slide, our actual current zoning would allow, at a basic level, more square footage than they proposed and we negotiated on, and benefitted here, to proceed under established terms, for a 17-plus year period, plus a period for extension. That's the trade-off. They could have gotten more going through the regular Court development process, but they really wanted that vested right, because it was a campus and needed phased. There was open space and infrastructure requirements. New street was being proposed with this. And really the city thought this was a benefit because this is an existing and operating health care campus. And we wanted to secure certain feature, and make sure that there's order in phase, and a cohesive build-out of the health care center, that would include community-focused uses. The community looked at this health center as an asset, and it still does, but said, hey, this is a master plan, this is a lot of development, how do we ensure construction of impacts. How do we ensure that the programs that Saint John's can provide to the city are really amplified, increased in some cases can address our community needs.
Through the negotiation of the master plan, the slide includes an image of the health care campus, just to give a context. The development is scattered amongst existing building, existing operations, so, the provision of all of that development over time, including some new streets, to the south, you take the lower portion of that diagram, those were really important negotiations, and they took some time.
So, in terms of community benefits that came out of this process, this development group was approved by the council in 2022. So, homeless services and services to other vulnerable population, our senior, children and youth in the community was really top of mind. We did focus our negotiations in that way. And one of the key benefits, as we keg Nated a 10-million-dollar mop tear contribution for Santa Monica behavioral health initiative to look at behavioral health, looking at funding potential outpatient or clinic care system. A whole host of projects and programmatic requirement potentially a new center to be determined by the city, did procure that monetary investment from the health center. We also negotiated some enhancements of the operation of the childcare facility to increase the number of childcare slots that would be provided and have tuition subsidy requirement and also negotiated ten years of affordable housing for a 99-year term. We did a whole host of vehicle, ped, bike infrastructure improvements, we negotiated more open space, we had an internship nurse requirement and had community benefits around -- they had a research and conference center being proposed, so we did structural requirement to allow community groups to use the meeting space when not used by the health center, and also health programs presented for wellness and other sorts of workshops and events that they would host for the community.
So, turning to key point, for you all to consider and policy considerations for you, based on lessons learned from our practice with DAs, the development agreement, it is really thinking about how to manage the development interest. And I think development interest from the developer, from the council, from your community, thinking about community benefit, and really, this is really important to think about future changes, how will this project not only get built, might take a few years, right, construction may not start for a few years, and how is this project, and have it lived in your city, how do the programs and operations unfold over time? In this case, the health center, 55-year term. You are really having to think long term and recognize that the current staff, current counsel, current community, are making decisions for how this project unfolds for a fairly long period of time. You want to focus on flexibility, and also, you know, the vested right, the predictable path. How do you do that? That's the balancing act. I would say in the negotiation, and that agreement will set the vested right and planned for the development for a particular site or probably. However, that contract, that development agreement, has to also accommodate the ability for future changes to that project. As Rafael mentioned, we use the standard tools in our contract. We talk about the provisions for -- what's the minor modification that can be approved at director level. What's the major modification that will require an amendment that will go back to the City Council. What kind of flexibility can you build in automatically for the range of uses that will be allowed. What you think today, that's always going to be -- that's always going to be an office building and we think that's what is being negotiated, that's what is proposed. But is there any interest in structuring a range of allowable uses in the event services go out of style and we can convert that building to housing. Does that agreement allow for that change at the Steph level, Director level? Is that something you can do that or want to renegotiate benefits at amendment.
Thinking about the structured path but allowing for future changes is really important.
On my slide, I saw that flex act equals lack of predictability for involvement of the community. And they said wait a second, it is the negotiated and vested rights path. What I mean by lack of stability, the developer said I don't know if I want to do a development with the city. Everything is wide open. I don't know what to predict at the onset of the process. That can discourage some developers from wanting to propose a project via development agreement, if that -- of, I don't know, how long will this take? It could take years. What will they be asking for? That's what they are asking for when referencing the community. The community will say, how do we get a say? How much are you inviting into the negotiation process. I think is t is worth there. We've been successful at it. But it does have that dynamic to it.
I've already talked about how to draft contract terms to address regular changes. Oh, we're in construction, primary construction documents. This, that and the other. That's typical in development. What terms in your contract have you drafted to allow for, you know, all of the minor modifications that are going to pop up. They are countless. And making sure that you have some guardrails. I can approve that at the Director level. But I'm not stepping out into making a big policy shift. My Director approval will not change, you know, the real cool pieces of the project that were negotiated out in public. Nevertheless, you don't want to limit yourself to having no discretion and no authority to do that, because you'll be back in front of council. That's an arduous process.
Striking that down is important.
In terms how to deal with unforeseen circumstance, economic downturn, the developer selling the property to another entity, again, that minor modification, the major modification, and fundamentally DA amendment, renegotiation of the term of the contract. It happens to us, we have done it countless times. They are manageable. We've done I have worked on probably four or five DA amendments.
You just have to go into it, knowing -- having a clear discussion about is this the reopener, the whole community benefit package, are we going to focus the negotiation on that change that's being requested and say, what additional community benefit, do we need to negotiate. It is not a reopener to the whole project. Could it be we really tried to take that lead in framing it? What is really on the table for negotiation. Sometimes the community thinks we should be more expansive, sometimes not. It really depends on the proposal. I think one other
I think one other policy consideration to think how a development agreement process can more effectively, most etch effectively address the need of the community additionally, thinking of childcare necessities, that's an important ask from our colleagues in the human services department. They said, you know what? Can we subsidize tuition for families that are of lower income so they can avail themselves to high quality childcare, so they can get that better job, continue their education. Those kinds of things are really important to think about not just the facility, but think how you, your DA can support programs.
I think one other important point is really to rely on your whole city's expertise. You have an entire organization at your disposal. You have public work, you have community services. You have homeless resources. You have -- every facet of municipal operations and delivery can really be a part of the equation, seek them out, in the project, seek out expertise and input as negotiating community benefits. I had things brought to my attention. I hadn't thought about that. That's a way to address the project, why don't we fund some internships through the community college. Lots of new idea can come from reaching out to your colleague.
And remember, this is your best judgment. You're putting the proposal forward to the City Council, they are the ultimate deciders. They are the party who enter into that contract. They will certainly tell you, we like that, but we would like to amend this. They may send you back and do additional negotiation when at that public hearing. What feels at the end of the line there may be additional negotiation to be had.
And I think those are my major considerations of the project benefits. In terms of economic analysis. Don't get caught up in the numbers, don't let economic analysis dominate the discussion. Those are your decision makers. You can't spend all of your time defending the number, because we have found there's been attempts to do that, and we have steered the conversation away from using that as a metric, to say we demand more community benefits, or we can't Troy provide that to you because our financial analysis says otherwise. We just use it as guides I already mentioned this, be prepared for an intense, lengthy process. These projects, I don't want to say win-win, but they are, both parties need to address on the terms of the contract. To that extent they are a win-win in a certain way. Controversial proms can be litigated so be prepared for that. We keep a clean record as we go through this process. We've been lucky. Folks have not litigated in the last two, so, we think that reflects the community commitment to the overall process.
And finally, I would say respect to monitoring, we do have a mandate to monitor annually. We do that preparation, and that's really important to help main train trust to the community that what is being discussed is being provided.
And with that, thank you for your time. If there's time for questions --
>> RAFAEL ALDRETE: Thank you. I think we have a few questions in the chat. First, has the City of Santa Monica ever been challenged when negotiating building height?
>> ROXANNE TANEMORI: Absolutely, we have. But I will say the way that building height -- let me back up. Building height is really a key and sensitive issue in our community, in part because we're next to the shore and because of historic development of the community. We have a whole mix of buildings and history buildings. This is really important to the community. What we did, we negotiated maximum building height, where most intense specifically and directed and programmed into our downtown. We negotiated the absolute height limit through our downtown community, our specific plan. We did that first. The development had to follow suit. So, we set the stage. We had not been litigated within the context of the development agreement specifically over building height, but it was a point of significant discussion.
One of the projects -- two of the projects in our downtown that we moved since 2020, originally proposed that 200 feet, for instance, we establish a 130-foot maximum building height limit so help manage that conversation.
>> RAFAEL ALDRETE: Thank you. And after this question, we can above on to the next presentation. The next related to CBA, has Santa Monica codified requirement for a CBA process?
>> ROXANNE TANEMORI: We have not. I was listening to Rafael's presentation, and it is not a too that we use in our city planning process. I will say that the help center example that I discussed briefly, does have a separate community benefit program obligation to the state of California, and then we have a community benefit program, but that is still -- obligation, but that is nested within our development agreement.
I will say this: In terms of community benefits what we call the program that's involved and approved as part of the development project, we may have some specific time frames for that that exceed the term of the DA, but for instance, the DA is placed we negotiated the contract for 55 years. We may say, these three community benefits going to e-seed the requirement will exceed the life of the development agreement. We will record that, we will establish that through a different contract vehicle. We will record that against title so that it will live for the life of that probably, whereas the DA funds that plan for 55 years. We don't call it a CBA but that's the only parallel example that I can think of.
>> RAFAEL ALDRETE: Thank you, Roxanne. And, Pepper, do we have time for another question, or do we leave it until later?
>> PEPPER SANTALUCIA: I think we'll move ahead with our next presentation, Rafael, and then we'll take questions at the end.
>> RAFAEL ALDRETE: Okay.
>> PEPPER SANTALUCIA: So, our third and final speaker today is Jeff Mullan. Jeff has more than 25 years of experience working at the highest levels of transportation and redevelopment projects in chute and throughout New England. As a member of Foley Hogue's administrative law department. Jeff represents client on a wide range of matters related to real estate, transportation, crux, infrastructure development and redevelopment.
Jeff, I'll turn things over you to now.
>> JEFFREY MULLAN: Thank you very much, Pepper. And thank you, Rafael, and Roxanne for those presentations. Let me -- I just moved the slide deck and give you an outline what I'm going speak about. The two prior presentations gave a lot of detail about specific projects and a deep detail regarding how those projects were carried out in various jurisdictions. I'm going to use that information, and -- which is very similar to my experience, and I would agree with what was presented and speak about tactics. Here's an outline. Preliminary observations, a discussion about value an then I'll go through some slide for you to consider As think about Value Capture techniques and development agreements in your jurisdiction.
Firstly, make three preliminary observations. The first, we can call these lots of different things and we do call these lots of different things, but they are really all about agreements with property owners, to achieve mutual goals and benefits. I should -- this should say it is often, in lieu of condemnation, but it is not always. My experience has been in lieu of condemnation, because that's often been a central part of what our client are seeking, but it is not always. What they always do, they always represent a value-based exchange, they don't always value in the vesting right. But they always result in both party getting something out testifies. Something they seek. And the last point is that I'm going to focus on tactics, themes, and advice that I hope will be helpful in multiple jurisdictions as you pursue these objectives. And, at the end of my presentation, I'm happy to take questions.
First, a note on value. I think it is a bit of a misunderstand stood phrase, word. Federal Highways center for innovation finance support has a definition. I think that's a fair definition. There's a generally accepted definition but my point it is not cost. I hear constantly people confusing these two words. Value is different for each party. It also includes more than money. And when you're working in the public sector like I know many of you are, we need to think about time, certainty, achievement of policy objectives. Limiting sharing of risk, economic development goals, effectively using our people in the private sector to accomplish our objective, and all of these things that offer us value. So, my point is, let's -- let's refrain from measuring the value of a particular Value Capture technique, or development agreement solely in terms of money.
Framework for consideration I would urge people to consider the development agreement just like any other project. Begin with the end of mind, what are our goals. How do we define success? What are we seeking to accomplish? Like every other project, a development agreement should have a purpose and need. An understanding of our goals, a summary of the key considerations of other parties. I would urge people to spend a lot of time thinking about what the counter party wants to achieve. And I would urge you to vet those internally, I think Roxanne referred to the need to talk about your project, your objective, your agreement requirement, techniques, as after as possible, and return to them often. As I said in the previous slide, I urge you to not confuse cost and value. In my last two point I visit the balcony often so people who study negotiation techniques will know about this tactic. I think sometimes during a negotiation people's subjective shift. I think sometimes we have a tendency to lose perspective, and that is certainly true of the party for whom we're negotiating, and it is definitely true of the other side. So, I would urge us to understand the prospective of the counter party as often as possible and reassess our situation as we go along.
The last point, I don't think it always needs to be a win-win. And certainly not always a win-win. I do urge, particularly public sector client, to avoid zero-sum thinking. If it's good for the private property, it is not necessarily bad for you, for the agency, and I would, instead of zero-sum thinking, I urge you to focus on the value principles and key objectives sought to be accomplished prior to the understanding of the development agreement.
Step 1, agreement formation. I think this would be the most critical part of the project that is the development agreement. These are five steps that I urge you, and your team, to think about as you embark upon one of these negotiations. I think focusing on past experience is critically important, and not used enough. I think that you should think about how to frame the schedule with reasonable expectations, including preconditions to actions. That is, what do I need to do before I even begin to negotiate.
Thirdly, every action taken, and this was one of the comments in the chat, I noticed as earlier presenter was speaking, every action has to be lawful and authorized. I would say it has to rest on its own bottom. That is to say that the fact that you've got one agreement that some of the actions may be authorized doesn't make the other actions authorized. Most of these things, most of these actions, all of these actions for public sector client will be found in the statutes of your various jurisdictions and some may be part of the common law in your jurisdictions but you need to tie back every action you're taking with a lawful precedent, a law that authorizes you to do it or precedent that permits you to do it based upon a course of defensive lying with the parties. I think it is critically important to map that out.
I think it is a common mistake is to pre negotiate agreements before you're ready. I think oftentimes this result in giving away too much or making a misstep in the larger negotiations. I think this happens, sometimes with leadership, where they might get ahead of the team and offer things that aren't able -- you aren't able to accomplish. And then, as part of your agreement formation, I would focus on a benchmark approach for comparison. You always needed to be able to walk away from the deal and sometimes the best deals those that aren't made, right? So, if you don't keep your agency options open, and you're up against a deadline to accomplish, you lose a significant amount of leverage in finalizing the agreement, because you will have run out of time to move to option 2. You need to keep options 2, 3, 4, alive. And sometimes that's difficult but you certainly need to be aware of not abandoning a benchmark approach.
Negotiation itself, discipline yourself, spend time understanding the counter party. Do only what work for you and your agency. Develop a team approach where you've got a key spokesman or a team approach, where you deal with parties consistently, you take notes, you circle back, you communicate to your team, you work with your team and you recognize that your team is working for the agency, or for another government unit, where operations are Paramount. Doing things outside of the normal mission and vision of your organization only result in one-offs and things that can't really be leveraged, and sometimes are outside of the scope of what your agency is seeking to accomplish.
I think it is important during the negotiations to justify and document everything that is happening. I think oftentimes you could be facing criticism. You may be subject to audit. You will be subject to questions from third parties. And carefully negotiated agreement in the course of dealing with the counter party. I think our critically important, and I think it is best to document them as you go along. And then lastly, perhaps this is obvious, but I think you should -- I think people should adopt a no surprise approach when managing leadership expectations and make sure the negotiating team is proceeding according to the desires of the leadership of the agency.
Lastly, I see too often with agencies for whom -- for which I've worked or with which I've represented, put the agreement in the file and move on. I think development agreements, and value capture techniques need to be thought of as part of your overall management system, and the things that you Barragan for at the table are as important as anything in the development of any other project, because they usually affect the infrastructure that the agency is working with, or government unit that is -- that you've -- that you're working with. I think it is important to communicate to the project that that's going to live with this agreement going forward, because we all know that agencies, and governments, witness turnover. Agreements shouldn't die with personnel. They shouldn't sit in files. They should be an effective part of any management unit. I would urge everybody to do an after-action review about what happened and what has gone right and what has gone wrong, and I would anchor the progress wherever possible. Things that went well, I'd do again. Thing that didn't do well, I wouldn't do again. So, that those three steps, you form your agreement, based upon any -- as if it were any other project. You develop an approach to the negotiation and consistently apply it and once you reach your agreement, you don't just put it away. You think about it lick any other project and you leverage that, and build that into the organization, so that you can use that for both management of the expectations of the counter party going forward, since they are still there as well, and so that the agency can learn.
I'm going give you three case studies. Two transit projects and one highway project that will illustrate a little about how Value Capture has been applied in Massachusetts. This is a new -- well, not so new now, it is several years old at this point, but a commuter rail station in the Austin neighborhood of Boston, sponsored by and largely funded by, almost exclusively funded by, and Rafael referred to this in his write-up. New Balance t-is now operating. It's been successful. It received a lot of support from the community and City of Boston, because it helped to unlock some development potential. The development needed the station to assist with its permitting. And MBTA, which didn't love the station because it affected project headways heading west out of Boston, and east into Boston, in the A.M., but took the project and agreed to accept it on the condition that it was paid for by others. It stands as Boston's best example, or Massachusetts best example of a private party stepping up and building a major piece of infrastructure. It's often cited as a lull of how future stations will be built. I think the jury is still out on that. I think it could be a very important station in the few tour, as Massachusetts moves away from commuter rail into more of a regional rail model where moving commuter rail assets at more and -- more head way during non-peak commute times, to provide more and better access to these kind of neighborhoods, I think the station has been successful in that some people use it, but it is hard to tell exactly how successful it has been in the pandemic world, because occupancy, and load factors are down so much. And I'm sure that's true all over the country. It has added trip times and it is very close to other stations. It is out of sequence with MBTA's traditional spacing on commuter rail network. But I think thought of as a success, certainly as an example to point to, when the private sector wants to step up and achieve objectives and public sector is willing to accept the asset with conditions.
The second is South Station which is a 50-year-old or so project that is currently under construction, initiated in the 1960s by the Boston redevelopment authority which is cushion renewal facility. They retained the rights to retain the air rights above the station when it sold the station to MBTA substation, so that people are aware, as the MBTA's major asset for commuter rail. It is intramodal operation, that has bike and ped services, bus terminal. It is the central facility into the City of Boston for MBTA. Part of the bus station was built in the 1990s but never finished and they negotiated in exchange for some development rights, the conveyance of the building of a bus terminal in the BRA's air space. It is under construction right now. It is an extremely unique set of fact only made possible because of the enormous land values that we're talking about. The bus terminal is scheduled to be turned over at the end of this year, and the MBTA will then manage the bus terminal. It is interesting, the buses are not MBTA buses they are inner city bus carriers and we run private bus service in there.
And the project will finalize a set of objectives that began nearly 50 years ago, and people, I think, are quite excited to see what the completed asset looks and feels like and gets used in a critical part of the City of Boston.
And the last case study I put on here, I thought about this, because I -- my point with this slide, is that not all development agreements and Value Capture technique, need to be large, massive projects like the one I just described at South Station. This is a very simple project that happened because a developer needed a little bit of land and was willing to rebuild the park and ride facility for the Massachusetts Department of Transportation, and it was supported by the local community, because it unlocked development that would not have otherwise happened.
Here, MassDOT is permitting part of the park and ride for the street that keeps the parking lot whole and to perform routine maintenance.
In the scheme of things and things all of you work on, the project is small, but my point is that it takes many forms, in that you can do simple agreements by leveraging the rights you have, in ways you might not be Tying about, and it saves human capital for the agencies. I think it stand for maximum leverage of the land that your agencies have to accomplish this is truly a win, win, win. And the developer walked away pretty happy that for a relatively minimal investment if accomplished its objectives but didn't hurt the overall objective of the Commonwealth of chute or the host community. So, those are three examples how the tack takes that I talked about earlier in the presentations have been applied in Massachusetts. Hopefully to great success. I think we'll wait and see with South Station. But so far it looks pretty good.
That's the end of my presentation. I'm happy to take questions.
>> RAFAEL ALDRETE: Thank you, Jeff. We have a question that a little bit general, but maybe you can address. I lost it here. Is, the question is, what mechanisms exist to ensure the developer fulfills their obligations on the developer agreement, for example, to prevent the developer from not completing in a timely manner. We have the agreement that sets forth the rights and obligations, obviously it is a legal process, but I was wondering if you have any examples that you can discuss when this has happened?
>> JEFFREY MULLAN: Yeah, sure. At the state level, in chute, property taxes associated at the local and they have remedies related to collections of taxes leaning on real estate. But what I have seen are performance guarantees from well-head corporations that usually the development organization is single purpose entity created for the purpose of developing a particular project and often don't have assets beyond what the program represents. In response to that, most of our clients seek guarantee from an organization that has got sufficient assets to back the obligations that are in the agreement. You perhaps more importantly, in in addition to the guarantee, our client usually seeks a letter of credit that is a liquid assurance, a liquidity vessel, so that in the event of a default, or a loss, or a cost that's incurred, that can call the letter of credit. It is a demand instrument that gets held by the public agency in order to enforce the agreement and only released upon the satisfaction of the agreement.
That's in addition to insurance, and you've got lien s -- you've got bonds, but my experience is that that letter of credit is quite powerful when enforcing the terms of the agreement, at least the projects that I've worked on has been pretty successful.
>> RAFAEL ALDRETE: Thank you. We have another question. And this one is about pre negotiation. Could elaborate on the pitfalls of pre negotiation and benefits of having pre negotiation and at what point in the process does the actual negotiation begin?
>> JEFFREY MULLAN: That's an excellent question by Caitlyn Bush. I -- up with of the reasons why I'm focused on pre negotiation, I'm a lawyer and I do a lot of this, but at one time I was the Secretary of Transportation at chute, and I live this real life where developers would call and say, Mr. Secretary, we're interested in accomplishing X, Y and Z, and my reply would often be, yes, I'm going to put Mr. And Mrs. So and so in charge of it, and I've had the occasion to have the developers interpret that as a commitment by the Secretary or Governor of the Commonwealth to actually accomplish the objective that the developer seeks. When I talk about pre negotiation, I talk about -- I think of the fact that oftentimes people hear what they want to hear, and in my experience, anything beyond making it very clear that we're not negotiating, let us talk about what our mutual objectives are, so that it is not misunderstood that the agency, you know, let's say the developer is seeking land or development right, that the developer is not, by virtue of the fact that the call was taken or the agreement has begun to be discussed, you want to avoid having it as a presumed fact that the developer is in fact getting the land or getting the development rights or getting the other value that the developer seeks, before the agency has an opportunity to actually think about the impacts that that development anyway have on the agency, or on the mission of the agency or on the separations that the agency performs. So, my point about pre negotiation is to guard against it, to make sure that people are clear that discussions are not negotiation, and in terms of when it actually begins, I would be clear that it begins when the agency says it begins.
And perhaps the only way to make that clear or make that clear is that early conversations need to be stressed that they are not negotiations. I hope that's clear. Maybe it is not. Maybe I talked in circles. I think this happens a lot, a lot more than we think. And part of it is just human nature.
>> RAFAEL ALDRETE: Thank you. That was a good explanation.
For the next question, I am going to post it for both of you, Roxanne, and Jeff. There's a question about, you know, who negotiates, and arrangement of DAs and the question is, the general understanding I have is that DAs are mostly arranged by and formed by municipals and developers, and that the division of transportation and planning organization wouldn't really play a part.
Can you speak from your experience when and where this may not be true? And this is particularly specific to DAs.
>> JEFFREY MULLAN: I'm sorry, is that for me, Jeff Mullan?
>> RAFAEL ALDRETE: Either one of you who may want to tackle it first or both.
>> JEFFREY MULLAN: I would say the development agreements and Value Capture agreement that we're talking about are negotiated by the onus of the assets that are impacted by the projects or project proponents for the counter probably, so, if there's a highway project or transit project going along with the property owner and the public agency is seeking land, for example, I can see where a development agreement would be negotiated or Value Capture agreement would be negotiated. My experience regional planning agencies aren't doing that. What they are working on is transportation improve plans or loading Federal fund, et cetera. At least in chute, they are not project proponents or agencies only assets, but they are not involved in that level. Other jurisdictions may have different answers.
>> RAFAEL ALDRETE: Thank you, Roxanne, would you like to add anything?
>> ROXANNE TANEMORI: I don't have anything to add on that. I'm not familiar with, you know, how MTA would be involved directly in the negotiation, the example I gave is how we negotiated that as dollars to fund a project ongoing with our MTA, but I don't know how they would do that directly.
>> RAFAEL ALDRETE: Thank you. The next question is environmental justice in developing agreements how do increase the impact with developer agreements in the agreement. We talked about affordable housing, can either one of you, maybe this is for Roxanne. Can you talk about EJ and development agreement?
>> ROXANNE TANEMORI: Sure. In terms of environmental justice, I would say that we -- we are still looking at ways to carry development agreements around. We tend to address, the needs of our underserved community and looking at environmental justice. We have done it more through our planning, our policy document. I would say, for instance, we set the framework around what kind of development can go, and around certain areas with industrial freeway, that's a really complicated conversation that we tend to set the direction where the DA has to be in compliance with what the general plan indicates. For instance, in our housing development we just adopted, we have addressed not just affordable housing, but looking at past practices in terms of zoning and where affordable housing, and whether certain groups have been excluded. That's in the housing element. And planning for housing in a different way to make sure we're ensuring through housing development complex. If DA is proposed, we'll look at those principles and requirements.
I'll say more broadly, addressing need of the most vulnerable populations, we tend to that to have of programs, our internship programs we prepare first outreach reverence, not require anything, that's a legal issue but we direct preferences and first choice review and outreach to a particular community, or area of our community. We look at -- we direct internships to our Community College. We look at commission substitutes for low-income family, for programs and childcare. We require affordable housing well above what our code already requires. And that comes with income level requirement as well.
That's typically how we deal with a little more important aspects of our planning work through a DA.
>> PEPPER SANTALUCIA: Ralph?
>> RAFAEL ALDRETE: My apologies I was on mute. Thank you, Roxanne. We have the next question, and it is about examples that can be used as references, factual agreements that have been used in the past. And the primer does include an example, developing agreement that a generic example, but has all of the different elms that a DA has, and after the webinar, we will probably try to send all of the references provided that are publicly available from the web.
So, we have -- the last question we have listed now in the chat is how do you have room to negotiate the impact fees that would be standard for development? Does the negotiated fee need to benefit the same agency? And I guess this discussion is for either one Roxanne or Jeff. In your experience, is there something that you have experience?
>> ROXANNE TANEMORI: I guess I can start. I wanted to add about development agreements on the template, as indicated, that we -- in Santa Monica, our document is public document, for all council agenda, if anyone is interested in that particular one, we have the mixture having the hotel, or museum, or health center. I can make sure it is at the right council meeting and we take a look at that.
Can you tell me what the question was? Oh, impacting --
>> RAFAEL ALDRETE: Impact --
>> ROXANNE TANEMORI: Have we negotiated them down. We collect these -- here's an example. We collect a whole range of impact fees. So, these all contribute to city funds, to our general fund, or to set aside account for our operations and work. We would not, for instance, negotiate down a cost that a developer has to pay that we would not give away their fund in any way, shape, or form. But in terms, of taking that, transportation impact, that goes back -- that's paid to the city. We have negotiated some of the dollar amount down from what they would normally be required to provide based on negotiated agreements. We do that very -- we tend to use the regular calculated amount as the baseline, and we negotiate up, but I would say in some case, the negotiation, we really wanted -- we may increase that a lot. That's just negotiated. 10 million dollars for behavioral health initiative. We I may say, okay, we have dollars put there. You're going to be doing infrastructure, utility for that and new cost. We may reduce that transportation impact fee slightly, or subject to negotiation, we have done that.
>> RAFAEL ALDRETE: Thank you, Roxanne. And I don't think we have any additional questions that have been addressed. I see Jeff addressed the question on Woburn, and I don't know how we're doing on time?
>> PEPPER SANTALUCIA: I think we're about ready to wrap things up, Rafael, so, thank you for your help with the question-and-answer session -- portion of this webinar. If you're paying attention to the chat, you can see that we've had a conversation about accessing the file, the slide decks. There is a file share window to -- on the left side of the screen. If you would like to download, either the primer, on development agreement, that was referenced earlier, or the one PDF file with all three slide deck, you can hover your mouse arrow over the file name, and look for a downward pointing arrow icon that will start the download process, or you can click on the three buttons in the upper right corner of that file share window, and there should be an option to download all, in which case you get a zip file with both files inside it.
So, that is -- that is the process for file downloads. We do also have web links down below. The first one will bring you to our landing page for this webinar series, where you can see recordings and transcripts of our previous webinars. As you can see on the slide, we have four more webinars to go before the end of the calendar year, you can register for them at that web page. So, again, there are even links at the bottom of that page, back to our prior webinar series that covers some of the same Value Capture topics.
If you would like to receive confirmation for your attendance today, you can send a request to Value Capture@dot.gov. It is valuecapture@dot.gov. You are also welcomed to provide any feedback on today's webinar through that e-mail address, but we also do have an evaluation tool that's now showing on the web page, in the center of the webinar room. So, we invite you to try that, if you wish, to provide feedback.
We really would like to, again, thank you Rafael, Roxanne, and Jeff for their presentations today, for Jeff and Roxanne, it was a repeat performance from 2021. We would like to really thank them for coming back and updating their content and offering it to this audience this year.
We also would like to acknowledge the ongoing support of the FHWA web conferencing office, and the past support of the FHWA everyday count program. With that, our webinar is now finished. Thank you for your participation.
>> JEFFREY MULLAN: Thank you very much.
>> OPERATOR: Ladies and gentlemen, this does conclude your conference today. Thank you for your participation and for using AT&T event conferencing. You may now disconnect.
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