The Massachusetts Department of Transportation generated $40 million from the lease of air rights over state transportation assets in FY 2011. Earlier this month, the state built upon that revenue stream by designating AG Scotia II as developer of air rights over two parcels above and along Interstate 90 in Boston. The 99-year lease agreement will yield the state a net present value of $18.5 million in rent.
Massachusetts is far ahead of Virginia in recognizing that the development of property above highways and rail lines is a win-win-win proposition. Air rights can generate lease revenue for the state, attract private investment, build the local property tax base and restore walkability to an urban fabric ripped apart by the highway or rail line. According to the Massachusetts DOT, here are the numbers for the AG Scotia project: 230 residential units, a 270-room hotel, 50,000 square feet of office space and $360 million in investment.
Virginia may be slow to learn, but it does learn. Last year the Office of Transportation Public-Private Partnerships (OTP3) began studying the use of air rights in connection with the Rail-to-Dulles project, with a particular focus on the four stations in Tysons.
States a OTP3 project screening report: The vision is to transform Tysons Corner from suburban office park and activity center to an urban center that could include 200,000 jobs and 100,000 residents. The vision also calls for 75% of all development to be located within an easy walk (1/2 mile) of Metro. Such transit oriented development (TOD) might include a combination of commercial, office and/or residential projects as well as public amenities such as parks and green areas. The transportation benefits of the potential project will address travel demand management, vehicle trip reduction and improve mobility by building livable and sustainable communities.
A public-private partnership would net revenues to VDOT that could be used to fund other transportation projects in the region. Upgrading Routes 7 and 123 to accommodate the surge in traffic in and out of Tysons created by the massive increase in density there could cost billions of dollars.
A public-private partnership, states the OTP3 report, would “transfer the risk of engineering, design, construction, operations and maintenance to the private sector. The most likely scenario will be that VDOT collects royalties or payments for granting such leases.”
On the positive side, building offices, apartments and a hotel directly on top of a Metro station will encourage use of the Metro, which will need all the fare revenue it can generate in order to minimize ongoing subsidies. Because the train line is elevated, it is less clear to me what impact air rights would have upon walkability in Tysons, but the potential surely exists to improve the situation. A potential downside is that creating air rights would add to the potential glut of development rights in Tysons.
If I have any criticism, it’s that revenue from the air rights should have been applied to directly the project that made them possible — the Metro Silver Line — and the revenues used to offset the cost of that project to the public. But if air rights work in Tysons, they might work in Reston and other stops. Perhaps revenue from those stations could be used to buy down Dulles Toll Road tolls that will be used to finance Phase 2.
Northern Virginia isn’t the only place where air rights might apply. Two structures have been built over the Downtown Expressway in Richmond. Why not more?
The McDonnell administration deserves credit for looking into the idea. Now, let’s hurry things along. Let’s make the most of the opportunity.
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