Transit and Transportation

If you haven’t heard of Waymo, you’re probably not alone. I didn’t know of the work of Waymo until I started reading up on the phenomenon that is known as “self-driving” cars. Waymo is the Google self-driving project that became a standalone subsidiary in December 2016. Last year, Waymo launched a self-driving taxi service in Phoenix, Arizona, as a limited trial of this technology using real people.  Today, over 400 riders have signed up to use the new car service.

How does it work? Waymo engineers use sensors, software and cameras to operate driverless cars. After test driving and simulating driverless trips for over 10 million miles, Waymo engineers believe that they can ensure safe driving conditions under different weather conditions, including snow and rain. In Arizona, riders young and old have signed up for the trial program. Fleet dispatchers arrange rides to the gym, shopping, work and entertainment over an app, much like ride sharing services today.

In addition, Waymo has partnered with public transportation providers in Phoenix to connect users of transit with a ride for the “last mile” of their trip, getting people to final destinations in areas unserved by transit or public transportation. What this means is transit riders can get off buses and light rail and connect to Waymo for a ride to their final stop, whether it is work, home or a doctor’s appointment.

While the pilot appears mostly successful, it’s not without some controversy according to reports published recently in the Arizona Republic.  Chandler police have documented 21 incidents in which people have harassed or threatened driverless vehicles used in the trial. Since self-driving cars use radar, lidar, and cameras to navigate, they are able to capture these events in enough detail to identify those involved. Still, it must be a little intimidating to riders when opponents of this technology actually assault vehicles.

Next up is a road test of self-driving for trucks. Earlier this year Waymo launched a pilot in Atlanta where self-driving trucks carry freight bound for Google’s data centers located there. The launch in Georgia comes after a year of road tests with trucks in California and Arizona.  While the technology is similar to cars, it takes a bit more technology to maneuver a fully loaded truck and trailer.

In my home state of Minnesota, outgoing Governor Mark Dayton just announced recommendations for connected and automated vehicles.  Transportation Commissioner Charlie Zelle chaired an advisory council that recommended legislation to authorize a pilot program for safe testing of self-driving vehicles and platooning of trucks [Governor’s Release]. I can’t think of a better place to test whether self-driving cars and trucks really can operate under all weather conditions.

Recently the Minnesota Supreme Court invalidated a municipality’s use of an unauthorized transportation fee to fund projects that are not directly tied to a specific project. It also invalidated a city’s use of a development contract to “negotiate” such an illegal fee into the contract. Minnesota cities have long contended that development contracts are bona fide arms-length agreements which reflect true give-and-take between the parties. The Supreme Court rejected this argument on the basis that a city’s police power authority created an overarching pressure on a developer to concede the transportation fee or risk project denial. You would think this settles, finally, once and for all, this vexing issue. You would be wrong.


The association for Minnesota cities has communicated to its members that there are still several work-arounds available to cities that are determined to collect these fees. For example, a city could deny projects that are deemed premature owing to a lack of necessary infrastructure. The irony is that the court decision involved a developer who already had committed to pay for the necessary transportation improvements, inside and outside his development; this in fact is quite routine.

What cities are objecting to now is their inability to collect such fees and save them for future roadway projects some other place at some other time, rather than relying on taxpayers to fund such improvements (assuming another developer doesn’t agree to construct them). One city, and there may be more, has tentatively decided to impose a city-wide development moratorium so it can evaluate how to continue collecting the fees. This will adversely affect multiple development projects that are queued up for approval, putting their long-term viability at risk depending on the duration both of the moratorium and the current real estate cycle.

The battle between developers and cities seems never-ending as cities continue to perceive developers as ripe for fee extraction. And, frankly, too many developers have accommodated cities in their thinking. It might be time for the development community and city representatives to sit down and negotiate a truce.

Imagine a world without gas stations, parking ramps or parking meters. It may sound crazy, but many people in real estate development and design are doing just that.

In my last post, I introduced the discussion taking place around autonomous vehicles, or “AV” for short. Momentum for AV is building as car companies and technology companies join forces to advance legislation and design for a world where vehicles driven by people are no longer the norm. In this post, I take a look at local efforts to prepare for this future.

Bloomington is a good example of a traditional suburb with some forward looking development districts. Neighborhoods like South Loop and Penn American are designed for a shift to a more sustainable future where people again live and work in close proximity, walk to dinner or shopping and travel by transit or ride share.

Bloomington Central Station is located in the city’s South Loop, a district served by light rail and anchored by the Health Partners campus. In recent years, the urban redevelopment project has added condos, apartments, hotels, restaurants and structured parking all wrapped around a central park. Urban design elements include easy pedestrian access to amenities, public parking and public art.

Convertible Design

Funding provided by the Bloomington Port Authority has leveraged the value of this key location near Mall of America and the Minneapolis-St. Paul International Airport. According to Port Authority Administrator, Schane Rudlang, the next phase of the project will include parking that is designed from the start to convert to residential units if parking ratios drop significantly as a result of ride sharing and AV.

“If the public is putting money into parking, looking at the opportunity to convert parking in the future is the responsible thing to do,” according to Rudlang. Parking levels are flat, not ramped, and the upper levels of parking are designed to be removed to make way for construction of housing units. “Convertible designs don’t have to cost more to build, but they do take some planning ahead of time,” said Rudlang.

Mall of America, the largest retail and entertainment complex in the country, is still growing and designs for expansion of the mall will look closely at conversion of parking and other uses. “When you design a project to attract visitors for the next 50 or 100 years, you have to spend some time anticipating the future,” said Kurt Hagen, Senior Vice President of Development for Triple Five Worldwide.

Future Focus

Whether it’s parking, rides, attractions, or dining, owners and developers are now considering how they convert space and uses when the next big thing comes along, like virtual reality. For instance, Mall of America has far more dining and entertainment options than when it first opened in 1992. Its transit station is expanding and electrical vehicle stations provide charging for Teslas that can be rented onsite by the hour or the day.

Many still scoff at the idea that the majority of us will ride in shared or driverless cars, but consider construction of the interstate freeway system. When it was unveiled in the 1950s, most families had one car and still took trains to visit family out of town. Today, we can’t imagine a world without the convenience of the interstate and our single-occupancy, gas-powered vehicles. The future is right around the corner and some predict that more of us will be riding in AV than traditional driver-driven vehicles by 2030.

With the advent of driverless cars, young people are already lamenting the loss of freedom to hit the open road. Seemingly every major car company and every major technology company is racing to be on top of this promising new technology, referred to by many as “AV” or autonomous vehicles.

What does AV mean for real estate? According to experts at the Urban Land Institute, planners are designing new parking garages with flat plates for easy conversion to other uses like offices, retail, hospitality and community gathering spaces. Streets and sidewalks will make way for cafes and other active uses as the need to park cars on the street is significantly reduced.

According to a report by Fortune in 2016, the average car in the U.S. is parked 95 percent of the time. This simple fact means AV will bring much greater efficiency to transportation, with most cars working on the roadways all day long rather than sitting idle in the garage.

With new technologies, such as radar, lasers and cameras, driverless cars will drive closer, stop quicker and avoid crashes more often than vehicles operated by drivers. Even crashes and accidents that involve driverless cars today are largely based on human error; someone walking in front of driverless vehicle; or a driver-operated car striking the driverless vehicle.

Recently, Andy Cohen, co-chair of Gensler, told a Minneapolis audience of NAIOP members that 2020 will be the peak sales year for cars in the U.S., followed by a steady decline due to driverless cars. Uber and Lyft are making it cheaper to rideshare than own a car in many major U.S. cities.

Insurance companies are surely taking note of the rapid roll-out of AV technology given predictions that a good portion of the $200 billion auto insurance industry will go away. More than 90 percent of accidents are caused by human error according to the National Motor Vehicle Crash Causation Survey. Roads and highways will be safer, eliminating nearly two million crash related injuries.

Still, predictions of the societal impact of AV are not all positive. Today, almost six million workers drive buses, trucks, and taxis. If driverless vehicles advance as quickly as some predict, these dislocated workers will need retraining and new jobs in other industries.

All of this change will not happen without new and modified regulations. State legislatures across the country are considering changes to help U.S. companies compete in a global race for dominance that may make the moon shots of the 1960s look like a high school foot race. Last year, the House of Representatives passed the Self Drive Act with bipartisan support. The bill lays out a framework for AV regulation on the federal level.

While the history of driverless cars dates back to the 1920s when futurists demonstrated the first radio controlled cars on the streets of New York and Milwaukee, the real potential of this burgeoning technology now rides on advancements in mapping, radar, and smart phones. Given consumer demand to order everything from pizzas to mortgage loans on their phones, it’s not hard to imagine a world where we call for a ride and then check the stock market and sports scores as we tool along in the comfort of a driverless car. Goodbye little GTO!

After almost a year delay, the Metropolitan Council today opened bids for the Southwest Light Rail Transit (SWLRT) project that appear to save $100-$200 million compared to bids rejected a year ago as “nonresponsive.” The price tag for the 14.5-mile line linking downtown Minneapolis with Eden Prairie is $1.9 billion, which includes planning, design, environmental review and right-of-way acquisition.

As the lead agency on the project, the council decided to re-issue its invitation to bid on the project after rejecting the first round of bids last September. Consideration of the bids potentially puts the state’s largest public works project back on track. The two bids opened today were:

  • Lunda/C.S. McCrossan – $799,514,338.22
  • Ames Kraemer – $812,125,583

Next Steps

While there is an “apparent low bidder,” members of the council’s staff will now review the bids to make sure they include all construction activities, requirements for things such as workers’ compensation and unemployment insurance, performance bonds, and state and federal legal requirements, including Disadvantaged Business Enterprise goals (16 percent is the goal for the civil construction contract). Next, the council will seek consent of its funding partners, including Hennepin County and the Federal Transit Administration (FTA).

Recent Project Milestones

In making today’s announcement, the Metropolitan Council identified significant progress on the project in recent months:

  • In February the council and FTA published the Supplemental Environmental Assessment. The council will vote on that document in May.
  • The council has acquired nearly half of the property needed for the project, with relocation of displaced businesses underway or complete.
  • Construction workers have been hired and construction support contracts are in place.
  • Congress enacted its largest single-year appropriation ever this year for transit way projects like SWLRT in its Federal Transit Capital Investment Grant (CIG) Program.

If all goes according to plan, rail service will begin on the new line in 2023. SWLRT will serve as an extension of the Metro Green Line that now connects downtown St. Paul with the University of Minnesota and downtown Minneapolis. The extension will add St. Louis Park, Hopkins, Minnetonka and Eden Prairie to the line with 15 new stations.

Source: Metropolitan Council

It may not occur to you, when you walk from the bus stop to your office, that you are taking part in a form of “multimodal” transportation. Again, if you get off the train in Minneapolis and pick up a Nice Ride (bicycle) for a tour of Nicollet Island with visiting friends, you are taking part in multimodal transportation. Almost every trip we take requires multiple forms of transportation; car, transit, carpooling, biking and walking.

Leveraging multimodal transportation in the development arena was the focus of one of two panels sponsored recently by Larkin Hoffman and the Minneapolis/St. Paul Business Journal. Panelists included Lucy Galbraith, transit oriented development director at Metro Transit, Mark Fabel, executive vice president at McGough Construction, and Jaci Bell, director of development for Kraus-Anderson Realty.

Until the 1980s, most developers viewed transit as the way people got to work in the central cities. Planners and designers changed all that by creating incentives to partner on transit oriented development (TOD), locating transit stops in or around private offices, shopping centers and multifamily sites. Green space, parks, bike sharing and other public amenities were added to many TOD projects more recently. TOD has created some of the most vibrant urban environments here in the Twin Cities and around the country.

Take a look at Bloomington Central Station (BCS), a 45-acre campus developed around a transit station and public park. Planned by McGough, the project combines the headquarters for Health Partners, with condos, apartments, a new Hyatt hotel and structured parking facilities. BCS is just two station stops from Mall of America, a pioneer in transit-oriented development, which was constructed more than 25 years ago with a transit station built into its east parking deck. More than 10 years ago the last station for the blue line added light rail transit (LRT) to Mall of America and what is now the busiest transit station in the state.

Panelists also pointed to more than $2 billion of commercial development along the green line which runs in the center of University Avenue between downtown Minneapolis and downtown St. Paul. Adult bookstores and movie houses have been pushed out by successful ethnic restaurants and groceries, student housing, senior housing and new employers, all connected by LRT.

Galbraith noted that 40 percent of employees don’t drive to work, so good transit and multimodal facilities are essential to attracting employees from an increasingly tight labor pool. Sometimes employee incentives take the form of free- or reduced-price transit passes. Other employers offer bike racks, showers or preferred parking for carpools. Today’s smart phone apps, like ZAP, even create opportunities for friendly competition among coworkers who uses transit or bike to work. The entire environment for TOD has improved dramatically in 30 years.

For a complete review of the TOD panel, follow this link to the Q&A published by the Business Journal.

So, the government knocks on your door and says, “We’d like to locate a transit station on your property.” Access to transit and workers who use transit is usually a boon to an employer or commercial property owner, if you can navigate the potential pitfalls and risks associated with transit leases, easements, funding, management, operations and security.

What You Need to Know

Transit stations and park-and-ride facilities are usually built for the long term. Once you grant rights in your property and service begins, it is often difficult to reverse course or modify the location and scope of transit operations.

Public funding typically follows the decision to construct transit facilities on private property, but beware of hidden costs and other hidden impacts to your property. For instance, would a transit station displace parking and render the site in noncompliance with local parking requirements? Or will local authorities provide a credit against parking counts based upon the proximity to transit?

What happens if “park and riders” create queuing or access problems as a result of peak hour demand for access to transit? What if the transit operator doesn’t lease parking spaces from the owner? Will the property become a de facto park-and-ride location nonetheless?

Who owns the improvements – the government or the private property owner? Usually the transit operator leases land or acquires an easement and owns any improvements constructed for transit service. Be clear in your agreements about who owns what because it is important when the time comes to remodel, relocate or remove transit facilities.

What about exhaust emissions, particularly in enclosed or semi-enclosed structures? Make sure the transit operator is responsible for air quality.

Depending on the size of the facility, who would secure the location? Transit authorities employ transit police. However, the level of service is often dependent upon the number of riders in a particular location. If your property is on the edge of town, it is unlikely to be secured by transit police.

Would the private property owner have the opportunity to brand transit facilities or provide wayfinding? For instance, some agreements give private owners review and approval of the design and exterior treatment of transit facilities located on private property.

What happens if the facility is damaged or abandoned and who is responsible for maintaining liability insurance? Private owners assume this is the obligation of the transit operator, but that is not always the case.

Of course, any transit opportunity presents more routine legal issues that are negotiated as part of any long-term arrangement, but some of the considerations above will keep you on the right side of a good transit deal.

Property owners in the path of light rail and bus rapid transit projects are now eligible to receive the full protection of the state’s eminent domain laws, thanks to legislation passed in 2017 by the State Legislature.

Before passage of this legislation, the Metropolitan Council (Met Council) had been taking the position that it was a public service corporation. This status would have exempted the Met Council from extending to property owners certain compensation rights normally available under Minnesota law when private property is taken for public projects.

Because of this new legislation, the following property owner rights are now available to those whose property is taken – in whole or in part – by the Met Council for a light rail or bus rapid transit project:

• Attorney fees under Minn. Stat. § 117.031, which provides that the court may award attorney and expert fees if just compensation recovery is at least 20 percent, but not more than 40 percent greater than the Met Council’s last written offer. The statute further provides that the court must award such fees if the just compensation recovered is more than 40 percent greater than the last written offer.

• The Met Council must provide property owners with a written offer, along with a copy of an appraisal. The council must also make a good faith attempt at negotiating with the property owners and reimburse them for appraisals up to $1,500 for single and two-family residences and $5,000 for other types of property.

• Property owners must now be advised by the Met Council of certain rights in the petition filed with the district court to commence the condemnation proceedings. These rights include their right to challenge the public use, purpose or necessity of the project for which their property is being taken and their appeal rights from any adverse determination on such a challenge.

• Business property owners are now eligible to seek compensation for “loss of going concern” under Minn. Stat. § 117.186, and to seek minimum compensation under Minn. Stat. § 117.187. Minimum compensation recognizes that when a business owner must relocate, the damages, at minimum, must be sufficient to allow the owner to purchase a comparable property in the community.

• The Met Council cannot require a property owner to accept as part compensation a substitute or replacement property and cannot force the owner to accept the return of property that has been acquired.

• Displaced business property owners are now also eligible for relocation assistance in the form of reestablishment expenses up to a maximum reimbursement of $50,000. All displaced property owners also now have the right to challenge their eligibility for relocation assistance and to challenge the amount of such assistance through a contested case proceeding before an administrative law judge.

These are significant statutory rights that the legislature adopted to ensure that property owners displaced by a public project would have the opportunity to receive “just compensation” for the taking of their property, as the state and federal constitutions require. The 2017 legislation restores these rights to property owners who find themselves in the path of transit projects carried out by the Met Council.

Depending on your politics, you may regard transit investment and transit-oriented development (TOD) as “government boondoggle” or “essential building blocks” for livable communities. Setting aside politics for a moment, let’s look at what TOD is and what it can do for a developing community or region.

At its core, TOD is urban development that harnesses public investment in transit infrastructure to leverage private development, usually with a mix of uses and amenities, within walking distance to bus stops or train stations. In most major urban areas, transit investment and TOD is commonplace and not the least bit controversial. Look what happens on the East Coast or in Chicago if commuter trains stop for weather, accidents or labor problems – people can’t get to work.

Here in Minneapolis-St. Paul, or in places like Denver and Seattle, where a renewed focus on transit has led to new lines, light rail transit (LRT), bus rapid transit and commuter rail, the controversy rages. And it usually centers on how best to maximize use of limited transportation dollars. Still, even here TOD has proven its value.

In Bloomington, Mall of America and Bloomington Central Station are two successful examples of TOD that were planned over years, built in phases and primed with transit investments, first in bus stations, and later in LRT stations, park and ride and related amenities. Each project has much higher transit ridership, lower parking costs, less congestion and programs that support employees who choose transit.

In St. Paul and Minneapolis, the once dying commercial areas along University Avenue now thrive with more than $2 billion in investment in retail, restaurants, entertainment, housing and employment since construction started on the Green Line in 2013. Critics say the demand for development would have occurred without the Green Line; supporters claim University Avenue would be home to adult bookstores and empty storefronts without it. And soon, Major League Soccer will replace a once-polluted bus garage within walking distance of an LRT station.

On a national scale, transit development and transit investment may go up or down, depending on who is in power in Washington. Still, the success of this model is proven and business leaders overwhelmingly favor transit investment for one simple reason: Millennials are attracted to urban work environments with transit options. With a growing labor shortage, our major employers compete for coveted workers to fill the jobs of the future. Without good transit, cultural amenities, affordable housing and livable communities, we will lose this contest for the best and brightest.

I don’t know why funding for transit and transportation is controversial – it’s not an either/or proposition. We need both. Billions of dollars in reinvestment in roads and bridges has been deferred and bottled up in the process. More recently, politicians have campaigned on transit versus transportation. Meanwhile, drivers and commuters suffer in gridlock. It’s time to find a long-term solution for all modes of transportation if this metropolitan area is to remain competitive. Let’s face it, we can no longer rely on our great weather to attract people to our region.

The Twin Cities of Minneapolis and St. Paul, and surrounding metro region, are experiencing a surge in large public transit projects, most notably the long-awaited Southwest Light Rail Line (SWLRT), which extends the existing Green Line from Minneapolis to the southwest suburbs, terminating in Eden Prairie, MN. In addition to light rail, several other fixed transit ways are being constructed or are in the planning stage.

What does this mean for a property owner with land potentially in the path of any work required to construct a new transit corridor? Uncertainty, confusion, frustration, anger and anxiety are just a few of the emotions that landowners, including business owners, experience when they discover their property may be taken through a future condemnation action. The consequence could be to force a wholesale relocation of a business and its employees to an unknown new location, with all the risks associated with such a move.

The public agencies do a reasonably good job of providing base-level information about a major public project, including broad estimates of timing, and SWLRT is no exception. However, when it comes to the specific project location, impact, land payments, relocation and especially timing, such agencies often themselves have no answers on which to base a plan.

In the case of SWLRT, the involved public agencies and their hired contractors have been waiting literally years to throw the switch and get started on land acquisition and construction of the new approximately 15-mile corridor.

The “promised” start date has been a moving target, frustrating the planning efforts of affected parties. This means landowners and business owners have been riding a roller coaster of emotions as they anticipate a firm start date. The practical consequence of this uncertainty is that an affected business owner might be forced to hedge a bet and speculate about a new location, sometimes even committing to buy land or another building for a future relocation if and when it occurs.

This means they are forced to expend time and precious capital to research new location options, evaluate the value of their existing property and make concrete plans for the future. The alternative is not a good choice either: delaying a search process to secure a new business home could place an affected business at risk of losing its current home without having secured an acceptable replacement.

For those with special site needs, such as extended parking or outside storage, the challenge to find a location is further frustrated by municipal zoning restrictions affecting such uses. The prudent step is to initiate the planning process presuming the outcome and secure as much lead time as possible before making a hard commitment to the new location. If you have a particular urgency to act, the Metropolitan Council has been cooperative in confirming eligibility for relocation assistance ahead of formal condemnation proceedings.