The Red Line Rail Project — An Economic Development Driver

Last night, the Red Line task force, a subcommittee of the Metropolitan Transit Commission, met with Paul Morris of Greenleaf Strategies to discuss the policy directions that needed to be made to guide the Red Line Commuter Rail forward. With nearly a dozen years of discussion behind us, Paul Morris is a consultant that was “lent” to the task force by NC Secretary of Transportation Gene Conti, who has been very supportive of the Red Line and sees it as a link to further transportation options throughout the state. Paul Morris has been working for months to hone in on the policies that should be the guiding forces behind completion of the rail line. His advocacy, and Secretary Conti’s, are extremely important locally, regionally and nationally. Mr. Morris in fact, will soon become Secretary Conti’s Deputy Secretary of Transportation and will continue to finish his Red Line consulting stint…a very good thing for those of us along the rail line.

Because the focus for the rail has become economic development, as a commuter rail and as a freight line, I thought it vital to share with those of you interested in the successes of local businesses. Remember that rail as an economic stimulus cannot only be a selling point for corporate prospects, which would increase your business, but can also enhance the quality of life in our area and bring in new residents, bring in tourists, bring in more opportunities.

There are no answers yet as to funding; those are the next steps. But this memorandum is essential in sharing with you all the prospects for bringing rail to our future.  The following memorandum is from Greenleaf Strategies.

POLICY MEMORANDUM

 To:                  Red Line Task Force

 From:              Paul Morris, Mark Briggs, and Katherine Henderson

 Re:                  North Corridor Red Line Rail Project:

Achieving Integrated TOD/FOD in the North Corridor

 Date:               August 15, 2011

The Red Line Rail project is an initiative to upgrade an existing 25-mile section of the Norfolk Southern Railroad “O” Line in the North Corridor of the Charlotte metropolitan area of North Carolina, running from Charlotte to Mooresville. In order to advance both regional transportation mobility and economic development goals, the Red Line is currently envisioned as a dual-benefit rail system which would serve both freight and commuter traffic. This dual-benefit system would be integrated with transit- (TOD) and freight-oriented development (FOD) at strategic locations throughout the corridor.

This memorandum is designed to facilitate discussion and reach resolution on several critical policy considerations related to the Red Line project.  It provides case reference context, previews potential implementation issues, and presents recommended next steps for the project.

 

1.    Policy Considerations for the Red Line

Moving the Red Line Rail project forward requires consensus on three major policy considerations, each of which is explained below.

1.1.        An Economic Development and Job Creation Focus

The Red Line is more than a transit project; in a larger sense, it is an economic development strategy. By providing a high-quality service that will attract new residents, employees and private businesses, this rail investment can strengthen the North Corridor’s effectiveness as a focal point for the region’s economic development. Simultaneously, the Red Line can create an attractive alternative corridor to I-77, where congestion poses problems for both transportation mobility and continued economic growth.

Maintaining this vision for the Red Line rail project is essential to capturing the full benefit of the project investment: job creation, population growth and private capital deployment.  This wider view of Red Line benefits is essential—not incidental—to the project. By framing the project in terms of this full set of objectives during the planning process, it will be easier to achieve the consensus needed to bring this project to life and create a variety of economic development opportunities for years to come.

1.2.        Dual Benefiting Investment Strategy

The Norfolk Southern “O” line is currently the only direct north/south rail freight route with the potential to serve the industrial sectors from I-40 and Statesville south to Charlotte and mainline corridors to the Mid-west, South and Atlantic coast seaports. This route represents a significant logistics opportunity: to develop the Red Line as a dual-benefit rail link that maximizes the integrated and efficient movement of both goods (freight) and people (transit).

Joint development opportunities are common where commuter transit and freight operations coexist. However, they are rarely planned, programmed, developed and operated upfront with this duel benefit strategy in mind.  To generate the full measure of value from the reconstruction of the Red Line, commercial and industrial area spur expansion should be integral to the development of transit area stations, thus capturing the full benefit of both transit-oriented (TOD) and “freight-oriented” development (FOD).

The goal of this duel benefit strategy is to design an integrated rail and road transportation system that supports the highest and best pattern of land development and stimulates a robust stream of revenue (value creation) from escalating land and commercial values along the corridor.  This unique and extraordinary revenue will then be directed back (via value capture) to fund capital improvements, operation and maintenance of essential direct and indirect improvements along the corridor.

Transit station and industrial spur development is typically undertaken on an ad hoc basis, with little or no coordination between the related economic development objectives or opportunities, let alone passenger rail operations and the larger region’s intermodal connections.  By treating this project as a duel benefit strategy and actively attracting additional industrial development and transit ridership, the Red Line will help generate more jobs for the region, better strengthen the North Corridor’s economic position, and leverage revenues to support its operations.

1.3.        Regional Network Benefit

Conceptualizing and executing the Red Line Rail project as a “regional network benefit” is critical to its viability and long-term success, as explained below.

1.3.1.  Purpose and Need

The Red Line Rail project will produce a significant regional network benefit.  Achieving this benefit is metaphorically akin to assembling a car.  Each benefiting jurisdiction effectively purchases a part of the car.  As such, the car only runs when everyone has contributed their part and all parts are collectively assembled.  Each part is different, and each part is essential.

Each participating local jurisdiction only achieves its local benefit by collaborating in the assembly of the Red Line Rail project as regional network.  The train cannot run if the rails, stations and spurs do not connect every local jurisdiction along the corridor, including all critical origins and destinations for potential users.

To be successful, the Red Line must seamlessly and efficiently move both goods and people. As noted above, the dual benefit strategy is essential to unlocking the full economic development potential and capturing the full financial value of the North Corridor.  On a practical level, regionally networked operations are required to maintain the level of service demanded by both passenger and freight customers.

Accessing a regional user base is also essential for attaining the type of critical mass (volume of traffic) needed to sustain it in the long term.  After demonstrating the success of a first phase of the Red Line (Charlotte to Mooresville), further phases may be developed to extend the line to the north – accelerating and expanding the benefits of this investment into the larger regional context.

Figure 1: Regional Context

1.3.2.    Unified vs. Segmented

The local jurisdictions working to fund the Red Line Rail project recognize the need to identify the funding source(s), both public and private, needed to cover the “50% funding gap” associated with completing the project. Unique funding mechanisms must be pursued to fill this gap.  As a result, extensive work is being performed to identify and target value capture mechanisms for this purpose.  Before determining the particular value capture mechanisms that are best suited for application in this setting, the local jurisdictions must first make a policy decision regarding how funds will be generated and allocated throughout the project.

There are two primary approaches that could be employed – segmented and unified.  As shown in the figure below, with the segmented approach, each local jurisdiction functions as an independent agent who manages some fraction of the project costs and benefits within their own boundaries. This approach prioritizes the autonomy of each municipality, but ignores the intrinsically integrated purpose of the facility. Further, the segmented approach introduces significant legal, logistical and financial complications. The unified approach, on the other hand, creates one streamlined district covering all Red Line Rail benefit and allocation areas.  Costs and revenues are distributed along the length and breadth of the project, wherever needed— reflecting the regional network benefit of the project.

Figure 2: Segmented Vs. Unified Approach

While the unified approach requires greater cooperation between municipalities, it greatly streamlines the process in other respects, and would likely be the shortest route to generating the local capital needed to fund the project.   The unified approach will also be far more attractive to the bond market and private investors, as they will look to a single source rather than working with as many as seven individual jurisdictions contributing revenues.  The unified approach simplifies project delivery, providing efficiencies in both building and operating the project; while establishing a foundation for future growth and expansion.

A unified approach could be implemented via a single Joint Powers Authority (JPA), an entity that allows two or more local jurisdictions to operate collectively for the purpose of achieving intergovernmental cooperation on a project of regional need and significance.  Rail agencies in many other states have partnered with local jurisdictions via JPAs.  Through such authorities, the partners can collaborate to establish common goals and ensure that the design for the commuter transit function is integrated with the freight rail needs and is accommodating of surrounding development. The local jurisdictions creating a JPA choose those specific powers to grant the authority (e.g., collection and management of funds).  Prospective investors would look to the JPA to secure the revenues from the participating entities.

According to existing North Carolina statute, the prevailing law permits JPAs as a type of interlocal cooperation agreement, per Chapter 160A cities and towns (Article 20, Interlocal Cooperation; Part 1, Joint Exercise of Powers). The formation of a new local “governing entity” to oversee the Red Line Rail project would need to be spelled out as part of any contract or agreement.

 

Figure 3: Pros and Cons of the Unified Approach to Project Delivery

Unified Pros (vs. Segmented)

Unified Cons (vs. Segmented)

More attractive to bond market

Requires greater cooperation

Streamlines negotiations and administration (JPA)

Raises concerns over perceptions of control

Eliminates cross jurisdictional complexities

Requires new way of thinking and acting on local funding

Increases efficiency and likelihood of project delivery

In contrast to either a purely unified or purely segmented approach to funding, there is a third alternative that could be termed “hybrid”.  This hybrid approach would allow for some flexibility in the generation of each jurisdiction’s contribution, either independently (via value capture or other public financing mechanisms), or through participation by some jurisdictions in a contiguous unified district. In either hybrid case, the combined revenues of all contributing jurisdictions would ultimately be pledged to the JPA and used to fund the project.

  1. 2.            Applicability and Transferability

NCDOT considers the Red Line Rail project to be a project of statewide significance due to its cross jurisdictional context, multi-modal function, public-private interface, influence on regional logistics and mobility, and impact on other regions of the state.  The following sections consider the state perspective on regional transportation and multimodal connectivity in this context.

2.1.        NCDOT guidance on cross jurisdictional effectiveness in transit

At the state level, there has been an Executive Order mandate in place since 1978 to coordinate transportation resources.  NCDOT defines “regionalization” as: “A geographical area consisting of at least two contiguous counties or an urban fixed route transit system and a community transportation system, administered by a single entity.”  NCDOT views the regionalization initiative as the logical next step towards meeting the mobility needs of individuals, particularly those who reside in exurban and rural areas. They emphasize that the benefits of regionalization can only be obtained with a system’s consolidation under a single regional entity.

Goals of NCDOT’s regionalization initiative include:

  • Providing better and increased services that cross county lines;
  • More effectively addressing regional problems such as traffic congestion and air quality;
  • Greater opportunities for creation of local dedicated funding sources for transit; and
  • Increasing capital, operating, and administrative economies.

It is a fact that regional systems operate at a lesser cost per mile and cost per trip than single county systems.  Regional systems also qualify for enhanced federal operating assistance beyond that provided through standard formula funding sources.  NCDOT also provides additional incentives, including: technical and financial assistance for the marketing and public relations campaigns required to inform the public about service additions/changes; priority consideration for construction or renovation of transit facilities, amenities and advanced technology deployment; and additional funds for other transitional costs, including staffing and training.

2.2.        Statewide Multi-modal Logistics and Mobility Mission

North Carolina believes that surface transportation, and rail infrastructure in particular, is critical to the state’s economic vitality.  As such, North Carolina has invested heavily in improving the rail infrastructure of the state, to benefit both freight and passenger service.  NCDOT and the state-owned North Carolina Railroad Company have invested more than $300 million over the past decade to modernize the railroad infrastructure, improve safety, increase efficiency and enhance capacity for our carriers and shippers.

The state also recognizes, however, that achieving its greater transportation mission requires thinking beyond individual modes of transportation. In order to significantly improve the mobility of people and goods throughout North Carolina and across the Southeast, NCDOT is looking to develop an integrated network of multimodal transportation systems and supporting logistics centers. Further, the state wants to clearly link North Carolina’s long-term transportation investment strategies to jobs, economic opportunities, and both environmental and financial sustainability.  NCDOT has emphasized these as priority goals for the Statewide Transportation Plan, referred to as the 2040 Plan, which is currently under development.

  1.   Reference Cases

Successful regional rail projects elsewhere across the country provide useful information to help shape the framework for and delivery of the Red Line Rail project.  Several example cases are referenced below, by region, with the full list of cases provided in Table 1. We begin with the older, established systems in the Midwest and Northeast, followed by the more recent precedents in the Northwest, Southwest and Southeast, concluding with a brief look at the ongoing rail initiative in Dallas, Texas.

3.1.        Midwest and Northeast History

Regional rail systems in the Midwest and Northeastern United States include: MetroNorth Railroad (9 counties in New York and Connecticut); the MARC Train (Maryland/DC); Virginia’s Railway Express; Minneapolis, Minnesota’s Northstar Commuter Rail (30 local governments); the Metra system in Chicago and Pennsylvania’s Northeast Regional Rail Authority.  These rail lines are typically robust, established systems with heavy passenger traffic.  While there is steady freight activity on the lines, it is secondary to movement of people.

Minnesota’s Northstar Commuter Rail is of particular interest for the Red Line project. This system involves a large number (30) of local governments over its 40 mile length, and track is shared with Burlington Northern Santa Fe Railroad. A Joint Powers Authority called the Northstar Corridor Development Authority was established in 1997 to implement the project, which ultimately became part of Metro Transit’s regional service network.

3.2.        Northwest, Southwest and Southeast Precedents

Though somewhat younger than their Northeastern and Midwestern counterparts, there is significant precedent for regional rail in the Northwest, Southwest and Southeast of the country as well.  Examples include: the Metrolink system (southern CA); Westside Express Service (Portland, Oregon); Sounder (Seattle/Tacoma, Washington); Rail Runner Express (Albuquerque/Santa Fe, New Mexico); Capital MetroRail (Austin, TX); TriRail (southern Florida); ACE (San Joaquin, CA) and FrontRunner (Salt Lake City, Utah).  These are all successful dual-benefit corridors moving both people and freight.

Metrolink in southern California is the fifth largest commuter rail system in the U.S. This multi-county regional rail system was established by a Joint Powers Authority, and tracks are shared with freight traffic. (For more detail on Metrolink, see the full case study in Chapter 4 of the Greenleaf/PB Value Capture Report). The ACE system in San Joaquin, CA is another example of a successful dual-benefit corridor organized under a Joint Powers Authority.

Table 1: Regional Rail Projects Operating in Dual-Benefit Corridors

System Name

Location

Regional Entity Operating Commuter Rail Service

System Length (miles)

JPA Created?

Key Characteristics Relevant
to Red Line

Northeast, Midwest

MetroNorth Railroad

CT / NY

MetroNorth

775

*

Occasional freight customers.

MARC train

Maryland / DC

MTA

187

*

Shares with CSX.

Railway Express

Virginia

NVTC / PRTC

90

*

Shares with CSX and NS. Partnership of 2 transportation commissions.

Northstar Commuter Rail

Minneapolis, MN

Metro Transit

40

Yes

30 local governments. Shares with BNSF.

Metra

Chicago area

RTA

500

*

Shares with BNSF and UP.

Northeast Regional Rail Authority (NRRA)

Pennsylvania

NRRA

100

*

Currently upgrading for passenger traffic.

Northwest, Southeast, Southwest

Metrolink

Southern California

SCRRA

512

Yes

Fifth largest system in US.

Westside Express Service

Portland, Oregon

TriMet

15

*

Tri-county system. Operated on upgraded P&W Railroad line.

Sounder

Seattle / Tacoma, WA

Sound Transit

82

*

Shares with BNSF

Rail Runner Express

Albuquerque /
Santa Fe, NM

3 regional agencies

97

*

Shares with BNSF

Capital MetroRail

Austin, TX

CMTA

32

*

Shares with Austin Western RR

TriRail

Southern Florida

SFRTA

71

*

Shares with CSX

ACE

San Joaquin, CA

SJRRC

86

Yes

Shares with UPRR

FrontRunner

Salt Lake City, UT

UTA

45

*

6 miles shared with UP

 

Cotton Belt Rail Corridor

North Texas

DART / FWTA

68

N/A

PLANNING STAGE. Would upgrade/share with BNSF.

* Governing structure unknown.

 

3.3.        Texas Initiative (Dallas)

As a final reference case, the Dallas region is embarking on an ambitious new cross-regional initiative called the Cotton Belt Rail Corridor. This project, currently in the planning stages, is considering innovative financing and public-private partnerships to establish major regional rail linkages across north Texas.

3.4   Summary of case findings

Based on a recent study performed for the Red Line Rail project by HDR, 30 commuter rail operations currently exist in the United States, of which 24 contract some portion of their operations out to a third party.  State or local jurisdictions (individually or through a joint powers authority) own nearly all of these operations.  The older systems tend to be the largest and are usually public owned and operated by public agencies. The newer start-up systems tend to be operated by third-party contractors.  Many of the systems operate a portion of their service on rights-of-way belonging to other freight or passenger rail carriers.

4.            Conclusions and Recommendations

This following represents a summary of the key policy direction needed for the Red Line project, a discussion of implementation issues, and a list of next steps.

4.1.        Key Policy Inputs and Recommendations

To move from this point forward, the Red Line Task Force needs to definitively answer a series of policy-related questions that will determine how this project is administered, financed, operated and promoted to the public. These questions, along with recommendations for each, are listed below.

 

  1. 1.    Should the Red Line Rail project be treated as a regional economic development initiative?

Recommendation: Pursuing the project as an economic development corridor significantly improves its regional and statewide importance, along with its ability to fill the funding gap. Regional approaches across the country have been the most successful, both in terms of transit service efficiencies and in spurring economic growth around the stations.

  1. 2.    Should the Red Line Rail project pursue a dual-benefit strategy?

Recommendation: Pursuing a dual-benefiting strategy is essential to achieving the project’s full economic development potential. Further, the relief of traffic from I-77 will come both from reduced auto commuting and a reduction in truck traffic, which will only occur with a dual-purpose system.

  1. 3.    Should a unified district be established to provide regional benefit and allocation, administered via a Joint Powers Authority?

Recommendation: Establishing a unified district and a JPA will dramatically streamline and simplify the process, be more attractive to the bond market and/or investors and increase the Red Line Rail project ability to move forward. The JPA is the approach most often used when a system crosses county lines and requires cooperation by multiple local jurisdictions.

  1. 4.    Should the state take a leadership role in Red Line Rail project?

Recommendation: The state understands the importance of encouraging dual-purpose rail in Charlotte and also other regions of North Carolina. Participating in a lead role in the Red Line will improve the chances of project success and establish precedent for effective implementation elsewhere in the state. The state should take a lead role in elevating the importance of this project and negotiating directly with Norfolk Southern. The state should also consider hosting the JPA and providing specific financial incentives (via NCDOT) for regional participation.

4.2.        Issues for Implementation

Two primary issues for implementation have been emphasized in project discussions over the past several months.

The first implementation issue is the topic of partnering with private railroads to achieve a dual-benefit rail corridor strategy. Reference case precedents show that dual-benefit corridors are typically operated (dispatched) by the private railroad partner.  There are financial and operational aspects to the public-private partnership required—aspects of which have been the subject of past negotiations for the North Corridor with Norfolk Southern in the past. If the Red Line Rail project chooses to proceed according to the recommendations above, NCDOT would need to engage directly with Norfolk Southern to evolve this relationship at the State level (with potential local, regional and statewide implications).

The second implementation issue results from project success. If the initial Red Line Rail project attracts significant ridership and generates value capture revenue as projected, it could conceivably be extended beyond Mooresville in the future to connect with other major regional transportation networks. Specifically, over time the Red Line could reach:

1)    North (Iredell Line) to I-40 and the Lowe’s Corp Distribution Center

2)    Southwest (Gaston Line) to Charlotte-Douglas and the I-85 corridor

3)    Southeast (Union Line) to Monroe, the US-74 corridor and Carolina/Georgia seaports.

These extensions would greatly increase the utility and attractiveness of the Red Line – a positive outcome for economic development – but could ultimately prove detrimental in other ways if the extra through traffic degraded the balance and level of service for all modes in the North Corridor. To guard against this “too-successful” scenario, the Red Line Rail project could impose maximums on trains per day and/or train length.  That has been accomplished on other dual benefiting corridors across the country.

Next Steps

Activities scheduled for completion by the end of 2011.

  • Red Line Task Force:
    • Approves policy recommendations, setting directional guidance on:
      • Economic development agenda;
      • Dual benefit development strategy;
      • Revenue capture and capital cost allocation methodology; and
      • Governance, implementation and administration program.
      • Approves Local Finance Plan and requests Adoption/Implementation by all participating local jurisdictions.
      • Provides guidance with regard to all communications, messaging and strategy
      • Finance Working Group:
        • Prepares technical recommendations, defining substance of:
          • Benefit and Allocation District Map
          • Value Capture Mechanisms
          • Direct and Indirect Capital Costs
          • Assists Task Force with communications, messaging and strategy
          • Economic Development Group
            • Provides strategic guidance and input on:
              • North Corridor Rail Economic Development Focus:
                • “business case” and communications strategy
                • Local jurisdiction investment agendas
                  • §   TOD/FOD typologies for targeting throughout the corridor

Activities scheduled for execution during and completion by end of 2012

  • To Be Determined…
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Author: jillswain

Mayor Advertising consultant Mom Rec league girls' volleyball coach Champion of all things Huntersville, North Carolina

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