New Jersey Transit relies more heavily on fares paid by riders to balance its budget than other mass-transit agencies, but over the past year the agency has been trying to increase revenue from its many real-estate holdings.
The new focus on real estate comes after NJ Transit’s auditors last year highlighted the heavy reliance on rider fares, and after Gov. Phil Murphy signed a bill that required the agency to, among other changes, create a new division focused on real-estate development deals.
In response, NJ Transit in recent months announced new collaborations with private developers to advance revenue-generating development projects at train stations, including in Bayonne and Matawan. A search is also underway for developers to work with the agency on enhancing properties adjacent to the 37-mile River Line between Camden and Trenton.
Earlier this month, NJ Transit also announced the hiring of a veteran real-estate professional to fill a newly created position of chief of real estate, economic development and transit-oriented development (TOD) to lead its new emphasis on asset monetization. That followed through on one of the specific recommendations made in last year’s audit.
Once known as one of the nation’s top-performing transportation agencies, NJ Transit has struggled in recent years as state funding has not kept pace with increased ridership. The agency has also faced an increasingly upset customer base, thanks to its declining reliability. A series of fare hikes that were implemented during the tenure of former Republican Gov. Chris Christie have also added insult to injury for riders.
Searching for former glory
Murphy, a Democrat, has emphasized the need to restore NJ Transit to its former glory as part of a broader push for new economic development that could increase state revenues. Last year, Murphy ordered a comprehensive audit of the agency. That review, which was released in October 2018, faulted the current revenue model and suggested a dedicated source of funding should be established for NJ Transit.
The auditors also said NJ Transit — which relies on rider fares to sustain an estimated 45% of its annual operating costs — was relying more heavily on fares than many similar agencies. For example, the Metropolitan Transportation Authority in New York used fares to support 42% of its annual operations in fiscal year 2016, the period looked at for the audit. Fares supported 40% of annual operations for the Chicago Transit Authority, and they supported 37% of annual operations for the Southeastern Pennsylvania Transportation Authority, according to the audit.
Murphy and lawmakers have yet to come up with a dedicated source of revenue to address NJ Transit’s funding issues, but they did work together last year to enact the law that required NJ Transit to create its new real-estate division. The law also called on NJ Transit to produce a full catalog of properties owned by the agency on an annual basis, the first of which it released in September.
Last week, NJ Transit announced that it has hired Carmen Tavares, formerly of the Europe-based real-estate trust Wereldhave, as the agency’s chief of real estate, economic development and transit-oriented development. Tavares, a more than 20-year veteran of the real-estate industry, will be paid $175,000 annually and report to NJ Transit’s chief financial officer, officials said.
“Carmen brings a wealth of experience to the job and will be a huge asset in our vision to more aggressively use TOD to develop under-utilized properties around transit, optimize the value of assets across the state, and generate additional non-farebox revenue, which will ultimately benefit our customers,” NJ Transit president and chief executive Kevin Corbett said.
Selling off properties
Agency records show that NJ Transit has already launched other efforts to boost revenues from sources outside of the fares that train and bus riders pay.
In fiscal year 2019, NJ Transit generated nearly $11 million by selling off properties in Kearny and Somerville, according to agency records. Another nearly $50 million in revenue was generated in FY2019 through property leases, parking fees, billboard advertising, utility permits and cell-tower licenses.
Meanwhile, NJ Transit officials announced in October the agency is seeking developers to improve the use of properties adjacent to train stations along its River Line light-rail system linking Camden with Trenton. The 37-mile system traverses 15 municipalities along the Delaware River in Burlington, Camden and Mercer counties and serves a total of 21 stations. Officials have prioritized transit-oriented development. (Such developments, often referred to as TOD, typically feature mixed uses like retail and residential, and are designed to be pedestrian-friendly).
The River Line effort followed NJ Transit’s earlier announcements this year of new mixed-use developments at its Aberdeen-Matawan station and at the Hudson-Bergen Light Rail station in Bayonne. The agency has been promoting other development opportunities elsewhere in the state, including in Bound Brook, Hoboken and Trenton, and has created a new website to help promote those efforts.
“We encourage any local government interested in sustainable and environmentally sensitive growth to reach out to NJ Transit about opportunities to work together in a mutually beneficial partnership,” Corbett said in August.