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New NJ Transit Division to Take Advantage of Hefty Real Estate Portfolio

A recent audit found the agency relies heavily on revenues from fares. A new law is aimed at leveraging its vast property holdings

Train station
Credit: NJ State League of Municipalities

New Jersey Transit is among the mass-transit agencies that rely the most on fare revenues, according to a recent audit, which suggested a hefty real-estate portfolio could be better leveraged to bring in more for the operating budget.

Several weeks after the release of the audit that raised this issue, Gov. Phil Murphy has signed into law a measure requiring NJ Transit to establish a new division that will concentrate solely on real estate, economic development and so-called transit-oriented development that is generally located within walking distance of train stations.

The new law also requires NJ Transit to provide both the administration and lawmakers a host of information about its real estate every year, including a full inventory of all agency-owned properties and projections of their revenue-generating potential.

“NJ Transit is the second largest landholder in the state, and there has never been a listing of all [its] properties,” said Assemblywoman Yvonne Lopez (D-Middlesex). “This will help us moving forward in determining how to allocate funding to ensure that there are no wasted dollars.”

NJ Transit officials hope the real-estate inventory and emphasis on economic development within the agency will generate more private-sector interest in developing agency-owned properties and ultimately create a new revenue stream that could ease the burden on riders. The new law is also drawing praise from smart-growth planning advocates as it is expected to encourage more innovative development around train stations in the type of walkable, “transit-oriented” communities that are in high demand among millennials.

Development opportunities

Some examples of transit-oriented economic-development opportunities that other states and even a few places in New Jersey have deployed include bringing all-day cafes into train stations, along with coffee bars, and errand stations where people can drop off laundry or request an evening food delivery. Planning advocates suggest that adjacent properties could also be better managed or found to have other uses — including as housing — in ways that could generate new riders.

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 and a series of fare hikes that were implemented during the tenure of former Republican Gov. Chris Christie.

Gov. Phil Murphy NJT
Gov. Phil Murphy has pledged to fix NJ Transit.

In fact, the comprehensive audit ordered by Murphy earlier this year determined that fares account for roughly 45 percent of NJ Transit’s overall revenues, a figure that is “near the top of comparable transit agencies of similar size.” The review by the North Highland consulting firm also highlighted the unpredictability of state-budget assistance, which is subject to political and economic influence; it concluded the current revenue stream is “inadequate, uncertain, and unsustainable.”

Among the auditors’ many recommendations was a call to prop up NJ Transit’s revenues by better leveraging the agency’s vast real-estate holdings, including by exploring new sale and lease opportunities. Those agency-owned properties are primarily located “adjacent to stations and along their right of way,” the audit said.

On the same page

“This real estate has the potential to expand both residential and commercial revenue for NJ Transit,” the audit noted.

While the auditors suggested that NJ Transit hire a full-time real-estate development manager to explore such opportunities, lawmakers in Trenton had already been considering legislation that called for the move after their own set of hearings on the agency and its finances. That measure cleared the full Assembly in June and passed the Senate in late September, days before the North Highlands audit was released to the public by the Murphy administration.

The law calls for a real-estate development division to be established immediately. A fiscal estimate prepared by the nonpartisan Office of Legislative Services assumed NJ Transit would have to reassign some staff members who already handle real-estate development matters but also predicted those changes could “ultimately reduce the amount of the State appropriation necessary to implement the provisions of the bill.”

Asked to comment on the new law, Nancy Snyder, a spokeswoman for NJ Transit, said on Friday that the agency “continually looks for ways to maximize non-farebox revenue, from real estate, leases, advertising and other sources.”

In the wake of Murphy’s action on the bill, the sponsors of the measure say they are anxious to see what the new office comes up with as it begins to inventory all the agency’s properties. In addition to cataloguing NJ Transit-owned real estate, the new law also requires the agency to reveal how much its parcels are worth, why NJ Transit owns and is holding onto them, and to disclose “any revenue the corporation receives that arises out of the property interest.”

Ties in with governor’s strategic plan

“The information and recommendations NJ Transit will receive from the office’s analysis will prove valuable and assist them in efforts to strategically generate additional non-fare revenue sources moving forward,” said Sen. Linda Greenstein (D-Mercer).

Putting a bigger emphasis on new development in communities located near or adjacent to NJ Transit train stations should also fit in with the broader approach to economic development and housing that the governor has sketched out as a key policy goal. Among the many new programs Murphy proposed during a major speech in Nutley last month is a new state tax-credit program that would seek to incentivize new investment in New Jersey’s cities, downtowns and aging suburban communities that are linked to mass transit.

Peter Kasabach, executive director of New Jersey Future, praised that vision and overall “strategic plan” after the governor signed the bill.

“New Jersey is seeing substantial demand for walkable downtowns, particularly those situated near and around transit, and the creation of an office of transit-oriented development within NJ Transit will be a great resource to help meet that demand,” Kasabach said.

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