. miseragan State I University PLACE IN RETURN BOX to remove this checkout from your record. To AVOID FINES return on or before date due. MAY BE RECALLED with earlier due date if requested. DATE DUE DATE DUE DATE DUE oifiéodw _,LAN_Z_J_§Q,JU Bore APRflazmo 121509 i§1*709 WW2 2/05 a/CTRC/DateDueJndd—sz In B Paper Smith, Jeffrey J. September 11, 2007 2007 . The Impact of Commuter Rail Transit Estimating the net impact on average home values commuter rail transit would have on Ann Arbor, Dearborn, and Freedom Township in the State of Michigan A Plan B Master’s Degree Paper Prepared by: Jeffrey J. Smith Masters Student Urban and Regional Planning Program Prepared For: Rex LaMore, Ph.D. Advisor Michigan State University Department of Urban and Regional Planning East Lansing, Michigan 48824 http://www.msu.edu Table of Contents Table of Contents 1. Executive Summary ............................................ 1 Purpose of Report ............................................................. 1 Potential Benefits of Commuter Rail Transit .................... 2 Overview of Approach ...................................................... 3 Conservative Approach to Measuring Net Benefits ......... 4 Overview of Findings ....................................................... 4 Impact ............................................................................... 6 11. Market Overview .............................................. 9 Michigan ........................................................................... 9 Texas ............................................................................... 10 III. The Model ..................................................... 12 I V Literature Review ........................................... 15 Readings .......................................................................... 15 Summary ......................................................................... 19 V. Socio-Economic and Demographic Analysis .. 21 Population & Number of Households ............................. 21 Table: Population Profiles ............................................. 21 Table: Household Profiles ............................................. 22 Income Figures ................................................................ 22 Table: Income Profiles .................................................. 23 Labor Market .................................................................. 23 Table: Unemployment Profiles ..................................... 23 Property Values ............................................................... 24 Table: Average Home Values ....................................... 24 VI. Impact of Commuter Rail .............................. 25 Substitution Effect .......................................................... 25 Table: Substitution Effect Parameters ........................... 26 Net Impact ....................................................................... 26 Table: Impact on Michigan Study Areas ...................... 27 Conclusions ..................................................................... 27 Michigan State University Table of Content- Appendix A: Maps ............................................. A-I Appendix B: Demographic and Socioeconomic Profile ........................................... 3-1 Appendix C: Impact Model and Results ........... C-I Appendix D: Bibliography ............................... D-I Michigan State University PURPOSE OF REPORT Executive Summary 1. Executive Summary This report provides an analysis of the net impact that Commuter Rail Transit may have on home values in three municipalities in Southeast Michigan (“Michigan Study Area”). The report is the culmination of a three-month study of comparable markets, concluding with the net impact of a commuter rail sys- tem on a municipality’s average home values. Michigan Study Area Defined. For this report, we evaluated the potential impact commuter rail transit has on average home values in the communities of Ann Arbor, Dearborn, and Freedom Township. Comparable Market Defined. To qualify results of the net impact of commuter rail transit on a community, a comparitive market that has an established system was examined. For this report we have chosen the Dallas-F t. Worth market in Texas. Specifically, the Cities of Ft. Worth, Irvine, and Aledo. Estimated Net Benefits Defined. Throughout the report we identified, where pos- sible, the estimated net benefits of commuter rail transit. These are the benefits after deducting the “likely” events that would otherwise have occurred in the region without the operation of the commuter transit system. Commuter Rail hansit Defined. Commuter rail systems can be defined as rail service between a central business district and suburbs or vise-versa, and from other locations that draw large numbers of people to a concentrated area.l 1. Source: Memphis Online, “Let’s Learn From Nashville’s Rail”, 2006. Michigan State University POTENTIAL BENEFITS OF COMMUTER RAIL TRANSIT Executive Summary Commuter rail does not, however, include light rail or rapid transit service. Light rail generally requires construction of new track and overhead electric cir- cuits to power the trains. Commuter rail service is generally powered by diesel fuel rather than electricity and is typically built to run on the same tracks uti- lized by freight trains. In this report, we focused on identifying the impact of commuter rail transit on average home values on a municipality, therefor this approach is more clearly a regional impact study. We have not “drilled down” to examine the impact of sta- tion location on a local market, nor have we determined distance of rail track from home vs. value increase or decrease. There are other potential benefits that the commuter rail brings to the region. These benefits may include: improved environmental quality, increased safety of travel, reduction in travel costs, increased employment opportunities, higher density development near stations, increased tax revenue for municipalities, and improved access to name a few. These potential benefits are important, how- ever, they are not quantified in this report.2 2. Source: Transit Now, “Kenosha-Racine-Milwaukee Commuter Rail Extension”, December 2002. Michigan State University OVERVIEW OF APPROACH Executive Summary Our analysis included the following steps: 1. The collection and management of data from several sources, including the US Census, the State of Michigan, the State of Texas, each municipality in the study area and comparable market area, and ESRI, Inc. 2. A comparison of the Southeast Michigan Study Area to an established com- muter rail system in Central Texas. 3. An analysis of the socio-economic and demographic characteristics of the primary markets, neighboring counties and, the States of Michigan and Texas. 4. An analysis of the changes in average home values for comparable markets. 5. An economic impact analysis providing a measure (multiplier) that com- muter rail has on average home values in the comparable municipalities. 6. An assessment of the portion of these changes that represent new or addi- tional changes in the municpality, above those that would otherwise occur if the commuter rail system were not in operation. 7. A review of recent literature that focus on the impact of commuter rail. 8. A discussion of results benefits the commuter rail has on economies, but which are not quantified in this study. 9. Measuring the additional impacts that may contribute to a change in average home prices. Michigan State University CONSERVATIVE APPROACH TO MEASURING NET BENEFITS OVERVIEW OF FINDINGS Executive Summary 9. An application and analysis of the measures to the Michigan Study Area to quantify the impact of commuter rail to a municipalities’ average home val- ues . The approach we have taken is a broad view impact analysis. However, we have attempted to calculate only the net benefit, that is, the benefit after subtracting out the estimated income, population, employment, or other benefits that may have otherwise impacted average home values in the municipality regardless of whether commuter rail was constructed. For example, we calculate the benefit of the market’s household income levels, the changes in population and households, and the unemployment rates of that market. We then apply these measures to the changes in average home values before concluding the result is the sole effect of the commuter rail system. As a result, we make a reasonable effort, when possible, to provide clear and quanti- tative results that are based solely on a single variable, the existance of com- muter rail. Comparing the Michigan Stuafv Area with Markets in Texas Our comparison of the Michigan Study Area with select municipalities in Texas found that: 0 Although larger in Population and Households, the Texas markets had lower overall per capita and median household incomes levels. (See Exhibit 1 and Exhibit 5 in Appendix B) Michigan State University Executive Summary . Although dissimilar in size (acreage), the populations of Freedom Township, Michigan and Aledo, Texas are comparable, seperated by only a few hun- dred people, as of 2005. (See Exhibit 1 and Exhibit 5 in Appendix B) o The 2005 Unemployment Rate in Texas was lower than the state average in Michigan (5.3% and 6.7% respectively). (See Exhibit 1 and Exhibit 5 in Appendix B) o The average home values for all markets was lowest in Ft. Worth, Texas at $110,296, and highest in Freedom Township, Michigan at $328,804, nearly triple Ft. Worth. (See Exhibit 3 and Exhibit 7 in Appendix B) The Study Area Economies We further examined the Michigan Study Areas relative to each other. This helps us understand to what extent the municipalities effect the regional econo- mics.3 Some prominent socio-economic and demographic characteristics of these markets area are as follows: 0 Despite no significant population change in Dearborn over the last five years, populations in Ann Arbor and Freedom Township are growing, albeit at a minimal rate of 0.7% and 1.0% respectively (see Exhibit 1 in Appendix B). 0 Ann Arbor and Freedom Township both gained households from 2000 to 2005, whereas Dearbom had 0.1% negative growth over that period. The 3. See “Socio-Economic and Demographic Analyses” on page 6 for further description of both the Michigan Study Area and Texas comparable market economies. Michigan State University 5 IMPACT Executive Summary number of Households are expected to continue increasing for both Ann Arbor and Freedom Township, however, Dearbom is expected to remain sta- ble from 2005 to 2010 (see Exhibit 1 in Appendix B). o The Per Capita Income levels of Ann Arbor and Freedom Township were both higher than the state average, while Dearbom was slightly lower in 2005.4 In addition the Median Household Income level for Freedom Town- ship was significantly higher than the State average, while the levels for Ann Arbor and Dearbom remained consistent with that of the State (see Exhibit 1 in Appendix B). 0 While data was unavailable for Freedom Township for unemployment rates, both Ann Arbor and Dearborn both posted lower percentage than the state average (see Exhibit 1 in Appendix B). Adjustments to a community’s transportation system, such as implementing a commuter rail system, impact not only transportation, but also the economy; in this case average home values, in the communities nearby and within the rail line.5 The results of the impact analysis can be found in “Appendix C: Impact Model and Results”. Our analysis of the net benefit due to the introduction of commuter rail on average home values found that: 4. The State of Michigan average per capita income for 2005 was $25,633, and the Median Household Income level was $50,118. 5. Average Home Values normally increase as time moves forward regardless, the impact of commuter rail mearly increases or decreases the rate of growth. Michigan State University Executive Summary 0 The results of the impact analysis for Ann Arbor shows an increase in aver- age home values from $314,812 to $316,523 in 2007, and from $366,927 to $388,799 by 2010. o The average home values for Dearbom increased from $198,387 to $200,901 in 2007, and from $226,255 to $237,942 by 2010. . The results of the analysis for Freedom Township indicate a decrease in the rate of growth for average home values. Based on our analysis, the average home values in Freedom Township were $41,768 lower with the commuter rail than without by year 2010. All these measures are net benefits, meaning they have been calculated by sub- tracting out the likely economic factors that would have occurred by other eco- nomic events in the area if the Commuter Rail were not in operation, such as changes in population, households, per capita income, and unemployment. We recognize that this analysis is partial, as it ignores many of the important benefits of the commuter rail system, including impacts on home values relative to distance from rail line or stations, tax dollars added to communities, added employment opportunities, as well as the local and state costs associated with construction and operation of the commuter rail system. However, it does indicate an important finding: the possibility of increasing the average home values of communities such as Ann Arbor and Dearborn and improving the region’s transportation network both at the same time. These Michigan State University Executive Summary types of economic activities help generate attention to an area in the form of business recruitment, as well as improved attractiveness to potential residents. A more detailed discussion on the economic benefits can be found in “Net Impact” on page 25. Michigan State University MICHIGAN Market Overview 11. Market Overview In the sections below, we detail the Michigan Study Area and the comparable markets used in our analysis. In determining which market to use as a compara- ble market for this study, we first examined the makeup of the markets in the Michigan Study Area. Second, we looked for markets with established commuter rail systems and examined the distance of the route between endpoints, distance of municipali- ties from each other, distance of municipalities from the rail line, and socioeco- nomic and demographics. The Michigan Study Area is comprised of the City of Ann Arbor, the City of Dearbom and Freedom Township. Ann Arbor. Ann Arbor is a college-town, located approximately 30 miles west of the City of Detroit. Ann Arbor is the County Seat of Washtenaw County and is widely known as the location of the main campus of the University of Michi- gan. As of 2000, 82.4% of the cities 27.3 square miles of land had been devel- oped.3 Dearborn. Dearborn is a suburban metro area adjacent (west) to the City of Detroit in Wayne County, and is east of Ann Arbor along Interstate 94. Consid- 3. Source: Southeast Michigan Council of Governments (SEMCOG), http:\\www.semcog.org Michigan State University TEXAS Market Overview ering the city’s proximity to Detroit, roughly 90% of the city’s 24.5 square miles of land has been developed.4 Freedom Township. Freedom Township is a rural community approximately 10 miles southwest of Ann Arbor in Washtenaw County. Freedom Township is the largest market, in terms of area, in the Michigan Study Area. The Township covers an area of 35.6 square miless, of which 5.8% has been developed. See Map 1, “Michigan Study Area Overview and Proposed Commuter Rail Route,” in Appendix A, for the market area overview. In researching markets with established, but relatively new, commuter rail sys- tems in place, we discovered the Dallas, Texas to Ft. Worth, Texas commuter rail link. The system has been in place since 1996, and was extended to Ft. Worth in 2001. The municipalities we choose to compare and analyze were the City of Ft. Worth, the City of Irving and the City of Aledo. Geographically speaking, these municipalities were comparable to the Michigan Study Area municipalities. Ft. Worth. The City of Ft. Worth is located approximately 30 miles west of Dal- las, and is the county seat of Tarrant County. Ft. Worth is the 19th-largest city in the United States and covers an area of approximately 300 square miles.6 4. Ibid. 5. Ibid. 6. Source: United States Census Bureau Michigan State University 10 Market Overview Irving. Irving is adjacent (west) to the City of Dallas in Dallas County. Accord- ing the US Census, the city covers a total area of 67.7 square miles. Aledo. Texas is one of few states that does not have townships as a jurisdiction.7 Therefore, we could not compare township to township and as such we com- pared Freedom Township to a market in Texas based on distance from the com- muter rail line, the proximity to the other study areas (Ft. Worth and Irving), and similar population and household sizes. Aledo is a relatively small city approxi- mately 15 miles southwest of Ft. Worth along Interstate 20, covering a total area of 1.9 square miles. See Map 5, “Texas Study Area Overview and Commuter Rail Route,” in Appendix A, for the Texas market area overview. 7. [bid Michigan State University 11 TheModeI III. The Model Our goal in this study is to determine the potential net impact on average home values when commuter rail transit is introduced into a market. To evaluate how commuter rail translates into impact, we: 1. Determined annual average home values in three communities in Texas where commuter rail transit has been established. 2. Calculated average home values based on 1990-2000 growth rates before the rail was constructed and compared those with forcasted 2000-2005 and 2005-2010 growth rates after the rail was established to estimate the gross impact on average home value prices. 3. Applied those impacts to the three communities in Southeast Michigan (Study Area) to determine the estimated net impact the commuter rail would have on these communities from 2006 to 2010. We accomplished this through the use of our economic model. The average home value impact model is used to determine the economic activity stemming from the introduction of commuter rail to a community. The model relies on data collected from US Census and ESRI, Inc, and includes 1990 and 2000 Cen- sus figures and ESRI estimates for 2005 and 2010. In the sections below, we outline the steps for completing the model.2 2. See “Appendix C: Impact Model and Results” for the results of the Model. Michigan State University 12 TheModel In step 1, we input the average home values from 1990 to 2000 and 2000 to 2010 for the Texas comparable markets, as well as the calculated growth rates between those two periods. The commuter rail was non—existent prior to 1996 and would most likely had little impact from 1996 to 2000. We applied the growth rate from 1990 to 2000 to the average home values from 2000 to 2010, as this is the “status quo” scenario prior to commuter rail existing in the market. We then calculated the 2000-2010 average home values based on the growth rates from 2000-2005 and 2005-2010 projections. The percentage change between the original values and those with the adjusted growth rates is deter- mined to be the potential gross impact of commuter rail on the Texas compara- ble markets. In step 2, we determined the average home values in the Michigan Study Areas between 2000 and 2010 based on 2000 to 2005 and 2005 to 2010 growth rates. This was our benchmark to calculate the change in average home values between unadjusted and adjusted average home values. In order to quantify the weight of each economic factor, we measured the 2000- 2005 Compounded Annual Growth Rates (CAGR) for each market. If the mar- ket’s CAGR was higher than the state average, the market received a 2. If the market’s CAGR was comparable to the state average, the market received a l. Michigan State University 13 TheModel Likewise, if the market’s CAGR was under the state average, the market received a 0.3 Applying these numbers to the results adjusts the impact on aver- age home values, and helps us gauge the net economic impact of commuter rail. The model is then used to calculate the change in average home values based on the introduction of commuter rail transit to a community. We choose not to begin applying the impact to values before 2007 since 2006 is more than half OVCI‘. The substitution effects were averaged, divided by 100, and subtracted from ‘ l ’ to determine the percentage of the gross impact that would be applied as a result. The largest reduction the substitution effect can have in this model is 2%. For instance, if a municipality scores all ‘2s’ in five categories, the average (2) is then divided by 100 (.02), and finally subtracted from ‘1’ (.98 or 98%). The substitution effect accounts for the likely substitution of other economic activities for increases to home values, should the commuter rail never have been established. These “substitution” effects were then weighted against the gross impact to arrive at an estimated net direct economic impact figure. The results can be found in section “Impact of Commuter Rail” on page 25 3. Note that for unemployment rates, we assigned lower numbers for lower rates. If the market’s CAGR was higher than the state average, then the market would receive a 0. Likewise, if data was unavailable for any market in any economic category, we considered the market aligned with the state average and assigned a l. Michigan State University 14 READINGS Literature Review IV. Literature Review This literature review is an essential step in analyzing the impact of commuter rail on home values. An analysis of the results of these reports and studies pro- vides insight into the impacts of commuter rail on property value in general and strengthens the methodology of this report. The following subsections provide a brief summary and analysis of methodolo- gies used in the reviewed literature. KENOSHA-RACINE-MILWAUKEE CORRIDOR TRANSIT STUDY. PRELIMINARY REPORT. TRANSIT Now, DECEMBER 2002. The study concluded that commuter rail enhances economic development, workforce development, and has a perceived value which increases the value of local communities. Through an alternatives analysis the study also found that between Commuter Rail, Combination Bus and Rail, and Commuter Bus that Commuter Rail provided: . The best transportation option for serving low income and minority popula- tions; . The best access to the most jobs; and . The best overall impact on highway traffic reduction. Michigan State University 15 Literature Review LAND VALUE IMPACTS OF RAIL TRANSIT SERVICES IN SAN DIEGO. ROBERT CERVERO AND MICHAEL DUNCAN, JUNE 2002. This study found appreciable land-value premiums for different land uses in dif- ferent rail-transit corridors in Sand Diego County. The most appreciable bene- fits were: 46% premiums for condominiums and 17% for single-family housing near Coaster commuter rail stations in the north country; 17% and 10% premi- ums, respectively, for multifamily housing near East Line and South Line Trol- ley stations; and for commercial properties, 91% premiums for parcels near downtown Coaster stations and 72% for parcels near Trolley stations in the Mis- sion Valley. THE BOSTON GLOBE: RAIL LINES BOOSTING HOME VALUES, JANUARY 12, 2002. This Boston Globe article provided an analysis of data on home prices between 1995 and 2001 , that showed the median price of single-family homes nearly doubled in 19 communities after they gained MBTA commuter rail services. The methodology used in this analysis was unclear, however, it appears as though the analysis simply evaluated the median home values from year to year of communities with commuter rail stops. CHARLOTTE OBSERVER: COMMUTER RAIL LINE DRIVES UP PRICE OF LAND, JULY 7, 2002. This press publication addressed the impact on land values along the South End leg of the light rail corridor that opened in 2006 in Charlotte, North Carolina. The article reported that land values have doubled, and in some cases tripled, in Michigan State University 16 Literature Review the past four years. The analysis was based on the City Assessor’s evaluation of results from two home value studies conducted four years apart. TRANSIT’S VALUE-ADDED: EFFECTS OF LIGHT AND COMMUTER RAIL SERVICES ON COMMERCIAL LAND VALUES. ROBERT CERVERO & MICHAEL DUNCON, NOVEMBER 2001. This research uncovered significant capitalization benefits on distance of a LRT station in Santa Clara County CA, increased land values on average by over $4.00 per square foot, or by around 23 percent. For properties in commercial business districs and within a quarter mile of a CalTrain commuter rail stop, the capitalization premium was even larger, over $25 per square foot, or more than 120% above the mean property value. IMPACTS OF RAIL 'IRANSH ON PROPERTY VALUES. RODERICK B. DIAz, MAY 1999. The 1999 report found that property value premiums due to increases in accessi- bility range between 3% and 40%. The relative increase in accessibility pro- vided by the new transit investment was found to be the primary factor in increasing property values. Conversely, slightly negative impacts of rail on property values were attributed to noise, Visual intrusion, and the association of the rail right-of-way with industrial uses. In general, both proximity to rail and investment in rail transit have positive impacts on property values. Additionally, the effect of a new fixed guideway transit investment benefits two ways. First, transit investments improve accessi- bility to other parts of a region Via station locations. Second, rail transit accessi- Michigan State University 17 Literature Review bility enhances the attractiveness of property, increasing the likelihood that the property can be developed or redeveloped to a higher or better use. The report utilized the results of several recent studies to determine the impact of twelve rail projects (including both heavy rail and light rail) throughout North America. Several measures were assessed in the process including sales prices of single-family homes, apartment rents, and median home values. RAIL TRANSIT INVESTMENTS, REAL ESTATE VALUES, AND LAND USE CHANGE: A COMPARATIVE ANALYSIS OF FIVE CALIFORNIA RAIL TRANSIT SYSTEMS. JOHN LANDIS, ET AL, 1995 This report did not find any Significant impact on home values based on the proximity to a rail station. However, homes within 300 meters of a CalTrain right-of-way typically sold for $51,000 less than comparable homes not within 300 meters of a rail station. The study areas were defined by measuring ground distance from the nearest station. IMPACTS OF COMMUTER RAIL SERVICE As REFLECTED IN SINGLE- FAMILY RESIDENTIAL PROPERTY VALUES. ROBERT J. ARMSTRONG, JR, 1994. In this report, single-family residential properties in metropolitan Boston, Mas- sachusetts, are examined. Results of the analysis indicate that there is an increase in single-family residential property values of approximately 6.7 per- cent by virtue of being located within a community having a commuter rail sta- tion. At the regional level there appears to be a significant impact on single- family residential property values resulting from the accessibility provided by commuter rail service. Michigan State University 18 SUMMARY Literature Review The study area covered municipalities with 50% or more of their land area within 10 miles of the commuter rail line. The report focused primary on nui- sance complaints near the right-of-way, and the location of rail stations to deter- mine the overall impact. CAPITALIZATION OF TRANSIT INVESTMENTS INTO SINGLE-FAMILY HOME PRICES. JOHN LANDIS, ET AL, 1994. This analysis identified no discernible positive or negative impact of commuter rail or rapid transit in general. Property values varied greatly fiom mode to mode and location to location relative to non transit proximate property. The study also found that the extent to which a rail system captures ridership from its market area affects the extent to which property values are increased Over- all, frequency of service and regional accessibility affect the value of a rail sys- tem. While this study only touched on the impact of commuter rail on home values, there are several publicly available reports that address an array of results with varying methodologies for measuring the impacts of commuter rail. After reviewing these reports, it is clear that this report looks at the impact of com- muter rail differently. This report adds to the current literature in the following ways: . No analysis was found that identified the implied impact on average home values, . Few reports provided a model similar to the one used in this report, Michigan State University 19 Literature Review . The use of the “substitution effect” provided in this report was not found in other reviewed reports, and . Few studies provided a defined study area similar to this report. Overall, the literature review revealed the numerous benefits and positive impacts of commuter rail, and Showed that the majority of property values increased as a direct or indirect result of commuter rail. It is worth noting that the author and researcher John Landis, who has written several articles and reports on the impact of commuter and light rail transit, has found that property values have risen and decreased following the introduction of commuter and light rail. And that there is no discernable impact based on these types of transit. Michigan State University 20 POPULATION 8: NUMBER OF HOUSEHOLDS TABLE 1. Population Profiles Soda-Economic and Demographic Analysis V. Socio-Economic and Demographic Analysis In order to fully understand commuter rail’s economic contribution to local economies, we must first understand the markets of the study area, which is defined to include Ann Arbor, Dearborn, and Freedom Township in Michigan. To accomplish this, we have evaluated the populations and households, house- hold incomes, employment, and average home values in the sections below. As evidenced by Table 1 below, the overall population of the State of Michigan is rising, at a rate of .7%. All of the communities, with the exception of Dear- born, experienced positive changes in population from 2000-2005. These trends are expected to continue from 2005-2010. Population Compound Annual Growth Rate (CAGR) Geography 1990 2000 2005 2010 1990-2000 2000-2005 2005-2010 State of Michigan 9,295,297 9,938,444 10,310,273 10,731,309 0. 7% 0. 7% 0. 8% Ann Arbor 110,134 113,092 117,116 123,263 0.3% 0.7% 1.0% Dearborn 89,395 95,267 97,900 98,092 0.9% 0.0% 0.0% Freedom Township 1,404 1,562 1,643 1,729 1.1% 1.0% 1.0% Source: US Census and ESRI, Inc. The number of households is also important in determining the economics of a region. The State of Michigan outpaced the study area from 1990 to 2000 in growth of households, however from 2000 to 2005, Freedom Township exceeded the State of Michigan’s growth. The number of households for the Study Area has increased, and is projected to continue to do so. Again, the exception to the rule is Dearborn, which posted a -0. 1% annual loss of house- Michigan State University 21 Soda-Economic and Demographic Analysis holds from 2000-2005, but is not expected to gain or lose households from 2005-2010. Table 2 below displays the results of the household growth analysis. TABLE 2. Household Profiles Compound Annual Growth Rate Number of Households (HH) (CAGR) Geography 1990 2000 2005 2010 1990-2000 2000-2005 2005-2010 Michigan 3,419, 331 3, 785, 661 3,980,867 4,176,763 1. 0% 1.0% 1.0% Ann Arbor 41,697 45,112 47,710 50,954 0.8% 1.1% 1.3% Dearbom 35,482 36,809 36,682 36,686 0.4% -0.1% 0.0% Freedom Township 523 561 607 649 0.7% 1.6% 1.3% Source: US Census and ESRI, Inc. INCOME FIGURES If the incomes of individuals and households in a market area are increasing, then potentially, more people can be expected to spend money, buy more expen- sive houses, etc., in turn adding value to the locale. Table 3, “Income Profiles,” on page 23 shows the income trend in the Study Area. All markets experienced an annual growth in both per capita and median house- hold income, from 2000-2005. Although increasing, the growth in per capita and median household income in Dearbom was under 2% at 1.7% and 1.9%, respectively. The market with the highest growth was Ann Arbor, with a 2.9% growth in Per Capita Income levels and 2.3% growth in Median Household Incomes. Michigan State University 22 TABLE 3. Income Profiles Socio-Economic and Demographic Analysis Per Capita Income Median Household (HHld) Income CAGR Projected CAGR Projected Geography 2000 2005 2000-2005 2010 2000 2005 2000-2005 2010 Michigan $22,711 $25,633 2. 5% $30, 029 $44,683 $50,118 2. 3% $55,605 Ann Arbor $27,324 $31,597 2.9% $37,626 $46,248 $51,824 2.3% $59,544 Dearbom $21,942 $23,916 1.7% $27,314 $44,576 $48,927 1.9% $54,024 Freedom Township $27,051 $31,059 2.8% $36,564 $63,872 $71,318 2.2% $81,347 Source: US Census and ESRI, Inc. LABOR MARKET Equally important to the level of income for the region is the number of people actually who are employed, and umemployed for that matter. Table 4 shows that the majority of markets are experiencing relatively high unemployment rates. To put these numbers into perspective, the current national unemployment rate is 4.8%. The only market in the analysis under the national average was Ann Arbor, Michigan at 4.5%.2 TABLE 4. Unemployment Profiles Unemployment Rate CAGR Geography 1995 2000 2005 2000-2005 Mrchigan 5.3% 3. 7% 6. 7% I 2. 6% Ann Arbor 2.3% 2.5% 4.5% 12.5% Dearbom 3.0% 2.7% 5.5% 15.3% Freedom Townshipa ‘ ' ‘ ' Source: Bureau of Labor Statistics - Not Seasonally Adjusted a. Data not available. 2. The low water mark for each of the markets’ unemployment rate occurred in 1999, however the data also illustrates the volatility of the markets from 1995 to present as there are few con- sistancies between then and now. -Source: Bureau of Labor Statistics Michigan State University 23 PROPERTY VALUES TABLE 5. Average Home Values Sade-Economic and Demographic Analysis Table 5, “Average Home Values,” on page 24 details how the average home val- ues of the markets have changed fi'om 1990 to 2005 and what the forecast shows for 2010. Freedom Township had the highest average home value in 2005, at $328,804. Inversely, Dearbom had the lowest average home value in 2005 at $181,669. Average Home Value Compound Annual Growth Rate (CAGR) Geography 1990 2000 2005 2010 1990-2000 2000-2005 2005-2010 Michigan 573, 927 $137,227 $1 75, 940 $225,638 6.4% 5.1% 5.1% Ann Arbor $137,461 $212,403 $283,919 $366,927 4.4% 6.0% 5.3% Dearbom $79,382 $148,341 $181,669 $226,255 6.5% 4.1% 4.5% Freedom Township $100,809 $241,105 $328,804 $430,329 9.1% 6.4% 5.5% Source: US Census and ESRI, Inc. Note on Data Precision. This analysis is based on survey data firom the US Cen- sus and the Bureau of Labor Statistics, as well as supplemental data and analysis from ESRI, Inc. Every effort is made to represent the data completely and accu- rately without bias. Michigan State University 24 SUBSTITUTION EFFECT Impact of Commuter Rail VI. Impact of Commuter Rail As it would pose a change in environmental impacts, safety, and development, commuter rail transit is more than just and alternative to automobiles. Com- muter rail transit also adds increased access to employment, recreation, family, and entertainment. As such, access to commuter transit is a major consideration for residential location, which we quantify below. In completing this impact analysis, we have researched, and examined, numer- ous economic impact analyses on the matter of transit. In most cases, the impact to the economy was based on a multiplier. As is the case in this report, as we have taken sufficient steps to find a true indicator (multiplier) of the impact commuter rail has on a community. The economic impact is based on several economic factors in the community, however it does not take into account the costs associated with the development of the commuter transit system. Considering this, we have weighted the gross economic benefit, meaning just the increase of average home values alone, against the other economic factors in consideration—such as population, income, and employment—to conclude with a net economic benefit to a com- munity. We have considered these economic factors to be the substitution effect. Michigan State University 25 Impact of Commuter Rail Table 6 below shows the numbers used to weigh in the economic factors that may have a role in increasing or decreasing average home values. TABLE 6. Substitution Effect Parameters Per Capita Population Household Income Median HHld Unemployment Geography Effect Effect Effect Income Effect - Effect Ann Arbor l 1 2 1 l Dearbom 0 0 0 0 0 Freedom Township 1 2 2 1 1 NET IMPACT The multiplier that results from weighing in substituted economic activity, is what we refer to as the net direct impact. To remain consistant in our measures, we have applied the impact from years 2001 to 2004 to the Michigan Study Areas 2007 to 2010 numbers.2 Using the values from the Texas comparable markets from 2006 to 2010 would show what would have been likely to occur had the commuter rail been established in the Michigan Study Area pre-2001, as is the case in Texas. Table 7 below shows the potential impact of commuter rail on average home values in the Michigan Study Area. The average home values in all markets dips slightly in the first year, however by 2008, average home values for the majority of the study area markets begin increasing at an increasing rate. In Ann Arbor, average home values increased from $331,497 to $339,181 in 2008, and from $366,927 to $388,799 in 2010. In Dearbom the multiplier 2. As shown in Table 7 on page 27, we have calculated the not impact beginning with 2007 as 2006 is more than half way over. Michigan State University 26 Impact of Commuter Rail increases from 1.013 in 2007 to 1.052 by 2010, creating a net increase in aver- age home values Of$11,687 by 2010. Suprisingly, there is a negative effect on average home values in Freedom Township, and even though the average home values are increasing, the values are increasing at a lower rate than the status quo values.3 TABLE 7. Impact on Michigan Study Areas Ann Arbor Dearbom Freedom Township Original Original Original Value Multiplier Net Impact Value Multiplier Net Impact Value Multiplier Net Impact 2007 $314,812 1.005 $316,523 $198,387 1.013 $200, 901 $365,967 .965 $352, 992 2008 $331,497 1.023 $3 3 9, 1 81 $207,315 1.026 $212, 601 $386,095 .944 $364,303 2009 $349,066 1.041 $363,460 $216,644 1.038 $224, 983 $407,331 .923 $3 75, 976 2010 $366,927 1.060 $388, 799 $226,255 1.052 $23 7, 942 $430,329 .903 $388,561 CONCLUSIONS The results of this analysis are positive for the study area communities. Both Dearbom and Ann Arbor stand to benefit, in terms of increasing home values. The results indicate that there can be positive impacts on home values for a municipality and some negative. Although the majority of the study area markets improved their average home value prices, the reverse effect occured in Freedom Township. This may be due to a number of scenarios, including: 1. The more attractive locale is near the commuter rail line, and Freedom Township is furthest from the route, 3. It is important to note, that average home values continued to increase with time in Freedom Township, but at a slower rate than if the conunuter rail had not been introduced. Michigan State University 27 Impact of Commuter Rail 2. The rural character of the community may be percieved to be threatened with the construction of a commuter rail in the market area, 3. The home value market plateauing once values begin to rise for surrounding markets. Another factor to consider from the results is the notion that increasing property values may not be what a community wants. In some cases the opposite is true. For example, California’s housing affordability is becoming a crisis, where home values are outpacing incomes in the area.4 4. See: http://www.cbia.org/index.cfm?pageid=1154 Michigan State University 28 Appendix A: Maps 88 35.53.20 5.5 .5 Sea. sue-5 083.8 E. .8. .Ewm .88 ...... . m39eth39ee¢ i.‘ 233-. 'I’l ‘II 3.358585- (I. EBSD - u m _ Sam-Eigl m it 1F 8:3— : Lea—.5390 coax—e...— E—e BoEo>O «0.2 .35 Heme—22 .p Emixm as: .. V ESSQRV A-l Michigan State University Mops AppendbrA ...... 7 ..i.... . \fiV .1. Te . «I I...‘ . .s x . Risk .. a...) I ...4 . .... P. . x... .11. 5.2.... v.11. . .A\~ II». n .r- .. v. I .5; 24?»... «mm. ..s. 2.1... . . . 4...: .. 43.7.2? 71 ... rt. a run 1.... .1: n.1I ner- ! ._ . . . r ....c .. k t. Ii. .. r41 ,evwr f .n 2,4,1...» 4.. . {f I. .. [as .111. \aEHu.‘ .. C 4 .. $11.1... . s p .1 life}. 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Michigan State University Appendix c.- Economic impact Model and Results e_.ow eeow eeow woew eeow meow veow meow woew Foow eeow oeedo 5 eeedowa eeodema .92. E032“. I Eofiaoo ll .82 52 £3..on - 83:... $le .32 ::< - 688. .02 I .95 E032“. - 88...... 82', eoedovo y eeedema eeodoe» 235.3 can =5— ..oSEEoU 5.3 - 33 3 eeow 8:3» oEofl 09:95. «0.3 2:.“ 5338—2 .2. szm C-2 Michigan State University Appendix c: Economic Impact Model and Results crow meow meow noon meow meow vocN meow NOON room coon 086m» 1.. [F 1 f . 8983 \\ \ ocodmrfl .\ 08.8N6 802 ll 9.5. I 532, .E .. I 8.9.88 0002 - 63E. 320' 9.3... - 838. 826' €25 .m - 882. 820! 26.88 2.223 ...... .5. 5.....55 5.3 - 22 8 8.." 8:3» 2.3: out»; 82 3.5 85h ... :25 Michigan State University Appondbr D: Bibliography Appendix D: Bibliography Armstrong, R. J ., “Impacts of Commuter Rail Service as Reflected in Single-Family Residential Property Val- ues”, Transportation Research Record, 1994. Brinckerhoff, Parsons, “The Effect of Rail Transit on Property Values: A Summary of Studies”, February 2001. The Boston Globe, “Rail Lines Boosting Home Values”, January 12, 2003. Cervero, Robert; and Duncan, Michael, “Land Value Impacts of Rail Transit Services in San Diego”, June 2002. Cervero, Robert; and Duncan, Michael, “Transit‘s Value-Added: Effects of Light and Commuter Rail Services on Commercial Land Values”, November 2001. Charlotte Observer, “Commuter Rail Line Drives Up Price of Land”, July 7, 2002. Covington, Sid, “Austin - San Antonio Intermunicipal Commuter Rail District - Regional Commuter Rail gaze/7;“.austin-chamber.org/thechamber/AboutTheChamber/Infiastructurefl‘101-Covington.pdf, 2004. Diaz, Roderick, “Impacts of Rail Transit on Property Values”, May 1999. Editorial, “Let’s Learn from Nashville’s Rail”, Memphis, Online, August 2006. http://www.commercialappeal.com/mca/editorials/article/O,2845,MCA_25348_4939622,00.html Grillo, Thomas, “Rail Lines Boosting Home Values”, The Boston Globe, January 12, 2003. Landis, John; Cervero, Robert; Guhathukurta, Subhrajit; and Zhang, Ming, “Rail Transit Investments, Real Estate Values, and Land Use Change: A Comparative Analysis of Five California Rail Transit Systems”, 1995. Landis, John; Guhathukurta, Subhraj it; and Zhang, Ming, “Capitalization of Transit Investments into Single- Family Home Prices”, 1994. McCoppin, Bob, “Why Metra is Booming”, Chicago Daily Herald, March 20, 2000. Regional Transportation Authority, “The Effect of CTA and Metra Stations on Residential Property Values”, June 1997. Transit Now, “Kenosha-Racine-Milwaukee Commuter Rail Extension”, http:transitnow.org/report-synopsis.html, December 2002. Michigan State University D-l Appendix a: Bibliography Transportation Research Board, National Research Council, Economic Impact Analysis of Transit Invest- ments: Guidebook for Practitioners. Washington, DC: National Academy Press, 1998. Wyatt, Mike, “Light Rail/Commuter Rail Benefits”, New Transportation Alliance, http://www.da.nenet.org/bcp2006/benefits.html. Michigan State University D-2 llHlHHlllllllllllllllllll\lltill”lllllllllllllllllllllill 31293 02656 9578