On its face, this effort may be a cynical attempt to reduce the power of environmentalists. That said, no one can deny that CEQA imposes enormous additional costs on new housing and infrastructure projects by creating an uncertain and onerous approvals process.

What a streamlined CEQA review process could look like vs. the existing process.

In the newfound belt-tightening spirit of “doing more with less,” even some liberals are willing to consider regulatory reform as a form of economic stimulus. Dan Rosenfeld, LA County Supervisor Mark Ridley-Thomas’ deputy for economic development, made such a remark at ULI’s Urban Marketplace forum earlier this month. Indeed, regulatory reform is one of the few tools available to localities that does not involve the direct expenditure of tax dollars.

In his latest book, Triumph of the City, urban economist Ed Glaeser criticizes CEQA, pointing out that it is prejudicial against new development, since it only considers the impacts of a given project against a “no-build” alternative.

This is unrealistic, Glaeser points out, because new growth pressures demand a release valve; if denied in one place, a developer will inevitably decamp to a more receptive city or region.

In Glaeser’s view, since its enactment in 1970, CEQA has displaced new growth away from the greenest possible locales in the U.S.—namely, coastal California, where per-capita energy use is relatively low—out to areas with more extreme climates, such as Las Vegas, Phoenix and Dallas, that are intrinsically less green.

For urban infill projects, CEQA’s point of reference for assessing greenhouse gas impacts, for example, should therefore be not a no-build alternative, but a base case scenario in which the same project is instead built in a car-dependent, less temperate environment. Such a scenario would be equally hypothetical—and more reflective of the real world.

Rather than simply throw more money at the problem, the Bay Area Metropolitan Transportation Commission (MTC) has formed a new $50 million revolving loan fund in partnership with the private and non-profit sectors. Its $10 million contribution will be in a “top loss” position and provide developers of affordable housing the opportunity to acquire land near transit stations while they navigate the approvals process at the local level.

This arrangement not only reduces borrowing costs for the developer, but effectively mitigates regulatory risk as well because the MTC’s participation in the fund implies public agency support for a given project just by virtue of granting the loan.

Plus, it leverages commitments by the private sector to stretch affordable housing dollars much further than they would otherwise go as direct grants or subsidies. MTC staff estimates its $10 million contribution to “a $40 million TOD Fund could be used to help finance the acquisition of at least 20 to 30 acres around the region, which, depending on the density of build-out, would support development of anywhere from 1,100 to 3,800 units of affordable housing.”

New York City has a similar partnership in place. With the region’s transit network poised to expand significantly under the 30/10 Initiative, it is time for the City of Los Angeles to step up the financial committment to its own New Generation Fund, too!

This announcement has predictably added fuel to the fire of HSR critics, who believe it will be a train to nowhere.

Assuming the segment from Borden to Corcoran is completed on budget, however, it will rank as one of the lowest-cost high-speed rail projects ever built on a per mile basis. Look at this capital cost comparison of international HSR projects completed in the last 20 years (adjusted to 2010 dollars)*:

Granted, it is impossible to do a precise apples-to-apples comparison due to variations in key cost inputs such as land and labor across countries. Obviously, too, a tunnel is going to be more expensive than an alignment cutting through farmland in the sparsely populated Central Valley.

At the same time, as the first project of its kind in the United States, the CAHSR does not benefit from the economies of scale and other efficiencies that ordinarily result from, say, a coordinated nationwide program of HSR projects, as in Japan or France, making its low (estimated) cost all the more remarkable.

This analysis is not likely to silence the critics. That said, if the project is successfully completed within budget, it would constitute a tremendous bang for the buck, while boosting the CHSRA’s credibility as a competent steward of taxpayer dollars.

* Adapted from UK Commission for Integrated Transport, High-Speed Rail: International Comparisons (2005). Excludes trainsets, financing, and project management costs. Since the CHSRA cost estimate for the 66.7 mile segment presumably includes project management, an adjustment of -8.7% was made to the total $3.312 billion cost, reflecting the percentage attributed to this cost category by CHSRA for the entire Phase I project (San Francisco to Anaheim.)

Weighing in its favor is the sheer size of the regional air market between the Bay Area and Southern California, the largest in the country. This makes the project attractive to investors. But the current route alignment sets it at a potentially insurmountable disadvantage to both auto and air travel.

“Over the last number of years, there has been some land speculation in various places, so the line goes via a slightly odd route that is 100 miles longer than the highway. So high-speed rail starts with a handicap,” explains Tolmach, in terms of being “competitive with the energy utilized [per trip] and with the cost of driving and air travel.”

“There is a 50 percent chance it won’t happen, because the CAHSR Authority will expend all of its planning money before they can package a project that’s workable.”

According to Tolmach, some Japanese and European companies (Kawasaki, Bombardier) are interested in bringing their own funding sources, subject to a significant project redesign that would make the capital costs more affordable and the overall system financially viable to operate.

Indeed, Tolmach’s assessment of the project’s main design flaw underscores the tension between the public mission of the high-speed rail project – to serve as an economic development tool that will connect the struggling Central Valley  to urban job markets – and the private imperative to maximize profit if the project is to attract a sufficient amount of capital to move forward.

But apparently not quick enough, because in the last week, the entry price has been lowered to $819,000 for a second-story flat of 1,383 sq. ft. (or $592 PSF).

I actually interviewed with the developer, Bob D’Elia, back in January 2008, as an internship-seeking graduate student. At the time, I had produced a mock pro forma for Dogtown Station, estimating its construction costs, revenue from condo sales, IRR, and presented it at the interview.

D’Elia was impressed by the accuracy of my estimate for sales revenues, $41.3 million, which took into account both pre-sales and the planned release of remaining units at escalating price points. With the development totaling 57,869 sellable sq. ft. (excluding common and outdoor areas), that translated into an average sale price of approximately $714 PSF. D’Elia would not verify the accuracy of my cost estimates but boasted of a project IRR in excess of 20%.

Overall, this newest price point, $819,000, represents a 17% decrease (on a PSF basis) from the early 2008 peak average…without counting the additional incentive of a 36-month lease on a new 2010 Toyota Prius with the purchase of any unit (valid until December 31st).

Dogtown Station has lowered its price and and is offering an additional buyer's incentive.

Assuming a 2010 Prius base sticker price of $23,370 with monthly  lease payments of $341, this incentive is worth around $13,000 by my calculations, meaning that the effective price PSF is closer to $583, or about 19% off the original ask. This percentage drop is, perhaps not coincidentally, in the zone of the developer’s originally projected IRR, which means that Dogtown Station may have hit rock bottom in terms of the price decreases its investors can absorb before erasing profit margins entirely.

Parking rates are going up in Santa Monica.

The City of Santa Monica just voted to raise parking fees at its public garages along the Promenade, after a  study concluded that “extra revenue is secondary to the money that City Hall and property owners would save if they don’t have to acquire land and build new garages. Instead, they need to better manage what exists,” according to the Santa Monica Daily Press.

This conclusion sounds practically ripped from the pages of Donald Shoup’s 800+ page tome, The High Cost of Free Parking. A professor of urban planning at UCLA, Shoup has inspired legions of fellowers, who have evidently invaded the ranks of city planning departments, particularly on the West Coast.

If you do not have the time to read Shoup’s book, simply memorize his most oft-repeated recommendation: to price public parking competitively with the hourly cost of private garages such that at any given time, 15% of the spaces are vacant and available for those most willing to pay.

Santa Monica’s decision to boost parking rates, rather than interpret its lack of peak-hour parking as a mandate to build additional garages, may be just the latest evidence of Shoup’s growing influence, at least in progressive circles.