Balancing Act
Oct 1, 2007 12:00 PM, By Elaine Misonzhnik
According to the Saint Consulting Group, a Hingham, Mass.-based land use political consultancy, 73 percent of Americans oppose new development in their community and 75 percent say the relationship between elected officials and developers makes the city planning process unfair. Landfill projects tend to cause the most discontent, with 87 percent of Americans opposing them, while single-family homes are viewed as relatively benign (only 6 percent oppose them). Shopping centers, however, rank pretty high on the opposition list, with 57 percent saying they don't want a shopping center.
And these people are not likely to suffer in silence, says Patrick Fox, president of the Saint Consulting Group. In the course of his work, he found that those who support a new real estate development won't bother showing up to public meetings and vocalizing their support, while those who oppose new projects will go through every channel to try and prevent the development.
Winning support for a project can be daunting. But there's no getting away from public/private partnerships. There aren't greenfield sites to be found. Instead, finding sites takes work — and help — from public entities, whether through site assembly, expedited entitlements or even financing.
The increased role of cities within retail development is crystal clear when looking at ICSC itself. There are now 4,300 economic development officials in the organization, a 7.5 percent increase from 2000. And they've made themselves visible. There used to be just a handful of city booths at the Spring ICSC Convention. Now there's an entire “Municipal Court” on the floor in Las Vegas, which this year featured 101 exhibitors.
Doing it right
Fortunately, it doesn't always play out like it did in Portland. On the other end of the spectrum is Glenview, Ill., a suburban village of 44,655 that's part of the affluent North Shore suburbs outside Chicago. When the town came into possession of the 1,121-acre Glenview Naval Air Station base in the early 1990s, local officials spent more than two years working out the best uses for the site, eventually deciding to push for a mixed-use project. The town, with the help of San Diego-based developer OliverMcMillan and Chicago-based consultant Mesirow Stein Real Estate, Inc., incorporated both public and private uses into the property to create the $1.1 billion Glen mixed-use development, ending up with 470,000 square feet of retail and commercial space, 1,100 new residences, a 140-acre park and a children's museum. The Glen Town Center opened in October 2004 and the Kohl Children's Museum in October 2005.
The village of Glenview is now reaping the benefits of 2,640 new full-time and 1,359 part-time jobs (the total number of jobs is projected to reach 5,600) and a 35 percent increase in tax revenue, including property, sales and entertainment taxes. The project worked out so well, it received the 2005 Award for Excellence from the Urban Land Institute, with the ULI calling it a “textbook example” of consensus building and effective use of public resources.
Based on its size and the complexity of the undertaking, the Glen should have been more of a challenge than the Maine State Pier. But in public/private partnerships, success is not always based on the tangibles, like the value of the land or the amount of money the city can throw at a project. More often than not, it's about the intangibles — a shared vision between the developer and the city government and a spirit of cooperation.
“In public private/partnerships, it's not location, location, location,” says Scott Kaplan, senior managing director in charge of retail services for the western region with the brokerage firm CB Richard Ellis. “It's location, finance and politics.”
When all three components are present, public/private partnerships bring benefits for both municipalities and real estate developers. American cities are increasingly strapped for cash and while they may own valuable swaths of land, they often don't have the development acumen to turn those plots into income-producing properties, says Richard Norment, executive director of the National Council for Public/Private Partnerships, a Washington, D.C.-based advocacy group that encourages public/private projects. An experienced retail developer can take that piece of land and create a new source of revenue for the city in the form of sales taxes, he says.
And sales taxes are one of the more valuable tools in a city's income-producing arsenal. According to a 2005 Fiscal Conditions study by the National League of Cities, a Washington, D.C.-based group that represents more than 1,600 municipalities around the nation, 68 percent of city finance officers in municipalities that rely on sales tax as the primary source of revenue had an optimistic outlook on their city's future financial performance. Only 36 percent of finance officers in municipalities that rely on income taxes reported being optimistic about the fiscal health of their city.
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