AP WIRE
December 10, 2005
In high-stakes world of development, some cities 'able to ask for more'
CHRISTINA ALMEIDA
Associated Press
LOS ANGELES - Developer Rick Caruso didn't blink when leaders of an
upscale Los Angeles suburb made their unusual request: Could the lake he
was planning as part of a multimillion-dollar retail and dining center
double as an ice rink?
Caruso spent a few hundred thousand dollars to build the rink - and
landed favorable terms on a 90-year-lease for a public lot adjacent to a
performing arts plaza.
"It's an expensive undertaking," Caruso said of the rink. "But it's
well worth it."
The rink, which opened last month, is one example of how some cities
are asking - and getting - perks from developers who see gold in
rejuvenated urban cores and other high-demand areas. Motivated by
reduced redevelopment funding and armed with improved negotiating savvy,
select communities nationwide are getting concessions from
public-private partnerships.
Cities "realize they have something developers want," said Maureen
McAvey, senior resident fellow with the Urban Land Institute. "They are
able to ask for more."
It's more than just roads, sewer lines - and ice rinks. Other pending
projects include restoration of a church in San Jose and a new
elementary school in Chicago.
It used to be cities were doing the giving.
As the West was being settled, towns desperate to grow threw land and
grants at railroad companies that could make or break them. These days,
some cities still use a range of incentives to attract developers. But
particularly in booming markets, the pendulum has moved the other way.
On Chicago's waterfront, developers agreed with a city alderman's
suggestion to incorporate an elementary school as part of their $4
billion Lakeshore East project.
"We felt that as part of a village concept, that a school is very
important," said Joel Carlins, president of Magellan Development Group,
which co-owns the 28-acre project.
In San Jose, builders of Parkview Towers were told they would need to
restore a century-old church to buy land owned by the city's
redevelopment agency for two residential high-rises.
The redevelopment agency could not have made such a request if San
Jose hadn't been one of the nation's most competitive real estate
markets, according to Martin Menne with MCM Diversified, a co-partner on
the project.
Restoration of the Greek revival-style church will cost about $5
million - a mere slice of the $120 million total development cost.
Developers will own the vacant church, which they may lease as office
space.
In the past, cities were desperate to lure developers from booming
suburbs. Then came urban renewal, when communities looking to tackle
blight ended up razing entire neighborhoods, said William Klein,
director of research for the American Planning Association, which has
37,000 members including city planners.
Now cities are looking beyond distressed neighborhoods when it comes
to redevelopment.
"What we do today is much more sophisticated, more comprehensive in
its scope," Klein said. "It's about looking at the entire city."
For cities, cuts in federal funding have made it harder to redevelop
long-neglected areas without public-private partnerships. The Community
Development Block Grant program, for instance, was cut 5 percent in
fiscal year 2005 to about $4 billion - compared to about $4.4 billion in
1994. And earlier this year, President Bush proposed combining it with
18 other programs, reducing total spending by more than $1 billion.
Those cuts can hit hardest in cities where the market is more bust
than boom - the very places where officials need developers the most.
"You talk to the mayor in Cleveland, Detroit, Pittsburgh .... You ask
them if they have any sway over developers and whether they can do the
things you just said," said Jeff Finkle, president of the International
Economic Development Council.
That contrasts with hot markets, particularly those with downtowns
that are attracting former suburbanites.
"Where you have very strong growth and a strong market, the city is
in a stronger position to negotiate," said McAvey, the Urban Land
Institute fellow who specializes in city redevelopment.
And there's an added impetus for city officials who may be looking
for good press by extracting benefits from developers at little or no
cost to taxpayers.
"It's wonderful to be able to go into your district to say, 'I helped
get this new school, this new park, this new ice skating rink," McAvey
said.
Not that developers are hurting by making such concessions.
"There's always a public benefit," said Klein with the planning
association. "And there's rarely an instance where the developer doesn't
benefit as well."
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