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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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