What makes a city great? It's a long and oft-debated answer, but one undeniable factor of a great city is the public realm—the parks, memorials, museums, and other public spaces that are available to all.
Yet there is often a deep chasm between the vision and implementation of projects intended to enhance the public realm. The reality is that many designs for these spaces and places never see the light of day. Overwhelmingly, the difference between a paper plan and a built project comes down to funding.
Here we offer a taxonomy of revenue generation strategies, identify latent opportunities to bring public realm projects to fruition, and share the true value of these projects.
In the public realm, there is a wide range of options for revenue generation. The primary mechanisms include:
1) Public Funding—appropriations, grants, loans, bonds, sales tax
2) Philanthropy and Corporate Sponsorship—sponsorship, foundations, friends groups, crowd funding
3) Earned Income—concessions, user fees, special use, concerts
4) Internal Real Estate—ground lease, PILOT, right-of-way lease, mineral or drilling rights
5) External Value Capture—TIF (tax increment financing), BID (business improvement districts), RETT (real estate transfer tax), developer incentives
Traditionally, a combination of public funding and philanthropy or corporate sponsorship is most frequently used to cover the capital cost of new public realm projects. Park projects tend to rely more heavily on public funds, while cultural institutions lean more toward philanthropy and corporate sponsorship.
During the last several years of fiscal restraint, there's been a notable trend: the public sector is increasingly reluctant to fund operating and maintenance costs for public realm projects in perpetuity. Public officials have pushed project sponsors to find alternative sources of operating funds. Here, earned income from things like concessions and special events has played a progressively larger role in raising revenue.
External value capture is probably the most untapped resource for funding public realm projects. While TIF (tax increment financing) and BID (business improvement districts) are well utilized for funding urban redevelopment projects and maintaining urban districts, they are underutilized in the public realm. Several high profile projects have leveraged these mechanisms—including Millennium Park in Chicago (which used TIF funds) and Bryant Park in New York (which employed BID)—but the vast majority of public projects have not. There is enormous potential for public realm projects nationwide to take advantage of external value capture.
External value capture is probably the most untapped resource for funding public realm projects.
By concurrently considering planning, design, and economics, we can not only fund public realm projects in new ways, but also create enormous utility for end users and boost the value of surrounding properties. A great example of this is the six blocks of the Chicago Riverwalk for which we led the design and simultaneously conducted an analysis on the economic benefits of the project for the City of Chicago. The city recently announced that the $100 million project will be funded using a federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, and repaid through revenue generated by on-site retail and tour boat operations. Once constructed, this project will change the face of the Chicago riverfront and—we are confident—prove to be a wise investment culturally and economically.
We're excited about bringing our work in Chicago to the next phase, and about the opportunities that exist for the public realm in cities across the country as we leverage new ways to help our clients fund such projects.
Next week, Laura Marett and Jason Hellendrung write about how we helped bring a park in Cedar Rapids to fruition. Stay tuned!