Also from this session:

The Role of the Lawyer in Redevelopment

ABSTRACT: It is clear from a survey of selected sources and jurisdictions both inside and outside the United States that there are at least two keys to major development/redevelopment of urban waterfront tourist destinations: government cooperation and government money. In some instances, as appears below, government gets some of the money back. Sometimes not. In either instance, the key is government acceptance that redevelopment of a particular area or district is necessary, or at least desirable, from a public perspective, and is therefore willing and able to assist the private sector in undertaking such development/redevelopment. If there is a common thread running through most of the materials that we have surveyed and experts with whom we have conferred over the past several months, it is the necessity for public-private cooperation.

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Table of Contents

I. Introduction

II. Synopsis of Techniques

III. Summary of Techniques

IV. Jurisdiction Surveys

A. Washington, D.C.
B. California
C. Seattle, Washington
D. Florida
E. New York City
F. England
G. Chicago
H. Australia
I. Kentucky
J. Toronto
K. Arkansas
L. New Zealand

Appendix

Preface and Acknowledgements

This survey was conducted by means of selected collection of materials from sources contacted by telephone, e-mail and FAX, during the period of February – August 2000, and again in January 2002.

I. Introduction

It is clear from a survey of selected sources and jurisdictions both inside and outside the United States that there are at least two keys to major development/redevelopment of urban waterfront tourist destinations: government cooperation and government money. From Barcelona to Wellington, the story is much the same: government primes the pump and invests substantially in infrastructure, often making cheap money (tax exempt bonds, loans, and the like) and a variety of tax incentives available either directly or through specialized development agencies or zones in aid of private development/redevelopment. (For a summary of such support, see Gregory Wilson, “Making Moves on the Waterfront,” 60 Town and Country Planning No. 5, May 1991, at 156-158.)

In some instances, as appears below, government gets some of the money back. Sometimes not. Thus, for example, Illinois’ Pier Authority received approximately $150 million from the state to tear down substandard structures and construct basic infrastructure on Chicago’s Navy Pier, prior to its successful development for entertainment, retail shopping and recreation. No further incentives were provided to private sector tenants, but the Authority received none of this money back, nor did the state.

In either instance, the key is government acceptance that redevelopment of a particular area or district is necessary, or at least desirable, from a public perspective, and is therefore willing and able to assist the private sector in undertaking such development/redevelopment. Without such clear support, such projects and schemes are bound to fail. There appear to be no short cuts, and the process is time-consuming both in the framing and the executing of a development/redevelopment scheme.

If there is a common thread running through most of the materials that we have surveyed and experts with whom we have conferred over the past several months, it is the necessity for public-private cooperation. As one expert observed, hardly any hotels and little recreational development is occurring without special incentives flowing from the public to the private sector. Without this spirit of cooperation and financial support, it is unlikely that any program will be ultimately successful.

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II. Synopsis of Techniques

Various governments and governmental agencies use a variety of techniques in order to facilitate redevelopment and revitalization of waterfront areas. While some incentives are “mixed bags,” the techniques fall into the following categories:

A. Tax Incentives and Relief

1. Tax Incentives

Kentucky and Arkansas have detailed legislation permitting qualified tourism projects to receive sales tax credits. Florida has a proposed statute to authorize sharing of state sales taxes by qualified developers and development projects similar to the real property tax increment financing process.

2. Property Tax Relief

Chicago’s Metropolitan Pier and Exposition Authority pays no taxes on substantial holdings like McCormick Place and Navy pier. Florida provides similar tax relief. So does the British Enterprise Zone designation.

3. Tax Increment Financing (TIF)

Florida, California and Washington, D.C., are among several jurisdictions that provide for the financing of some public projects through tax increment financing. Bonds to pay for such projects are paid for through collection of “excess” real property tax revenues generated by the project, above and beyond what the redeveloped parcel generated prior to redevelopment. Hawaii has a statute providing for TIF.

4. Corporate Income and Employment Tax Relief

This is a characteristic of the enterprise zone – particularly in the British model – as noted and described below.

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B. Special Designations

1. Urban Development Corporations (UDC’s)

Urban Development Corporations are used with considerable success in both New York and England. A typical UDC is able to permit redevelopment without the need for a variety of planning and land use permissions, condemn land, and provide a range of financial incentives. It is a legislatively-created mini-unit of local government with a specific and limited lifespan, specifically to redevelop and revitalize a specific area.

2. Enterprise Zones (EZ’s)

Both England and the United States use enterprise zones as part of a range of redevelopment techniques (most often in tandem with the UDC) to revitalize a specific geographic area. The most common and effective tool connected with the EZ is employment and corporate tax relief for the duration (in England, 10 years) of the life of the EZ.

C. Bonuses and Other Non-Tax Incentives

1. Bonuses

Seattle provides for density/height bonuses for inclusion of certain public benefits in a project, such as public open space, art and day-care.

2. Land/Tenure

Chicago and New York provide for attractive landholding arrangements, often in the form of long, low leases of public land, often acquired through eminent domain. In other instances, particularly in New York and London, public authorities used eminent domain powers to assemble parcels and close public streets and other facilities to facilitate redevelopment. Authorities credit these techniques with successful development of Chicago’s Navy Pier and several projects in New York City.

3. Infrastructure

Often in tandem with attractive landholding arrangements, Chicago and New York as well as agencies in New Zealand and Toronto provide public facilities/infrastructure at public expense on certain designated redevelopment parcels. Authorities credit successful development in all of these cities as due in part to this public providing of infrastructure.

III. Summary of Techniques

A. Tax Incentives

1. Sales Tax Incentive Legislation

The states of Kentucky and Arkansas have reasonably detailed legislation permitting qualified tourism projects to receive relatively substantial sales tax credits. However, according to our Legislative Reference Bureau, experience with these statutes is, so far, negligible, consisting of one completed project (an aquarium) in Kentucky and nothing yet in Arkansas. Kentucky reportedly has been unsuccessful in attracting tourism development to underdeveloped areas, but since this is not a particular concern for Hawai`i, such failure is probably irrelevant. The Arkansas statute appears to have been in effect for about three years (since 1997) and the Kentucky statute for about two years (since 1998).

Both statutes have a fairly detailed process for application and screening of projects to be eligible for the tax credits. Tourism projects are broadly defined, but tourism attraction projects are more narrowly defined. In both statutes, the emphasis is on redevelopment and the relieving of unemployment. Both provide for agreements between a governmental entity and an approved company proposing to develop a tourism attraction project.

The Arkansas statute sets out the terms of the sales tax credit at 15-11-507 Ark. Code. (1999). Depending upon the level of “approved costs” that an approved company is committed to making under the terms of its agreement with the state, such company may receive a sales tax credit of between 10 percent and 25 percent of those costs, to be applied against its total sales tax liability. Unused credit can be carried forward for up to nine years. The statute appears to limit the granting of such sales tax credits to two years (four years if a state official determines that there has been a delay in the completion of the tourism attraction project that is unavoidable, or if the project is too large to be completed within two years). Clearly in terms of benefits, a large project could generate sufficient credits to provide for the virtually sales-tax-free operation of a qualified development for up to ten years.

The state of Florida has proposed a statute to authorize the sharing in state sales taxes by qualified developers and development projects. The process borrows from property tax increment financing by permitting the project or developer to recapture a portion of the state sales tax revenues expected to flow from completed projects. A state agency reviews the applications from developers and certifies those projects it deems eligible. To be eligible, minimally a developer and a local government must have entered into a 10-year redevelopment agreement whereby the developer agrees to pay at least one-half of the costs of development and the local government determines that the project will produce a certain amount of retail sales tax after one year of operation. If certified, a project is thereafter entitled to a fixed amount of state sales tax revenue during the life of the 10-year agreement, so long as sales tax projections are met, and provided the funds are used in conjunction with the certified development. This legislation is expected to add significantly to Florida’s already substantial and much used redevelopment district legislation described in part below.

2. Ad Valorem Property Tax Relief

In Chicago, the Metropolitan Pier and Exposition Authority of metropolitan Cook County not only does not have to pay any state taxes on its holdings of McCormick Place, the largest convention center in North America, or the Navy Pier, a retail and entertainment area, but it can also benefit from the sales tax paid by the public. The Illinois state sales tax, as of 1999, was 6.25 percent. Five percent of that stays in state government (1.25 percent goes to local governments), and of that 5 percent, a portion goes to the Authority. One and three quarters percent is transferred to a separate fund in the State Treasury for the Authority’s payment of debt service on the $314,115,000 principal amount of Dedicated State Tax Revenue Bonds. This fund is only used if the funds from the Authority Taxes (taxes that the Authority can levy against users of its property) do not meet the payment requirements of the annual debt service. Once the debts are completely paid, the fund will be dissolved. Since the state has issued Series 1999 bonds, however, the forecasted end of the debt continues to be pushed back.

The Florida Constitution permits local government to grant property tax exemptions for new and expanding businesses if and when approved by referendum. There does not appear to be any intrinsic reason why such power needs to be authorized by state constitution, or subject to or dependant upon a referendum. Statutory authorization without either would in all likelihood be adequate. The relevant Florida statute provides that a local government “may exempt from ad valorem taxation up to 100% of the assessed value of all added improvements to real property made to facilitate the expansion of an existing business….” (s.196.1995 (5)). Such exemptions are not limited to a distinct geographical area (though there is some indication the exemption was originally tied to the creation of enterprise zones, discussed in the next section below). Such exemptions remain in effect for up to 10 years “regardless of any change in the authority of the county or municipality granting exemptions….” As appears more fully in the section below, real estate tax credits of up to 100 percent are a defining characteristic of the British enterprise zone programs and legislation (as compared to its U.S. counterparts) and is one of the reasons for the ultimate success of such zones according to a poll of businesses that relocated to such zones.

B. Tax Increment Financing

As noted above, Florida and California do a substantial amount of public-private development and redevelopment by means of redevelopment districts funded in part through tax increment financing. They are not alone. Thirty-seven states have tax increment financing legislation, and a substantial number use the technique in conjunction with redevelopment districts and areas to accomplish development/redevelopment. California has probably used the technique the most, having passed its TIF statute in the 1950’s. The Bunker Hill Redevelopment Project, commenced in 1959, has something over 14.5 million square feet developed, with annual tax revenues as of 1995 of $27.3 million as compared to just over $100,000 in 1959. [I have additional information on this project as well as the Little Tokyo and Central Business District projects, which successfully used TIF and redevelopment districts as well. I also have similar information on TIF/redevelopment districts in Wisconsin and Minnesota.]

Tax increment financing in the nation’s capital requires that a project fulfill both of Washington, D.C.’s economic goals: revitalizing the downtown as a destination area, and adding to the tax and employment rolls. Each application for TIF will be reviewed on a case-by-case basis, and those that may qualify include improvements in public infrastructure, neighborhood retail projects, affordable housing and rehabilitation of historic structures. Some benefits to the district that qualify include the elimination of blight, district-authorized public improvements, increasing employment and the tax base, increasing property values, and fostering the economic development strategy of the district. Each TIF project must provide private investors; include all available combinations of public and private funding in the forms of loans, incentives, bonds, credits, grants, etc.; and use other business development incentives for which the project and D.C. are eligible. Private funding need not exceed 20 percent of all project costs. The district can sell tax-exempt government revenue bonds to help finance development within “Priority Development Areas,” but the TIF proceeds per project cannot exceed 20 percent of the project’s total cost, the amount of private funding, or 50 percent of the net value of the project’s estimated total tax debts.

Hawai`i has a statute which provides for TIF, but it has not been widely used, to the best of my knowledge. This may in part be due to a common provision which makes refunding the bonds dependent upon the success of the project: no incremental property tax revenue, no recourse. From an investor’s perspective, this makes the bonds risky, particularly when compared to general obligation and “regular” revenue bonds.

In Florida, a number of local governments have used tax increment financing in connection with redevelopment districts and redevelopment agencies to achieve development/redevelopment goals. Among them: Clearwater, Daytona, Riviera Beach, Ft. Lauderdale, Miami, Key West and Pensacola. Authorized by Part III of Chapter 163 Florida Statutes (1999), the Community Redevelopment Act, an eligible project or development can capture and spend annually an amount equal to 95 percent of the difference between (1) ad valorem taxes levied annually by relevant taxing authority on real property within a designated redevelopment district, and (2) the amount of such taxes produced in the district or area prior to the creation of a redevelopment agency. The agency has broad discretion to use such funds to finance or refinance any redevelopment within its jurisdiction.

While somewhat complicated to designate, the definition of a redevelopment area (Community Redevelopment Area) is fairly broad and may include an area where there is a “predominance of defective or inadequate street layout” or “faulty lot layout” or “unsanitary or unsafe conditions” or “deterioration of site or other improvements.” The designated area is governed by a community redevelopment agency (or the relevant local government which grants itself such authority) by resolution of the relevant local government. Such an agency has all powers necessary to carry out the purposes of the Community Redevelopment Act, including the power of eminent domain, the power to sell and dispose of real property, and the power to develop property and to issue revenue bonds. Once the agency has created and approved a community redevelopment plan, it establishes a redevelopment trust fund and funding therefore, largely from the tax increment financing process noted above.

C. Urban Development Corporations

a. England

England’s Local Government, Planning and Land Act, 1980, developed the ideas of Urban Development Corporations and Enterprise Zones. The intentions of both were to help revitalize deteriorating or dead urban centers.

Urban development corporations were created ad hoc solely to “regenerat[e] areas of derelict, run-down land (often the inner cores of old towns).” The Secretary of State could designate any land anywhere in England as an urban development area, so long as it had been approved by both Houses of Parliament and it was within the realm of “the national interest.” To allow the public sector to lead the regeneration of urban areas, the corporations, whose members were appointed by the Secretary of State, took over several functions of the local authorities for the area. UDC’s had a chair, a deputy chair, and five to 11 other members, all of whom the Secretary of State found to have a particular knowledge of the area.

The UDC’s had power to acquire land by compulsory purchase, which could have helped to promote redevelopment as quickly as possible, but in fact was used sparingly. The Act required that the development of a plan for regeneration must be finished within a year of the creation of the corporation. Once the corporations had decided on a plan, the Secretary of State could, after conferring with the local planning authority, approve the plan with or without modifications, and grant an automatic planning permission for the development of the land. This expedited approval allowed UDC’s to use their expansive powers to acquire, manage and dispose of land and other property; to build; to provide utilities to the area; and to generally undertake any business or other project to expedite the main goal of regeneration of the area. The local government may have had input, but no responsibility for the outcome of the project. Thus, the corporations could most efficiently achieve their goals of: 1) putting land and/or buildings to “effective use”; 2) encouraging industry and trade; 3) creating an attractive environment; and 4) providing adequate housing and social facilities.

The Secretary of State controlled the corporations’ powers by occasionally limiting them, extending the corporation over another district, and accumulating land via a vesting order, or compulsory purchase. The corporations had the ability to dispose of such vested land to those they thought could do the best with it for regenerating the area. They also could, with the secretary’s permission, allow development not permitted by a special development order or the general planning laws. UDC’s did have to abide by laws protecting properties of historic or conservation value, limiting advertising, maintaining wastelands, and enforcing planning controls.

The Secretary of State also could transfer various functions of the local government for an area to the corporations, including the control of development of land and buildings, fire precautions and home insulation, housing, sewerage and some public health issues. To accomplish these goals, the UDC’s could acquire, compulsorily if the Secretary of State confirmed the need, land within or adjacent to the development area. UDC’s had completed their functions, they were to be disbanded, with their responsibilities and powers returned to the local authorities.

b. New York

UDC’s are key to recent redevelopment in New York City as they have been in England. The most important contribution to the redevelopment process, according to one expert, is the public ownership of the redeveloped land, acquired either through bargain and sale or through eminent domain. After the UDC acquires the property to be redeveloped, it can and does subsidize infrastructure costs and provide tax relief by requiring of the long-term redeveloper-lessee a fixed payment in lieu of real estate taxes. Only through public ownership can such tax and land cost subsidy occur because the city becomes/is the landowner, tax collector and real estate tax payer all at once.

A prime example of the process at work in New York is the so-called Brooklyn Metrodeck project. The state created a UDC to redevelop downtown Brooklyn (which sits atop eight subway lines) in the 1980s, for office buildings. The UDC condemned 40 acres (4-5 city blocks) to create a downtown commercial office park consisting of nine new buildings over ten years, available for rent well below that of Manhattan, by providing:

1. Land cost “subsidy” by owning the land;
2. Substantial capital grants to develop public infrastructure such as sewer, water, and so forth;
3. Payments in lieu of taxes; and
4. Closing losing of select streets to provide more developable space and permit development at a higher density.

D. Tax and Land Use Regulation Abatement: Enterprise Zones

a. England

Enterprise zones freed businesses within the area from certain planning controls and certain taxes for up to 10 years in order to attract private sector development. Under the 1980 Act and the Town and Country Planning Act, 1990, certain district or London borough councils, or UDC’s could be chosen by the Secretary of State to create an enterprise zone plan for their area. Once the plan was authorized, development specified in it has automatic planning permission, and like the urban development corporations, the zone authority may take over the local planning authority’s responsibilities. This, according to one expert, was a critical incentive for private development.

For 10 years from the date at which the zone is created, new and existing businesses and industries would gain the following benefits:

- exemption from the Development Land Tax (a tax later abolished in 1985);

- exemption from rates on industrial and commercial property;

- exemption from Corporation and Income Tax for capital expenditures on commercial buildings;

There is good evidence to indicate that the UDCs, used in conjunction with the British versions of Enterprise Zones – EZs – are effective tools for the redevelopment of economically troubled or depressed areas. The EZ’s, created in the early 1980s, eventually designated thousands of acres in 25 zones throughout England, Scotland and Wales. The total government outlay approximated $2 billion, of which one-third came from foregone real property taxes at the local government level and an additional one-third from public sector investment in the zones, mostly for the providing of public facilities/infrastructure. It is interesting to note that the public sector would have contributed about two-thirds of that amount toward infrastructure even without EZ designation. Studies indicate that EZs created 58,000 additional jobs. The same studies indicate that the 100 percent “relief” from property taxes was the most important incentive for firms to relocate to the zones, followed by enhanced capital allowances for tax purposes and relaxed land use controls. Private capital investment was approximately 2.3 to 1 over public investment. The zones were eventually “de-designated,” and normal tax and planning controls resumed at the local government level, with little apparent effect on existing businesses.

b. Washington, D.C.

The Washington, D.C., Enterprise Zone of 1998 created tax incentives of more than $1.2 billion for the nation’s capital. These incentives include $3,000 a year in employer wage credit for each worker living in D.C., up to $8,500 over two years for Welfare-to-Work credit, $5,000 for purchasing a first home in the district, 0 percent capital gains tax on some investment earnings, a personal property expensing allowance, and up to $15 million in tax-exempt financing for qualified projects. Projects that qualify for such tax benefits must: be a “qualified business,” have at least of half its business income be from business within the D.C. zone, have much of its business property within the zone. The zone mainly contains census tracts with 20 percent or higher poverty rates, which is a third of the census tracts and about half of the district’s developable property.

E. Bonuses and Incentives

1. Seattle and FAR for Public Improvements

Although the city of Seattle development regulations have a low base floor area ratio (FAR), they allow property owners to increase their development potential by getting FAR bonuses for some benefit features. Such bonuses can more than double the allowable heights of new buildings. Owners can also purchase TDR's in some downtown zones, particularly from low-income housing or landmark theatre sites. Property owners in the Downtown Zone can obtain FAR bonuses through either public benefit features or the transfer of development rights.

Features can be eligible for a bonus within only a particular section or throughout the zone. The downtown harborfront, for example, allows the least bonuses — only for harborfront open space (Seattle wants to maintain views from the center of the city.). As one gets farther from the “downtown office core,” the amount of allowable bonuses lessens. The intent of promoting these features is to bring life and beauty to the downtown area. The city holds tight reins on the bonus features, however, and rules of dimension, placement, aesthetic, and quality govern them all. Cinemas, rooftop gardens, small site developments, human services, child care, theatres, public atriums and housing are eligible for bonuses in the most downtown locations. Bonuses are occasionally also available for such things as shopping malls, urban plazas, parks, and aesthetic and infrastructure improvements (green areas, sculpted rooftops, widened sidewalks, parking, transit station access, etc.).

The Downtown Housing Bonus Program promotes the preservation and construction of low and low-moderate income housing. The housing bonus can be received for new construction, rehabilitation of vacant residences, conversion of commercial buildings to residences, and the mix of commercial and residential uses in one building (all new work must include provision for security for completion). The property owner can also directly subsidize housing or, in some areas of the downtown zone, purchase TDR's. Also, the owner can make a cash contribution through subsidies or to a DHHS-approved housing fund or developer. Cash options equate dollar amounts to commercial square feet.

2. New York

Sales and leasebacks of land by the local government are sometimes used to motivate development by easing the process and cost of obtaining land. Sometimes a developer will build a facility upon agreement with the city, then sell the facility to the city at cost. The city then would lease the site back to the developer at an agreed upon price for a long-term lease, either as low as $1, or with a plan of starting low and building back up to market rent. Sometimes the city prepares the site for development, and then sells the property to the developer at a below-market price.

For example, the quasi-public agency of the Port Authority of New York and New Jersey sold, instead of the more common leasing strategy, property in fee to a private corporation. While the contract of sale was very similar to that of a sale of property between private individuals, one major difference was a section that limited the purchaser’s rights. Speculation is that the Port Authority sold the property below value in order to facilitate development, and does not want IKEA to simply turn around and make a quick profit from a quick sale of the undeveloped property. To prevent that, and to promote the preferred development, for five years, IKEA cannot resell, lease or otherwise dispose of the property without written approval from the Port Authority, and the Port Authority has the right of first refusal of any offer for the property.

3. Chicago

For Chicago, as mentioned above, the Metropolitan Pier and Exposition Authority is a political entity that manages, promotes and improves upon McCormick Place exhibition and meeting center and the Navy Pier. In 1991, to preserve McCormick Place’s market share in trades shows and meetings, Illinois created the Expansion Project, and money was used to acquire land, design and construct a new facility, remodel an old facility, construct a concourse connecting the facilities and hotel, and design and construct offsite infrastructure improvements.

Also, the city of Chicago formerly owned the Navy Pier, but it transferred the pier to the Authority in 1989. The state of Illinois provided a grant of $150 million to help the Authority conduct structural repairs, renovations and redevelopment. The pier now operates as a cultural and commercial area for shops, restaurants and recreation areas, and in 1998, more than 8 million people visited it. Any charges collected from running the Navy Pier are used to defray the Authority’s expenses and to pay the principal and interest upon any revenue bonds issued by the Authority. The Authority can exercise the right of eminent domain through condemnation proceedings for property, with the property only to be used in relation to this Act. The compensation can be through money; substitute property; interests in other property; or leases, licenses or concessions of Authority property. The Authority must plan for relocating any businesses displaced by condemnation, and must try to relocate them within McCormick Place first and the City of Chicago second.

4. Oakland

Another example of a city subsidizing progress is found in the Port of Oakland. The Port of Oakland built a multi-level parking structure (to hold about 1,000 cars) in the waterfront area. Besides supplying parking to the waterfront area, the Port and the City also planned to bring cars to the lot and thus the area by leasing some of the property within the structure to an entertainment business that might help to make the area more of a destination. To jumpstart the locale, Oakland had to make the lease more enticing than the area seemed to warrant. It did so by instituting a “Lease-Back Agreement.” The property is on the ground floor of a parking structure, all of which is owned by the Port. The Port leased the property to a developer, and the City of Oakland Redevelopment Agency then subleased the property from that developer, and prepaid the entire lease at once. It provided $2 million for 30 years from the date the restaurant and club open. The rest of the financial responsibility for the $3 million development project belongs to both the developer and the sublessee. The Agency supplies $2 million; the developer pays $800,000; and the restaurant lessee pays $200,000.

F. General Infrastructure Construction

Internationally, cities have been priming their own pumps by inducing private investment through public creation of infrastructure and public facilities. In areas where private investors might be leering of sinking funds, the local authorities tempt the private sector by showing their own commitment to the area. By laying the groundwork, the local authorities prove an intention to follow through with a redevelopment plan, and an intention to work in partnership with private concerns.

1. Miami Beach

For example, by investing in public facilities, services and infrastructure, Miami Beach made itself more attractive to investors. The city began a $9.8 million bond-funded investment in improving South Pointe’s infrastructure. Miami Beach planned a second, $10 million stage as well. The first stage paid for the completion of, among other things, the Miami Beach Marina, a police and court facility in the Art Deco district, and an oceanfront promenade in front of the Art Deco district. The city also invested in restoring 10.5 miles of a 300-foot-wide beachfront, beginning in 1977. By improving the surroundings, the city made itself more attractive to higher income visitors, and hotels began refurbishments to meet the needs of their new clientele, soon seeing improved profits. The city’s initial investment has since been backed up by that of local banks, which initially had been reluctant to invest in the redevelopment without proof that the city would complete its own investment and redevelopment.
2. Toronto

The Harbourfront Plan of Toronto also provides a public commitment to redeveloping the inner harbor of Toronto, about 41 acres. The plan shows a hope of redeveloping a strip of land along the waterfront into a mixed-use area for visitors and residents, using commercial, residential and recreational elements. The City of Toronto will take over title to the property from the Harbourfront Corporation in return for adopting the plan, continuing a new zoning ordinance, relieving the developers of any further payments or charges for development, and issuing certain development and building permits. The corporation will continue to make funding contributions for the capital improvement projects.

A major part of this agreement is that Toronto will provide much of the area’s infrastructure. It will improve the public facilities; dedicate the land, design and construct the road system; perform the required environmental remediation work; and complete improvements to the waterfront promenade. The city will also seek financial and other assistance from appropriate government agencies to build and operate such public facilities as schools, community centers, fire stations, libraries, health facilities and public assembly spaces. Toronto is in charge of providing pedestrian access to and through the area as well as improving the public transportation infrastructure. Other elements to be provided by the city are affordable housing and parks and open spaces.

3. Spain

In 1975, Spain was experiencing a malaise, and the old industries of Barcelona were dying. Between 1975 and 1985, the city began to shrivel in an economic crisis, with industrial and transport sections of the city moving elsewhere or disappearing entirely. Barcelona’s city council used this opportunity to buy much of these abandoned spaces, mainly between 1976 and 1979. The city created a new metropolitan plan, incorporating that new land into be new centers of service growth and offices, spreading that element from a congested city center. Because of the economic crisis, the council didn’t have much competition for the land or the planning from private developers. The city later used that land to build much of the Olympic facilities and village. Much of the residential development in the city came from private sources, but most of the infrastructure was and is publicly funded. After the Olympics, those apartments were sold, during a brighter economy, to the wealthy, thus helping to subsidize further urban transformation. Possibly the most important improvements from that period (despite the major work on floodwater drains) were updating roads and telecommunication towers.

4. New Zealand

In Wellington, New Zealand, a partnership was created in 1985 to build a special development zone along the Wellington waterfront. Wellington established an independent statutory authority, the Lambton Harbour Development Project, and a development agency, the Lambton Harbour Management Limited to stimulate private investment in the waterfront. The base funding for the redevelopment came from the leasing of all property in the zone, which was put in a trust that generated lease money of about NZ$ 4-5 million a year. That money would be used to lay the infrastructure and public facilities required to make the area amenable to redevelopment. The rest of the estimated $1 billion cost of redevelopment would come from commercial redevelopment of the zone and the leases to prospective developers, and much of that money would also go toward public facilities. Because the land was initially relatively cheap, Wellington could afford to buy enough in speculation to actually see some profit and progress from its “pump-priming.”

Another part of New Zealand thought similarly. The Ports of Auckland leased part of its harborfront to a private group, which planned to lease sections to individual developers with specific projects, particularly for the America’s Cup Challenge. Viaduct Harbour Holdings became the holding company for the land, and Viaduct Basin, site of the land, became the site for the America’s Cup village (home of about 12 yachting syndicates, the sponsored commercial activities, and the financial and administrative aspects of the event). The developers ran into roadblocks with the city’s zoning plan, which had eliminated the possibility of office blocks, and provided different height restrictions for the three zones within the leased area.

In early 1998, the Auckland City Council decided on $50 million for public works, and a 7.5 percent development levy (while the rest of the city is 5 percent), and negotiated height restrictions for the three zones in the area. As of June 1998, only one development on the site had no lessor. Many were taking advantage of the novel zoning alterations that allowed Viaduct Basin to be the only area on Auckland’s waterfront that contains office buildings and a mix of retail and restaurant spaces. The city council also paid for artists’ proposals for temporary and permanent artworks to be displayed in the area. Once proposals were selected, various businesses bid to pay for the projects as a unique advertising ploy.

5. Australia

Nearby, in New South Wales, Australia, has created powerful public agencies that can buy, sell and condemn coastal lands for redevelopment purposes. For example, the Sydney Harbour Foreshore Authority has a fund into which legislatively appropriated moneys are deposited. It can conduct activities for tourists, education, recreation, entertainment, and cultural and commercial activities, as well as build transportation facilities and beautification projects. The authority has the right to acquire land via condemnation, with compensation, and, if a minister of another agency has unused land, the minister must cede the land to the Sydney Harbour Authority.

This authority not only can patrol and enforce the laws of its development area, but it also divides its land into “core,” “non-core,” “managed” and “public domain” areas. “Core” areas include lands vested in the authority, which it manages and can develop. The authority cannot sell this land, however, and can only exchange it for adjacent land. “Non-core” land is vested in the authority from time to time, and can be sold, leased, exchanged, or have easement granted over it with the consent, and possible conditions, of the Minister. Private landowners may give the authority the right to “manage” land, and the authority must always act within the terms of the agreement with the landowner. “Public domain” areas must be managed, improved and regulated by the authority, all under the guise of economically sustainable development.

A further example is the Honeysuckle Project occurring in Newcastle on the New South Wales North Coast. Honeysuckle is Newcastle’s biggest foreshore development, encompassing over 50 hectares of surplus State Government property adjacent to Newcastle’s CBD. To facilitate the development of this waterfront area the NSW State Government has issued an order under Section 5(2) of the Growth Centres (Development Corporations) Act 1974 (NSW) creating a “development corporation.” Section 4(2) of the Growth Centres Act states that this corporation is a statutory body representing the crown. Section 4(3) of the Growth Centres Act stipulates that the newly established development corporation must be subject in all respects to the control and direction of the Minister for Planning.

The Honeysuckle Development Corporation, by way of grants from the NSW Government of $30 million, has transformed Honeysuckle land into “invest-ready assets.” This process involved:

• demolishing old buildings and rail and wharf structures;
• clearing the site and decontaminated industrial areas;
• providing drainage, power, water and sewerage services;
• building a new road system.

The next phase of development will be undertaken by private developers who must bid for the right to further develop the property.

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Author and Copyright Information

Copyright 2002 by authors

David L. Callies, FAICP
Benjamin A. Kudo Professor of Law
William S. Richardson School of Law
The University of Hawaii

and

Heidi Guth
Class of 2002
William S. Richardson School of Law