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Cities respond to budget crisis – seek new revenue streams:Back to News
By Ian Gillis
Apr 06, 2010
More and more Cities are facing structural budget deficits as a result of reduced revenues due to lack of new construction, shrinking tax receipts and reduced economic activity. Several are going to a “City led” model for effective redevelopment of key properties.
In the short term, cuts to programs and services need to be made to balance the budget. However, several Cities in California are taking a careful look at their real estate assets with a view to adding value and income streams to their General Fund through active asset management and entitlement strategies.
Because of the length, complexity, risk and cost of the entitlement process in California, very little planning activity has taken place over the last several years as a result of the depressed economic climate. Investors have been looking for opportunities to purchase existing assets at bargain prices rather than invest in new projects.
In order to “jump start” the development process and to create value and revenue from existing City assets, several jurisdictions’ have been working with private sector developers and consultants to formulate economic strategies and to entitle City properties with the appropriate levels of approvals so that they can be ready when activity picks up and debt and equity finance again becomes available.
By leading the development and entitlement process in this way a City can bring to the market a development property with much of the risk and complexity removed, resulting in a more attractive and valuable prospect for future investors and developers. The City is also able to fine tune the financial transaction to meet its future goals.
Some Cities are looking for long term income streams; so, rather than simply looking to sell the property to the highest bidder, they are designing transactions with ground leases or other potential joint venture type structures which throw off sustainable annual income which can be used for the General Fund.
Urban Community Partners has been working in the City of Salinas and for the City of Alameda to facilitate the public outreach, planning vision and economic feasibility of several such projects. The multi-disciplinary nature of these projects requires an experienced team including public finance, urban design, civil engineering and finance professionals.
To review some of the results of the public planning and visioning sessions please click on the links below:
