Who Will Pay for a Better City?
It’s an easy piece of logic.
A developer constructs a building downtown. The space is rented, business is expanded, more jobs are created, the region’s wealth is increased. Furthermore, the city’s role is enhanced, its tax base broadened, and the developer, broker and investment partners are enriched.
Sounds simple, doesn’t it? It seems that everyone wins. But the consequent growth makes the morning and evening rush hours more congested and increases the demand for city services.
New development also crowds the agenda, sometimes overshadowing our need to preserve our old buildings, the treasures of the past. The new development leaves less room for parks, walking spaces, fountains and sky.
Who’s going to preserve and recycle those historic buildings? Who’s going to pay for more traffic cops, street lights and public transportation? Who’s going to clean the air we breathe, house the new downtown workers, provide expanded police and fire protection, schools, child care, cultural facilities and parks?
And who will prime the pump for greater economic prosperity by building new public facilities such as the larger and more competitive Convention Center?
In other words, who’s going to pay to make Los Angeles not just a big city but a great city? After all, it’s the amenities and support systems surrounding commercial development that give the city the flavor and quality of living that we’re all looking for.
The far-sighted developer understands that the value of his property is enhanced by the richness of the neighborhood in which he builds. He recognizes his responsibility to be a primary contributor to community amenities.
The short-sighted critic claims that someone should pay to build a great city to leave to our descendants, hoping the bill will be theirs, not his.
Will developers, who reap the benefits of growth, help pay for that legacy or merely pass it on to their clients and the taxpayers?
These are the issues that were skirted in the “Speaking Out” column of Oct. 15. (“CRA’s Fee Bodes Ill for Healthy Downtown,” written by commercial real estate broker John C. Cushman III).
In the article, the writer bemoaned the fact that phenomenal growth has spawned serious urban problems that threaten the continued prosperity of downtown and the region. Nothing new there. We’re grappling with these problems every day. He chose not to offer any constructive solutions, but merely to flail once again at the bureaucratic process.
Redevelopment has been successful in this city. A robust financial center has bloomed and the assessed property valuation in Los Angeles’ Central Business District has tripled within the past decade.
The developer of 10 years ago took a risk for a lower price. Today’s developer may be paying full market value but his investment is more of a sure thing.
But redevelopment doesn’t stop at the edge of a visibly successful commercial core.
A larger, more complex central city presents an agenda that cries out for action. Homeless families with no place to go live on the streets of Skid Row. Some 6,000 dilapidated housing units must be upgraded. An estimated 6 million square feet of vacant or under-used commercial space in historic buildings goes begging for tenants.
A viable 24-hour residential community in South Park must be nurtured in order for it to take root and eventually provide 15,000 to 20,000 units for downtown dwellers of all economic levels.
These are some of the issues in Los Angeles that developer fees help us to address.
Pending before the City Council is a proposal prepared by the Community Redevelopment Agency in response to the council. (Effective June, 1988, a city ordinance required the CRA to develop a uniform procedure for regulating density transfers and providing for public benefit contributions.) The proposal is designed to provide for public benefits without choking new development and to give order to a previously chaotic and arbitrary system of density transfers.
There seems to be a lot of misunderstanding about this proposal. It is nothing new for a large project to contribute significant public benefits.
For example, the massive assembling of development rights to allow the construction of Library Square, which consists of the 73-story First Interstate World Center and the Southern California Gas Center, is generating upward of $50 million for the rehabilitation and expansion of the Central Library, restoration of the west lawn and construction of the Bunker Hill Steps. California Plaza provided for the Museum of Contemporary Art and for the future Bella Lewitzky Dance Gallery.
The landmark Bradbury Building at 3rd Street and Broadway was saved from demolition by the agency’s approving the use of its unused development rights to raise funds for the cost of seismic upgrading. The Home Savings Tower at 7th and Figueroa will include a major portal into the Metro Rail and Light Rail station beneath the building. Citicorp Plaza made Seventh Market Place possible, which, in turn, kept two department stores from abandoning downtown.
The proposal, essentially a procedure to implement a city ordinance to regulate TFAR, an acronym for transferable floor area ratio otherwise known as development or density rights, could become one of the most important pieces of city legislation in recent years.
The procedure is quite simple. It’s based on the proposition that if the city grants additional building rights to a developer that will enhance the value of his land, then the city can rightfully ask the developer to pay a fee to help offset the impact of the additional development.
The new proposal, which will get full discussion before the City Council in the months to come, follows a common real estate practice in cities all over the United States today.
In downtown Los Angeles, zoning regulations allow six square feet of building for every square foot of land on a site. A 100,000-square-foot site gives property owners the right to a 600,000-square-foot building. Developers who want to build a 1 million-square-foot building must ask the city to transfer additional unused development rights from another site. This action is called a density transfer .
The procedure under consideration by the City Council states that everyone who is awarded additional development rights, or density transfers, should pay a public benefit fee. This fee can be used by the city to satisfy the needs brought about by the development itself, such as extra open space, housing and child care.
A public task force made up of developers, appraisers and real estate attorneys worked for over a year to design a procedure that supports both the efforts of the developer and the interests of the community. The Central City Assn., a civic-minded coalition of private downtown interests, helped shape a proposal that is sane, equitable and necessary to combat the problems that threaten the future of our city.
The CRA estimates that the city will garner upward of $209 million over the next 20 years in public benefit payments resulting from density transfers. And where will the money go? To support housing for families and individuals of all income levels who work and live in downtown. To beautify the streets and make them more secure. To build much needed open space? To save our stock of fine historic buildings. To provide child care facilities for today’s working parents.
Ultimately, public benefit payments will help create an environment that contributes to the financial health of a development. A project that enhances the community reaps the rewards of good corporate citizenship.
With the year 2000 just a decade away, city leaders pondering the future of Los Angeles are trying to achieve a union between the city’s continued growth and a modern, efficient and balanced urban environment that provides an improved quality of life for all of its citizens.
Rather than listening to a misplaced solo that may be out of tune, a full representation of a vast choir of diversity must be heard. All of our efforts must go forward in full partnership if we are to secure the future.
The problems have received anxious attention. The solutions demand our thoughtful discussion.
