Turning land into equity via public-private partnership
A recent Knowledgeplex reprint of a Chicago Sun-Times article highlights one of the many benefits of public-private partnership — combining public resources with private expertise to make something neither could do alone:
City officials have struck an unusual bargain with developers by agreeing to provide land for new homes on the Near West Side in exchange for a share of the sales proceeds.
The city gets new housing with negligible downside:
The project carries little risk to taxpayers because the city is laying out no cash. New West is securing private financing for construction and will bear all those costs.
The developer contributes expertise and risk tolerance:
Mazola, a former alderman, said he suggested the new arrangement because developers typically face red tape when the city issues bonds. “It’s much more easy for me to get my own financing,” he said. “I’m willing to share the profits down the line.”
Of course, the developer also gets the benefit of government facilitation:
Some of the parcels require zoning changes from classifications that require retail space on the ground floor. What’s planned is exclusively residential.
The scheme is potentially replicable, anywhere there is good demand:
The property involved is among some 10,000 city-owned lots, often acquired through foreclosure to satisfy the city’s demolition costs. The city also gains title to properties with delinquent property taxes.
“Let’s get these properties back on the tax rolls,” said Peter Skosey, vice president at the Metropolitan Planning Council. He praised the new program as an example of “good creative thinking.”
And in addition to mixed-income housing (20% of the apartments will be affordable, the others market), it’s good business:
Officials project that the 43 vacant lots provided to New West’s venture could produce aggregate sales revenue to the city of at least $4.17 million. The amount could be greater, depending on sales prices.
