MUST THE CITY ALWAYS ENSURE IT 'RECOVERS ITS COSTS' IN DEVELOPMENT?
Charlie raised some interesting questions in his last post on the GSE Sale. Let me focus in on the questions that that I think is driving the City approach to the project...
In the February 2005 issue of Avenues, a member of the Kelly administration talked about the Brewery project. The official suggested that some possibly historic elements of the Brewery might not be able to be saved in a cost-effective way: "...the city will have to pay some 'serious money' if it is granted the right to buy the property. Having too many restrictions on redevelopment, she said, could make it impossible for the city to recover its costs."
It's that last part of the sentence that interests me the most. Should the city always ensure it "recovers its costs", especially in public investment and historic preservation? Or is there a time and place to not fully recover costs, at least in the sense that the City official intends? Where should we draw the distinction? I suspect 'cost recovery' explains why the city did not opt to buy the property itself -- the political pressure to preserve certain elements is more forceful when the property is under city ownership than when in the hands of a private owner. Yet, as Charlie notes, a public RFP process would have been more ideal.
This is a ultimately a values-laden question. Would Landmark Center still be standing if the government had to recover its costs there? (I think not.) Does Crosby Farm Park or Harriet Island Park "recover its costs" of ongoing ownership, or should part of those parks be sold off for prime riverfront development? Is there a scenario under which a Twins stadium would "recover its costs"? (Again, no.)
Sometimes the economic benefits of city investment can't be captured simply in the P & L statement for a specific project - these are "externalized benefits" in economist speak. Historic preservationists talk about the importance of landmarks in establishing a sense of community. Stadium supporters talk about the spinoff effects of other entertainment development, or elevated stature for the City. Where should we draw the line? How much does broad community support play into the decisions of which projects to pay attention to? I don't profess to see an easy answer.
Yet this principle of "cost recovery" seems like its being applied with increasing frequency, particularly to community-based projects under Kelly, and that has its benefits and drawbacks. The only crystal-clear principle is to simply expect 100% recovery on all community projects, as Kelly seems to. But most St. Paulites wouldn't be happy if that principle were applied more univerally: no Xcel Center, no Twins stadium, no Landmark Center...you get the point. Given examples of past excess, its good to be fiscally prudent...but at what cost? Given the City's direction, and tight economic times, I think its an important question for the community to grapple with.
As John Mannillo alluded to, I keep thinking back to the Coleman era, and projects like the Lawson building, where the City ultimately did not recover between $20 to $30 million. (Which John correctly notes, took away from projects like the Brewery). Lawson, of course, was one of Coleman's "signature" projects. Clearly, we're taking a very different approach on the Brewery than we did on Lawson. What's the appropriate level of City commitment here, or on other projects?
Something to think about.
Bob Spaulding Downtown
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