Sports entertainment districts

Two recent articles present two very different takes on glitzy sports entertainment districts – Kansas City’s Power & Light District and San Francisco’s Mission Rock project. The former is completed; the latter has just been announced. What do they have in common? Both are anchored by a sports facility; the Baltimore-based Cordish Companies acted as the developer; and each includes the usual mix of chain retail, bars and restaurants.

Power & Light District, Kansas City

The Wall Street Journal has labeled the Power & Light District a dismal failure and significant drain on the city’s budget. The San Francisco Chronicle touts the all but assured success of Mission Rock. While I know San Francisco is not Kansas City, the Power & Light District is a cautionary tale for cities betting their future and investing their dollars in one of these districts.

Kansas City finds itself using general funds for more than 2/3 of the debt service on the $295 million in bonds it issued for the project because projected sales and property taxes generated by the project have lagged. In addition, the city funded more of the $276 million cost of a new arena that has been waiting for its first sports tenant since its 2007 opening. As a result, the city has been forced to cut back on basic services.

The story is much the same in Glendale, Arizona, where the city provided hundreds of millions in funding for a hockey arena and spring training complex only to see the hockey team and adjacent mixed-use development, Westgate, go into bankruptcy. For each of the past two years, the city has covered $25 million to the NHL which now owns the hockey team to cover operating losses. Now the city is facing a $35 million budget deficit and the possibility it will still lose the hockey team to another city.

San Francisco’s plans are even more grandiose – $1.6 billion cost for a park, 1,000 rental units, 1.7 million square feet of office and retail, and parking garages. The Giants and Cordish plan to ground lease 27 acres comprised of existing surface parking lots and Pier 48 and begin construction in 2015. I suspect San Francisco’s efforts to use a sports facility as an anchor and catalyst for a major redevelopment project will be more successful than either Kansas City or Glendale. The worrisome thing is that there are numerous second and third tier cities currently looking at smaller scale, sports entertainment districts (e.g., Allentown, PA) as an avenue to urban regeneration. One hopes that they will not only look at the promise of projects like Mission Rock but also the reality of projects like Power & Light and Westgate.

Mission Rock site plan

 

Regulatory takings – and givings

One of the favorite targets of those who are concerned with protecting private property rights is so-call regulatory takings. In Lucas v. South Carolina Costal Council, 505 U.S. 1003 (1992), the U.S. Supreme Court held that a land use regulation which eliminates all economically beneficial uses of a parcel constitutes a taking and just compensation must be paid to the landowner by the jurisdiction that enacted the regulation.

Lots that were the subject of the Lucas case

For property rights advocates the Court did not go far enough; so they have resorted to legislative efforts in numerous states. Some of the more noteworthy measures include those in Oregon, Florida, Arizona, and Texas have enacted measures either legislatively or by referendum that require compensation be paid when a regulation reduces the value of a parcel of property by a state amount (e.g., 25% diminution in Texas). There is a wealth of literature about the effectiveness of these measures, their impact on land use regulation and the lawsuits they have spawned.

Most recently this issues has been raised in Maine where the legislature is wrestling with a proposed regulatory takings bill that would required compensation when 50% or more of a parcel’s value is lost due to regulation.

Delving into all of that is not the purpose of this post. I simply want to ask if landowners should be compensated when a land use regulation diminishes the value of their property, should the state or local jurisdiction be compensated by landowners when they increase zoning densities or construct infrastructure at public cost that increases the value of a private party’s property?

The truth of the matter is that in its natural state the value of most land is attributable to one’s ability to raise crops, harvest timber, harness water power, and extract minerals. In order to make use of land for anything other than extremely low density residential development requires a combination of infrastructure that is usually publicly funded (e.g., roads, sewer, storm water, water, electricity, telecommunications, schools) and regulations that bestow the right to make use of this infrastructure for various land uses and at various densities. All of this focus on how land use regulation may reduce the value (though not render it without economic value) of individual parcels of land loses sight of the forest for the trees as it ignores the fact that much of the value that remains is in fact the result of public investment and public regulation.

When tribes become developers

Since the establishment of Native American reservations, tribes typically were opposing attempts by outsiders who wanted to exploit resources located on the reservations. More recently, tribes themselves have become active developers of reservation land often for casinos and related development. Quite a different sort of project was announced last month by the Navajos, who in partnership with Confluence Partners LLC propose to develop a $1 billion complex consisting of a resort hotel, spa, restaurants, retail and commercial space and a tramway to the river’s edge. The project would be located at the confluence of the Colorado and Little Colorado Rivers and along the east rim of the Canyon.

Not surprisingly an opposition group has already sprung up, and long established environmental groups have begun to voice their concerns. You can download a copy of the Memorandum of Understanding at Save the Confluence’s website.

While I have no doubt that there are significant environmental issues that need to be addressed, my real interest in this is the collision between culture and legal systems. Native Americans have a very different concept of property rights but have long chafed under the paternalistic and often bumbling oversight of the Bureau of Indian Affairs. Environmentalists often allied themselves with tribes who were seeking to protect sacred sites on and off reservation lands. This particular project raises the prospect not only of internal conflicts within the Navajo nation but between the tribe and the federal government and environmental groups.

 

 

Sagebrush Rebellion redux

Updated: May 15, 2012

Brewer vetoes AZ bill.

As if battles with the federal government over immigration and health care weren’t enough, several western states have embarked on a campaign to wrest control of tens of millions of acres of federal lands in the West. Utah is furthest along with the governor there having just signed into law a measure asking the federal government to give back more than 20 million acres of public lands. Not to be outdone, the Arizona Senate just passed SB1332 which would require the federal government to transfer nearly 30 million acres (or roughly 40% of the state) to the state by 2015 or face the imposition of property taxes. Governor Brewer somewhat unexpectedly vetoed the measure acknowledging that it was unconstitutional and would have imposed a huge budget liability on the state if the federal lands were actually put under state control. Measures are expected to be introduced in Colorado, Nevada, Idaho and New Mexico.

Coupled with these legislative efforts are a new raft of lawsuits alleging that the federal government reneged promises made at the time these states entered the Union that federal ownership would be temporary. While most legal commentators agree that this issue has been resolved in the federal government’s favor repeatedly over the years, that doesn’t address the very different public-private land ownership patterns between states in the Mountain West and the rest of the country.

Its clear from comments being made by sponsors of the bills that if they are successful they believe state ownership will pave (literally and perhaps figuratively as well) the way for more aggressive resource extraction and development. The issue has even reared its head in the Republican primary where Senator Santorum has said if elected he would work to transfer much of the federal lands to the states and sell them to private interests. The Cato Institute, a libertarian think tank, has recently issued a lengthy study discussing possible reforms to federal land management including the transfer of such lands to the states.

Environmentalists have been quick to  raise the alarm of what such a transfer would likely mean for treasured wilderness areas such the red rock lands surrounding Moab, Utah. As this issue evolves it is almost a certainty the public trust doctrine will be invoked by those seeking to insure continued management of such lands in a manner that promotes the interest of the general public rather than a small group of private parties interested only in economic development. A recent Nevada Supreme Court decision did just that in applying the public trust doctrine to a dispute about whether the state had to transfer some land recently acquired from the federal government to a county.

While the takeover is supported by many in the Tea Party, in this case it is environmentalists who are raising the disastrous impact such a transfer of land could have on state budgets.

 

Is Agenda 21 really evil?

For those of you who wonder what happened as a result of the U.N.’s Earth Summit in Rio in 1992, Tea Parties will tell you that it launched a global conspiracy against property rights in the form of Agenda 21, a set of policy and program recommendations for national and regional governments to implement to protect the environmental and promote sustainable development. Like all too many well meaning U.N. documents, this one has been largely ignored in the ensuing years though sustainable development remains a favorite approach of planners and environmental advocates around the world.

Michael Shaw is one of those credited with first raising the alarm about Agenda 21 back in the 1990s. More recently the Tea Party has latched on to this issue and has been making appearances at zoning and land use hearings around the country (see examples in TennesseeVirginia and Florida) and to warn of the insidious affect of Agenda 21. Specifically, Tea Party members see a link between Agenda 21 and local actions regarding bike paths, public transit, zoning, conservation easements and smart growth as steps towards undermining private property rights.

The Arizona Legislature, which can always be counted on to be in the forefront on matters like this, has introduced a billthat would prohibit state and local governments from implementing “the creed, doctrine, principles or any tenet” of Agenda 21. One wonders what would be left of land use and environmental planning and regulation in Arizona if this bill were to pass.

This might seem like a tempest in a teapot if you will but recently the Republican National Committee at its 2012 winter meeting adopted a resolution condemning Agenda 21. This resolution will be offered as part of the Republican Party’s platform at its upcoming convention. You ought to take a moment to read it in its entirety but the following passage will give you an idea of the underlying sentiment:

“WHEREAS, this United Nations Agenda 21 plan of radical so-called “sustainable development” views the American way of life of private property ownership, single family homes, private car ownership and individual travel choices, and privately owned farms; all as destructive to the environment . . .”

It’s difficult to know where to begin commenting on something like this. I think it is fair to say this is another reflection of the deep divide there is in this country on a broad spectrum of fundamental issues. As is the case with many of these issues, those in the Tea Party and an increasingly large portion of the GOP would like to return to an earlier, simpler era such as the 1950s. In the case of land use regulation this means ignoring all we have learned about the nature of ecosystems and their relationship to human health and well being. Yet there is a clear track record throughout U.S. history that property rights have been a malleable concept that have adapted to new scientific and technical knowledge in areas such as hydrology, oil and gas geology, air travel, and telecommunications. If it had not, airlines would have been required to purchase air rights easements from each landowner over whose property a plane flew.

The nature of property was at the heart of this country’s founding (though not necessarily in the way popularly imagined) and has been at the foundation of our two greatest failings as a nation – the unwillingness to recognize the very different property regimes of Native Americans and the institution of slavery. It should be no surprise that we continue to struggle as a society with the property balance to strike between individual and collective property rights.