Donjek :: The Cents of Place Blog

Donjek Project: Picturing Value in Walkable Neighborhoods

Over the last several months, I have been working with developer and consultant Michael Lander (Lander Group) and urban designer Peter Musty (Peter Musty LLC) to develop a concise, visual statement about the prospective impact that transportation investments can stimulate. Hopefully, you'll find the graphic product below clear and persuasive - and you can download a pdf version here if you prefer.

Donjek Project: Little Rock's MacArthur Park District Master Plan Wins Awards

Last fall, Donjek was hired to support a master plan process for MacArthur Park in downtown Little Rock, Arkansas, producing findings on feasible investment models for the City and its partners to reinvent the space. 

The process,  led by Conway+Schulte Architects of Minneapolis, has since received two awards for the MacArthur Park District Master Plan: A Citation of Urban Design from the Boston Society of Architects, and a 2009 Merit Award from the Minnesota Society of Landscape Architects. Congratulations to Conway+Schulte and their partners at the University of Arkansas Community Design Center and Oslund and Associates.

As part of the planning process, I examined multiple park revitalizations, searching for sustainable models for renovating, operating and maintaining quality urban open space. 

Pack Square Park in Asheville, North Carolina provides an example. Just over six acres, Pack Square Park is today the focus of a $20 million redevelopment effort involving the public, private and philanthropic sectors, at the helm of which is an effective conservancy.  Private capital will finance half of the renovation, and the new Pack Square Conservancy is raising an endowment of $2 million to bolster ongoing maintenance by the City of Asheville and Buncombe County.

Funding the capital and operating components of open space is a key area of public finance. Open space, in turn, is a key driver for effective places and a substantial influence on surrounding property values. If your community has an underutilized space or a park calling out for reinvention, contact us.

Talking Open Space

On May 28, I presented to the quarterly meeting of a land conservation  collaborative that has brought together groups including the Metropolitan Council, the Minnesota Department of Natural Resources, the McKnight Foundation, Trust for Public Land, and 1000 Friends of Minnesota. Embrace Open Space has released an analysis of five years of Hennepin County housing sale data, which illustrates the influence of nearby open space on home values. The analysis has identified that a typical Hennepin County home located near open space is roughly $15,000 more valuable than a comparable property located elsewhere. The study follows a related analysis of Washington County sale data, released in 2007, which reached similar findings.

As part of the program, I will present context for the study, describing the range of economic, fiscal, and ecological benefits that flow from parks and other conserved lands, in cities, suburbs and in rural places. I also expect to discuss how open space produces benefits that cross sectors - for example, open space has been shown to produce improvements to health and serve as transportation infrastructure (as with greenways), as well as meeting recreation needs. 

View the Donjek five-page summary here.

Photo: Post Office Square in Boston; courtesy of Flickr.

Donjek Project: Public-Private Partnership Plan for Proxima.us

I am pleased to announce the launch of Donjek client Proxima.us, a software development and maintenance enterprise. Proxima’s founders, Mike Bougie and Patrick Lynch, are experienced software designers who hail from small towns, and have established Proxima to create top-quality software in rural areas of the United States. 

Outsourcing information technology (“IT”) services to India and elsewhere is widely assumed to be a permanent fact of life, but in fact many U.S. companies are becoming less satisfied with the costs and benefits of working internationally to fill these needs. A recent survey of chief financial officers by Information Week magazine revealed that while 79% outsourced IT work overseas last year, only 42% anticipated doing the same this year.

The benefits of reduced wages abroad have narrowed and many U.S. clients have experienced inconsistent quality of service. More important, international outsourcing exposes clients to risks to data records and intellectual property, as well as financial risks associated with currency and interest rate fluctuations.

Proxima’s service couples highly skilled and educated programmers working in rural America, with clients who desire top-quality IT assistance, personal contact in a domestic time zone, and legal protection in place under U.S. law.

Donjek’s role has been working with Proxima to develop a public-private partnership plan, illustrated above. Watch for this company’s development in Minnesota and elsewhere, as its market shifts and they create professional IT jobs in rural America.

Donjek Project: Identifying the Economic Impact of Housing

An economic impact analysis produced by Donjek for the Minnesota Housing Partnership and Greater Minnesota Housing Fund was released at a news conference held at the State Office Building in St. Paul on February 18; the Finance and Commerce coverage of the release is available here.

The key findings of the report, titled "Housing as a Lever for Economic Recovery," include:

• Public investments in housing leverage private capital; a 2008 analysis by the Minnesota Housing Finance Agency (MHFA) indicates a commitment of $1,310 in private funding for every $1,000 investment by the agency. Financial leverage broadens the impact that state housing investments bring to bear as a stimulus measure. 
• Housing investments are an effective vehicle to stimulate spending and revenue creation; analyses show that $1 million invested in housing generates $1.75 million to $2.1 million in economic activity, resulting in income, sales, property and other tax revenues.
• Studies reviewed in this report indicate the job creation potential in housing as well; an investment of $1 million (in public funding leveraged with private capital) in housing generates 14 jobs according to the MHFA analysis, and up to 21 jobs in other studies.

An application of the findings to a Minnesota setting is included in the final report and is also available here. An effective stimulus ought to have a broad range of approaches. Substantial leveraging of private equity and lending, as well as the funding of federal and other public partners, make housing finance a powerful approach for the state to consider in its plans to support economic recovery.

Photo: Courtesy of Flickr.

Should Recent Shifts in Interest Rates Encourage Placemakers?

It’s been a week since I posted to the Cents of Place.  I’ve wanted to contribute more in that time, but a number of projects have taken a turn for the more involved.  Why? Chaos in the private lending market has placemakers thinking twice and three times about potential partnerships with the public sector.  

One client is a well-seasoned developer and investor, looking to break ground this spring for a project in a major transit corridor. Financing is in place for multiple floors of retail and office, and preleasing has gone well.  Perhaps, the development team has explored, we could add thirty or more rental or condo housing units by building upwards, with a stepped design to ease concerns about views from the street?  Despite their record of selling and managing housing in urban corridors, lenders aren’t enthused.

Part of banks’ lack of spirit on this point is due to the recent spike in the rates banks charge each other for overnight or short-term lending.  The enclosed graphic shows how much higher is this short-term interbank rate (LIBOR) than the three-month Treasury bill; this difference is known as the “TED spread.”  In October, banks would demand interest over 4.50% higher than the three-month Treasury bill, to lend their funds to other banks.  Such a spread between the rates indicated dramatic anxiety among lenders.  If you’ve visited with real estate lenders in recent months, you know what this has done to your odds of securing project financing.

The bright side, of course, is that the graph illustrates the precipitous drop in the TED spread, from 4.63% in October to 1.08% as of this afternoon.  Hopefully, as economist Jim Hamilton suggests in this post, the shift is part of a larger, positive next chapter for the economy.  

Thanks to good friend Courtenay Brown, seasoned bond trader, for providing the graphic.  With uncharacteristic brevity, Brown called the drop in the TED spread “pretty good.”

@Strib Forum: Now Contributing to Newspaper's Online Space

Starting last month, I have participated as one of seventeen writers in a new project created by the Star Tribune. The forum, Your Voices, features commentary by artists, advocates, entrepreneurs. When the subject of material I post to Your Voices is topical to readers of the Cents of Place, I will publish a brief post here with a link to the story. The pieces I have published to date are available most directly here.

As with this space, please let me know what you think about Your Voices!

Donjek Project: Minneapolis Downtown Open Space Initiative

The year's twilight is a good time to add a postscript to a previous item I wrote, at that time introducing work undertaken to help the City of Minneapolis evaluate the prospect of converting downtown land area to open space. Since that post in fall, 2007, Donjek has been engaged on projects in a similar vein in Little Rock, Arkansas and I have written a number of short commentary pieces on that project and issues surrounding parks.

The City of Minneapolis' Department of Community Planning and Economic Development (CPED) recently posted the full report of the multi-disciplinary team to its website and the document is available by chapter or as a whole here. There is never a "perfect time" to convert land from taxable to tax-exempt use (history suggests the same), and property and sales tax revenues are at a premium across the country today for core public purposes. Still, what is also evident is that other things equal, urban land stands only to become more valuable in the coming decades thanks to transportation logistics, energy policy and climate change. In economists' terms, the opportunity cost of failing to procure open space for downtown dwellers now stands to grow significantly in the future.

Photo: Courtesy of jpnuwat/Flickr.

Intuition, Criterion for Your Next Project

Got intuition?

I work with parties involved in urban land use and redevelopment, ranging from public agencies to private developers and foundations. In some respects, this field, like many, become more analytical and data-driven. We break down components of location: Road, rail and transit access. Visibility. The quality of pedestrian environment. Hot zones. Proximity to vendors and customers. Market values and discretionary income in surrounding neighborhoods. Mix of adjacent land uses.

Recently, I called a client involved in commercial real estate investment for forty years and asked, what's in a location? How do you evaluate places for their potential? To be sure, he cited all the factors listed above and others. It didn't take long to move through these aspects of location, presented individually, understood to influence each other.

But afterward, the list exhausted, he had more to say. After the division of location into components, there was a remainder. An important one.

Intuition. Or is it thin slicing?

I recently read Malcolm Gladwell's book, Blink. The premise of the book is that we have an ability and tendency to evaluate others and situations on an immediate, subconscious level. Once we establish these "thin slices," in the author's lexicon, they guide (or misguide) us without much consultation from the thinking side. I'm left to wonder how much of my time has been spent residing in the analytic part of my mind, pretending I am in charge while the subconscious pulls all the levers.

On loan in the Donjek office space is an energetic pair of oil paintings created by a friend, whose artistic method for the works was to project an image on the canvas, paint based on the projection, project a different image, repeat. The outcome is a finished work thickly endowed with oil, drawing the eye and teasing the brain to interpret the combinations of strokes a hundred different ways.

Welcome to the places we're redeveloping.

Value Capture Finance: Seeing is Believing

One of the trends I've observed here over the last year, is that multiple factors are prompting more consideration of value capture finance - the mechanics of "capturing" development values and benefits to pay for elements of the development itself.  Among the drivers are:

• Diminishing public willingness to support funding for services traditionally considered to be core public functions; 
• Increasing gathering of data and readiness of access to this data; and
• Improving ability to use this data to measure property value, patterns of how people use places, and the economic health of small or large areas (just to cite a few examples) using geographic information systems (GIS).

Value capture finance, in summary, is a method of using future financial or economic benefits precipitated by a development, to repay part or all of the debt incurred to create the development in the first place.  A typical example is tax increment finance (TIF), authorized in forty-eight U.S. states, which allows increased tax revenues (property and/or sales) generated by redevelopment to be channeled to the project’s debt service or other uses.  A less typical example, not currently contemplated in Minnesota law, is the financing of public fixed-rail infrastructure through commercial districts, using neighboring properties’ increased tax revenues caused by enhanced access to LRT or streetcar service. 

I’ve just completed some analysis for the Midtown Community Works partnership pursuing this line of inquiry:  If state law could be amended to allow for a "transit TIF" district, for example, what kind of value could be captured in future years?  How much capital could be raised by borrowing against these future tax receipts?  What planning and equity issues demand consideration in exploring such an approach?  

This concept may strike some readers as marginal to the planning and public finance worlds.  I don’t agree.  The three forces described above are at the root of analysis commissioned by the Minnesota Legislature earlier this year, and continuing economic impact analysis of the state’s first LRT line, the Hiawatha.  Identifying what value is created by transit infrastructure is a critical step in leveraging this value for investment in a regional system, and made more feasible by improvements in GIS technology. 

And regardless of whether the infrastructure is constructed by a private, public or public/private entity, the end outcome - investment in places that work for people - represents an increasingly important competitive advantage for regions in the U.S. and abroad.