It has been said that those who fail to learn from history are doomed to repeat it.
Lambda Alpha members who attended the Weekend Experience in May 2009 (see “Vancouver Primps for the 2010 Winter Olympic and Paralympic Games: The LAI Vancouver Weekend Experience May 7-9, 2009” ) were shown a city whose facilities for the 2010 Winter Olympic Games were well on the way to completion on time and on budget. Each development – the Richmond Olympic Oval, the expanded Trade and Convention Centre and others – had been carefully designed with a specific end use in mind in order to avoid creating the white elephants that had plagued so many earlier Olympic cities.

Athletes' Village from north shore of False Creek.

Perhaps the most ambitious project was the Athletes’ Village, constructed on land owned by the City of Vancouver on the last uncommitted parcel on False Creek, the urban redevelopment jewel in Vancouver’s reputation as one of the most beautiful and livable cities in the world. After years of planning for a neighbourhood that would set a new standard of sustainable development, the City committed to the Vancouver Olympic Bid Corporation in 2002 that a residential neighbourhood of 1,100 housing units would be constructed and made available on October 30, 2009 to house about 3,000 athletes for the Games. The units were then to be refurbished and sold or rented as part of the city’s newest and most sophisticated residential neighbourhood, with a mix of incomes and tenures and new amenities, including a community centre and seawall. For a number of LAI members who toured the site in May 2009, seven months after the economic downturn, there was a whiff of hubris in the air.

Vancouver was awarded the Games in June 2003, but it wasn’t until 2006 that the City completed the process of selecting a developer to design and develop the project, initially dubbed “Millennium Water.” The fact the developer offered the highest price per square foot ever paid in the city, combined with the fact that the developer had limited experience with a project of this scale, appeared to some observers to create a significant risk if conditions changed.

And change they did. Although the developer was able to pre-sell about 200 units that sold like hotcakes, the costs of the project soon started to rise.

The City had not cleaned up the contamination on the site before turning it over, leading to $20 million in cleanup costs and a three-month delay for the developer. The City upped the environmental performance requirement from LEED silver to LEED gold. The City’s insistence that the property be a leasehold rather than clear title (until the construction was completed and the Olympics were over) meant that conventional financing arrangements with typical Canadian financial institutions were unfeasible, so the developer turned to a New York-based hedge fund for financing at premium interest rates.

Athletes' Village under construction.

With costs escalating, the hedge fund became very nervous about providing further backing for the project, and in a remarkable development, the City agreed to guarantee the loan, provide additional financing and ultimately take out the hedge fund and take over the financing of the project. These moves, which eventually required the extraordinary recall of the Provincial Legislature to authorize, placed the entire risk of the project on the City’s taxpayers without their full knowledge or consent.

News of the commitments undertaken by the City began to seep out in the leadup to the City Council elections in November 2008, which saw the election of the former opposition party and a new mayor, who described the Athletes’ Village as a train wreck.

Fortunately, the project was completed and turned over to the Vancouver Olympic Organizing Committee on schedule, and by all accounts it provided the best athletes’ accommodation of any Games to date.

When the dust settled after the Games, the situation continued to deteriorate. A sales launch in May 2010 failed miserably, since the market had softened from the time of the initial pre-sales, and buyers could now see what they were buying (or not buying). With only 35 sales in five months, the developer was unable to meet its financial obligations to the City and the project was placed into receivership by mutual consent.

The cost of the 252 social and rental housing units had increased to more than $400,000 per unit, and many people argued that these units should be sold to help recoup some of the City’s losses, but the City Council decided to keep these units and seek an operator for them. This proved to be a struggle and for a variety of reasons, to date more than 200 of these units are not rented.

Unit prices in that area of the city had dropped by as much as 30 percent since the initial presales occurred, so market interest from new purchasers was dismal, while those with presold units were looking at a severe decline in the market value of their assets. Many of the 200 pre-sale purchasers found that the innovative heating and other systems had quality issues to be worked out. Class action law suits were initiated by owners who had lost value and by other owners who alleged that the units were not as presented at presale and/or were of a lower quality than promised. Major retail tenants delayed opening their stores due to the lack of traffic, which rendered smaller retail operations unviable.

The place began to be described as a “ghost town.” Bold action was needed to reposition the project in the marketplace.

The receiver, armed with more current appraisal information, dropped prices by about 30 percent and Rennie Marketing Systems rebranded and relaunched the project as “the Village on False Creek,” hoping to jettison the negative aura generated by its troubled birth. When Bob Rennie announced in February 2011 that he had sold 128 units in four days, there was a sigh of relief in the development industry. As Kerry Gold noted in a story in the Globe and Mail newspaper, “the controversy surrounding the Village was perceived as creating hesitancy as buyers wondered whether there might be a sudden blowout sale, or if the market as a whole could drop in price.” When the Village on False Creek units started moving, the whole market settled down.

Pedestrian and cycle bridge on the seawall.

“The consumer can now see there is a sense of order,” an upbeat Mr. Rennie told the Globe and Mail. “We removed the financing cloud. The receiver has certainty. The city carrying it has certainty. We started to remove the ghost town cloud. We stabilized prices. My new batch of buyers sees an orderly process instead of a sense of urgency.

“[The project’s developer] could not afford to sell at these prices because it put them offside with the loan arrangement. This is below what they were allowed to sell for. Now it’s a really calm process that’s getting a lot of attention.”

While all City taxpayers, including this one, can feel relief that the project finally appears to have some stability and a positive direction, it remains to be seen whether these conditions will be sustained. In early April 2011, the City announced that it would be writing off $40 to $50 million in losses on the project in its financial statements. Other commentators noted that the City would not be receiving the $200 million the developer had committed to pay for the land beyond a down payment of $29 million, bringing the loss of value to the city into the $230 million range. Given the unfolding situation, it will likely be some time before we learn the net result of the immense financial risk that had to be incurred in order to meet Vancouver’s Olympic commitments.

The 2010 Winter Games were a huge boon to the City of Vancouver (see “Wasn’t that a Party? The 2010 Winter and Paralympic Games Transform Vancouver” .) There is no doubt that the Athletes’ Village was a key part of this success. It will almost certainly be a remarkable neighbourhood offering many pointers on how to build more sustainable communities. Unfortunately, it also offers an object lesson in the ghastly consequences that can ensue when a local government gets directly involved in real estate development without having in place a game plan, an appropriate corporate structure and access to the necessary expertise.

* Ken Cameron is Scribe for the Vancouver Chapter of Lambda Alpha International.
The views expressed here are strictly those of the author.

Lou Slade KeyNotes Editor

Turning over a new leaf

I’m trying something new this month, inspired by a letter I received from Tom Dyke, Ely Chapter.

Tom writes:

Editor,
I thought it was about time the nation addressed the subject of too many local governments. We can’t afford them all and I prepared this brief statement about the area where I have been living for the past 50 years. I thought it might be a subject LAI might want to consider and therefore am sending it to you for publication in our newsletter. Please consider using it as you prepare the next letter to members.

Sincerely,
Thompson A. Dyke
PS: I just retired in January

LOWER THE COST OF LOCAL GOVERNMENT

The recession caused great financial problems for local governments and private citizens. Property values have declined causing decreasing public revenues, increased assessments and rising tax rates. Bankruptcies are occurring in Vallejo, California and Harrisburg, Pennsylvania. Pension plans are underfunded in Illinois while some local boards are fraudulently raising salaries for retiring employees. Unemployment and personal bankruptcies remain high.

What should be done?

In September, leaders on the North Shore of Chicago met to discuss how they could cut costs through intergovernmental cooperation and joint service agreements. Discussion should include consolidation of government dues to the huge number [7,000] in Illinois. I have been a planning consultant for every municipality on the North Shore during the last 50 years except Kenilworth and know that such an idea will be met with fierce resistance from local elected and appointed officials as well as labor unions even though it would reduce cost to the taxpayer. Maine cut the number of local school districts, Teterboro, New Jersey is studying mergers in Princeton while counties in Kentucky and Georgia have already been combined. Now is the time to take bold steps and reduce the size and complexity of local government.

What are you waiting for?

- Thompson A. Dyke, AICP, ASLA

Editor’s Comments
First and foremost, congratulations to Tom on his recent retirement, and thanks to Tom for writing KeyNotes.
I’d like to get feedback on Tom’s letter and viewpoints from our membership. Is this kind of consolidation happening in your state? Is it a result of good advance planning to streamline and gain efficiencies, or is it the result of desperate, last minute efforts to stave-off insolvancy? How does the structure of local government in Canada and the U.K. inform us on this subject?

Tom presents an argument that makes sense from the standpoint of fostering efficiency in providing public services and representation. However, my first reaction to Tom’s view is that “all politics are local,” and that based on my experience with municipal government, I think even the taxpayers would resist the elimination of their local governments even if it reduced their taxes. Even the private sector has difficulty with the consolidations that come with project partnerships and corporate mergers.

Also, the other end of this kind of argument is that the Federal government is too big. Taken with Tom’s view, is there so much excess government in the U.S. that we can make reductions at the national and local level and then rely on State and county government to pick up the slack? How do these views match-up with the fact that Americans’ taxes are less than most other Western nations?

On the other hand, I believe that what Tom is arguing for at the local level is already happening in fragmented ways. Local municipalities that outsource services to private companies enter contracts with companies that have similar contracts with neighboring municipalities; for example California American Water operates many municipal water systems in CA, a de facto consolidation of local government services. A recent NYTimes article reported that the town of Half Moon Bay CA was shutting down its local police force, and that service would be taken over by the county government. My point is that the kind of consolidation that Tom recommends is already happening in various ways.
I am a firm believer that a benefit of recessions is that they force leadership to rethink our systems of taxation, our commitments to entitlements, and all of our other spending. This recession, along with our recent big deficit years and our extreme indebtedness, is causing Americans to pressure our leaders to come to grips with all of the tough decisions they’ve been ignoring for years. I think that’s a really good thing. It’s a huge challenge, and the partisan posturing is a major stumbling block. But, with a presidential race just starting up, it’s a great opportunity for a candidate to inspire American leadership at all levels to find the solutions we need to regain the solvency of our governments at all levels.

Please email your views to me, and I’ll consolidate them in next month’s issue.

Maya Emsden, who is in charge of creative services at MTA, spoke about public art. With a projected $3 Billion annual budget, the MTA is required to dedicate 1/2 percent towards public art, and Maya described the MTA's processes for meeting its obligations. We learned how the artists are selected, how they work together with the architects and planners, and how the MTA goes about maintaining and preserving its collection. Many of its projects are years in the making, which makes this process all the more interesting. The talk, which was held in the outside courtyard at Traxx Restaurant, was followed by a docent-led tour of Union Station and the subway, to view some of the MTA collection. We learned that for some, this was their first trip on the LA subway.

Hearty congratulations to two Ely Chapter members:

• Norm Elkin, a long-time Ely Chapter member, who was inducted in 1963 and currently holds the record for longest Ely Chapter membership, was recently also honored by the Chicago Loop Alliance (CLA), an organization whose mission is to strengthen downtown Chicago as a mixed-use destination and to work toward Chicago’s standing as a world-class city and tourist attraction. Mr. Elkin was recently appointed as an Honorary CLA Board Member. A Chicago native, Mr. Elkin worked in real estate development in the city for more than 20 years and has held leadership positions with downtown economic development organizations for nearly 30 years. In fact, he lists as one of Chicago’s greatest assets the strong cooperation of the public and private sectors to accomplish major planning and redevelopment feats. Among his many contributions, Mr. Elkin played a major role in the rebirth of State Street, the Loop’s premier destination district, during the 1990s. Along with that, he has seen the dramatic transition of the downtown with it’s increase in educational and residential uses, and with amenities like Millennium Park and the Theater District, downtown is increasingly being recognized as a place for recreation not just as a place for work. This is not Mr. Elkin’s first award, as he was honored by the Ely Chapter in 2005 with the Harry Chaddick Distinguished Public Service Award.
  
  
• Larry Okrent's new book, Chicago from the Sky:  A Region Transformed, 1985-2010, is scheduled for release on or about April 15. The book embodies a selected collection of Okrent's own aerial photographs of Chicago and the region. With over 40 years of professional experience and 25,000 aerial photographs, Mr. Okrent has produced a work of urban history, illustrating how extensively the city has changed in the span of a single generation. The book will be available at local bookstores, Amazon, and Barnes & Noble. For more information, www.okrentassociates.com.

Lori Healey: Lessons Learned and New Initiatives for a Changing Chicago

Jackie Loewe, Ely Chapter Program Chair; Lori Healey, The John Buck Co.; Linda Goodman, Ely Chapter President.

Ely Chapter’s March 2011 Luncheon features lessons learned and peak into the future from one Chicago’s premier public, and private, sector leaders in this city’s redevelopment efforts. Lori Healey shared her unique perspective on public-private partnerships, how the world views Chicago after the 2016 Olympic pursuit, and how real estate deals are getting done after weathering the Great Recession.

Ms. Healey drew upon her extraordinary professional experiences including President of Chicago 2016, Mayor Daley’s Chief of Staff and Commissioner of the Department of Planning and Development, Principal at Perkins & Will and now currently as a Principal and Director of Development with one of the premier Chicago-based development companies, The John Buck Co., the highlights of which are below:

• Chicago is viewed by other cities as a model of how effective partnerships between government and the private sector can produce amazing results in enhancing the growth of the city. This includes a stable government leadership, and bringing in talent across all fields to do creative problem solving and to work tirelessly toward improving the city while in government. They then move on to the private sector, and serve on non-profit boards, creating policy, or governmental advisory boards, or  fund-raising for the city’s great charities. Those organizations in turn have such a significant and positive impact on the growth and development of our neighborhoods, coming full circle with the goal of good government.  

Ms. Healey highlighted current and future public sector issues facing Chicago:

• Tax Increment Financing has been under fire and will face challenges under the new group of elected officials, the result being that proposed development projects in significantly strapped neighborhoods will be effected.
• Public sector budgets will continue to erode which will lead the way for innovating financing transactions like public private partnerships will continue to be utilized. Canada, Europe, Australia have already proven how to shift the burden of financing, construction, and ultimately operations and maintenance for both social and hard infrastructure to the private sector as long as there is a sufficient return. Additionally, City/County consolidation of facilities, in particular public health centers, may be a new focus for government.
• In her private development experience in other cities and countries, Ms. Healey notes there are billons in public infrastructure funds are waiting for projects to invest in like transit, roads and bridges, water and waste water systems, and the real estate infrastructure of schools, community colleges, and public buildings. Other cities are outpacing Chicago in using these innovative financing transactions. Chicago will have to move past any negative publicity of some of the past attempts at this.
• Other new issues facing Chicago’s new government include:

  + Planned Manufacturing Districts’ overabundance of land. Ms. Healey recommends looking at small zoning adjustments to create development opportunities that don’t exist now and can jump start development.
  
  + Wave of new multiple-format Walmart stores coming to Chicago with neighborhood-sized, fresh food-focused facilities, offering urban wage jobs and other much-needed amenities.
  
  + Former 2016 Olympic Village (Micheal Reese Hospital) site will be an interesting site to re-evaluate after the previous 2016-focused redevelopment deal of high end residential didn’t work 4 years ago. Now tech parks, business parks, and other ideas are being considered.  The next step will be to follow same process as before, by pulling private sector experts to evaluate demand and capacity for different types of development.

From Ms. Healey’s recent experience in at the John Buck Co., she sees strong development opportunities in the Chicago CBD, where interest in hotels is growing, as is investments in rental residential. She sees this trend in Washington DC., Philadelphia, New York, and San Francisco. Additionally, Banks are re-engaging again as they see viable development opportunities. Chicago is poised to capture foreign capital. Mayor Daley endeavored to make Chicago a Global City; it was one of the major positive results of the 2016 Olympic bid effort. The Mayor is one of the most-well known mayors throughout the world by other U.S. Mayors and by major foreign dignitaries. His efforts toward raising the rest of world’s awareness of Chicago, its assets and strengths, have placed Chicago in a key position to capitalize on his success going forward.

A full audio broadcast is available at www.ely-chicago.org

Terri T. Haymaker, Ely Chapter Scribe

Greenbelt vs. Growth vs. Agriculture

Ontario’s Greenbelt and its implications for land use planning was the focus of a panel discussion at the February dinner meeting of the Simcoe Chapter. Will agriculture get caught in the squeeze between the permanent preservation of the Greenbelt and the need to accommodate millions of new residents and jobs?

In 2005, the Province of Ontario enacted the Greenbelt Act, which provided the authority for the creation of a Greenbelt Area and the establishment of the Greenbelt Plan. Ontario’s Greenbelt is an area of permanently protected green space, farmland, forests, wetlands and watersheds. The Greenbelt area extends approximately 325 kilometres from east to west around the Greater Golden Horseshoe (the Toronto centred urban agglomeration at the western end of Lake Ontario). It is reported to be the world’s largest greenbelt, protecting an area of 1.8 million acres, including the environmentally significant Oak Ridges Moraine and Niagara Escarpment. The Provincial Government’s Greenbelt Plan contains policies for providing permanent agricultural and environmental protection as well as providing for recreation, tourism and cultural opportunities in the area. The Act requires that decisions made under the Ontario Planning and Development Act, 1994 and the Planning Act conform to the Greenbelt Plan.

In 2006, the Province of Ontario prepared and approved the Growth Plan for the Greater Golden Horseshoe, which contains a set of policies for managing growth and development to the year 2031. While the Growth Plan confirms the Greenbelt Area, it also anticipates an additional 3.7 million residents and 1.75 jobs in the Greater Golden Horsehoe over the 2001 to 2031 period.

Responsibility for determining how 5.45 million additional residents and jobs can be accommodated in the Greater Golden Horseshoe given the constraints imposed by Greenbelt has been left to municipal governments. The area between existing urban areas and the Greenbelt is informally referred to as the “whitebelt” and this is the area where municipalities are considering urban expansion. The panel assembled for our February dinner meeting is uniquely qualified to provide Simcoe Chapter members with some insight into the tensions between the Greenbelt and the preservation of lands in the “whitebelt” for agricultural use.

Ron Glenn, the Director of Planning Services for the Regional Municipality of Halton, is responsible for bringing the Region’s Official Plan into conformity with the Growth Plan for the Greater Golden Horseshoe. Russell Mathew of Hemson Consulting Ltd. played a major role in the preparation of the long-term population and housing forecasts incorporated in the Provincial government’s Growth Plan and he has helped development growth management strategies for many Ontario municipalities, including Halton Region. Laura Taylor is an assistant professor at York University, with a particular interest in the politics of nature in urban expansion. She has studied greenbelts around the world. The panel presentation and the animated discussion session were very capably moderated by David Butler.

The Ontario experience may be of interest to LAI members in other jurisdictions where municipalities must plan to accommodate substantial growth, while also preserving green space and prime agricultural land.

Jeannette Gillezeau, MA, Simcoe Chapter Scribe

LEF EXPANSION

The Board of Trustees of the Land Economics Foundation has continued efforts on a monthly conference call basis to crystalize the meaning and purpose of the organization; the intent is expanding the impact of the Foundation. Commitments over the past six years have produced a number of successful ventures on a co-funded basis, these may be found on the LAI website. The Trustees agree that it is time to enhance both LEF and LAI exposure on multiple levels. By the end of this year it is their desire to trifurcate the Directors’ obligations among three core functions to increase effectiveness.

• Research Approval and Review Committee
• External Funding Committee
• Communications Committee

The expanded internal structure will allow more Members (whether Director or not) to participate, increase funding of projects within five years to $100,000 annually directed to both academia plus the public/private sector ventures having effects in other arenas through greater communication. A growth oriented Business Plan will be presented to and discussed by the Board of Directors in Scotland; the results will be shared with LAI Members in ensuing Keynotes. We invite input from all LAI members on this new direction. If you would like to take an active role in this process please contact any of the officers. We will keep you informed as we move through this new strategic direction.

Steven R. Gragg MAI, FRICS, LEF President

Lambda Alpha International (LAI) has recently created a group on Linkedin.com. Linkedin is an online professional network of more than 60 million professionals in over 150 industries. Linkedin is a great place to exchange information, ideas and opportunities. Linkedin allows you to:

• Stay informed about your contacts and industry,
• Find the people & knowledge you need to achieve your goals, and
• Control your professional identity online.

Our LAI Linkedin group will provide a means to further promote communication and networking among LAI members. Please join us at LAI’s newest place to network: www.linkedin.com.

Forgot how to login? No problem.

Please visit the LAI Website at www.LAI.org. On the left hand side click on the Members Only Tab. Here you will need to use your email and the password is lai.

Scotland Land Economics Weekend

June 1-4, 2011
Scotland

Please visit www.scotlandthebrave2011.com for all the details.

Sacramento Land Economics Weekend

October 20-22, 2011
The Citizens Hotel, Sacramento, CA