Winning Community Support for Mixed-Use Development Partnerships With Local Governments

September 1, 2023 Posted In

CREJ Building Dialogue –

Communities that seek economic growth often rely on incentives such as urban renewal programs and tax increment financing (TIF) to attract and partner with developers to achieve their long-term public policy goals. For private developers, partnering with local governments has its benefits and drawbacks.

There are several motivating factors for local governments to enter into partnerships with private developers to complete mixed-use development projects. And as a developer, understanding these factors, as well as nurturing relationships with community stakeholders who stand to benefit from the project, can help pave the way for a smoother process.

Why Local Governments Pursue Private Development Partnerships

Local governments may form partnerships with private developers using urban renewal programs and TIF incentives for several reasons, including:

• Enabling the city or town to deliver on its long-term vision and economic growth;
• Addressing site conditions, such as lack of infrastructure, the presence of hazardous materials or other undesirable conditions that prevent viable private development from occurring;
• Revitalizing the local economy through an increased tax base and job creation;
• Spurring development when market conditions otherwise prevent economically viable and financeable development.

Overcoming Challenges

When local governments partner with developers to undertake large projects such as mixed-use development, it is common for community members to mistakenly assume that their tax dollars are being spent to support private development interests. This is where a strong awareness campaign and consistent, transparent communication with the community can help ensure a project’s success.

TIFs do not create a new tax, nor do they increase existing property or sales tax rates. TIF revenue is only realized if the real property tax base within the project area where TIF is applied grows through land development, increased density, land value increase or a combination of these.

Urban renewal authority structures and TIFs are not commonly top-of-mind for the average resident but are often critical elements to a city’s ability to meet long-term goals and sustain a vibrant community.

McWhinney’s mixed-use development team has found success partnering with local governments to truly understand and align with their long-term vision and plans, as well as partnering to raise awareness and conduct community outreach campaigns. To help ensure success, it’s critical to connect directly with community members and emphasize:

• Partnerships between local governments and developers do not fund private projects. They leverage the potential future value of a site to offset costs of public infrastructure. Private development and public entities coming together to create high-quality environments that attract people into those spaces for a variety of purposes maximize that area’s economic development potential and long-term vitality.
• TIFs are like a 401(k)-retirement plan. They allow local governments to leverage the future value of taxes through bond financing to pay for infrastructure, and once the financing is paid off, 100% of the revenue created by the development goes back to the city. And residents don’t have to wait for the debt to be paid off. In exchange for this investment in the future, residents may get vibrant, mixed-use, walkable communities; attainable housing; work force housing; public parks and other recreational spaces; new roads; utilities and infrastructure and more to support job creation and economic development.
• Cultivating trusting relationships with the community requires transparency, regular communication and meaningful opportunities for residents to get involved in the planning process. The more community members feel heard and the more their desires are reflected in development plans, the more successful the project will be during the development and activation phases.

Site Selection

What makes for a healthy partnership for a mixed-use project that not only attracts people once it’s completed, but also continues to draw them to the area for decades to come?

• Get familiar with community goals. Get a feel for the community and the current administration’s long-term goals. Instances where local governments have identified areas which are eligible for TIFs or designated as blighted, and have invested in long-term, strategic planning offer the best opportunities for developers on mixed-use projects.
• Understand what local incentives are available when acquiring sites. Is the site part of an urban renewal area? Does the city’s long-term vision include robust economic development and are they supportive of private development partnerships? Look to invest in communities that recognize the benefit of these partnerships for all the parties involved.
• Solicit stakeholder input. By working with key stakeholders transparently and aligning plans with the local government’s long-term vision, developers are in a fantastic position to deliver incredible amenities that provide immediate and long-term economic benefits through partnerships with local governments. Whether it’s an urban infill project or a fresh start in a rural setting lacking infrastructure, transparency and long-term vision alignment are key to a successful mixed-use project with a government partner. Locations that offer a vibrant mix of office, residential and retail are thriving, and these partnerships provide the resources for that kind of development for the benefit of communities today and well into the future.

For examples of successful public-private partnerships, visit Urban Land Institute.

Article featured in Colorado Real Estate Journal, Building Dialogue – September 2023

(Contributor: Karen McShea, McWhinney Senior Vice President of Commercial & Mixed-Use Development