Greater Greater Washington

Development


Let the market decide how to redevelop public land

Residents and community leaders are unhappy with the District's chosen developer for a city-owned property at 965 Florida Avenue NW in Shaw. Instead of choosing a development scheme behind closed doors, could DC just auction it off and let the market decide what's best for it?


The winning proposal. Image from MRP.

Last week, the Deputy Mayor's Office of Planning and Development (DMPED) selected a proposal from MRP Realty, Ellis Development Group and Fundrise to build apartments and a market over one from the JBG Companies, Gragg & Associates, and Moddie Turay Company to build housing, offices, a hotel and a Harris Teeter supermarket.

Advisory Neighborhood Commission 1B, of which I am a member, voted for JBG, which many residents preferred. But we did so without knowing an important piece of information: the price that each development team offered DC taxpayers. Neither bid has been made public, but DMPED's spokesperson said that MRP's was higher. By ignoring how much the bids are, politics, not the best use, decides how DC allocates public land.

In 2008, the city appraised the 1.45-acre parcel at over $17 million, and land values in this neighborhood have climbed considerably since then. Despite the high demand for space in the area, the price that either developer bid did not factor into the public discussion about a taxpayer asset. Instead, during the process each developer presents a development proposal, and the price is only revealed in closed-door discussions with DMPED.

DC law says that the ANC, a neighborhood-level governing body that makes recommendations on local land use and licensing issues, is entitled to "great weight" in determining which developer purchases city land. This means that if DMPED chooses to award the site to Ellis Development Group, it must explain why it went against the ANC's recommendation.

Rather than soliciting proposals for city-owned land disposition, DMPED should simply auction off government land to the highest bidder. The current process has two primary flaws. First, it invites lobbying from developers in an attempt to win land deals for their firm. Earlier this month, WAMU did a series on the city's land disposition practices, revealing that it has sold $200 million of land for near-zero prices in the past five years.

In many cases, city-owned land sells for a price well below market value based on the assumption that the projects will provide affordable housing and jobs for DC residents. But as the series points out, sometimes these promises fail to materialize, and some of the developers who have purchased valuable city-owned land for a song have also made large contributions to mayoral and council campaigns.

Once the city awards a parcel to a developer, the price that the winning firm pays will become public record, but the price offered by the competing firm will not. Closed-door conversations between DMPED and developers create an opportunity for corruption in which politically-favored firms win land deals over firms who would provide the development that residents are most willing to pay for.

Second, removing the price system from land use decisions prevents residents from getting the type of development that they want. Land prices indicate where customers want to live and work and which areas have the greatest demand for new buildings.

By removing the price system from city-owned land, DMPED also removes the signals that show developers what kinds of residential, office, and retail space their consumers are willing to support. And selling land at below-market rates dampens the profit and loss signals which tell entrepreneurs whether or not they are correctly interpreting this demand, limiting the ability of the city to evolve to meet residents' needs.

Land disposition presents an appealing tool for policymakers to provide benefits to their constituents without using general fund revenues. But selling city-owned land for below market rates turns the request for proposal process into a beauty contest. Developers compete to make their projects look like opportunities to achieve policymakers' goals instead of on the price they are willing to pay for a taxpayer asset.

Rather than issuing a request for proposals, the District should simply auction surplus land to the highest bidder, permitting land to go to the highest value use as determined by the market process. Public policy goals should be carried out through direct subsidies that are more transparent and preserve price signals in the market for land.

Emily Washington is an ANC Commissioner in South Columbia Heights for Single Member District 1B08. She manages research at the Mercatus Center at George Mason University, and she writes at Market Urbanism and Neighborhood Effects

Comments

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Not sure an auction with two participants is really a "market".

by charlie on Aug 6, 2013 10:22 am • linkreport

ugh. what're the chances of getting this decision reconsidered? I want W street.

by guest1 on Aug 6, 2013 10:23 am • linkreport

Some public policy goals of buildings are not easily seperable into things that can be directly subsidized. From aesthetic/design considerations, to the specifics of retail mix, to on site affordable housing or on site bikeshare. Its good to have more transparency (perhaps by giving a fixed bonus for affordable units, for example), and to seperate out what can be seperated out, but I fear that a pure cash only auction will deprive planners of a valuable tool.

by AWalkerInTheCity on Aug 6, 2013 10:24 am • linkreport

Seconded on W St, and please please please no upscale "market" with $10 tomatoes and $7 bunches of thyme.

My prediction is that the ambiguous "market" they're planning will either fall through or go bust, and then the ground-level retail will sit vacant for a year because it won't be a good space for anything else, and then it will become another CVS/Walgreens/Rite Aid.

Good move, Gray.

by MJB on Aug 6, 2013 10:33 am • linkreport

Honestly, if the writer's preferred bidder had won, would she be advocating for a public auction process? I doubt it.

If you were going to renovate your basement, you wouldn't call all the general contractors to your house at the same time and auction off the job. You'd get the lowest bid alright, but have no idea if the contractor is even capable of completing the job at that price.

A development like this is many times more complex and more factors than just price must be considered. And the bidders need to have their pricing models remain proprietary because this is a competitive market.

by microT on Aug 6, 2013 10:34 am • linkreport

I think we need to be careful not to be too broad. An auction could potentially be a better result for this particular property, but if we always let the market decide how to develop everything, we'd have no parks. Nor would we be able to extract community benefits like bikeshare stations or underground utilities.

The concept that sometimes we need to plan ahead instead of just selling to the highest bidder is the whole point of city planning. Sometimes I agree we go too far with our regulations, but going too far in the other direction isn't desirable either.

by BeyondDC on Aug 6, 2013 10:34 am • linkreport

The irony here is the "market' worked and DC sold the property to the highest bidder.

I'm sure we DC is going to have to pay 25 million from the Housing Trust fund to build more affordable housing there, and you're absolutely right we are going to get a really ncie Rite Aid.

by charlie on Aug 6, 2013 10:38 am • linkreport

The W Street issue is a good example of something thats not seperable. You could pick the highest bidder, and then later if that bid doesnt recreate the street, you could develop a project to create the street that goes around the new building somehow. Or tunnel under it. Or tear it down to build the street. None of which sound like good ideas.

I suppose you also could simply say that any bid HAS to include a reopened W street - but then you might rule out some very good, very high bids, that did not.

I think the point is that what is required is a good hard look at whats being included along with bid price as criteria A. Are they things that really are intrinsic to the bid, or are they things that could be funded seperately with no inefficiency B. Is the way they are weighed in evaluating the bid transparent?

by AWalkerInTheCity on Aug 6, 2013 10:39 am • linkreport

@microT Honestly, if the writer's preferred bidder had won, would she be advocating for a public auction process? I doubt it.

Actually I'm pretty sure she would given that she writes for the Market Urbanism blog and is a consistent advocate for market-based solutions.

@BeyondDC but if we always let the market decide how to develop everything, we'd have no parks.

If the DC government wanted this to be a park then yes, an auction would make zero sense. But the DC government wanted this to be commercially developed, and so an auction makes perfect sense. Saying that the market should be allowed to determine how every piece of DC should be developed is a bit of a strawman, since I don't think either the author or anyone else is arguing for such a policy.

@charlie The irony here is the "market' worked and DC sold the property to the highest bidder.

It did? How do we know that? Can you provide the bid amounts offered by each? Furthermore, given that the winner was picked by politicians instead of the market, doesn't it stand to reason that this dissuaded other possible players from participating in the process? Doesn't seem at all like the market working to me.

by Colin on Aug 6, 2013 10:54 am • linkreport

if you presume that the public has no interest in shaping what's there, regardless of the fact that the land is owned by the public, then your position is reasonable. And if you further believe that "the government" even though at its root, the government is "the people" is always flawed.

GGW is making me increasingly Marxist, because of the continued espousal of incredibly neoliberal arguments.

The recent piece on the central library is the sibling to this post.

I can't imagine the author of either piece wants to read _Planning the Capitalist City_, but I'd recommend it. I can't imagine it's on many of the bookshelves in offices at the Mercatus Center.

cf.

"Neoliberalism has hijacked our vocabulary"
http://www.theguardian.com/commentisfree/2013/jun/11/neoliberalism-hijacked-vocabulary

"March of the neoliberals"
http://www.theguardian.com/politics/2011/sep/12/march-of-the-neoliberals

"Neoliberalism's 'trade not aid' approach to development ignored past lessons"
http://www.theguardian.com/global-development/2012/oct/30/neoliberalism-approach-development-ignored-past-lessons?newsfeed=true

Note that I am not defending government/the public as making better decisions always. But the market has no desire to invest in "public elements" of its projects, other than how they contribute positively to marginal return.

That's as much of a crap shoot as government-the public involvement.

FWIW, Foglesong in _PTCC_ refers to these points as the democracy and property contradictions in property ownership and planning. Property owners need the state to protect them from bad decisions by other property owners, decisions that could negatively impact their investment. But state involvement triggers public involvement.

by Richard Layman on Aug 6, 2013 10:54 am • linkreport

@AWalkerInTheCity:

Those things are separable. The winner of the auction still has to go through the normal entitlement process.

by Michael Hamilton on Aug 6, 2013 10:55 am • linkreport

I think it really depends on the property. Auctioning is probably right for most parcels, but in places like this where market rate affordable housing is non-existent it's a valuable tool the government has. They should probably take a similar tack with the 14th St property instead of just giving it up to get a soccer stadium built.

Wouldn't W St still end a couple of blocks later where it's offset at 2nd St? Howard probably (legimitately even) feels its worthwhile to avoid cut through traffic. Don't get me wrong though I find that stretch of Florida awful as it stands.

by Alan B. on Aug 6, 2013 10:56 am • linkreport

In an ideal world, the "community benefits" that cities demand from such deals would be provided across the board, through regulation, taxation, or spending.

In the real world, these benefits are invaluable (unable to be valued), taxation levels are kept artificially low, and government feels compelled to extract its share of profits from one of the few industries (land development) that they have near-complete control over. Not to mention that quite a few of the development deals that WAMU profiled just could never be tidy due to their peculiar circumstances.

FWIW, Hoskins claims that MRP offered "millions more" than JBG.

by Payton on Aug 6, 2013 10:59 am • linkreport

Richard

A. Does it make sense to include distinctly seperable elements (like say, land for a stadium) as criteria in a BID? How about commitment to fund off site affordable housing or transport improvements? It seems like in those cases, the neoliberal argument is on point - seperating them out does not reduce the options to the govt, and does increase transparency.

B. Seems to me the problem with the post is that it does not address the extent to which there are things not easily seperable that are proper criteria - something like completig the street grid seems like a paradigm example, or park space thats integral to the project (like at McMillan). Or design issues.

C. For those, I think it would be better if the weight were clearer. For example "connecting W street is worth 5 million" or "the bid amount is 90% of the decision, and rebuilding W street is 10%"

D. there are some amenities that are going to be intrinsicially controversial - notably affordable housing, and retail mix. There is certainly disagreement about the extent of proper govt involvement in each, and the nature of it.

by AWalkerInTheCity on Aug 6, 2013 11:02 am • linkreport

Something in between with more transparency. As it "works" in DC these are more secret backroom deals.

And advertise more widely. We always get the same local (suburban) developers who were frat bros with the mayor or his brother or some other social, political or business connection. And we get the same clone projects over and over.

In fact we should encourage the most widespread competition possible. Then make the selection process totally transparent. Many places have independent boards do the selection.

by Tom Coumaris on Aug 6, 2013 11:03 am • linkreport

("Peculiar circumstances" applying to sites like McMillan, The Wharf, or West End Library where the site is not exactly a flat cornfield.)

by Payton on Aug 6, 2013 11:03 am • linkreport

@Alan

Technically, W St continues half a block south of 2nd & W as a two-way to North Capitol.

Howard shouldn't be a giant traffic block, like Meridian Hill Park on steroids.

As it stands, all East-West traffic has to go either up to Harvard or down to Florida, and it makes all the other side streets in LaDroit Park and Pleasant Plains as well as Park View into maniacal Mad Max Motorways for Marylanders.

by MJB on Aug 6, 2013 11:04 am • linkreport

"Those things are separable. The winner of the auction still has to go through the normal entitlement process."

Im not sure what you mean. Are you saying that extending W Street would be mandatory for the winning bidder, and thus not part of the bidding process?

by AWalkerInTheCity on Aug 6, 2013 11:04 am • linkreport

@AWalkerInTheCity:

I was referring to this comment: "Some public policy goals of buildings are not easily seperable into things that can be directly subsidized. From aesthetic/design considerations, to the specifics of retail mix, to on site affordable housing or on site bikeshare."

If you're simply auctioning the land then these don't have to be part of the process. Once the developer comes forward with a plan after winning the auction, all of these can be addressed.

by Michael Hamilton on Aug 6, 2013 11:09 am • linkreport

MJB I think that problem probably has more to do with the insanity that is Georgia Ave. Boulevard that shit and it will cut down on the MMMM action.

by Alan B. on Aug 6, 2013 11:09 am • linkreport

MH

take design. Developer A has a beautiful design that enhances the neighborhood, and bids 10 million. Developer B has an ugly design that detracts from street life, but bids 11 million. Developer B wins, and now you start negotiating with developer B. You ask for something like what developer A proposed, and Dev B says thats not feasible, not his vision, and not what he based his bid on.

Seems like a very inefficient way to do business. If design (or other site specific features) is important as a criterion, than say so. And assign a transparent weight to it, and as transparent as possible a way to evaluate it. Including, as Tom C suggests, an independent board.

by AWalkerInTheCity on Aug 6, 2013 11:13 am • linkreport

@Colin; pretty simple-- the higher bid won. We don't how much higher, on their ability to pay, their ability to build a building without more public aid, etc, but it was a higher dollar amount.

by charlie on Aug 6, 2013 11:17 am • linkreport

The author repeatedly states that the market for land reflects the desires of "residents," as if land in DC only exists to serve the needs of the people who live here. Land uses such as offices, hotels, and retail may largely serve the needs of non-residents, and in many cases letting land go to the highest bidder can result in projects that go against the desires of residents for a more livable community. To really serve the needs of residents planners may sometimes need to catalyze the market instead of merely following it.

by jimble on Aug 6, 2013 11:20 am • linkreport

Tom C -- yes, we get local bidders mostly. At the end of the day, land development is a local business, even if some of the companies are national. It's about what you know. The out of towners tend to do crazy stuff. E.g., we'll see what happens with Trump and the Old Post Office.

2. AWITC -- it's hard to say what is right. With publicly owned land, you're primed to consider nonmonetary considerations. It's the whole point about shaping "the market" in better ways, like how the US Govt. was one of the earlier purchasers of recycled office paper, even though it cost more, to build the market for that product. Or Jeep, when owned by AMC, got lots of contracts for USPS vehicles, to help keep them in business.

Neoliberals argue that the govt. always f*s up, can't do anything right, and that nonmarket considerations are a form of corruption, always. (Granted, they can be, at times, which is why I argue in my writings for open, transparent processes.)

3. wrt this deal, I've been meaning to write about it. Both JBG and Ellis have compelling arguments for why they are the better choice. JBG is a premier investor in the city more generally, while Ellis has done some projects around 7th and U Streets NW when no one else was all that interested.

Then you get the argument about helping smaller businesses, a la the "social justice" argument (cf. _Between Justice and Beauty_ by Gillette).

I find it interesting because of the Popularise/Fundrise element, which is a way to monetize community and make it a key element of the project.

I was about to write a post saying that Popularise/Fundrise could play a role in certain kinds of projects, but wouldn't be a scalar change in the industry.

I think I might be wrong. It could be a key element of every project involving govt. owned land, such as how Forest City was doing online crowdsourcing of input for their Walter Reed bid.

And it reshapes the RFP process in the interim, until every bidder includes a comparable element.

by Richard Layman on Aug 6, 2013 11:20 am • linkreport

@Emily: Good article -- although there is much to disagree with, it's great to have posts from this perspective here at GGW.

by Bitter Brew on Aug 6, 2013 11:36 am • linkreport

"2. AWITC -- it's hard to say what is right. With publicly owned land, you're primed to consider nonmonetary considerations. It's the whole point about shaping "the market" in better ways, like how the US Govt. was one of the earlier purchasers of recycled office paper, even though it cost more, to build the market for that product. Or Jeep, when owned by AMC, got lots of contracts for USPS vehicles, to help keep them in business."

Im not sure the latter would even be legal today under US govt procurement practices - and the approach to GM and Chrysler was different - the govt helped them directly, and did not hide subsidies in say the USPS budget (where it would artificially make USPS look worse than it is). I think thats a prime example of seperability meaning more transparency.

As for recyclable paper, thats one where its possible (and IIUC thats how its done) to add a transparent premium or goal to the procurement process.

Govt need not always be corrupt to make seperating goals out be the preferred option. There may well be external benefits to society of anything from a supermarket, to a soccer stadium. But bundling things together makes it harder to see what the real costs of such things are. When they can be unbundled, I think they should be. though I am skeptical that specific on site features (like design, reconnecting the street network, and, in some cases, on site affordable housing and specific retail) can be.

by AWalkerInTheCity on Aug 6, 2013 11:47 am • linkreport

You have to have some control, at least set requirements for a bid. Suppose a developer determines the best commercial use for parcel is a long-term storage facility. The developer finds that the economics of a storage facility will be better than rent revenue from apartments, and the bid reflects it. The city gets maximum amount of money for the parcel, and neighborhood gets a completely dead reuse. (I'm not considering long-term tax gains from residents paying income taxes and spending in local businesses here, but just making a point.)

But if you set requirements, it still becomes a somewhat subjective process.

I do agree that the process, as it now stands, can be corrupted and easily.

by kob on Aug 6, 2013 11:55 am • linkreport

The ANC "votes" without seeing the bid prices? What a farce. Drawing straws or flipping coins would be as effective.

by MJ on Aug 6, 2013 12:02 pm • linkreport

As a neighborhood resident I strongly believe that we should absolutely have some say in the development of major land parcels that are OWNED BY THE CITY (i.e., it is OUR land). We are the stakeholders most affected by what is done there.

The highest bid should only be one consideration. Every effort should be made to find out if there is a consensus opinion of the area residents. If there is a consensus on a particular proposal (which seemed to everyone to be the case here) and that proposal is viable financially then is should be a no-brainer to go with what the people want.

by Kevin on Aug 6, 2013 12:09 pm • linkreport

but if we always let the market decide how to develop everything...Nor would we be able to extract community benefits like bikeshare stations or underground utilities

I don't think the author is saying the market should develop everything. For example, all proposals would have to meet ADA requirements. The trick is just to have the big include rules like.

1. Site must include space for a 33 dock bike station for use by city free of charge.

2. Utilities must be underground

etc...

Then best price wins.

You can even address other issues with additional rules.

3. Building design must be able to gain approval from CFA (or other aesthetic judge) within two years or property reverts to city.

As for W Street, that does become a little more difficult, but all you have to do is value the land. If one developer is giving up 10% of their land for a road that DC wants, then they're bid only needs to be 90% (+$1) as large as the highest overall bid. But that would need to be resolved beforehand.

When there are many criteria and they become fungible, that does leave the door open for corruption. Not that I'm saying that's the case here, just it's a risk.

by David C on Aug 6, 2013 12:11 pm • linkreport

The ANC "votes" without seeing the bid prices? What a farce. Drawing straws or flipping coins would be as effective.

It is a joke and a little frightening. If ANCs can input "great weight" into development decisions, while missing such important information, it no mystery why so many nonsensical projects have been approved over the years.

by hoos30 on Aug 6, 2013 12:15 pm • linkreport

There is a fundamental issue here. The market value of urban land is not an intrinsic property of the land, it is determined by what the city chooses to allow to have built there. What you're allowed, in practice, comes out of a negotiation between the planning agencies, the public, and the landowner.

So selling land by auction doesn't get rid of the negotiation and potential favoritism, it just moves it to a different stage of the process. If there is going to be political favoritism, the high bidder will not the one with the cleverest idea for the land, it will be the one who thinks they have the most political clout to get high density approved.

Political favoritism in land use decisions is certainly a real problem, but this isn't a solution.

by Ben Ross on Aug 6, 2013 12:23 pm • linkreport


I don't think the author is saying the market should develop everything. For example, all proposals would have to meet ADA requirements. The trick is just to have the big include rules like.

etc...

Then best price wins

But that is the whole point obtaining bids from private sources. They may think of some creative aspect that the city didn't think to list in their "rules". Developer X plans to install a cold fusion generator and the building will be 100% off the grid. Sorry, that wasn't in the rules and Developer Y wins.

If the city was good at doing this, we wouldn't need developers in the first place.

by hoos30 on Aug 6, 2013 12:25 pm • linkreport

Ben Ross makes a good point: MRP could offer a higher price for the land because they were planning to build more density -- something that government intrinsically controls. JBG stuck to the existing zoning (which, they are correct to point out, is what the city asked them to do) and proposed lower density and thus a lower price.

by Payton on Aug 6, 2013 12:40 pm • linkreport

" Site must include space for a 33 dock bike station for use by city free of charge."

if thats an absolute criterion sure. But what if its not? What if we would LIKE a 33 dock bike station. But we wouldnt forego 3 million in extra cash for it? Or we might get a bid thats 2 million bucks higher and has a 20 dock station? Or a 15 dock station thats really cleverly integrated into the design?

It just seems needlessly constraining to say - all criteria must be absolute, so we can decide on price alone. Thats not, as a general rule, how private sector procurement works. Its not how individuals buy things, usually. They look at the complete package and evaluate it.

Now granted, the possibility of corruption, or even just the bad results from lack of transparency about costs of desired public goods, means that the public sector process has to be more explicit and objective than that. But I think there are probably ways to do that that still allow for the weighting of different factors.

by AWalkerInTheCity on Aug 6, 2013 12:45 pm • linkreport

"They may think of some creative aspect that the city didn't think to list in their "rules". "

this. But. To have a fair and transparent process the criteria need to be set in advance. You could add "10% weight on sustainability features" but I think "just put in something creative, and we will decide if it meets a public goal" isnt really feasible for an objective, transparent process.

by AWalkerInTheCity on Aug 6, 2013 12:47 pm • linkreport

wrt Payton and Ben Ross' points, I think that there could well be a legal challenge to this award. What you have now is jockeying.

AWITC@12:47 -- this is why govt. contracting is so f*ing frustrating. Mostly there is no room for creative proposals, for offering the ability to do more. Usually RFPs are overly narrowly drawn, and set up to favor particular bidders anyhow.

But you can build in an RFP process the ability to do offer more, so long as there is criteria.

But I am surprised that if MRP bid expecting a zoning change, that the city did not do a revision to the RFP, and with that as a new floor, asked bidders to submit a new and best final offer, using the same criteria.

by Richard Layman on Aug 6, 2013 12:56 pm • linkreport

good point richard

The govt doesnt have to just put an RFP out. They can do an RFI, and try to get input from potential bidders on what criteria might make sense. Or they can put in a provision to do a second round of bids if one of the bids has something creative they didnt envision in the original RFP.

by AWalkerInTheCity on Aug 6, 2013 12:59 pm • linkreport

"Zoning
The Site is zoned CR – Mixed Use (Commercial Residential). This designation permits diverse land uses including a mix of residential, office, retail, recreational, light industrial and others. Inclusionary Zoning applies to the Site. The following are the basic requirements of the CR Zone:
Matter‐of‐Right: 6.0 FAR maximum; 90 feet maximum; 3.0 maximum non‐residential FAR;
75% maximum residential lot occupancy.
Planned Unit Development (PUD):
8.0 FAR maximum; 110 feet maximum; 4.0 maximum non‐residential FAR; 75% maximum residential lot occupancy.
Inclusionary Zoning:
7.2 FAR maximum; 100 feet maximum; 3.0 maximum non‐residential FAR; 80% maximum residential lot occupancy.
Public Space:
10% of lot area
Respondents may propose to develop the Site to conform to the matter‐of‐right zone designation, seek variance or special exception relief, or propose, a Planned Unit Development (a “PUD”). Respondents should detail their zoning strategy, including a detailed explanation and justification for any proposed special exception or variance relief from the zoning requirements, and present an estimated schedule that fully describes each step in the approval process necessary for assumed entitlements. (Respondents will be responsible for all costs associated with obtaining a PUD, variances, or special exceptions.)
Respondents should review all applicable District of Columbia Zoning regulations prior to submitting responses. Please refer to Title 11 of the District of Columbia Municipal Regulations (“DCMR”) for a complete list of zoning provisions and requirements. Zoning regulations and maps are available on the Office of Zoning website (http://www.dcoz.dc.gov/)."

I think the issue is the JPG includes more street (bryant and W) b/c it owned the adjacent parcel of land. That might lead to lower density of the parcel for sale, but more over the area.

by charlie on Aug 6, 2013 1:09 pm • linkreport

AWITC, you're making some good points. Perhaps we need to try and quantify certain things like what is bike station space normally worth? What is it worth at this location? etc...And then we give bids "credit" for these things. And the credit needs to be public and comparable to other projects. In the end you'll get bids that are of unequal values before money is even mentioned.

Then we auction the site with the credits for the current bids included.

by David C on Aug 6, 2013 1:11 pm • linkreport

@Richard Layman if you presume that the public has no interest in shaping what's there

Except in an auction the public does shape what's there. We vote with our dollars as to the best use of the land and the market provides it. In fact, this seems like a much better way of gauging public sentiment than some back door deal concluded by a handful of politicians.

by Colin on Aug 6, 2013 1:19 pm • linkreport

Dave C

thats one approach, that gets to a lot of the problem. Its not perfect (one developer gives you 20 docks at a good, visible location, and one gives you 25 docks at an awkward, hidden location) But thats an inevitable tradeoff. Obejctive criteria can never completely exhaust all the things of public value - but OTOH subjective approaches both invite corruption, and tend to mask real costs. At some point you have to settle on where along the tradeoff you want to be.

by AWalkerInTheCity on Aug 6, 2013 1:24 pm • linkreport

"We vote with our dollars as to the best use of the land and the market provides it."

Id personally rather be in an attractive (on the outside) building than an unattractive one. But I might not be willing to spend a lot for that. Certainly not as much as the collective of all the folks who WONT live in the building but will be effected by its appearance. Thats the nature of an externality. The market does not intrinsicallyh internalize it. It tends to lead to a "market failure".

"In fact, this seems like a much better way of gauging public sentiment than some back door deal concluded by a handful of politicians."

I think the general consensus here is that the process must be much more transparent. That could mean as Dave C suggests, placing some shadow price value on desired features. Or as Tom C suggests, placing the decision in the hands of an independent board. I think even establishing clear weights for different criteria might be an improvement.

I dont think the current process, and an auction based on price alone that ignores exteranalities, are the only choices.

by AWalkerInTheCity on Aug 6, 2013 1:29 pm • linkreport

Colin -- Auctions have no room "for the public". By definition, they are about the highest bidder. There is no involvement of the public in the process.

2. wrt AWITC's last point, I agree 100%. What matters most is a good project, not the immediate most money. E.g., I've made that point about Hine, better to get a great project.

(Hine also is an illustration of the point I make that an RFP isn't a plan.)

by Richard Layman on Aug 6, 2013 1:38 pm • linkreport

Richard

to clarify

Some part of the public is effectively represented, in a bidding process. The folks who will pay to use the building built by the developer. If folks want to rent small apts, he will build more small apts - if large ones, he will build more large ones - if folks want to shop at a supermarket he will build a space for a supermarket, and if a farmers market, a farmers market (though as you have written, retail is in fact more complex than that). The consumers preferences are signaled via prices to profit maximizing developers, which determines what they will propose and how much they will bid.

Whats NOT represented are the people impacted who will not be direct users of the building. The folks who will live with the enlivened or deadened street space. The folks who will get new walking and biking options due to an extended street grid, or not.

by AWalkerInTheCity on Aug 6, 2013 1:48 pm • linkreport

Here is the example I was thinking of. In the early 90s, NJ was bidding out either the repaving or rebuilding of a certain section of the Garden State Parkway. This was before the internet was everywhere. Lo and behold, one of the bids came back and the contractor had proposed to run fiber optic cable down the median of the highway. Because the state would make extra money on the deal, it blew the other bids away. Of course, the competitors sued, claiming that "fiber optic cable" wasn't a part of the original RFP. Sorry I can't remember who won the court battle, but I think of it as an innovation that would never have surfaced in an auction style bid process.

by hoos30 on Aug 6, 2013 2:14 pm • linkreport

I don't agree with this: Some part of the public is effectively represented, in a bidding process.

unless you consider a market study to be an accurate reflection of "the public."

And they aren't represented if for whatever reason the bidder didn't go with that particular program formulation for the use of the property.

E.g., when I pointed out to people at a training session sponsored by the NoMA BID that there are residents there, but residents aren't included in the BID oversight structure, it was helpfully pointed out to me that residents--apartment dwellers--were more than adequately represented by the property owners of the buildings in which they reside.

http://urbanplacesandspaces.blogspot.com/2011/10/noma-revisited-business-planning-to.html

again, cf. the neoliberalism cites

by Richard Layman on Aug 6, 2013 2:29 pm • linkreport

"I don't agree with this: Some part of the public is effectively represented, in a bidding process.
unless you consider a market study to be an accurate reflection of "the public.""

Id say a market study is as accurate a representation of the part of the public that will be paying to live in the building as any other process. The problem with it is that that is not the whole community.

"And they aren't represented if for whatever reason the bidder didn't go with that particular program formulation for the use of the property."

The bidder has an incentive to respond to the market. Even if they are going on a hunch, thats reflecting the market.

"E.g., when I pointed out to people at a training session sponsored by the NoMA BID that there are residents there, but residents aren't included in the BID oversight structure, it was helpfully pointed out to me that residents--apartment dwellers--were more than adequately represented by the property owners of the buildings in which they reside."

thats a bit more complicated, to the extent that BIDs take on not just functions related to development, but even more classcially governmental ones. I can see the argument (the landlord has an incentive to run the neighborhood the way the renters want) but Im not comfortable with it, more on political grounds than on economic ones. Direct participation in decisions has value. And a community deciding on its day to day public operations is different in many ways than deciding on how to provide an intrinsically private consumable.

but if you want more egregious privatization of public functions, you should look at some of the giant HOAs, like Reston.

by AWalkerInTheCity on Aug 6, 2013 2:41 pm • linkreport

the problem with this argument is that in capitalism, the market as the term is commonly understood, always refers to the most profitable segment of the market, at least at that particular time.

For one particular lot, the lot at hand, not the whole "market." And it's just a wee sliver of the whole.

And whatever might be best for that particular lot at that particular time isn't necessarily the best thing to do for the city, in terms of overall market success, resilience, community, revitalization, etc.

It's why providing incentives and other considerations may be worthwhile, to achieve objectives that go beyond the confines of a particular lot.

E.g., the difference between even the Ellis Company and their current projects and Martin Jawer's property at the U St. Metro. One adds value, one doesn't really provide the pop that leads to further additional private investment. Compare the Martin Jawer building (where the Starbucks is) to the multiplicative effect of the Ellington Building.

Similarly, neither the Rite Aid project nor the 7-11 project have really contributed to U St. other than being place holders for better development down the line.

The point of leveraging public property for private development is to achieve multiple goals, whatever they are, as defined in city and neighborhood planning documents, etc.

2. And yes, I probably prefer that rather than have HOAs in places like Reston (or Columbia), to have true city governments.

I choose to not live in places like that as messy as regular democracy is...

by Richard Layman on Aug 6, 2013 2:51 pm • linkreport

"And whatever might be best for that particular lot at that particular time isn't necessarily the best thing to do for the city, in terms of overall market success, resilience, community, revitalization, etc."

as I have said repeatedly, there are genuine externalities. I take it you concerned with more subtle things than such obvioius physical externalities like design or transport infrastructure - you beleive there are market failures in things like provision of the right mix of retail, the right (community wide) provision of different size units, etc. I will not ideologically say the market is perfect (in retail high fixed costs tend to also lead to market failures) on those issues - but I think the linkages in the market that lead to better outcomes are stronger than implied in your above post, and that the difficulties in getting a better result through govt action are considerable.

Would I have govt input on issues of urban design, transit, public spaces and even architecture? Yes. Retail mix - maybe, but with some skepticism. Residential mix - I would think not - not that the market is always perfect, but I would focus govt input on items that are more clearly classic externalities and dont rely on a tortous story of market failure to justify govt intervention.

by AWalkerInTheCity on Aug 6, 2013 2:59 pm • linkreport

we are more arguing different sides of a similar coin. Mostly I argue for way better planning regimes,and the development of robust processes and systems, along the lines of "nudging", designed to produce better outcomes as a more routine event rather than luck.

There are plenty of reasons for market failure (which has to be addressed at the submarket level). But in general, we don't build the right processes to reduce the likelihood of market failure (and this is the thrust, basically, of most of my own entries).

It doesn't so much matter in high value locations, like Downtown. It matters a lot in more marginal locations.

But what is defined as marginal is a running target. Ten years ago, most places in DC outside of Downtown were still marginal, U Street, Columbia Heights, Petworth, H Street, NoMA, etc. and all required extranormal incentives, govt. involvement, etc., to move things along. Until the core of the CBD was built out for the most part, what was then called "the East End" now called Penn Quarter/Gallery Place, was marginal too. Hell, it took 20+ years for the Gallery Place site to be developed, after development rights were awarded. Who remembers that, the big vacant property, with a couple of signs...?

Places like east of the Anacostia (really south) are still marginal. E.g., there is a reason it's taking decades to redevelop Skyland...

by Richard Layman on Aug 6, 2013 3:36 pm • linkreport

Richard- The old DCRA buildings, those ugly light blue things, were where Gallery Place is. Was there a vacant lot there also before they were demolished for Gallery Place?

by Tom Coumaris on Aug 6, 2013 5:06 pm • linkreport

partly. there was empty space. and the sign.

by Richard Layman on Aug 6, 2013 7:20 pm • linkreport

I disagree that an auction will necessarily result in the best use. Perhaps a developer is willing to build only affordable units and wants to build a very large number of units and a desirable mixed use project, including a parklet or other public amenities. As a result of creating this best use development proposal that developer cannot realistically be expected to make the highest bid for the land.

Planners have spent far too much time and hot air with this non-sense of highest and best use. Let's remember that we live in a representative democracy and we have a Constitution to guide our political process. Milton Friedman came after these were established. Even friedman acknowledged that public parks required government intervention ... and market failures... blah blah. I can't stand that stupid idiom that the highest price leads to teh best use. What if we could show high prices for urban office rents resulted in less hiring by various firms? Would a developer of "flagship office space" then be seen as makingt he highest and best use of land by tearing down a more affordable, older office building and putting up a new building that only the wealthiest tenants could afford to use? Higher rents and fewer jobs... Why can't planners admit that economics is about winners and losers, not just making winners without losers.

by Solution Giver on Aug 6, 2013 10:05 pm • linkreport

HIghest and best use right here in DC, as explained by Charlie: "The irony here is the "market' worked and DC sold the property to the highest bidder.

I'm sure we DC is going to have to pay 25 million from the Housing Trust fund to build more affordable housing there, and you're absolutely right we are going to get a really ncie Rite Aid."

Thank you Charlie, you brought my point home better than I did!!!!!

by Solution Giver on Aug 6, 2013 10:07 pm • linkreport

There's a couple of questions that haven't been answered here, that I hope will be in the coming days:

1. Why did the city reject the JBG proposal? Ostensibly, it was about the money, but were there other factors at play?

2. Why did MRP bid more unless they expected to make more out of it in the future?

3. Why does the city think we need another indoor artisans market? I can see the need for a grocery store as there isn't one close by (maybe the Giant in CH?). Moreover, TJ and HT wouldn't really compete with each other.

by cspk on Aug 7, 2013 8:07 am • linkreport

@Richard Colin -- Auctions have no room "for the public". By definition, they are about the highest bidder

And he highest bidder must recoup their money by providing what the public wants. Developers generally don't make a lot of money peddling things that the public is not interested in. Again, the public votes with their dollars, and the market provides.

by Colin on Aug 7, 2013 1:09 pm • linkreport

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