Friday, April 15, 2011

Great Development and Missed Markets – Stalling for Dollars

For every large project designed and developed in California (and most of the civilized world) an approval process is in place (by code and ordinance) to assure the local residents that the project will be: safe, painless, unnoticeable, environmentally neutral, pretty, and sustainable (and I still don’t know what that is). Seldom are the terms successful, marketable, and profitable used. It is like two separate worlds exist and the proposed development floats in and out of each of them.

In the economy of the world today, large projects will take five to ten years to complete. Whether they are master planned communities with a broad mix of land uses, a large commercial project with phased-in retail, or even a large institutional/research facility, the proposal has to show how every square foot of use or residential unit fits within the local government’s program (i.e. General Plan, Specific Plan, Urban Master Plan, etc.). Absorption rates are quantified, tax dollars computed, and bonds are priced and issued based on these forecasts. I would suggest that the vapors used on the Oracle of Delphi rendered better results.

To require devining the future of a particular project beyond the next four to five years is speculation, beyond ten years is just a waste of energy and paper, beyond that is like walking around with a stick looking for water. Yet, for the last twenty-five years or so, this is exactly what we have been requiring most projects to do. These thick reports, such as the Environmental Impact Report in California, produce incredible volumes of speculative studies and tweaked results. The next change in the economic cycle often made them irrelevant and obsolete. What will be built in 2025 will be what the market demands, not what a politician or a planning staffer wants. The time and energy spent on these efforts makes projects miss markets and opportunities. I worked on one housing project in Marin County that took eighteen years to be approved, it went through three economic cycles, but it was in Marin and eventually the third developer made a lot of money.

Governments at all levels are asking more and more of the development community to prove their projects are “right and just.” They are spending great parts of their budgets chasing intent, fairness, and justice in these proposals. I pointed out last year in The California Labyrinth, that there are now over 75 California state agencies and commissions that deal with development and housing (I’m sure in your particular state there are a goodly amount as well). Every one of these requires some form of obeisance or approval; dollars or fees must be exchanged, salaries paid, rules obeyed, fines collected.

Can you imagine, in 1845, if the Mexican government had set up strict rules for development in California (my guess we would have ignored them). Or how quickly the state would have adapted to the influx of “seasonal workers” brought in by the Gold Rush of 1849 (assuming H-1B visas had been required). Or later, when the “migrant worker” issues developed over the Transcontinental Railroad of the late 1860s (Chinese and European immigration – no driver’s licenses were required then), or the effects of the attack on Pearl Harbor had on California throughout the 1940s (growth in population and military spending). These all challenged and had impacts on then current land uses. These events all led to significant improvements in how land is developed, utilized and reused. We are now well beyond rational in today’s processes. There are projects today (built from land use plans from the 1980s) that are now being torn down and their sites recycled; this is how it always will be. A broader and more intuitive sense of the future must be learned and held by both the elected and hired public managers of our counties and cities.

Collectively we are now very afraid of making mistakes, yet this practice only feeds our collective paranoia about making errors, and as such, we delay, litigate, freeze and legislate. We all want to be perfect, our projects must be perfect, and to paraphrase Garrison Keillor, we all want to live in a land “where all the politicians are strong, all the developers are good-looking, and all their projects are above average.”

I would have liked to meet the politicians and planners of Lake Wobegon.

Stay tuned . . .

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