Special Assessment Districts

Another way for cities to access capital markets to fund their urban regeneration initiatives is through the use of special assessment districts. Unlike a TIF, this type of tool assesses an additional tax on the full value of a property, usually paid by property owners within a defined special assessment district that will benefit from specific public improvement(s).

In order to issue special assessment district bonds, a majority of owners must agree to a self-assessment. Special assessment districts have been used to finance major infrastructure upgrades (such as public transport), build roads, and install water and sewer systems. Such upgrades help to enable the construction of new homes and commercial spaces. The appealing aspects of this type of tool are that it expands the available capital budget and aligns incentives of payees and beneficiaries. Further, special assessment districts involve lower repayment risk and are less speculative than TIF because the fees are tied to existing rather than anticipated or future development. The fact that existing owners have agreed to additional self-assessment also makes the option attractive.

Similar to the TIF, this tool requires robust real estate and economic conditions. However, it can also involve high transaction costs. It is best utilized when urgency exists to capitalize on market dynamics such that landowners are willing to commit to an additional assessment in order to access positive economic impact rather than wait for the public sector to identify capital funds. Implementation of this tool is also easier when the majority of land within the designated area is held by a few commercial landowners. This makes it easier to negotiate any required agreements, as opposed to dealing with the organization of hundreds of owners of smaller parcels. See box for an example of the use of special assessments in development.

Policy and Regulatory Tools for Financing Urban Regeneration

Cities have significant ability to grow and shape their economies when they have substantial control over local land use, zoning, planning, and enforcement. Whether in partnership with other sources of capital or in the absence of access to external capital, cities can leverage their policy and regulatory powers to create a regulatory framework that promotes the design, building, operation, and maintenance of public infrastructure by the private sector. Policy and regulatory tools enable governments to influence or shape redevelopment in a given area on private land.

Nonfiscal regulatory tools solely depend on the government’s land use planning powers and ability to leverage these powers in achieving urban regeneration. Cities that lack the legislative authority or fiscal space to borrow can leverage their limited resources in other ways, such as by exercising regulatory powers. For example, cities can offer zoning flexibility and streamline permits or offer more flexible building codes. While arguably a more passive approach than proactive investment of capital or proactive disposition of public land, leveraging land use policy and municipal regulatory powers to encourage or disincentivize aspects of development within a target urban regeneration area can be powerful with respect to advancing an urban regeneration vision.