Determining the optimum institutional structures will be key to the success of the project. Institutional arrangements may range from formal to informal, with varying degrees of authority, accountability, and responsibility for coordination, handover, and delivery. Depending on the project requirements and whether it is public or private sector-led, there are a number of options for the types of vehicles that might be created to guide, monitor, and maintain the regeneration project to ensure coordination and results. These entities might have a range of powers depending on the scale and complexity of what is required to catalyze and sustain the regeneration project.
Given the complicated nature of development, a useful and very broad delineation of public and private roles will be needed to distinguish between land development and development of the buildings. In this instance, it is the public sector that potentially assumes more of a role in the delivery of some services, such as parks and transportation improvements. For its part, the private sector delivers the buildings and public amenities that will attract people to the regenerated areas. Financing, governance, and operational responsibilities can then flow from this.
Although this is necessarily a general construct, it can be useful as a guide for land or vertical development. For example, it is often the case that the public sector will build and manage affordable housing. A key and commonly used method for the public sector to maintain control, ensure competition, and protect its interests is to release parcels for development only when necessary. Parcels are offered through a competitive process to ensure that the highest quality and best financial offer is achieved. The extent of public land ownership is a key determinant of the type of public-private institutional arrangement that will be possible. Further, it gives the public sector broad latitude in using land as an incentive and source of leverage in achieving a city’s regeneration.
One example of institutional arrangements in this type of development is public development corporations established by the government to directly lead and manage regeneration projects, such as the Battery Park City Authority in New York City. It led the 40-year-old redevelopment of 80 acres of prime waterfront land in Lower Manhattan. Likewise, in the United Kingdom, the London Legacy Development Corporation was created to lead the development of the 600-acre Olympic Park following the 2012 London Olympics.
Other models involve public sector organizations, such as planning commissions or advisory entities that rely more on regulations and the enforcement of contracts than direct involvement in the delivery of development projects. Some examples are summarized below; however, more arrangements could be possible depending on each country’s specific regulatory environment.
- Public development corporations. This is the most formal type of organization created to manage project development and handover. It can have a full range of powers, depending on project requirements and political will, including eminent domain, land use, financing, development and construction expertise, marketing, master planning, design review, and facilitation. More information regarding these corporations is detailed in box in this section.
- Public-private board. The term “board” is used here to include various public-private arrangements—from joint legal entities to contractual relations, such as concession leases. Depending on whether and how public land is contributed to the regeneration venture, the board can be more or less formal. If the public sector is an equity partner, it would fully participate in all project decisions and would be responsible for project oversight, handover, and performance. However, even if public land is not contributed as equity, joint venture arrangements can be organized to allow for significant joint-decision making, project oversight, and assurance. Some potential examples of such boards or corporations are covered in below box.
In general, there are three main institutional models for handling urban landholdings by the government:
- In house: Implemented by governmental departments or public agencies themselves;
- Corporate model: Implemented by a government–established company, often called a “special purpose corporation” which is tasked with managing some specific asset management work;
- Public-private partnerships (PPPs): Implemented through engaging the private sector within this partnership framework (Kaganova 2011).
Countries embarking on city regeneration initiatives have established different practices within the corporate model. These corporations often act as private entities and are empowered under the commercial code. Importantly, they also have a degree of separation from the government. Their responsibilities include land acquisition, infrastructure provision, and releasing vacant land for market sale. They are also tasked with building housing for low-income families, managing properties used by governments, and so on (Kaganova 2011).
City regeneration carried out by a special purpose corporation often involves the use of special regulatory powers. These powers enhance the project’s ability to create development value through project-specific density arrangements, a situation referred to as density financing (Sagalyn 2007). A review of these corporations has shown that in addition to land development, almost all of them are involved in economic development; in recent years, low-income housing has also been included in some of their mandates. Furthermore, to avoid conflict of interest, such corporations separate real estate and land development roles from the regulatory and planning roles of the government (Kaganova 2011).
In the United Kingdom, for example, urban development corporations were established as land development entities to bring derelict land back to the market. They were involved in planning, reclaiming, and reassembling land using eminent domain. They were also in charge of developing infrastructure and social services as necessary. In addition, they filled the gap between development costs and the value of developed land (Greenstein and Sungu-Eryilmaz 2004). Whereas some of these corporations are structured to deliver a regeneration plan as part of the national development plan, others are the product of local bottom-up efforts. As such, they are not subject to national coordination or planned programs of national resourcing (Clark, Huxley, and Mountford 2010). Cities in Europe are increasingly using publicly funded development corporations through which they grant operational concessions for major urban and transport projects.
A variety of questions should be posed in determining the type of public-private cooperation for urban regeneration. For example, is the public sector interested in playing a more active and involved role in the process? To what extent do city leaders want the private sector to deliver and the public sector to act as guardian of the public interest and beneficiary of regeneration? The answer to these questions of course depends on how much is required of the public sector for the regeneration program, especially if it entails direct funding.
The organizational structure of public-private cooperation is an important element in the success of such partnerships. There are many variations of such cooperation, from creating wholly or partially owned public companies, to fifty-fifty partnerships, to more passive ones in which the public sector participates through contractual land and profit-sharing arrangements. In considering different cooperation models, it is critical to be clear about the roles, authority, level of responsibility, decision making, and risk the public sector is seeking and willing to assume relative to the private sector. A lack of clarity on any of these issues will create barriers to effective project implementation. These roles must be defined from the very conception of the project. The three examples below are illustrations of the possibilities for passive, active, and hybrid models.
Passive Model. Assume for illustrative purposes that the public sector is the majority land owner and wishes to retain long-term land ownership. However, the public sector is not interested in having any direct involvement in implementing or delivering the project. Rather, it prefers that the private sector assume full responsibility for all aspects of the project, including infrastructure, site preparation, and vertical construction. A cooperation arrangement to achieve these objectives would be structured whereby the public sector enters into a long-term ground lease (from between 99–199 years) with a private developer. The arrangement would establish some of the following parameters: project objectives (specifying the type of development the public desires, the quantum of the development, and social targets, such as levels of affordability); phasing requirements; schedule for land payments, ground leases, and the formula for profit sharing; remedies for nonperformance and default; and key decisions requiring the approval of both parties and/or those that are held as reserve matters for the public sector.
Once the cooperation is established, the public sector role is largely limited to monitoring performance, participating in major decisions, and ensuring that its social and investment goals are being achieved. The governance structure might consist of a board of directors with equal representation of both parties that meets on a regular basis. The private sector is clearly empowered to deliver the project pursuant to the agreement.
Active Model. In this model, the public sector is the primary entity responsible for actual delivery of the project. It assumes all execution risk and responsibility and acts as a developer would in managing the land and vertical development process. This is rarely used in its pure form due to the lack of expertise in the public sector and the high level of execution risk this entails. However, there are instances, often in the case of the development of large-scale public housing, that the public sector has assumed such a prominent role. The cooperation model here might have the private sector assuming some of the risk and delivery responsibilities, such as developing some of the parcels or infrastructure financing. In this model, the venture is controlled largely by the public sector, with the private sector playing a more narrowly defined role.
Hybrid Model. This model is more typical of city regeneration projects. As an example, assume the majority of the land is owned by the public sector and requires significant infrastructure development, especially in the early stages. The public sector is concerned with the quality of the urban environment and wants to maintain a long-term active role in its development. However, it does not want to deliver the vertical construction or assume such a high risk. In this model, the cooperation would be structured in such a way that the public sector acts as the land developer responsible for the funding and delivery of area-wide infrastructure (not parcel specific). For its part, the private sector would be responsible for building and financing the vertical construction.
The venture would clearly delineate the respective roles, investment requirements, and profit-sharing and decision-making arrangements. In this way, all parties would understand and agree on the clear division of financing and execution responsibilities. Given the interdependence between the public and private sectors in delivering the regeneration project, issues such as the phasing of development, timing and obligations for capital investment and capital calls, and the level of decision making on key aspects of project conception and execution will need to be well articulated and fully documented.
These examples highlight the complexity of public-private arrangements. In deciding on the appropriate arrangement, the public sector should generally be very clear about the extent of its own capacity and expertise.
- Planning commissions. These entrust delivery to the private sector. Public sector involvement would be limited to regulatory oversight through a planning body that would ensure the master plan is being implemented pursuant to its approval.
- Contract management with advisory board. A project is managed largely through contract performance depending on the differing roles of the public and private sectors. There might be an advisory board to monitor progress and resolve conflicts. However, it is largely a contract-driven relationship that defines handover until and unless there are nonperformance issues.
- Steering committee. The least formal arrangement, the steering committee structure is a forum to bring together the diverse interests engaged in the regeneration project to monitor implementation, resolve problems, and provide advice on project-related issues. It is best used to either supplement other vehicles with a more formal structure, or when the project is private-sector-led and delivery is largely within its purview. The committee structure would be useful in galvanizing outside resources and maintaining and promoting the profile of the project. It can also work to resolve any major tensions that might surface.
Providing for ongoing operations and maintenance is critical to project sustainability and must be planned for in advance. This “aftercare” of projects during and after construction includes provisions for security, the upkeep and programming of the public realm, and providing for the needs of the local community. A well-established vehicle is a business improvement district (BID), which is covered in the financing section of this chapter.
The key point is that it is never too early to plan for the best range of organizational entities that the regeneration project might require. Indeed, there can be multiple entities, each with its own focus that can be created or supported to ensure long-term success. It is therefore not a simple matter of whether regeneration is public or private. Rather, it will usually be a complex mix that requires careful consideration of a range of options for how the public, private, community, and civic sectors can best interact, as well as the institutional arrangements that are best suited to the aspirations of the leadership and demands of the project.
One example involving thorough institutional arrangements in urban regeneration projects concerns the Santiago Repopulation Program (see chapter 5), delegated to the Santiago Development Corporation (SDC). The SDC was conceived as the executive arm for the implementation of the Santiago Regeneration Plan. Its flexible institutional structure facilitated the negotiations and partnerships developed with the private sector. Municipal corporations in Chile are ruled by the private law. Thus, they are authorized to enter into contract with public or private institutions, receive contributions, and borrow from private banks or financial entities, and so on. This institutional feature allowed SDC’s executive directors to play the role of public entrepreneurs, working on behalf of the community—and using the financial instruments available to the private sector. The PPP agreements between the SDC and other actors were regulated in the same manner as contracts between two private actors. However, beyond its managerial attributes, the SDC worked closely with the municipality, as the mayor was the president of the corporation. For more details, see for the organizational chart of the corporation.
Presidency | President (mayor) Vice president (municipal secretary of planning) |
Executive director | Director Vice director Manager of administration and finance |
Directors (5 elected members ) | Representative of universities President of the Architects Association Representative of the Chamber of Commerce of Santiago Representative of NGOs Representative of firms of Santiago |
Assembly of associates (35 members with urban interests) | Guilds (Architects Association, Engineers Association, Chamber of Commerce of Santiago, Developers Association, SMEs Association) Representatives of banks Representatives of universities Representative of Ministry Housing and Urban Development Housing Cooperatives Representatives of real estate developers Representatives of neighborhood development committees Representative of the Neighbors Association |
Source: Authors’ elaboration based on Parra and Dooner (2001); Contrucci (2013).
Note: NGO = nongovernmental organization; SME = small and medium enterprise.
