Partnering Arrangements with the Private Sector
Whether an urban regeneration initiative is led by the public or private sector, there are various types of structures that can be adopted for creating a mutually beneficial partnership between them. The most appropriate approach will depend on the specific institutional, market, and political context. Whereas some municipalities may be open to sharing risks with private parties through joint-venture forms of PPPs, other cities may be legally constrained from or have limited human resource capacity to prepare, procure, and manage high-quality agreements with the private sector. Many countries have regulatory limitations on municipal public-private agreements and may require that a city use a concessional approach for any agreement with a potential developer or investor.
Regardless of structure, attracting private capital and high-quality development partners to invest in a proposed urban regeneration plan will require that certain core conditions are met. Predictability of up-front and ongoing project costs and anticipated future revenues are investor prerequisites in determining a project’s feasibility. Risk identification and mitigation are critical for any investor—and can be as important as a project’s expected rates of return. Thus, for a city to attract private investors and developers to buy into a municipal vision for urban regeneration, certain core conditions should ideally be in place, including:
- A legal system, in which property and contract rights in particular are recognized and enforced;
- A stable regulatory structure, in which laws and administrative procedures (for example, obtaining building permits) are transparent and reasonably predictable with respect to cost and timeframe implications;
- A stable national and local fiscal framework, in which the financial responsibilities of various levels of government are known—and in which municipal financial responsibilities are also reasonably predictable;
- Political stability in the form of an established transition process upon changes in municipal administration or political parties in power;
- Market strength, in which market conditions are sufficiently robust to absorb and grow from the anticipated new development. Given private sector expectations, many cities desirous of attracting private capital have invested time in anticipating and meeting investor demands—all in an attempt to improve local conditions for investment readiness. Typically, until a city has established a proven track record of successful partnership with the private sector, investors may cautiously assume that greater risk is involved and, with it, commensurately higher returns.
An example of government investment in infrastructure and parallel development of planning guidelines can be observed in the revitalization of the Singapore River. The planning authority built a 15-meter-wide continuous riverfront promenade connecting the three zones of the river. Three new pedestrian bridges were also planned and subsequently constructed, linking the three zones together. Urban design and planning guidelines were stipulated by the Urban Redevelopment Authority. Their goal was to enhance the different themes envisioned for each zone by guiding and controlling land use and physical development to be built by the private sector (see chapter 10).