Tools to return the value of public investments to the people

I grew up in Inglewood, California. Despite being overly isolated, this community was vibrant and welcoming. This city just south of Los Angeles has They receive little assistance from L.A. County, the largest group of black homeowners on the West Coast.

Then Stanley Kroenke, the billionaire sports investor and real estate mogul who owns the Los Angeles Rams, returned to town.

Kroenke had been there once before, and that time he tried building. It’s our local Walmart. We told him to leave. But in 2014, he returned with visions of a giant soccer stadium and imported outsider “skinfolk” to defend him. And he won.

SOFI Stadium opened in 2020 and hosted Beyoncé and Taylor Swift’s World Tour this summer. (And, just minutes away, there’s a 17,700-seat Intuit Dome is scheduled to open later this year. ) It’s no secret that I’m not a fan of stadiums and the public donation of precious tax dollars in them. As an urbanist, I feel that soccer stadiums are a waste of resources in our current economic formation. SOFI boasts that it is entirely privately funded, but that’s not exactly true, to put it politely. The Associated Press reports that its developers expect to collect up to $100 million in local taxes during the first five years of operation.

Most recently, the Federal Transit Administration $1.6 billion capital grant for a monorail, transit connector connecting the Metro K Line to SOFI Stadium. Los Angeles’ transportation infrastructure, whether it’s highways or trains, is built and funded with tax dollars. We all pay for the public infrastructure that powers our economy, so all residents should benefit economically. Instead, SoFi Stadium is his second-highest grossing venue in America, with total revenue exceeding $107 million as of 2022, but Inglewood residents are being left behind. .

When SOFI Stadium needed a system for people to get to the venue, $1.6 billion in funding magically appeared. But it’s not magic. It’s people’s money. And there are mechanisms, albeit underutilized, for spending that money with the public rather than with private developers. Land Capture provides a financial tool to help commercial property owners share their fortunes with those who pay their road and rail tolls.

Breaking the investment and transfer cycle

My neighborhood is becoming more gentrified. We know that gentrification usually leads to infrastructure improvements. But we also know that the value of that infrastructure is inaccessible to the original residents of once overly segregated areas, often low-income and minority families. Statistics show that members of historically excluded and overly segregated communities are disproportionately pushed out during gentrification.

In my neighborhood, new infrastructure includes the reopening of the Morningside Park Library (the library of my childhood). libraries (which the community has been asking to reopen for more than a decade), public facility enhancements, and transportation upgrades (including a monorail to SOFI Stadium). These investments improve the quality of life for future residents and are paid for by residents’ taxes.

Here’s how the situation typically unfolds: The wealthy recognized the place of historically excluded communities. Private interests belong to local governments. Publicly funded infrastructure improvements improve neighborhoods, but often involve displacement. It denied employment and increased police presence, and publicly supported questionable financial instruments like TIF and later private investment. The profits go almost entirely into the pockets of individual investors, as if they had done it alone.

This can be achieved by moving away from creating overly segregated communities excluded from public infrastructure and toward building inclusive communities that capture value from the outset from the unearned profits of commercial entities derived from publicly funded infrastructure. The cycle can be broken from the beginning. .

If we want to create inclusive communities, we must respect public spaces, publicly funded projects, and the public. Building and maintaining roads, internet service, water, and electricity is no small investment. These are large-scale public works projects. These are investments in our society, paid for by all workers, and commercial landlords should also support. Winston Churchill once said: “Roads are built, streets are maintained, services are improved, electric lights turn night into day, and all the while landowners sit still.”

How to get public investment

Nobel Prize-winning economist Joseph Stieglitz’s Henry George theorem states, simply put, that land prices rise in response to public infrastructure spending, and that the net income earned by private commercial owners is unearned income, which they must share with the community. states that it should.

Capturing the value of land allows us to give our citizens a portion of the value gained through public investment in infrastructure. That net passive income can be used to fund schools, affordable housing, and a host of other democratically chosen initiatives. Understanding land prices can also help mitigate boom-bust land price cycles, reduce sprawl, and encourage developers to use land more efficiently.

For example, SOFI Stadium If the FIFA World Cup were to be held in 2026, one group of economists said the estimated economic impact would be two-thirds greater than the $356 million generated by Super Bowl LVI, held at SoFi Stadium in 2022. “It will happen,” he predicts.

This is not just for projects that have already received public funding, but also for future projects that will receive public funding, such as the $1.6 billion investment in the monorail. A portion of the revenue that SOFI Stadium and other commercial entities surrounding the stadium receive is passive income. It exists thanks to publicly funded roads, publicly funded internet, and public transportation that gets people there. That passive income should be shared with L.A. County and the city of Inglewood.

To do this, there is a range of policy options that are proven to benefit the public. Land banking, land leasing, land readjustment. Another undervalued tool is linkage fees, which are an effective cost recovery method. Similar to development impact fees, these are levied by local governments on new developments, but also take into account the indirect impacts of development on local communities. Local governments can vote to impose these fees on developments to shore up funds to offset the negative impacts of development. These fees can be set aside to fund affordable housing and similar purposes such as education, public space enhancements such as pedestrian infrastructure improvements, and capital construction projects. For example, in Somerville, Massachusetts, commercial developments over 15,000 square feet are subject to a $2.93 per square foot coordination fee that funds the Somerville Job Creation and Retention Trust.

Another powerful method is incentive zoning. Although zoning has traditionally been used as a practice to attract the working class, communities can use zoning along with land value capture for the public good. The city of Cambridge is located right next to Somerville. 100% Affordable Housing Overlay Zone – An exemplary model of how to use planning and economic tools to bring about true social equity and change. In AHO, affordable housing is mixed-income and included throughout the area where development is taking place, so overly segregated and excluded communities are not rebuilt elsewhere. Developers can provide infrastructure or provide funding.

Donald Shoup, a professor emeritus at UCLA who studies urban land economics and finance, wrote his seminal book,Free parking is expensive. He suggests that municipalities eliminate public subsidies to private businesses for free parking and instead direct 100% of the funds to street projects.

This is not much different from the idea behind business improvement districts. bid. Given that SOFI Stadium is publicly subsidized through his $1 billion grant, the surrounding area should benefit.

Capturing that value means financing middle-income workers to live near public transit, increasing access to public transit, and making it reasonable to ride a bike or walk. It can serve as a source of income to choose from. Their budgets can be targeted to benefit the working and middle class, whose low salaries make it impossible to live near public transportation or save for a down payment on a home.new york city was built Co-op City as a development for 50,000 low- and moderate-income workers. By adopting this development style, Los Angeles will be able to more rationally improve the density of a dysfunctional city.

Land value capture can be managed by a revitalized California Redevelopment Agency (CRA), which has a significantly different mission than previous iterations. The focus must be long-term and local across Southern California, rather than hopscotching across political lines. Supporting bad policies focused on the wealthy and their private development “fixes” so-called blight by inadvertently displacing residents and promoting sprawl. New CRA cTo be transparent and democratic, to use the unearned profits of for-profit organizations to reimagine Metro Los Angeles and the Southern California region with a focus on people and their functional boundaries.

Public infrastructure makes life in Los Angeles possible. Los Angeles would cease to function without public infrastructure and public works. But for Los Angeles to be fair to its working class, it needs to find a way to share its wealth and wonders with all of Los Angeles.

Understanding land prices can limit sprawl, Metro Los Angeles where the wealth we all create is shared.