FOR IMMEDIATE RELEASE ON JUNE 6th, 2007
Downtown Market Study:
Memo from Mayor Barrett to Members of the Common Council
Earlier this spring, as the City of Milwaukee faced an unprecedented level of both development interest in downtown neighborhoods and requests for public investment in downtown projects, I asked the Department of City Development to seek a third-party perspective. I felt we needed to understand more about the market for these proposed projects in order to predict their success and their impact on existing downtown real estate. I asked that this analysis pay particular attention to the many downtown hotel proposals, and to proposals within the Park East Corridor.
|DCD, with the assistance of the Redevelopment Authority, sought the help of S.B. Friedman & Company and HVS International, a hotel consultant, to respond to my request. Links to their findings are in the box to the right.
While I am certain that you will draw your own conclusions as you read this material, I thought it would be helpful to share my perspective.
I have a fundamental belief that any project that uses public funds needs to advance the public’s agenda. My administration’s tax incremental financing guidelines clearly state the public’s agenda in this context:
||Attract and retain permanent family-supporting jobs
||Facilitate development of underutilized properties, and promote development in emerging neighborhoods
||Improve blighted properties or clean up brownfields
||Advance catalytic projects that will spin off benefits to surrounding properties and neighborhoods
The Friedman and HVS reports point out that real estate development projects built to satisfy demand for goods, services or real estate are most likely to advance this agenda.
Friedman documents that demand for downtown housing units remains strong. I believe that if we are to consider public assistance for projects in the office, retail and hotel sectors, they also must be demand-driven. When demand is soft, new projects succeed only at the expense of existing properties. I believe we ought to heed the consultants’ advice on this point: don’t open the public pocketbook to pay for projects that simply move tenants from one downtown building to another. On the other hand, when developers are looking for help to relocate major tenants into the city, we ought to be open to that opportunity, because it advances our jobs agenda.
The reports also conclude that public investment may be appropriate to support projects that spin off economic and community development to nearby neighborhoods. The report says the project proposed for vacant property at 4th and Wisconsin could be such a catalytic development, if it includes sufficient entertainment and restaurants to increase Milwaukee’s appeal to convention-goers. The Redevelopment Authority owns that site, and I support the use of public funds at an appropriate level to ensure a high-quality project there.
The Friedman/HVS team took a hard look at the Park East corridor, where we face a circumstance without precedent in Milwaukee. Following the investment of about $47 million of public funds, a large supply of land has come onto the market within a very short period of time. Although building sites are prepared, and the land is highly valued, prospective developers insist that they cannot proceed without substantial public subsidy.
The consultants point out that while TIF assistance can make projects more financially feasible, such assistance does nothing to grow demand. In fact, they say, the expectation of tax incremental financing assistance may well be encouraging land speculation in the Park East. The report also emphasizes that unwarranted subsidy of Park East projects could put the City’s investment in the Pabst Brewery redevelopment at risk.
To make the most of the Park East opportunity, we need to be smart about the pace of development of the vacant land. We’ve got more than $400 million worth of Park East development underway, in the Pabst, North End, Flatiron, Convent Hill and Staybridge Suites projects, and current market conditions suggest it could take a decade or more to fully develop the corridor.
I look forward to working with you as we thoughtfully consider the appropriate use of public investment to grow downtown Milwaukee.