New York City's next mayor will face a daunting challenge of budget gaps that according to current projections will range from $2.5 to $3 billion during each fiscal year between 2014 and 2016.
If the past is prelude, the coming years will likely see reduced discretionary spending and fewer publicly funded capital projects -- as well as a myriad of ideas on how to increase revenue from property taxes, fines and other actions that have served as a disincentive to new investment.
At the same time, the city needs to upgrade its decaying infrastructure to remain globally competitive. Limited capital funds and greater need to invest? What to do? The city has historically neglected a potentially lucrative vehicle for generating new revenues and saving taxpayer dollars: namely, the city's zoning code.
Changing zoning rules to encourage developers to include state-of-the-art municipal facilities within their projects, at no or greatly reduced cost to the city, could create new libraries, health care facilities, schools and municipal offices with little impact on the capital budget -- and all built with the kind of private-sector expertise that helps ensure both quality and proper cost management.
One approach would be to offer additional development rights -- called a "floor area ratio (FAR) bonus" in industry jargon -- for every square foot of municipal space built for the city. This could potentially generate millions of square feet of free space for municipal uses. Project priorities could be determined by such stakeholders as Community Boards, Council members or city agencies -- or some combination of input from these entities.
This idea is not new. In fact, when developers seek zoning changes or other so-called "discretionary" land use considerations from government, local communities typically seek some sort of public benefit as part of the process. Forest City Ratner, for example, was approved to redevelop Manhattan's Beekman Tower after agreeing to build a 100,000-square-foot school along with a 21,000-square-foot ambulatory care center for a local hospital. And at the forthcoming Dock Street residential project in Brooklyn's DUMBO neighborhood, Two Trees plans to build an approximately 45,000-square-foot public middle school in the building and donate the cost of the school's "core and shell" component to the city -- generating some $40 million in taxpayer savings.
The mechanism by which this process plays out can sometimes be unwieldy, and the application of the standards can be inconsistent. Yet the public policy rationale underlying this idea is rock-solid.
So, why isolate this incredible opportunity to those few sites where developers seek discretionary actions? Why not take the notion of a "community facility bonus" and modernize it by either offering or mandating that every significant development provide some sort of public benefit in the form of a built facility?
For structural reasons, some city agencies would be unable to benefit from such an initiative. Private developers cannot undertake such construction projects as roads, sewers and bridges. But many agencies could benefit.
The city's preliminary capital budget for fiscal year 2014 envisions more than $5.68 billion in capital spending to meet the needs of eleven agencies suitable for such an initiative. If 10 percent of this amount could be eliminated thanks to public-private developments, the city would save some $568 million over four years. Imagine more than a half-billion-dollar reduction in taxpayer spending on capital costs related to schools, libraries and senior centers -- all because the private sector was paying for it.
This program would not work everywhere. Some outer-borough neighborhoods simply lack enough development opportunities for the idea to take hold. In landmark districts and in low-density areas, adding density to pay for community amenities would be politically unpalatable. But in mid- to high-density areas, the public would hardly notice the marginally increased height of a project. The local community's quality of life would almost always be improved by the new amenity the development created.
The city's zoning code has not been significantly altered since the 1960s, when "incentive zoning" was introduced. Because of population growth, weather changes and other factors, the next mayor will tackle many challenges that will require substantial capital spending. That is why now is the perfect time to unlock new forms of public value through smart and creative changes in zoning codes. We can build upon visionary policy decisions of the last century to meet the challenges we face in this one.