Municipalities across the U.S. have an opportunity to unlock revenue by re-purposing underused and undervalued assets, according to a report by RBC Capital Markets and HR&A Advisors.
The report, entitled “Unlocking Value from Public Assets,” was released last week by Chris Hamel, RBC’s head of municipal finance, and highlights the problems that local governments and public institutions have in finding ways to invest more in infrastructure.
As governments struggle to find more money, discussion has been growing about ways in which municipalities can leverage specific public assets to create revenue streams that will allow them to reduce costs while delivering better services.
The report focused on using the expertise of the private sector in ways that benefit the public, and provided local governments a best practices guide on ways to do that.
“Ninety-percent of all non-defense public infrastructure in our country is owned by state and local government,” Hamel said at a gathering at RBC headquarters in Manhattan. “That is an incredible amount of stuff that state and local government owns. And really what this report talks about is what can they do with all of this stuff they own that can produce real revenue, real funding. ”
Financing has not been the problem, Hamel said, given the municipal bond market and its various types of low cost financing vehicles at issuers’ disposal. Rather it has been the funding that has been at issue – and finding a reliable revenue stream to back up the financings.
Five case studies from around the country highlighted successful collaboration between the public and the private sectors: LinkNYC’s link communication hubs replacing pay-phone kiosks; Ohio State University’s comprehensive energy management plan; Massachusetts Bay Transportation Authority’s on-demand para-transit program; the Oregon Department of Transportation’s solar highway program; and the University Center of Chicago’s disposition strategy.
Dan Doctoroff, CEO of Sidewalk Labs and former New York City Deputy Mayor for economic development and rebuilding, spoke about the goals and success he found in his roles in the public and private sectors.
“Cities are sitting on a wealth of value,” he said, “if they’re only creative enough to actually realize them. But they’re often not the kinds of things that you think.”
He gave some examples of assets he thought could be monetized by state and local governments.
- air (such as air rights over the Highline, a public park in NYC built on an old elevated freight line);
- the future (such as tax increment financing for Hudson Yards, a large redevelopment program in NYC);
- property (not just selling it, but using it to create industries as Cornell Tech on Roosevelt Island);
- streets (using a congestion pricing model);
- cheap financing (such as selling bonds for affordable housing); and
- sidewalks (LinkNYC replacing NYC's old payphones with WiFi kiosks to create the world's largest and fastest free public WiFi network and monetize their large screens with advertising.)
The report highlighted 10 different best practices for unlocking new value from public assets, which involve identifying the opportunity, refunding the concept, implementing the project, and looking ahead.
These best practices are to: know you mission; inventory and evaluate assets; pursue creative thinking; leverage windows of opportunity (political and financial and regulatory); build support; test and iterate; optimize benefits; align expectations; standardize performance; and articulate benefits.
HR&A is a real estate advisory firm that provides strategies to unlock value in a range of development challenges.
Sidewalk Labs, one of Google's Alphabet companies, says it imagines, designs, tests, and builds innovations to help cities meet their biggest challenges.