As the new generation of state-of-the-art parks begins to age, will we live to regret creative financing models?
Cities all over the world are trying to replicate the runaway success of parks such as New York City's High Line and Chicago's Millennium Park. These state-of-the-art parks are credited with pumping up real estate values and drawing hordes of tourists.
But unlike the great public parks built in previous eras, the new generation of flagship parks is almost completely dependent upon massive private support for its survival. Design decisions and the responsibility for maintenance and operations budgets have been outsourced to quasi-governmental organizations and "Friends" groups. The problem? It's unclear whether these kinds of public-private partnerships can be financially self-sustaining without completely selling out.
To obtain private financing for parks, cities are selling naming rights, setting aside of sections of parkland for commercial development and allowing periodic closing of parks for fundraisers. Also in the toolkit are special tax districts to provide direct revenue streams for parks and the granting of controversial zoning concessions to private developers in exchange for donations.
The argument in favor of new park financing models is that they are critical in an era of dwindling municipal budgets. "If we are dealing with a public park, ideally the public pays for its construction and maintains it at a high level, but we know empirically for a variety of reasons that hasn’t happened," says Harvard University Graduate School of Design Professor Jerold Kayden, the organizer* of a conference on public space at the GSD earlier this year. "So we begin to rely on this model of public-private partnerships, which have risks and rewards."
One of the most controversial aspects of the new park financing models is that they provide a structure that enables real estate interests and wealthy individuals to funnel tax-deductible donations into public parks in their own neighborhoods. The most prominent recent example is hedge fund manager John Paulson's $100 million gift to the Central Park Conservancy, the philanthropic organization that runs the day-to-day affairs of New York's Central Park and was one of the pioneers of the public-private partnership model. To some observers, such donations are self-serving because they concentrate wealth rather than spreading it. In a column on Paulson’s Central Park gift last December, Reuters blogger Felix Salmon argued that it ought to be "Exhibit A in any attempt to cap the amount that American taxpayers can deduct in any given year."
The High Line, the elevated rail trestle converted into a public park that opened in 2009, takes the public-private partnership model to a new level by allowing developers to expand the size of their buildings in certain designated areas in exchange for donations to a special High Line Improvement fund. Many of the innovative financing schemes for the High Line come from the Friends of the High Line, the politically well-connected non-profit group in charge of the park's day-to-day operations and maintenance.
Among the Friends' wealthier supporters is the power couple Barry Diller and Diane von Furstenberg, who both own businesses within blocks of the park. In total, the couple has made a reported $35 million in gifts to support the maintenance of the High Line. Such private money lavished on the High Line highlights the disparities between it and other parks in New York City's park system, which in the past five years has had its operations and maintenance budget slashed and its staff cut by more than 30 percent. This year, after a major campaign by advocacy groups, some of the city's parks department funding was restored. But that modest shot in the arm for a chronically under-funded parks department budget doesn't address the growing gaps between rich and poor neighborhoods in terms of quality public space.
"The reliance on philanthropy has definitely benefited the parks where they are able to generate a lot of the money," says Charles Brecher, a professor of public health and administration at New York University and author of a 2007 study on the New York City Parks system for the Citizens Budget Commission, a New York-based good government organization. "This is a real public administration issue. How do you both get the benefits and the resources that philanthropy provides in ways that are not too distorted by the preferences of the donors?"
One of the first parks created under the new public-private partnership model is Hudson River Park, which runs along Manhattan's west side from the city's downtown up to West 59th Street. This park is run by a special entity called the Hudson River Park Trust, which in effect is both a development agency and a parks agency. Unlike a typical park funded by tax dollars, Hudson River Park is charged with raising its own funds through concession fees, grants, donations, and rents from commercial tenants within the park.
Much like the High Line, which according to city officials has been the spur for $2 billion in private investment within its immediate vicinity, Hudson River Park has been credited with revitalizing Manhattan's post-industrial waterfront. But a little more than a decade after opening, the park is now facing an estimated $100 million shortfall in capital maintenance costs and needed repairs. So the Trust is lobbying state officials to change the special law that created the park, to permit housing and hotels inside its boundaries in order to plug budget holes.
"I opposed [the law creating the park] because it created a public benefit corporation, which I felt was an unaccountable authority," said New York State Assemblywoman Deborah Glick in an interview this past winter after a controversial hearing on proposals to build housing in the park. "It is not surprising to me that the overreach of public authority has been the way that the Hudson River Park Trust has acted," Glick added. "It is the nature of the beast."
"This [The Hudson River Park funding issue] really raises a red flag," said Holly Leicht, executive director of the advocacy group New Yorkers for Parks, at the Harvard conference on public space. "We are continuing to pour hundreds of millions of dollars of capital into new parks assuming that they are going to be self-sustaining. But where that private money is going to come from is a real question mark."
In extreme cases, some city parks can become privatized to the point where the public is shut out for most the year. Damrosch Park, for example, a New York City park run by Lincoln Center for the Performing Arts, is closed off for seven to ten months every year for private events, such as Big Apple Circus and New York City's Fashion Week. In addition to being regularly closed to the public, Damrosch Park has had 57 trees cut down and its distinctive granite benches removed to accommodate such events, which help raise money for Lincoln Center. Park closings have also had a significant impact on the public experience in other cities. In Chicago, the Lollapalooza Festival takes over Grant Park during summer every year, and although the festival only lasts a few days, it often results in damage and extended delays to reopening sections of the park.
One factor driving the increasing privatization of new state-of-the-art parks is their stratospheric maintenance costs. The pressure to pay for the upkeep of the High Line, which is considered to have the highest per-square foot maintenance costs in the city, has forced the Friends of the High Line into taking positions supporting commercial developments that create the very types of conditions that public space is supposed to mitigate.
Last year, the Friends came under attack for their support of expansion of the Chelsea Markets, an indoor mall and office complex bordering the High Line. The developers of the Chelsea Markets had pledged $20 million to the Friends. At the initial public hearing, the Friends was reportedly the only group to come out in support of the expansion, which was widely opposed in the Chelsea neighborhood on the grounds that it threatened to block views and cast shadows on the surrounding streets. City officials ultimately were able to make a deal under which the developers got their expansion in exchange for agreeing to donate one-third of the multimillion dollar gift originally slated for the Friends to fund affordable housing in the area, as well as educational programs for young residents of nearby public housing projects.
Corporate support footed almost half of the approximately $500 million bill for the building of Chicago's Millennium Park, a 24.5 acre green roof that sits atop a tangle of rail yards and an underground parking garage. The city's $270 million commitment involved the expansion of a Tax Increment Finance District that provided $95 million in financing for the park. The other part of the city's investment consisted of $175 million worth of construction bonds that were attached to revenue from the 2,200-space municipal parking garage beneath the park.
But the creative financing scheme used to pay for Millennium Park has compromised the park's public aspect and raised the cost of city services. Until community groups began to push back, sections of the park were closed off to the public for daylong functions thrown by some of the companies that funded the park. Spaces within the park are littered with signs that advertise the various corporations that contributed money toward construction. Thus there is McDonald's Cycle Center, Chase Promenade, and BP Bridge. Millennium Park also has its own special revenue stream, the Tax Increment Finance District, which allows tax revenues that would otherwise go into Chicago's general fund to instead be channeled into an amenity that helps pump up adjacent property values.
Perhaps the most problematic aspect of the Millennium Park deal is that the in order to pay off the construction bonds and provide financing for the maintenance and operations budget for downtown neighborhood parks, in 2006 Chicago leased its downtown public parking garages for 99 years to a Morgan Stanley-led partnership for a one-time payment of $563 million. The agreement set no limits on what the concessionaire could charge, and rates at the parking lot jumped by nearly 40 percent soon after the deal was signed. The Millennium parking deal continues to haunt Chicago—this past March an arbitration panel ruled that the city owed the Morgan Stanley-led partnership $57.8 million for allowing a new public parking garage run by another company in a competing parking area.
Public-private partnerships certainly have helped set new standards for park design and maintenance. They have also helped reduce direct pressure on municipal governments suffering from tight fiscal budgets. But given the never ending scramble to find more money to fund operations for many of the new so-called self-financing parks, their designs and scope may have been overly ambitious. This new generation of parks, with their reliance on private sector investment, has led to growing concern about the equitable distribution of public resources.
There may be upcoming changes to one of the main pillars of these new park financing models: philanthropy. According to Leicht, high-profile gifts such as Paulson's have prompted discussion in New York City between park advocacy groups and city officials about putting donors on notice that in the future, a certain percentage of their gifts will be have to be allocated to a fund that would provide aid to less affluent areas. "It raises the question: Are parks somehow inherently different than other cultural institutions?” Leicht says. "I would argue that as public space they are, and that this probably is a model that should be piloted and tested. And let's see if donors are truly frozen in their actions."
*CORRECTION: Previously this story incorrectly identified Harvard University Graduate School of Design Professor Jerold Kayden as one of the organizers of a conference on public space held in March. Professor Kayden was the only organizer of the event.