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Event Recap: WLI Presents - Rezoning Midtown East
On January 12, ULI New York's WLI hosted key players involved at different levels of the recent Greater East Midtown Rezoning.
February 20, 2018
By: Daniel Rojo
Driving Development: The Future of Infrastructure
At this year’s ULI New York Real Estate Outlook, four panelists — Samara Barend from AECOM Capital, Rick Cotton from the Port Authority, Janno Lieber from the MTA, and Edward Pallesen from Goldman Sachs — were moderated by Thomas McKnight from the NYC Economic Development Corporation for Driving Development: The Future of Infrastructure. Each touched on challenges and opportunities from different vantage points in the public and private sectors to discuss how the region can begin to address critical infrastructure investments to meet existing needs and provide a framework for growth.
In the face of the extreme challenges the region faces with its existing infrastructure — and potentially even more daunting challenges facing new infrastructure projects necessary for growth — the panel did not have all the answers. These experts did not give the sense that there was even a clear roadmap to solving these issues. But there is a clear shortfall, and there are examples of successful projects that have connected formerly isolated parts of the city, improved the lives of residents of the region, and helped drive new development that meets critical needs. The key to moving them forward will be leadership.
In the face of competing needs, how do you prioritize? Do we focus on connecting the greatest number of current regional residents to existing economic centers or create transformational new projects that create new economic opportunities? Do we focus on the state of repair of existing infrastructure that powers the city as it is? The scale of the challenge is extreme, but you have to do both. Signal upgrades are expanding capacity on the 7 train and the LIRR’s Third Track project will increase throughput capacity by 50%. Both of these projects have the potential to unlock tremendous potential along their corridors. Similarly, the extension of the 7 train to the West Side unlocked nearly 20 million square feet of new development at Hudson Yards alone — and millions more in new development in the surrounding area. These projects can all both expand opportunities and create new ones. The first phase of the Second Avenue Subway was about access. Can phase two be more about transformation? Projects should not be either or.
It may seem that investing in existing infrastructure is lower hanging (although still very expensive) fruit at the expense of transformation but — with thoughtful planning — arguments for growth, leveraging, value capture, and other advantages and opportunities can be made for both. Selecting which projects move forward is a messy process. It will require community input, but ultimately the decision-making is in the hands of elected officials. Investments must happen alongside careful planning and a new vision for an area affected by those investments. In complicated political environments, that will take leadership.
We must look to global best practices to move projects forward more effectively. Little in the management and processes that develop and build our infrastructure has changed for decades. With challenges this grand, and progress so slow, we need institutional change. Leveraging design build processes can get projects built faster and cheaper. Utilizing technology being explored as part of MTA’s “genius grants” can let us complete more work with less service outages. One of the biggest opportunities is better leveraging public private partnerships.
Public private partnerships can allow the government to offset risk. In Toronto, significant transit investments have been undertaken with risk transferred to the private market. The private sector can take on both financing risk and also liabilities for delivering projects on time and on budget. Even in maintenance, private expertise can be leveraged while also being held accountable by performance standards.
These partnerships present an opportunity to leverage the private sector in environments with scarce public financing — and global institutional capital is looking for safe, long-term investments to pair with their long-dated liabilities. However, the private sector is not well position to take risk if there are regulatory or political liabilities and funding is easier from the private market with dedicated revenue streams. 2/3 of the funding for the redevelopment of LaGuardia airport came from private sources, but that was a project with secure revenue streams and demonstrated political support.
In response to an audience question of what the public sector can do to build confidence in the private sector to build infrastructure projects, Pallesen cited stability and predictability around things you cannot control. If the private sector knows all the pieces, they can price it. Barend raised the equally important point that project leaders need to understand the politics of the moment. How do project timelines relate to the terms of elected officials? Does an unpredictable elected body have approval power at the end of an entire process (which might give private investment pause)? If political and regulatory questions remain up in the air, the private sector will not be confident to move into projects.
The scope of the challenges facing our infrastructure needs is vast enough that there is room to try many different strategies. Pallesen put it well, pointing out that we have a big job to get back to where we should be compared to 20 years ago, but the world 20 years from now will look very different too. McKnight asked, from a real estate and economic perspective, what projects are the most important. None of the panelists took the bait and spoke about how everything is important. That is understandable given the public venue, but at the same that was indicative of the challenges we face. Prioritizing will result in winners and losers, but without strong decision making our infrastructure systems will continue to atrophy. Fixing it will be hard, and it will take leadership.
Daniel Rojo is a Director at James Lima Planning + Development, a real estate and economic development consulting firm focused on the economics of placemaking. He is an urbanist with international experience in real estate development, finance, urban planning, and design — and a special interest in the intersection between them all.
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