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Urban Revitalization

Urban Revitalization refers to a set of initiatives aimed at reorganizing an existing city structure, particularly in neighborhoods in decline due to economic or social reasons. Urban revitalization initiatives generally include improving features of the urban environment, such as the quality of pavement and the functionality of the sidewalks. Depending on the intended usage of the revitalized neighborhood, the projects can also address the need for improved community engagement and occupation of the public spaces, providing new entertainment facilities like parks and museums. In several initiatives, projects aim to prepare parts of the city to fulfill a desired economic function by adjusting the utilities network to specific requirements.

A revitalized urban space, with effective infrastructure, can create the conditions for an efficient city, capable of promoting innovation, a higher quality of life, and economic development with shared prosperity and environmental respect. Urban revitalization initiatives can, however, be large projects, complex in terms of implementation and operation, and require innovation in technology and scope.

Public-private partnerships (PPPs) can help facilitate the implementation of urban revitalization projects in a number of different ways. First, through a PPP a project can be financed fully, or primarily, by the private sector, optimizing the fiscal space and differing public sector spending through the duration of the contract. PPPs, in this respect, can be a source of financing used by cities to organize its capital expenditure.

Second, PPPs can help municipalities plan better. Long-term by definition, PPPs incentivize municipalities to account for whole-life costs during design and implementation phase. While this does not mean costs are always within the budget, PPPs do force a level of planning that may otherwise be absent.

Third, and perhaps more importantly, PPPs can add flexibility to the street-level service delivery, such as maintenance and operation, of specific assets, which public sector agencies typically lack. PPPs harness private sector capabilities and increase efficiency of services.

Issues

  • Diversity in partnership models

    The use of PPPs in urban revitalization is typically associated diverse contractual models, which require a wide range of institutions to support them. In other words, in contrast to traditional economic infrastructure, the arrangement that...

    The use of PPPs in urban revitalization is typically associated diverse contractual models, which require a wide range of institutions to support them. In other words, in contrast to traditional economic infrastructure, the arrangement that enables private sector participation in urban infrastructure, such as the conservation of cultural heritage sites, might require creative revenue and risk sharing mechanisms that are not common to traditional infrastructure and might be tailored specifically for each project.

    As a result, it is difficult to standardize contracts, process or documents within the urban revitalization PPP space, and each project requires a diverse set of stakeholders. The diversity in partnership models requires a flexible enabling regulatory environment that allows for the design of different types of contracts. 

  • Revenue model

    Finding an appropriate revenue model that can sustain a financially and commercially feasible project is a challenge. Often, this challenge is addressed by alternative revenue sources, like generating commercial revenue (advertising spaces or...

    Finding an appropriate revenue model that can sustain a financially and commercially feasible project is a challenge. Often, this challenge is addressed by alternative revenue sources, like generating commercial revenue (advertising spaces or sharing the underground galleries for specific utility services). However, a common revenue model considers, at least in part, a public financial support mechanism, in which the government meets the viability gap with funding coming directly or indirectly from tax payer’s money.

    The use of public financial support schemes creates, in turn, specific problems of credit ratings in subnational (local) governments, particularly in countries where central governments or national authorities do not provide sovereign guarantees to the liabilities assumed locally.

     

  • Financial support mechanisms and guarantees

    The assumption of long-term fiscal liabilities by municipalities, either direct or contingent, poses an important challenge for local authorities conducting large-scale urban revitalization through PPPs. The fiscal commitments associated with...

    The assumption of long-term fiscal liabilities by municipalities, either direct or contingent, poses an important challenge for local authorities conducting large-scale urban revitalization through PPPs. The fiscal commitments associated with PPP deals might not be as clear and transparent as the liabilities arising from traditionally procured projects and, thus, affordability of PPP projects become an issue that need to be thoroughly addressed.

    Since several urban revitalization projects are procured at the subnational or local levels, the associated fiscal liabilities might not be accompanied by sovereign guarantees.  Often private investors fear high risks when entering into deals that rely heavily on long-term public sector payments without a guarantee of national government backing.

    To solve these problems, specific financial guarantee mechanisms have been developed to reduce the risk of the private sector investor and promote commercial feasibility of projects. However, especially for smaller economies, identifying assets to be used as collateral or creating the institutions that enable the use of financial guarantees can be difficult. The effective solution of the credit risks of subnational entities entering PPP deals, nevertheless, need to be overcome if deals are to deliver the value for money they promise.

  • Addressing community priorities

    Communities generally have strong views about what kind of urban revitalization initiatives should be implemented and how. To ensure community buy in, project leadership should develop mechanisms that take into account communities preferences...

    Communities generally have strong views about what kind of urban revitalization initiatives should be implemented and how. To ensure community buy in, project leadership should develop mechanisms that take into account communities preferences during the selection, appraisal and structuring phase of the PPP project cycle. Public hearings, community meetings and dedicated project websites can play a key role in building public support for a project, and work to guarantee that a project is effectively meeting the demand its was designed to address.

    Direct community involvement can also be considered during the contract management phase, where infrastructure users can help contract managers assess the quality of the service to guarantee contract enforcement and to promote effective transparency during the lifespan of the contract.

Tools & Guidance

    • United Nations (UN), United Nations Development Programme (UNDP)

    Toolkit for Pro-Poor Municipal PPPs

    This step-by-step guidance presents a detailed account of the PPP project cycle, from identification to contract management, focusing on issues faced by municipalities in urban infrastructure projects. It also describes the main challenges faced by cities in the process of preparing and managing PPP transactions and presents principles and practices of how to overcome them from the public sector’s perspective.

Projects & Case Studies

    • 2014
    • Hary Agus Rahardjo, Fitri Suryani, and S. T. Trikariastoto
    • IACSIT International Journal of Engineering and Technology

    Key Success Factors for Public Private Partnership in Urban Renewal in Jakarta

    This paper presents some of the initiatives that have been implemented by the city of Jakarta, particularly in housing conditions for the poor, and explores quantitative and qualitative data to identify the key success and failure drivers of the private investment into urban renewal projects.

    • 2013
    • Kelly Bryan Ovie Ejumudo

    Urban Development and Renewal in Nigeria

    The Potency of Public Private Partnership

    This academic publication discusses some of the issues surrounding the relationship of the public and private sector in urban revitalization projects. Using the example of the Nigerian government the author concludes that PPPs can be a very effective tool but issues of policy coordination, such as poor commitment and governance, inadequate policy formulation and execution, can lead projects to fail.

Lessons & Analysis

    • 2012
    • International Finance Corporation (IFC)

    Handshake Issue #4: Cities & PPPs 

    Handshake Issue #4, Cities & PPPs, explores how thoughtfully tailored urban infrastructure can enhance the proximity among people that makes innovation possible, and how PPPs facilitate urban growth on a scale and timeline that would be impossible without private capital.

    • 2014
    • Susan Macdonald and Caroline Cheong

    The Role of Public-Private Partnerships and the Third Sector in Conserving Heritage Buildings, Sites, and Historic Urban Areas

    This paper, sponsored by the Getty Conservation Institute introduces the challenges associated with bringing private sector capital and expertise to enhance the task of promoting cultural heritage conservation. It concludes that many governments “have fulfilled their responsibilities as the primary caretaker and financier of heritage buildings and their conservation by turning to the private sector through PPPs” and that, where institutions and regulations are in place, this mechanism could be used more extensively to improve the government’s capacity to preserve heritage sites.

    • Darja Reuschke

    Public-Private Partnerships in Urban Development in the United States

    This report contains a in-depth analysis of several case studies of urban renewal projects in many cities in the United States with practices in Germany. Some lessons are identified such as the relevance of autonomy in the local level to conduct efficient negotiations with the private party.

    • 2002
    • Qingshu Xie, Roger Stough
    • George Mason University

    Public-Private Partnerships in Urban Economic Development and Prospects of Their Application in China

    The term “public-private partnerships” has frequently appeared in the media and in the economic development literature in recent years. As an institutional approach, however, public-private partnerships have a long history in local economic development policy. With the structural change of the economy in the developed countries and the development of economic globalization in the last two decades, urban regions have been forced to use a wide variety of incentives to compete for mobile capital and high quality labor. In the United States, urban economic development activities have increased since the 1980s; at the same time, the composition and focus of public-private partnerships in urban economic development also increased....

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