The examples below cover most property sectors including wind energy, retail, theme parks, and urban redevelopment. They illustrate how the gathering of real-time intelligence - what we call political due diligence – and the creation of campaign strategies and tactics can mitigate objections, neutralize the opposition and rally community support.

• Saint Model Outcomes – actions speak louder than words in land use politics
• Saint Model Outcomes – help developers find and rally latent support
• Saint Model Outcome – local group is key to winning support for theme park
• Saint Model Outcome – video, local outreach win town board vote on retail move
• Saint Model Outcome – politics of planning wins referendum to protect development
• Saint Model Outcome – coal-fired power plant must respond to local concerns
• Saint Model Outcome: counter opposition to urban renewal, find your own support
• Saint Model Outcome — a wind farm case study on how to build community support

Saint University, the academic and corporate training arm for The Saint Consulting Group, offers corporate training and professional development seminars drawn from a quarter century of winning land use battles in the US, Canada and UK.  For more information about The Saint Consulting Group, visit www.tscg.biz

By Nick Keable,
Vice President, UK Operations, The Saint Consulting Group 

Assuming that the Tories do manage to come out of the General Election in control of the UK, and that is by no means certain at all, they have this week laid out their proposals for reform of the planning system.  And it’s big.  And radical.  And scary.

Most scary of all is the introduction of third party rights of appeal.  This could be truly horrible for the development sector.  Labour flirted with the idea earlier this decade but backed off.  In Scotland, they came close but stayed sane.  Let’s hope that this is an idea that can be seen off  as a ‘sacrificial layer’ of their proposals.  But maybe not.  The Tories are now the party of NIMBYism.  They are no longer the party of business.  And their ‘localism’ mantra is the driver for this new found love for third party rights, so it may be hard to disabuse them of the third party appeal concept.

The second fundamental fear is the impact of yet another – the third – round of planning system reform since 1997; all policy certainty shot to pieces, council officers sucked out of development control and into policy making, not to mention the inevitable ‘planning by appeal decision’ which during any transitional period always occurs.

There would be winners and losers in this new system. 

The losers would be regional government (which would be abolished), potentially developers of major infrastructure projects (whose planning regime would once again be controlled by politicians) and frankly all other developers (who will be impacted by the sclerotic affect of any change to the planning system, as well as a more difficult planning regime at the end of it all).

The winners are many: LPAs (which gain lots more power), county councils (which are being given a role once again), NIMBYs (who will find it much easier to campaign against development) and, of course, planning consultants (who will have to help us mere mortals understand what the hell is going on)!

See here our bullet point summary of the Tories’ proposals…

Short Guide to the Main Proposals in the Conservatives’ Planning Green Paper

National policy

Human Rights Act – Replaced by a new Bill of Rights

New primary legislation – Local Government and Housing Bill, Queen’s Speech 2010

New National Planning Framework – Will include all PPS’, debated and adopted by Parliament

Use Class Order – Replaced by “flexible zoning” ie freely change use within a range

Planning gain – New ‘Single Unified Tariff’ slimmed down S106, graded on development size.  CiL to be abolished

All Killian Pretty recommendations accepted.  New Killian Pretty Review to look at expanding permitted development

Regional/sub-regional policy

All RDAs to be abolished – Consulting with GLA on London

All RSS’ to be scrapped – Perhaps quickly by executive order

New sub-regional policy – County structure plans return but now called Infrastructure Plans

Local policy

LDFs replaced by local plans – Must use ‘collaborative democracy’ process to consult

Time limit for adopting new local plans – Otherwise national planning guidance conformant applications will get automatic approval

Plan changes – Removal of inspectors’ power to change new local plans at inquiry.  Instead, inspector reports to SoS for breaches of national guidance, SoS to decide, then LPA amends and resubmits

Transitional arrangements – LPAs can cull disliked ‘imposed policies’

Architectural/design standards – Must be included in new local plans

New ‘duty to cooperate’ – For statutory consultees on new local plans

Incentivisation – Let LPAs keep council tax/business rates increase and match it for 6 years.  Additionally, LPAs will retain some of the new Single Unified Tariff

Development control

New third party rights of appeal

But only 2 grounds for appeal – “Procedure” (dealt with by Local Government Ombudsman) and “in contravention of LDF” (dealt with by Planning Inspectorate).  JR process as per now

Pre-application consultation – Mandatory ‘collaborative design’, by enquiry by design, charettes etc for larger projects

Objections – Significant number of objectors triggers conformity assessment of application

Neighbour compensation – Pay off your objectors.  Parish councils considered neighbours

Councillor interests – Change to ‘predetermination rules’.  Let councillors oppose development openly

Parking – National standards to be abolished.  LPA to decide local standards

Major infrastructure

IPC – Becomes ‘Major Infrastructure Unit’ within Planning Inspectorate

Major linear projects – Via hybrid or private Parliamentary bills

Ministers’ final decision – Set time limit for making decision

Residential

Housing targets – Abolished. Use so called “Option 1 numbers”

Affordable housing – Local targets set by LPAs (125% council tax incentive)

Density – Scrap PPS 3 targets

Back gardens – Changed back to greenfield from brownfield

Retail

Needs test – Reinstated

Competition test – Must be taken into account

Minerals/Waste

Strategic planning – RSS responsibilities back to minerals/waste planning authorities

Education

New schools – Automatic right of change of use to education

D1 land cannot change use – Unless Education Secretary allows

Appeals – Dealt with by new Major Infrastructure Unit

Wind energy

LPA keeps business rates of operational wind farms for 6 years

Community ownership to be explored

Discounted electricity for communities in local vicinity to be explored

Mobile phone masts

End permitted development rights – All masts must have full application

Previously discussed emerging policy that did not make it into the Green Paper

Abolition of LPA centralized performance targets, Planning Delivery Grant, application timescales

‘Merton Rule’ expansion

TIFs or bonds

Referenda for controversial projects – Petition of 10% of local electorate

Abolition of GoL – All powers to Mayor, GLA or London boroughs

Other relevant emerging policy not discussed in the Green Paper

Cease Government support for Heathrow 3rd runway.  Promote high speed rail

U-turn on empty business rates

Mayors for 12 large cities

Nick Keable is vice president for UK Operations, The Saint Consulting Group, email keable@tscg.co.uk, phone +44 207 592 7050

While folks in Arlington, Texas, bust their buttons with hometown pride over the billion-dollar football stadium they helped Jerry Jones build for his Dallas Cowboys, taxpayers in Hamilton County, Ohio, have a serious case of buyer’s remorse over their 1996 vote to fund new stadiums for the Cincinnati Bengals and Reds.

Hamilton County voters 13 years ago approved a half-cent sales tax increase to fund not only the stadiums, it turns out, but extravagant lease deals for the millionaire owners of the professional football and baseball franchises.
Political backers of the stadiums bought support for the giveaways with a golden carrot: the tax increase would also pay for a rollback of property taxes.

A tax increase for a tax break? Yee-haw! And the voters bought it.

Besides, they didn’t want the rest of America to think Cincinnati was a hick town if the professional sports teams moved away.
Now voters who fell for the cynical deal feel like rubes played for suckers at the carnival, because they’re on the hook for what looks like a $13 million deficit next year in the stadium fund that pays off construction debt for Paul Brown Stadium and Great American Ball Park.
The deficit might be even more — possibly $92 million by 2014 if nothing is done.

Loath to increase property taxes — or, as they put it, eliminate the ‘rollback’ — politicians are looking at Cincinnati’s public school budget for a chunk of the money.
The Reds and Bengals, meanwhile, are reported to have no interest in renegotiating the sweet deals they got. (The county actually pays the Bengals $8.5 million a year to lease and operate the stadium it built for them. The Reds pay rent now, but the county will have to start paying them in 2012.)

Back when it was sold to voters, the stadium funding assumed sales tax revenue would grow 3 percent a year — called a ‘conservative’ estimate at the time. Alas, revenue has averaged only 1.65 percent growth since 1996 and declined five of the last nine years.
The annual Saint Index© survey of American attitudes toward land use and real estate development has consistently found high levels of cynicism about the process by which what does and doesn’t get built is decided. And selling taxpayer funding of new sports stadiums by promising voters a property tax rollback certainly qualifies as a cynical pitch.
But the voters of Hamilton County, Ohio, can only kick themselves for buying the scam. To now make the school system pay the price? That would be a truly cynical deal.
Links to stories about it:
http://www.bizjournals.com/cincinnati/stories/2009/08/24/daily5.html
http://news.cincinnati.com/article/20090824/NEWS0108/308240095/Taxpayers+will+owe++13M+to+stadium+fund
http://www.bondbuyer.com/article.html?id=20090831VQFK8A86

If you’ve ever invested millions or billions in capital to develop a project and watched it all disappear one night at the hands of a few elected officials who voted ‘no,’ stop reading.  You know what political risk is and wish you had included it in your project risk analysis.

On a macro level, if you are an energy company with generation and distribution assets and future project plans, no minute goes by where your thoughts don’t turn to how climate change discussions on Capitol Hill or in Copenhagen will impact your business.

Companies with significant dollars at risk often turn to professionals to manage how political decision-makers will impact their industry.  Lobbyists, PR professionals, attorneys and ad agencies are utilized to manage (or minimize) the impacts of political decisions on their short-term and long-term investments.

Increasingly, these efforts also extend to land use permitting by employing political strategies to minimize investment risk.

The investment community is no longer immune from local political or NIMBY influence. Long delays in the permitting process, endless legal appeals or even outright rejection of zoning and land use applications are a serious threat to investors.

Political risk management, be it for a wind farm, a gas-fired generation facility or a linear land use project such as a pipeline or transmission line is increasingly applied in the following areas:

Feasibility

Understanding risk is the first step to minimizing the loss of investment. How many of you wouldn’t allocate less than one percent of the capital raised for your project to understanding whether you would get any return on 100 percent of that investment?

Yet, a majority of those involved in the energy and capital markets community fail to conduct political due diligence to determine the risk of losing the vote that delivers the return on investment.

Asset Development

Once you’ve calculated the risk factors and made a decision to pursue permit approvals, you manage that risk by doing what it takes to ensure that every dollar spent in the development phase is an investment in future earnings once operations commence.  A dollar spent reducing your development timeline means a quicker return.

Land use decisions are political.  Therefore, if political pressure from residents in support of your projects is applied early and often, you’ll see your first dollar of investment return sooner.  Local community opposition equals risk to early returns or no return at all.

Asset Protection & Sustainability

For a family that has bought a new home that purchase represents the most significant investment in their future. If a detrimental use were proposed across the street from their house, their opposition would be rooted first and foremost in a desire to protect their investment. The same is true for your investment in your project. Those who stand idly by while threats to their market build up around them are destined to see a reduction in returns on their investments.

Risk doesn’t end after your operations begin. Holding fast to your market in a down economy is critical to coming out of it intact and with advantages in the market.

Ben Kelahan is senior vice president for energy, The Saint Consulting Group. email: kelahan@tscg.biz
Tom Ahern in senior vice president for capital markets and health care, The Saint Consulting Group. email: ahern@tscg.biz

In his most recent book, “The Housing Boom and Bust,” economist Thomas Sowell argues that the current financial crisis was partly caused by politicians who were attempting to solve an “affordable housing” crisis, which did not really exist on a national basis.

Land use laws and attempts to protect open space, block sprawl, etc, made housing very expensive in selective markets, like Washington DC, San Francisco and Boston, he says. But most markets around the country, where there were few if any land use controls, had very affordable housing. But to solve the perceived “Crisis”, politicians from both parties forced banks to offer easy credit to people who were not otherwise qualified, causing the disaster when interest rates rose and forced many into foreclosure.

Sowell’s book brings up a seldom-debated issue: by blocking what can be built, and where it can be built, do local land use planners also raise the price of land, forcing the price of housing and other development way up?  The Law of Supply and Demand would argue that if you artificially limit supply without lowering demand, you do raise prices. Is that good? What problems will it create?

Sowell cites lots of data and examples, including a Coldwell Banker study that showed in San Jose, with severe land use constraints, the price of a single family house cost almost a $1 million compared to $155,000 for a similar house in Houston, which has no similar land use restrictions.

In their passion to protect open space, preserve historic buildings, limit encroachment on undeveloped land and control sprawl, do planners and their supporters create housing shortages? Do they examine the economic consequences of their constraints on growth? Shouldn’t they?

In his book about central economic planning, Nobel Prize Winner F.A. Hayek argued that central planning would ultimately take away individual freedom since central planning would create unintended consequences that would require additional laws and regulations to “fix”, creating still more unintended consequences, requiring still more laws and regulations to “fix.”

Are land use controls doing the same thing? Are they blocking affordable housing development, requiring government to pass other laws on credit, mortgages and rent control, in order to “fix” the problem?

P. Michael Saint is chairman and CEO of The Saint Consulting Group, email msaint@tscg.biz

The New York Times recently reported that cities missed an opportunity on transportation funding due to politics.  Specifically, the Times reported that despite the fact that two-thirds of the population lives in large metropolitan areas, these cities are seeing far less than two-thirds in transportation stimulus money (see Cities Lose Out on Road Funds from Federal Stimulus). 

Morris Newman of the California Planning & Development Report says that this is extremely unfortunate as mass transit is the central issue in urban economies, after jobs and housing.  In particular, he sees commuter rail expansion as a do-or-die issue in Southern California (see California Planning and Development Report).

The historical benefits of mass transit support Newman’s case. 

For instance, one only needs to look to Salt Lake City to see the positive impacts of light rail and commuter rail on the community.  Even in the current recession, that city’s downtown is being revitalized by millions of dollars in private sector investment as a result of these new transit systems.  This is no surprise as public sector investment in rail transit has been shown to lead to private sector development.

One study commissioned by the American Public Transit Association found that a community gets back $4 for every $1 invested in rail transit.  It would be hard to find a better ROI for transportation money.

Owen Eagan is senior vice president for transportation, The Saint Consulting Group, email eagan@tscg.biz, phone 818-827-7127

Recession is a great time to go after development entitlements. Many landowners sit on properties that may have a higher value and better use. In addition, cities and counties are much more receptive to economic development. They need the tax revenue and may be less strident on approving new projects. The Saint Report has carried accounts of how NIMBYs are taking a back seat to recession.

Without turning over a shovel of dirt, owners can add significant value to their property by adding development entitlements and then holding off on construction until the economy improves.

One owner may use the downturn to rezone land so that when economy recovers, he can better market the land to a developer at a much higher return than if they kept the industrial zoning it has now.

Despite the downturn and uncertain need for new retail and office properties in a major metropolitan area, another developer may forge ahead a significant mixed use project, arguing that more development will help drive a recovery in the region.

However, this is not without its challenges. Existing or recently entitled projects have a limited shelf life. And when this time runs out, depending upon the form, the extension of time can be challenged. Generally, a permit is good for so much time (12 or 24 months), and if the owner doesn’t start the use or construction then the permit lapses.

Sometimes the city ordinance allows the planning director or city manager to extend the time period for good cause; other ordinances require the landowner to file a formal application to extend the time. The requests for extension are rarely denied or challenged, as this is a pretty pro forma activity. However, if the proposed land use is controversial, there have been occasions where requests have either been denied or approved with additional conditions.

In Montrose, NC, the Charlotte Business Journal reported, one developer whose ambitions for a 9,000-home community waned in recession is now looking at options to set aside 2,000 acres for a Sun City-style age-restricted community.

He’s using the down time to line up regulatory approvals for bringing utilities and a sewer plant to the site. “We’ve been using this time wisely for entitlements, studies and approvals.” That will position Montrose for a fast start once the economy improves, he adds.

See San Jose Business Journal for updated feature by Katherine Conrad on how California cities are throwing the construction industry a lifeline to keep entitlements alove.

Jesse McKnight is executive vice president, The Saint Consulting Group, email mcknight@tscg.biz, phone 510 279-4271

Go to a local zoning board meeting on any given Tuesday night and you are bound the see the following: lawyers, lots of lawyers, usually in suits and not exactly looking like the general citizenry of the town or hamlet. There will also be developers and their assorted consultants — traffic engineers, landscape architects, environmental engineers. But look again, and now you may also see a representative from the investment firms that source capital for these projects.

When investment firms, private equity or hedge funds, banks and other instruments of capital invest in real estate development, they enter the uncertain world of land use politics. Developers routinely hire land planners, engineers and lawyers to contain their risks and protect their investment as they seek the public approvals and permits necessary to build. But who is protecting the interests of the capital investors as local politics are injected into the debate?

An interesting dynamic is shifting the way these sources of debt and equity approach local politics.

The goal for many is to simply better manage the risk that comes with investing in real estate development projects. Now, it matters not whether the investment is made in a wind farm, a hospital, a copper mine or a traditional retail power center.

In the past, investment firms would simply provide the capital and step back and wait for the developers to complete the project. A little hoping and praying would go into the waiting period, but rarely, if ever, did the source of capital inject themselves into the local permitting and approvals process. That is changing, both as a result of the recent economic downturn and of the responsibility of investment firms to ensure better returns for fund investors.

So, how can a private equity firm with hundreds of millions of dollars (or euros or British pounds) invested in multiple projects around the US or the UK better manage the political risks? First, by getting a top to bottom scope review of the political realities of the community. The investor who best understands the true timeline of a local approvals process can better manage the flow of capital needed for the project.

Political risk comes not only from the uncertainty of the local elected officials, but also from local activists and citizens who may step forward to oppose the project. We have seen cases where a small group of committed citizens is able to hold up a development project for years — freezing capital and putting in jeopardy the assumed return on investment to the fund investors. Managing risk also comes from understanding how to build support for the project, a job that used to be the exclusive interest of the developer. No longer.

Scoping a project before it begins is just the first step for investment firms in managing the political risks of development. No longer are many in the investment community sitting back and trusting that the developer or their consultants will deliver the project on time and on budget. They are engaging their own team of consultants to build local support, to manage the local political environment and increase the likelihood of a smooth approvals process.

A recent conversation with an investment fund manager confirmed this new focus for those writing the checks — they simply cannot afford to have million of dollars tied up in projects that, despite the best efforts of the local development team, stand little or no chance of getting approved and built in a reasonable amount of time.

Tom Ahern is senior vice president for capital markets and health care, The Saint Consulting Group, email: ahern@tscg.biz phone 781 836-4343