Public-Private Joint Ventures for High Volume Retailers: Who Benefits?

Allan Kotin and Richard Peiser
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Allan Kotin: KMG Consulting, 12100 Wilshire Boulevard1050, Los Angeles, California 90025, USA, akotin@idt.net
Richard Peiser: KMG Consulting, 12100 Wilshire Boulevard1050, Los Angeles, California 90025, USA, peiser@almaak.usc.edu

Urban Studies, 1997, vol. 34, issue 12, 1971-1986

Abstract: Retail development has become the preferred land use among Californian cities because the sales tax dollars generated by such development have the greatest impact on local budgets. This situation is a direct result of California's Proposition 13, passed in 1978, which limits property taxes to 1 per cent of the original purchase price of properties. The paper explores how the benefits of public assistance are distributed among the major parties to public-private joint ventures—the city, the anchor retailer and the developer. It attempts to answer the question, "Who really benefits from public assistance?" We focus on high volume retailers, sometimes referred to as 'big-box' retailers, because they represent a homogeneous class of public-private projects. The results show, somewhat surprisingly, that while the city's share of the benefits may have eroded, new performance-based incentives are being employed in public-private joint ventures that help to protect the city's share. The North County Square case study illustrates how new performance-based public-private deals are structured. The paper then compares the distribution of public tax benefits in four public-private transactions in California. The analysis shows a wide variation in the percentage of tax benefits that are retained by the city. In those situations where the city must compete with another city where the development will otherwise occur, the developer and the tenant are more likely to receive a large percentage of the total benefits. The case study demonstrates that cities do not necessarily have to receive a smaller and smaller share of the public benefit over time as tenants and developers become more sophisticated in playing off one city against another. Deal structures such as those presented here provide ample tools with which to protect the public's share of the benefits.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:sae:urbstu:v:34:y:1997:i:12:p:1971-1986

DOI: 10.1080/0042098975178

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