Tag: development agreement

 Historic mills stand as proud reminders of America’s industrial past. For residents, they also serve as an anchor of stability in a rapidly changing world. However, as time passes on these historic structures, there is a growing urgency to stabilize, preserve, and repurpose abandoned mills before they deteriorate beyond repair.

Often inheriting dilapidated mills and their associated environmental risks, upkeep costs, and security hurdles, local governments are keen to explore opportunities to unlock their potential. In addition to their value as heritage sites, a historic mill can represent a redevelopment opportunity to spur economic growth, boost tourism, and host new community facilities. Local governments typically lack the resources and expertise to rehabilitate properties independently, turning to public-private partnerships (P3) as a tool for historic mill redevelopment.

Laying the Groundwork for a P3 in Historic Mill Redevelopment

Before issuing a P3 solicitation for a private partner, a municipality must craft an implementation plan to guide a successful P3 strategy. Among many issues to consider:

  1. Envision the Mill’s Redevelopment: Prioritize desired outcomes like historic preservation, economic revitalization, or creating a cultural hub.
  2. Assess Public Support: Gauge the readiness of leaders to back the redevelopment financially and politically.
  3. Plan the Infrastructure: Identify essential public infrastructure and potential funding sources to support the project.
  4. Blueprint the Project: Draft a realistic timeline and budget for the project.
  5. Clarify Roles: Define public and private stakeholders’ roles, expectations, and benchmarks for success.

While foundational plans are important for a successful P3, flexibility is critical. Allow room for private partners to leverage their insights and expertise and adapt to evolving market conditions.

Crafting an Effective P3 Request for Qualifications (RFQ)

A well-framed P3 RFQ is a vision statement and an outline of how the local government will execute a project. It should demonstrate the municipality’s commitment to leverage the benefits and address the challenges of a P3. Instead of demanding design specifics and financial data from respondents, emphasize the public project team’s clarity of purpose and preparedness. Focus on evaluating potential partners for their alignment with the town’s goals and resources.

Collaborate, Adapt, and Overcome

Even with the right P3 partner on board, challenges will arise. Anticipate structural surprises in the building, regulatory hurdles, community resistance, and market flux. An adaptable implementation plan and well-defined public-private partnership can navigate and overcome challenges as they arise.

Be Realistic, Be Ready

Sometimes, a historic mill property might not be ripe for immediate private investment through a P3. In such cases, a town’s initiative to enhance infrastructure, host community programming, and invest in supporting public facilities will lay the groundwork for a future P3 and signal the local government’s commitment to the project’s long-term success.

Florence Mill: Laying the Groundwork for a Historic Mill Redevelopment

The Florence Mill in Forest City, North Carolina, represents an example of public investment preceding a P3 in a historic mill redevelopment project. The Town has taken the lead in revitalizing the mill property, investing in the mill’s structural stability, adding a public amphitheater, bolstering infrastructure, and building an adjoining rail trail connecting with neighboring towns in Rutherford County. As the Town sets out to engage a development partner, the Town’s efforts showcase its dedication and readiness for the rehabilitation of the 1986 mill building through a P3.

INNOVATE P3 guides local governments in conceptualizing, strategizing, and implementing P3s to redevelop historic mills by emphasizing careful advanced planning and creating compatible and value-added public-private partnerships.

Extending water and sewer infrastructure in new basins not served (or underserved) by utilities requires careful planning and collaboration between private developers, utility providers, and local planning jurisdictions.

What is a service basin?

A water and sewer service basin is a defined geographic area where a utility provider supplies water and manages wastewater collection, treatment, and disposal. The boundaries of a service basin are determined based on factors such as infrastructure capacity and coverage, population density, hydrology, and service area agreements. The provider establishes and maintains infrastructure within a service basin, including water supply lines, sewer lines, pumping stations, and treatment facilities, to deliver clean water and adequately manage wastewater. The utility provider plans for infrastructure expansion within the basin based on projected growth in the area. In fast-growing metros, development can outpace capital infrastructure plans; in this case, private developers typically extend and expand infrastructure to accommodate new growth in coordination with utility providers and local planning jurisdictions.

how does the water flow?

When designing new sewer infrastructure, utility providers build gravity or force main lines, depending on an area’s topography and geology. Gravity lines use the land’s natural slope to move wastewater, relying on gravity to guide the flow. Force main lines require pumps to overcome elevation differences and propel wastewater through the system.

Water systems primarily use pressurized systems to distribute water. Pressurized water distribution systems rely on pumps to maintain consistent and controlled pressure throughout the network. Water is pumped into the system at a higher pressure, allowing it to flow to consumers’ taps and fixtures. This pressurized system ensures that water reaches all distribution network areas, including areas with varying elevations or uphill locations. Unlike gravity systems, which rely on the natural downward flow, pressurized water systems provide the flexibility to distribute water to higher elevations and overcome terrain challenges.

What is Oversizing?

Utility providers and local governments may require developers to oversize utility lines to accommodate future growth and avoid costly expansions. This approach involves installing larger infrastructure than necessary for a single project to account for future sewer demand and prevent the need for parallel installations later. For example, instead of a 12-inch force main line for a single residential project, a 16-inch line may be required to accommodate future demands. The public utility or local government should cover the cost of oversizing through cost-share arrangements to ensure fair allocation of the added financial burden.

In new basins with multiple developers requiring expanded water and sewer capacity, one developer may enter into cost-sharing agreements with other developers to equitably distribute the financial responsibility. These agreements consider factors such as land area, anticipated usage, and projected growth to allocate costs.

In either case, the first developer in an unserved or underserved basin often bears a higher cost burden for initiating infrastructure improvements. Additionally, local and state laws may not address or require cost-sharing arrangements, leaving the first mover reliant on voluntary agreements with public utilities and other developers to share costs.

What is actual flow vs. calculated flow?

When considering the design and cost of new sewer infrastructure, it is crucial to understand the difference between actual and calculated flow (or paper flow). Calculated flow refers to estimated sewage flow rates based on factors such as population density, building occupancy, and predicted water usage. Actual flow considers real-time data and usage patterns and represents the actual flow rates of wastewater through a system. Utility providers establish infrastructure sizing requirements for new development based on minimum calculated flow rates, typically set by state law and local ordinance or policy.

Continuing improvement and implementation of water conservation measures can result in actual flow rates substantially lower than the minimum calculated flow requirements. Consequently, new wastewater lines may be oversized to provide unnecessary future capacity. On the other hand, climate change and natural weather events can put an unanticipated strain on wastewater systems. Rising sea levels, extreme rainfall events, and storm surges can overwhelm existing sewer infrastructure, with an influx of excess water into the sewer system exceeding its capacity, causing backups, overflows, and system failures. Additionally, flooding can introduce contaminants, such as pollutants and bacteria, into the wastewater system, further complicating treatment processes downstream.

Changes in legislation can significantly impact the requirements for calculating sewer flow and permitting sewer line extensions. North Carolina, for example, recently passed legislation changing the minimum calculated flow rates for wastewater systems. The legislation allows wastewater treatment systems to calculate wastewater flows for new residential units at 75 gallons per day per bedroom or a lower rate approved by the NC Department of Environmental Quality. This change represents a significant reduction in the minimum calculated flow previously required by the state for new sewer infrastructure. It will impact the design, cost, and capacity of new systems across the state for utility providers and private developers.

Navigating water and sewer infrastructure planning and expansion requires a significant investment of time and resources by utility providers, local governments, and private developers to meet current and future demands. With the added impacts of climate change and a shifting regulatory landscape in communities across the country, building resilient and cost-effective infrastructure will require more collaboration among public and private stakeholders.

Innovate P3 works with local governments, utility providers, and private developers to create partnerships and equitable cost-sharing arrangements for water and sewer infrastructure planning and development in urban and rural communities.

 

Transit-oriented development (TOD) integrates public transit with land use and development to promote walkable, and vibrant neighborhoods that reduce reliance on private vehicles and enhance the use of public transportation. TOD locates residential, commercial, and community uses in close proximity to each other and to transit stations or hubs, making it more convenient and attractive for people to walk, bike, or use public transportation instead of relying on cars. There are several types of TOD that serve a variety purposes:

  1. Destination TOD: These projects create vibrant urban spaces that attract residents and visitors as local or regional destinations. They typically feature mixed-use retail centers, entertainment venues, cultural attractions, or recreational facilities. By drawing outside visitors, these TODs encourage the use of public transit to reach the destination.
  2. Transit-Hub TOD: This type of TOD focuses on the functionality and operations of transit stations or hubs where multiple transportation lines converge, such as train or bus stations. Commercial and public spaces in these TODs cater to the needs of transit users, providing convenient services and amenities. They include retail stores, restaurants, cafes, convenience stores, and services that serve commuters and pedestrians. Well-executed developments create a bustling and pedestrian-friendly environment around transit hubs, incentivizing public transit use by facilitating access to daily amenities.
  3. Neighborhood Services TOD: Neighborhood Services TODs provide essential amenities and services within walking distance of residential areas or integrated communities. Community and retail spaces cater to the daily needs of residents, enabling them to access goods and services without relying on private vehicles. They typically include grocery stores, pharmacies, small-scale retail shops, restaurants, healthcare facilities, and other community-oriented services.
  4. Employment-Oriented TOD: This type of TOD focuses on creating spaces that meet the needs of the neighborhood’s workforce. It includes office buildings, co-working spaces, business centers, and support services such as restaurants, cafes, and convenience stores. The goal is to provide amenities and services that support nearby workers and encourage public transit commuting. By locating job opportunities near transit hubs or along transit lines, this type of TOD aims to reduce traffic congestion and the need for commuter parking.
  5. Mixed-Use TOD: Mixed-use TOD combines various land uses, including commercial, retail, and residential, often incorporating elements of destination-oriented, transit-hub oriented, and/or neighborhood services-oriented TOD. These developments create vibrant and diverse environments where people can live, work, shop, and enjoy recreational activities within a walkable, pedestrian-oriented area. They include a range of retail spaces, from small local shops to larger anchor stores or entertainment venues, fostering a sense of community by offering services and amenities within walking distance.
  6. Innovation-Oriented TOD: Innovation-oriented TODs create environments conducive to research, development, and innovation, especially around universities. These developments feature commercial and retail spaces tailored to technology-based industries, research institutions, startups, and incubators. The goal is to foster a collaborative ecosystem that supports knowledge-based industries and attracts a talented workforce. Innovation-oriented TOD can include office spaces, co-working areas, research facilities, educational institutions, and retail spaces tailored to students, entrepreneurs, researchers, and office workers.
  7. Cultural-Oriented TOD: Cultural-oriented TOD emphasizes arts, culture, and creativity in the neighborhood. These projects often include commercial spaces that support cultural institutions, art galleries, performance venues, and creative industries. Public investment drives the creation of a vibrant cultural scene that attracts residents, visitors, and artists, enhancing the cultural richness of the community. Cultural-oriented TOD can also include retail spaces offering unique products related to art, crafts, or cultural experiences.

In practice, TODs often incorporate elements from multiple development types to create a diverse and vibrant environment that supports public transit use, enhances the quality of life, and reduces dependence on private vehicles. While a specific TOD project may include multiple elements, it is essential to prioritize the primary goals of TOD to create a cohesive and successful project theme that aligns with community goals and achieves a reliable financial return.

Innovate P3 collaborates with public agencies and design teams to deliver TOD projects more effectively and with less risk compared to traditional public-private partnership (P3) development approaches.

Development agreements are critical in memorializing partnerships between local governments and private partners on public-private projects. Consider these tips for creating better public-private development agreements:

  1. Start with a term sheet. Effective development agreements start with robust business term sheets. Too often, development partners begin drafting legal agreements before business terms are thoroughly vetted. Investing early effort in a well-considered term sheet helps the business team chart the project’s course and saves time and legal fees later.
  2. Focus on development terms. A well-crafted development agreement is a storyboard for how a project will unfold and builds accountability and transparency in the public-private development process. In addition to fundamental business terms, it provides a blueprint for conducting and managing the project, clearly addressing scope, budget, schedule, risk management, design, construction, oversight and approvals, close-out, regulatory compliance, change management, and claims management.
  3. Separate the property transaction. The transfer of property rights (purchase or lease terms) should be handled in a separate agreement. A development agreement can outline the timing and conditions for an eventual closing and attach the transaction agreement as an exhibit, but the business and legal terms of the two documents should be segregated. Intermingling development and conveyance terms threatens the efficacy of a development agreement as a project delivery vehicle and risks confusing how legal provisions, such as indemnities and remedies, should be applied for failed performance.
  4. Develop processes. Effective risk mitigation creates procedures to limit the impact of forecasted risks if they materialize during development. Successful public-private partnerships also demand a practical and collaborative approach to tracking accountability, continuous monitoring, and adaptation. The development teams executing the project should play a key role in preparing a development agreement and craft practicable processes to address risk and facilitate project implementation.
  5. Change management. Project scope, budget, and schedule changes are the most common causes of disputes in public-private partnerships. Development agreements should clearly define how changes to a project are processed, accounted for, and tracked.
  6. Check the law. State law may be more or less prescriptive in how public-private development agreements may be structured and what terms they must contain. Without specific statutes, other legal or constitutional limitations may apply. Check local law to understand how public-private development agreements may be used in your state.
  7. Keep it simple. A well-prepared development agreement for a complex project can get lengthy. At the same time, it is the document the development team will refer to during project implementation. Thus, it must be logically structured, clearly written, and pragmatic in its application.
  8. Build flexibility. No agreement can anticipate every problem that might arise during the development process. Effective development agreements provide for flexibility and collaborative problem-solving as a project unfolds. Creating a development operations committee, for example, allows issues to be identified and resolved collaboratively during development and is a valuable communication tool for public-private partnerships.
  9. Create a project management plan. Consider creating a separate project management plan that outlines more detailed processes and conditions to guide project implementation. While a management plan can be incorporated by reference into the development agreement, keeping it separate allows it to be a living document that helps build a genuinely collaborative public-private development partnership.

Innovate P3‘s program and project development approach helps clients consider and structure a public-private initiative’s critical business and policy elements long before the contract-drafting phase.