Public ± Private Joint Ventures for High Volume Retailers: Who Bene ® ts?

Summary. Retail development has become the preferred land use among Californ ian 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 origin al purchase price of properties. The paper explores how the bene ® ts of public assistan ce are distributed among the major parties to public ± private joint venturesÐ the city, the anchor retailer and the developer. It attem pts to answer the question, ª Who really bene ® ts from public assistan ce?º We focus on high volume retailers, sometimes referred to as `big-box ’ retailer s, becau se they represen t a homogeneous class of public ± private projects. The results show, som ewhat surprisingly, that while the city ’ s share of the bene ® ts may have eroded, new perform ance-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 perform ance-based public ± private deals are structured. The paper then compares the distribution of public tax bene ® ts in four public ± private transaction s in Californ ia. The analysis shows a wide variatio n in the percen tage of tax bene ® ts that are retained by the city. In those situations where the city must compete with another city where the development will otherw ise occur, the develop er and the tenant are more likely to receive a large percen tage of the total bene ® ts. The case study demonstrates that cities do not necessaril y have to receive a smaller and smaller share of the public bene ® t over tim e as tenants and developers become more sophisticate d in playing off one city again st another. Deal structures such as those presen ted here provide ample tools with which to protect the public ’ s share of the bene ® ts