Flying Experts in Saarbrücken
Business Improvement District fits best for funding Stadtmitte am Fluss
ReUrbA's Flying Experts visited Saarbrücken from 10 -12 July to advise the city on the best ways of financing the Stadtmitte am Fluss (SmaF) project. Five experts on private and public financing of ULI (Urban Land Institute, USA) found a city with great potential and were impressed with what Saarbrücken has to offer. During three days of fruitful consultation, the panel came up with a series of practical recommendations.

How to finance the public improvements essential to the redevelopment of the downtown? As so many other cities with regeneration plans, this is the question Saarbrücken is facing. An interdisciplinary team of experts, chaired by Richard Ward of the Urban Land Institute (ULI), tried to come up with solutions.

They concluded that the implementation of a Business Improvement District (BID) is the most fitting method for Saarbrücken to generate a revenue stream. In a specially designated district businesses can be taxed in order to generate revenue to improve the value of the district.

Tax Increment Financing (TIF), a method frequently used in the US, turned out to be less applicable in the German situation.

In this method, public infrastructure is financed by the increased tax revenues in development or regeneration areas. A fairly substantial property tax rate is essential for TIF to work. The Saarbrücken tax rates would yield too little revenue.

The panel considered BID and TIF as methods that come under the principle of value added budgetting, one of the ReUrba tools. The panel stated a number of recommendations for implementing this BID. First of all, the city has to define why such a tax district is necessary and reasonable. A steering committee of stakeholders should be established to make sure the legislation and process are accepted.

The panel further concluded that the tunnel, financially the most ambitious plan of SmaF, is not likely to be funded by private parties within the conditions set by Saarbrücken (no toll). In this instance the city should look toward the federal government for funding.  

The panel added suggestions for a number of financing concepts that will not generate large amounts of money at once, but may in the long run contribute to fill a void in funding. These include development impact fees (a fee on new development or redevelopment to help to offset the city's cost of the project), fundraising and capital campaigns for cultural facilities.

Apart from this financial advice, the panel had a number of recommendations regarding the regeneration process, with a focus on attracting private investors.  

To successfully attract these investors, the panel defined three critical conditions: return on investment, clear development targets and an open and flexible permit and entitlement process.

The return on investment should come either from cash flow revenue or increased value of real estate. The typical rate of return on the investment is 15 percent.

To define the development targets the areas available for private development and investment have to be defined, as well as the acceptable types of development

An open and flexible permit and entitlement process is needed, because investors want to know what to expect.

To arouse the interest of private investors, the foremost thing to do is to create a clear picture of the future Saarbrücken ('branding'). They will want to know who and what they are going to be building for. Who will live in the downtown about fifteen years from now? And what services will they require?

The panel came up with some answers. They believe that the city will be a high quality urban environment with downtown housing 'of an appropriate scale' (not high rises). The majority of the inhabitants will be single with no children (young professionals as well as 55+). Saarbrücken will be a retail and entertainment destination in an urban setting.    

Secondly, the city will have to show that it is serious about the regeneration and is willing to assume some of the risk. Before investors will be interested, they need to know how much public money is going to be invested and on what projects. The GIU, the city's development department, should be clear about the conditions for development and define the available sites and the investment opportunities for the private sector.

It is also important to find 'strategic partners', parties that are instrumental in making the regeneration process work.

After the planning stage, it is important to show the potential investors that action is taken and that the implementation is in progress. A business plan, a detailed budget and a strategy for attracting private investment are essential in this stage. Once the implementation strategy is in place, the GIU needs to develop a roadshow to take to potential investors.

The best way to make the SmaF-project visible is to embark on three or four catalytic projects. The transformation of Berliner Promenade and Bahnhofstrasse should be the two major efforts to start with. But small enhancements as well may create the notion that things are moving in a positive direction. Signage for the old town area is one suggestion, encouraging façade improvements is another.

In redeveloping the downtown, the city should take care that the area will not be empty after hours. Therefore the development of housing projects has to be encouraged. Turning obsolete upper story offices into residences is one suggestion. In order to attract developers for the spots that are difficult to develop, the permit process should be streamlined. Another possibility is linking premium sites to less popular sites. Developers may be offered a reduced rate for developing the former, if they are willing to also regenerate the latter.

Major retail projects that could serve as a draw for the downtown should be encouraged. To create awareness of the city, sponsored events are of great importance.

For the long term attention has to be paid to the accessibility of the city. A parking and circulation study is recommended.

>>> Interview
with Mary Beth Corrigan, Vice President at the Urban Land Institute:
'If the local government is making an effort, taking some risk, that's a good sign for investors'

>>> Draft report
(for ReUrbA partners only)

Critical conditions for private investment

1. Return on investment (15 pct. is the typical rate)
2. Clear development targets
3. Open and flexible permit and entitlement process  

Recommendations of the Flying Experts to Saarbrücken

• Define the image of the city to be ('branding')
• Connect public money with private money: share the risk
• Define the conditions and possibilities for development
• Define and find strategic partners
• Work with a small group of investors on complex redevelopment programs
• Explore special economic districts and define the boundaries
• Develop the story of the steps ahead (business plan, budget, strategy)
• Start on a small number of catalytic projects to make the process visible
• Enhance what you have
• Draw attention to the city (sponsored events, major retail anchors)
• Make sure the city is easily accessible
• Make sure the city is not empty after hours (encourage residential development)

The Flying Experts

• Richard Ward (Chairman, ULI)
• Uwe Brandes (ULI)
• Elizabeth Hill McLoughlin (ULI)
• Rudy Stroink (ULI)
• Elena Wiezorek (ULI)
• Mary Beth Corrigan (ULI)
• Sophie Pauwels (ReUrbA)
• Willemien Faling (ReUrbA)

(ULI is Urban Land Institute, a US-based non-profit research and education organisation)