Five Innovative Ideas For Funding Parks And Open Space

Article by Christopher Rizzo 1

1. INTRODUCTION

   New York State and its municipalities are not likely to have adequate revenues to support maintenance or expansion of parks and open space in the next decade. Declining income and property taxes, a cap on property taxes, and constitutional debt limits will severely constrain state and local spending for the next ten years. These constraints come after two decades of aggressive expansion of the parks and open space system. The problem is plain: government must now do "more with less," and this will require creativity on the part of municipal and land-use lawyers. This article therefore considers five alternative revenue strategies that show promise for leveraging private dollars for public parks and protected open space. They include (1) strategic sale or lease of parkland subject state legislative approval; (2) commercial uses of parkland; (3) transfers of development rights and related zoning concepts; (4) public-private management partnerships; and (5) tax increment financing.2 The article concludes by recommending best practices for each method.

2. PARKS IN NEW YORK STATE

   State and local parks play a strong role in New York State's economy. New York State's parks and protected open spaces are, collectively, larger than some nations and U.S. states, covering approximately 325,000 acres.3 The New York State Department of Environmental Conservation owns and operates an additional 4.6 million acres, including some land where logging and mining are permitted.4 New York City owns 28,000 acres of parkland. Other counties and municipalities own and operate hundreds of thousands of additional acres.5 This amounts to almost 8,000 square miles of protected open space, larger than Connecticut, Rhode Island, the Bahamas or Jamaica.

   Given their size and popularity, the economic importance of parks is tremendous. State parks had 55 million visitors in 2009 and generated $1.9 billion in revenue. Protected open spaces have an even bigger impact.6 As Governor Cuomo stated in 2010 (while then a gubernatorial candidate):

   Open spaces support industries that generate billions of dollars in annual revenue for the State. Industries reliant on open space include the $54 billion outdoor recreation and tourism industries, the $13 billion forest products industry, and the $36 billion farming industry. Undeveloped land not only preserves and protects plants and animal species, but also provides so-called "Ecosystem Services," which foster positive environmental results[.]7

   These "Ecosystem Services" are the largest (and unquantifiable) benefit of protected open spaces, which filter air and water pollution, protect shorefronts from erosion and recharge drinking water aquifers.

   Parks and protected open spaces also have a direct benefit for property owners. One 2003 study concluded that residential and commercial buildings in New York City near well-maintained parks have higher property values, more stable prices and less tenant turnover than similar properties further from parks. Central Park reportedly adds $17.7 billion in value to surrounding buildings, providing $656 million in annual real estate tax benefits to New York City.8 The benefit is not limited to affluent neighborhoods in Manhattan; it extends to well-maintained parks in all corners of New York City. The report stated: "Single-family home prices in close proximity to well improved parks ... typically exceeded sale prices further from the park, ranging from 8% to 30%."9

3. THE PROBLEM OF PARK FUNDING

   Both New York State and New York City have aggressively expanded the size of parkland and protected open space in the past decade, while simultaneously cutting maintenance funding. In flush times, acquisition and capital funds are relatively easy to find through one-time legislative appropriations and bond issuances. As explained below, however, maintenance funds are far more difficult to secure, particularly since the recent recession. The result is a larger and less well-maintained parks system.

   Beginning in 1995, former governor George Pataki undertook numerous efforts to increase the size of the state park and open space system. He succeeded, and the park and open space system expanded by 25%.10 The State funded much of the acquisition through one-time bond issuances.11 The State also created a new real estate transfer tax to fund an "Environmental Protection Fund" to ensure that state monies were available for stewardship of these new resources.12 In flush times, the governor's programs worked well, but in recent years the State has repeatedly cut general funding for the Office of Parks Recreation and Historic Preservation ("OPRHP"), which has dramatically reduced maintenance of parks. For example, the State reduced OPRHP's budget by 18% between 2008 and 2011.13 The Alliance for New York State Parks and Parks and Trails New York reported in 2010 that the state park system faced a $1 billion maintenance shortfall, which has resulted in closures and safety concerns around the park system.14 Compounding the problem, the State Legislature has siphoned hundreds of millions of dollars from the Environmental Protection Fund to balance the state budget, leaving very little for park and open space projects in the past few years.

   The State has a very limited ability to pay for parks and open space in the future through issuance of new bonds or more debt. The legislature must authorize new debt by a three-fifths vote; the state must directly allocate the debt to a specific project or purpose but not general park maintenance; and state-supported debt cannot exceed 4% of the total personal income in the state.15 Localities face similar limits.16 The State's comptroller estimates that state-supported debt is at or near constitutional limits.17 And, of particular relevance to parks, state law prohibits issuance of debt for non-capital (i.e., maintenance) purposes.18 This last restriction means that park maintenance can only come from general state revenues, which have diminished considerably since 2008.

   New York City parks face the same problem as the State—a much larger and more complicated park system, but much less money for maintenance and operations. Mayor Michael Bloomberg has dramatically increased capital funding for parks since taking office in 2002, much of it being spent on new and complex parks like the High Line (built on an elevated rail line), Brooklyn Bridge Park (built on waterfront and piers)19 and Hudson River Park (built on waterfront and piers).20 These projects have indisputably been economic drivers for the City, increasing tourism and creating jobs. But waterfront parks are extraordinarily expensive to maintain, with bulkheads and piers requiring constant attention. HR&A Advisors, a Manhattan-based consulting firm, estimates that while maintenance of traditional parks may cost $2,800 per acre, per year, flagship parks like those cited above may cost $180,000 per acre, per year. It is simply impossible to rely on general municipal funds for these new parks at a time when the City has cut funding for overall park system maintenance and operation from $366.8 million in 2008 to $291.9 million in 2013 (a 21% decline).21 The dilemma creates issues of equity and environmental justice; will these new flagship parks consume a disproportionate share of maintenance funds at the expense of existing parks, most of which are in middle- and lower-income communities? Building private-public partnerships can help address these disparities.

4. SELECTIVE ALIENATION OF PARKS

   Before exploring ways to involve the private sector in stewardship of parks, it is essential to understand the core law governing uses of parkland—the "public trust doctrine." The doctrine is defined by over 150 years of state court decisions explaining when municipalities must seek state legislative approval to dispose of or "alienate" public parkland.

   Without legislative approval the State, its agencies, counties and municipalities cannot (1) sell or lease parkland; or (2) use dedicated parkland for non-park purposes.22 Courts have given wide leeway to park administrators to determine when an alienation is occurring.23 Courts have also permitted a host of commercial facilities in parks so long as they genuinely serve park users, as described below, but sale or lease of parkland is always an alienation that requires State Legislative approval.24

   It is tempting for municipalities to view parkland as a fiscal resource that can be (1) selectively sold or leased to raise money; or (2) used for an important municipal facility to avoid paying for a privately-owned site. From 2003 to 2011, municipalities and counties sold or leased at least 1,369 acres of parkland with state legislative approval.25 In many instances, the State Legislature required dedication of replacement parkland, leading to no net loss of parkland or less financial benefit to the municipality. But municipalities alienated at least 300 acres without any defined mitigation or replacement parkland. Some municipalities are selling parks simply to raise money, like the City of Utica's 2005 sale of a 1.39-acre playground that was deemed "abandoned."26 In other cases, municipalities are selling lands for privately-operated recreational facilities, like the Town of Thompson's 2007 sale of 64 acres for a ski resort.27

   Clearly some municipalities have already made a policy decision that selective alienation can sometimes be appropriate to ensure the long-term stewardship and improvement of parkland. So long as the municipalities comply with applicable laws, like the State Environmental Quality Review Act ("SEQRA"), obtain state legislative approval, and comply with any mitigation requirements, the approach is legal.

   Three considerations should guide the use of selective alienation. First, since municipalities already control parkland, it will always be tempting to view them as quick revenue fixes and...