ECONOMICS UNIQUENESS

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216 ■ THE <strong>ECONOMICS</strong> OF <strong>UNIQUENESS</strong> BOX 8.1 Rehabilitation of Historic Urban Brownfi elds Is Part of Nation Building and Economic Development in Eritrea Eritrea Cultural Assets Rehabilitation Project (Project number 058724) Total Project Cost: US$5.4 million Total Loan Amount: US$5 million Approved: July 2001 – Closed: July 2007 As Eritrea began the process of rebuilding its economy after the confl ict with Ethiopia, the World Bank supported a pilot project to test the potential of more fully integrating cultural heritage conservation into economic development. One focus of this project was the rehabilitation and conservation of the unique architectural heritage in the historic city cores of Asmara and Massawa. Both were suffering from severe deterioration as a result of natural and human forces. The work included developing new zoning regulations for the city cores and conservation plans for key historic buildings. The project also supported the production of a number of important publications and studies on Eritrean cultural heritage, particularly related to the built heritage of Asmara and Massawa. These publications have become popular among residents, scholars, and tourists, thereby increasing local awareness, international interest, and tourism. The project also supported archiving ancient manuscripts and recording oral history as part of the investment in cultural assets to support nation building. Source: Eritrea Cultural Assets Rehabilitation Project Implementation and Completion Report. As shown in fi gure 8.1, the two types of urban brownfi elds share public good characteristics relative to the negative and positive externalities and the risks and uncertainty of redevelopment projects. Th e next section of this chapter will examine in greater detail the public good features of urban brownfi elds, and in so doing will consider the eff ects of redevelopment projects in relation to their costs and benefi ts. In this context it is important to highlight that in both brownfi eld defi nitions, the costs and benefi ts of the interventions are very hard to predict because they relate to three activities unique to brownfi eld redevelopment: site assessment, site remediation plan, and actual redevelopment eff ort. From a fi nancial vantage point, remediation and redevelopment activities should be viewed as brownfi eld development potentials; as Groenendijk argues, “it is important to be fl exible about the end use of the site […]. Making (minor) changes to the site plan may result in much more cost-effi cient reclamation”
FINANCIAL MECHANISMS FOR HISTORIC CITY ■ 217 (Groenendijk 2006). Th erefore, the costs and benefi ts of brownfi eld interventions are always linked to the actual end use of the site. Bartsch warns that brownfi eld remediation is a fi nancial “twilight zone” and thus developing adequate and aff ordable fi nancing mechanisms is the most signifi cant barrier against reusing brownfi eld heritage in urban areas (Bartsch 2002). With Bartsch’s caveat in mind, this chapter will review diff erent fi nancial mechanisms dedicated to redeveloping cultural and natural heritage brownfi elds, which include the intervention of the private sector. It will fi rst provide some background with a discussion of the risks and externalities associated with investment in urban brownfi eld development. Next, it will address the role of public administration as the catalyst for the development of urban brownfi eld sites. In so doing, it will consider the private sector as the primary source for urban brownfi eld funding, and will discuss four specifi c fi nancial mechanisms: public-private partnerships (PPPs), land value fi nance mechanisms, urban development funds, and impact investment funds. Each section will off er a case study of a project that has used the considered fi nancial mechanism. Th e chapter will end with conclusions including policy recommendations. Public Good Assets and Private Intervention Th e diffi culty of obtaining fi nancial resources for redeveloping natural and cultural heritage brownfi elds is oft en related to their public good features. Th is analysis focuses on urban brownfi eld areas that have development potential due to their heritage status but that are also imbued with signifi cant risks and externalities of development; therefore, by following the three-tiered model of the National Round Table of the Environment and the Economy (NRTEE) framework; these areas are labeled as B-sites (see fi gure 8.2). Th e uncertainty and externalities are two specifi c market failures that dominate the development of B-sites. In addition to the normal risks that one may confront in an urban development—including site risk, construction risk, and operating risk—two other risks are added in the case of brownfi eld investments: uncertainty about the actual redevelopment costs and uncertainty about future land value. Th ese two types of risk instigate various other risks associated with the fi nancial lenders, particularly loan and credit risk, which correspond to the inability of borrowers to make loan payments; for example, in case the value of the property which may be given as security is eroded. Th ese types of risk are particularly troublesome in developing countries where there is seldom a well-developed credit system and there may also be limited experience in the business of borrowing for brownfi eld projects (Meyer 2000). Moreover, Bartsch notes that, because the transaction costs related to brownfi eld project underwriting have tripled in the last decade, lenders
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Public Disclosure Authorized Public
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Th e Urban Development Series discu
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© 2012 International Bank for Reco
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vi ■ CONTENTS Project Appraisal i
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viii ■ CONTENTS Appendix II: Addi
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x ■ CONTENTS 7.4 Tourism Is Coupl
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xii ■ CONTENTS 9.1 How to Organiz
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Exegi monumentum aere perennius reg
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ACKNOWLEDGMENTS ■ xvii Cultural O
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xx ■ OVERVIEW What Are the Object
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xxii ■ OVERVIEW and captures the
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xxiv ■ OVERVIEW periphery, especi
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xxvi ■ OVERVIEW tourism—by impr
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xxviii ■ OVERVIEW 3. Institutiona
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1 Livable Historic City Cores and E
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LIVABLE HISTORIC CITY CORES AND ENA
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2 Investing in the Sense of Place:
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INVESTING IN THE SENSE OF PLACE ■
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0 45° INVESTING IN THE SENSE OF PL
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FIGURE 2.4 continued INVESTING IN T
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A Dubious Alternative: Property Rec
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46 ■ THE ECONOMICS OF UNIQUENESS
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TABLE 4.1 Overview of Hedonic Price
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FIGURE 6.5 Quito and Oaxaca: Timeli
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Boxes, fi gures, maps, notes, and t
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China. See also specifi c cities ac
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public sector role, 222-26, 223b, 2
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Kraay, A., 198 Kratz, C. G., 96 L l
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Pine Ridge Reservation (U.S.), 238
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Shaoxing, China, local residents re
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urban economics appraisal approach,
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ECO-AUDIT Environmental Benefits St
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ECONOMICS UNIQUENESS

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