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In a recent article featured in the Journal of Park and Recreation Administration, I explored the relevance of excess acquisition and benefit districts for addressing the contemporary challenge of how to fund city parks.

During the mid-1800s in England, the world’s first large city parks emerged in London (Regent’s, Victoria and Battersea Parks) and Liverpool (Prince’s, Birkenhead, Newsham, Stanley and Sefton Parks). However, at that time, there was no general-enabling legislation authorizing municipalities to purchase land or to develop it for a park. Consequently, these pioneering public parks were developed as central attractions in speculative real estate developments.

Developers acquired a large acreage of land and allocated approximately one-quarter of the site around the periphery for the sale or lease of lots for the construction of up-market residences for wealthy residents. It was anticipated that the attraction of the park would raise the price of lots to a level that increased the profitability of the real estate.

This was the same principle that has been adopted in residential golf and marina developments since the 1960s in the United States. Investment in these recreation facilities was driven by the knowledge that they led to a substantial increase in a development’s lot prices.

When the concept of city parks transitioned to the United States in the 1850s, ’60s and ’70s, this principle of “value capture” was similarly prominent. The land for nearly all the early large parks in U.S. cities was obtained through eminent domain. The mechanism of “excess condemnation” (sometimes called “recoupment condemnation”) involved the taking of more land through eminent domain than was necessary for a park, selling or leasing the balance of the land when its value had appreciated after the park was created, and using the profit from the transactions to finance the project.

By the early 1900s, excess condemnation for this purpose was authorized by constitutional amendment in eight states and by statutes in an additional 13 states. However, by the early 1940s the courts had ruled that when eminent domain was used to take land from an unwilling seller to subsequently sell parts of it to other private interests for a profit, it was an abrogation of private property rights and unconstitutional.

Contemporary Versions of Excess Condemnation
In the current environment of a major economic recession and subsequent large decreases in local government funds for parks, the principle of “value capture” to pay for the construction and/or operation of parks is worth revisiting.

It can take a variety of forms. As an example, the property-lease model was pioneered on a major scale by the 4,235-acre Mission Bay Park in San Diego, California (46 percent land and 54 percent water). The park was created by dredging and filling between 1945 and 1962. Upon the park’s completion, the city established two guiding financing principles designed to make it fully self-sufficient: 1) there would be no private ownership of land in the park; and 2) commercial leaseholds would not exceed 25 percent of the land area. The intent was for the commercial lease revenue to pay for the park’s operations, and any surpluses would go to fund enhanced infrastructure and other park improvements.

Mission Bay attracts around 15 million visitors annually. Its leases to hotels, restaurants, a theme park and other commercial businesses generate large amounts of surplus revenue. Inevitably, much of this surplus has been diverted by the city for other uses. However, the basic principle of capturing the value to pay for the capital and operating costs of the public park remains intact.

Discovery Green in downtown Houston, Texas, is a 12-acre park built at a cost of $70 million. Its impact on the assessed values of surrounding properties is shown in Figure 1. In the four-year period prior to the park’s announcement in 2005 to when it was completed in 2008, the assessed values abutting it increased by 51 percent. The increased tax revenues created by the new park fully justified the city’s investment in it.

My city council is considering the purchase of a 105-acre site on the periphery of our city. Although it likely will be another decade before the area around it is developed, one of the financing options under review is to use economic development funds for part of the purchase price rather than park funds. This would enable the city at some future date to capture the property value that the park will create by leasing/selling some of the acres on its periphery and use the transaction profits to partially redeem the bonds.

These examples reflect large-scale projects, but the principle is equally applicable at a small scale. Parks clearly create added value. Typically, this has been a “windfall gain” for developers of the area around a park. The essence of the principle was expressed more than a century ago by Robert E. Cushman, author of Excess Condemnation: “We propose that they who sow shall reap and that the taxpayers’ money having produced the increment [of value], the taxpayers shall receive the return....” Perhaps, it is time to revisit this principle.

John L. Crompton, Ph.D., is a University Distinguished Professor, Regents Professor and Presidential Professor for Teaching Excellence in the Department of Recreation, Park and Tourism Sciences at Texas A&M University and an elected Councilmember for the City of College Station.