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Economy / Economic development

In the Covid era, the relationship between cities and megadevelopments makes even less sense

In this environment, large-scale projects like Sidewalk Labs’ Waterfront Toronto appear increasingly untenable.

Sidewalk Labs’ Waterfront Toronto project was the first high-profile megadevelopment to be undone (at least in part) by Covid-19, and it may not be the last. The project, battered by years of controversy over the Alphabet-affiliated company’s desire to turn a 12-acre (and later a 362-acre) Quayside area into the world’s first neighbourhood “built from the internet up,” gave up the ghost in early May, with Sidewalk CEO Dan Doctoroff citing “unprecedented economic uncertainty” for the withdrawal.

a rendering of Waterfront Toronto
An old rendering of Sidewalk Labs’ now-failed Waterfront Toronto proposal. (Image by STR/AFP via Getty Images)

Unprecedented economic uncertainty is, improbably, an understatement. With a coronavirus vaccine unlikely to emerge until 2021 at the earliest, there remains no way for the economy to come fully back to life without significant loss of life, a reality that has already disproportionally hurt lower-income communities of colour. In this environment, large-scale projects like Quayside appear increasingly untenable, laying bare many of the criticisms brought against such developments: speculative by nature, they make even less sense in an economy decimated by the virus.

Although both are still active, I think of two similar megadevelopments currently planned for Chicago, where I live: Lincoln Yards and The 78, projected to cost $6bn and $7bn, respectively. Lincoln Yards, located adjacent to the wealthy Lincoln Park and Bucktown neighbourhoods on the city’s North Side, originally promised the construction of a Major League Soccer stadium and three Live Nation-owned performance venues, but both of those aspects were eventually scuttled, leaving a mixed-use residential and retail district built on the banks of the Chicago River. Meanwhile, The 78, so named as a proposed addition to the city’s existing 77 community areas, also offers a river-centric, mixed-use plan, with a technology and business incubator and towers reaching nearly 1,000ft. It’s slated for construction just south of downtown, served by the addition of a new train station on the CTA Red Line.

“Both The 78 and Lincoln Yards are long-term development projects that anticipate market conditions to fluctuate over time,” says Peter Strazzabosco, Chicago’s deputy planning and development commissioner. “Work is underway and expected to continue through multiple development phases for years to come.”

Combined, Lincoln Yards and The 78 would further transform a city already known for intense (and growing) racial and economic segregation, adding 16,000 units of luxury housing on land whose value has ballooned thanks to continued development in adjacent communities. Particularly worrisome for the city of Chicago is the use of tax increment financing (TIF) resources for both projects, with the city voting to allocate $1.6bn in future uncollected tax revenue to support construction. Now, with a possible failure to launch brought on by a global economic downturn, the question emerges: where do we go from here?

It’s a challenging problem for Toronto and Chicago and for any other city whose financial future is tied up in massive projects that are jeopardised by current events. Also troubling are the long-term impacts such projects can have on planning processes, particularly in terms of democratic oversight. Even if these particular megadevelopments never come to light, the consequences of having pursued them are likely to reverberate for years to come.

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In Toronto, one of the loudest voices raising these types of concerns is Bianca Wylie, the co-founder of Tech Reset Canada, a lobbying and policy organisation focused on the intersections of technology and governance. Described by CityLab as “the Jane Jacobs of the Smart Cities Age”, Wylie has been deep in the trenches of the Sidewalk planning process, using detailed policy analysis, op-eds and frequent media appearances to challenge official narratives about the project. While Sidewalk’s decision to leave Toronto gives Wylie and other critics a moment to pause and celebrate, there remain deeper questions about the democratic process and the ways in which it was overridden by Sidewalk’s approach.

“If democracy is one thing, it’s complexity,” Wylie says. “This project really showed how easy it is, if you’ve got enough money or power, to use that complexity against people, because there was no way to hold a coherent conversation with people talking about so many pieces at once.”

One of the biggest sticking points for those examining Sidewalk’s proposal was the issue of data governance. Throughout the planning process, Sidewalk was cagey about its data collection plans, taking over a year to announce a proposal for a publicly controlled “civic data trust” that critics argued was halfhearted. According to Andrew Clement, a professor emeritus of information at the University of Toronto and member of the Digital Strategy Advisory Panel, which advised Waterfront Toronto on Sidewalk’s data proposals, it appeared that the government willfully ceded regulatory oversight of these practices to Sidewalk, with the request for proposals (RFP) granting significant leeway to the private sphere.

“The [RFP] talked very inappropriately but significantly about their partner co-developing digital governance arrangements with them,” Clement says. “There was a recognition that urban building was increasingly digital, and they didn’t know this area, so they could look to the tech experts to bring them up to speed.”

Similar challenges around the limitations of public oversight have been present for both Chicago megadevelopments. Lincoln Yards and The 78 were integral to former Mayor Rahm Emanuel’s legacy; he presided over the passage of the TIF packages during his final city council session, after his successor, Lori Lightfoot, briefly suggested that she’d review both projects upon taking office. While Lightfoot’s campaign platform of reforming Chicago’s government, coupled with the election of six democratic socialist council members, was widely seen as a referendum on Emanuel’s eight years as mayor, the passage of both TIF packages nevertheless bowled over the persistent opposition of countless Chicago residents and community organisations.

The approval process for both developments required support from several city council subcommittees, but the most controversial component was the TIF financing. TIFs, a complicated financial mechanism used across the US and extensively in Chicago, shift any increased property taxes raised inside a TIF district from the general- revenue pool for up to 23 years, with the upfront financial commitment made by the city banking on projected property tax increases. The use of TIFs has long been one of the biggest sticking points for community activists in Chicago, who have cited the millions of dollars of TIF funds spent on vanity projects (including the $55m renovation of Navy Pier) as evidence that austerity measures such as Emanuel’s 2013 closure of 50 public schools are morally and financially indefensible.

For a proposed development to qualify for TIF financing, projects are supposed to meet at least five of 13 loosely defined criteria outlined by the state of Illinois. In the case of Lincoln Yards, the document provided to justify its approval was written by a consultant hired by the project’s developer, Sterling Bay, a fact undisclosed to council members at the time of the vote. A Chicago Tribune investigation found that the project would have failed to meet one of the five criteria just six weeks after its approval, as reassessed property taxes suggested that the land, adjacent to some of the city’s wealthiest neighbourhoods, would have likely been developed without TIF subsidies.

In total, these mismanaged processes have reflected the outsize sway held by private developers in shaping the future of the city. The Hideout, a beloved dive bar and music venue located across the street from Lincoln Yards, led a vibrant and vocal movement against both TIF districts. Their eventual approval suggested to many watching that the city’s priorities are largely out of alignment with the needs of its residents.

“The only way that [TIFs] work is by increasing property values, and doing so in a capitalist political economy means that those who can ride the wave of appreciation can do quite well,” says Rachel Weber, a professor of urban planning and policy at the University of Illinois at Chicago, who has studied the impact of TIF districts and financialisation on urban governance. “At its core are some basic inequities, feeding into all these negative things: reinforced income inequality, racial polarisation and segregation.”

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With Sidewalk departed and the long-term fate of Chicago’s developments still uncertain, where do both cities go from here?

While government at local, provincial and federal levels has yet to devote specific financial resources to implementing Sidewalk’s vision for Quayside, all three levels of government already spent CA$1.25bn ($950m) to build flood mitigation infrastructure at the proposed site to prepare it for future development, money that Wylie says was rarely discussed during public debates about the state’s role in the project. Sidewalk’s departure may serve as an opportunity to reset public discussion, but Wylie worries that chronic underinvestment in the public sphere, and the ways in which private developments frequently offer infrastructure improvements as part of their proposals, will continue to entice the city to work with companies intent on extracting as many public resources as possible.

“When cities are underfunded for important infrastructure, it allows people to come in and say, ‘We’re going to fund this, and along with it comes all this other stuff,’” Wylie says. “That vulnerability is going to be even worse with Covid, especially with procurement for things like education and healthcare.”

A view of the area slated for the Lincoln Yards development, from a 2019 Chicago presentation on the project. (Image by Chicago Plan Commission)

Should Lincoln Yards and The 78 falter in the coming years, Chicago will face similarly difficult questions about its financial commitment to both projects. With cities around the world staring down severe revenue shortfalls in the wake of the coronavirus, the decision to commit billions in city money to unrealised megadevelopments will come under even greater scrutiny. According to Strazzabosco, both TIF redevelopment agreements (RDAs) will not reimburse the developers for city-approved infrastructure improvements until they are constructed, suggesting that the developers are primarily responsible for the fate of their projects. In addition, both RDAs have force majeure clauses in place, potentially freeing the city and the developers from their obligations to the projects in the case of unforeseen circumstances.

“The eligible costs within the TIF districts supporting Lincoln Yards and The 78 are for public infrastructure exclusively,” Strazzabosco says. “TIF funds will be allocated on a reimbursement basis after the developers front-fund and complete each project identified in their respective redevelopment agreements.”

Beyond these projects, the deeper question of how TIFs are being used by Chicago cannot be ignored: according to the city’s most recent annual TIF study, more than a third of its taxable revenue in 2018, or about $841m, was collected as TIF revenue, effectively sequestering it from the rest of the city’s budgetary needs. While Lightfoot has introduced several reforms to the use of TIFs, including making a public-facing website available for residents to track their implementation, organisations such as the Chicago Teacher’s Union criticised the changes as inadequate. Weber argues that the widespread use of TIF districts in Chicago creates revenue flow issues for most city departments already struggling to adequately fund their initiatives, challenges that will only increase as the city examines a potential $1.6bn deficit brought on by the virus.

“Over time, TIFs have made it harder for government agencies to have an adequate cash flow, which puts them in a tough fiscal situation,” Weber says. “With the Covid emergency, there is an opportunity to rethink how the city uses that TIF money – maybe there’s something else we could be doing with this right now since it won’t be a great time to invest in new construction.”

Of course, Chicago and Toronto are not the only big cities deeply implicated in multibillion-dollar development plans to remake the urban fabric. One Sidewalk critic, the researcher and designer Michele Champagne, was particularly concerned about the visual narrative of the development, noting the ways in which the company saturated news media, even articles critical of the project, with an eclectic array of imagery that made the case for redevelopment.

“Sidewalk blanketed the media with anything and everything promoting Alphabet’s interests and demoting democratic interests,” Champagne says. “The consultations and reports and stats and images were so numerous and diverse, they prevented any meaningful public understanding or participation. It’s a new form of public relations – or propaganda ­­– which hasn’t yet been digested.”

Given the use of former industrial sites at Quayside, Lincoln Yards and The 78, as well as the construction of the heavily subsidised Hudson Yards project in New York City over existing rail infrastructure, Champagne worries that the ways in which the public can picture different city futures are being reshaped by the visual narrative of megadevelopment. By suggesting that the city’s industrial past can be reimagined only in the form of speculative real estate projects, other approaches to the uncertain future of the city are crowded out at a moment in which large-scale development grows increasingly disconnected from city residents’ most pressing needs.

In the case of Lincoln Yards, the commitment to residential and commercial real estate development meant the demise of the city’s first-ever planned manufacturing district (PMD), an important tool used to maintain land available for industrial uses. While PMDs in other parts of the city have slowed the loss of many blue-collar jobs and created new opportunities for business incubation, using the land for luxury real estate suggests that the city’s priorities have shifted.

“What the industrial images are telling you is, ‘You do not want that,’” Champagne says. “It suggests that this land is sitting unused right now, nobody is there. This is a no man’s land, and therefore, why not us?”

Annie Howard is a freelance journalist and master’s student in urban policy and planning at the University of Illinois at Chicago.