October 2020 - Parks & Recreation - 32

FINANCE FOR THE FIELD
Capturing Proximate Premiums
by Excess Acquisition
By John L. Crompton, Ph.D.

I

n 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.

Figure 1
Changes in Assessed Valuations in Response
to Discovery Green Park

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Parks & Recreation

Year

Average Assessed Value Per Sq. Foot ($)

2005

87.87

2006

102.68

2007

116.77

2008

133.08

| O C TO B E R 2 02 0 | PA R K S A N D R E C R E AT I O N .O R G

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 selfsufficient: 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
October 2020 - Parks & Recreation

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