Real Estate Development and CBAs - 5 Questions for Prof. Musil

Tom Musil

Thomas A. Musil, D.P.A., assistant professor in the finance department recently presented his research on Regulation of Real Estate Development Through the Use of Community Benefit Agreements. Here then are five questions with Prof. Musil:

Q. What are Community Benefit Agreements?

A.  CBAs establish a process for real estate developers to include community objectives as part of the development. The developer enters into a private contract, usually with a coalition of community, faith based and/or special interest groups in exchange for their support, cooperation or forbearance regarding the proposed development. The community group typically gets the developer to agree to include any of several components in the project or in the development process. This includes things like local hiring, hiring from under-represented groups, creation of minority owned businesses, and paying for support of the community coalition. In fact, in some cases the community coalition has an approval process and monitors the development activity and final management of the development.

Q. What are you hoping to accomplish with your research?

A. Very little is known about CBAs. There is scant evidence of how these agreements produce outcomes and enhance the project and/or the community. In my research, I specifically looked at 28 of the 50 projects nationally where CBAs have been used in the development process. I reviewed at each of these projects in terms of their impact on environmental justice – the fair treatment and inclusion of all people regardless of their race, color, gender, national origin or income. Of the CBAs reviewed, 28% involved hiring in the agreement, 57% required communication between developer and community, 53% contained requirements in terms of minimum wage or living wage jobs and 53% related to contracting with certain groups such as those who are local or typically harder to employ.

Some of the projects I looked at are well known developments such as the Staples Center in Los Angeles, Consol Energy Center in Pittsurgh (home of the Pittsburgh Penguins), and Yankee Stadium. Locally, I looked at projects such as the Riverside Plaza in Minneapolis, a housing development in the Longfellow neighborhood and the Minneapolis Wifi project. It is likely that areas around the central corridor light rail will have CBAs coming from that redevelopment, as well. Some proposals for a new Vikings Stadium also call for a CBA. CBAs can cover many types of development from stadiums to mixed-use projects, housing to infrastructure projects such as the Minneapolis Wifi project.

This is a second paper I have done on CBAs and is one of only a few academic papers on this topic. My goal is to create the basis for looking at the total range of impacts coming from these agreements as opposed to the existing research which examines projects on a case study basis.

Q. Why is this topic of interest to you?

A. I am aware of the power community groups and neighborhoods have in articulating the design of a project and in some cases even having the power to stop a very good development project. Community groups are becoming an equal partner with developers and cities in crafting and implementing successful development endeavors. From this perspective, I was interested in digging down to the elements that the community groups sought in these community benefit agreements and what the community groups required of developers.

Because of the growing use of CBAs, cities have found themselves in an unusual position. Developers are entering into agreements with the community prior to structuring agreements with municipalities. Cities like NYC and Washington DC are drafting municipal ordinances to standardize the processes and collecting community input and data to better understand what important to this process. Community outrage has stalled a lot of projects. Creating processes around this type of agreement can help all parties involved to make things move more smoothly.

Research and discussion around CBAs will help to better understand the key stakeholders, create more dialogue between these stakeholder groups, and increase understanding of how they are each affected by development. More discussion will also help to create standardized processes within cities/states in working with CBAs and specifically, a better understanding of the social environmental justice components.

Q. Will this research impact your teaching at St. Thomas?

A. I teach the real estate development course at both the undergraduate and graduate level at UST. In real estate development projects, the developer is essentially a partner with the city and the community in which the project is located. It is important for developers to understand both community and political dynamics surrounding a project, the negotiation of public subsidies and the long term benefits that the community is seeking with the proposed development. Research in this area provides and insightful view of the community/developer/municipality dynamic.

UST undergraduate and graduate real estate students need to understand these agreements because a developer without the support of a community and city often fails to obtain project entitlements. This includes public support such as zoning changes, subsidies, variances and land dedications.

Q. What was the most surprising finding from this project?

A. Community groups are looking to solve environmental justice questions connected to real estate development projects more than they are trying to address the physical bricks and mortar composition of a development. Community groups have broader socio-economic goals. Hopefully this research will lead to a more informed dialogue between the developers and community in which they work.