When is a Nine-acre Park Better than a Ten-acre Park?

Governments have no bottom line to worry about.  They get their funds from taxes, not customers.  Taxes are levied by legislators who theoretically express the will of the voters.  Legislators do not run governments as businesses.

Nevertheless, like people and business, governments have tangible assets. Being so disconnected from market economics, however, governments generally do not view their holdings as assets in the usual sense.  A park is a park, not a piece of real estate.  Or more accurately, a park is a valuable piece of urban real estate, but because it is a public park, this is irrelevant.  Or is it?

The purpose of the park is to provide a public good which is not likely to be provided privately because there is no profit model which would provide parks open to all regardless of wealth status.  Public ownership of community-provided parks is meant to insulate parkland from the temptations of the market.  There might be an economic argument for parks – they improve the environment and property values for all – but this is secondary.  

The management of government assets is more likely to reflect a goal of public-service rather than return-on-investment.  For example, a public marina may be run so as to just cover the costs of operation.  The public benefits provided are considered good enough; there is no motivation to make a profit.  In fact, public marinas often have waiting lists so long that one has to wait for years before a slip is available.  A profit model would match the price to the demand and thereby eliminate the waiting list.  A private owner would likely do this; a government agency will not.      

Because government assets are not viewed economically, they are virtually never evaluated as such.  There is unlikely to be any government official who is tasked with reviewing the productive use to which assets are put.  Consequently there are lands and buildings owned by a government which sit idle for decades.  In addition, there are active facilities which are grossly underutilized, not only recreational and park lands but schools, parking lots, offices, and other buildings. 

A consequence of viewing public assets non-economically is that they often do not produce on their underlying value. This is not inherently good or bad.  It can an either.  It can even be both.   

Sticking with parks, a non-economic view is generally a good thing.  Selling off the local parks could of course bring in revenue, but doing so is anathematic to the very concept of parks. 

But is this always so?  When is a nine-acre park better than a ten-acre park? 

A nine-acre park is better than a ten-acre park when the ten-acre park is not utilized to its maximum potential and there is a housing shortage.  One urban acre could accommodate fifty or more housing units.  In this situation, is the community better off with ten acres of park, or nine acres of park and additional fifty housing units?  If there is a case to be made for keeping the entire park, so be it.  However, in an unrelentingly tight housing market, the better argument would likely favor a slightly smaller park and a meaningful addition the housing stock. 

A cost/benefit analysis would pit the loss of an acre of marginal park land against the benefit gained by an additional fifty housing units.  The gain likely exceeds the loss given either a conservative or a liberal point of view.  A conservative would appreciate the benefit of a market-rate development meeting an otherwise unmet demand housing.  Furthermore, a tax-generating use – the new housing – would replace a tax-absorbing use — the marginal acre of parkland.   The liberal approach might be to address the corollary to any tight housing market: the lack of affordable housing.  A local government, so inclined, could opt to subsidize the project on the ceded acre with a lower-than-market purchase price in exchange for some level of subsidized housing.  In the end, whatever local values prevail can be embraced. 

Generally, government assets are classified as active or surplus. Surplus property can be disposed of, usually by auction, but there is often a reluctance to declare property as surplus.  Unless there Is pressing revenue problem, accompanied with a consciousness that the sale of surplus property may help, the usual instinct is to keep property.  Neither elected officials nor bureaucrats are likely to get any grief from maintaining the status quo.  Selling off an asset will always offend someone.

It is even more unlikely that a government would evaluate its property with an eye to partial disposal.   Who in a government bureaucracy would routinely have the job of reconsidering the use of public assets?   A larger city may have someone akin to a real estate manager, but it would be rare for someone in that position to think of the partial disposal of specific properties.  The idea to spit off an acre of a parkland to increase the housing supply would not likely come from the bureaucracy.  It might come from a city council member, but they too rarely think in these terms.   

Local assets are infrequently declared surplus and it is even more unlikely that they would be considered dividable.  This is a great loss for government.  They often hold valuable assets which could produce significant benefit with minimal loss.  Most simply, these assets could be sold or leased to ease the tax burden or to pay for an unexpected problem or to fund some special project.  More carefully considered, social and economic benefits beyond cash are attainable. 

Reuse could range from leasing public space for sidewalk cafes to major sale of urban lands for megabucks.  There are two major VA hospitals in very expensive urban areas in California where the actual facilities are in the middle of hundreds of acres.  Just selling off the periphery would generate millions while leaving the core hospital function unaffected.  These hospitals are active and the properties will never be declared surplus.  But they are way bigger than necessary.  Who in government would even notice?