Public Development Authorities and Preservation & Development Authorities (PDAs) can create and maintain permanently affordable commercial space in communities. In this page you will learn about the following:
- What Are PDAs?
- PDA Formation
- PDA Governance
- Developing and Leasing Commercial Space
- Strengths of PDAs
- Weaknesses of PDAs
PDAs are quasi-governmental corporations created by a city, town, or county ordinance to manage a special project or carry out a specific mission of public value. The municipality that creates a PDA does not legally own it, but it does oversee its budget and operations.
The Revised Code of Washington established the ability to create PDAs in Washington State through the (RCW) 35.21.730, et seq. [1] Under these laws, a municipality can create a PDA to oversee a specific federal program or grant, to receive and manage funds, goods, or services from private entities, to improve the efficiency of government services, or to improve the quality of life in urban areas for economic development purposes. For example, a PDA might manage low-income housing and commercial properties, construct and operate a public art museum, or help preserve a historic neighborhood. In 2013, there were 38 unique PDAs in Washington State; 12 of these were located in King County.
According to Kenny Pittman, Senior Policy Advisor for the City of Seattle’s Office of Intergovernmental Relations, any group of organized, dedicated citizens can start a PDA as long as they can demonstrate that they have developed a concrete plan and have set aside enough money to cover the entity’s first year of operating costs. The group must outline projected future revenue sources and draft an official PDA charter. The Mayor approves the creation of all new Seattle PDAs, and Seattle City Council approves all PDA council members.
Members of the Seattle community created PDAs in Seattle as early as 1971. Led by activist architect Victor Steinbrueck in 1971, Seattle prevented the demolition Pike Place Market – the community established a PDA to restore and care for the market’s buildings.
Two other Seattle PDAs created in that same era include the Seattle Chinatown International District Preservation and Development Authority (SCIDpda) and the Capitol Hill Housing Improvement Program, established in 1974 & 1976 respectively.
PDAs are supervised by an all-volunteer governing board tasked with supervising staff and programming, setting PDA policies, and ensuring compliance with the charter. Each PDA charter outlines the size of the governing council, council term-length, and how members will be selected. In Seattle, PDA councils are made up of between five and twelve individuals. Some of Seattle’s PDA councils are appointed entirely by the Mayor, but the majority of councils are composed of a mix of mayoral appointees, constituent-elected members, and PDA council appointees.
The founding charter determines the extent of a PDA’s power and authority. As a result, the strength of a PDA varies considerably depending on the intent behind the PDA’s formation. As quasi-governmental corporations, PDAs are subject to the same laws regulating public officials and local governments as outlined in RCW 35.21.759 et seq. PDAs must therefore:
- Publicize all council meetings and ensure they are open to the public.
- Make council meeting minutes and other documents accessible and open to the public.
- Participate in competitive bidding processes when undertaking projects.
- Remain in compliance with public works and accounting requirements as well as the prevailing wage laws.
- Prepare records for public audit.
- Ensure PDA facilities are not used for campaign purposes and that PDA officers follow the same ethical code as local government officials.
In spite of these similarities, PDAs are quite different then the municipalities that created them. For example, PDAs cannot collect taxes and do not have the power to take someone’s land for a broader public use through eminent domain. However, PDAs can accept government funds land that the government acquires through the assertion of eminent domain. In addition to other unique powers that may be granted in their defining charter, PDAs can, in general:
- Own, manage, and sell property.
- Loan and borrow money.
- Receive, administer, and transfer public and private money, property, and services.
- Issue bonds backed by the government entity that created them.
- Sue and be sued.
- Contract with other private, public, and non-profit agencies and individuals.
Developing and Leasing Commercial Space
Land Acquisition
There are two general routes a PDA can take to acquire land or commercial space. First, the PDA can purchase vacant or previously developed land. Second, PDAs can also receive land at below market rate from a government entity, as mentioned above. Such land could be excess government property, or land acquired via the government’s eminent domain power. Because PDA’s are mission-driven organizations, they are well placed to acquire land with preferential rates from government entities with the understanding that they will be providing a benefit to the community. Such is the case for Capitol Hill Housing’s 12th Ave Arts development, which sits atop a Seattle Police Department-owned parking lot.
Master Lessor Leasing Model
Current examples of PDAs managing commercial space like the Pike Place Market PDA and SCIDPDA’s IdeaSpace reveal that PDA’s will almost certainly manage their space using the master lessor model. While a PDA could in fact sell property, selling is likely not the purpose for which the PDA was formed; rather, the City and public see public value in the long-term management of the space. Under the master lessor model, PDAs outline specific goals for their commercial space, including who the ideal tenant is, lease duration and stipulations, and rent agreements.
- PDAs can be Bolder and Riskier than the Government: One of the primary advantages of PDAs is that these entities can administer a project or manage a public good that would be too difficult or risky for a municipality itself to undertake. The legal separation of a PDA from its sponsoring government entity reduces liability and financial risk for that municipality.
- Entrepreneurial Management and Focus: While a PDA’s operations and decisions must be made public, just as they would if the PDA’s project was run by a government department, routine administrative tasks and decision making processes, such as buying property or managing commercial space, can be carried out more swiftly by professional managers rather than busy government officials lacking the experience or time necessary to conduct such complex operations. In addition, many PDAs manage entrepreneurial projects that require specific skills [2] more readily available in the private sector, such as the PPMPDA’s mandate to manage, preserve, and protect the community and properties in the Pike Place Market.
- Guarantees: If a PDA becomes financially insolvent or experiences management difficulties, the municipality that created the entity will assume management responsibilities. Any property managed by the PDA is owned by the public and would not be sold to a private company in the case of bankruptcy. In addition, any of the PDAs’ charter-driven duties, such as land stewardship, will be taken on by the municipality.
- Access to Private and Public Funding Sources: PDAs can access both private and public funding sources, including tax-exempt bonds, which the municipality that created the PDA could choose to guarantee. [3] PDAs can use their access to funds to create more affordable rents for businesses accessing the affordable commercial space.
- A PDA Is Only as Strong as Its Citizen Involvement and Oversight: PDAs are run by an all-volunteer governing council entrusted with ensuring the PDA is carrying out the mandates outlined in its charter. A PDA is only as strong as the abilities of the citizen volunteers serving on its governing council. PDAs are legally separate entities and responsible for the day-to-day tasks associated with carrying out their mandate. Therefore, municipalities have less oversight over PDAs than over their own programs.
- Weak Public Mandates: A PDA’s effectiveness is also determined by the strength of the specific mandate laid out in its charter. According to Maiko Winkler-Chen, Executive Director of SCIDpda, the amount of control a PDA has over land in the area in which it operates would likely directly impact how effectively a mandate to provide permanently affordable commercial space could be carried out.
- Questions of Financial Sustainability: Although PDAs are founded with the intent of financial sustainability, some PDAs may need continued public funding. For example, the PPMPDA does not earn enough through its leasing agreements to make necessary infrastructure updates to maintain market buildings long-term. In the late 1980s, the PPMPDA had to fight a legal battle to maintain market property. Seattle voters approved a $73 million levy to pay for these updates as recently as 2008. Many PDAs are not financially sustainable and struggle if tax codes change at a state or federal level and when certain types of funding sources are cut.
- Ineffective Governing Structure, Municipal Oversight, and Funding: According to a WA State Auditor’s Office 2013 report, while many PDAs are in good health, less healthy PDAs are plagued by common issues: an insufficient and ineffective governing structure, a lack of effective municipal oversight, a lack of sufficient funds to carry out the activities outlined in the PDA’s charter, and a lack of compliance with laws that regulate PDAs. Unless a PDA’s charter and governing structure are strong enough to overcome these common issues, any new PDA created to provide long-term affordable commercial space could experience these same problems.
- Are Land Trusts Legal? While the City of Seattle has provided excess land at low or no-cost to PDAs to help them carry out their public mission in the past, the legality of such transfers could be called into question depending on how the “full value” of the property was determined.
Footnotes:
[1] These statutes developed as a vehicle for carrying out the Model Cities’ Act Program of the late 1960s and early 1970s. The aim of this federal program was to improve the quality of life in urban areas and was just one element of Lyndon Johnson’s War on Poverty. See http://nwda.orbiscascade.org/ark:/80444/xv22921 for more information
[2] Examples: specialized real estate knowledge or prior experience navigating the intricacies of complex federal programs like the New Market Tax Credit Program.
[3] Before the Great Recession, the City of Seattle had backed the bonds of a large expansion project undertaken by the Museum Development Authority, a PDA whose mission is to support and manage the Seattle Art Museum. Washington Mutual had been identified as the primary lessee in the upper floors of the museum’s expanded building. The bank’s bankruptcy came as a surprise to city administrators and was an unanticipated temporary liability. In light of this bank failure and what it could have meant for the city, Seattle Office of Intergovernmental Affairs Senior Policy Advisor, Kenny Pittman, suggested that the City would be hesitant to guarantee bonds for any PDA going forward, especially for any newly formed, untested PDAs without a track record of success.
- “Public Development Authorities.” City of Seattle, City Departments. n.d. Web. 10 November 2014. http://www.seattle.gov/city-departments/public-development-authorities.
- Reich, Jay, Crawshaw Lewis, Stacey and Deanna Gregory. “Public Development Authorities.” Excerpted from Budget Suggestions for 2004, MRSC Information Bulletin No. 416. August 2003. PDF File.
- Ibid.
- “Public corporations – Powers of cities, towns, and counties – Administration.” Washington State Legislature. n.d Web. 26 November 2014. http://app.leg.wa.gov/rcw/default.aspx?cite=35.21.730.
- “Public Corporations/Public Development Authorities.” Municipal Research and Services Center. 2013. Web. 11 November 2014. http://www.mrsc.org/subjects/econ/ed-pda.aspx.
- Washington State Auditor’s Office. “Audit Summary of r Public Development Authorities and Public Facilities Districts.” November 2012. PDF File.
- Kenny Pittman. Personal interview. 19 November 2014. “Pike Place Market History.” Pike Place Market. n.d. Web. 9 November 2014. http://www.pikeplacemarket.org/history.
- “Who We Are.” Seattle Chinatown International District Public Development Authority. n.d. Web. 11 November 2014. http://www.scidpda.org/who-we-are.
- “About Capitol Hill Housing.” Capitol Hill Housing. n.d. Web. 26 November 2014.http://capitolhillhousing.org/about/
- The League of Women Voters of Seattle. “Public Development Authorities in Seattle.” May 1989. PDF File.
- Gregoire, Christine. “State – Counties – Cities and Towns – Municipal Corporations – Public Funds – Relationship of Intergovernmental Disposition of Property Act to RCW 43.09.210.” Washington State Office of the Attorney General, AG Opinions. AGO 1997 No. 5 – October 6, 1997.
- “New Developments: 12th Avenue Arts.” Capitol Hill Housing. 2014. Web 11 November 2014. http://capitolhillhousing.org/ourproperties/newdevelopments.php.
- Preston Gates Ellis LLP. “City and County Options for Creative Financing: PFDs, PDAs and 501(c)(3)s.” 2003.
- Municipal Research and Services Center . Web. 11 November 2014. http://www.mrsc.org/artdocmisc/PDAPFDfinan.pdf
- Preston Gates Ellis LLP. “City and County Options for Creative Financing: PFDs, PDAs and 501(c)(3)s.”
- Presented at the Washington Economic Development Association’s Spring Conference. 15 -16 April 2003. PDF File.
- “Charter.” Pike Place Market. n.d. Web. 9 November 2014. http://www.pikeplacemarket.org/charter.
- Davis, Roger and Alexandra Davis. “Nonprofit Corp orations: Borrowing With Tax-Exempt Bonds.” Orrick,
- Herrington & Sutcliffe LLP. 2001. PDF File.
- Winkler-Chin, Maiko. Seattle Chinatown International District Public Development Authority. Personal Interview. 11 November 2014.
- Franz-Knight, Ben. “Pike Place Market Levy.” Pike Place Market Preservation & Development Authority. 2014 PDF File.
- “New York investors give up their claims to own Seattle’s Pike Place Market in a legal settlement approved on October 15, 1991.” Pike Place Market Preservation and Development Authority. n.d. Web. 26 November 2014. http://www.historylink.org/index.cfm?DisplayPage=output.cfm&file_id=8972
- Turnbull, John. Pike Place Market Preservation and Development Authority. Personal Interview. 4 November 2014.
- “Public Development Authorities in Seattle.” Washington State Office of the Attorney General. n.d. Web. 21. November 2014. http://atg.wa
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