Daniel Burnham, one of the founding fathers of modern city planning, said in a 1910 speech: “Make no little plans; they have no magic to stir mens’ blood . . . “ 
He was obviously on to something because there is no shortage of “Big Plans” proposed by developers, cities or various civic groups on an almost continuous basis. Big Plans – with their slick renderings full of futuristic buildings and happy people – do indeed stir mens’ (and womens’) blood. Not only are they visually attractive, they come wrapped around financial projections and employment promises that are so wonderful that it seems almost idiotic to not move forward with as much haste as possible.
What Daniel Burnham didn’t say (or perhaps didn’t anticipate) is that virtually every Big Plan comes with a big public price tag. And that an uncomfortably high percentage of Big Plans either fail outright or at least deliver substantially smaller benefits than were initially promised. Many cities have approved convention centers, arenas, ballparks, entertainment districts, or mega-malls only to be left holding the bag for the financial cost of construction bonds or maintenance expenses when project revenue streams fall short of projections. What was supposed to be an economic boon turns into an economic boondoggle.
I want to be clear that I am not entirely opposed to Big Plans. The Brooklyn Bridge, for example, was thought by many to be a crazy undertaking but was crucial to the growth of New York City. And some convention centers, ballparks and mega-malls do, in fact, generate more public revenue than the public subsidy that was required to get them built and big projects often do have positive benefits – both tangible and intangible – for the entire region. Sometimes the path forward requires a leap rather than a series of tiny steps.
The problem is one of separating the wheat from the chaff. How does a community know which projects to support and which to reject? There are no easy answers, but my goal with this post is to put some structure around the problem to make the decision easier. In particular, there are some red flags that I think should make communities think twice before moving forward.
But first, what do I mean by a ‘Big Plan’? The term is relative, of course, but for the sake of this post I’m talking about development projects that share three characteristics:
They are far bigger in size than the normal development proposal for the community. So big, in fact, that civic boosters feel like they won the lottery.
They require a substantial public investment. Without fail, the cost of public incentives is justified by projections of public benefits (generally jobs and tax revenue) that far exceed the cost.
The project is complex. Big Plans invariably involve a lot of moving parts, each of which represent a potential point of failure.
The proponents of a Big Plan often call on decision makers to have a bold ‘vision’ for the future. Many others have pointed out, however, that there is a thin line between a vision and an hallucination.
Is a Big Plan Needed?
As I mentioned earlier, sometimes cities need to take a big leap. But before cities approve a Big Plan they should evaluate whether a series of small projects would accomplish the same goals. In my opinion, 50 developers building 20 housing units each is generally going to be better than one developer building a 1,000-unit housing project. Organizations such as the Incremental Development Alliance and Strong Towns have been extolling the virtues of small-scale, incremental development for years. Incremental development yields greater variety in the end product, is more resistant to boom-or-bust cycles, and does a better job of spreading wealth across the community.
In 1959, Charles Lindblom wrote an influential article entitled “The Science of Muddling Through” that defended an incremental approach to public policy-making rather than an all-inclusive, theory-based, “rational” approach. The same thinking can be applied to development projects. A big development project is often so complex that its odds of success cannot be accurately calculated and the ripple effects cannot be accurately predicted. Consequently, big projects entail big risks. Incremental development entails much smaller, more understandable risks and is more adaptable to unforeseen circumstances.
All of the cities that chased Amazon’s HQ2 project a few years ago would have been far better off channeling that effort toward building and supporting a pool of local developers with projects that are less reliant on public subsidies. Incremental development may not “stir mens’ blood” but also isn’t likely to bankrupt cities.
Still, big projects are going to be proposed and may sometimes be necessary. So the remainder of this post is going to examine the red flags that cities need to be looking for. Don’t fall for the siren song of a Big Plan without a clear-eyed analysis of the risks.
Beware of Land Flippers
To get a Big Plan built, developers typically need two types of approval. The first is development approval under the city’s development regulations. This might entail rezoning the property or getting a development plan approved. The second type of approval is a financial incentives package. This typically involves infrastructure improvements, a tax-increment financing plan, or tax abatement. These two approvals are obviously connected, but they are distinct from each other and have different value to the developer.
Some developers will try to make money by focusing on the first part of the approval process. They will buy land that generally has not been considered for intensive development, prepare a Big Plan with fancy renderings and optimistic economic projections, and apply for development approval despite the objections of nearby residents who are shocked that anyone would propose such intense development in their previously quiet neighborhood.
If the developer is successful in obtaining the development approval from the city, the value of the land skyrockets to a level well above what they originally paid. The project can then be shopped around with other developers who are more focused on actual construction because the biggest (and most contentious) hurdle in the development process has already been cleared.
The development team for this type of Big Plan tends to be politically connected but may be light on actual construction expertise. The proposed plan will be very dense (because density equals value) and often unrealistically lavish. Economic projections will be equally stellar with promises of top-tier tenants and high-paying jobs, but will be vague on details and lack firm commitments. The developer may try to placate neighboring residents with perks such as parks or extensively landscaped buffers in order to win over city leaders who are undecided on how to proceed.
This type of Big Plan is essentially a bait-and-switch scam. When a developer who actually wants to build something takes control of the project, they will inevitably ask for substantial changes to the plan. The lavish building designs will be labeled “financially infeasible” and replaced by much more mundane designs. The top-tier tenants will be replaced with local tenants or chain stores with jobs that are no more lucrative than elsewhere in the community. In fact, the new development may simply poach businesses from other parts of town and add very little net economic activity.
The problem is that once development approval has been granted, it is very hard for a city to legally take it away. City leaders are faced with the choice of either allowing the plan to be substantially watered down or being taken to court by the developer.
Financial Planning on the Fly
The crazy complexity of a Big Plan is often revealed in the financing details. Initially, a developer may have only a general sense of how a project will ultimately be financed when the project is submitted for approval. That is because most investors won’t formally commit to a project until development approval has been granted. Once that happens, leasing commitments can be obtained, designs (and costs) can be finalized, and investor details can be worked out. This is where the second type of approval – the financial incentives package – comes into play.
Most developers proposing a Big Plan will ask for development incentives up front but the details will be vague or they will take an unrealistic “ask for the moon” type of approach. In either case, negotiations won’t get serious until development approval has been granted. The problem is that investors are generally a better judge of financial feasibility than cities are. Investors will try to push as much of the financial risk onto the city as possible. Once city leaders have been seduced by the fancy renderings and the promises of a golden stream of tax revenue, it is hard to say ‘no’ to requests for the city to provide more financial support or take more financial risk.
The second problem is that the complexity of the financial structure behind a Big Plan has many possible points of failure. Unexpected occurrences or mistaken assumptions can cause tentative agreements to fall apart. Once the financial plan starts to crumble, it can be hard to rebuild. Cities need to insist that private capital be the first money at risk if things go south. Public funds should either not be at risk at all until construction is underway or should be subject to “claw back” provisions if the project doesn’t move forward.
In my opinion, the most problematic form of public incentive is when cities agree to build infrastructure in support of the Big Plan before anything else is built. It is almost impossible to recoup those costs if the project stalls. Cities end up with dead-end water and sewer lines and roads that lead nowhere – the cost of which falls on the rest of the community because virtually no tax revenue is coming in.
Optimization is Not Always Optimal
In order to build public support, almost every Big Plan will be accompanied by a cost-benefit analysis that shows future revenue from the project far exceeding the value of the public incentives. This analysis will be prepared by financial experts with impressive resumes and far more experience than any city staffer. The developer will assure city officials that the development details have been optimized for their community and the economic characteristics of the region. It will also be so complex that most people will skip over the details and go straight to the bottom line.
The problem is that every cost-benefit analysis is built on a series of assumptions and varying those assumptions can produce very different results. Keep in mind that the consultants preparing the analysis are getting paid by the developer and are getting paid regardless of whether the project succeeds or not. They have virtually no “skin in the game” and often have no long term connection to the community. This is not to say that every economic analysis is worthless, but there is generally a bias toward optimistic assumptions that make the project look as good as possible. So what could go wrong?
Overstating Growth Projections. It is frequently assumed that the new residential units in a Big Plan will attract new residents to the city, that new retail space will attract new shopping options, and that new office buildings will attract new businesses to the area. In most midwestern cities, growth does happen but it is a slow process. Construction of the Big Plan leads initially to an oversupply of space which means that shops are filled with stores that moved out of other shopping centers and office buildings are filled with businesses that left other office buildings. Promises to recruit new retailers or new employers from outside the region may be well intended but they are often overly optimistic and cannot be enforced by the city. The result is that residents, retailers and businesses are mostly reshuffled from existing developments leading to high vacancy rates elsewhere in the community.
Confusing Gross Revenue with Net Revenue. The economic analysis accompanying a Big Plan will often tout millions of dollars in retail sales or hundreds of millions in wages from the jobs that will be created. Once the project is built and occupied, those projections might actually be correct, but they rarely reflect the fact that most of the money spent in the newly built development is a substitute for money that would have been spent elsewhere in the community. It is not new economic activity, it is just redirected economic activity. Total sales tax collections, for example, may not end up changing much at all.
People will Behave Differently. Proponents of a Big Plan often claim that their project will “draw people back to downtown” or “attract tourists from surrounding states” or “double game-day attendance.” It is, of course, almost impossible to prove or disprove these types of statements but they are frequently exaggerated. People sometimes do change their behavior but most people are creatures of habit and while they might try something new, long term change is harder than people realize. Entertainment districts and downtown ballparks seem particularly prone to these kinds of projections, and initial attendance numbers might seem promising but basing a 20-year revenue stream on such assumptions is very risky.
The National Economy will Continue to Grow. This assumption is probably true but what is rarely reflected in the economic analysis of a Big Plan is that the national economy is cyclical. This means that there will occasionally be economic downturns or even recessions. What impact would such an event have on the revenue stream? It is a rare analysis that even attempts to address that scenario but it can have a huge impact on the economic health of a community. A recession can wreak havoc on a municipal budget, but having to take over bond payments or maintenance costs for a big development project at the same time could be disastrous. Cities should try to avoid being on the hook in this type of situation because they almost inevitably will occur.
The bottom line is that life is stubbornly resistant to optimization. The best laid plans often go astray because the future is filled with unforeseen events and people are prone to irrational actions. The recent string of bank failures (and the growing list of struggling banks) is an example of this principle. All of those institutions were led by very bright people with a carefully considered strategy that made lots of money until, suddenly, it didn’t. Something as seemingly predictable as rising interest rates proved to be catastrophic.
A quick review of my local Kansas City region reveals examples of Big Plans that have succeeded, struggled and failed. On the positive side, Kansas City just opened a new airport which was delivered on time and on budget. And the city’s long-neglected riverfront has started to blossom with mixed use buildings and a new stadium for the women’s professional soccer team – refreshingly financed with largely private funds.
Kansas City’s Power and Light District has re-energized the downtown area and provides venues that support tourism, conventions and events at the T-Mobile arena. Unfortunately, revenues from the district have not met projections and the city has been forced to kick in roughly $10 million per year to make up the difference. 
|Mission Gateway Site|
I’m willing to bet that virtually every major metropolitan area could put together a similar list. Again, this is a wheat versus chaff issue. Cities need visionaries and risk takers, but they need not fall victim to projects where the odds of failure are greater than the odds of success. In mythology, Sirens were creatures that lured sailors to destruction through the irresistible sweetness of their songs. Cities need to learn to cut through that sweetness and see the risks involved before getting on board.
1. “A Chicago tale: Why we’re happy to erase the asterisk from Daniel Burnham’s “Make no little plans’;” Chicago Tribune Editorial Board; March 2019; https://www.chicagotribune.com/opinion/editorials/ct-edit-daniel-burnham-quote-20190305-story.html
2. Thomas Friestad; “Kansas City has paid over $160M to cover Power & Light’s debt;” Kansas City Business Journal; February 2023; https://fox4kc.com/business/kansas-city-has-paid-over-160m-to-cover-power-lights-debt/
3. Kyle Palmer; “After decades of false starts, the Mission Gateway project is now facing foreclosure;” Shawnee Mission Post; April 2023; https://www.kcur.org/housing-development-section/2023-04-25/after-decades-of-false-starts-the-mission-gateway-project-is-now-facing-foreclosure