Part One: Why Build a New City?
Welcome to Part One of a three-part series “A Trail of New Cities: A Simple Story About Planning Complex Things Better” an insider view of new city mega-projects too big to fail, but too expansive, too expensive, and too dependent on outside factors to succeed. Practices, pitfalls, and how to do it better.
Part One provides the thumbnail sketch of urbanization and why people build cities, how they do it, and a few of the more obvious big-picture challenges facing such an effort. Part Two is for urban planning and/or project management geeks, and speaks to the “master plan” itself, the set up for early implementation, and several specific issues impacting these undertakings. Part Three provides a handful of constructive ideas that have broad applicability for project management in general, and urban development in particular. If interested, start here.
PART ONE: Why Build a New City?
Here is a short primer on urbanization for anyone coming from outside. Most cities throughout history are founded because a significant natural resource or local advantage made it sensible for groups of people to begin huddling together in that one location. Rivers and confluences of all sort play a large role. They start as clusters of huts, grow into villages, towns, then cities, then larger cities, and finally, for a select few, on to metropolis. It all happens in this order without deviation.
By now most good locations for cities are taken. The vast majority of urbanization, 80,000,000+ new urban residents per year through migration and internal growth, is hastily absorbed at the fringes of existing cities and towns. In fast urbanizing regions, growth is compounding at >5%/year, doubling population in 15 years or less. This forced feeding overloads and asphyxiates these locations in myriad ways. Here though, our topic isn’t the growth of the existing but the birth of the new. A city “master planned” and constructed from a single “blueprint”, that skips the hut-village-town steps entirely. A turnkey edition, a manufactured city, a city in a box, a city that will -if built- form a new planet in the local urban constellation. How exciting. Just add water…and power …roads …schools …people …etc.
Building brand new cities is rare, but not as rare as you might think, as humans often exhibit a magnetic attraction to the grandiose. Kings and potentates through history have engaged in new city building, both systematically and as one-off monuments. Others pursue new settlements to address social and economic problems and inequities. Today parts of Asia and the GCC countries of the Middle East have programs of new city construction as a semi-regular part of business in order to accommodate burgeoning urban populations and industrializing economies. Sporadic efforts occur elsewhere in the world but most countries either a) have mature urban systems and don’t need them, as with “the West”, or b) rarely embark on them even if they could benefit from them, as with parts of Africa and other parts of Asia. This story focuses on the GCC countries where projects have proliferated since the turn of the 21st century.
Creating the masterplan for a new city is a complex undertaking. The work is steered from the top by political, financial, and regulatory interests, while the details of the job are undertaken by groups of urban planners, urban designers, civil engineers, and their friends. The economic and financial justifications are generally in place at that point, or being hastily assembled in another room with little contact. In my experience, projects of this type exhibit, each in their own way, the legendary efficiency and market responsiveness of a centrally planned economy and the far-sighted and stable management practices of a market traded company. Joking. But despite their many substantive differences - location, size, organization, finance, economic circumstances, political environment, social system, etc.- projects of this type run in an eerily arc, facing many of the same challenges.
City building projects tend to exhibit the legendary efficiency and market responsiveness of a centrally planned economy and the far-sighted, stable management practices of a market traded company
The audacity of taking on projects of this magnitude in this day and age is remarkable, as it requires serious intent, confidence, prolonged commitment, buckets of money, and an equal amount of underlying economic logic to even get a strong start. And rarely are all these factors available in equal measure, with prolonged commitment and economic logic the hardest to come by. The projects are so big that normally only national governments initiate them, nested within larger national economic development or housing policies. Not surprisingly, implementation is also often government led but can be revert to the private sector to execute under a bespoke concession arrangement as a PPP (public, private partnership). Irrespective of nominal project ownership, government controlled or related entities will almost always remain principal partners and “golden vote” investors due to cost, complexity, liability and risk assumption, regulation, and governance.
Entities and legal structures, financing, the flavor of management and decision making, and development strategies that emerge differ markedly between public and private projects, but the underlying substance and purposes remain similar. All the same things need to be built, all the same stakeholders, investors, regulators and users must be brought into to play their parts or be ignored, as the case may be. Public owners are always keen to get private investors on-board, if often unsure how to do so, while private investors are equally keen to get public monies injected into their projects, if sometimes craven in their attempts.
Other common characteristics of ambitious new city projects is that they are usually launched with improbably rapid development programs, such as breaking ground within 6-9 months, near exponential growth over 5 years, and full build-out within 10-15 years. Targets that are not realistic and will never be met but still heavily influence the course of events during the crucial start-up stages. Once underway, initial schedules fall by the wayside and projects develop an erratic but powerful momentum through the years that belies their often-unstable economic underpinnings. They regularly re-emerge from the most difficult economic circumstances and restructurings, like phoenix or perhaps zombies, “too big to fail” but too expansive, too expensive, and too dependent on outside factors to truly succeed.
“A city is not an inanimate object it is a living entity”
A city is not an inanimate object but a living entity, so talking about a creating a new city as a “project” is a gross but convenient simplification. Sticking to the physical construction of the core infrastructure only, and conveniently putting aside the complicated and messy social and economic dynamics, secondary construction and all the rest, we still find that our project is not a project at all. At least it is not a project not in the classical sense of having clearly defined goals, finite deliverables, a distinct end point, and other characteristics of conventional project structure. Rather, the “new city project” is a sprawling series of interrelated singular projects, extended building programs, and government initiatives that does not come with an instruction booklet, code of practice, nor even many relevant comparables. Direct on-site costs to governments can be anything, but what I have seen runs easily to US $15-45 billion over a 15-30 year period. Total investment by all parties will be many multiples higher if the city is successful as a social and economic entity, but beyond an undefined point it all just becomes economic growth. It takes a lot of organization to maintain such a high level of spending on a single patch of ground.
While visions of future grandeur are easy to create, mapping the route from here to there is anything but. At the start of a project, site boundaries are often the only fixed item, and not always even them. It is extremely difficult to assemble land at this scale, particularly in locations appropriate for building a city. Countries that ‘have the land’ where governments closely control land rights are still unable to deliver unencumbered sites of 50-200 km2. Local populations, existing towns, environmental characteristics, power lines, roads, pipelines, etc., it could be anything but will definitely be something. No surprise here. These realities lead to sprawling sites with odd shapes and /or lots of clutter, overhanging legal issues, or other significant environmental problems that have the potential to greatly complicate the design and construction process, aggravated by chasing a timeline that rarely takes these factors into account.
Logistics, in the largest sense of the word, are critical. When you think about what goes into a city from the ground up, the core infrastructure such as roads, power stations, transmission lines, potable water network, sewage treatment plants, parks and open spaces, and all the rest, will be built through numerous multi-year projects overlapping in space and time, consuming many (hundreds of) millions of dollars of annual spending, and falling under the control of different final owners and operators. No two key stakeholders will have the same level of commitment to the project, or similar desire to resolves conflicts, as the project owner. And this is just the infrastructure elements of the physical construction. Add in all the other major construction activities (the housing, offices, commercial, industry, etc.) and there will be steady high background levels of construction activity punctuated by sharp peaks spread across several decades. From the site level to the national level, projects of this magnitude test a market’s ability to respond.
When you think about what goes into a city from the people down, the hugely complex social and economic interactions defining it all take place somewhere, and the qualities of place, how they look and feel, their relative location to others, all has a huge impact on how successful a location becomes. Master planning projects come with ideological and practical tension between the art of design and the science of engineering. It is not an exercise in social and economic engineering directly, but rather, an exercise in spatial engineering that, at its best, successfully addresses social and economic issues. The emphasis is important as the mandate is complex but limited despite the implications being broad. A master plan focuses on physical elements supporting and promoting underlying change, rather than being a primary change maker itself. On a pragmatic level, a “good” master plan is simply one sensible enough to be followed when construction begins. Anything else is a digital fantasy. The magic, if there is any, is allowing for the right amounts of development, of the right types, at the right locations, in the right sequence, to happen at the start, and to do so without a heavy hand and in such a way that allows the new city to then organically take root.
“Few people in the construction sector know much about the social and economic dynamics of cities, while few people who understand the social and economic dynamics of cities know much about the construction sector”
Few people in the construction sector understand the social and economic dynamics of city development, while few people who understand the social and economic dynamics of city development know very much about the construction sector. This is a widespread challenge. At the project level, most executive and high level managers on the technical and financial sides come either from real estate or infrastructure; consequently they tend to view the city as either a really big real estate project, or a series of large infrastructure projects. Key officials and executives, advisors and consultants, financiers, regulators, and down the line of career professionals all share this thinking. It is perhaps only natural as master planned cities are rare, while large real estate and infrastructure projects are relatively common.
The perception of the city as either a really big real estate project or series of large infrastructure projects is problematic due to a trees and forest thing. When working at city scale, real estate and hard infrastructure assets, huge undertakings in their own right, are the largest of the trees but are not the forest itself. Master planning takes all of these individual elements and works to create an environment more dynamic than a sum of parts. Not only must different uses come together in a way that minimizes direct conflicts, but ultimately these pieces must perform together in such a way that enhances the quality of life and economic vitality of residents and users. A high-minded mission indeed, and very open to interpretation. Thoughtful people have said that master planning is a playground for cognitive biases and riven with agency issues. And that much is true. Master planners generally bring a strong ideology to the table and are closely involved in foundational decisions with huge implications, while ultimately being responsible for nothing. But, still, the job must be done because there is truth in the old saw “fail to plan, plan to fail”.
The early concept stage of any master planning effort is where the big spatial decisions are made, as certain land uses and development opportunities can be located only in specific locations. These initial decisions create a cascading series of subsequent choices which define the layout of the city, generally with less and less leeway to vary as you move along. At the earliest points in a city plan, any off-hand line drawn on the map can be the difference between a great place or a failed space and can mean millions of dollars of additional costs or savings to various parties. So, obvious care must be taken in the details. Yet, it is all too easy to become overwhelmed by waves of such details and become unable to make decisions. This is a common condition known as “analysis paralysis” prone to striking analytical “left brained” people. Creative “right brained” types tend to go the other way, latching on to anecdote in the face of data overload (eponymously known as anecdotalism).
There is an absolute need to simplify and give order to things, usually accomplished by following a defined development strategy, recognized principles of urban design, established standards in infrastructure, and various other regulatory and quasi-regulatory requirements. These are then put together in an order and emphasis of your choosing, usually as the result of significant workshop and debate. So it is fun. Context, experience, and pattern recognition, and the ability to assess tradeoffs are all important, and the process demands continuous switching between macro, telephoto and panoramic mental settings. The worst part of it is you won’t know for years if you have “got it right” or not. And if it does happen to go right you may or may not be able to directly impute this success to your own contributions.
Fortunately, major pieces of the puzzle are effectively self-directing and are ‘plugged in’ to the physical plan once locations are agreed. Large installations like power grid stations, regional hospitals, and inter-modal transport hubs are examples of ‘plug and play’. The full details of who, what, when, where, why, how, and how much matter for many reasons, but master plans need resolve only the what, where and when. Other elements are the very minutiae of the plan itself. The details of the spatial organization of the different neighborhoods and districts, the number, size and disposition of community services (schools, clinics, etc.), parks and public realm, local infrastructure (boxes, manholes, chambers, etc), and innumerable other elements that will define the look and feel of the city are debated ad nauseam.
“From a business perspective, the city-as-project is perilous”
From a business perspective, treating the city-building exercise as a “project” is perilous. The principle of accountability is simple enough - any project should be accountable for, and measured against, its own costs, while excluding other “enabling investments” that may help it but are instituted to support larger goals. Drawing this line, however, is extremely difficult. A few examples demonstrate:
The national electricity company is part of a large and powerful ministry whose mission is to provide universal access and sufficient power to all legitimate users, and as such will be responsible for providing grid level power to the city. But what are the ministry’s precise level-of-service obligations? The city needs power and the ministry needs to provide it. But the city needs this power in certain amounts at certain locations by certain times according to its growth plan. Is the ministry obliged to operate according to the city`s schedule? Who bears the offtake risk if actual demand does not match projections? Are the capital costs accounted for in the ministry’s current capital investment program? If not, are there other identified sources of funding available that match requirements? If not, where is the money coming from? Obligation aside, does the ministry have the capacity to deliver the project according to the city’s schedule? Who absorbs any additional costs incurred in meeting the city`s deadlines, and who calculates these costs?
The questions around public schools are similar. The ministry of education is obligated to provide sufficient schools for the student-age population. But if the students in this new city are largely transplants from other schools within the system itself rather than ‘new’ students, effectively emptying older schools to fill up the new ones, what are the obligations of the education authority to provide these new facilities, and all the teachers and administrators to run them? Does the education authority get additional funding, and is so from whom? Is the authority obliged to deliver the schools per the schedule forecast by the city developer? There is huge value to the city developer in having school capacity in place early to boost attractiveness to potential residents, but this would mean low school enrolments for the first years. Who bears the costs and risks around these timing issues?
What if the national government’s industrialization policy pushes the city toward providing large districts of serviced industrial properties, substantially beyond current market demand forecasts? Who bears the cost of providing and operating these industrial parks, and the risk of oversupply based on ambitious national strategy forecasts? Is this a legitimate project expense – as the city will benefit greatly from the national policy should it succeed – or is it an ‘enabling cost’ to be picked up by the higher level of government?
These three simple examples offer a flavor of the issues in constant motion between some combination of the project owner, upper levels of government, key stakeholders, administrative levels of government, and the master planning team; it also demonstrates the breadth and depth of alignment required to propel a project like this forward. Discussions can be fraught when this much money and inconvenience is at stake, and referrals ‘up the chain of command’ from the project teams are often required. These referrals can lead to long delays which play havoc with project timing and force risky assumptions to be taken by the project teams in order to maintain forward progress. Synchronicity is not easily achieved.
There is also the question of understanding costs and calculating a return on investment [ROI]. Costs are spread across a vast array of stakeholders and there is no universal accounting leger, project-wide pro forma, or financial template for direct costs in their entirety, and certainly not for secondary financial impacts or beyond. Even assembling the ingredients of a business plan is challenging. The program parameters lack clear extents and limitations; there is no agreed list of “what costs are in and what out”; there is no comprehensive list of sources and uses of funds due to the array of financial stakeholders; rarely are there well-developed risk assessment and mitigation strategies across the many asset classes, and the list goes on. From a quantitative perspective, anyone at the project level trying to create a global financial picture in order to judge project performance is forced to push assumptions of highly variable quality into the models as surrogates and simplifying agents.
Monitoring project performance is equally murky from an asset perspective, particularly on PPP projects adopting a very commercial orientation. How to ascribe value to non-monetary contributions is hardly a unique problem and it plays out here as well. Only certain assets in a city are ever going to be commercially viable (parks don’t pay), and ownership and operating responsibility end up spread across many hands. But assets with little direct commercial viability may well be absolute prerequisites for other, profitable, activities owned by others. There can be no successful new modern city without an extensive public realm any more than there can be one without intelligent multi-model urban transportation management, potable water, sanitary and storm systems, etc., none of which “pay” and most of which are owned and operated by different autonomous agencies. While at the top level ‘the government’ will control most urban services in most cases, one should never underestimate the complexity of reaching detailed agreements on how these services will be built, paid for, and operated.
“Private developers are typically caught out by large directs costs that are considered externalities in more ‘normal’ projects”
Typically, a private developer is caught out by large direct costs that are considered externalities in more “normal” projects but can become part and parcel of these types of projects. These costs often involve big infrastructure such as treatment plants, power stations, highway links and junctions. Anything really, but invariably something, and often many things. Short of paying outright for an asset, which can happen, project owners may need to cover the bridging costs of bringing forward the delivery date of an asset, or enter into build-transfer or build-operate-transfer agreement in order to meet the city`s deadlines. None of the situations themselves are particularly novel, rather it is their profusion and cumulative impact on a project`s finances that differentiate the planned city from other undertakings.
“Governments tend to systematically underestimate the overall ‘burden on the public purse’ as costs are held across numerous ministry budgets”
Government projects, for their part, tend to systematically underestimate the overall “burden on the public purse” by not consolidating directly related costs incurred across different ministries and agencies. And because governments, too, must demonstrate efficiency and business savvy, they rightly promote public-private partnership. But then they immediately assume overly optimistic scenarios for private financial participation in order to keep their budgets low and approved. These rosy assumptions often put a public project owner at odds with both industry and partner agencies in terms of cost assumption and risk sharing, with the ultimate outcome being that many of these expenses revert to the project, and thus to government, over time. Or, if lucky, these costs simply get “buried” somewhere within a ministerial budget.
Specific variations between public and private projects are profound, but the themes ring similar. Money is spent, money is made, money is lost, that much is certain. Lots of it. And people will keenly track each and every cost element, every single penny accounted for, but this will happen in isolation or part only depending on the interest of the particular stakeholder. In a strange way each individual cost is known but nobody knows the total cost. After a certain point, and generally far from the finish line, uncertainty overwhelms the exercise and people just stop counting anything other than their own pile.
It is all too easy to create white elephants while dreaming of unicorns.
This is the end of Part One providing the set up for the new city project. Part Two speaks to the master plan itself, the set up for early implementation, and several of the large issues overhanging these projects. Part Three provides a handful of constructive ideas should you find yourself in the improbable position of having to plan and build a new city.