# Problem_Set_4_-_Answers - Department of City Regional...

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Department of City & Regional Planning CP 1134A - Fall 2006 U niversity of California at Berkeley Mark Wolfe PROBLEM SET #4 Answers 1. Last year, real estate impresario Travis Bickle purchased the beautiful but dilapidated 1920s-era Checkercab Hotel in New York City for an “undisclosed sum of money.” This morning, he held a press conference at which he announced plans to demolish the structure and replace it with a 50-story glass-and-steel office tower designed by famed corporate architect Bunshaft Mies van der Gropius. Upon hearing the news, City Planning Czarina Zoe Zonerino springs into action and immediately re-zones the hotel site for “Pre-War Hotel Preservation” uses only, thereby preventing its demolition. Bickle balks, bemoaning the blow to his budding business. He demands that the City of New York pay him full compensation for the loss of economic benefit resulting from the re- zoning, which he estimates to be in the neighborhood of a net present value of \$200 million. He shakes his fist and threatens to file a lawsuit if the City doesn’t pay up. Feeling the political heat, Zoe asks you, her trusted advisor, to estimate the actual economic loss to Bickle, and to come up with an economic rationale to justify the zoning action. Mayor La Motta, meanwhile, informs you that unless he can be convinced that the total benefit to the City and its taxpayers from the re-zoning exceeds the total costs, he’ll order the action reversed and allow the demolition. He agrees that benefits and costs are not always easy to quantify. In a few paragraphs, identify what information you would need in order to estimate total net loss (or gain) to Bickle, and the total net loss (or gain) to the taxpayers. Explain how would you go about measuring and/or quantifying the costs and benefits of the action. Is there a way to justify the re-zoning as a long-term economic benefit to the taxpayers? Is there a way to justify it as a long-term economic benefit to Bickle? 12 Points total Key points: (Market) value of land is the present value of the future income stream the use of it generates. 1

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2 Different uses of land generate different future income streams of greater or lesser value. Zoning limits the range of different uses to which the land may be put. So, in order to determine the net loss or gain to Bickle : - Compare: (Income from Office Use - Costs of Office Use) vs. (Income from Hotel Use - Costs of Hotel Use)
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Problem_Set_4_-_Answers - Department of City Regional...

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