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permitted entrepreneurial local governments to share risks with the private sector in order to
leverage private investment. UDAG were largely used for repayable loans by municipalities.
Cities also used UDAG to take an equity position in private sector projects in return for
UDAG assistance. More specifically, loans were heavily subsidized through UDAG and in
return cities demanded profit-sharing in the development project. In some cities UDAG was
the “key financial mechanism” in redevelopment. Most cities provided financial incentives to
developers and investors through UDAG (Keating; Krumholz; Metzger, 1989:129). UDAG
gave cities considerable discretion how they spent their grants. A city might use it for a
variety of incentives for private development activities, including (low-interest) loans, land
write-downs, land assemblage, provision of public infrastructure and so forth. But each
UDAG project required “a minimum of at least two participants (one public, one private)”
(Clarke; Rich, 1982:53).
A distinct feature of the UDAG program was its shift from a mere grant program to “an
investment program in which government agencies loan their action grant funds to private or
nonprofit participants, enabling the public sector to recapture its UDAG funds and recycle
them for future housing and community development activities (Clarke; Rich, 1982:54)”. Due
to this new public action, Clarke and Rich characterize those cities as “entrepreneurial” in
contrast to “donor” cities (Clarke; Rich, 1982:54). The major mechanism through which cities
generate an income out of UDAG funds are lease agreements, loans, and equity participation.
Cities might either lease land or facilities. Cities might use their UDAG funds also as loans to
the private sector. Clarke and Rich state that in 1980 about one-third of UDAG funds were
used as loans. The most noteworthy instrument, however, is equity participation. Here cities
contracted “kicker” provisions in development agreements which permit the city or the
authorized agency to share in the net cash flow of the development project (Clarke; Rich,
1982:55).
In conclusion, the Reagan administration launched the UDAG program explicitly to facilitate
and encourage development partnerships. Fostering public-private partnerships in urban
development was due to the assumption, that the public sector alone could not revitalize
decaying cities. The UDAG program “demanded that entrepreneurs sign a statement that
stipulated that ‘but for’ the federal grant, they would have been unable to proceed with the
project” (Stephenson, M. O., 1991:115). The stated purpose of the UDAG program was to
“fill financing gaps in public-private economic development projects” (Frieden; Sagalyn,
1989:160). UDAG were explicitly designed to leverage private resources. Development firms
had to agree to invest a specific amount of money in the project by entering a legally binding
commitment. In return they could receive a direct cash subsidy from the federal government.
With UDAG cities were able to experiment with new financial techniques. Cities have
changed their financial assistance from grants to loans and in doing so accumulating loan
paybacks. “As a development tool, the UDAG program was both more flexible and more
precise than urban renewal” (Barnekov, T.; Boyle, R.; Rich, D., 1989:74).
III. Typology of Public-Private Partnerships
There have been some attempts to classify public-private partnerships. The classifications are
surprisingly different from each other and more or less comprehensive. Some scientists focus
only on a certain city and describe local public-private partnership while a general application
is missing. Some analysts, in contrast, classify public-private partnerships concerning only
certain partnership element while forget about other important partnership characteristics.
Some scholars use special terms in order to distinguish partnerships but do not take the wide