Developing St Kilda – A Cautionary Tale

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I have read several articles recently on plans to redevelop the St Kilda area, although little clarity appears regarding what social or physical issues the plans are looking to resolve. I would also add that most residents like the current St Kilda atmosphere which combines old fashioned sea side town with sophisticated city beach front (although some more police control late at night to remove the seedier elements would be welcomed by this resident).

The question raised is: what would the consequences of the development plans be? If we look at modern trends across inner city redevelopment programmes we may be wise to exercise some caution – modernisation often to leads to homogenisation.

To address the concern we first have to look at how local councils fund regional development and then consider the consequences.

Funding Regional Development

Every major city seems to resemble a building site, and this is not a coincidence. But why do cities and local councils invest in major physical development projects? The answer lies in Financial Alchemy….

A city council invests in a major development programme to regenerate the local beach front and infrastructure, but most of the money is spent on large building firms to manage construction. The building firms now benefit from the additional revenue, which they use to employ people to perform the work. The state taxes both the firms’ earnings and the employees’ salaries, so a percentage of the money invested by the city comes back to the city in the form of tax revenue.

When the development is completed the city will have lots of new buildings, better road infrastructure, and hopefully increased pedestrian access. Companies involved in the development programme will have also gained through the additional revenue. Regional workers benefit through additional jobs created (both directly and indirectly) to complete the building work and to service construction workers.

Once the construction project is completed the city can sell or lease the new buildings and will likely recover the development costs via rental or sale proceeds and by increasing local service charges.

The city has in effect earned from taxes charged to the companies involved in the development work and from taxes charged to the workers being employed. When the development is completed the city gets all its investment money back by either selling the new buildings to large property companies or by leasing the office space to local businesses. Local retailers should also benefit from the increased number of visitors flooding into the area.

Consequences of Development

So far all of this sounds like great news for local shop owners, workers and the area in general – but every action has a consequence….

When the city sells or leases building space it will generally look to maximise return (rental or sale value) on behalf of the local residents. As a result larger national and multinational companies will often outbid local companies to occupy the building space; with the consequence that streets could potentially lose the local shops and characters on which much of the local charm results from.

With the local boutique traders gone the area becomes homogenised with global generic brands taking the place of unique independent traders.

I’m not saying this is all bad, but before we rush to regenerate an area let us not forget the old world charms and cultural history of that area which in the end drew us to visit it in the first place.

by Obruni Agogo

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