Public-private real estate development has always been a complexaffair, with the participants having to balance competing goals,such as job creation, profit motivation and tax payer approval, asthey build the capital stack. Still, though, this give-and-take hasusually been worth it for developers over the last several years ascities, flush with funds, happily invested in their locallandscape. That DC, which last quarter began running a deficit, isstill investing in these projects is a good sign, observers say.Forest City will begin construction on the 5.5-acre park, using $42million Payment-in-Lieu-of-Taxes funding.

Unfortunately, though, the project may well prove to be more theexception than the rule going forward – and not just for DC, butfor most cities. Simply put, these projects are suffering from twinforces: a dwindling tax base thanks to recessionary pressures, andthe tight credit market.

"In general local governments have less revenue to spend, whichcuts margins for developers even further," says Debra Yogodzinski,a partner with Arent Fox, who along with several other colleaguesat the firm, is an expert in this particular strategy. "Also, thegovernment will not have the revenue to devote to infrastructure asit should, which will further add to the crunch," she tellsGlobeSt.com.