Smart Growth

by
Ann Eberhart Goode, Elizabeth Collaton, and Charles Bartsch

Urban sprawl was a pivotal issue during mid-term elections in 200 cities and states. Focus groups on growth management proliferate in communities across the country. Vice President Al Gore recently announced three new federal initiatives that could help Americans build more livable communities. What's going on? These and other initiatives add up to a national upsurge of interest in "smart growth" -- a view that metropolitan growth patterns can and should serve the environment, the economy, and the community equally.

Smart growth takes aim at the programs and policies that literally drive development away from existing communities. Veterans of urban planning argue that the issues pushing the smart growth debate, while not new, have emerged into a fundamentally different approach to maintaining metropolitan areas as sustainable places to live and work.

Federal Barriers to Smart Growth

Even as innovative planning and development ideas begin to take hold in some communities, federal programs often discriminate against widespread brownfield reuse, infill redevelopment, and transit-oriented projects. Federal regulations can push new investment out of urban cores, and national spending policies often pull investments to previously undeveloped areas.

Federal subsidies for new development beyond the existing urban fringe include an array of infrastructure programs, notably transportation. The federal transportation program long has focused its spending on new highways, and states have mirrored that priority. Repair and preservation of existing capacity have been secondary goals, and transit has been the poor step sister to highway development. These priorities began to change in 1991 when Congress overhauled the federal transportation system. The new legislation recognized the completion of the National Highway System, and it refocused on managing congestion and improving air quality. Congress continued these trends in 1998 when it updated the federal transportation law. The share of funding dedicated to new highways was reduced, while maintenance and transit spending both saw moderate increases.

The Transportation Equity Act (TEA-21), as the new law is known, is a good model for federal program innovation. It not only recasts direct spending priorities, it ferrets out less obvious subsidies and barriers. For example, past government-supported, employer-provided transportation benefits encouraged automobiles and highways over mass transportation. The value of free parking was entirely deductible, while transit benefits were limited to $15-$21 per month. Under the new law, employers can deduct up to $65 per month in transit benefits, and parking benefits are capped at $175. While the playing field remains tilted, it is somewhat improved.

On the regulatory side, TEA-21 retains some of the flexibility in spending that was introduced in the 1991 highway program. It also compresses the planning requirements that regions must meet as they develop their transportation priorities for state and federal funding. States also may allocate more of their federal resources to environmental reviews, and they must conform to tighter time frames for such reviews.

TEA-21 also created a demonstration program for innovative approaches to link land use, community, quality of life, and transportation needs. The Transportation and Community and System Preservation Pilot program (TCSP) supports efforts that "increase the efficiency of the transportation system while decreasing its impacts on the environment, lessening the need for costly future investments, and providing efficient access to jobs."

Other agencies also are showing a willingness to determine if their core programs inadvertently encourage sprawl and inefficient development. Although as a regulator, the Environmental Protection Agency (EPA) doesn't provide extensive subsidies to any sort of development, with the exception of the state revolving funds for drinking and wastewater treatment facilities, it has made extensive use of demonstration programs to promote smart growth. EPA's Brownfield Economic Development Initiative, for instance, has provided grants to more than 200 cities wanting to clean up and redevelop contaminated or potentially contaminated property.

The Role of Design and Community Involvement

A new breed of town planners stresses that "design is not an extra." At a recent gathering of city planners, Victor Dover of Dover, Kohl, and Partners (Miami, FL) listed the five critical physical elements of traditional neighborhood design. Success, he said, often involves:

• giving the development an identifiable center and edges;
• building at a scale that encourages walking to destinations;
• offering a mix of land uses and building types;
• featuring a network of walkable streets (sidewalks, trees, shade); and
• allowing for special sites and buildings for civic purposes (library, town hall, post office).

Such principles are responses to the endless miles of suburban tract housing that dominate the "garagescape," as Dover likes to call it. Even the designed high-end communities in outer-ring suburbs -- because they are so isolated -- discourage walking, separate land uses intentionally, and require people to spend a lot of time in their cars.

Tools available for communities to reach consensus on the design principles include visual preference surveys, computerized photo-graphics programs, and commercially-available GIS mapping products that can help communities take the long view on how and where to manage growth.

Yet sophisticated design tools must be complemented by participation and buy-in by community members. Such public involvement often is the most controversial and elusive element of urban revitalization strategies. "Too much" community participation can seem burdensome to developers; "not enough" can perpetuate the often adversarial roles adopted by community groups and local officials, gridlocking progress.

The good news is that models are emerging nationwide that offer "place-based" approaches to determining community priorities and needs. For example, civic officials in Trenton, New Jersey, organized an eight-week local leadership course that enabled graduates to develop their concerns, back them up with facts, and present them effectively to the city council. The Chamber of Commerce in the Kendall neighborhood of South Miami culminated a three-year effort with a week-long planning charrette involving more than a hundred community residents, numerous local and state government officials, and nationally-recognized planning firms. In another example of community outreach, the community development agency orchestrating a brownfield cleanup in Minneapolis televised its public hearings and formed a citizen task force that identified 18 areas of concern that were resolved before the project proceeded.

Infill housing raises its own community outreach challenges because it centers around the politically divisive issue of the availability of downtown housing. Especially as urban cores are reborn as prestigious places to live, the provision of affordable housing becomes a hot political issue for local officials, but one that is vital to making infill development viable. The phenomenon of gentrification has made many downtown apartments too expensive to house poor or moderate-income residents. Creative approaches to affordable housing, especially those that mix housing types and price ranges, are helping to break up the isolated poverty in inner cities.

New urbanist planning firms have shown how communities have stifled criticism of density by combining design features with public amenities like open space and parks in order to create diverse neighborhoods. In the best of development projects, high-end, single-family homes co-exist peacefully with tastefully-designed, multi-family housing. Dallas, for instance, is cycling many of its commercial buildings into residential use, and its officials see downtown housing as the means to becoming a more livable community.

Local Leadership

Maryland, New Jersey, and Colorado are some of the states taking the lead on smart-growth state initiatives. Yet much activity is occurring on the local level. Visits to half a dozen cities around the country have shown an encouraging mix of efforts to translate smart growth principles into practice. Interviews tell of the numerous barriers, including institutional gridlock, city leadership selling out to developer interests, community "NIMBY" opposition tactics, and zoning codes. But a growing number of local leaders are confronting the affordable housing crisis; avoiding duplicative and costly infrastructure by limiting development subsidies to existing communities; and protecting natural resources through conservation easements, open space bonds, and urban parks. Consider the experience of Brea, California.

Located just southeast of Los Angeles in Orange County, Brea has aggressively revitalized its downtown. With a population of approximately 100,000, the city has been affected by the movement of residents -- and then jobs -- to the "inland empire" counties of San Bernardino and Riverside, where land and housing are less expensive than in developed Orange County. In order to maintain its quality of life as well as its tax base, Brea developed a comprehensive program to make the city an attractive and affordable place to live.

Brea's redevelopment efforts focused on its downtown, which was experiencing a downward succession of land uses. Before the revitalization effort began, the area hosted numerous vacant structures originally built for oil field workers. ("Brea," in fact, is the Spanish word for oil.) Most of these houses were in bad condition, and some had never been tied into the city sewer system and were still served by septic system. In addition, a major new highway located a mile or so east of downtown, completed in 1974, spurred retail and commercial activity to relocate away from downtown.

City leaders in 1972 formed the Brea Redevelopment Agency (BRA). While Highway 57 drained activity away from downtown, it did facilitate in 1977 the development of the BRA's first project, the Brea Mall, between downtown and the highway. The mall is the region's second largest, generating $350 million in sales annually.

The city also assembled downtown parcels, cleared much of the land, and began to develop a master plan. In October 1989, the City Council hosted a "Downtown Charrette" to help create a downtown master plan. The charrette elicited community comments on both the role and location of downtown, as well as the specific design and elements of this new part of Brea. The resulting vision document articulated the community's goals and created a framework for master planning and development. Some general goals included:

• Downtown should be the symbolic focal point for the community;
• High-quality design and development are needed;
• Downtown should appeal to Breans of all ages and backgrounds;
• Downtown should be linked visually and functionally to the Brea Mall and the Civic Center;
• Historic preservation should highlight oil industry heritage;
• Brea wants a 24-hour city in the downtown area;
• Diverse housing options should be provided downtown; and
• Traffic facilities should not carve up downtown activities, but vehicular traffic must be well served.

The ideas and choices articulated at the charrette, along with the few existing site constraints, allowed the resource team to develop a conceptual plan for downtown. In addition, renderings of how village-style development could look were developed and provided in the final vision document.

Despite a severe recession in the early 1990s, much of the downtown envisioned by Brea's citizens now has been completed. New residences have been constructed, others have been revitalized, and new commercial and institutional buildings are occupied. While more development is on the near horizon, downtown Brea is alive with a new activity that is well integrated with the surrounding neighborhood and commercial uses.

Brea's revitalization efforts are notable on several fronts. First, the public's early and consistent involvement forged a vision that guided difficult development choices throughout the project. Second, inclusion of a strong housing program enabled the project to reach its goal of having a dynamic downtown accessible to low- and moderate-income families, as well as to those who can afford more expensive units. Third, Brea's redevelopment staff formed many partnerships that leveraged their human and financial resources. These long-term commitments are paying off handsomely in a livable downtown.

Financing Smart Growth

Redevelopment in the urban core can be a complex matter, and private financing sources are generally more expensive than in less developed suburban areas, where projects can be simpler and risks considered lower. High-end office developments generate enough revenue to be attractive investments in urban core areas, but less intense uses and smaller projects, including infill housing, historically have not. In addition, mixed-use projects, another important element of the smart growth agenda, often face a financing hurdle because of their complexity and attendant time risks.

A major change in the capital market for urban infill development is the emergence and rapid growth of Real Estate Investment Trusts (REITs), which both acquire and develop properties. Compared to other developers or investors, a REIT's functional distinction is that its tax treatment encourages the holding of its properties as a primary source of income. As a result, REITs tend to focus on a specific sector or geographic market, and can become major stakeholders in their communities. Since they provide an efficient and liquid form of real estate investment for institutional investors, such as pension funds, REITs also can significantly improve local capital markets where they focus. In addition, because they tend to hold their properties and develop an unusual (for financing intermediaries) depth of expertise regarding their markets, REITs can manage risks that have made redevelopment so expensive in the past. Several cities, including Dallas, point to a REIT's participation as a key element of their successful infill development programs.

Public finance mechanisms also have been changing to better stimulate economic activity and investment in urban areas. Noting that site preparation of downtown tracts usually includes extensive environmental assessments and cleanups, and that investors are still reluctant to cover those costs, the public sector has worked to fill this financing gap with loan guarantees, subsidized loans, or cash grants. Local officials increasingly see that the benefits of bringing new business activity to established city locations outweighs the risks accompanying the acquisition of abandoned sites. The public sector also is showing that with limited seed investment and assistance with managing potential cleanup liability, it can establish the climate that invites greater levels of private involvement in smart growth projects.

Tax increment financing (TIF), available in nearly 40 states, traditionally has been employed for numerous types of economic revitalization efforts, and is playing a more prominent role in brownfield and infill development. The TIF process uses the anticipated growth in property taxes generated by a development in a specific area to finance public-sector investment in that zone. TIF programs are built on the concept that new value will be created -- an essential premise of most smart growth initiatives -- and that the future value can be used to finance part of the activities needed now to create that new value, and that ultimately the new value will accrue to the jurisdiction's tax base.

TIF bonds are issued for the specific purpose of redevelopment -- acquiring and preparing the site; upgrading utilities, streets, or parking facilities; and carrying out other necessary site improvements. However, many jurisdictions have been hesitant to use TIF mechanisms for infill projects since it can be difficult to retire the bonds if projected development fails to materialize or unanticipated complications arise. Some local economic development practitioners also cite the complexity of many TIF initiatives as a practical disadvantage.

California's redevelopment law offers a new way to focus TIF funds on infill projects. Tax increment financing long has been available in California, and 20 percent of the revenue from TIF bonds has been earmarked for affordable housing projects in distressed areas. Yet because these housing projects, for many reasons, often did not materialize, the state legislature recently required jurisdictions to choose between obligating the affordable housing funds within four years or having none of the TIF revenue available for any type of investment. This amendment creates a strong incentive for creating affordable infill housing. Since housing is such an important part of balanced revitalization of urban areas, this policy also is a strong addition to the public sector's financing portfolio.

Conclusion

Like brownfield redevelopment, smart growth and infill development require an integrative approach to land development that incorporates environmental, economic development, and community needs. Local governments are responding to the pleas for more livable communities, and private capital markets are beginning to meet the high demand for urban reinvestment. Federal policies should be changed to support these efforts.

Ann Eberhart Goode, Elizabeth Collaton, and Charles Bartsch coordinate the Northeast-Midwest Institute's Urban Environment program.