The Fiscal Fix

Peter Katz

A former planning director proposes analyzing development projects on the basis of how much revenue they generate per acre. The results will astound you.

by James A. Bacon

A discourse about the fiscal impact of low-density vs. high-density development may not seem like riveting subject matter to most people, but Peter Katz has a way of pulling you in. The professorial-looking planner with a salt-and-pepper beard speaks with a measured voice as he piles image upon image, fact upon fact, graph upon graph, until you go, “Wow.”

He starts with a slide of a Walmart in Sarasota, Fla. It’s a familiar image: Identical to hundreds of other Walmarts across the country, the big-box building squats in a vast parking lot. It may look barren but the store generates hundreds of thousands of dollars in property tax revenues for Sarasota County – a seeming bonanza.

Not so fast, Katz says. When you calculate the property tax per acre of land, including the parking lot, there’s nothing extraordinary about it at all. In 2008 the Walmart yielded $8,350 per acre. That’s only a couple hundred dollars per acre more than the county collected from a typical single-family house in the city of Sarasota (a separate municipality; the home owner actually pays city taxes as well).

Next, he mentions the return from a property housing a Burger King near the Interstate. What a surprise: The development yielded $15,500 per acre. And then he flashes a photo of Sarosota’s premier retail destination, Westfield’s Southgate Mall, which generated $21,800 in property taxes per acre.

Just as it dawns on you where he’s heading with the presentation, Katz shows an older two-story, urban mixed-use building with a shop on the ground floor. It’s attractive and well located, but hardly a luxury destination. Yet the tax yield leaps to $91,400 per acre, more than four times that of the swankiest mall in the area and more than 10 times that of the Walmart.

What happens with urban mixed-use mid-rise buildings? Katz clicks to a photo of an older 10-story building with street-level retail, one floor of office space, and condominiums above. The property tax take: $790,000 per acre. (Yes, that’s a number with six digits.) Finally, the piece de resistance: Up pops a slide of a newly constructed, mixed-use high-rise loaded with retail, commercial space and luxury condos. The property tax yield is nearly $1.2 million per acre – or about 140 times that of the Walmart.

Photo credit: New Urban News. (Click for more legible image.)

So simple. Yet so revolutionary. Katz’s information overturns decades of conventional analysis. Planners typically look at the tax take per house, per store or per office building. But that doesn’t tell you anything particularly useful, says Katz, who in the past 20 years has served as the first executive director of the Congress for the New Urbanism, co-founded the Form Based Code Institute and worked as a senior planning official in Sarasota and then Arlington, Va. The cost of providing most government services – water/sewer, roads, sidewalks, police, fire and rescue, almost everything but schools– varies not just by the number of houses, stores or office units being served but by the geographic area being served.

According to Katz’ Sarasota study, the tax yield per acre from a mixed-use urban development runs anywhere from 25 to 100 times that of low-density, single-use developments. Yet local governments have been approving projects at ever-lower densities for the past half-century, deluded by the impression that spreading growth further out onto cheaper land makes it a better deal for the municipality. Spreading out growth may or may not reduce the cost per acre – that’s the subject of considerable debate — but it undeniably consumes many more acres. Is there any wonder, Katz asks, why local governments are facing so much fiscal pressure?

Questions about the cost per acre of providing infrastructure, while important to the analysis, become almost immaterial compared to the difference in the tax yield per acre. Katz says. “When you see such huge revenue disparities between the downtown high rise and the suburban big box; there is simply no way that anything on the cost side will significantly change the equation. We’re not talking about differences of 20 percent or 30 percent here. We’re talking differences of thousands of percentage points!”

The implications of this way of looking at the tax base are profound. Jim Ley, who was Sarasota County administrator when Katz commissioned the study in 2010, said the tax-yield-per-acre perspective helped tear down myths that supported low-density development. It was widely believed that the biggest taxpayer in the county was a mall, he says. “That’s true… but it sprawled over 40 or 50 acres.” The same acreage dedicated to mixed-use development would have generated far more in taxes.

In the 2000s, Sarasota County boomed and revenues increased year after year. But the real estate crash turned the growth paradigm upside down. “In this part of Florida, people have lost 36% of their property value,” says Ley, who describes himself as a bottom-line guy and a fiscal conservative. In other words, the county lost one third of its property tax base. Politically, the board couldn’t raise tax rates while people were hurting. The solution, he suggested, was not authorizing more development – it was authorizing development that yielded more tax revenue per acre.

Katz, who worked under Ley, hired Public Interest Projects to conduct the research. In a smaller exercise, the consulting firm had found that a mixed-use project set in Asheville, N.C.’s downtown district consumed less land, produced more property taxes per acre and supported more jobs per acre than the local Walmart. The really amazing thing was that the downtown project even produced more retail sales tax per acre.

Stimulating mixed-use re-development in downtown districts has dual advantages. Urban cores already have infrastructure such as water, sewer, roads, streetscapes, etc. And when infrastructure needs to be added, water pipes run shorter distances and much of that distance is vertical, paid for by the developer. Often high-rise mixed use in a downtown area requires less new infrastructure investment than if comparable square footage were built in a lower-intensity greenfield location. Combine lower infrastructure investment per acre with a higher tax yield, and the revenue return on the public’s infrastructure investment is far superior.

There are different ways to look at that return. Katz measures the length of time it takes for tax revenues from a project to pay back local government’s initial infrastructure investment. Under his most dramatic positive scenario—a group of close-in, mixed-use high rises—the payback is a mere three years. In the case of low-density multi-family residential development (2- to 3-story garden apartments, like those shown above) at the edge, the payback is more than 40 years — not even counting the interest that ought to be charged on what he regards as a long-term government loan to the developer. He calls this new metric the “fiscal impact quotient.”

Joe Minicozzi with Public Interest Projects translates the same Sarasota data into a Return on Investment (ROI). The downtown Sarasota scenario, he said in a presentation to the 2012 Congress for the New Urbanism, provides an 18% ROI. The low-density suburban scenario is 2%. Or, from yet another perspective, the downtown Sarasota scenario puts the county $34 million in the black after 20 years, but the low-density suburban scenario is still $5.2 million in the hole. “This is a Ponzi scheme,” Minicozzi said. “We can’t pay our way out of this stuff.”

Katz is currently gauging interest in launching a not-for-profit organization to coordinate the efforts of a handful of local governments and regional planning agencies around the United States that are beginning to track such fiscal metrics. He believes that local governments, facing mounting costs related to poorly utilized infrastructure in outlying areas, eventually will start to use this kind of fiscal impact data as a “screen” for granting development approvals. His proposition is that government shouldn’t be writing blank checks for large infrastructure investments that will take decades, if ever, to recoup.

Conceptually, gathering the data is easy. Just go to the assessor’s office (many post the information on the web); find the acreage and tax paid on each parcel, and perform a simple calculation to get the revenue paid on a per-acre, per-year basis.

But this new metric has a few complications: The analysis of property-tax revenue does not take into account sales tax revenues (although, according to Katz and Minicozzi, this is not as big of a factor as one might imagine), nor the fact that tax structures vary significantly from state to state, locality to locality. Also, in some instances, high-rise buildings that spin off a lot of revenue can detract from the value and tax revenue generated by nearby buildings, as when they block views or light, or house large numbers of cars in street-killing parking podiums. Even with fiscal analysis aiding in development decisions, Katz says, the need for good planning remains.

This kind of “tax literacy,” a term that Minicozzi has coined, is desperately needed in Virginia, where fiscal impact analysis remains in the dark ages. An institute like the one Katz proposes could provide clarity to city councils and boards of supervisors as they struggle to understand the revenue implications of different forms of development.

“Smart growth has become highly politicized,” says Katz. “Reducing zoning and permitting decisions to pure dollars and cents may seem cold, but it removes the issues of ideology that people get hung up on. You make it safer for both sides of the aisle to talk to each other, and you end up with better decisions in local government.”

This article was made possible by a Piedmont Environmental Council sponsorship.

33 Responses to The Fiscal Fix

  1. Yet the tax yield leaps to $91,400 per acre, more than four times that of the swankiest mall in the area and more than 10 times that of the Walmart.

    =======================================
    Sounds like that guy is getting screwed on his taxes.

    By tax yield, I assume he means Net tax yield, the costs of servicing the property being already subtracted. So, what possible justification is there for one property contributing so much more to the general coffers, over and abve what it costs?

    Besides that, who cares wht it costs as long as the owner is paying that cost, and more? The cost part may vary all over the map, but the more part ought o be at least somewhat equitable.

    Which is why I cringe when I hear the conservation addicts caliming that we need to save our parms because they pay twise as much as they cost.

  2. Questions about the cost per acre of providing infrastructure, while important to the analysis, become almost immaterial compared to the difference in the tax yield per acre. Katz says. “When you see such huge revenue disparities between the downtown high rise and the suburban big box; there is simply no way that anything on the cost side will significantly change the equation.

    =====================================

    Maybe I spoke too soon. This makes it sound like the yield is counted independent of costs. Gross yield, not net. Again, if there is really a difference in yield of thousands of percent, someone is getting screwed. But if you first solve the tax fairness issue, this argument goes away, anyway. Each residence and each business contributes on some rational and equitable basis.

    Besides, it is all well and good to say, “If only we had mixed use we could collect thousands of percent more.”, except this is a ridiculous argument. First of all, you could not collect that much more because citzens would be outraged. Second, there isn’t the demand for it. When Walmart comes to you with a project, do you say, “Nah, we think we will wait for a mixed you to come along.”?

  3. Right, there’s only a finite demand for high-density, mixed use. You can’t build any more than there’s a demand for. But the key is, when it comes along, you permit it (unless there are unusual circumstances, such as you might find in, say, Tysons Corner).

  4. Jim, have you ever lived in or around a ‘mixed-use’ development? In the Portland area they built many of them, mostly because the developers got government money to help with the cost of them. They LOVED to build them in and around the light rail stations. Three things have happened to them. First when the time-limited, government sweet-heart deals ran out (like severely reduced property taxes for a period of time), people moved out (tried to sell) like the places where on fire. Second, they WANTED to bring in a group of folks who would eventually limit or eliminate the car as a principle mode of transportation – didn’t work, even with incentives, without parking, the units just sat there. Third, they are now getting older (10 years and more on the first TOD’s), while the parking has been addressed, the units are no better or worse than living in apartments and people believe, live and act that way. They are becoming run down, attract an unsavory type of clientel. Basically, they were and are not desireable for a large, large portion of the population.

    • I’ve always said that people should be free to live where they want. If you don’t like mixed use communities, you shouldn’t have to live in one. But if there’s a pent-up demand for such communities, it is foolhardy to zone them out of existence. Not only are some people being deprived of the kinds of communities they want to live in but counties would be banning the more cost-efficient (tax revenues vs. expenditures) form of development.

  5. keep in mind that the taxes that commercial development “generates” is the sales taxes collected from customers. These taxes are not taxes paid for by the business but collected by the business for the state and locality.

  6. Something bothered me about this, but I couldn’t pick it out. Finally I saw it. It is an inconsistent argument.

    It makes out Walmart to be inefficient if you average in all that nonproductbe land under the parking lot.

    It makes out school to be inefficient because of all that unused space, not only in the front and back yard, but above the roof.

    But a mixed use high density development ALSO creates a bunch of unused or under used land. If that is counted against the development in the same way it is counted against Walmart, then the figures change drammatically.

    Such a place cannot work without sucking the life out of other places. Consider what would happen if the authors suggestion was followed: such placed would be treated preferentially. But now, an entrepreneur has no place to go. If Hewlett and Packard had lived in one of these places, there would have been no garage start up. Nothing can be done in that environment without you are a huge investor. The developer landlord might find you a space, but the rent will suck the life out of you.

  7. And they all lived happily ever after. Does a fully rented, mixed use, high rise building provide more property tax revenue than a SFH or a one-story commercial building? Absolutely. Will multiple high rises produce more property tax revenue than 25 acres of SFHs? Absolutely.
    But what does it cost to support the former versus the latter with adequate public facilities? Much, much more. Ask the Fairfax County Planning Commission. It is struggling to find out how to finance $5.46 billion in road and transit to make Tysons work and grow until 2051. That’s more than $2 million needed each and every week from now til then.
    Moreover, those costs do not include two additional rail lines that are needed to take growth beyond 84 MSF. Some of believe the County just doesn’t want to scare people to death. A real live example from what is probably one of the best studied development plans ever.
    Tippecanoe & Tyler Too! Let’s get real.

  8. But what does it cost to support the former versus the latter with adequate public facilities? Much, much more.

    =============================================

    This is the argument I have been making for years, although I concede there seems to be little credible and unbiased data. I simply fall back on the observation that such places are more expensive to live in and more expensive to govern (higher taxes), and therefore their alleged benefits are not fully priced.

    But, I reiterate, that a real hidden cost is the loss of opportunity caused by handing over control of so much to a handful of giant landlords. Just as in the example I noted above, I can point to a number of examples (my own included) in which people have been blocked for years or decades even from economic activity that, really, hurts no one, yet activists and neighbors have taken over the control of property they do not own to the extent that the hurdles of getting anything done are simply higher than the reward.

    The case of the Martella Vineyard is a case in point. It took years of legal wrangling for the vineyard to prevail over the homeowners association that wanted to put them out of business. The owner died before the state supreme court ruled in his favor.

  9. In the link posted above, there is this one which lists the ten most expensive structures in the world.

    I think the Space Station should top the list, but maybe it doesn’t count because it is “out of this world.”

    http://www.businessinsider.com/the-most-expensive-buildings-in-the-world-2011-10#4-bellagio-hotel-and-casino-in-las-vegas-cost-16-billion-to-build-7

  10. Here is a picture in Portland Oregon, taken 2 days ago. This mixed-use project was started back in 2009 and located near light rail. The following is the picture taken by a Portland resident, the following comments are his not mine.
    http://bojack.org/images/shrinkwrappedbunker.jpg

    I just took these pictures today. The only difference from 2009 is that the plastic wrap is tattered, and they took down the sign proudly announcing it is a PDC [Portland Development Commission] project…. If you want to talk about ruining a neighborhood and blight, look no further. The sidewalk has been closed and the place enclosed in chain link fence. Makes you want to invest and settle right in as a neighbor — so much for all that multi-use housing demand along the light rail line. I wonder how much money down the rat hole, between transit-oriented development and PDC, has put together this mess.

    Read more: http://bojack.org/#ixzz1yIWA75vw

    Mixed use isn’t the answer … to much of anything (IMHO).

  11. yeah.. I think the concept of mixed-use has some flaws in an era of beltways.

    live, work, play and shop in a mixed-use enclave flies in the face of personal mobility to go where you want when you want to get what you want.

    When beltways and similar came along, it changed the mixed-use game.

    Notice the dichotomy of TOD with rail stations are and no equivalent paradigm for IOD – Interchange Oriented Development -

  12. I went to an interesting meeting last evening – a presentation by Fairfax County DOT on the first Consolidated Transportation Impact Analysis being completed. This is being done for the Tysons East area. The 527 TIA process only looks at individual re-zoning applications. Fairfax County wanted to understand the effects on transportation of the full proposed and permitted levels of development. The County is modeling all development that is proposed by the multiple pending applications for re-zoning and the level of development that the Comp Plan authorizes for the rest of Tysons. Note that this is more development and traffic than that which was modeled for the Comp Plan 527 TIA because the County allowed more development at the four stations than was assumed for the earlier modeling.
    More mixed use development means more traffic, which, in turn, requires even more road improvements. Some in Tysons and some not in Tysons. Moreover, DOT believes neighboring communities might well have even more traffic congestion.
    What is an example? The intersection of Route 123 (Dolley Madison Blvd), Lewinsville Road and Great Falls St. (LR is west of 1213; GFS is east.) Today, Lewinsville Road carries 11,000 vehicles, and Great Falls St. has 13,000. The two streets take considerable traffic from Maryland, DC and Arlington to Tysons and back. FC DOT believes it may be necessary to build an overpass on top of Route 123. And all along, I’ve been told urban development at Tysons protects the suburban neighborhoods.

  13. As James Bacon and Peter Katz point out, various real estate developments, depending upon their use, type, and location, have wildly different fiscal impacts, both positive and negative, on their communities. This being true, how can land use decisions be expected to work for the public good unless they are informed by such impacts? Indeed, how can decisions otherwise achieve reasonably predictable and intelligent results, much less approach optimum results or even fair or acceptable ones? The task grows harder, and margins for its success narrow, as land grows urban. Why? Because decisions multiply and their consequences compound as the mix of uses at work within a neighborhood become more complex. In such cases, one project’s impacts are often cumulative, generating multi-faceted consequences that ripple throughout its community.

    So in urban areas with complex relationships, or those that hold such potential through the use of Urban Smart Growth Principles, the Fiscal Fix Model suggested by Mr. Katz may be the critical tool. How otherwise can decision makers properly assess and balance complex opportunities with conflicting interests, or arrive at nuanced decisions that generate the maximum potential benefits over the longest periods of time throughout the community while minimizing its costs? These questions reveals the enormous potential for the Fiscal Fix Model to build far better engines within cities that generate not only self-sustaining revenues, but also exponential wealth and benefits the lifts the boats of all its citizens.

    These ideas gain heightened significance given the deplorable state of many of our cities. An effective tool for building antidotes to urban failures and decay is sorely needed. Our Urban problems are chronic, rising, and systemic. Their consequences are in plain view: the massive dislocations of synergistic uses in our cities, their abhorrent quotients of livability, their sterile sprawl of dying uses and obsolete infrastructures, their ever more congested and distant commutes through ever more balkanized neighborhoods. The gaps between the costs our cities impose, and benefits they confer, widen annually. Our as built cities can’t keep up. Their internally generated revenues fall ever farther behind their fixed and escalating costs.

    But, however dysfunctional our cities, we seemed unable to fix them. Why? Because our old tools too often fail us. Often they only perpetuate and compound the problems. Our outdated Euclidian models of land use have for far too long built mostly static neighborhoods segregated by classes and uses. These patterns of use isolate whole groups of citizens and commerce behind invisible walls of exclusion. Here everyone suffers. Whether they’re individuals or enterprises, whether locked into, or out of, whatever combination of land use boxes, everyone confronts huge inefficiencies that limit everyone’s opportunity. Mobility is lost. So business suffers. Nobody can walk to a retail store, and shop, or office. Without mobility they lose the ability to interact and profit from one other, physically, socially, emotionally, or intellectually. Imagination is stifled. Stereotypes perpetuate. No one learns. Whole varieties of social pathologies emerge. Examples are endless. Here’s only one: mythologies built on fear. Like those whipped up in the hothouse politics of closed neighborhood faction, breeding NIMBYism. Its virulent emotions freeze all change that remedies require. So, year after year, the endemic and brittle inefficiencies of the way we use our land use works to retard our progress, compound our losses, and thwart the flexibility and variety that our communities’ need for innovation, creativity and growth. Costs escalate as inefficiencies compound, piling one atop the other. Old neighborhoods in drastic need of overhaul refuse it, only to die or stagnate instead. Meanwhile, their urban blight and intransience far too often forces new and more inefficient sprawl that sprouts like weeds ever farther out across the countryside.

    It all works like a rat on wheel. How do we break the cycle? This cycle of obsessive, compulsive growth that’s killing us? James Bacon and Peter Katz have suggested new and powerful tool to uncover remedies. One that brings a highly relevant fact based analysis to decision making. One that injects clarity and objectivity into a process that sorely needs it. One that, in the right hands, can reveal and parse each neighborhood’s complex problems, and suggest to expert observers the opportunities asleep within it. And then can help to reveal what new patterns of use might best knit together a far stronger community, one whose synergies can attract the mix of businesses, people, and investment most likely to build it into a healthy, dynamic, efficient community that generates long term exponential wealth for all its citizens.

    How can we be so sure? We can because it’s been done before. See, for example, on this website’s Smart Growth for Conservative Blog how Arlington County Va. rebuilt its urban core using Smart Growth Principles in downtown Arlington County. The Fiscal Fix model will help us to build more Ballston to Rosslyn urban cores, faster, better, with fewer mistakes, and far more certainty.

  14. Given above discussion, it’d be interesting to calculate with Mr. Katz’s tools the monetary cost versus monetary benefit of four different developments.

    1. The Ballston Rosslyn Corridor versus Tyson’s Corner –
    2. Upper Connecticut Avenue versus Upper Wisconsin Avenue in DC.

    Such comparison of the two examples in each category holds particular interest given that initially each development likely held roughly similar potential for costs versus benefit. Yet, I suspect the Ballston Rosslyn corridor now far outperforms Tysons Corner in most every respect. And that that has been true for a good long while. And I suspect that the disparity widens annually, whether in terms of mounting / decreasing costs, or mounting / deceasing benefits, both locally and regionally, or by most every standard one can dream up to measure. And that, likely, too, that trend will continue into the foreseeable future.

    I’m also confident the same holds true for Connecticut Avenue versus Wisconsin Avenue. Here too, I suspect the differences astound.

    With all the fancy computer metrics today (such as Mr. Katz’s) I suspect these numbers could be run with sufficient accuracy to be meaningful. And therein might well be found many lessons. For example, that for far to long Government zoning and land use decisions has focused far to little on long term Revenue benefit and cost mitigation in making its decisions.

    I also suspect there will be lessons to be earned that are applicable to many different kinds of land use decisions: all the way down to access on primary and secondary state roads for example.

  15. Localities are not interested in cost-benefit calculations for roads as long as they are not on the hook to pay for them and they get all the economic benefits instead of an ROI to the fund that built the road.

    When localities are directly responsible for the road costs – as they are in 46 other states, all Va towns and cities and 2 counties, there is a lot more due diligence in looking at road costs vs economic development benefits.

    Virginia’s big problem is that localities have no skin in the land-use/transportation game.

  16. So that’s a problem that needs fixing, the idea were not responsibly, the taking the easy way out we get a free ride. And, likely too, huge local opportunities are being lost. Many localities are losing far more than they realize. Getting them to see it, I suspect, is a whole different story.

    I spent a lot of time growing up in northern VA, and spent summers in the Piedmont and Northern Neck, and drive through a lot of Va now. What a beautiful state back then. Its really sad to see how much Va. clutters and trashes itself up, so many places. Painful to see really. Makes your teeth hurt.

  17. Correction to above comment at end of 1st sentence: ” So that’s a problem that needs fixing, the idea that “we’re not responsible, and so can take the easy and cheap way out, getting mostly a free ride, its very short sighted, obviously.

  18. a good part of the fix is to do what most other states do and that is make the localities responsible for local roads and do not let them use State roads for commercial development venues unless strict access management is employed.

    A recent law that passed the GA required VDOT to review local Comp Plans and there was outrage that VDOT was intruding into local affairs but many of their Comp Plans designated land along major state roads as prime commercial development land.

    Look at the major roads like 29 through Cville and NoVa or Routes 3 and 17 in the Fredericksburg Area – all heavily developed with commercial development and all of them suffering degraded transportation capabilities and all of them discussing “bypasses”.

    Ultimately taxpayers pick up the tab as they are in the bypass in Cville. If you look at the cost of the proposed bypass, it’s way more costly that Cville residents could pay so all Virginians are paying for it and in doing so are forgoing funding for their roads.

    Combine that with the fact that the gas tax has not indexed for inflation for 25 years and we have very little funding left and are resorting to toll roads.

  19. That’s getting to the nub of it.

    I recall, traveling the newly opened DC Beltway on my way to C’ville, to be amazed when confronted by a tall building sprouting out of cornfield at Tyson’s Corner. That was ’63’. The sight was vivid as yesterday.

    Also vivid as yesterday was my first Arby’s Beef Sandwich on ’29’ just outside C’ville.

    In hindsight, these were of the newest iteration of a bad habit, roadside tactics refined on US Route I. (Even Dumfries had been a pretty place). Apparently, most other states have figured its problem out. Not Virginia.

    I’m an Anti-Federalist at heart, a property rights guy too. But this stuff got nothing to do with either. These are not Tom Jefferson’s Virtuous Virginia Farmers at work. Dress it up anyway you like, but at base, it’s not a pretty sight, on any level. And it sure does not promote virtue.

    No, this is about local power using other people money for private advantage. It’s doing it at the front end, the long middle, and back end too. Question? Who builds the means of a few people’s wealth, maintains it for generations, then is left to clean up of the mess these few people leave behind. The Good Taxpaying Citizens of the State of Virginia.

    So, despite the bargain at the time, that ’63’ cornfield tower on the new Beltway and that ’60’s’ Arby’s Roast Beef sandwich were no bargains. Va.’s taxpayers are still picking up the Tab nearly FIFTY YEARS LATER. And at the present rate, they’ll been picking up the tab that built a few other peoples for generations to come. Folks ought to be marching on Richmond.

  20. and now the roles have changed. VDOT will tell you that Route 1 is now a critically important “bail out”route when I-95 gets shut down.

    and of course, now we are looking for a “bypass” around the Washington Beltway!

  21. Yes, and the current congestion and clutter now in many parts of Northern Va. is the future of the most all the Commonwealth. That is unless and until responsible government and business bring many more disciplines to bear on the process of where roads go and what purposes they are built to serve.

    Our matrix for such decision making to date has been far too narrow. Mostly it would seem to be the calculations of concrete and traffic load engineers and special interests, thinking narrowly about term fixes and short term gains. So in the long run problems compound.

    The classic example of fundamental error is now plain too see: the idea that the Washinton DC’s Beltway was Fairfax County’s Main Street. Everybody hopped gleefully upon the Concept. It opened up a land rush.

    And we see the results. Short term gains traded for long term losses leading to eventual decline. Along with bagfuls of every growing problems and inefficiencies that culminate in ever larger and more costly fixes, ever more pain, trying to fend off the inevitable Gridlock.

    Apparently now, folks out in many parts of the rural Virginia want to follow “Your Beltway is is my Main Street Example. But its a dead end.

    Gridlock. What then? Hard Choices. You’re left with disposable urban cores, or dramatic and costly game changing renewal.

    Yes, Dramatic Renewal worked in the case of Arlington’s new downtown. Why? Several Factors. Arlington’s absolutely exceptional, indeed unique, location. The County’s highly Pro-business local government. A Goverment with exceptional expertize based on prior experience, including many mistakes, in urban planning and business development. An affluent in place citizen base built around a strong business community. A group of very strong, public spirited and business savvy local “Community Organizers.” But not the community organizers as often thought of today. These were business leaders.

    Finally, Arlington was Blessed with the timing of a Region Wide REVOLUTION: The Washington DC Regional subway system. The subway was a huge game changer, funded by entire region. So Arlington got huge benefit relative to cost.

    The Point is the Arlington was, to a degree, very lucky. The problems it faced are often far harder to unwind. We’re seeing that now in Tysons. The really sad fact is that much of Tyson’s problems could have been easily avoided up front. The know how was there to avoid them.

  22. reed fawell | July 25, 2012 at 11:33 am | Reply

    It’s difficult to overstate the damage that flaws in current land use and development laws inflict on our communities. The opportunities lost and damages incurred last for generations, compounding annually. Society not only loses billions in revenues, its poor land use choices disrupt, handicap and limit the lives of its citizens, especially those most vulnerable.

    The results are plainly visible along our roads, but many bad consequences hide in plain sight, woven deep into the fabric of affluent neighborhoods.

    What’s worse, all these very blighted neighborhoods should be engines of affluence. When they’re not, it’s typically due to a failure of government.

    Compare the Tale of Two Grand Avenues, twins in all respects, but one. Yet one generates less likely 5% of the hundreds of millions of dollars that the other generates for its City annually, yet costs the same to maintain.

    Why? Both are urban thoroughfares designated Grand Avenues by the City’s Master Plan. Both are engineered to identical standards to serve the same purposes. Each runs parallel to the other, ten blocks apart, flanking the same well established, leafy and affluent neighborhoods they serve, mostly homes on subdivided lots owned by many of the City’s most wealthy citizens. Urban subway stops and commercial stores line both avenues. A university fronts each. Both are also major commuter arteries for suburban commuters working in downtown. Each Avenue carries roughly the same amount of traffic daily. And both streets serve an equal mix of local and long distance commuters daily.

    So why is one a great fiscal loser for its city, and shabby sister of its twin?

    The answer is startlingly simple: Some 60 apartment and condominium buildings front Upper Connecticut Avenue in DC. These range from 3 to 12 stories, comprising thousands of apartments and condos amid vibrant neighborhood centers and busy subways stops that share Connecticut Avenues sidewalks. Thus tens of thousands of people flood those pavements, shopping, living, eating, walking around, and commuting by subway, spending money that ripples throughout the Avenue and city, dramatically enlarging its wealth.

    All day and evening these residents enrich local merchants who employ others who pay their own taxes, spend their own profits, and create their own families who in turn do the same. They also pay local income tax, sales taxes on their purchases, and real estate property taxes (personally if condo owners, through landlords if not). Such revenues easily total hundreds of millions yearly.

    Thus Upper Connecticut Avenue, an engine of exponential wealth, spreads revenue throughout its city. And does it efficiently too, at low cost to the city, in a myriad of ways. Its density of its mixed uses reduce commutes and maximize public services at low public cost, whether in terms of utilities, street repairs, garbage collection, to public transport. The benefit versus cost equation is astounding, and its all for the Great Public Good.

    So what about the shabby twin sister? And what’s the government got to do with her? We’ll deal with that next.

  23. So what about the shabby twin sister?

    Upper Wisconsin Avenue (from The National Cathedral north to the D.C. line into Maryland) is a second-class street at best. It’s few apartments rise mostly across from the Cathedral then tail off rapidly.

    Once past Sidwell Friends School, and Fannie Mae, Wisconsin’s streetscape fades into a 1950’s era retail strip. One typically found along aging suburban thoroughfares: 1 story convenience stores, a few low rise class B & C office with first floor storefront retail, amid gas stations, fast food outlets, one hour opticals and the like.

    Half way up Wisconsin, 10 blocks north of the Cathedral, one encounters Tenleytown. This odd assortment of tired small 2nd and 3rd class buildings present a startling contrast to Connecticut Avenue’s bustling commercial centers such as Woodley Park and Cleveland Park.

    Here, at Tenleytown, the eye sore traveler, otherwise surrounded by many the America’s most affluent communities, will confront:

    A Z Burger, a Mattress Discounter, a Pancake griddle shop, a Radio Shack, a Payless Shoes store, a Pizza Hut, a Subway shop and Guapos, several dry cleaners, a computer repair shop, a Karate studio, liquor store, crab house, record exchange – cluttered around two “Anchors”.

    One Anchor, a Whole Foods Store, hides as if embarrassed within an abandoned concrete multi-story parking garage. The 2nd Anchor, a Best Buy big box retail store, hides across Wisconsin Avenue, inside a defunct and long abandoned Sear Roebuck Store built in the 1950s.

    Everything in Tenleytown squats beneath its two high-rise radio towers, the first built in 1949. And, despite its Metro Stop, nothing bustles in Tenleytown. A closed 2nd entrance of its Metro Subway stop disappears darkly into the pavement of its busiest corner.

    Tenleytown calls itself “eclectic … a trendy shop-and-cafe zone …” A Washington Post article’s description is more apt: “A Hodgepodge.” And it gets shabbier traveling north up Wisconsin Avenue. Eye sore before, our weary traveler’s teeth now also begin to hurt.

    Why? He’s seeing the neighborhood decline out his window – a cigar shop, a nail studio, an aqualung store, an Robo-Wash Car Wash, a semi vacated used car lot, an electric grid distribution center, a bus maintenance depot, punctuate more weary 1950’s streetscape.

    Then, approaching the last block of Wisconsin Avenue, before the Maryland Line, he encounters a mirage. Abruptly, a miracle bursts out of the mirage onto the street. Clutter collapses. Marble and Granite soar phoenix like. It shimmers above busy shoppers, strollers, and commuters as far as his eye can see up Wisconsin Avenue into Maryland.

    Why? Because along here suddenly he sees great engines of wealth. They are pumping out money into everyone’s coffer, private and public:

    A Neiman Marcus, and Saks Fifth Avenue, and Lord & Taylor’s, and Bloomingdales –

    And Brooks Brothers, and Van Cleef & Arpels, and Dior, and Louis Vuitton, and Cartier, and Gucci, and Ralph Lauren, and Tiffany & Co. –

    And Clyde’s of Chevy Chase, The Capital Grille, The Cheesecake Factory, Chadwick’s, and Hyatt and Embassy Suites, and Ritz-Carlton (http://www.lifeatthetop.com/area/FriendshipHeights)

    Why, 10 blocks north of stagnant Tenleytown, this sudden change out the window? Because high-rise apartments and condominium punctuate this scene on Wisconsin Avenue. They’re feeding 7000 residents into this world class shopping. They’re doing it daily. Simply by walking over they are creating immense wealth every hour, and doing it only 2 blocks north of the Hodgepodge.

    Why? Because urban streets need Walking About People the way People need Blood: desperately.

    So Upper Wisconsin Avenue remains a shabby sister to Connecticut Avenue, indeed even a pale shadow of it own self in Maryland on the north and Georgetown on the south, until somebody fixes its people problem.

    Next, we’ll briefly discuss how these twin avenues happened, their consequences, and possible remedies.

    • This lack of “Walking About People” is the root cause of many of Northern Virginia’s “Zones of Devastation.”

      If you don’t know I mean by “Zones of Devastation,” spend a few days ‘strolling’ through parts of downtown Woodbridge, Virginia. It’s heartbreaking. So many people have to live there.

      We’re building wastelands. Instead, in Woodbridge, we could be building vibrant (wealth, health and knowledge creating) communities.

  24. I’d suggest a detailed cost/benefit analysis of DC Upper Connecticut Avenue. This northern segment of avenue begins at the Taft Bridge over Rock Creek Park. It ends miles north at Chevy Chase Circle on the DC line.

    Remarkable its the creation by visionary entrepreneurs (akin to Reston’s Robert Simon), the idea for the bridge and avenue bloomed in the late 19th century. Centered around the idea of mass transit, streetcar, they first built the bridge that opened up the NW Quadrant of Washington DC to high density residential. Then they built the avenue whose mass transit drove the early 20th century boom of great apartment buildings now along the Avenue. This changed the face and nature of all Washington DC. In many ways it was a key to inventing a new middle class for the city. This in turn generated thriving commercials centers built in the 1930s. Like pearls strung along the Avenue, places like Cleveland Park have thrived ever since. Opened in 1976 the DC subway completed the transportation mix.

    A cost benefit analysis of this Avenue will astound. And demolish myths. For example, in addition to the property tax revenues generated by low-to-high rise residential buildings as described in article posted on this website in February of 1213, entitled Land Use and Tax Revenue in Fairfax County, such buildings bring a wide array of benefits to their city.

    Here’s a partial list of some other benefits if such buildings are part of a large, efficient mixed use commercial center served by mass transit. Like Connecticut Ave in DC, or within Arlington County Virginia’s new downtown, the Rosslyn – Ballson Corridor.

    1/ Compared to types of housing, multi-unit residential buildings generate by far the lowest auto trips per day. The reasons are obvious. Tenants rely on walking or mass transit, for work, shopping, and entertainment. Even the few auto trips taken to or from such buildings are typically far shorter, given the abundance and variety of nearby services. Thus typically high density tenants own fewer cars, and require less parking per unit.

    2/ The interior living space, and exterior walls, per occupant is typically far smaller and more efficient than single family housing. Electric, oil, and water consumption is far less. Less roof, less outside hard-scape plus underground garage = far less storm water runoff per unit. The advent of LEED building codes compound these natural advantage exponentially. As do fire and safely cost given more compact populations at risk. And all these advantages apply to all nearby stores, shops and restaurants.

    3/ Such residential tenants also typically put far less demand on schools. The reasons are obvious. They tend to be young, middle age, or elderly singles (whether alone or in groups), or couples whose children are grown.

    4/ Such tenants also use far more mass transit, and use it far more efficiently. So, to a great degree, they subsidize the mass transit system for outlying low density areas whose far fewer riders heavily burden the system, given the far higher capital / operating costs incurred to serve them.

    5/ Many such tenants lead far more efficient lives that most suburbanites. They have far shorter commutes, far more local conveniences, far fewer kids, so enjoy far more “free time” to work, play, and spend money locally. Plus more are single. So they often tend to go out more, to restaurants, bars, movies, galleries, plays, etc. than suburban cousins. Hence they pump vast sums into down-down local economies that would otherwise be dark and dangerous. These monies radiate throughout the city, whether in tips to waiters or sellers of expensive art, and everything imaginable in between. Much of all this would be lost without these multi-unit buildings.

    6/ Also many tenants in these buildings are not able to afford to rent or buy a home on a lot, or a townhouse in high priced down-towns. Thus these tenants would likely be living outside Wash. Dc. or Arlington Country but for these down-down rental units and condos. So instead to living and paying their taxes “in town,” they’d be paying sales, income, and property taxes to an outlying county while commuting daily into Washington or Arlington, often by car. This would clog the streets and poison the air of DC and Arlington after they’d lost the tenants’ tax revenues to maintain them, and their consumer buying power for the local economy to boot.

    7/ In addition, without such rental and condo units in-town, many such otherwise tenants would refuse to waste their time on long commutes into town. They’d find jobs elsewhere, outside DC and Arlington. DC and Arlington then would lose not only all the benefits that go along with these vibrant and highly productive citizens, they’d likely lose their employers as well. Without nearby affordable employee housing, many companies would move out of Arlington and DC or refuse to move in town in the first place. More and more employers today need to locate where the best workers for them are, if they’re to compete, given ever increasing commutes into single use commercial areas. Indeed bosses demand it for themselves as well.

    8/ Imagine if these multi-family units weren’t in Arlington’s downtown. Or on Connecticut Ave. I guess that roughly 18000 low mid to high rise occupants front Upper Connecticut Avenue alone. Without the buildings, where would their occupants go. Many elderly depend on their convenience for the lives. Many others can’t afford living any where else in Downtown DC. If DC lost these thousand of units, the already ungodly high housing prices in all the rest of NW Washington would sky-rocket yet again. It’d cause a forced migration by the thousands, including many of our most vulnerable citizens. Only the richest among us would be left. Connecticut Avenue, because of its high density apartment stock, is our last barrier to the exclusion of all but the rich in NW DC. Its been doing this invaluable service for generations.

    These are only some of the benefits such intense residential buildings bring to urban down-towns. And its only half the story. Because it doesn’t explain how such housing works in tandem with nearby office use to exponentially compound the benefits they spread throughout a city. Which is precisely what’s happening in Arlington County Virginia’s new Rosslyn-Ballston Corridor. More about that later.

  25. Conservatives should not cede the Smart Growth field to Liberal activists. Smart Growth is far too a powerful a conservative tool to abdicate. And the Fiscal Fix tools described above is a powerful collateral tool not only to build a highly effective commercial center, but it proving its worth.

    And us to abandon these tools and ceded the field to liberal activists is a dangerous game since Smart Growth can serves difference aims, depending upon the philosophy of those who wield it. Liberal activists far too often use Smart Growth as a weapon to regulate and limit the behavior of those with whom they disagree. Driven by liberal orthodoxy, their means will typically rely on the exercise of top down government power. Conservatives, on the other hand, use Smart Growth as a tool to liberate. Their goal is to create models of highly efficient and practical land use and development that fuels market driven solutions to urban problems or opportunities. To achieve these ends, they endeavor to fuse livability, sustainability, and business efficiencies that generate, rather than limit, wealth and opportunity and spread both among many. To do this the Conservative must organize local skills into local action using Smart Growth principles to generate local benefits. Unlike the Liberal activist, the Conservative has no interest in (or need for) stepping outside the local community to mass and motivate the political power of alien interests to regulate that local community to achieve someone else’s ideology.

    Since Liberals’ primary goal is to use law to limit the land use of others, particularly business and commercial interests, so as to force their version of Utopia on others, they typically lack the practical skill to build self-sustaining wealth creating Smart Growth Communities. In essence theirs is a Zero Sum Game. So, instead of building a viable future, they threaten otherwise workable solutions, as they twist Smart Growth into a Weapon used against others, rather than a productive engine of Opportunity for all.

    Conversely, those skilled in wealth creation are the best innovators and drivers of Smart Growth. They own the tools, the skills, mindset, and capital to make Smart Growth work. This has been proven again and again. That Smart Growth is best driven by local businesses and entrepreneurs working with local pro-business governments to build dynamic new communities or transform blighted older ones. One of the most vibrant Smart Growth urban communities in America shows this clearly, Arlington’s downtown.

    Arlington County, Va., began to transform into one of the nation’s first suburbs at the turn into the 20th century. The reason: geography. Its direct access into downtown DC over the Potomac at Key Bridge, and its “outer beltway” of Glebe Road that linked it to DC via Chain Bridge on the north, and Alexandria’s port on the south, fueled this early growth. After expanding for decades, its suburbs exploded during and after WWII.

    But debilitating change arrived in the 1960s. Unexpectedly, DC’s new outer beltway eroded Arlington’s commercial core while siphoning off its growth, carrying both to Fairfax County’s suddenly accessible outer farmlands. As Tyson’s Corner grew into Northern Virginia’s new downtown, Arlington’s downtown withered. The opening of Dulles Airport & later its Toll Road and I-66 compounded the distress. New downtowns sprung up seemingly overnight and effortlessly, fed by newly convenient commercial corridors that engulfed small towns to Dulles and then beyond, to Leesburg. Meanwhile Arlington’s downtown choked on its clutter. It’s once vibrant urban core became a brown field of obsolete buildings, shuttered businesses, vacant lots, and hodgepodge of tawdry and tacky uses. Arlington County’s government and small business fought back. But its Not in My Backyard Crowd kept doubling down, thwarting solutions. A decade of small fixes and false starts failed to slow the tide, much less reverse it. So what to do?

    How do you tear down an obsolete city and build a viable new one in its place when confronted with opposition to remedies found across every neighborhood fence, and competition down the road sprouting from cornfields amid sudden immense advantages?

    Fortunately, Arlington County still had its affluent residential neighborhoods, the skills its citizens honed during its commercial success, and its location, so had lost only the means to leverage its advantages against powerful new competitors. This helped its local government and business community marshal the will to effectively make and implement hard decisions. The first would jumpstart the County’s long-term future. Instead of locating a new regional subway in the Interstate 66 right of way that split their county, they dug it two and a half miles underground through their blighted commercial corridor. Then they compounded that advantage by designing a Smart Growth plan that built their own future. Founded on the livability of its citizens, and sustained by an internal engine of mixed business and residential uses, this plan fueled dynamic new businesses while attracting an influx of energetic citizens to drive those businesses and enliven Arlington. This potent mix sustained the quality of life of its citizens, turbocharged their affluence, insured local business success, and built a strong tax base for excellent public services and amenities. In short, the model itself, properly deployed, jumpstarted then drove its own success, transforming desolation into opportunity that, once properly primed and fueled, then outperformed the very competition that earlier had nearly destroyed it.

    So Smart Growth was the engine, the subway its jumpstart, the driver private enterprise. Despite what some say, only enlightened business interests working hand in glove with highly competent pro-business local government did this, got that kind of Smart Growth engine up and running. Private enterprise build it, financed it and keeps it running, spinning off jobs, homes, amenities, taxes, and affluence for the citizens of Arlington.

    That’s what happened in Arlington County. It was not easy. It was terrifically hard. The success of the 1970’s, 80’s, and 90’s was built on the back of costly earlier mistakes. Success was achieved despite virulent local opposition, fierce regional competition, and the devastation of several national recessions. Many individual and corporate fortunes were lost along the way, yet insured ultimate success, and all monies and much labor was invested at great risk. Private enterprise, driven by a few individuals, did most of the heavy lifting, and suffered the vast majority of heavy losses. Local government, driven by a few remarkable individuals, did most all of the rest. Today’s liberal Smart Growth advocates who now claim most all the credit are due little, if any, of it. So read their modern histories, and their nostrums for “our’ future, with a jaundiced eye. It’s misleading on facts, long on theory, short on practical experience or record of real results. Indeed, it is a Trojan Horse that carries within it an unworkable and contrary agenda. Only inspired local government and private enterprise can successfully ride the Smart Growth Horse. Both need only to gather the vision and the will to take the reins.

  26. The new and ongoing renovation of the Ballston Common Mall highlights several facts critical to Arlington County’s urban development success, as distinct from Tyson’s Corner’s failures.

    First, very early on, Arlington County came to understand, and found solutions to deal with, the fact that commercial development generates far more traffic than residential housing. In contrast, the development of Tyson’s Corner acerbated this basic problem. It built a suburban city.

    Think about it. One person typically occupies far more space at home than in his office. Plus a doctor sees far more daily visitors in his office than at home. So does a store clerk. So does the typical office worker. So does someone working in a convenience store, at a hairdresser’s, or flower shop.

    Suburban uses, dependent on the automobile, turbo charge these realities, traffic wise. Here, shopping centers, regional malls, and big box retail are the worst offenders. Their sales depend on auto visitors. So does their value, should the owner sell his asset because its traffic volume proves the drawing power of its stores. So suburban retail centers are designed to draw auto traffic, the more cars from the more far away locales the better. (Potomac Mills is an example. Tysons Corner Mall is another mega example. Ballston Common Mall is not an example for the reasons explained below.)

    As a result, within suburban malls, shopping centers and big box outlets, a single parking space can “turn over” 65 times in a single day. One space makes possible 65 visits (each one by a different car that comes and goes) during business hours. In contrast, a parking space within a typical urban residential high-rise might generate only one turnover a day. Office buildings also substantially outpace residential. Distance between uses in suburbia drive this traffic.

    Herein lies some of the secrets Arlington County discovered early.

    1/ Density of development does not create traffic.
    2/ An imbalance of separated uses creates traffic, irrespective of density.
    3/ High density development of synergistic uses properly properly placed relative to one another, within an urban center, will drive traffic down. And it will keep reducing traffic until, and so long as the optimum mix of uses is achieved and maintained, and varieties of mass transit is steps away.
    4/ Mixed uses are best developed in tandem. Then your “city will find itself.” Then its best mix of uses, their variety, proportions, and nuance emerge in time to be captured. Thus, tandem development fuels best opportunity for market and financial success for all involved – whether office, retail, or residential tenant, owner, worker, or store clerk.

    Complexities are involved in building a successful urban center. But at base and speaking generally, Arlington learned that office space should never exceed nearby walk-able residential. That retail commercial should be built at same time as office and residential. That commercial space – office, retail, hotel – should best not exceed total nearby residential space.

    And, that the proper mix and match of uses can be used to drive traffic down as far as possible, by creating synergies that take visitors out of their cars, put them into mass transport, and/or on the streets walking instead. This in turn creates vibrant many faceted neighborhoods. This attracts ever more tenants, residents and shoppers. This throws off ever more revenues to pay for expanding public amenities and necessities. This becomes a spiral that feeds on itself, throwing off ever more benefits for all involved.

    Tyson’s Corner’s did the opposite. It tried to make a city living off an Interstate by building an suburban office park next to a suburban mega mall, and strip retail And so built itself into a dead end. Fairfax County knows what the solutions are. Now it should follow the Arlington example.

  27. Pingback: Smart Growth: A Missing Metric | Jefferson Policy Journal

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