Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Friday, February 11, 2011

Further thoughts on rethinking comprehensive plan theory in terms of city planning and public finance

For a long time I have argued that (most) cities don't have what we might call a business or organizational plan, if a business plan is defined by the Business Dictionary website as:

Set of documents prepared by a firm's management to summarize its operational and financial objectives for the near future (usually one to three years) and to show how they will be achieved. It serves as a blueprint to guide the firm's policies and strategies, and is continually modified as conditions change and new opportunities and/or threats emerge. When prepared for external audience (lenders, prospective investors) it details the past, present, and forecasted performance of the firm. And usually also contains pro-forma balance sheet, income statement, and cash flow statement, to illustrate how the financing being sought will affect the firm's financial position.

And a business plan for a municipality or county would be more than having an economic development plan, it would be a broad-based plan for "everything."

The closest thing most cities and counties have to a business plan is the Comprehensive Land Use or Master Plan.

DC's Comprehensive Land Use plan has many elements. The framework; land use; transportation; housing; environmental protection; economic development; parks, recreation and open space; urban design; historic preservation; community services and facilities; educational facilities; infrastructure; and arts and culture elements comprise the Citywide Elements of the plan.

This collection of elements is pretty common across municipalities and counties across the country, although some places may have additional elements (such as agriculture) depending on specific community circumstances. Additional and more specific master plans for specific elements and subelements (such as Parks or Libraries master plan, a retail plan, etc.) are created as part of the overall planning process.

(DC's Comp. Plan also includes a section of "Federal Elements" concerning the federal government. The process of producing the Federal Elements is managed by the National Capital Planning Commission.)

In the recent DC Comprehensive Plan amendment process, I proposed a number of amendments that I knew would go nowhere because they focused on the concept of broadening the Comp. Plan so that it could serve more broadly as the city's "business and operations" plan, and the proposed amendments were far outside the scope of what the amendment process aimed to accomplish, which was tinkering and adjustment, not full blown changes.

All of my proposed amendments were rejected--some were specific (sometimes too specific) and some were broad and theoretical.

I should have testified about them nonetheless, in order to broaden the issuespace around how the Comprehensive Plan is considered as the guiding document for how the city functions, operates, and plans for the future.

One amendment proposed organizing the Comp. Plan into four sections: (1) Guiding or Leading Elements, such as Urban Design and Transportation which would be foundational, to which the other elements would be subservient; (2) Citywide Elements; (3) Agency Elements, which would have been the operational plans for government agencies designed to ensure that agency operations are congruent with the Comp. Plan/Master Plan; and (4) Area Elements, which are comparable to what other communities call "sector" plans.

One of the elements that doesn't exist in the Comprehensive Plan currently is on Public Finance. And for years I have pointed out that there needs to be greater public discussion and knowledge about public finance issues more generally, and separate from the annual process, especially about how various tax streams are constructed and utilized.

Proposed Amendment 22 (scroll down to this page) addressed this specifically and called for the creation of new elements on Public Finance; Capital/Public Assets and Capital Budgeting; and Management, with this justification:

As discussed in previously submitted amendments, the Citizens Planning Coalition suggests that the Comprehensive Plan in part be repositioned as the vision-business plan for the city as well as the land use plan, and therefore propose that the plan be set up in four sections:1. Framework and Leading Elements; 2. Citywide Elements; 3. Public Finance, Capital (or Public) Assets and Agency Management Elements; and 4. Area Elements Elements for each DC Government Agency.

With regard to Public Finance and smart growth and the Walmart issue, I was thinking about this in terms of Foulger-Pratt's desire to take the easy way and not do a mixed use project at their site at Georgia and Missouri Avenues NW, because they want to minimize their investment and maximize their return, plus they have a conflict of interest in doing a great project at this location because it could compete with their considerable investment in Silver Spring.

The return on development capacity to a community is significantly higher for mixed use projects than for single use projects, based on an impact analysis done for Sarasota County, Florida, as discussed by Mary Newsom in "Mixed-Use Downtown Development Puts Standard Malls’ Tax Yield to Shame," and this presentation from 2009, Smart Growth: Making the Financial Case to the Sarasota County (Florida) Board of County Commissioners.

From the Newsom article:

Sarasota County Director of Smart Growth Peter Katz, speaking to a meeting of Citistates Associates in Minnesota late last month, described a recent analysis of the county’s property tax revenue per acre. He pointed first to residential areas. Not surprisingly, when you work the numbers on a per-acre basis, residential property inside the county’s municipalities offered the biggest revenue per acre — a little more than $8,200 per acre for single family houses within the city of Sarasota. This makes sense, as in-town land values tend to be higher.

Next, Katz showed the results from retail properties. Here comes surprise No. 1.: Big box stores such as WalMart and Sam’s Club, when analyzed for county property tax revenue per acre, produce barely more than a single family house; maybe $150 to $200 more a year, Katz said. (Think of all those acres of parking lots.) “That hardly seems worth all the heat that elected officials take when they approve such development,” he noted in a related, written presentation.

Among retail properties, the biggest per-acre property tax revenue in his county, almost $22,000 per acre, comes from Southgate Mall, the county’s highest-end commercial property with Macy’s, Dillards and Saks Fifth Avenue department stores. That’s not so surprising.

But here’s the shocker: On a horizontal bar chart Katz showed, you see that zooming to the far right side, outpacing all the retail offerings, even the regional shopping mall, is the revenue from a high-rise mixed-use project in downtown Sarasota. It sits on less than an acre and contributes a hefty $800,000 in tax per acre. (Add in city property taxes and it’s $1.2 million.) “It takes a lot of WalMarts to equal the contribution of that one mixed-use building,” Katz noted.

DC's tax revenue stream is much different from a typical community, because the city retains all of the sales tax revenues (which normally are split between cities, counties, and the state) and all of the income tax revenue from residents (this may be split with the locality and the state as it is in Maryland, although it is subject to recission, or there may be no direct sharing of state income tax revenues with localities).

This slide from the presentation shows the revenue generated per acre for different types of development. It's not fully generalizable to DC not just because of the sales and income tax revenues, but also because of the height limit, which reduces the overall revenue from commercial property.

Even so, just using the data from mid-rise developments, it's likely that the revenue generated by mid-rise mixed use is 4.5 times greater than that generated by single use big box retail, even if the store has sales in the tens of millions of dollars, because of income tax revenue from residents.
Slide, Smart Growth: Making the Financial Case, County Tax Yield Per Acre, Sarasota presentation
Slide, Smart Growth: Making the Financial Case, County Tax Yield Per Acre, Sarasota presentation

DC's Land Use Plan and the Zoning Regulations need to be written in order to encourage the best outcome for the city in terms of public finance, rather than their being written to encourage the simplest types of developments, with the lowest economic return to the city.

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