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Sprawl, slow growth, pro growth, no growth, smart growth – these terms dominate local and state political conversation. The
debate alienates elected officials and our citizens from an essential segment of our local economy – the building and development industry. This divisiveness is not productive and should be avoided.
This article attempts to provide the building industry perspective on the Growth Control & Infrastructure Funding issue.
These issues are not new nor are they unique to Virginia. But much misunderstanding and many misconceptions exist among our citizenry, elected
officials and those aspiring to local and state office. We all have an obligation to become better informed and understand each other’s perspectives and motivations in this debate.
This discussion is presented in five general areas:
Background
Several regions of Virginia had, until recently, experienced a very healthy economy.
Job growth had been strong after the 1990-1991
recession, particularly in the Northern Virginia
suburbs, largely due to the strength of the Information Technology and Communication sector of the economy.
This prosperity which has benefited many Virginians with job security.
But rising incomes also has brought something that some may not
want: new neighbors and the prospect of even more new neighbors.
Job growth brings population growth, which by necessity means new home construction and land development to house these new Virginians—our new neighbors.
Many of the new homes, particularly the town-homes and apartments, were necessary to house the young Virginians (our children) that grew up in our communities and went to elementary and high schools paid for by you, your
parents and even grandparents. These kids were fortunate enough to find a job and a home in Virginia and did not have to look elsewhere.
But now some of our neighbors have banded together (even created a formal coalition) to challenge the entry of the new neighbors into our communities. This idea is politely referred to as “Growth Control.”
Some on this growth control bandwagon would even like to stop growth in their community—although they will not usually admit it.
Some say they want to slow the pace so the community can “take a
breath” — but good luck trying to get a consensus on what is the fair and reasonable rate of housing construction necessary to accommodate their community’s population growth.
Even more interestingly, try to gain a consensus from the growth control advocates on where the additional housing and new neighbors should live—and don’t be surprised if it’s not in my back yard (or school district).
This is not a new debate; it has been recurring periodically over the last 30 years or more. Early in the maturation process of every suburban community, when the population growth and housing development really accelerates, the rate of change becomes very noticeable particularly in communities where the existing population base is relatively small such as in Loudoun County.
Here-to-fore, vacant tracts of land are converted from what some thought was their privately-owned park or open space to the new residential subdivision.
Schools, which you thought were just for you and your existing neighbors, must now be shared with your new neighbors. New schools do not get built fast enough, crowding occurs or redistricting changes school boundaries and your child is moved to a different school. Politicians (your elected local officials) tell you that taxes may have to be raised to pay for the new schools and teachers and tax increases become a political dirty word.
All of this represents change and in some cases rapid
change. And if there is one thing we have learned over the years,
it is that many people resent change. Some even fear it. When this growth and change in your community lasts for a sustained period, it is usually met with a
“backlash” — a desire to “stop” it or at least “get it under control.”
The resurrection of the Growth Control debate is an inevitable consequence of our recent prosperity. An economic downturn was inevitable, but despite the slow-down in job growth, new home construction has remained relatively strong, driven by low interest rates and a flight from rental apartments (where vacancy rates are now high).
Even with the recognition by some that housing construction (both locally and nationwide) is one of the few bright spots in the economy growth control advocates continue the pressure for greater legislative authority to curb housing. Interestingly, concerns over the economy have not significantly dampened the growth management debate, and the Virginia legislature continues to study growth-related proposals.
Community and political leaders who have been around for the last
20 to 30 years recognize the cyclical and recurring nature of this “no growth” debate.
In 1972, Fairfax County had the infamous “Pause for Planning” which resulted in the so called PLUS Program adopted in
1975. This followed several years of sustained rapid growth in Fairfax County during the mid and late
1960s, when some bragged Fairfax had the largest school bus fleet east of the Mississippi and was building a classroom a day.
In 1989, responding to the fear that, of all things, commercial and industrial development was getting out of hand, Fairfax County once again engaged in Growth Control. This time downzoning the “Commercial” and “Industrial” Districts to reduce employment use density. Wouldn’t Prince William County and several other jurisdictions throughout Virginia desirous of employment growth, loved to have had this problem?
Growth
Control Motivations
It is possible to identify the motivations behind Growth Control.
First, there is the dirty, six-letter
word — sprawl. It's very hard to define but we’re sure you will know it when you see it—or more likely, you will identify it as the new subdivision that is proposed down the road from you even though it’s very similar to the subdivision you live in. Do you realize your home may be part of the problem?
Most of us live in the suburbs, where the growth is occurring, and probably live in a development that some of the Growth Control advocates would label as
sprawl. Some of these same groups and individuals--and you know who they are--are visible by their strident admonition that we must change the way we live in order to avoid building more roads,
to reduce traffic congestion and to save the environment and farm land.
Further, the Growth Control advocates believe that the alleged sins of
sprawl include not only environmental consequences
but the inefficient provision of public services and facilities. Actually, this is more the result of another growth phenomenon called "Leap Frog” development which sometimes is confused with
sprawl.
These folks advocate urban in-fill development as opposed to more suburban development on the urban-rural fringe. Sounds great, but guess what? Builder
focus groups conducted around the country time and again point out how most Americans and, yes even Virginians, want to live in a single-family house on a tract of land at least a quarter of an acre in size and preferably larger.
Interestingly, there is a growing fear among the residents of many established suburban neighborhoods where services and facilities exist that the push for in-fill development will disrupt their community. Again, people resist change even when others have deemed it to be in the public interest.
All too often, citizens are against both “sprawl” and “infill,” if it’s in their neighborhood.
The second major motivator of the Growth Control advocates is money—yours and mine.
Public services and facilities cost money and the demand
for them increases along with the growth in jobs,
population and enrollment of school-age children. It is not caused by the construction of the new homes or the development of new subdivisions and communities. The builder and developer is acting to provide shelter, as well as office and commercial buildings to accommodate this growth in the same way the local
school board is building the schools to accommodate the increase in school population. This demand, particularly for schools, is putting pressure on local governments to raise revenue to pay for school construction and teacher’s salaries.
Unfortunately, the real estate tax is the single largest revenue source for most, if not all local governments in Virginia. As public facility construction needs increase due to job and population growth, so does the need to increase the revenue from the real estate tax.
Revenues rise either as the local governing body
increases the tax rate or as market values rise,
pushing up real estate assessments with them. Real estate assessments are driven by the market place and not directly by local government actions. Local governments could indirectly influence the market value of real estate by restricting the supply of land (through zoning regulations). If
local government policy restricts the supply of properly zoned land necessary to meet market demand,
the land values of that which is zoned may increase.
As the real estate tax burden increases, homeowners often believe the increased government spending is to pay for growth and the reaction is swift and negative. The result – the cry that “growth should pay for itself.” This reaction is exacerbated when the rate of real estate tax increase is rapid and the amount significant. This usually occurs when the demand for housing is greater than supply and housing values are rising rapidly, as they have in the last few years.
Even though the increase in home value is to the ultimate benefit of the owner, the resulting tax increase must be paid from the taxpayer’s income, which has no relationship to the real estate value.
The net result of these economic realities is that the existing homeowners resent the larger real estate tax bill which
they don't perceive as being matched by an increase
in government services for them.
The politicians’ reaction to the taxpayer unrest and search for “solutions” is to shift the burden to others.
The easy target is the builder and/or developer, who is creating the new homes – but not the growth.
Finally, and sadly, there are a growing number of Growth Control advocates who are motivated by a desire to redistribute the wealth. They believe it necessary and fair and honorable to take money from those they feel are prospering from growth by building homes and developing real
estate — the builder/developer. In this category
are some who believe that
imposing impact fees on new homes is part of the answer to the Growth Control puzzle.
The motivations behind the Growth Control movement have not changed in the last 30 years and neither have the proposed solutions.
Solutions
Proposed by Growth Control Advocates
Some local governments seek enabling authority for
impact fees as the answer to raising revenue for local infrastructure, particularly schools.
Anyone who fairly and honestly evaluates the concept of the
impact fee, which is levied as a hidden tax on the purchaser of a new home, will recognize that it is neither fair, equitable nor a reliable source of income. The homebuilder or developer does not pay the
impact fee. The purchaser of the new home will pay this fee, which will be in the purchase price like all other costs incurred by the builder.
By raising the price of new homes, impact fees will eliminate many potential buyers from qualifying. Ultimately, it will be those less fortunate that will get hurt the most.
Impact fees are not fair because the “new-home” purchaser is not always the new resident of the community who has moved into the region from “out of town” to take the new job. It is the “new family” that represents the real growth of the community that has caused the increased demand for facilities such as schools. The new-to-the-area family frequently buys a “previously owned, resale home,” not wanting to wait the
four-eight months for the new home to be constructed. Conversely the
“new home” is frequently purchased by an existing resident moving within the area. In some communities as many as
60 to 90 percent of all new homes are purchased by existing residents of that community. This existing resident is actually helping the local economy with the purchase of the new home
and the goods and services that accompany a new home such as furniture, hardware, interior accessories and landscaping.
A
point often lost in the debate is that impact fees
bear no relationship to the price of the new home.
Fees, if rationally applied, will disproportionately
impact lower-priced housing, often purchased by
young or lower-income families with no equity from a
previous house. Struggling to make their first home
purchase, these buyers must look further and further
into the outlying suburbs to find affordable
housing. This, in turn, contributes to longer
commutes and increases demand for public services
and facilities in outlying communities. In other
words, impact fees accentuate sprawl.
To
pass legal muster, the fee must bear a reasonable
relationships to the home buyer's proportionate
share of the cost of the facility to be constructed
with the impact-fee revenue. This is referred to as
a rational nexus. In the case of schools, school construction cost when divided by the total number of students must be fairly and equally divided among all the homes that will generate that student population, regardless of the price of the home.
Therefore, the impact fee amount is based on the number of students expected from that home, whether it is a $150,000 starter town home or a $550,000 upscale single family home on a large lot. And while there
are frequently slightly larger numbers of school age children in the more expensive single-family
homes, the difference is not sufficient to overcome the disparity in financial consequence that the
impact fee has on the less expensive home. The $150,000 homebuyer will pay almost 4 times the percentage of the new home price
in impact fees than will the more expensive $550,000 home buyer, assuming the fee is roughly the same for each house.
In short, the imposition of impact fees is bad public policy and for lots of reasons.
The fundamental issue is whether an impact fee placed on the “new home” (not necessarily the new resident) is fair and reasonable. The building and development industry suggests it is not, and the General Assembly of Virginia should not expand this authority.
If we really wanted growth to pay for itself, as we often hear, then we should establish a “Border Tax” and levy the fee on every “new family” moving into the community whether they buy a new home or a previously owned existing home. As ridiculous as it sounds, it would be fairer and
more intellectually honest as a solution than the Impact Fee.
The most radical reaction to the symptoms of growth is the proposal for an Adequate Public Facility (APF) ordinance, which is sometimes called “Concurrency” or “Level of Service” (LOS). APF Ordinances or other similar schemes restricting building permits would allow the local government to impose a moratorium or limits on subdivision or housing permit approval if certain public facilities are deemed by the governing body to be inadequate.
The moratoriums on housing, resulting from APF Ordinance building restrictions in one jurisdiction, simply encourage sprawl and leapfrog development into the adjoining outlying jurisdiction. This furthers traffic congestion, and simply pushes the public facility problem to the neighboring community. Think about it - are APF or other building restriction schemes really the answer to the regional job, population and housing growth issue? Absolutely not! The imposition of building moratoria, even when temporary or short term, does not solve the problem of generating revenues.
A new twist on APF is the “Affordability
Index." This proposal is similar to the concept of “Adequate Public Facilities” ordinances in that its stated purpose is to link the pace of growth to the local government’s ability to pay for new capital facilities. In truth, however, it is not the County’s ability to pay for new infrastructure that is at issue here. No statutory limit or financial insufficiency bars the local government from incurring debt to pay for needed infrastructure. It is largely a political matter of not wishing to place “undo[sic] stress on existing taxpayers.”
The marketplace, responding to our constitutionally guaranteed freedom to move and choose our place of residence as regulated by the “Existing Growth Controls” and not an arbitrary limit imposed by local government, should control the number of building permits issued in any given time period.
These simplistic solutions -- impact fees, APF or the combination of the two
-- are not needed either to control growth or to raise revenue for school construction. Local governments have enough authority now to plan and control growth but frequently lack the will, and in some cases, the expertise to properly use it.
Existing
Growth Controls - The Available Solutions
What does growth control or managing growth really mean?
Controlling growth means regulating or deciding:
1. Where growth is to occur — where geographically within the community certain uses
are to be permitted.
2. What is to occur — for example, which use such as commercial, residential, etc., is
allowed.
3. How much of a given use is permitted — such as the density of residential uses or intensity of commercial uses.
4. How it should occur — essentially the regulation of design such as building heights, setbacks, and parking requirements.
And finally,
5. When it should occur – the “timing of growth”.
The “where,” “what” and “how much” of Growth Control is accomplished through the governing bodies'
exercise of the Comprehensive Plan process and the adoption of the Zoning Ordinance and subsequent amendments.
The “how it should occur,” or regulation of development layout and design, is accomplished with requirements and restrictions and standards established by the Zoning Ordinance and the Subdivision Control Ordinance, along with construction standards and specifications adopted by the governing body, as well as the State Health Department, Highway Department and others.
The “timing of growth” within a multi-jurisdictional region or Metro area is largely controlled by the rate of regional job growth and in-migration and new-household formations—none of which can be materially influenced by any one jurisdiction.
However, within any jurisdiction the governing body can greatly influence, if not control, the timing and direction of growth within certain geographic areas within its borders through thoughtful, careful, long-range planning and using a strategy combining the Comprehensive Plan, the Capital Improvement Program (CIP) and public sewer and water expansion policy.
The locality can go a long way toward deciding when as well as where suburban residential development will occur.
Local governments have tremendous authority and discretion in dealing with most of these issues. The local governing bodies are allowed wide discretion in enacting and amending
zoning ordinances because of their knowledge of local conditions and the needs of their communities. The courts will not substitute
their judgment unless there is a clear abuse of power.
Local governments also have almost total latitude in adopting the Comprehensive Plan. The Comprehensive Plan is an expression of policy, philosophy and guidance. The locality decides where it is going to allow certain uses by adopting its land use plan and enacting its
zoning ordinance, which divides the community into different and separate use districts. The
zoning ordinance is one of several local government tools available to implement the Comprehensive Plan.
The locality can deny higher density residential in certain areas and encourage it in others in order to optimize the use of existing infrastructure including schools, sanitary sewer, and mass transit facilities or bus routes. For example, several years ago Prince William County adopted a
zoning ordinance text amendment “downzoning” its townhouse density from 10 dwelling units per acre to 6 dwelling units per acre. Another example of
growth control with existing tools.
In addition, Prince William County adopted a Comprehensive Plan establishing a vast area of low density known as the “Rural Crescent” in which it established a policy whereby no services or facilities are to be expanded, thereby discouraging even the 10-acre minimum lot subdivision, which is otherwise permitted by right.
In 1982, Fairfax County accomplished a similar “down-planning” and “downzoning” of approximately 40,000 acres from one- and two-acre lots to five-acre lots. This was sustained by the
court, which allowed only 20 or so of the hundreds of landowners to continue development on
one to two-acre lots since they had established a vested right to do so. In short, Fairfax County drastically reduced the density in much of the southwestern part of the county and the courts supported the action.
Most recently in 2002, Loudoun County “down-planned” and subsequently “down-zoned” much of the western two-thirds of the county. This action increased the allowable minimum lot size from
three acres to 20 acres and 50 acres. This increase in minimum lot size reduced the number of permissible lots and future homes by as many as 80,000. Some existing residents see this growth management move by the Loudoun County government as a positive, desirable decision. Others recognize that the future population that would be housed in the 80,000 homes will now be forced to look beyond Loudoun in Clarke and Frederick Counties in Virginia, or to Frederick County,
Md. and Jefferson County, W.Va.
The zoning ordinance, site plan, and subdivision
control ordinances provide tools to set design parameters such as setbacks, yard requirements, building heights, minimum open space, parking, and landscape requirements as well as recreation requirements in certain residential districts.
Land dedication for schools and parks can be obtained at no cost to the locality if sufficient density incentives are included in the
subdivision control and zoning ordinance. Using this strategy for over 30 years,
Fairfax County has built a world-class stream valley park system and
acquired almost all of its elementary school sites for “free.” In this regard, Fairfax County had a fair and reasonable ordinance and it worked.
Localities can do much more than they do to influence the timing of significant residential development within certain areas of the jurisdiction. True,
a locality does not have the authority to stop or
even materially slow the pace of market-driven housing sales
-- nor should it be allowed to, unless we are ready to sacrifice a fundamental liberty which we have thus far preserved in Virginia.
But, and there is always a but, localities can adopt a Capital Improvement Program (CIP) which
invests public dollars and expands infrastructure, including schools, only in areas where the government wants private development
to take place during the foreseeable future. In
additiona, counties can work with the Virginia
Department of Transportation to influence the Six-Year Road Program to ensure that
scarce transportation dollars are spent in the right
place.
Other than zoning, the existence of sanitary sewer facilities and municipal water supply is the most significant factor in determining whether
suburban- density residential development can occur. The Comprehensive Plan can clearly articulate which areas of the jurisdiction are to be “opened up” with public sewer and water. The governing body can establish where sewer and water is to be located and when. The locality can accomplish this directly, if sewer and water systems are provided as a part of the municipal government, or indirectly by working closely with its appointed Service Authorities.
Finally, the local Planning Commission and the governing body have control over whether or not any public utility, building, or facility can be constructed. The section of the Code of Virginia, which deals with the “Legal Status of the Plan”, gives
a locality the authority to prevent construction of the public facility if it is not in accordance with the adopted Comprehensive Plan.
The
use of such tools to control timing does not imply
that a locality should shut down private development
simply because it decides it cannot afford more
schools or other public facilities. But control over
water and sewer does allow the governing body to
phase the timing of development so it can do a
better job of anticipating when and where schools
are needed. That's exactly what Loudoun County did
in the 1970s and 1980s when it postponed for
years the
development of its Route 50 Corridor, southwest of
Dulles Airport, by refusing to plan the area’s growth and not extending sanitary sewer further up the Broad Run Watershed.
Fairfax County invoked a similar strategy in its Pohick Watershed during the 1970s and early 1980s when much of its development
occurred. The county permitted development in the main branch and middle run of the Pohick but
prevented it in the South Run during the 1970s by
not extending sewer service to that sub-shed.
In conclusion, a locality can determine the “where,” “what,” and “how much” of growth. Local governments have all the tools and authority they need and they do not need more.
As a local county attorney active in the
growth-management debate has noted, localities can
accomplish most of their goals just by using
"legislation that’s on the books right now."
While localities may find it difficult to halt
growth in its tracks, it can influence the timing of
development and channel growth into or away from
certain geographic areas. The limits on localities'
powers to stop growth is a good thing: It should not
be easy to interfere with builders' responses to
market demand for housing. Builders don't erect
houses unless the population is growing and there is
a demand for them.
The General Assembly, has in the past, sought to achieve
a delicate balance between the individual property rights of its citizens and the health, safety, and general welfare of the public as promoted by reasonable restrictions on those property rights.
Recognizing this need for balance, the General Assembly passed SB570 in the 1998 session in an attempt to protect those property rights which would otherwise be injured when a governing body exercises its considerable power to downzone land and amend the land use regulatory ordinances creating greater restrictions or requirements (see section 15.2-2307 of the Code of Virginia). At the time of its passage, the reaction among some local officials and editorial opinion writers would have had you believe that the General Assembly took away the localities’ power to plan and zone. This is a gross distortion of what the legislature did.
We should not be tempted to undo or diminish the overdue protections and balance provided by that law.
In summary, the building and development industry
will continue to oppose APF, Impact Fees, any
schemes to combine the two, or any effort to modify
the vest-rights legislation. The development sector
is very sympathetic, however, to local governments' need to raise revenue and construct new schools and otherwise expand the public infrastructure in our more rapidly growing communities.
Where Does All of this
Lead Us, and What's the Real Issue and
Solution?
The building and development community believes the legitimate issue is not
growth control but revenue generation. The prosperity and job growth of the mid- to late-90’s,
which brought population growth and residential development,
also brought increased state revenue from income and
sales taxes. The state did not share much of that
revenue with the high-growth communities that
generated it. Relying heavily on the local real
estate tax for revenue, local governments struggled to meet the
state’s constitutional mandate to educate our
children.
The real estate tax is becoming almost as unpopular as the “car tax.” As the demand for housing outpaces the supply, prices on all homes tend to rise, including existing homes!
The imbalance results in higher assessments and, in
lockstep, a higher real estate tax burden -- unless,
of course, the local government reduces the tax rate commensurate with the increase in assessment. The real estate tax burden is often increasing at a rate faster than incomes such that the taxpayer really feels the tax pain and
derives little consolation from the fact that his home value increased – unless he is on the verge of selling.
If the General Assembly and the administration would adequately fund school construction,
they would eliminate a major argument in the debate over Growth Control.
Virginians then could focus on whether the other more parochial issues pushing the debate are worth the extreme solutions advocated by such groups as the “High Growth Coalition” and other growth control advocates.
The more mature Northern Virginia jurisdictions have experienced the same or similar demands on schools and other infrastructure resulting from rapid residential growth. These localities weathered the storm
with existing legislation, and without APF ordinances or School Impact Fees. They solved their problems of school construction finance with solid long-range school planning and programming and the use of bond debt. And even though it may have been painful at times,
the local governing body balanced the books with
little or no state help. If the state would provide
some financial assistance, even today's high-growth
localities could do as well.
If the state won’t raise revenue for local school construction, it needs to
equip local governments with authority for fair, equitable, broad-based and reliable
options to raise the revenue locally. Potential
tools may include: local income tax and/or sales tax dedicated to infrastructure; equalizing taxing authority between municipalities and counties and/or a special real estate sales tax for local expenditure on infrastructure.
What Virginia does not need to do is succumb to the political expedient of stopping new home construction through APF moratoria or by imposing an Impact Fee on a very small segment of our citizens, who are buying new homes and who are underrepresented in the process.
Impact fees and other exactions such as cash proffers designed to raise revenue for
the general good do not meet the test of being fair, equitable, broad based and reliable. Remember,
in many communities existing residents typically
purchase 60 percent to 90
percent of all new homes. These families are not the
ones augmenting the population, and they have
contributed to the local and state tax base their
entire lives.
In short, we should not single out the new homebuyer to shoulder a disproportionate share of the tax burden necessary to pay for growing communities. It is, after all, this buyer of new homes and the home building industry that
many economists credit with keeping our fragile economy
for what little vitality it currently enjoys.
--
July 28, 2003
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