Study: Sprawl hits a city's bottom line

gstapley@modbee.comMay 25, 2013 

    alternate textGarth Stapley
    Title: Reporter
    Coverage areas: Regional water, growth, land-use and transportation; civil law, real estate fraud and special projects
    Bio: In his 19 years with The Bee, Garth Stapley has focused on city and county government

Poorly planned sprawl makes cities poor.

That's the claim of a national study pushing smart growth as an innovative strategy to keep local government out of bankruptcy.

Cities and counties that perpetually whine about cutting services or desperately seeking new revenue might be on better footing, the report says, if years ago they had grown up rather than out. Projects with a well-planned mix of jobs, stores and homes provide far more taxes, acre for acre, than big-box retail or your typical subdivision gobbling farmland at a city's fringe, the study concludes.

"It makes so much sense," said Bill Fulton of Smart Growth America, which produced "Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth."

Urban planners for years have known that unchecked sprawl contributes to clogged highways, dirty air and poorer health because such growth patterns require more driving. "Building Better Budgets" is the first report to quantify costs to local government agencies:

• Infill development, or recycling land close to a city's core, costs about one-third less for infrastructure because builders don't have to extend roads and water and sewer lines.

• Keeping closer to downtown reduces trips for police, firefighters and ambulances, saving taxpayers 10 percent in ongoing costs.

• Mixed-use projects generate 10 times more tax revenue per acre than cookie-cutter housing tracts.

"The truth is, what we get to run government out of single-family homes is inadequate to provide services," said Modesto Mayor Garrad Marsh, a longtime advocate of smart growth. A local study a few years ago found that the city loses about $1,000 for each home in outlying subdivisions.

Why have leaders consistently approved such growth? "Shortsightedness" might be the simplest answer.

Chasing revenue

"Elected officials tend to chase revenue," said Fulton, a former Ventura mayor and councilman. "Sales and property tax looks tempting because it gives you a revenue boost at first, but it never covers the whole cost."

The initial boost comes from development fees, which should pay for streets; water and sewer lines; and even parks, libraries and a share of buildings such as fire stations needed for additional families. But such fees don't pay salaries for librarians or public safety workers, and property taxes almost never keep up.

"The only way to stay ahead of the curve is to keep approving subdivisions," Fulton said, "and when the (housing market) crash comes, you're caught with your pants down."

Other factors contribute to sprawl. Sometimes it's hard for builders to find parcels in cities, and it's easier to deal with one landowner at a city's edge than several within.

Perhaps more important, "the standard single-family home is the product that a significant portion of our population desires," said Marsh, echoing what home builders have said for decades. Why build something no one wants to buy?

Market trends seem to be changing, even in the valley, where surveys suggest people are warming to the compact quarters often seen in the Bay Area, coupled with an emerging awareness of the importance of conserving farmland.

"It's very hard to change the model," Fulton said. "The building industry pounds on the politicians, saying, '(Conventional housing) is what people want,' and it's more true in the valley than in coastal areas. But it is less true than it used to be."

Projects nixed

Several years ago, downtown Modesto was on the verge of embracing its first mixed-use projects in many decades, with ground-floor shops and offices topped by apartments and condominiums. Two groups reported keen consumer interest in plans at 10th and J streets and at 14th and J streets.

"Unfortunately, they went by the wayside with the downturn in the economy," said Patrick Kelly, the city's planning manager.

That sort of development is far more tax-rich than subdivisions, according to a study last year focused on Central Valley towns, including Modesto and Turlock, that dovetails with the recent report.

The 2012 study found that downtown Modesto's City Tower building produced $62,000 on a per-acre basis for the city and Stanislaus County, compared with $6,900 per acre from Vintage Faire Mall and $2,440 from the Target store on McHenry Avenue.

"We're finding that local governments really aren't running the numbers," said Laura Podolsky of the Local Government Commission, which sponsored last year's report. "This information needs to be at the table when we're trying to make decisions, to avoid a lot of the pain that cities are in."

Modesto's preliminary budget for the fiscal year starting July 1 shows a $473,000 gap between revenue and spending. Its nearby neighbor Stockton is in bankruptcy, and Stanislaus County's preliminary budget relies on reserves to bridge a $69 million shortfall.

Kelly's office, which is revamping the city's general plan, a growth-guiding document, previously revised downtown development rules, making it more attractive to pursue walkable, smart-growth visions with incentives for high rises. But the effects of the recession have been hard to shake, and a slow recovery has brought only proposals for more tax-poor subdivisions north of Modesto.

The Tivoli development, which could bring 3,000 homes northeast of Sylvan Avenue and Oakdale Road, could emerge from dormancy in the next couple of years, and Fitzpatrick Homes wants to build 353 houses and 180 apartment units northwest of Pelandale Avenue and Tully Road.

"I believe (more progressive projects are) just a matter of time," Kelly said, noting a downtown cultural renaissance that could be bolstered with a new railroad depot connecting to the Bay Area as soon as 2018. "It may be ambitious optimism, but it's also goal setting."

Former Oakdale Mayor Pat Kuhn, who championed smart growth during 14 years in public office, said healthy principles can be undone if those elected later don't share the same vision. "You have to make it a priority," Kuhn said. "If you don't have goals, you don't go anywhere."

Said Marsh: "I believe there still is significant influence on local government by the development community. As long as you have that influence, they're able to retard" a transition to smarter growth.

Bee staff writer Garth Stapley can be reached at or (209) 578-2390.

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