Urban Containment As Smart Growth
		Arthur C. Nelson, Ph.D., ASCE, FAICP
			Author Info

ABSTRACT

During the 1960s, Oregon's population grew by 300,000 but it lost 3.2 million acres of farmland, about 10 acres for each new resident. Its per capita taxes rose twice the national average. Between 1982 and 1992, however, Oregon lost virtually no farmland despite adding about 300,000 residents while its taxes rose half the national average. How did it do it? Urban containment leading to smart growth.

URBAN CONTAINMENT ESSENTIALS

Urban containment programs conscientiously intervenes in the private market to pursue certain goals important to society that the market is not able to address. In some respects, urban containment attempts to undo or offset actions of others, such as the federal government's generous home ownership subsidies, to result in a landscape that would exist but for those actions. In other respects, urban containment acts as a coordinating mechanism to assure that while development needs are accommodated, there is no more development than is needed to meet market demands over the planning horizon. In several other respects, urban containment: protects taxpayers from the high costs of underused or misplaced infrastructure; creates mechanisms to share in regional benefits and burdens to make everyone better off; and works to minimize negative externalities while fostering positive ones. Because urban containment focuses on the creative use of resources to achieve goals, it must be efficient in implementation. Urban containment is thus an attempt to satisfy six basic goals:

Protect landscapes providing public and merit goods.

Accommodate development needs.

Provide adequate facilities at minimum cost and with equitable burdens.

Share necessary burdens and benefits.

Prevent negative and foster positive externalities.

Implement plans efficiently.

Urban containment combines regulatory, financial and land use management techniques and tools to reach those goals. Although the concepts of techniques and tools are often used interchangeably, in this paper refers to specific planning devices used to containment urban development, while techniques refer to a combination of two or more planning tools.

Protect Landscapes Providing Public and Merit Goods

Public goods are those things that people value but for which they have a difficult pricing. For example, most people value clean air but they do not know its worth to them. Clean air is a public good. Merit goods are those for which society believes the value to future generations is higher than the present generation is willing to pay. Prime agricultural and forest land are often considered are examples of merit goods. As the world's population increases and trade becomes more globalized, the demand for agricultural and forest products should increase and so should its price, but the market values only that which can be foreseen within the next few years, not the next few decades or generations. Urban containment attempts to preserve landscapes offering public and merit goods.

Accommodate Development Needs

Under urban containment, all development needs of the community including its fair-share of regional needs must be accommodated. This does not mean necessarily that all communities large and small must have their own sanitary landfills but they must all share the planning and financing burden to properly locate, design, and manage needed development. It also does not mean fostering development patterns that will destroy landscapes providing public and merit goods, but it does mean identifying those patterns and meeting their needs as much as possible given landscape constraints (more on this later under preventing negative and fostering positive externalities). In meeting needs, urban containment is achieved through containment of urban development and through rural and exurban development management.

Containing Urban Development. Urban containment involves directing development to areas prepared to accommodate it and away from areas not prepared development or important for their public and merit good values. When done properly, urban containment improves of accessibility of everyone to all destinations usually with a variety of modes. Jobs are closer to home and so is shopping, personal services, schools, and friends and relatives. Several techniques help to achieve urban containment such as urban containment lines, phased urban development, zoning, urban infill and redevelopment techniques, minimum development density zoning, neighborhood conservation, and strategic use of new communities.

Rural and Exurban Development Management. Rural and exurban development management is crucial to any growth management effort. Most of the two million hectares (five million acres) of land being converted annually to development is in tracts stretching tens of miles (kilometers) from metropolitan areas. Management of this kind of conversion is essential.

Provide Adequate Facilities at Minimum Cost and With Equitable Burdens.

Urban containment facilities urban development by providing an adequate supply of public facilities at minimum cost. If facilities are not provided, development will seek locations that may be farther away, less appropriate, and ultimately costing taxpayers more money to serve; cost is thus also an issue. If some people pay less than the cost of facilities they impose on the community, they will tend to use more facility capacity than others. This has the duel effect of rendering facilities less efficient and more costly for those whose use less capacity.

Adequate Public Facilities. Known also as "concurrency" (especially in Florida), adequate public facility requirements are formal mechanisms used to enforce one of the most fundamental tenets of land-use planning: development should not be permitted where it can not be adequately accommodated by key public facilities and services. While land development regulations have historically been used as a means of ensuring that residents and end users of a development project can be adequately served by community facilities, adequate public facility regulations go further, by ensuring that new development will not cause unacceptable reductions in service for existing area residents.

This is a two-way street, however. Some communities consciously work to reduce public facility capacity in the face of needs to divert development elsewhere. If the community indeed is built out and is otherwise providing for its fare share of regional burdens (see below), this may be an appropriate response. If this behavior, however, is intended to force other communities to absorb a greater burden of development needs despite having adequate land capacity to accommodate more of its fair share of regional burdens, it is behaving irresponsible from the perspective of urban containment. In a word, it is not smart growth.

Minimize Cost With Equitable Burdens. Somebody has to pay for facilities. Until the early 1980s, many communities could rely on the federal government for three-quarters of cost of wastewater treatment facilities and sometimes more. Those days are gone. Those costs now fall on local taxpayers, but it turns out that many taxpayers pay less than actual costs despite their financial ability to pay their proportionate share. Urban containment addresses both problems: financing facilities and assuring that costs are borne equitably between users.

The first problem is perhaps the most important if only because facilities have to be financed or growth does not happen. Local governments are by necessity becoming ever more creative in meeting needs. The second problem is at once the lesser because without facilities there is no growth, but more problematic because it cuts the heart of who pays how much. Unfortunately, substantial evidence exists to suggest that those who consume the least pay the most. For example, because most wastewater rates are assessed based on average cost principles, those people living on the largest lots farthest away from treatment plants and therefore the most costly to serve pay the same as those on the smallest lots or in apartments closest to treatment plants. Often, those living farther away on larger lots in larger homes have higher incomes than those living closer in on smaller lots or in apartments. From a planning perspective, this is not equitable. Because adequate public facilities are crucial to containing urban development and achieving smart growth. The following boxes review issues and approaches to doing this.
 
 

Share Burdens and Benefits

Responsible urban containment addresses issues of equity since it requires accommodation of needs for all purposes including low income housing, jobs, and access. People must be housed and provided reasonable access to jobs, shopping, and services. People also need certain facilities they would just as soon never see, such as landfills and treatment plants. Unfortunately, not all burdens are shared equally among communities in a region; some communities seem to absorb a very large share of the low income housing and not-in-my-backyard (NIMBY) burden while others enjoy high quality of life without those burdens. Urban containment takes a regional perspective and involves every community facing up to its fair share of the region's burdens.

Another element of responsible urban containment is sharing regional benefits. Perhaps a region can support only one regional shopping center, so the community landing it receives most of the new tax and fee revenues. Certainly that community also incurs some cost but chances are the benefits exceed costs by quite a margin. This is why communities may compete against one another for the few regional-scale projects available. Such competition can undermine the cooperation needed between communities to make urban containment effective, especially if one community "wins" the shopping center bidding war but is not prepared for its infrastructure impacts while another that is prepared ends up having unused infrastructure, while still another community suffers from shoppers traveling through it on their way to the center. Urban containment attempts to identify regional needs, identify appropriate ways to meet those needs, and work to make all communities better off as a consequence. Tax-base sharing, fair-share allocation of marquee developments, and other efforts can be used.

Prevent Negative and Foster Positive Externalities

An externality is something felt by someone when someone else does something. If a landfill is constructed in your neighborhood, chances are your property value will go down. This is a negative externality. If you own a commercial property and a government agency builds an expressway accessing it, chances are your property value goes up. This is a positive externality.

One goal of urban containment is to prevent negative externalities while fostering positive ones. For example, two automobile dealers locating next to each other will have positive effects on both because more customers are attracted to the vicinity for comparison shopping. This interaction should be encouraged in planning. A jewelry store locating next to a department store (seen often in shopping centers) has no effect on the larger store's sheer volume of business but since the department store attracts customers to the vicinity, the smaller jewelry store benefits. Since no one is made worse off and someone is made better off, this interaction should also be encouraged. These are examples of mutually positive or positive-neutral externalities.

Landscapes providing public and merit goods are at a disadvantage when faced with urban development pressures because of what I call value-inflating and interactive externalities. Value-inflating externalities are essentially subsidies. Federal subsidies to farms comes to about $15 billion annually. Those subsidies help farmers keep farmland despite fluctuations in the market. In contrast, because home owners can deduct their mortgage interest and property taxes from their taxable federal and state taxable income, they receive a combined subsidy approaching $100 billion. Economists would say that the value of urban subsidies is "capitalized" into land, artificially increasing the value of land for urban uses relative to farming. If the subsidies did not exist, a certain amount of urban sprawl would be contained through simple market forces.

Interactive externalities occur because farmers and urban residents make poor neighbors. A residential subdivision may leap-frog over development landing in a farming region to enjoy the scenery and privacy. Once there, however, residents suffer from what farmers do such as using chemicals (fertilizers, pesticides, and herbicides), raising livestock that are smelly and noisy, running heavy machinery at all hours of the day and night, and operating slow moving vehicles on narrow rural roads clogging traffic. Farmers suffer when residents resort to the courts alleging nuisances or force new government regulation to change how farmers operate. Residents also consider farms their private domain by helping themselves to fruits, vegetables, and nuts grown on the farm, and allowing pets to run amok chasing or killing farm animals. Both land uses suffer from what each does at least until farmers are forced out of the region; this is considered a mutually negative externality. An example of a negative-neutral externality may be locating a sports stadium in a neighborhood causing residents to suffer from traffic, noise, loitering, and littering but having residents imposing any effect on stadium use. Both forms of externalities should be discouraged because at least one party is made worse off.

The one-two combination of artificially higher land value for urban uses because of subsidies and lower land value for farming because of adverse interactions means that much more land is converted to urban sprawl than should be the case. This is not smart growth. Urban containment attempts to create a clear separation between landscapes providing public and merit goods and those intended for urban development.

Provide Administrative Efficiency

As one may begin to imagine, urban containment can be complex and present administrative challenges. Long range planning, capital improvement programs, impact analysis and negotiating developer exactions to mitigate impacts, and almost any permitting process can bog development down. If time is money, then urban containment can cost developers plenty. Market needs will not be met and urban development will be displaced to areas less suited for development, or will not happen resulting in higher prices because supply is constrained relative to demand. If developers are uncertain about when and where they can develop, they will need to raise their "risk premium" resulting in higher prices, and they will abandon the lower end of the market. Economic development, housing, and other opportunities may be lost making perhaps everyone worse off in some way. Effective urban containment must make development easier, more predictable, and less time consuming than traditional land development control programs. They do so by understanding market needs and accommodating them. In return, the development community can rely on land use and infrastructure investment decisions to make their own decisions about when, where, and what to build. Citizens gain a clear understanding of what to expect in terms of where their taxes will go and what to expect from the change that is inevitable. This is accomplished through several administrative principles.

PUTTING IT ALL TOGETHER

Urban containment planning can be complex, and lengthy, but based on the experience of states, regions, and communities that have done so the rewards seem to be worth the effort. Consider two states that are perhaps more different in their attitude toward growth than any. Oregon, which adopted its Land Use Act in 1973, set about a generation ago to be more smart about containing its growth -- not to stop or slow it down. Georgia, in contrast, eschews any effort to meddle with growth. Planners and scholars are thus presented with a unique opportunity to compare effects of growth in two states using entirely different attitudes to managing development. This paper compares key indicators between those states and their largest metropolitan areas, Portland and Atlanta. Across nearly every dimension, Oregon's approach to smart growth, which hinges on urban containment, leads to better outcomes than Georgia's laissez-faire attitude. Among key findings between the 1980s and 1990s are:

• Portland and Atlanta's population and employment growth rates are comparable.
• Portland's income growth rate is outpacing Atlanta's.
• Atlanta's property taxes are rising much faster than Portland's.
• Atlanta has become more dependent on the automobile while Portland has become more dependent on transit, walking, and bicycling.
• Atlanta's air quality is deteriorating but Portland's is improving.
• Portland's homeownership rate has surpassed Atlanta's.
• Atlanta's average lot size is nearly four times that of Portland's, indicating urban sprawl driven by large lots.
• Atlanta's housing with more than 1 person per room rose 42% compared to Portland's 8%.
• Convenience to transit as a factor in new-mover location criteria rose by 152% in Portland but fell by 23% in Atlanta.
• Neighborhood quality has fallen by 20% in Atlanta but risen by 10% in Portland.
• Relative to their regions during the past three years (1996­1999), Atlanta's housing affordability index is becoming worse but Portland's is becoming better.
• The city of Portland is capturing an increasing share of the metropolitan area's new housing units but the city of Atlanta's share is falling.
• Georgia has gone from having among the nation's lowest levels of obesity to among the highest, and in Georgia fewer people walk or bike to work than used to.
• Oregon's rate of obesity has remained about average and more people walk or bike to work than used to.

Many of these outcomes are summarized in Table 1.

Table 1 COMPARING URBAN CONTAINMENT TO BUSINESS AS USUAL

METROPOLITAN PORTLAND (OR) & METROPOLITAN ATLANTA (GA)

Changes between mid-1980s and mid-1990s

Source: Adapted from Nelson 9991, Urban Containment = Central City Vitality and Quality of Life, paper presented to Bridging the Divide, U.S. Department of Housing and Urban Development, December 31-41, Washington, D.C.

Some argue that Portland's version of smart growth that relies on urban containment leads to higher housing prices and reduced housing affordability. Evidence indicates otherwise. Consumers are willing to pay for higher quality of life especially if they are also better off in ways that reduce costs. This is shown in Table 2.
 

Source: Housing prices from National Association of Realtors, www.NAR.org. All other figures from U.S. Bureau of the Census and U.S. Department of Housing and Urban Development, American Housing Survey (Washington, D.C.) for respective years (as calculated by author).

THE CHALLENGE AHEAD

General trends seem to be clear. Despite reasonable similarities between them, the smart growth approach of Oregon makes it and its principal metropolitan area, Portland, better prepared to accommodate and realize economic development than the laissez-faire attitude represented by Georgia and its principal metropolitan area, Atlanta.

The benefits of urban containment based on smart growth take many years to see. Oregon began its program in 1973. It is only now, a full generation later, that measurable results can be seen. The extent to which politicians and, more directly, the general public are willing to sacrifice the status quo today and wait for tangible results in 25 or more years is not at all clear. What may be clear, however, is if the short term sacrifice is made, the quality of economic and social life for our children will be improved.
 
 

Author and Copyright Information

Copyright 2000 By Author

Arthur C. Nelson, Ph.D., ASCE, FAICP
Professor of City Planning, Urban Design, and Public Policy
Georgia Institute of Technology
Atlanta, Georgia