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The Bottom Line on Smart Growth

By Parris N. Glendening

Summer 2012

It's actually about growth!

Editor's Note: After the final panel discussion at last year's ACCE Convention in Los Angeles, a group of attendees circled around the podium. The Honorable Paris Glendenning, former Governor of Maryland, was surrounded by people asking questions and inquiring about his speaking schedule. Given the enthusiasm for his theories on the impact of future gas prices, real estate values and demographics, we thought we'd provide him a platform to explain why Smart Growth is a worthwhile subject for every chamber executive to understand. Some economists and developers are critical of Smart Growth, and some chamber leaders may take issue with some of the governor's conclusions, but thinking about future-focused development, community viability and growth oriented public policy is a positive thing.

In Lodi, Calif., a town of 60,000, a $4.5 million project to make its sidewalks and streets more walkable attracted 60 new businesses, reduced storefront vacancies by 12 percent and increased downtown sales tax revenue 30 percent.

Silver Spring, Md., revitalized its central business district over a five year period. A $360 million public-private investment in a mixed-use town center served as the initial catalyst. Annual property tax revenue eventually increased by 30 percent, nearly $1 million greater than pre-project levels.

Were those outcomes coincidental? Hardly.

During my eight years as Governor of Maryland, we focused extensively on the issues of managing sprawl, adding transit-oriented development and increasing sustainability. Collectively, these focus areas formed a basis for the nation's first modern "smart growth" policies.

The reason then and now for my interest in smart growth is its potential for far-ranging positive impacts, from adding jobs, to stimulating business growth, to improving air quality, to keeping farmland farmable. At the end of the day, just taking the time to think about how we're building our great country is hugely beneficial.

At the end of my terms as governor, I became president of Smart Growth America's Leadership Institute. In that capacity, I speak to organizations and audiences across the country about sustainability, walkable and transit-oriented development, and the relationship between physical health and the built environment. In other words, I speak as an advocate for smart growth.

Responses to my comments are predictable. The environmental community is very supportive but impatient about the pace of change. Health advocates fret about how to make the public aware of the relationship between the built environment and obesity. State and local elected officials are cautious about the political impact of policy changes. Likewise, agricultural, transit advocacy and tax reduction groups, to name just a few, all have a unique but understandable perspective and reaction.

Business organizations and audiences of business people also have an understandable and predictable response. They've heard the talk about how smart growth makes for "better neighborhoods," but what does that really mean in dollars and cents?

The confusion is understandable because the term has been hijacked by no-growth lobbyists and rigid zoning regulators, leaving business advocates like chambers and developers with a bad taste. During this period of continued sluggish economic growth, it is especially difficult to look at a philosophy or set of principles that could limit certain kinds of investment as a welcome player at the business table. In this space, however, I will focus on the reasons that smart growth is indeed an economic growth strategy for communities and regions, rather than a growth killer.

From Durham, N.C., to Reading, Pa., to Houston, Texas, chambers want to know the answer to a very simple question: What does smart growth have to do with my bottom line, or with my members' bottom lines?

My response is, "Everything."

Smart Growth Defined

Smart growth is a more thoughtful way of building and maintaining our towns and cities. While many have attached the label to bizarre land use rules, it really means building urban, suburban and rural communities with housing and transportation choices near jobs, shops and schools. As history has shown, that thoughtfulness can often pay big dividends for business and for quality of life.

The smart growth approach supports local economies, protects the environment and creates stronger neighborhoods. At a more technical level, smart growth takes shape in three primary ways:

  • Development and redevelopment in or adjacent to existing cities, towns and villages. Investments in existing communities make them stronger and keep sprawl to a minimum, reducing local governments' costs to develop and maintain utility and transportation made decades ago. This reinvestment also fights neighborhood blight, a problem that can affect region-wide development in many ways.
  • A mix of uses in one neighborhood and a more compact development pattern Restrictive zoning does not favor the market. When people use only their cars to get from Point A to Point B, it becomes more of a hassle to get things done. It also adds costs. Consumers spend more money on gas or idle time instead of in shops and stores. When people can easily access many different business options in their local community, they are more likely to see that community as a place to go out, raise a family and find a job.
  • A range of convenient transportation choices. Every business owner knows that easy access is essential. All across the country, businesses and local communities are seeing the payoff of strategically building along transit or other public transportation lines, from light rail, to trolleys, to shuttle services. They are also encouraging accessible foot and bike options. Cars do not buy goods and services, or work in office buildings. People do.

These strategies are not restricted to big cities. The "new urbanism" term often used interchangeably with Smart Growth calls for more compact and thoughtful settlement being applied to all kinds of settings. Lifestyle shopping malls and plazas contrive to create such settings. Previously dormant small cities often reconstruct themselves with vibrant, live-in downtowns, whether they're located in Western Kentucky or Northern Maine. Far-flung, center-less exurbs, and linear beach communities increasingly seek to apply Smart Growth principles to their planning, even if they would never admit that they have adopted the label.

Unfortunately, many local, state and federal policies remain at odds with the kinds of development consumers want. Incentive structures, tax credits, transportation investments, and zoning and other regulations often make it easier to develop properties that promote sprawl. Don't be misled into believing that current government policy isn't tilting the playing field in one direction. As real estate developers know, it is often easier to build a whole subdivision in a greenfield than it is to plan one multi-family unit in an existing community.

It is true that some of smart growth's strongest proponents come from an environmental or land conservation background. Hundreds of business owners and local chambers of commerce, however, already know that it literally pays to support sensible growth policies, even if they would never frame their position as advocating smart growth.

By making the most of limited taxpayer dollars and getting a good return on public and private investments, we can create local communities that are more walkable, livable and more likely to stimulate business growth.

Ask almost anyone if they think that concept makes sense and they will say "yes," even those who insist that they don't support Smart Growth.

How it Works

When you build the "smart growth" way, you invest funds in transportation, real estate and economic development in a way that leads residents to the center of the community. The other method can use different strict zoning and subsidy models to promote ever-expanding, low-density, non-walkable sprawl. I realize that one person's sprawl is another person's real estate boom. I also realize that in this economy, people are so eager for investment and growth of any kind that another strip mall or tract housing project could seem like a blessing, but I also believe that thinking about how you build and grow will help you avoid unsustainable community costs and delayed long-term economic prosperity.

Building "smarter" puts businesses in close proximity to housing, making it easier for customers and employees to get to and from the places that matter. Keep that in mind as you deal with slow-market desperation or boom-market demand.

I resist efforts to limit choices and market preferences. Millions of Americans will continue to desire large-lot, suburban development lifestyles. The question isn't whether citizens should be allowed to make such choices; the question is whether any other viable lifestyle, housing and transportation choices will be available to them if policies deter attractive, compact development. And, there are questions about whether all of us should indirectly subsidize the construction of more distant developments . . . and we are.

In many ways, what we are talking about is common sense. Every business owner knows how important it is to pick the right location, and the value in sticking to a strategic plan that takes into account market demands. Smart growth involves upfront planning, and works to design communities in a way that maximizes economic capacity. The built environment of your town—how it looks and feels—can either help or hurt your businesses. So, thinking about these issues ahead of time is absolutely the right course of action. Laying a sensible groundwork and planning are not anti-business. Strategic business moves of this kind give your region and your employers a leg-up on the competition.

There are many reasons. First is the most obvious—that smart growth puts businesses closer to consumers and thus makes those consumers more likely to frequent your business.

The competitive advantage of bringing consumers, houses and businesses closer together go well beyond new storefronts and sales volume. It also increases productivity, makes better use of tax dollars, attracts human capital and helps to keep employees healthy.

  • Productivity: When employees spend less time commuting to and from jobs, they are healthier, less likely to be tired and more likely to contribute in the workplace. Studies also have shown that creativity is higher in smart growth neighborhoods.
  • Sound Use of Tax Dollars: When local governments invest in existing infrastructure versus expanding outward, businesses and residents pay less. Nobody likes higher taxes, but many current policies promote the kind of sprawling development patterns that will eventually demand greater upkeep and maintenance costs. Unless change how we build, we will be left with two likely outcomes: A continually deteriorating infrastructure or added taxes. Neither is good for business.
  • The Best and Brightest: Recent college graduates and experienced professionals see the strong neighborhoods and business districts created through smart growth policy implementation as highly desirable. Talented employees want to live in communities "with a sense of place."
  • Reduced Energy Use: The price of fuel will rise as energy resources become more strained and markets tighten. The cost of gas has an immediate impact on businesses with a transportation component, while others will see the impact of employees and customers who are spending more money at the gas station and less money in other segments of the local economy.
  • Healthier Residents: Walkable and transit-oriented neighborhoods promote healthier lifestyle choices and help to reduce instances of obesity and obesity-related illness. That is good news for business owners who know the high cost of supplying health care for their own employees and carrying the tax burden for those covered by government programs.

The discussion of these topics as part of smart growth's positive impact on business occasionally produces a hesitancy or questioning by some members of the business community. I remember a conversation that occurred during a meeting of chamber executives in Texas:

At the dinner the night before my speech, a young lady representing one of the local chambers came up to me and said in a very friendly but forceful manner, "So you're the person from Smart Growth America that has come out here to tell us how to use our property."

I replied in an equally friendly manner, "No, ma'am, I'm just here to explain what the choices are."

The next day in my comments, I talked about the impact of gasoline almost certainly hitting $7 to $10 a gallon by the end of the decade. Think that's hard to imagine? Eight years ago, the price of gasoline was almost exactly half what it is today. The impact of 100 percent increase in commuting on employees is fairly straightforward. They cannot afford to get to work and productivity goes down, or they get to work they spend too much of their disposable income on gas. This puts the economy at risk of constant recession because we are a consumption-based economy. Or, lastly, they manage get to work but demand higher wages to offset higher fuel costs and we go into a period of energy-fueled price hikes.

"Which do you want" I asked "Lower productivity, recession or inflation?" Not surprisingly, there wasn't much enthusiasm for any of those choices.

After an uncomfortable moment of silence, I added that we can change the rules of the game. By helping to locate workers and jobs in closer proximity and by having public transportation alternatives, we can position our businesses and communities to withstand the impact of petroleum price increases, as well as compete for customers and job creation opportunities.

First choose where to live, then look for a job

There also are demographic and cultural shifts occurring that mean smart growth could have an exponentially greater business impact in coming years.

All across the country, we see changes in how people want to live and get to work. Young people of today will both inherit and create our future. Knowing how they think and what they want puts businesses and regions a step ahead of the competition.

In the last U.S. census, almost two-thirds (64 percent) of college-educated 25- to 34-year-olds said they looked for a job after they chose the city where they wanted to live. "Where they live" is deeply important to the today's millennial generation. They want opportunities for social interaction and places to go, like the restaurants and shops seen in walkable business environments. They increasingly gravitate toward transportation options like public transit, biking and walking. They are less likely to own a car than previous generations.

Knowing this is vital, if one of your chamber's goals is to make your community attractive to younger workers. In order for your town and region to have a competitive business future, it must attract and retain the best talent. Where are potential employees and bright young people going to live? The answer is easy: As the most social, diverse and well-connected American generation yet, they will migrate toward neighborhoods with the most appeal.

While the full impact of these demographic and cultural trends remains to be seen, the market is already adapting. The 2010 census showed, for the first time in generations, that more people are moving to urban locations versus suburban or exurban locations. The census confirmed what many in the real estate community have been hinting at for years. A USA Today article, published in May 2012, highlighted that fact:

"The nation's development patterns may be at a historic juncture as builders begin to reverse 60-year-old trends. They're shifting from giant communities on wide-open "greenfields" to compact "infill" housing in already-developed urban settings. The market slowdown has given builders time to assess sweeping demographic changes that are transforming the way Americans want to live.

Young Millennials and older Baby Boomers are rejecting traditional suburban lifestyles in favor of urban living and shorter commutes. Many want to live near city centers so they can walk to work, shops and restaurants or take public transportation. They also prefer smaller homes because they're single or have no kids and don't want to spend their free time maintaining their homes."

Likewise, a new report from the Demand Institute, a division of the U.S. Conference Board, found that homes with amenities within walking distance will be those most in demand in coming years. The overall U.S. housing market has begun to recover, but it's these homes, called "Resilient Walkables" in the report, that will be at the forefront:

"About 15 percent of the population lives in this segment, which comprises populous urban or semi-urban communities well served by local amenities. House prices here fell by less than the national average between 2006 and 2011, in some cases by much less. The same is true of local employment… These localities will be the first to recover."

Chris Leinberger of the Brookings Institute, who serves as president of Smart Growth America's LOCUS real estate developer coalition, recently released a report showing an unprecedented level of correlation between walkable neighborhoods, economic performance and market demand. Comparing Washington D.C., neighborhoods on a five-step scale of walkability, Leinberger found that a one-level increase in walkability translates into a value premium of $9 per square foot in office rents, a $7 per square foot premium in retail rents, an 80 percent increase in retail sales, a $302 per square foot premium in residential rents and an $82 per square foot premium in residential housing values.

What that means for business owners and regional development activists like you is obvious. The days of unquestioned sprawling development may be behind us. Locating in, and building more, smart growth neighborhoods is a way to take full advantage of the real estate market.

The Future of Smart Growth

Implementing smart growth strategies to drive growth in your community and boost your bottom line is not an easy task. Business organizations, including your boards, need to be aware of how many investments and decisions—from transportation to zoning to land use—have a collective impact on economic capacity.

What do you do if your chamber represents a region that lacks most of these elements of future-focused growth? If you represent a suburban area along one of our coasts or in a megalopolis region, how do you even start to change what you are? What if your community is rural and a small commercial crossroads is the closest thing you have to a city center? Can your chamber play a role if you're located in a fully built-out edge city or an existing downtown? What if expensive past efforts to create downtown vibrancy have failed, leaving attractive, accessible blocks with no retail tenants?

The answer to these questions is that there are planning and policy choices to make for the future, no matter what your setting and history. Someday, somewhere in your territory, somebody is going to modify a road or a bus route. You can influence the choices about where and how. Someday, somewhere, a developer will want to build housing for a number of people. Will you tell them (and policy makers) that the what-where question will have an impact on the rest of the economy and community?

My recommendations, then, are straightforward:

  • Rather than being fearful or confused about the term, find out about smart growth and make your members aware of the real meaning. Great resources and background materials are available for you and your team.
  • Understand that smart growth does not mean more regulation; it actually tends to be about fewer or more flexible regulations.
  • Support development projects in your cities and towns that focus on more than automobile factors. How could public transportation being included in the development and if you have transit, bus or other alternatives, support development that connects to those lines. Support the policies that make it easier to build them.
  • Help make the link in the public consciousness between walkability, quality of place, job creation and business growth. It isn't always intuitive, but it is a fact.
  • If it's more palatable in your community to push the individual components of smart growth without ever using the term, we won't be offended!

No matter what you call it, these are simple steps today that will pay big dividends tomorrow. Smart growth is just smart business.

Former Maryland Gov. Parris N. Glendening is president of Smart Growth America's Leadership Institute and the Governor's Institute on Community Design. In these roles, he travels extensively advising state and local governments on smart growth, transit, and sustainability. As governor (1995-2003), he created the nation's first state-level smart growth policy package. He also served three terms as elected county executive of Prince George's County, Md., a Washington, D.C., suburb, and taught political science at the University of Maryland, College Park, for 27 years.

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