• Should voters decide land use?Should voters decide land use?

• What consequences of public votes on What consequences of public votes on what gets built where?what gets built where?

• If put to a vote, what incentives for If put to a vote, what incentives for voters to say yes or no?voters to say yes or no?

Ballot Box Zoning

• Ballot Box ZoningBallot Box Zoning• Power of local vote varies by statePower of local vote varies by state• What is subject to direct democracy?What is subject to direct democracy?

• Set density?Set density?• define allowed land use?define allowed land use?• adopt / reject entire general plan?adopt / reject entire general plan?• grant / block rezone?grant / block rezone?• grant / block variances to plan?grant / block variances to plan?• Decide on individual properties?Decide on individual properties?

Exclusionary Zoning

• Ballot Box ZoningBallot Box Zoning• UtahUtah

• rezone not subject to referendum; what rezone not subject to referendum; what else?else?

• OregonOregon• Fassano case; map amendments, Fassano case; map amendments, ‘‘general general

ordinancesordinances’’ subject to referendum, not subject to referendum, not actions on specific propertyactions on specific property

Exclusionary Zoning

• Ballot Box ZoningBallot Box Zoning• WashingtonWashington

• Leonard v. City of BothellLeonard v. City of Bothell (1975); rezone land to retail; (1975); rezone land to retail; opposed by citizensopposed by citizens

• General plan had land as agriculturalGeneral plan had land as agricultural• WA Court: referendums and initiatives can be held on WA Court: referendums and initiatives can be held on

““legislative matterslegislative matters””, NOT , NOT ““administrative mattersadministrative matters””• ““amendments to zoning and rezone decisions require an amendments to zoning and rezone decisions require an

intelligent choice by individuals who posses the expertise to intelligent choice by individuals who posses the expertise to consider total economic, social and physical character of consider total economic, social and physical character of communitycommunity””

• Not votersNot voters

Exclusionary Zoning

• Ballot Box ZoningBallot Box Zoning• CaliforniaCalifornia• Arnel Co. v. Costa MesaArnel Co. v. Costa Mesa (1980) (1980)

• Citizens can use initiative and referendum to fight Citizens can use initiative and referendum to fight anything; a re-zone for a single propertyanything; a re-zone for a single property

• legitimate use of direct democracy, legitimate use of direct democracy, since it sees the rezone not as an administrative procedure, but a change affecting lifestyle of city residents.

• So, developers in CA must make voters happySo, developers in CA must make voters happy

Exclusionary Zoning

Since 1980s:Since 1980s:Increase in % of (wealthy) Americans living in Increase in % of (wealthy) Americans living in private communitiesprivate communities

16% in places ran by private associations (2004)16% in places ran by private associations (2004)10% in private ‘gated’ communities, as of 201210% in private ‘gated’ communities, as of 2012

Walled, gated, exclude based on ageWalled, gated, exclude based on agePrivate security forcesPrivate security forcesPrivate roadsPrivate roadsWhy pay city taxes?Why pay city taxes?

Private Communities

Population growth has occurred in Population growth has occurred in highly fragmented highly fragmented metropolitan areasmetropolitan areas

Areas are fragmented into cities, Areas are fragmented into cities, counties, towns, school districts, and counties, towns, school districts, and special districtsspecial districts

Places have local land use powersPlaces have local land use powers can & do use powers to excludecan & do use powers to exclude

Metropolitan Fragmentation (again)

Federal and local PUBLIC policies Federal and local PUBLIC policies have shaped development of metro have shaped development of metro areasareas

What equity issues?What equity issues?

Summary

Local Economic Development Competition

Cities as competing places for firms, jobs, certain residents, certain non-

residential properties

Land use one set of policies Zoning, eminent domain

Economic Development Policies another way they compete

Local Economic Development Logic: Supply side economics

Govts. can’t affect demand side Lower firm’s location costs

Goal: Attract firms that are net fiscal gain job gain

Local Economic Development Examples of what local governments try to

recruit/subsidize: Intel Plant (Dupont WA); Saturn Plant; BMW

Plant; Boeing; Call centers, distribution centers, shopping malls,

small employers... Sports franchises; multi-use arenas; convention

centers; hotels; Glass museum,

Local Economic Development Tools / Policies

tax abatements / rebates utility discounts public land acquisition / land consolidation regulatory relief issue debt for firm site improvements worker training grants TIF

Local Economic Development Major costs to state & local governments

$20-$30 billion per year in spending & tax breaks

PLUS $6b per year from fed.

Local Economic Development Which Places Use ED Policies? Everyone (almost)

Cities, counties, port districts, etc. Which ‘suburbs’?:

where less controversy over growth less affluent places older places larger places have dedicated ED office more homeowners (vs. renters)

How Do Firms Respond? What factors determine a firm’s Location

Decision?

1)? 2)? 3)?

How Do Firms Respond? Factors behind Location Decision

production costs / resources labor market conditions access to markets / demand for product transport costs lifestyle for managers

taxes, location costs lower down list

How do Firms Respond For many firms:

major location factors ‘region-specific’ Silicon Valley, US South, Greater Seattle...

Policy incentive may affect intra-regional decision Beggar-thy-neighbor fights within region

Does this Competition ‘Work?’

Policy Logic:

Policy -> increase -> more tax -> lower tax private revenue; rate

investment & jobs

Plus: a multiplier effect (or loop)

Stadium, manufacturing plant, convention center,call center, industrial park, etc.

Does this Competition ‘Work?’ Supply side assumption shaky

if public investment = tax breaks, and firm coming anyway, policy reduces net yield

Richer cities can do most, need least Poor cities do much, but have least to give

Does this Competition Work? Beggar-thy-Neighbor?

Assume a firm will locate in region City A offers 20% tax break City B offers 50% tax break

Firm goes to City B If cooperation, could both cities gain? Where do workers come from? Where do their

kids go to school? Where do they pay taxes?

Does this Competition Work? Beggar-thy-Neighbor?

There are COSTS associated with gain for City B:

Where do (low-wage) workers live? Where do their kids go to school? Where do they drive (traffic)? Where do they pay taxes?

Does this Competition Work? Evidence (macro): Studies of policy use across many places

Cities using more policies have greater growth of firm location

Cities using more policies DO NOT have greater growth of local employment

Revenue...?

Does this Competition Work? Evidence (project specific)

Public investment in large facilities (sports, convention centers) rarely repay construction cost

but how evaluate as ‘benefit?’

Benefits supposed to be ‘multiplier’

Is this worth public investment?

Does this Competition Work? Oklahoma ‘Sonics’ LA Lakers Utah Jazz Memphis Grizzlies Oak/LA/Oak Raiders St. Louis Rams

Does this Competition Work? Sports Stadiums; Matheson and Baade

Economic impact of an MLB team For city, net = $16m For region, net = $123m

MLB says $300m

Does this Competition Work? Sports Stadiums

Brookings Study: economic impact of minor league baseball = to “a

large pet shop” 3 decade study (Rosentraub & Swindell)

direct and indirect economic impact of major sports teams and facilities quite small

Does this Competition Work? Convention Centers

More payoff than sports facilities attracts people from outside region, outside the

state Sports competes for local entertainment $$

very little / no payoff for smaller markets

Does this Competition Work?• Why Should Public Pay?

• If profitable, would private sector provide?

Intangibles: Sports teams as a public good? Civic venues a public good?

meeting places, other uses

Intangibles

Do public economic development policies work? How mobile are

businesses?

Can places attract, facilitate, small business?

Evidence Evidence from

“Empowerment Zones” 1994-2001 Demand side ??

Improved labor markets

tax credits no capital gains taxes incentives to hire

people in zone wage subsidies

Metropolitan Fragmentation (again) Local hierarchy of places in region Winners and losers affected by:

Federal programs (1950s/60s vs. today) Local zoning policies Economic development policies

HUGE disparities w / in a region re: assessed value of property per-capita, sales tax rev.

A Level Playing Field? Mitigate beggar-thy-neighbor dynamic

Metro Governments regional structures; city/county consolidation;

share tax powers Tax-Base Sharing

each place dedicates a % of its tax base to a regional pool; revenues divided among all in pool (proportionate to population)

MN, Rochester NY; Hackensack NJ. Montgomery, OH

A Level Playing Field? Regional Tax Base Sharing

reduce competition among places for adding properties to tax base

create fair distribution of benefits and costs reduce tax base disparities w/in region help regional land use planning

Tax Increment Financing TIF / RDA A “downtown” tool...

city acquire land; “clear” land provide land to developer get (Fed.) grants to write down land cost Build mega facility establish RDA and RDA boundary marginal tax increase in RDA stays in area re-invest that w/ in RDA for how long???

Tax Increment Financing in WA Not as widely available in WA

Ltd to use with state property tax LIFT, HBZ

Constitutional amendments rejected 3X by voters

Local example Railroad & Holly Market was not generating development

Condemnation Flame Tavern Threat of eminent domain at opposite corner Public $ to make Starbucks site buildable Tax exemption zone for new residential dev.

Pit to Starbucks

Drug property to burgers

Abandoned building to apartments