Chapter 4.5

Paying for Growth - Part 1
(Oregon Planners' Journal, October 1996)

By Richard Carson

(This is the beginning of a series of articles regarding the costs of growth. I ask you to share with all of us what you know about what growth really costs, how we can pay for it, and how we can equitably assess who pays for what).

I recently had what is as close to an out-of-body experience as a planner can get. A consortium of developers came to me and offered to pay for 75 percent of the cost of building a new sanitary sewer line. They agreed to engineer it and then back its construction with an irrevocable letter of credit. That's better than gold.

These developers didn't want to bother forming a Local Improvement District (LID), they did not want to be paid back by later development through an Advance Finance District (AFD) and they did not ask for any specific guarantees on zoning or project approvals. What they wanted was to be able to create and develop subdivisions in one of the few remaining areas with large tracks of land within the Portland metropolitan area.

This is a truly amazing event. Local governments haven't seen 75 percent matching money since Reagan got the federal government got out of infrastructure construction in the early 1980s. What is going on? Simple, fiscal conservatives shut-off federal sources of municipal infrastructure revenue over a decade ago. Oregon state conservatives - through ballot measure 5 -shutoff the local source of municipal infrastructure revenue five years ago. And now many local conservatives have forced city wide initiatives that require a vote of the people on any new bonds or financing. There is only one source of money left to build our municipal infrastructure - the private sector.

What are the Costs?

There is only one minor problem. Most municipal governments don't have a clue what the true cost of growth is. In April of 1974 a report was issued by the federal government called the "Costs of Sprawl." The President was none other than President Richard M. Nixon - yet, his name is not to be found anywhere in this document. That says a lot about just how dangerous a document it was for a Republican President to allow to be printed.

The report was paid for by the Department of Housing and Urban Development (HUD), the Environmental Protection Agency, (EPA), and the Office of Planning and Management. It was sold by the U.S. Government Printing Office for the obscene price of $2.90. The subtitle was the "Environmental and Economic Cost of Alternative Residential Development Patterns at the Urban Fringe." This was -- to my knowledge -- the last and only intelligent financial assessment of the true cost of property development ever done by the federal government. Why? After 22 years you would think that someone would have answered this question. The fact is that everyone is afraid to answer the question.

Who Pays?

Even if we could determine what it costs to pay for growth, then we still need to decide what is an equitable way to assess the costs. We widen streets, build water or sewer mains, or acquire new parks. How much of the cost is attributable to new subdivisions and planned development. How much of the costs should be covered by the existing residents? This question is made more difficult by the fact that some people in a city buy a new house and sell their old house to people from outside of the city. Which is which now? Should the long-term resident, who remains in the city, pay for the new infrastructure? What if the resident moves out of the city and a new person buys their existing home. Has this new person created growth? It is after all the same house.

What is the answer?

One way to address this information void is to fill it here  in the Oregon Planners' Journal. Starting this fall, we are going to start soliciting and running a series of articles under the banner of "The Costs of Growth." This article forms the problem statement, but I will leave it to all of you to help show the scope of the problem and the possible solutions.

Richard H. Carson is Director of Oregon City's Community Development Department.

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Common Sense
by Richard H. Carson