Exposing The Big Lie!
Corporate Welfare – Part 3:Ending Systematic Development Scams
(For the condensed versiongo here)
Sections within this article:
Pausing to Consider the Human Ecology of Development
A Better, Balanced Growth Model
I’ve heard some real whoppers in my life: You know, the 40-pound trout pulled from a stream with a tin-foil fly, but unfortunately eaten over an impromptu camp-fire by its lone, stranded captor. Or, the 420-yard hole-in-one blasted during a solo late-afternoon on the front-nine. Or even this lollapoluzza:How increasing development fees leads to increased home prices. Pure bullshit! I tell ya, sometimes it just frightens me the way some yarn-spinners keep such a straight face. It’s practically delusional.
I’ll grant Uncle Marvin that his 40-pounder is possible, and surely brother Bob might have the arm-strength and shear hot-air required to cup a long dinger, but this one about the development fees is just ridiculous locker room trash talk! Mathematically impossible. The BIG LIE goes like this:
If you add development fees to the cost of building a house (or any project, really),
Then the developer’s costs are higher,
So more must be charged for the house (if the developer is going to earn a reasonable profit, right?),
Therefore, increasing development fees leads to increased house prices!
In fact, if we would only decrease the cost of development
(say, via tax incentives, fee waivers or infrastructure cost subsidies)
we will decrease prices and spur more profitable growth.
Then we will all be happier!
[ Stated mathematically: ( 7 – 12/2 ) * Apples = 64 Oranges / (2^6) ]
Economics 101
The above equation might look interesting on the surface, yet after analysis, we can see it is simply not true. It is a purely manipulative, corrupt and self-serving argument: A BIG LIE!
Now seriously folks…
Speaking as an ex-real estate developer, licensed real estate broker, and University of California, Irvine, MBA (who has developed many millions of dollars of real estate, and taught numerous real estate finance and development courses for UCI and UCLA extension programs) here is the actual economic and political equation:
(1) Home buyers demonstrate a willingness and ability to pay a certain maximum amount for various types of homes (based on size, features and location). Similarly, business owners do likewise for office and shop space.
(2) Developers design products to meet these (real or perceived) needs and wants, then calculate how much it will cost to design, engineer, build, finance and sell this product including the cost for all environmental mitigation, infrastructure costs and development fees. (For the moment, we’ll assume that these fees and mitigation are the same for everyone and are well known to everyone. The fact that this is NOT true is part of the problem we are aiming to solve.)
(3) Developers then look for land they can buy to build their project. The maximum price a developer is willing to pay for properly zoned land can be calculated as such: The Market Value of all Houses to be built (“Expected Revenue”) MINUS [Total Estimated Costs of Development (“Dev Costs”) + Risk-and-Time-adjusted Profit (“Expected Profit”)]. So, developers BACK INTO, or calculate, the maximum amount they can afford to pay for land!
Thus: Expected Revenue – (Dev Costs + Expected Profit) = Land Value.
(4) Land owners always want the maximum amount of money for their land. This is true, of course, regardless of whether they are selling the land to another developer, or are acting as owner-developers themselves. (For this reason, we will use the term Land Owner-Developer for anyone who ever intends to do anything with their land other than farm it, ‘en perpetuity’, or otherwise create a permanent non-developable ‘open-space’ easement.)
(5) When land owner-developers analyze the economics of development they easily reach two conclusions (given an existing market value for finished homes or shops, and a given minimum profit required to risk doing a project.) First, their land value goes up as allowed density increases (because more houses per acre means more profits per acre and so the developer can pay more land value per acre). Second, land value goes down as costs increase. Since they CAN NOT control the prevailing cost of lumber or sheet metal or concrete, they accept these as a given. But they DO try to control the cost of local labor (by fighting wage and labor laws), and the costs of infrastructure (which are, in effect, the building codes, impact fees and other development fees and taxes imposed by various agencies largely in response to public needs and political pressures.)
(6) Land owner-developers often learn these lessons explicitly from brokers and attorneys who are negotiating hard to put a deal together, or from a developer who is trying hard to show the land owner that he has already bid as much as he can for the land.
Therefore, to recap: Increased density equals increased land value; Decreasing costs equals increased land value. So, it is no surprise that these two factors are EXACTLY what local politicos attempt to manipulate in return for campaign contributions and other legal and/or illegal pay-offs.
To the land owners’ economic horror, they also realize the opposite is true… If density is decreased or development costs are increased then THEIR LAND IS WORTH LESS MONEY!!!!
This is absolutely true! Increasing development costs simply decreases the amount the free markets are willing to pay for land. It does NOT lead to increased home prices! This is what the wealthy landowners fight to keep secret. That is why they perpetuate THE BIG LIE… and this lie is destroying our communities by forcing exisiting homeowners to constantly subsidize new developments which are NOT paying for thie rown schools, fire, police, sewer, roads and many other types of local infrastructure.
Ask any honest economist and they will concede the truth: Increasing development costs has NO impact on what people can or will afford to pay for their homes or shops. People will nearly always pay as much as they can afford for what they want (or believe they need) for shelter. Does anyone REALLY believe that, in the face of market-driven price increases, any developer is going to say, “Ah shucks, I just would not feel right takin’ an extra $30,000 in profit per home. After all, I saved some money on my costs, and yer all such swell folks, I’m lowerin’ my prices!” If so, you are the same suckers who thought pure socialism would work: Sorry, but everyone is just too self-centered for that. Nope, increasing development costs have no impact on what people can or will pay, any more than decreasing development costs leads to lower house prices, they simply decrease the amount a developer is willing to pay the land owner. (In reality, the equation is slightly more complex, since developers often lobby for increased densities and decreased development costs AFTER they buy the land on the cheap — in respect of ostensible entitlement and infrastructure costs — then pocket the excess profits when they succeed at shifting these costs to the taxpayers. As an aberrant aside, the ONLY exception to this analysis is IF land prices have fallen to a “negative value”, which should NEVER happen in a balanced economy, but has actually happened a few times in our grossly flawed system… but that is another story for another time).
The Circle Jerk Begins…
“Ne-Ne-Negative land value!!!!!! Ahhhhhhhhhh!!!!!” As soon as the land owner wakes up from her sweet money dream gone bad, she immediately starts to rationalize “The Big Lie” in her own mind, then searches out the most likely allies to co-opt. [NOTE: In an effort to recognize the equality of greed and denial in both sexes, I have chosen to feminize the pronouns in this example.]
Her first round of targets is easy and obvious. The developers, contractors, and laborers who might make some money from the development process, plus any politician willing to trade votes for contributions . In essense, the pitch is this: “You lobby to increase my densities and lower my development fees and you’ll get work for the next 6 – 24 months…”
It’s too bad the suckers who take that short term pay-off don’t finish the sentence and the logic, “… of course, you’ll have to pay much higher taxes for sewage treatment plants, drainage canals, freeways and sound walls, bridges, utilities, water treatment facilities, schools, police and fire facilities to support these new homes. I mean, I do appreciate your lobbying to help ME avoid these costs (so I can gain a larger land or development profit), but since I now spend my time between Aspen, Sedona, and the Bahamas, your new taxes and over-burdened infrastructures are not really my problem.” This is how our cities have come to look as they do.
The next layer of players consists of ancillary business owners who expect bigger retail sales volumes to come from a bigger population. “You support lower development fees and you’ll get lots more houses filled with lots more shoppers…” Again, it is sad that the mainstream op-ed sections usually won’t print an article (such as this one) which finishes the thought, “…who’s homes created huge new infrastructure costs which are subsidized by the rest of you. Sure, multinational corporations (like Mall-Mart and SuperMegaBank) will drive you all out of business as soon as the population is large enough to make you wish you lived somewhere else. But, hey, have a positive attitude about it: There are a lot of people who barely survive on the wages these companies are forced (by minimum wages laws) to leave in the community before the profits are exported to The Netherlands Antilles… which also happens to be where I planted a big chunk of my land profits when I moved out of your over-developed town.” So, wrong as they are, many business owners and managers continue to believe ‘THE BIG LIE’. They have heard it repeated so many times they have come to believe that it equates with their self-interest.
Finally, shear political clout is brought to bear on the most abstract populations: Those folks who actually stand to lose in both the short- and long-term, but who must still either be convinced of a project’s rightfulness or marginalized into impotence. The co-opting slogans used in this realm are ingeniously simplistic and overwhelmingly varied, but basic examples range from “Freedom is good” to “Shut up before I send Vinny around to extract a videotaped confession regarding your membership in communist, narcotic and pedophiliac organizations”.
Since land owners, especially BIG land owners, are the most affluent and influential citizens of the world, and since this has been the case for a VERY long time, they have literally had generations to perfect and promulgate The Big Lie. I would wager a bet that most news writers, even real estate and finance writers, actually believe in The Big Lie. When questioned, they would NOT be able to articulate a defensible justification for this belief (short of repeating a few Big Lie sound bites). Somehow, along the way, they just came to repeat the equation: “Increasing development costs causes increased home and shop prices” until they accepted it as unquestionably true, and then they repeated it over and over with every similar story deadline. (Besides, do think their bosses want to risk losing all the yummy real estate advertising revenue? Gee, come to think of it, aren’t big newspaper owners also usually big land owners? Hmmm….)
Fairness forces us to question: Why should a retired couple (or any general population) have to pay general tax increases to build new schools for new residents? Why should existing residents pay for new roads and bridges, or increased sewer, drainage, and water plants which THEY did not need until these new projects were built? Why suffer increases in pollution, crime and many other density- and grow-related afflictions which existing residents certainly did NOT choose back when they bought their little slice of heaven, long before the current wave of growth pressures and politics? Yet, for some unexplained reason, the underlying assumption of “Growth is Always Good” is rarely challenged.
It is this precise set of circumstances, rationalizations, short-sight and misguided approvals which has led to rapidly rising property and other taxes (with major exceptions, such as the Williamson Act, which minimize taxes on — surprise — the undeveloped holdings of large land owners). Ultimately, this systematic corruption was the cause of one (rightful) taxpayer backlash (in California) called “Proposition 13” (which capped property taxes at 1% of purchase value plus 2% annual increases). After all, long time California residents were being forced out of their homes by skyrocketing property taxes which were increased annually by corrupt or ignorant politicians. Government kept raising general taxes instead of making developers pay ALL of the true costs which are associated with each new project. There is never justice in subsidies to private interests, only rationalizations sold to co-opt whichever constituencies the land owner-developers need in order to increase densities and decrease development fees.
By now, it should be obvious that The Big Lie is indeed patently false. Subsidized development does NOT make everyone happier. Specifically, it makes the original land owner VERY happy, it makes a few development process middle-men (like politicians and contractors) a lot happier for a little while, it make a few trickle-down business owners/executives a little happier for a little while, and it make EVERYONE ELSE worse off in both the short run and long run.
While the exposed truth is not as simplistic as “The Big Lie” constantly sold to Americans (and so, it makes for poor sound bites), it IS the sad reality — it is all demonstrably true. In fact, we challenge any (and all) responsible publications to sponsor public debates on this topic so that we may move beyond sound bites to hard truths. We should welcome the opportunity for an open dialogue, and any amount of publicity, for the true economics and politics of the development equation. Indeed, this is the first step toward solving the problem.
So, what is a better way? What solutions can we suggest?
Pausing to Consider the Human Ecology of Development
Like it or not, nothing is simple. Since development involves humans, with their attendant self-interests, conflicts-of-interest, unique personalities, and intricate social and economic structures, we must spend some time reflecting on the environment, or dynamic system, of development. This is important because all sides (liberals, conservatives, socialists, capitalists, etc.) need to contemplate the reasonable and valid arguments of each interested party if we are to achieve solutions. A paradigm shift is needed, so all of our assumptions must be called into question. Thus, we must pause here for a brief, perhaps esoteric, but ultimately necessary, digression regarding the human conflicts surrounding development:
Just the facts, Mam…
Physicists, biologists, sociologists and even spiritual leaders, tell us that our universe is made up of extremely complex webs of interacting and dynamic relationships. In physics, we speak of these interactions in terms of quantum mechanics. In biology, we have come to understand various chunks of these relationships as ecosystems. In sociology, we think of them as cultures and demographic groupings. In the spiritual realm, we envision an ultimate oneness, or an equivalent absolute emptiness, in which everything is part of everything else. Even modern business schools urge us to understand and embrace “systems theory”, instead of myopic and linear management techniques which have proven to be wholly ineffective and unstable over the long run.
Therefore, if we are to have a rational dialogue, and if we hope come to a sustainable balance between the competing interests of “individual rights” versus “rights of the society” (which is exactly what the debate over “property rights”, “development fees”, etc., is all about), then we must understand and accept certain realities which are inherent in the human dynamics of the development system.
Quite briefly, these realities are:
1) Most people want to own property, and believe in private property rights.
2) Most people who do not now own land hope to own land someday.
3) Once we own private property we will fight to keep it, use it, even sell it as we wish.
4) Land owners have rights!
5) Many people want earn to profits: Growth and development can provide profits.
6) Land owners have responsibilities!
7) Making someone else pay for my stuff is not just morally wrong, it creates tension and instability.
8) Ethics are reciprocal and dynamic: So we should be very careful of our own choices.
9) The best solution is to follow nature: Create an ecology of symbiotic relationships.
Right off the bat, let get something straight: If you disagree with any of the above relationships then you have not been paying attention in life. Go to the back of the class.
For the good students, let’s review the interplay of these realities in the context of the solution-oriented philosophy of “Liberty & Responsibility”, which seeks to balance our individual freedoms against the duties we owe each.
Individual Liberty
As we contemplate a better system of real estate development, one which does not depend upon The Big Lie, we must remember to respect Individual Liberty. When you tell someone what they can or can’t do with their land, “them’s fightin’ words”. In America (and most of the world), people (in fact, nearly all animals) feel so strongly about their right to claim power over their (often tiny) piece of turf that they are literally ready to kill over it. So, it’s a pretty wise move to accept folks desire for property as a reality (kinda’ like gravity) that we will just have to deal with. Then let’s move on.
We must also accept the fact that land owners (and developers) have rights! If this was not so, then no one would want to own land, yet most people do. “Perfect! No land ownership!,” say many people known by the Indian nickname for “Pollyanna”. In reality, people prefer barbaric war to loss of property rights. If you doubt this, please study a little history, or maybe read a modern newspaper once in a while. So, let’s just agree to respect the rights of property owners, okay?
Therefore, to have a sustainable system we must allow reasonable developments which pay their own way… regardless of whether some group “dislikes the design” in spite of what the market wants. Neighbors and bureaucrats who reject a decent plan to build housing (or “clean and honest” commerce facilities) on specious technicalities practically force owner-developers to fight for their perceived rights (to “protect their turf”) with a ferocity which naturally distorts their ethics in order. It’s called war… and generally we should try to reach cooperative agreements long before we incite a war. [As an aside: If various citizens REALLY want to protect open spaces in their world, they can (a) make development pay its own way, then (b) band together to buy the land from the existing owners and place a permanent open space easement upon it (i.e. presumably granting it to the state with a deed restriction on uses, simultaneously eliminating further property tax responsibilities)… or pass a democratic bond measure which let’s our counties collect money to buy and permanently retire open space in the name of the people!)]
Private property rights arguments are closely related to the idea of maximizing our returns for the investment we make in time and/or money, thus reaping the rewards of our efforts: That is, the basic premises of the Capitalist system, the “fair profit” arguments. The desire for “Individual Liberty” is the soul of Capitalism’s attraction (regardless of whether Capitialism can ever deliver on its promise). The hope for such freedom has helped Capitalism expand at a tremendous rate, world-wide; growing more widely than belief in God. Thus, it will be more productive to find solutions which respect (in fact, maximize) “Individual Liberty” than to argue about Capitalism’s moral validity. (That is yet another article for yet another time.)
Personal Responsibility
We must also negotiate a doctrine of Personal Responsibility which is consistent with our empahsis on Individual Liberty.
Personal Responsibility has many facets. As an example, we might refuse to use (or allow) tactics which are morally inferior. We are not talking about the morality of lying to kids about Santa Claus (still another topic for still another article); we are questioning the morality of using up all of the good stuff on this planet before your grandkids get to grow up; we are scrutinizing the Big Lies we tell ourselves.
For land owner-developers, the less-recognized (and unspoken) edge of a Liberty & Responsibility sword is “Land owners (and developers) have responsibilities to their neighbors!” This should be very obvious since what you do on your property may affect the surrounding property owners, distant property owners (who also have stake in our system and our world), and even future generations. The more ridiculous and selfish the demands of the owner-developer (“hey, I’m gonna build a nuclear power plant…and a biochemical research lab… in my garage”), the less moral currency she has to demand her rights over the rights of others.
The truth of an existing common interest (think air, water, and community facilities such as roads) has been understood for hundreds of years, as has “the tragedy of the commons”, so land owners MUST recognize the inherent limits of their rights, generally covering their own costs and avoiding infringement on the rights of others.
The Economy of Human Ecology…
There is a more subtle, and often more damaging, way owner-developers take advantage of many others in the high-growth communities considered as profitable “rapes d’jour”. Rapid development causes “super-hype” in an economy: Wannabe-important local officials push subsidies on the average citizens’ tax bills; bolstering the population leads to larger bulk tax transfers in city coffers; mini-fiefdoms are built as power platforms of the future; What this future often brings is a sudden expansion which draws in commuting workers and transient consultants (who live OUTSIDE the community and who take much of their wages out of the area) while producing only the (short term) appearance of real local gains. Sure, the traffic is worse, the water’s worse, less available and more expensive, crime is beyond belief for the previous generations (yet, perversely, accepted by the newest generation), and taxes continue to skyrocket while wages stagnate or drop, and work becomes unsteady. But, for a few years, the lunch trucks and coffee houses and gas stations increase their business, and local spending gets a trickle-down boost. Everyone thinks in a linear fashion, so the local “experts” and public relations firms wax prophetic about similar gains to be made in the coming years. SUPER-MALLS. AUTOMOBILE THEME PARKS. MEGA-SPORTS CENTERS! Even the “clever idiots” who recognize this as a game of musical chairs promptly delude themselves into believing that they, themselves, will always be able to find a chair when the music’s over. Once growth slows (as it always does) the economy implodes, leaving the community decaying, indebted, unbalanced, unsustainable.
What about the notions of Sustainability? Community? Self-reliance? Self-sufficiency? Balance? Charity? Honor? Concern for future generations? “Well, I guess some people jus’ got a better upbringin’ than others, that’s all.” Within one compliant generation, the profiteers can (and have!) reduced once-beautiful areas to hellholes. Everywhere are examples of communities which ‘got it wrong’ because human ecology caused their citizens to act in a selfish and irresponsible manner. The potential saving grace for humanity is that we can reflect on which aspects of our instincts are dysfunctional, utilize our democratic mechanisms to modify our social contract, and exercise our free will to curtail these behaviors.
But why should real estate developer choose to become more responsible?
To begin, asking us to pay for their stuff just doesn’t fly because, as they know, we don’t want to! So they either have to lie to us (so we’ll believe we are paying for our own benefits), or they will just have to shove it down our throats. Either way, payback will be coming, and paybacks are a bitch. We see all sides growing increasingly entrenched in these battles. Whenever a land owner-developer finds a way to avoid paying for any or all of the marginal costs of adding their new development to a community (such as roads, bridges, transit, police, fire and rescue, sewer, flood control, education, prisons, utilities, communications, environmental and social mitigation), they are simply shifting costs onto the backs of existing citizens while diverting ill-gotten goods into their own pockets. This is why, today, few people outside of development-related industries seem to want “growth” or “development” in their communities… and why they seem willing to fight (with war-like ethics) to stop it.
Similarly, it is the unabashed desire of the land owner-developers (acting also with war-like ethics) to rationalize the destruction of lands and peoples in pursuit of their personal profit which causes the subversion or circumvention of the will of the citizenry — usually in the form of old-fashioned overt corruption, but also through many subtle co-opting strategies.
It is an evident fact of life that people tend to believe (in their heart of hearts) in “an eye for an eye”. It simply rings true and just. If you cheat me, then it’s okay for me to cheat you. Your people killed my people. We now feel justified in killing yours. So, when developers justify special tax breaks, or routinely skip-out on infrastructure, as “incentives to stimulate development”, local activists demonstrate their outrage at such scams by organizing campaigns to block development through any legal manuever available.
Of course, as everyone knows, in the real world, money talks and B.S. walks: The co-opted players speak out, the “pro-growth” stories get published, the project gets ram-rodded through, and everyone’s ethics get marginalized. Battle by battle, and year by year, war is hell and every one of us suffers ethical and moral damage by continuing the charade of such inherently corrupt and irresponsible development practices. And so much time and money is wasted through these battles.
A Liberty & Responsibility solution?…
Rather than attempting to “win at all costs”, all sides would do better by negotiating a truce, vowing to stay on the moral high ground in order to end the corruption and hysterical hyperbole. Each side needs to recognize the valid objections of the others and create a logical, consistent and sustainable set of rules to govern future development: We must propose systems of development which allow all sides an opportunity to achieve their basic goals IF they play by agreed rules, IF their ethics are valid, IF they represent themselves and their communities with integrity.
We must all remember that ethics are reciprocal and dynamic: The more your actions negatively impact other people, the more they believe they have a legitimate right to restrict your “rights”; The more egregious the promoted act, the more legitimate the restrictions; The more obvious and reasonable is the objection, the more objectionable is your action. There will always be people who cheat simply because they are worthless scum, and we will always need a system of checks and balances, as well as rewards and penalties, to encourage honest and ethical play and discourage inappropriate conduct. Still, we must begin by understanding and accepting that we are part of a system which reacts to our actions.
In the end, we must accept and support a common set of ethics — such as Liberty & Responsibility — or chaos and, ultimately, war will rule.
A Better, Balanced Growth Model
Now that we know the true economic equation, and understand the motives of the players, we can begin a rational dialog regarding the construction of a sustainable development paradigm: An ecology of symbiotic relationships, if you will.
What practical actions might lead to a better, balanced growth model? Consider these four straightforward steps:
1) Calculate ALL of the marginal (added) costs of development for each new project.
2) Permit land owner-developers to develop (more or less) what and when they choose, as long as they first pay ALL related costs.
3) Require bureaucrats to “keep the faith”.
4) Let the real “free markets” solve the rest of the equation, within an arena of equitable rules of play, rigorous ethics and vigilant community oversight.
But what do each of those statements mean? Let’s take a closer look.
Calculate ALL of the marginal (added) costs of development for each new project.
This could be handled efficiently through a streamlined Environmental Impact Report (E.I.R.), which would also be more comprehensive and consistent than current E.I.R.s. if municipalities used standardized measures for all projects. On the other hand, “ALL” includes: Roads, bridges, transit, police, fire, rescue, sewer, flood control, education, prisons, utilities, air quality, communications, environmental and social mitigations. State and local agencies should be required to calculate the basic per unit cost projections, and then the per-unit related development fees, for these infrastructure costs as part of their own General Plan elements.
Yes, the true total of ALL the items within a comprehensive E.I.R. will scare the dickens out of many present land owner-developers. But that’s okay, the other 98.8% of us (and our planet in general) will realize tremendous benefits by creating a true economically-balanced development system. Under such a “true free market” system, society will quickly recognize that a lot of what now passes for viable development is not really economically feasible at all. However, once land owners and developers adjust to the new, realistic value of their land we’ll be ready to let the TRUE FREE MARKETS go to work to meet the needs of the citizenry.
Anything short of forcing development to pay its own way would be a continuation of the hypocritical “quasi-free market” rhetoric which has been used to plunder so many of our communities. The cynical irony of the present situation is that the same subsidized profiteers (and their co-opted allies) who constantly chant “give us free markets!” will be the one’s screaming the loudest rationalizations when we attempt to eliminate hidden subsidies so that true free market economics can operate.
As an aside, we would also need to do away with those convenient little “negative declarations” which essentially allow government officials to declare that a given development has no impact on our community. This legal and ethical loophole is as massive as it sounds, and has no place in an “equal justice under the law” society. It should be obvious that all development has an impact, and those who directly profit from the development should bear all related costs directly.
Permit land owner-developers to develop what and when they choose, as long as they first pay ALL related costs.
This really means that development would contribute more equitably to each community. Sure, sometimes we’ll have to wait (perhaps years!) until the local economy is really ready for a given development. And some developments, like building a nuclear power plant, might NEVER be financially feasible (i.e., consider the 500-mile radius of safety zone real estate that a corporation might need to purchase and de-populate; The pre-paid costs of actually doing SOMETHING SAFE with the spent fuel rods for the next 10,000 years; the massive nuclear fall-out containment safety dome they might need to construct, etc.). But hey, that’s what it means to let the free (unsubsidized) markets set the pace for development in a Liberty & Responsibility-based world.
That’s right: We need to charge developers fees equal to the entire cost of supporting and mitigating their development before they build it. “Do you really mean, charge the cost of EVERYTHING which common people have come to expect their ‘government’ to pay for (via their own taxes, of course)?” In a word: Yes! Government has a rightful place (e.g., collecting and holding the funds needed for infrastructure), but robbing Peter to pay Paul is not a legitimate role of government… it knocks the system out of balance. Logically, if there was no new development, we would enjoy our homes and hometown just as much we originally did. Taxpayers should only have to pay for maintenance and refurbishing of existing infrastructures, developers must bear the cost of new, improved or expanded infrastructures. This does NOT means that it will necessarily become more expensive for people to live in a given community, in fact the opposite is much more likely (as the previously pillaged “profits” remain within the community). However, once you do live in a given community, it will NOT grow at your expense, eventually becoming more than you can afford (or more filthy than you can stomach).
We must also end convoluted “swaps” and “credits” in lieu of the real costs due. For example, developers love to say, “We’ll donate land to the government (for parks, freeways, etc.), instead of paying our fees in cash”. This is always a swindle, allowing developers to part with unusable land (landslides, swamps, steep slopes) at the same values as “prime dirt”. Even worse, such “free” land often costs taxpayers more to build upon (i.e., a park, school or roadway) than if the taxpayers would have purchased prime land from the developer and built on that! (Really!)
As for density issues, these will solve themselves once ALL costs are considered and paid for up-front at the time of subdivision. For example, building 30 units per acre might be appropriate near a University or downtown. If the development provides little or no parking near the units (effectively encouraging pedestrian-oriented residents who will work and study nearby) then E.I.R. calculations should yield relatively low traffic demands, low air pollution, etc., and therefore much lower mitigation and infrastructure costs than a similar project proposed for a suburb 30 miles from downtown (can you imagine the costs for developers who are required to pay their pro-rata share of 30 miles of freeway expansion and smog mitigation?)
When all the true costs are considered and paid for by the folks making the “profits” from development, we might expect to see mostly low density developments (1 unit per 5 – 20 acres) in areas which have recently tended to become tacky suburbs. This is because pulling water from your own well, storing it in your own tank (which doubles as your fire-fighting system), putting sewage back into your own ground, and getting in and out via an all-weather-based road without street lights or sidewalks (which are unnecessary in this sort of a development) requires far less infrastructure and environmental mitigation. Therefore, it will cost a lot LOT LOT less in terms of development fees!
In fact, clean commercial and industrial developments (which provide local jobs and services) might realize very low development fees if, for example, they incorporated CC&R’s (conditions, covenants and restrictions) which restricted uses to products or services which were previously unavailable locally (therefore reducing traffic from the suburbs to the city centers) and which have few negative by-products (e.g. software development, accounting, telecommunications, food services). [For a related example of how a system of Liberty & Responsibility can furher eliminate hidden forms of “corporate welfare”
see FOOTNOTE 1.]
In essence, if we are to avoid a regional (much less global) “tragedy of the commons” scenario, each profiteer must be forced to pay taxes according to the question: “If each person did as I do, how much would infrastructure and mitigation really cost?”
Once land speculators learn they can no longer expect a windfall profit from every parcel within 90 miles of an employment center (which they will figure out literally overnight), the cost of land for self-sustaining parcels (i.e., perhaps 5 or more acres) will fall, and thereafter remain within the buying power of the average citizenry as we decentralize our new economy. This is also how and when it will be possible for local citizens to permanently retire rural lands (if they are truly willing to put their money were their mouth is). For the sad few who argue that humanity must accept infinite growth (of populations, economies, or otherwise) there is only one response: Pyramid scheme… they are illogical, illegal and ultimately impossible. We must identify our planet’s maximum carrying capacity and construct our societies within the limits of that reality.
Of course, until we can prove this system will work (over the next 10- to 20-years?) and re-write our laws correspondingly, we will still have to live with mandated (but largely farcical) general plans, zoning ordinances, etc. But look at the bright side: Once we show how much more consistent and sane a rational and balanced system is, we will regain the freedom to make our own free-market choices on a level playing field, rather than suffer the ills of development dollar-driven political shenanigans influencing local growth and tax issues.
To avoid short-term perversions in the markets, and to motivate everyone to compromise on codification of the new experimental rules, we must act initially to freeze all new subdivision until a new development process been has written into law and passed the muster of any judicial challenges. Once we witness the results of sustainable developments dictated by true free-markets, our citizenry will certainly vote to scrap “centralized” planning laws all together.
As for the landed gentry (and associated wannabes) wishing to dream big mall dreams, “Hey, sometimes life is tough!” The world is changing and humanity must change. Get used to it.
Require bureaucrats to “Keep the faith”.
Require, by law (under penalty of death, or forced viewing of ad nauseam Gilligan’s Island re-runs, if need be) that collected development fees must be placed into separate, interest-bearing trust funds (line-item by line-item) until they are actually used for the specific capital-investment projects for which they are earmarked (and absolutely forbid borrowing or spending these fees on “G&A” items such as government salaries and benefits). In the best of all worlds, we would re-introduce the “Community Savings and Loan Association” so that folks could put their savings into accounts which would only be loaned to local projects (like in the old days).
Where possible (e.g. roads, and perhaps schools), allow the developer to construct necessary infrastructure items directly, based upon government specifications. Where this is not possible (e.g. expanding sewage treatment plants, mass transit management, etc.) provide community-based oversight committees empowered to approve and commence projects as and when the community deems proper.
These procedures will ensure that infrastructure fees will be collected, saved, and spent according to the demands placed by the new developments and the long term needs of the communities… not frittered, wasted or swindled away.
Let the real “free markets” solve the rest of the equation, within an arena of vigilant community oversight.
Sorry, but just like the rightwingers who must accept responsibility to and for the commons, the way-out-left types will need to get comfortable with the reality of the masses, voting with their hearts, minds, wallets, and bodies — 40-plus hours each week — for Liberty. As long as we are willing to pledge Responsibility in return for Liberty (that is, our freedoms should only be revoked if we do not act responsibly), paternalistic micro-management must end.
For TRUE FREE MARKETS to work, however, we must be committed to maintaining a truly level playing field. Since money is such a corrupting influence, this means we must be vigilant in our oversight of our elected officials and appointed bureaucrats. Bureaucrats and politicians should NOT be given the latitude to grant exceptions, make special deals, impose arbitrary fees, etc. If we are to give true market economics a chance, the playing field must be consistent, levbel and well-known to all participants, and play must be consistently enforced.
We must deal harshly with all forms of corruption because the ugliness of our present system comes not as much from poor theory as from hypocrisy and subversion. If we tolerate these behaviors, nothing will save our humanity.
How Can We Get Started?
The solution sounds straightforward, even if politically improbable. It will obviously be hard to implement changes which require people to unlearn old habits, and which attempt to unseating the corrupted. But if we are to amke the world sustainable we must tackle the challenge. So, how can average citizens start this change?
First we need to begin screaming very loudly. We need to understand the economic and political equations, teach them to our friends and neighbors, and get them to scream loudly, too.
Then we must vote-out of office every local, state and federal politician who does not immediately pledge and deliver 100% support for this compromise of sanity. It will be the few (but wealthy) land owner-developers and their co-opted allies against all the rest of us — so we CAN win easily if we get the message out. We should do it at the next elections, because our communities are being destroyed and indentured more each year!
The experiment should begin now with each new proposed project (by county-wide measures and state-wide propositions, if necessary). We should freeze most or all new developments until developers pay all related costs; begin charging and banking comprehensive development fees immediately; rollback (and/or legally challenge-to-death) all developments and subdivisions which slick politicians try in anyway to “grand-father” past these equitable changes.
Any developing community can become the new model. We can show the world how to enhance communities through development, rather than allowing them to be destroyed by relentless incremental degradation of our commons. We can not (and should not) STOP growth, but we can and should control it. We can make growth rational and reasonable and sustainable.
If we have the will, we can make it happen… But we must act now because our communities are truly at risk.
Thank you for your attention, interest and concern.
FOOTNOTES:
1. A system such as “Liberty & Responsibility” could even locally remedy (revoke!) another massive “free market” subsidy: Hidden corporate welfare. As it works today, profit-exporters (such as Wal-Mart and McDonald’s) come into our towns to sell the same goods as existing local businesses might otherwise sell. Often they (or their developer-landlords, or both) receive tremendous tax subsidies in the name of “stimulating the local economy”, and “increasing sales tax revenues”. Then, they hire people at or near the mandated wage minimum. Ridiculously, the current minimum wage level is NOT high enough to allow a full-time worker, bread-winner for the traditional family of four, to even earn enough to rise above our own governments’ calculated “poverty level”! Many of these workers therefore qualify for and receive benefits from some of the dozens of county, state and federal programs (indigent health care, W.I.C., food stamps, welfare, etc.) which act as our “social safety net”.
What this means is truly shocking: The general taxpayers actually subsidize the profits of national and multi-national corporations. Since small local companies (largely Mom & Pop businesses) MUST pay themselves a living wage (by definition), they are automatically handicapped when trying to compete against these heavily subsidized corporations. Once the “big box” retailers come to town, they rapidly drive the local firms out of business, lower the local wage rates, and then export their profit dollars to some distant land… and often the get 5, 10 or 20 years of local tax breaks on top of that — further increasing the economic burden on the locals who they are displacing.
Instead, if companies were required to pay ALL employees wages and benefits which were at least equal to the real cost of living in each region (pro rated based on a 40-hour “full time” week) we would have truly free markets, and a level playing field for local companies (otherwise, we have Steinbeck’s “Grapes of Wrath” economics). If we recognize these subsidies as a COST of doing such a development (within the comprehensive E.I.R.) then we will easily conclude that (1) we should NEVER give tax breaks to encourage development, and (2) we should insist that all commercial-industrial developments include CC&R’s which mandate that owners and tenants must pay a minimum wage equal to the local cost of living. (The alternative, to have the developer post a bond equal to the potential wage shortfall to later be paid directly to low-wage workers, would be impossible to accurately calculate and administer, so this “pay as you go” system is much more realistic.) In this way, IF the Wal-Marts of the world could actually compete in our communities in an unsubsidized way (which I am not sure they can) by paying living wages and benefits and taxes appropriate to the costs of the communities they invaded, we should welcome them (because, of course, they would be leaving a much larger percentage of their sales revenues within our communities in the form of wages and otherwise paying their own way — as it should be.) If not, then local entrepreneurs will fill the bill.