Balancing the playing field
Recognizing that many of the reforms required by a sustainability agenda cannot be enacted without political and legal changes, SCS 2000 established a Political/Legal Working Group to discuss over-arching policy issues. Below are excerpts from the symposium presentation by the group's chair Kenneth Montlack, along with personal comments that reflect the needs of the older communities. The group's priorities appear at right.
By Kenneth Montlack
I'd like to start with a few underlying observations. First of all, the truly free market only exists in the Economics 101 classroom. We are never going to see that. Development decisions, location preferences and the like are shaped by government's direct and indirect subsidies. That's what government does. Government subsidizes. Decisions regarding roads, water lines, sewer lines, tax schemes, zoning codes, education funding, and other matters all represent incentives or disincentives for development or redevelopment. Virtually every decision or non-decision by any part of the federal, state, regional, county, and municipal governments in regard to revenues, spending, and regulations impacts and directs where development or redevelopment goes or doesn't go who wins and often who loses.
Another underlying observation is that all government units, departments, and divisions are essentially planning agencies, whether they know it or not. And even though it is a radical concept in Ohio, we believe that some agencies ought to think ahead and plan. Deteriorated, functionally obsolescent commercial, industrial, and housing sites can kill economies and kill the social fabric of communities.
We also think that there is no one-size-fits-all solution. The timing, the place, the political culture, and the circumstances dictate the shape of any agenda. There are a number of diverse agenda items here, and there are various constituencies that support one sort of agenda item over another. What is important is that all these constituencies, if they are going to accomplish anything, must work together in cooperation and collaboration. If that doesn't happen, nothing happens.
Maintaining existing communities
Our working group's first major recommendation is that the State of Ohio's priority should be the maintenance and redevelopment of existing communities. This is the absolutely essential bottom line of where the political/legal solutions must go. If Ohio achieves that, we don't have to worry about discussing anything else.
New development at the edges of our metropolitan areas is fueled by artificially cheap land. This is because the full costs of development are not paid by the owners and end users. New development at the edges is also fueled by the tremendous government investment in the interstate highway system and the prior investments in water and sewer facilities. It is also fueled by restrictive zoning and related economic policies, which reserve in the favored quarters places at the table only for affluent businesses and residents.
In Ohio today, new development is truly the priority, and there is a lack of priority for redevelopment. There are relatively few tax dollar incentives available to support redevelopment. Therefore, we have to work to make this a new priority.
State support for redevelopment
To achieve the political will in order to prioritize state investments and policies to promote redevelopment of older communities, we need only look around. For example, some of us here today traveled to this symposium by driving through Cleveland's east side corridors, and we saw some of the wonderful new housing that has now been built with government subsidies on clear, vacant land. We are pretty happy about that.
But let us think about how that cleared, vacant land appeared. It took four decades of destruction, devastation, and displacement of human populations in order to take what had been a developed and functioning community and turn it into land that was sufficiently blighted to qualify for government aid. If you are simply a community, such as some of those in the First Suburbs Consortium that are valiantly facing those challenges, in general, you don't qualify for assistance even though it may be more cost-effective in the long run to prevent decline rather than allowing communities to hit bottom.
It is absolutely essential, we believe, that we enact a line item in the state budget dedicated to the maintenance, restoration and redevelopment of deteriorated or functionally obsolescent housing, commercial and industrial sites in fully built-out communities. That line item must be funded in a total amount comparable to the impact of public dollars spent to promote new developments. This is needed because when you attempt to redevelop and assemble land parcel by parcel, then demolish obsolete structures, then deal with potential brownfield contamination, and then redevelop the work on what we call "grayfields," all that real estate that isn't making it in the market but hasn't reached the point of being brownfields will cost more in general than the alleged free market will support, and therefore some public dollars are needed to close that gap. Most of the great ideas that we have heard at this symposium cannot be implemented without some help from the state and federal governments. The cities that are most impacted do not have the dollars available.
Another approach is increased tax credits for the preservation and redevelopment of housing. At this time in the General Assembly, HB 463 represents the first step in this regard. We already have a federal Historic Housing Tax Credit Act on the books. However, the credits are insufficient. They have not worked in many cases, and they are not user friendly. In fact, if you want to use historic tax credits, generally, you have to hire a consultant who will tell you how to jump through this hoop and how to jump through that hoop. I don't think that you should need a team of accountants and consultants to do some of this redevelopment.
In addition, the state should prioritize the maintenance and redevelopment of existing infrastructure. And we certainly need to restructure the procedures, incentives, and support for brownfield redevelopment.
Most people basically agree on the need to redevelop existing communities, although they approach the work from different perspectives. I would like to thank the Cuyahoga County Commissioners, who put together a $15 million bond issue to give support for older communities in brownfield redevelopment. In many cases, our county is stepping up to the plate where the state has not, although the state's $400 million open space preservation and brownfield remediation issue that will be on the ballot this fall is a hopeful first step (even if it passes, though, we don't know how it will play out, since the legislature will have to set the ground rules for spending the funds, and the devil will be in the details). States certainly should work closely with public and private interests at the local level, and for models as to how this is done we can look not only to what the county commissioners did in terms of brownfields but what our County Treasurer Jim Rokakis has done with the linked-deposit program that provides low-interest loans for housing improvement to residents of older communities in the county.
Balancing the playing field
A second major group of recommendations relates to reducing the wasteful competition for tax base among states and local jurisdictions. Again, as an underlying observation, we are all part of a giant economic food chain that links the global, state, regional, and local economies in a win-at-any-cost competition. At the end of this food chain are the older, built-out communities that are left wearing a "kick me" sign.
To try and change this, you have to look at each part of the food chain. Starting at the national level, we might follow the example of State Senator Charles Horn, who a few years ago promoted a resolution urging Congress to save us from ourselves by limiting give-aways that allow local jurisdictions to use federal funds to lure businesses and jobs from other states.
At the state level, an important step would be to reform Ohio's Enterprise Zone Program so that it applies only to truly distressed areas, as it was originally intended, and emphasizes incentives. The Enterprise Zone Program facilitates tax abatement on a local level and was created under the guise of job creation in distressed urban areas. But it was soon expanded and has since been widely abused by permitting communities that have developable land and usually sit astride the interstate system to use those incentives to lure jobs and businesses from the truly distressed areas in Cleveland and other older, built-out communities. We think that's wrong and is counter-productive. The program should be brought back to where it was originally. Unfortunately, it was just extended for another five years, despite the valiant arguments of State Rep. Ed Jerse from Euclid.
We also must enable metropolitan areas to implement tax base sharing. Tax base sharing involves taking a portion of the tax revenues derived from new development and sharing it among other communities to reduce disparities. One rationale is that new development in one community often places burdens and costs on surrounding communities. For instance, we can think of the recent stormwater discussion between South Euclid and its developing neighbor, Beachwood, about how those burdens and costs tend to be ignored.
Which of these approaches makes it in Ohio is perhaps a question that we can discuss this afternoon. Generally, the state's political culture does not take too kindly to proposals for better planning. We have to speak hard truths here, and we can do so because this is a symposium in a university where we are dedicated to the truth, or at least seeking it out.
Breaking down barriers
Another important challenge is to reduce the concentration of poverty in older communities. One way to do that is to withhold state and federal funds from developing communities whose policies effectively exclude the development of housing for people of modest means. At present, cities in the region try to attract affluent people because the councilpeople, staff, and mayors know that people with higher incomes who live in higher-priced properties pay more taxes. Those taxes are used at the local level. In the wonderful world of devolution, just about everything happens at the local level. Education is at the local level, safety, everything that counts. So you need the tax revenues. When poor people predominate in your community, you are not going to get the tax revenues, and social costs are going to increase.
Therefore you have this competition that goes on from one city to another. Cities at the edge of the metropolitan area in what I would call the favored quarter are able to use their home rule powers to exclude the poor through large-lot restrictive zoning and related regulatory schemes. As a result, we have what may be the greatest architectural miracle of our region, something I call the Great Wall of Northeast Ohio. This great wall, though invisible, is certainly more effective than the Great Wall of China ever was in keeping people in one place and out of another. Our wall concentrates poverty inside the wall where older communities' tax bases face erosion, where their social costs increase, where they need to do all this redevelopment, and where they are, in effect, shouldering the responsibilities of the region in caring for and educating persons of modest means.
The state needs to recognize that older, fully development communities have diminishing tax revenues and increased service burdens, and so the state should enact no new legislation nor administrative policies that interfere with our tax bases or require tax relief to any category of tax payers. In other words, even if the state is not going to take effective action to help in our time of need, at least follow the physician's rule, which is first do no harm. For example, it would be a mistake to prevent cities from collecting income taxes on nonresidents who work in their communities. To do that would effectively crush many fragile local economies.
The state also must ensure greater equality of school funding. I don't have to say more about that, except to ask exactly whose children do we care about and should the obligation to fund basic education be based on community success in attracting affluent residents and excluding persons of modest means?
A final important set of recommendations concerns planning how planning should take place at the appropriate scale and should be integrated at the federal, state, regional, and local levels. This really relates to a smart growth agenda for Ohio. Many organizations, including the First Suburbs Consortium, have expressly endorsed the smart growth approach. I hope you do, too.
One way to grow smarter is to plan for open space preservation at the regional level and increase funding to preserve open space and farmland. As the First Suburbs Consortium pointed out in testimony by Euclid Mayor Paul Oyaski before the Ohio Farmland Preservation Task Force, redevelopment of urban areas and preservation of farmland and green space are simply two sides of the same coin. We are all in one system. If you want to take the development pressure off the edges, you have got to help redevelop the center, and vise versa.
Our cities and counties, of course, must meet their responsibilities to encourage and not impede sound, sensitive redevelopment. To accomplish this, older communities may have to reform and modernize building and zoning codes, as well as work on the best method for assembling land for redevelopment.
On this last point, I want to say that we have been very fortunate in this county. We have some good county officials officials who get it. We are going to use the model programs that are being developed here, and, once again, we are going to approach the governor, the General Assembly, and the administrative agencies and move this agenda, as the general manager of the Indians has said, to the next level.
Ken Montlack is vice mayor of Cleveland Heights and chair of the First Suburbs Consortium.
Proceedings of Sustainable Communities Symposium 2000
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Priorities for political/legal issues
Here are the sustainability priorities proposed by the SCS 2000 Political/Legal Issues Working Group.
The State of Ohio's priority should be the maintenance and redevelopment of existing communities.
The wasteful competition for revenue and tax base among states and local jurisdictions should be reduced.
Planning should take place at the appropriate scale and should be integrated at the federal, state, regional, and local (county, municipal, and township) levels.