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‘Smart Growth’ Isn’t Always Smart Growth

Orignially Published in the Herald-Mail

By Thomas A. Firey
Published on Sunday, September 25, 2005
OP-EDS

In early 2001, as the stock market bubble was collapsing and companies
like Pets.com, e-Toys and Webvan were fading into oblivion, a money
management firm launched an ad campaign about “the new New Economy.” In
the new New Economy, the ads said, investors won’t be charmed by
20-somethings on scooters who put made-up words in front of “.com.”
Investors won’t smile favorably on proposals that lack well-developed
business plans. In the new New Economy, investors will make decisions
based on serious analysis of market conditions and the likelihood of
success.

Those ads came to mind a few weeks ago, following the Washington County
Commissioners’ decision to pass “Smart Growth” rural rezoning. The
rezoning tightens 10-fold the housing density limits for more than three
quarters of the county, though it does not address the areas where
planning officials say 80 percent of development is occurring. The
commissioners’ decision follows three years of claims that the rezoning
will hold down local taxes, prevent overcrowding in county schools,
relieve congested roads, protect the local farm economy and preserve the
area’s rural heritage.

Though the commissioners’ vote came only recently, the rezoning has, in
essence, been in effect since 2002 when the county adopted a rural-area
building moratorium. So far, there’s little sign of Smart Growth’s
promised benefits-no tax cuts, no increased capacity in county schools
and on county roads, no sudden boom in area agriculture.

That shouldn’t be surprising. Tax increases, after all, are the result
of political decisions about how to use taxpayers’ money regardless of
whether the number of taxpayers is growing, shrinking or stable.
Congested schools and roads are the products of poor planning by local
decision-makers. The erosion of the area’s farm economy and rural
heritage are the consequences of Washington County’s three decade-long
decline in net real returns per acre of farmland. It is unclear how
altering housing density limits will rectify a generation of poor local
decision-making, let alone change global agricultural markets.

Perhaps, like the New Economy bubble, Smart Growth proponents are caught
up in “irrational exuberance.” If so, the exuberance will wear off at
some point and Washington County will have to make serious decisions to
contend with development. Call this a shift from Smart Growth to “smart
Smart Growth.”

When that day comes, here are two points to consider:
 
(1) Good “planning” is as much about economics as about engineering and
surveying.   As has often been noted, population growth means that local
government must increase its spending in order to maintain the same
level of services per resident. Less noted but equally important,
population growth also means increased government revenue as a result of
more jobs, workers and valuable properties. From 2002 to 2004,
Washington County’s population grew an estimated 3.6 percent-and county
tax revenue grew 14.0 percent.

 The higher revenues and demand for services require sound fiscal
planning to ensure public monies are directed properly and used
efficiently and effectively. Local government must determine the
”marginal cost” of the public services it supplies-that is, the cost of
providing those services to one additional household. Taxes and fees
should then be assessed to recover that cost. If necessary, new
construction should be assessed an appropriate impact fee that covers
the newcomer’s cost for new infrastructure. Property and income taxes
should cover the costs of true public goods-services, like police
protection and public parks, that can’t be financed with user fees. User
fees should cover the costs of government-provided non-public goods like
sewer, water and waste disposal. Such a system would be both fair and
financially sound-county residents would get what they pay for, and also
pay for what they get.

(2) Establish a depreciation budget and fund.   Despite the claims that
growth is to blame for the county’s need to increase spending on schools
and roads, a good portion of that spending will go toward replacing or
refurbishing existing infrastructure. (Remember, Washington County
Public Schools had higher enrollments in the 1960s and 1970s than it
does today.) This suggests that, for at least a generation, local
political leadership may have shirked on its duty to maintain the
county’s capital stock.

Responsible managers-both public and private-avoid shirking by
establishing depreciation budgets that require them to regularly save
and spend money on renovation and replacement. Washington County should
adopt that practice and establish a depreciation fund and annual
depreciation budgets. In doing this, the county would be better
protected from the sudden need to replace or refurbish capital, and
political leaders would have to consider long-term costs when
considering adding to the county’s capital stock.

Population growth does not so much create problems for local government
as it exposes already-present problems that have been ignored or hidden.
Washington County, not unlike most growing jurisdictions, now finds
itself faced with those problems. Hopefully, the county will use smart
policies do deal with that growth.

Thomas A. Firey, a Washington County native, is a policy scholar at the
Cato Institute and senior fellow at the Maryland Public Policy
Institute.