Shaping Growth: Using Capital Facilities to Implement Comprehensive Plans

This Advisor column was originally published in April 2008.

Most planners understand the importance of capital facilities in carrying out a comprehensive plan. Usually planners think of about the role of capital facilities in a reactive way: how can we ensure that our land use plans will be adequately supported by public facilities? However, the capital facilities can also be an active and powerful tool in helping to implement our comprehensive plans.

Capital facility financing policies are also an important tool in implementing plans since such financing policies will influence when, where, and how much capital facilities will be developed. Conversely, financing policies can hinder plan implementation if they do not adequately support providing facilities where and when they are needed to serve new development.

This discussion will explore the ways that capital facilities can be actively used to implement a comprehensive plan, and the role that capital facility financing policies can play in that process.

Growth Shaping with Capital Facilities and Urban Service Areas

Douglas R. Porter, president of the Growth Management Institute and recognized authority on growth management, has noted:

…the location, the quality, and timing of public facility construction is a major determinant in shaping the direction of the character of community development.” ⁽¹⁾

The investment in public facilities has been described in planning literature as “growth shaping” and key public facilities such as roads, sewers water lines and (more recently) transit systems as “growth shapers.” ⁽²⁾ A common way that capital facilities are used to shape urban development is to designate “urban service areas.”

Here in Washington, as we plan under the terminology of the growth management act (GMA), we have become accustomed to using "urban growth areas" (UGA) as an important planning tool. Before the GMA, some Washington communities applied a similar concept of “urban service areas” (USA). ⁽³⁾ Other parts of the country, such as the Minneapolis area, places in Georgia, and many places in California, still use the urban service area as the basis for planning the transition between urban and rural areas.

As suggested by its name, an urban service area is intended to be an area where key urban services such as streets, sewer and water can be efficiently provided. Jurisdictions would designate urban service areas as a means for efficiently phasing capital improvements into predefined areas. In contrast, the designation of “urban growth areas” denotes an area where urban-level densities and use intensities are permitted to occur. Designating these areas is intended to serve a range of planning objectives, such as protecting critical and resource areas and reducing sprawl, as well as to identify an area appropriate for urban services.

The primary purpose of an urban service area is to identify areas that can be most efficiently served (with limited public funds) by urban services. Prior to the mandate of the GMA to designate urban growth areas, this financial purpose for designating urban service areas appealed to many local policy officials who may not have otherwise been supportive of various land use planning objectives that are often associated with urban growth areas. Nonetheless, because urban service areas control the siting and development of key growth-shaping facilities, designation of these areas tended to be a significant tool in shaping development patterns, and often achieved other planning objectives at the same time.

Planners, however, tend to prefer the urban growth area approach which provides a broader basis for identifying where development should go, especially when considering local critical areas, agricultural resources and desired densities. While the GMA incorporates the broader UGA approach that planners prefer, the capital facilities element of local comprehensive plans still require local governments to consider their capacity to serve their urban growth areas with public facilities and capital facility development plays a crucial part in how these urban growth areas may develop.

The Role of Capital Facility Development in Comprehensive Plan Implementation

There are a variety of ways that comprehensive plans can be implemented. Planning departments administer a wide variety of regulatory systems designed to control and direct new development into appropriate areas and densities as anticipated in our comprehensive plans. These systems include zoning, platting regulations, application of the state environmental policy act, shoreline management act, etc.

In addition, local government can use public facilities to encourage and facilitate the types of development desired in the comprehensive plan and where the community wants new development to locate. The example described below illustrates this power. While this example is drawn from a real life situation, the example is simplified in order to clearly illustrate the power of public facility development and finance.

The adjacent diagram illustrates a hypothetical development scenario. It portrays two proposed developments in Area 1 and Area 2. Neither area is served by any significant public facility. Existing facilities are generally found only in the developed area designated on the figure.

In many cities, the extension of public facilities to support the development of either area would be reactive: responding to each new development proposal on a case-by-case, usually on a first-come-first-serve basis. This approach may lead the local government to try to serve each development with a limited amount of funds at the same time, resulting in the demand for these facilities exceeding available revenues. This situation often results in the local government either lowering levels of service, or increasing rates or taxes to finance the facilities.

However, it is possible to take another approach. The local government can examine its fiscal capacity and decide that, in the immediate future, it cannot afford to serve both areas at the same time and may decide to extend facilities into only one of the two areas (say, Area 1). This policy would either require Area 2 to wait until additional resources could be generated or require the developers finance the facilities themselves. This would greatly facilitate the development of Area 1 and reduce the fiscal stress on the local government from trying to serve both areas at the same time.

Most jurisdictions that may take this proactive approach to capital facility development would base their approach on the costs associated with the building the facilities. In this case, since Area 1 is closer to the existing facilities it would probably be less expensive to serve. However, this decision could also be made for planning reasons. For example the urban growth area may extend to the southeast beyond Area 2, but not beyond Area 1. By extending facilities into Area 1 before Area 2, the local government may be stimulating the demand to enlarge prematurely the urban growth area. In contrast, expending facilities into Area 2 would encourage further development into other parts of the urban growth area instead.

While the foregoing discussion has focused on the role of public facility development in influencing the development of undeveloped areas, public facilities can play a very similar role in redevelopment. A major barrier to redevelopment is the costs of retrofitting public facilities to serve new development and a city’s approach to locating and financing such retrofits will have a powerful role in stimulating or discouraging redevelopment. Indeed, the provision of needed public facilities is often considered a vital part of local governmental redevelopment strategies.

The Role of Finance

In the real world case from which the example above is drawn, both developments were proposed to the city at the same time. The city, consistent with its established policy, initially strove to extend facilities to serve both developments at the same time and was having difficulty devising feasible financial plans to do so. A change in city administration reevaluated the situation and determined that the city would not finance the extension of facilities to either (preferring to use available financial resources to improve service in developed areas). Instead, developers themselves would need to finance the facilities. At this point, economics took over. Since it was less expensive to finance facilities in Area 1, that area became the feasible project and the project for Area 2 lapsed. Since Area 1 provided ample capacity for development, this area met the community’s growth needs for many years. When additional capacity was needed, the facilities serving Area 1 provided the basis for further extensions of facilities to open new areas for development. While the policy basis for this scenario was financial, it also coincided with desired planning outcomes: Area 1 directed future growth toward other developing urban areas, while Area 2 would have directed growth more into rural areas, and toward critical and resource areas. Today, over 25 years later, Area 1 continues to expand and merge with other urban growth areas. Area 2 has not yet developed.

It is possible to incorporate financial measures to coincide or reinforce desired planning outcomes. Different financial measures can dramatically affect the economics of developing different areas. The same city that dealt with the challenge above had also very successfully provided financial incentives for the formation of local improvement districts (LID) that stimulated industrial development where it wanted that development to occur.

Financial policies also play a crucial role in redevelopment. Many cities in our region have successfully pursued financial policies that anticipate future revenue from redevelopment as a basis to finance facilities to stimulate that redevelopment. Policies relating the formation of local improvement districts can play a significant role in encouraging or discouraging how this financial tool might be used in redevelopment. In many cases, it may be appropriate to focus the jurisdiction’s available fiscal resources into stimulating infill in the developed area, requiring developments in undeveloped areas to finance the facilities themselves.

Phasing

Many jurisdictions and planners that have wrestled with how to finance the facilities to serve an urban growth area have noted that such financing challenges would be simplified if it were possible to phase new development into different parts of the UGA over time. While phasing has substantial technical merit since it is far less expensive to serve one area than several areas at a time, it has rarely been successful in the real world. It is politically difficult to convince some landowners that they need to wait while other landowners get to develop first.

However, the same results tend to occur by applying some of the concepts above. Phasing can be more readily justified (as evidenced by the successful application of the urban service area concept) when it is based on the direct public service costs of serving areas. Perhaps an urban growth area can be effectively phased by dividing it into “urban service” sub-areas where public financing would assist in providing facilities; while other sub-areas would either be required to wait or finance facilities themselves.

When developers are required to finance adequate facilities directly themselves, economics will tend to encourage those that are most feasible to occur first. The market will tend to encourage those developments to fill out more before other developments become more feasible.

Conclusion

I have been both a planning director and a finance director. Much to the chagrin of my planning director friends, I have often noted that I have more opportunity to influence the physical development of a city as a finance director than I have as a planner. As a finance director reviewing public works budget proposals, I have the opportunity to influence where those facilities may be built and the ability to influence the city’s financial policies regarding development. In that capacity, I have often reminded my public works friends that they need to pay more attention to the comprehensive plan in developing their budget proposals.

This topic might best be concluded by quoting Eric Damian Kelly, Professor of Urban Planning and Acting Chair of the Department of Urban Planning at Ball State University, one of the nation's foremost land-use attorneys and growth management specialists, and Barbara Becker:

“One of the best ways to make a future land use plan come true is to use investments in public facilities to reinforce the plan. The community should invest in new roads, sewer and water lines and other facilities where it wants growth to occur. It should refuse to make investments in areas where it does not want growth to occur.” ⁽⁴⁾

¹ Douglas R. Porter, Managing Growth in America's Communities, Island Press, Washington DC, 1997, page 120.

² See for example, Eric Damian Kelly and Barbara Becker, Community Planning: An Introduction to the Comprehensive Plan, Island Press, 2000; Myron Orfield, American Metropolitics: The New Suburban Reality, Brookings Institution, 2004, page 120; Timothy Beatley, David J. Brower, and Anna K. Schwab, An Introduction to Coastal Zone Management, Island Press, 2002, page 228; Edward John Kaiser, Hypothetical City Workbook: Exercises, Spreadsheets, and GIS Data to Accompany Land Use Planning, University of Illinois Press, 1998, Page 86; and Urban Systems Research & Engineering, The Growth Shapers: The Land Use Impacts of Infrastructure Investments by Council on Environmental Quality (U.S.). Also see Eric Damian Kelly, Managing Community Growth, Greenwood Publishing, 2004, for other thoughts on the topic.

³ Grays Harbor County, for example, applied the concept of Urban Service Areas to its planning in the 1970s creating urban service areas that were very similar to the types of areas now designated as Urban Growth Areas under the GMA. Urban Service Areas were also used in Oregon prior to adoption of its planning requirements to designate urban growth areas.

⁴ Eric Damian Kelly, and Barbara Becker, Planning: An Introduction to the Comprehensive Plan, Island Press, 2000, page 270.