South Carolina: How Shall We Grow?

(Note from JN: I found this on the USC website. Ms. Smith's husband is the Dean of the Darla Moore School of Business at USC -- Joel Smith. He also retired as the CEO of all the USA, SE areas, Bank of America. Ms. Smith is still on our County Council 2003.)

(Note: This is a veritable minefield of 'conned senses' / Delphi / language deception. Please read with the awareness that your emotions are being plied, while your intellect is being paralyzed.)

No date given.

By Kit Smith

South Carolina is coming close to winning the "sprawl contest." It's not a race we should even want to enter.

Earlier this year, South Carolina Gov. Jim Hodges convened a well-attended summit on growth issues in The Palmetto State. More than 200 leaders from areas experiencing rapid growth participated in the dialogue. Both Georgia's Governor Roy Barnes and a former undersecretary in the U.S. Department of Commerce warned South Carolina about the dark side of growth.

So what is this debate all about? What exactly do we mean by "growth"? And how does all this affect business in South Carolina?

First, it is important to distinguish between economic growth and growth in our "built environment," i.e., development of farmland, forest, and other open space. Our concern is not about economic growth per se, but about the sprawling pattern of development that is rapidly overtaking many areas of South Carolina. While there is no official definition of "sprawl," it generally means the inefficient development of land that results in a suburban built environment spreading into rural or undeveloped areas.

The type of infrastructure investment and service delivery system required to support this type of growth is extremely costly. According to many economists, if we don't develop strategies to grow more efficiently, we will not be able to sustain our economic momentum. So, while growth in the economy and growth in our built environment are irrevocably linked, they are not the same.

The "Sprawl Contest"

South Carolina is coming very close to winning the "sprawl contest," but it is not a contest we should even want to enter. Consider this: Between 1992 and 1997, the state ranked ninth in the nation in total acres of land converted to development, with more than half a million acres (539,700 acres, to be exact). When adjusted for relative size, we leapt to sixth place. When adjusted for population, we vaulted to fourth.

This means we're on our way to becoming another poster child for sprawl, right up there with Los Angeles, New Jersey, Atlanta, and Charlotte. Most of this growth is occurring along our coast and the I-85 corridor. But it's also happening in the Midlands and in other pockets around the state where the open countryside meets the built-up cities and suburbs.

South Carolina is converting raw land to a built environment at six times the rate of our population growth. And our rate of conversion continues to accelerate. During the 1980s, our rate of conversion was 13 percent. It rose to 14 percent by the early 1990s, and by the late 1990s, to more than 30 percent.

This is not a contest we should want to win. Not only is this pattern of growth extremely costly, but our archaic local government and school finance systems also compound the problem, setting up a formula for economic failure. While there is certainly room for debate about the degree of the problem, a look at the projected costs indicates that we simply cannot afford to continue this current pattern of development. A study by researchers at Rutgers University indicates that South Carolina will have to find an additional $57 billion before 2020 to cover infrastructure costs to sustain our current pattern of growth. Compare that figure to that of our state's general fund budget --$5 billion -- and you will understand the size of the problem.

Costs of Growth

It is a myth that growth pays its own way. We have long assumed that growth enhances our tax base, paying for itself and also adding funds to our governmental coffers to enhance our quality of life by improving our schools, funding our museums and libraries, and enhancing our recreational and leisure activities. But in South Carolina, many local governments -- some of them our fastest-growing -- are struggling mightily just to fund basic services. Look at the cities of Mt. Pleasant and Fountain Inn, or the counties of Lexington, Horry, Richland, and Beaufort.

Those political subdivisions experiencing rapid growth are either raising taxes, finding "creative" revenue enhancements, or holding the line by delaying funding for future needs. According to a study conducted by the Palmetto Conservation Foundation, wherever there is growth in South Carolina, there usually are higher taxes.

The cost of growth is compounded by the fact that local governments rely heavily on the property tax to pay for the services and infrastructure that support development. But here is the rub -- actually three "rubs" -- about using the property tax as a base to pay for growth.

First, the property tax is inelastic, and so does not grow with a service economy. This means that growth in service sector employment does not mean more revenue for local governments unless new buildings are built to accommodate these services.

Second, the property tax base is being eroded as we give away more to economic development incentives. While this may stimulate the economy, it also diminishes local government revenues and the ability to pay for growth.

And finally, real or proposed changes in state policy continue to gnaw at the property tax's ability to support development. The unpopular property tax on cars is elastic because more people buy more and bigger cars in a healthy economy. The car tax, in fact, is probably the only part of the property tax that does see significant growth. So, if car taxes are eventually reduced, as has been discussed recently by the legislature, local government's ability to fund growth will also be reduced. Increasing the homestead exemption, if not fully funded by the state, will also eventually take its toll.

All of this is not to suggest that property taxes should not be reduced, but to say that local governments are already in a bind attempting, with existing revenues, to pay for services (especially education) and infrastructure to support growth. Any reduction of those revenues without alternatives will make government's job even harder. An excellent study commissioned by S.C. Governor Carroll Campbell reached this same conclusion in 1993. But even if we were to accomplish needed tax reform in South Carolina, we still wouldn't have enough money to pay for our inefficient growth patterns without significant increases in taxes and fees.

Additional Hidden Costs

Besides these measurable direct expenditures, sprawl also extracts high environmental costs and damages our quality of life. These are hidden costs, for the most part, that hit us in our public and private wallets.

We rarely think, for example, about how all of the new parking spaces, driveways, and garage floors brought about by growth lead to new problems. But every auto parking space requires 300 square feet of pavement, plus aisles and access lanes. That means 1,500 square feet of parking is needed for every thousand square feet of retail. For every new office building, 300 square feet per driving employee is required. And, about seven new parking spaces are necessary for every new car added to a locality, not to mention roads and driveways. That adds up to a lot of asphalt. And that adds up to a lot of displaced water, which adds to our water pollution problem.

Air quality, too, is threatened by untamed growth. Regions of South Carolina are in danger of being named "ozone nonattainment regions," which would result in a substantial loss of federal transportation funds. South Carolina joined in a court challenge to restrain implementation of the federal Clean Air Act standards because of the costs to business and losses to state and local governments. But this issue will catch up with us sooner or later.

The quality of our land is also suffering, not just from contamination that eventually affects our water quality, but also from a loss of high-quality agricultural land. Much of this has to do with agricultural economics, but we also must be concerned about preserving our valuable agricultural land, something South Carolina has taken too much for granted.

We cannot afford to continue inefficient land use because it is impeding efforts to improve our quality of life. Because we are spending our limited funds on new roads and sewer systems and schools, and are making it more costly to deliver government services like fire and police protection, we don’t have the funds to improve our existing neighborhoods. We're finding it difficult to fund art and cultural activities, neighborhood improvements like sidewalks and parks, and our existing schools.

Our quality of life, of course, is vital to economic prosperity. Many leading economists say quality of life, in fact, is the cornerstone of economic development in today's high-tech economy. That is because this New Age economy depends on knowledge workers -- innovators who work alone or in small teams and want great places to live more than they need development incentives. States and regions that offer great neighborhoods with excellent schools and a high level of amenities will win the heart of the knowledge worker and also economic prosperity in this new millennium.

What to Do?

So what can South Carolina do to find a pattern of growth that is sustainable, that ensures continuing economic prosperity, that protects and enhances our quality of life, and that we can afford?

To begin with, we need to talk about it. We need to acknowledge the issue and begin to grapple with all of its implications. Governor Hodges' Summit on Growth in Greenville, South Carolina, earlier this year was a great start. As an outgrowth of that summit, regional meetings are now being planned. The media has become aware of this issue and are devoting a lot of ink and airtime to it. Local governments are wrestling with this issue, too, but they need help.

So, we're engaged. Now is the time to examine our options and work together to find common ground. Here are two possibilities:

Establish a statewide "Growth Vision" and/or Make way for "New Urbanism"

A Statewide Vision for Growth

A "growth vision" simply assures that individual land use decisions add up to something that makes sense. It's like knowing what the jigsaw puzzle is supposed to be before you start considering the individual pieces.

To establish the statewide "growth vision," we need regional and state leadership. If we agree that our current pattern of growth is not sustainable, then we need to formulate a vision that is. Establish goals. Decide what needs to be preserved, and where it makes good economic sense to develop. Come to grips with the fact that it doesn't make fiscal sense to develop the entire state. We can't afford to pave a road or lay a sewer line to every village and hamlet. We can't afford to build new schools, while others are standing empty. But in reaching this conclusion and shaping this vision, we must struggle for equal opportunity and quality of life.

We cannot leave growth issues to local governments because watersheds and highway systems don't respect political lines. So while our vision for growth must accommodate local plans and respect community needs and differences, it will require regional and state coordination.

The "New Urbanism"

A second strategy for improving growth in South Carolina is to encourage a new development philosophy that is gaining ground throughout America -- the so-called New Urbanism. The New Urbanism has more to do with the pieces of the jigsaw puzzle than how they work together. It affects how individual parcels of land are developed.

In the early 1990s, a group of architects developed a new way of designing neighborhoods that adapts traditional neighborhood development principles to suburban lifestyles and contemporary needs. These forward-thinking designers are attempting to build communities that once again incorporate different uses of land, more "walkability," and open space where people can live and work with a high quality of life. These are neighborhoods with big houses and little houses, where kids can bike to school or walk to the corner grocery store.

These new designs are gaining popularity across America and in parts of South Carolina. The problem is that many of our current zoning ordinances and subdivision regulations prohibit them. Instead, we require big lots and wide streets. We segregate big houses from little houses, and commercial areas from residential areas. In most parts of South Carolina with zoning regulations, Charleston-like neighborhoods with their narrow, crooked streets and corner commercial properties, would be prohibited.

While we certainly do not want to require neotraditional building, we should take a look at enabling and encouraging it. For the most part, it is proving successful for developers while saving our valuable resources and offering new choices to consumers.

Other Strategies

Developing a statewide vision for growth and permitting "new urban" neighborhoods are two of the steps South Carolina should surely begin to examine. But there are myriad other strategies that could be considered.

Consider the following as a sampling:

Encourage "location-efficient mortgages." Fannie Mae is currently considering the proximity of a home to a buyer's place of business in assessing credit worthiness. These mortgages recognize the impact of doing without an automobile, sometimes increasing home buying power by as much as $100,000.

Place government jobs in urban settings when it is efficient to do so. The state of Maryland is now moving its employees from suburban settings to towns and cities with an eye to reducing sprawl. Just think what locating government employees downtown could do for Main Street USA.

Encourage coordination of local land use with transportation planning. Studies indicate that bigger roads bring more traffic, not necessarily better traffic. It's called the "induced traffic phenomenon." If we better regulate land use around new roads, we can improve transportation and mitigate the cost.

Encourage conservation of land for open space. Using existing land trusts and conservation easements, South Carolina could take giant leaps in land preservation.

Market Forces

Despite interest in those and other strategies, some in South Carolina are fearful that "planned growth" will restrict the availability of land in such a way that housing prices will rise. A lack of affordable housing, they argue, will, in turn, impede our economic growth. Most of this argument is based on the proposition that most effective growth strategies restrict developers from going into rural areas to purchase inexpensive land for development. As an alternative, opponents of planned growth offer the "free market," which they imply controls land use today.

Nothing could be further from the truth, if you define "free market" as the absence of government interference or intervention.

The reality is that federal, state, and local regulations and subsidies exert a tremendous influence on current growth patterns. There is no such thing as "free market" in land use, and many argue that without today's government policies, we could not sustain our patterns of sprawl development. For example, economists estimate that every car costs its driver $6,000 a year, on top of which the public pays another $3,000 to

$5, 000 annually. (The average American household allots almost one-fifth of its budget for autos and their related costs!)

Society, however, pays much more. The gas tax covers only 60 percent of our total road costs (probably much less in South Carolina than elsewhere because of our low gasoline tax rate). Paying for police protection for our highways, uncompensated accidents, air pollution, and parking facilities drives the social costs to well over $3,000 per car per year. While drivers pay in private costs, it is clear the taxpayer is also holding a very large bag, with 20 percent of most state budgets going to pay for cars and their associated costs. Without this public subsidy, many people would not be able to afford to drive as far to shop and work.

There is also a hidden subsidy for many suburban services in South Carolina. Here is an oft-repeated scenario: A developer purchases a tract of land in a rural or undeveloped area where there are no schools, no water and sewer services, and no fire or police protection. The land is cheap because there are no services. The land is "improved" with infrastructure, and new residents move in demanding more governmental services. Government then responds by bringing fire and police protection, new parks and schools, and even picks up the cost of maintaining the streets and roads. The tax base grows, but not enough to pay for the services incurred at the margin and then spread across all taxpayers. Thus, "old" taxpayers are subsidizing "new."

While impact fees mitigate this hidden subsidy to some extent, they are one-time payouts for ongoing costs. They treat the symptom but don't cure the disease.

The notion of a "free market" seems to be false in other ways, as well. Is it "free market" when our tax laws actually encourage the abandonment of one big-box retail center or factory while a new one is being constructed? Is it "free market" when our building codes and standards make it much harder for a developer to rehabilitate an existing structure than to build a new one? Is it "free market" when our real estate lending policy, and state and local land-use regulations, require the separation of housing from jobs and shopping to the extent that corner stores and neighborhood schools become illegal? Is it "free market" when we build roads and sewer lines for industry or let them pay less for services than their competitors?

Those who argue for "free market" are often the same voices that yell "takings" whenever the use of land is constrained. But there is a distinct and important difference between taking away an existing right to the use of one's property and denying a new right of use. This is usually the crux of the issue in land use disputes in growth management.

Zoning and "Takings"

In South Carolina today about half of our counties have instituted zoning in an effort to protect property values and promote efficient use of land. Zoning is a major regulatory tool for growth management and will continue to make a major contribution if South Carolina moves toward a statewide growth vision. In general, landowners can use their land as they want to -- illicit activities excepted -- as long as the activities meet minimum standards established by relevant codes and do not create a public nuisance or harm a neighbor's property.

Let's say a developer purchases a farm for $1,000 an acre, the going rate for agricultural land in his area. The developer pays agricultural property taxes and continues to farm the land for a number of years, hoping that he can develop the land in the future. Some years later, he decides to build houses on the land and applies to the local government for a change in zoning designation that would increase the value of his land to $10,000 an acre. He is denied the rezoning by the local Planning Commission and County Council because his plan doesn't conform to the community's growth plan. The determination is made that to change the zoning to residential, and allow houses to be built there, would increase the cost of government and promote inefficient growth patterns.

This is not a "takings," because the local government is not required to guarantee speculation in land values, and nothing has been done to diminish the owner's current use of his property. His right to use the land as it was purchased has not changed.

On the other hand, it is more likely that a change in permitted use without the consent of the owner would constitute a "takings." In a different scenario, the landowner purchases land for $1,000 an acre with the land zoned for single family houses. The owner submits plans to subdivide the land, put in streets, water and sewer, then sell the land for $10,000 an acre. The government then changes its policy and decides that houses should not be built on the land. If this change in policy makes the land less valuable, the owner may have a "takings" claim.

While denying a change in the permitted use of land does not constitute a "takings," sometimes changing land use policy does. The bottom line is that South Carolina must work to achieve community and state land use goals in a way that treats private landowners (and those who derive their livelihood from the land) fairly within the framework of zoning regulations when they are adopted by a local community.

It's About the Future

Yogi Berra is supposed to have said, "Planning is difficult because it's always about the future." Whether Yogi said it or not, it is true. The mores of our society, and certainly of political structure, are built around instant gratification. That doesn't mean that trying to come to grips with growth is an exercise in futility. It does mean that we need to marshal reserves of patience and persistence.

We know that if we don't know where we're going, we could end up anywhere. So at a minimum, we should all decide where we want to go, what we want to look like, and what we want to save how, in other words, South Carolina should grow over the next several decades. After we decide on our destination, we might disagree about the proper route to take to get there, and we can struggle with those differences.

But all of us who live in South Carolina and who love this state share a common destiny. At the least, we should enter into a constructive dialogue to form a common vision, and work together to agree upon a common destination. If we don't, we may end up nowhere -- and on the short end of the economic stick, to boot.


Kit Smith is chairman of Richland County Council in Columbia, S.C. She has held both professional and elected positions, and is an expert in state and local government budgeting and policy development. Ms. Smith led Richland County through a community visioning process in 1999 that resulted in adoption of an award-winning "Town and Country" model for growth. She was also instrumental in developing the Palmetto Trail, a 400-mile footpath across South Carolina.