Local governments (and states) have identified sprawl and its management as a critical issue for communities, and many localities have begun to develop new approaches to counter sprawl and promote smart growth. Likewise, the federal government has launched several educational, funding, and regulatory efforts designed to encourage better local growth and development practices. Together, local communities and the federal government are seeking to establish new tools for sustainable local growth. This article examines existing and potential federal incentives for smart growth and suggests how local governments can put them to use.
The typical pattern of American urban development is sprawl. Sprawl is low-density, segregated use, automobile-dependent development on the fringe of urban areas. It is characterized by ever-expanding suburbs surrounding an aging and sometimes deteriorating inner core. Since World War II, the pace at which development has consumed agricultural lands, forests, and other open spaces in the regions surrounding metropolitan areas has far outstripped the growth of metropolitan populations. For example, in the Chicago metropolitan region, residential land use increased by 46 percent and commercial land use increased by 74 percent between 1985 and 1995, while population increased by only 4 percent. At the same time, the City of Chicago has more than 2,000 vacant manufacturing sites. These figures indicate that substantial, low-density development was growing outside of Chicago's core for reasons other than population pressure. This trend of diffuse development has affected nearly every local community and has raised new questions about the acceptability of the costs of growth patterns in recent decades.
The costs of sprawl are economic, environmental, and social. In their book Land Use in America (Island Press, 1996), authors Patrick Noonan of the Conservation Fund and environmental attorney Henry Diamond argue for new approaches to dealing with sprawl because land use is the key to environmental quality and to much of quality of life generally. Sprawl can threaten cities and the regions surrounding them by inducing disinvestment in existing communities; raising costs for new infrastructure; creating urban brownfields; increasing traffic and congestion; degrading air and water quality; consuming prime agricultural lands and habitat; destroying viewsheds; and undermining community and family life. Sources like the 1996 report, cosponsored by Bank of America, Beyond Sprawl, have cited costs to businesses from sprawl including decreased employee productivity; flight of suppliers and customers; reduced access to labor; decreased urban tax base and services; liability for idled contaminated properties; and the breakdown of the sense of community upon which successful businesses depend. The social and community costs of sprawl include loss of jobs and access to jobs; economic segregation and loss of social stability; shifts in political power and social services; and increased commuting time (and a corresponding decrease in family time) for workers.
Although sprawl development is caused by myriad social, economic and regulatory factors, federal policy has undoubtedly played a significant role in determining local land use and fostering sprawl. Federal environmental statutes, for example, influence local land use, from the assessment requirements of the National Environmental Policy Act of 1969, 42 U.S.C. §§4321 et seq. (NEPA); to the planning requirements of transportation law and the Coastal Zone Management Act of 1972, 16 §§1451 et seq.; from the nonpoint water pollution controls of the Clean Water Act, 33 U.S.C. §§1251-1387; and the development restrictions associated with the Clean Air Act, 42 U.S.C. §§7401 et seq. (CAA); to the effects of Superfund (Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§9601-9675), on the use of property.
Moreover, federal funding has been a major sprawl-inducing factor, including the subsidization of automobile use through the funding of road building, parking, and the cost of importing oil. See U.S. Congress, Office of Technology Assessment (OTA), Technological Reshaping of Metropolitan America at nn. 87-92 and accompanying text. OTA also notes that federal subsidies for home ownership have spurred exurban development through federal mortgage lending policies, the tax deduction for mortgage loan interest, capital gains tax deferment, and property tax subsidy payments. Id., nn. 32-43 and accompanying text. Likewise, federal funding of waste treatment systems, and related regulations that have led to excess capacity, contributed to sprawl in the 1960s, 1970s and early 1980s. Id., nn. 70-72 and accompanying text.
Federal environmental regulations also have discouraged productive reuse of urban land, providing a further impetus for sprawl. The specter of liability under Superfund has the unintended effects of discouraging present owners from investigating soil conditions or transferring properties, chilling developers from acquiring potentially contaminated properties, deterring municipalities from acquiring abandoned properties, and stifling lending on these abandoned sites. The risks and costs associated with the redevelopment of potentially contaminated properties at an estimated 450,000 "brownfields" sites — primarily located in urban areas — drive development away from cities and into the "greenfields" of nonurban areas outside the core metropolis, thereby contributing to sprawl.
Local governments have criticized CAA pollutant nonattainment policy for contributing to urban disinvestment and regional sprawl. Under the CAA, the U.S. Environmental Protection Agency (EPA) establishes uniform, National Ambient Air Quality Standards for six air pollutants, including lead, carbon monoxide, ozone, particulate matter, sulfur dioxide and nitrogen dioxide. If a local area improperly exceeds a standard for concentration of any regulated pollutant, EPA may designate the locality as a "nonattainment" area. Nonattainment status triggers stringent restrictions for a locality that may discourage economic development or even help induce the exodus of industrial facilities and other sources of air emissions from urban nonattainment areas.
These and other federal regulatory drivers of sprawl development call for an assessment of how national policies can be tailored to provide regulatory incentives and enhanced funding for "smart growth" in local communities. Smart growth is development intended to serve economy, environment and community. Smart growth is characterized by inclusive decision-making, locational decisions and site designs for development that minimize environmental and fiscal impacts, long-term strategic local and regional land use planning, and the use of regulatory and market incentives to promote more livable communities and minimize the impacts of sprawl. Smart growth tools include brownfields revitalization, mixed-use development models, eco-industrial parks, policies that make development pay for itself and its externalities, and development that is integrated with comprehensive transportation and environmental planning. Indeed, the toughest remaining environmental problems facing America are those involving land use — nonpoint water pollution, mobile source air emissions, brownfields, and the protection of open space, habitat, forest lands and endangered species — making smart growth policies and practices vitally important.
The federal government can foster and reward smart growth at the local level with educational, funding and regulatory initiatives that may, over time, help shift the prevailing pattern of sprawl development in America. Although newly emerging federal incentives for smart growth are not nearly sufficient to overcome the sprawl-inducing impact of current federal funding and regulatory policies, these federal tools represent worthy first steps in the long-term endeavor to promote sustainable local growth.
The federal government is seeking to foster smart growth by convening a national discussion on the issue of sprawl, coupled with educational, technical assistance and funding initiatives to promote innovative local programs. Curbing metropolitan sprawl has emerged as a top priority for the President's Council on Sustainable Development (PCSD), a council of high-level federal, business and environmental leaders tapped by President Clinton in 1993 to develop a strategy to promote economic vitality without compromising the environment and quality of life. In its 1996 report Sustainable America, PCSD recommended a policy to "manage the geographical growth of existing communities and siting of new ones to decrease sprawl, conserve open space, respect nature's carrying capacity and provide protection from natural hazards." Sustainable America, ch. 4, Policy Recommendation 5. PCSD promotes cooperation among communities to address regional issues like land use and sprawl, for example, by recommending that federal and state governments provide incentives for regional collaboration to address issues that transcend political jurisdictions. PCSD supported the creation of the Joint Center for Sustainable Communities, a collaborative effort of the National Association of Counties and the U.S. Conference of Mayors focused on encouraging cooperation among cities and counties on regional issues, including sprawl.
EPA is tackling the issue of metropolitan sprawl through its Urban and Economic Development Division (UEDD). UEDD sponsors the "Smart Growth Network," a nationwide network of developers, lenders, building materials manufacturers, local governments and smart growth advocates seeking to promote responsible land use, growth, and development.
EPA's Sustainable Development Challenge Grant program provides seed funding to promote long-term local investment in sustainable development. The grants fund projects like regional governance processes for better management of urban development, and metropolitan transportation programs that reduce vehicle miles traveled. EPA plans to award $5 million in sustainable challenge grant funds in 1998. In brownfields revitalization, EPA has awarded more than 120 grants of $200,000 each to support two-year brownfield assessment pilot projects by local governments. The pilots will serve as laboratories to test different cleanup and redevelopment tools, promote new methods to remove regulatory barriers, and build innovative partnerships for coordinated environmental cleanup efforts. EPA plans to award an additional one hundred pilot grants in 1998.
Federal funding initiatives can provide valuable support to communities seeking to implement smart growth practices. However, monies spent on these programs represent a drop in the bucket compared to the vast federal funding that supports activities contributing to sprawl. A fast step in rectifying the negative impacts of federal funding could be the establishment of a "smart growth funding scorecard" to identify the influence of federal monies on local growth patterns.
The federal government can also promote smart urban growth through regulatory tools. The Brownfields Action Agenda, led by EPA and involving fifteen other federal agencies, promotes urban revitalization through the cleanup and redevelopment of brownfields properties. The Clinton administration has expressly tied its brownfields efforts to the overall goal of smart growth, recognizing that metropolitan regions cannot successfully combat sprawl without building strong, vibrant cities.
Under the Brownfields Action Agenda, EPA has developed a package of administrative reforms to the Superfund liability scheme to promote reuse of urban land. The reforms include the removal of more than 25,000 brownfield sites from the Superfund Tracking System or "CERCLIS" list; and guidance on the negotiation of prospective purchaser agreements for contaminated sites, protection from liability for municipal involuntary acquisition of sites, future land use at brownfields sites, liability protection for owners of property above contaminated aquifers, and the expanded use of EPA "comfort letters" for brownfields sites. Congress, in 1997, also established a brownfields remediation tax credit for activities to clean up contaminated urban sites. In many ways, the Brownfields Action Agenda has focused national attention on the problems of urban redevelopment and metropolitan sprawl and has motivated communities to explore and implement better development practices.
CAA regulatory incentives could also promote smart growth. As the CAA is now implemented, areas designated nonattainment for any regulated criteria pollutants may be subject to strict limitations on new or expanded stationary sources like industrial or power generation facilities. Under these restrictions, new or modified sources could be prohibited unless those sources obtain "new source offsets" from other existing sources in the nonattainment area. Because urban areas have the greatest air quality problems, and nonattainment areas tend to be urban areas, CAA restrictions on stationary sources may drive economic development away from urban areas and accordingly contribute to sprawl.
This negative consequence calls for policies that provide flexibility in CAA nonattainment areas to encourage local economic development while ensuring continued air quality improvements. EPA is now considering a flexible implementation policy for the national ozone standard adopted in 1997 that would address some of these concerns. EPA plans to allow local areas that are not able to attain the stringent new ozone standard to be designated as "transitional nonattainment." Transitional status would be available only if a state agrees to impose strict controls on large utility and industrial boilers to reduce emissions of oxides of nitrogen (a component of ozone) by up to 85 percent. Under transitional classification, new or modified stationary sources in a local area will be able to obtain required new source emission offsets more easily, through pools of offset credits to be established at the state level. EPA also proposes that new stationary sources in transitional areas will not be subject to the most stringent level of control technology. By focusing the brunt of its ozone control strategy on large utility and industrial boilers on a regional basis, and providing regulatory flexibility in urban areas, EPA can promote smart growth by removing the incentive for these sources to shop for "greener fields."
EPA should go further with CAA incentives to reduce barriers to local smart growth activities by providing CAA credit to states for urban activities that reduce sprawl, vehicle use, and air pollutant emissions. Indeed, federal officials have advocated for EPA to adopt such a policy. Eligible urban programs could include zoning that encourages new transit-oriented development, greater density around existing transit facilities and pedestrian-friendly neighborhoods, tax incentives for urban infill development, and elimination of zoning requirements for minimum parking. Such a CAA policy would reward the City of Portland, Oregon's "urban growth boundary," which restricts development outside the Portland urban growth boundary and other developed municipal areas, and which has helped Portland to attain the national standard for ozone by reducing mobile source pollution.
Another potential tool for smart growth practices is the Clean Air Investment Fund. This summer EPA is expected to propose a program that would allow regulated sources whose costs for reducing NOx (nitrogen oxide) emissions under EPA's regional ozone strategy exceed $10,000 per ton to avoid compliance. Instead, these sources would pay the $10,000 into funds that would be used to finance alternative compliance methods. EPA and states should consider the Clean Air Investment Funds a source for innovation and experimentation at the local level where they could be directed into smart growth activities that achieve actual emissions reductions, such as telecommuting and alternative transportation measures.
EPA is also considering how Clean Water Act regulations can foster better local growth patterns. In January 1998, EPA issued a proposed "Phase II storm water rule" that would seek to control nonpoint source pollution by requiring National Pollutant Discharge Elimination System permits for smaller municipalities, construction sites and other sources. 63 Fed. Reg. 1536 (Jan. 9, 1998). The proposed Phase II rule would promote smart growth by allowing permitting authorities to release municipalities or construction sites from certain stormwater controls if the locality has adopted programs to limit water quality impacts from uncontrolled growth in a watershed. Id. at 1565, 1585. EPA proposes that municipalities or construction activities receive regulatory relief in core urban areas where special controls or incentives exist (such as transferable development rights or urban growth boundaries) to direct development toward compact/mixed use development and away from wetlands, open space, or other protected lands. The proposed stormwater rule would also promote smart growth by encouraging regional and watershed-wide collaboration by local governments in the control of nonpoint source pollution.
Transportation policy may provide another way to encourage smart growth. Federal transportation policy affects where we go and how we get there. Traditional federal transportation funding and policy fostered sprawl and exacerbated congestion in urban areas. With a single goal of increasing vehicle capacity, federal transportation spending paved the way (literally) for the post-war suburbanization of America. Rarely were alternative objectives or alternative modes of transportation seriously considered. As a political matter, roads projects remain a sacred cow in Congress, as demonstrated by the more than $200 billion roads bill passed in Congress this summer.
The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), Pub. L. 102-240, represented a significant break with past practice and a shift toward the integration of smart growth concerns into federal transportation policy. Its stated goal, "to develop a National Intermodal Transportation System that is economically efficient, environmentally sound, provides the foundation for the Nation to compete in the global economy, and will move people and goods in an energy efficient way," introduced new factors to the transportation planning equation with the potential to promote smart growth. 49 U.S.C. §5501(a) (1997). The transportation law was reauthorized in 1998 as the Transportation Equity Act for the 21st Century (TEA-21). Although the new law lacks a coherent national transportation policy other than vastly increased spending for more roads, the law builds upon the ISTEA approach and provides increased funding for environmentally preferable, smart growth transit projects.
TEA-21 contains significant innovations in the process of setting transportation policy. While giving increased authority to regional bodies and states to determine how federal transportation dollars are spent, TEA-21 also introduces a greater range of factors to the decision-making process. Mobility, environmental impact, social equity, civil rights, and impact on central cities must be integrated into the transportation choices of metropolitan planning organizations and state transportation agencies. TEA-21 also provides opportunities for meaningful public participation where few existed before. As a result, those interested in pursuing local smart growth strategies have a greater voice in setting policy. Flexibility is one of the hallmarks of TEA-21, permitting the shifting of highway funds to other uses targeted at reducing congestion. Thus, for the first time, money which otherwise would have gone to finance road construction has been allocated in many states for public and alternative transit. TEA-21 also designates a small fixed percentage of funding for spending on enhancements, which can include water pollution mitigation, bicycle facilities, historic preservation or other community-enhancing projects.
TEA-21 also seeks environmentally preferable alternatives to transportation projects through the Congestion Mitigation and Air Quality (CMAQ) program implemented by the Department of Transportation, which integrates concerns about air pollution into the transportation planning process. CMAQ allots $1.4 billion annually to alternative transit projects designed to achieve CAA standards. CMAQ funds may not be used to fund road projects that enhance transportation capacity for single-occupancy vehicles, but instead must support transportation improvements and alternative transit projects designed to reduce congestion and vehicular air emissions.
The federal government can do more than direct federal funds toward transit projects instead of new highway construction, however. Other proposed policies focus on changing the incentives to drive. For example, the multistakeholder group, Enterprise for the Environment, suggested the use of vehicle emissions fees in its 1998 report The Environmental Protection System in Transition: Toward a More Desirable Future. Emissions fees, calculated on a vehicle's estimated emissions level and actual mileage, could be assessed to each vehicle to promote less driving and thereby reduce mobile source emissions. Federal tax policy is another source of possible incentives to limit vehicle emissions. Until recently, the federal tax code permitted businesses to give their employees free parking as a tax-free fringe benefit, up to a value of $165 per month. However, the tax system did not permit employers to provide a tax-free equivalent cashout to employees who use alternative (i.e., other than single-occupancy vehicle) modes of commuting. To eliminate this discrepancy, the federal tax code was amended through TEA-21 to permit employers to voluntarily offer tax-free cash payments to employees who choose mass transit, telecommuting or carpooling in lieu of parking benefits.
Economic development incentives targeted at inner cities are another federal tool to encourage a more sustainable pattern of development. An increasing number of federal programs aim to provide tax incentives, government contract set-asides, and other benefits to businesses that locate in designated communities. For example, the Empowerment Zones and Enterprise Communities (EZ/EC) program administered by the Department of Housing and Urban Development, provides substantial federal funding and tax incentives to communities that demonstrate need and a viable plan for fostering economic development. EZ/EC programs provide a range of benefits to communities, including tax breaks for wages and capital investments to companies locating in designated areas and drawing a minimum percentage of their work force from the designated area. Moreover, EZ/EC funds have been used by cities like Baltimore and Detroit to support brownfields revitalization or innovative, mixed-use urban development projects. Likewise, the federal "HUBZones" program, administered by the Small Business Administration, supports business in core urban areas by giving government contract set-asides and other federal procurement incentives to small businesses located in designated "historically underutilized business zones." See Pub. L. 105-135, Title VI (Dec. 2, 1997).
The federal government recently launched as a pilot program another economic incentive for smart growth: "location-efficient mortgages" (LEMs) by national lending institutions. In early 1998, EPA and Fannie Mae, the federal mortgage lending company, announced a project to develop mortgages that reward home buyers for the beneficial environmental impact of buying houses in downtown areas instead of in suburban areas. When deciding on how large a mortgage a home buyer can afford, Fannie Mae's LEM project will take into account the cost savings a family achieves by living in an area with easy access to public transit or services within walking distance. The LEM savings achieved by downtown families from reduced transportation costs could encourage urban infill development, reduce vehicle miles traveled, and improve air quality. Environmentalists supportive of the LEM project have promoted the idea as a first of several lending programs that could be shaped by the concept of location-efficiency. In the future, insurance, investing, or even underwriting of municipal bonds could account and give direct benefit for savings achieved through smart growth.
Perhaps the federal government should look to NEPA as a source for new tools and incentives for the growing problem of sprawl. NEPA provides a potentially powerful tool for assessing the environmental impacts of, and potential alternatives to, major federal actions that contribute to sprawl. These federal actions include relocation of federal facilities from urban areas to exurban locations, and federal leasing, infrastructure funding, and construction activity.
NEPA and Council on Environmental Quality (CEQ) guidelines allow the assessment of the impacts of federal actions on sprawl. See CEQ NEPA Guidelines, 36 Fed. Reg. 7724, 7725 (1971); 40 C.F.R. §1500.6(b) and Appendix II; see, e.g., City of Rochester v. U.S. Postal Service, 541 F.2d 967 (2d Cir. 1976) (Postal Service environmental impact statement for construction of new postal facility was inadequate because it failed to consider possible environmental impacts of the abandonment of existing facility on city, including increased commuter traffic and physical deterioration of downtown community); Trinity Episcopal School Corp. v. Romney, 523 F.2d 88, 93 (2d Cir. 1975) (federal agency must consider impact of its actions on urban decay and blight and the city development planning); City of Davis v. Coleman, 521 F.2d 661,675 (9th Cir. 1975) (Department of Transportation failed to consider sprawl-inducing effects of highway interchange project); Conserv. Law Foun. of New England v. General Services Admin., 707 F.2d 626 (1st Cir. 1983) (GSA must consider potential development impacts from public sale of federal lands). However, serious federal consideration of sprawl, and the potential for smart growth alternatives, is not likely under NEPA unless CEQ strongly signals the need for such consideration.
Likewise, the federal government could reinvigorate its space management guidelines. Under Executive Order 12,072, Federal Space Management, 43 Fed. Reg. 36,869 (1979), President Carter directed the GSA to require the location of federal facilities "to strengthen the nation's cities and to make them attractive places to live and work." Carter's order and GSA regulations implementing it at 41 C.F.R. §101-17 (1998) require that:
Federal agencies shall conserve existing urban resources and encourage the development and redevelopment of cities.... Serious consideration shall be given to the impact that a location or relocation will have on improving the social, economic, environmental, and cultural conditions of the communities in an urban area.
41 C.F.R. §101-17.002. This policy establishes a preference for placement of facilities in cities and the central business areas of urban and rural communities, requires compatibility with conservation objectives, and promotes location of federal facilities in distressed urban areas. Id. The policy could be reinvigorated if all federal agencies would enter into agreements with GSA to implement the regulations, and to carefully consider the intent of the law in the context of urban sprawl whenever federal facility decisions are made.
The federal regulatory and economic incentives described and suggested above are critical first steps toward a proactive federal role in supporting sustainable local development. The costs of sprawl call for a national smart growth agenda to devote increasing attention, funding and innovative regulatory incentives in partnership with local communities "to strengthen the nation's cities and to make them attractive places to live and work." Exec. Order No. 12,072. The authors encourage the federal government, local communities and citizens to join in this national smart growth endeavor.