The silver lining

Could a recession help transform the way Sacramento grows?

Photo Illustration by David Jayne

Remember when we used to worry about sprawl? Runaway growth was once a top concern for Sacramento residents, along with its troublesome byproducts: traffic congestion, bad air and the loss of quality farmland.

We don’t hear so much complaining about sprawl nowadays, with the collapse of the housing bubble and the ensuing global financial crisis. After all, no economic growth means no development and no sprawl. Right?

The problem is that we’re sort of hooked on sprawl. Local governments are dependent on the growth in property taxes and sales taxes that come from booming development. So, when the housing downturn happened, the budgets of local governments got hit hard. But, though there’s plenty of pain, there may be lessons, too.

“The real problem with the housing market is with those houses that are out there in the sprawl,” said Judy Corbett, executive director of the Sacramento-based Local Government Commission, a network of local government officials, architects and planners whose goal is to create “healthy, walkable and resource-efficient communities.”

While falling home prices have affected almost everyone—the pain is greatest in the far-flung housing tracts of the suburban frontier. In fact, some researchers say sprawl is at least partly to blame for the current financial crisis. More on that in a bit.

In the 1970s, Corbett helped develop Village Homes in nearby Davis. The 60-acre community was ahead of its time, featuring energy-efficient design, encouraging biking and walking and de-emphasizing the role of the automobile, even including community gardens in the greenbelts between houses.Since those days, ideas about what makes good neighborhoods have changed a lot. In the last couple of decades, ideas of “smart growth” and the “new urbanism” have slowly gained currency.

Now, Corbett and others believe that the current financial crisis is a wake-up call, and an opportunity to finally transform the way cities grow.

“It’s a chance to rethink. It gives communities a bit of time to think about what they want, instead of just constantly reacting to the boom,” said Corbett. “I don’t think the economy is going to go back to the way it was in the past. If we want to create more sustainable communities, we don’t want to build any more sprawl development.”

Built to last or to collapse?
If you want to find where the trouble started, go to the ’burbs. That’s where the bad mortgages ran wild, and that’s where the foreclosures are clustered today.

Homes in the 95816 ZIP code of Sacramento, on average, lost 13 percent of their value last year, according to RealtyTrac ( That sounds awful, right? But in fact, the area, which encompasses the old neighborhoods of Midtown and East Sacramento, is in pretty good shape. Compare that drop to the suburban enclave of Sacramento’s North Natomas community. There, the ZIP codes of 95834 and 95835 dropped 27 and 25 percent, respectively.

Every neighborhood is different. Some suburban communities have done better than others, but the overall trend is clear in Sacramento, said Brian McMartin, owner of McMartin Realty.

Local Government Commission executive director Judy Corbett says the financial crisis is a great opportunity for Sacramento to rethink its development, transportation and energy plans.

Photo By dominick porras

“In general, the older established neighborhoods have fared much better.” And the closer to downtown, the better its values hold up.“Starting about five years ago, you really started seeing people wanting to live downtown. A lot of people prefer the urban life.”

By contrast, houses in some parts of Natomas are selling at half of what they were going for a couple of years ago.

It makes sense, said Corbett. The older neighborhoods were built to last. The homes in the sought-after Land Park aren’t any bigger or more luxurious than those in North Natomas. But there’s a different quality of place.

“I was raised in a 1,600-square-foot house in Land Park,” said Corbett. “We could walk everywhere. We walked to the park, we walked to Vic’s [Ice Cream]. You really didn’t need a car.” Contrast that to a brand-new, 2,000-plus-square-foot McMansion miles from any amenities. “It just makes a less desirable neighborhood,” she said. “And it can be more expensive to live there because of the transportation costs.”

It’s a pattern that has repeated itself across the country. Oregon-based researcher Joe Cortright compared Pittsburgh; Chicago; Portland, Ore.; Tampa, Fla.; and Los Angeles in his report “Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs.” In every case, home values stayed more robust in the older established neighborhoods closer to the urban core. “Distant suburbs have seen the biggest declines, while values in close-in neighborhoods have held up better and in some cases continued to increase,” the researcher explained.

Then Cortright goes one step further, blaming the collapse of the housing market on the family gas guzzler. “The reason for this shift is rooted in the dramatic increase in gas prices over the past five years,” said Cortright. “Housing in cities and neighborhoods that require lengthy commutes and provide few transportation alternatives to the private vehicle are falling in value more precipitously than in more central, compact and accessible places.”

It’s ironic. After all, the automobile made these commuter suburbs possible; author and urban planner Peter Katz called them the “drive till you qualify” subdivisions, “located a half a gas tank away from most everywhere.” But what the SUV giveth, the SUV taketh away.

“When values went up, all boats were lifted. But when they dropped, it was very uneven,” said Katz.

In the future, Katz said, financial institutions and government regulators need to start discriminating between sprawl and smart growth, and to encourage the latter.

“Maybe it’s time, even as the billions of bailout dollars flow, for official Washington to get tough,” Katz suggested, in an essay originally posted on the Web site “Why could Washington not advocate—maybe even require as a price for the potential subsidies and loan insurance it may offer—compliance with planning rules aimed at promoting more economically robust, resource-efficient communities?”

Katz pointed to the federal government’s $700 billion bank bailout as the culmination of bad loans and bad land-use policies. “Now we’re going to own all of this secondhand sprawl.”

He told SN&R he would welcome the revival of the Location Efficient Mortgage, a financial tool championed by Al Gore in the late 1990s. Under the guidelines for these LEMs, banks assume that it will be easier for you to pay your mortgage if you live in a neighborhood near public transit and shops. Think about it. How much better off is the average family of four if they can get rid of that second car?

Writer and urban planner Peter Katz thinks sprawl has exacerbated the housing collapse. In the future, he says, we need to “build better places, places that keep their value.”

Courtesy Of Peter Katz

Accordingly, LEMs offer homebuyers better terms for buying in a close-to-town neighborhood instead of out on the suburban edge. And Katz said the financial institutions that underwrite new construction ought to have new guidelines, too. “It’s all about risk,” he said. “Is the place going to keep its value over time?” Had these kinds of guidelines caught on a decade ago, the market downturn might have looked different. “It would have been milder, for sure.”

Now is the time to chuck out old ways of doing business, he said.

“It’s a good time for cleaning house,” said Katz. “We need to build better places, places that keep their value longer and can balance their books.”

The boom’s not coming back
Back in the spring, before the global financial system really started to unravel, Sacramento Mayor Heather Fargo tried to explain what was happening to the local economy. Part of the problem, she said, is that Sacramento is too dependent on development.

“I do think there’s a certain amount of your job base that could be in construction, whether it’s reconstruction or new construction,” Fargo told SN&R. “But when you’re building a new community and you’re adding 50,000 people in a five- or six-year period, that’s not sustainable. We can’t build that many houses forever.”

In fact, Sacramento and other communities may need to say goodbye for good to the building-boom years.

“California needs to think not about when the boom is coming back, but how we’re going to accommodate 50 million with fewer resources than we have today,” said Rick Cole, the city manager of Ventura, Calif., and former mayor of Pasadena.

“If you are financing your current operations on development, that’s what’s known to economists as a Ponzi scheme,” said Cole. All California cities do it, and it’s why so many cities around the state are looking at huge budget deficits.

One alternative, said Cole, would be regional tax sharing—where cities and counties in a metropolitan area split up sales and property taxes based on population. That would ease some of the competition between local governments and neighboring towns to put up the newest strip mall or subdivision, said Cole, and ease some of the disparity between rich and poor communities.

It was an idea that Darrell Steinberg pushed back in 2002, when he was still in the California Assembly. The idea was wildly unpopular among suburban politicians, whose jurisdictions were rolling in sales-tax dollars from new development, and who all but accused Steinberg of advocating socialism.

But today, facing a contraction of new auto sales and disintegrating local budgets, the city and county of Sacramento just this summer agreed to share any growth in sales taxes from local auto dealerships. Regionalism, considered heresy a few years ago, seems to be spreading out of necessity.

Cole said local governments around the state need to embrace Steinberg’s Senate Bill 375, which became law earlier this year, and which requires all local governments to participate in regional growth plans like Sacramento’s Blueprint. That plan covers the six-county Sacramento metropolitan area and calls for less suburban growth and more urban, more transit-friendly development.

Ventura City Manager Rick Cole says California’s boom years—driven by “cheap oil and cheap money” probably aren’t coming back. So plan accordingly.

Courtesy Of Rick Cole

According to research by planners at the Sacramento Area Council of Governments—the agency which crafted the Blueprint—compact communities are a lot cheaper to run than sprawling cities. Police protection, garbage pickup, public transportation, etc., can all be done much more effectively and efficiently when they’re not being stretched out over ever-greater distances.

In fact, according to SACOG, if the Sacramento region follows through on the Blueprint, the metro area will save $16 billion in infrastructure costs over the next two decades. Policy makers may begin to see smart growth not just as the right thing to do, but also as the economically conservative thing to do.

But Graham Brownstein, director of the Environmental Council of Sacramento, said he’s not optimistic that Sacramento will readily take up the challenge to change its sprawling ways.

“Local governments are going to be scraping for any revenue they can get,” said Brownstein, adding that he sees a “big fight” coming in two or three years when the housing market starts to come back, and when local officials are anxious to tap new development projects for needed taxes and fees.

Trying to wean local governments off of sprawl will be like “pulling the baby off the teat,” said Brownstein. “And it’s going to be ugly. I’m afraid we’re going to see a lot more stupid stuff getting approved and getting built.”

Growing cooler
Even if the economy bounces back in two or three years, Brownstein noted that the rules governing development may already be very different.

In fact, local government officials may find it increasingly difficult to approve sprawl in a post-Al Gore era. New concern around global warming was probably at least partly responsible for the success of state Sen. Darrell Steinberg’s S.B. 375, which also requires local governments to have regional growth plans in place and to have a plan on the books for reducing the carbon dioxide and other greenhouse gases associated with traffic and development.

In the spring of 2007, California Attorney General Jerry Brown sued San Bernardino County, arguing that the county’s general plan neglected to look at how its development pattern would affect California’s attempts to reduce greenhouse gases. The county settled, and when Brown threatened to bring a similar lawsuit against the city of Stockton, that government also fell in line quickly.

In Sacramento, ECOS and other environmental groups sued in June of 2007 to stop the expansion of Highway 50 with new carpool lanes. The environmental groups argued that the state was pushing the project without considering how it would increase the overall number of vehicle miles traveled, and how that would effect global-warming air pollution.

Sacramento County Superior Court Judge Timothy Frawley agreed, and in July of 2008 ordered Caltrans to look at alternatives to the new highway lanes, including considering additional light-rail trains along the Highway 50 corridor. The decision was celebrated by environmental groups because it bolstered their argument that local projects ought to consider global-warming impacts.

But times being what they are, environmental quality may soon take a back seat, once again, to economics.

Earlier this month, Gov. Arnold Schwarzenegger asked the Legislature to exempt projects like the Highway 50 expansion from further environmental review, including global-warming impacts, as part of his plan to stimulate the state economy.

Built to last: While prices of homes in the suburbs have plummeted, Sacramento’s older established neighborhoods have held onto more of their value.

Photo By Anne Stokes

In the interest of getting millions in state transportation bonds into the economy quickly, the Schwarzenegger administration came up with a list of road and other transportation projects that are to be exempted from provisions of the California Environmental Quality Act. As of this writing, the projects were included in legislation backed by Schwarzenegger in an emergency special session of the state Legislature, convened to tackle the state’s budget crisis.

Critics say Schwarzenegger is sending mixed signals on the environment. After all, he basked in the press attention when he signed Assembly Bill 32, the Global Warming Solution Act, in 2006. He further cemented his environmental credentials with his strong support of Steinberg’s S.B. 375.

“You don’t stimulate our economy by rolling back protections for our air and water,” said Bill Magavern, director of the Sierra Club California.

“If you look at the Highway 50 project, it looks to solve our transportation problems simply by adding more asphalt to the freeways. Instead, we need to give people more choices. Better mass transit, better bike and pedestrian access.”

Scientists at the California Air Resources Board estimate that about 40 percent of the state’s greenhouse-gas emissions come from the transportation sector.

There is no way to tackle global-warming pollution without taking a big bite out of VMTs—short for vehicle miles traveled.

CARB is responsible for implementing A.B. 32. If the agency actually manages to put the complex new law into practice by 2020, California’s greenhouse-gas emissions would shrink from the 500 million metric tons California produces today to about 430 million metric tons, the level of greenhouse-gas pollution in the state in 1990.

Right now, transportation accounts for about 200 million metric tons of carbon dioxide and other greenhouse gases. In a report called “Growing Cooler,” Rutgers University researcher Reid Ewing said the state could eliminate a big chunk of its greenhouse gases simply through better urban planning. “The rise in vehicle emissions can be curbed simply by growing in a way that will make it easier for Americans to drive less,” said Ewing.

The beginnings of a shift are already happening. Starting in 2007, rising gas prices and a weakening economy have pushed millions of new riders onto public-transit systems around the country. Mike Wiley, the general manager of Sacramento Regional Transit, told SN&R back in the spring that he wants to build a public-transit system that provides “full access and full mobility for all.” But as RT planners will tell you, it’s very difficult to build a good public-transit system around sprawl.

Plans like the Blueprint and other fundamental reforms will help, said Cole. But he concedes there’s a danger that the economic situation will lead policy makers to delay reforms.

“The last time the state went through this in the early 1990s, we had a guy who could have been a great governor,” Cole explained. That was Pete Wilson, who as mayor of San Diego was well-acquainted with the problems of sprawl and runaway growth. “He came in with a clear mandate that he would tackle growth. But when the economy tanked, he abandoned all that. When people asked him what happened to managing growth, he joked, ‘I wish I had some growth to manage.’”

California faces a similar choice today, said Cole, but with some profound differences.

“The last 50 or 60 years have been an exceptional period, driven by cheap oil and cheap money,” he said. “Those historic factors have changed pretty fundamentally. The next 50 years are going to be very different than the last 50 years.”