Summary of paper prepared by John C. Bergstrom, Jeffrey H. Dorfman and
Ihlandfeldt, under contract for the American Farmland Trust and The Georgia
In metropolitan Atlanta, the city and suburbs are competing for new development and
the economic opportunity that accompanies it. The suburbs are winning this
competition and the result is sprawl and urban decay. This outcome is not simply a
function of the free market. Government policy decisions have a pervasive influence
on the market for land and its use. If we want to change land use patterns, we must
change public policy.
Three Ph.D. economists from Georgia universities studied taxes and fees, development
regulations and procedures, redevelopment incentives and transportation policies, all
of which have a strong influence on land use in metro Atlanta. Based on an analysis of
the internal rate of return of four hypothetical development projects at five urban and
suburban locations, they concluded that public policies contribute to the greater
profitability of all types of development at three suburban locations than at two
locations within the City of Atlanta. The accuracy of these results is confirmed by
how closely they mirror the kinds of development that are occurring in the region.
The cost of land, averaging 8 times higher in the city than in the suburbs, is the single
most important factor favoring suburban development. Though its price is a function
of market supply and demand, the demand for land for development on the suburban
edge of the metro region has been greatly increased by the construction of highways.
This policy decision has brought thousands of acres of remote rural land into
competition with the city, while creating enormous wealth in the outskirts by
increasing private land values by $10,000 per acre.
Higher city rental rates offset the land cost advantage of the suburbs to some extent,
particularly for apartments. Development requirements like parking spaces, as well as
the longer period it takes to receive permission to build in the city, also play major
roles in giving the suburbs a competitive advantage. Taxes and impact fees give a
smaller but still significant advantage to the suburbs. On the other hand, the abatement
of taxes in urban enterprise and empowerment zones in the city is an important
counterweight to the advantage conferred on the suburbs by other policies. These
trends were corroborated by a survey of local developers.
The researchers' analysis was reviewed by academic peers and discussed at a
roundtable meeting of local private and public leaders. The report also contains a
summary of their views.
Based on the research and views of local leaders, this report recommends
that consideration be given
to a number of policy changes to level the playing field between the City of Atlanta and its suburbs
and, thus, to curb sprawl and improve the quality of life in the entire metro Atlanta region:
þ Augment tax incentives for enterprise zone development in the City
of Atlanta, paying
particular attention to attracting middle class housing to the downtown area. Accompany this
with stronger brownfield development incentives and indemnities.
þ Streamline the zoning and development approval processes in the
city of Atlanta to reduce
delays that add to developers costs, while maintaining adequate public input.
þ Examine current city specifications for developer-provided infrastructure
and make changes to
lower developers costs while still meeting public needs. Pay particular attention to
requirements for parking spaces, which are much more costly to provide downtown than in
þ Consider a tax surcharge on downtown parking lots to encourage
their development and
lower overall city land costs. Study a two-tier property tax system like the one that has
contributed to the revitalization of downtown Pittsburgh by encourging development of
þ Recapture a portion of the windfall increase in suburban land values
that has resulted from
construction of highways and other infrastructure. Without this, the chances of revitalizing
downtown and curbing the effects of sprawl on everyone on the region may be futile.
Possibilities for windfall recapture include regional revenue-sharing like that adopted by
Minneapolis-St. Paul, and a regional impact fee on new development that reflects the impact
that sprawl has on the core of Atlanta and, hence, the entire metro region. Reinvest the
proceeds in downtown Atlanta and perhaps older suburbs that may suffer the same
competitive disadvantage because of public policy decisions.
þ Ask suburban development to pay more of its full marginal cost
for public services. Begin by
changing the rules on impact fees to allow one jurisdiction to recover costs caused by
development in another.
þ Adopt a more regional approach to land-use planning and decision
making. A promising
opportunity for starting this may be the pending proposal to harness state transportation
funding as an incentive.
All of these proposals are offered, not as a definitive policy agenda,
but as a starting point for more
urgent and focused discussion off the future of land use trends and the quality of life in metropolitan
For more information, contact: Edward Thompson, Jr., Senior Vice President,
American Farmland Trust, at (202) 331-7300 or email@example.com.