land use for economic development in tough financial times · these tough economic times present an...

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Land Use for Economic Development in ToughFinancial TimesJohn R. NolonElisabeth Haub School of Law at Pace University, [email protected]

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Recommended CitationJennie C. Nolon & John R. Nolon, Land Use for Economic Development in Tough Financial Times, 40 Real Est. L.J. 237 (2011),http://digitalcommons.pace.edu/lawfaculty/843/.

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Zoning and Land Use Planning

Jennie C. Nolon & John R. Nolon*

Land Use for Economic Development in ToughFinancial Times

I Tough Financial Times and CitiesThe recession hit cities hard. Basic municipal sta�s and

services are being cut, debt is being restructured, capitalprojects delayed, and other cost cutting measures reported.The Congressional Budget O�ce reports that by Novemberof last year there were 241,000 fewer municipal employeesthan there were three years earlier when the recessionbegan.1 In its most recent report from city �nance o�cers,the National League of Cities states that city spendingcutbacks since 2009 are the largest since the survey was�rst taken, over twenty-�ve years ago.2 Despite this serioustrend, municipalities have not defaulted in debt payment

*John R. Nolon is James D. Hopkins Professor of Law at Pace LawSchool where is serves as Counsel to the Land Use Law Center. He is alsoVisiting Professor at the Yale School of Forestry and Environmental Stud-ies. Jennie C. Nolon is an attorney at the Land Use Law Center of PaceUniversity School of Law and manages its urban growth programs, includ-ing the Mayors' Redevelopment Roundtable—the subject of a case study inthis article.

1Fiscal Stress Faced by Local Governments, Congressional Budget

Office, http://www.cbo.gov/ftpdocs/120xx/doc12005/12-09-Municipalities�Brief.pdf (last visited July 22, 2011).

2City Fiscal Conditions in 2010, National League of Cities (NLC)

(Oct. 20, 2010), http://www.nlc.org/File%20Library/Find%20City%20Solutions/Research%20Innovation/Finance/city-�scal-conditions-research-brief-rpt-oct10.pdf (last visited July 22, 2011). In this report, 87% of city �nanceo�cers indicated their cities were worse o� �nancially than in 2009.Furthermore, according to �nance o�cers, city revenues, as generated inproperty, sales, and income taxes, will decline -3.2% in in�ation-adjusteddollars. To compensate, city o�cials are cutting back spending, withexpenditures declining by -2.3%. These are the largest cutbacks in spend-ing in the history of the survey and the fourth year in a row that revenuedeclined.

233© Thomson Reuters E Real Estate Law Journal E Vol. 40 No. 2

and there are few municipal bankruptcies.3 There is evi-dence that the horizon is clearing in some parts of thecountry for cities.4

As states continue to reduce funding for local governments,property values and taxes remain low, and the job marketremains �at, local elected o�cials in most cities will continuethe hard work of budget balancing through cost cutting.These realities notwithstanding, this article suggests thatthese tough economic times present an opportunity for localo�cials and residents to work on future revenues by plan-ning for increased urban economic development and toformalize that plan in local land use plans, incentives, andregulations. “[W]hen a man knows he is to be hanged in afortnight, it concentrates his mind wonderfully.”5

3Facts You Should Know: State and Local Bankruptcy, Municipal

Bonds, State and Local Pensions, ICMA, http://icma.org/en/icma/knowledge�network/documents/kn/Document/302445/Facts�You�Should�Know(last visited July 22, 2011). This fact sheet was issued by the InternationalCity/County Management Association, along with ten other organizations.Key �ndings include the following regarding municipal bonds:

E There are approximately 1.5 million municipal bonds outstanding,totaling $2.9 trillion.

E Seventy percent of outstanding municipal bonds are owned by in-dividual investors.

E Nearly 12,000 municipal bond issuances are completed each year,predominantly by state and local governments for governmentalinfrastructure and capital needs purposes.

E Municipal securities are considered to be second only to Treasuriesin risk level as a safe investment instrument.

E Since 1970, there have only been �fty-four defaults in the munici-pal sector—less than 1/3 of 1%, compared to a corporate defaultrate that exceeds 10%. In the largest municipal bankruptcy inrecent times—Orange County, California, in 1994—the countypaid its investors and did not default on its municipal bonds.

4See e.g., Lynh Bui, Phoenix Budget Shortfall Only $59M After LastYear's $277M Gap, Az. Repub. Mar. 24, 2011, available at http://www.azcentral.com/community/phoenix/articles/2011/03/24/20110324phoenix-budget-shortfall-only-59m-after-earlier-277m-projection.html. According to thearticle, “Phoenix o�cials will need to close a $59 million budget de�cit forthe 2011–12 �scal year, but they're calling it good news . . . It's a hugeturnaround compared with the past year, when o�cials implemented a 2percent food tax, raised millions in fees, and cut more than $63 million inprograms and services to shore up a $277 million general-fund budget def-icit for 2010–11. ‘We have a completely better outlook,’ [City Manager Da-vid] Cavazos told The Arizona Republic on Thursday after releasing detailsof his proposed budget for the coming year. ‘It's a sigh of relief.’ ’’

5Quote attributed to Samuel Johnson, Bartleby.com, http://www.ba

rtleby.com/73/369.html (last visited July 22, 2011).

Real Estate Law Journal [Vol. 40:2 2011]

234 © Thomson Reuters E Real Estate Law Journal E Vol. 40 No. 2

There are clear reasons for cities to believe that good plan-ning now will result in better economies and revenues later.

The importance of cities to viable regional economic growthand development, to preserving the environment, and tomeeting emerging market needs is becoming clearer everyyear. It is well recognized that successful regional economicdevelopment is dependent upon the existence of successfulcities as centers of commerce, transportation, culture, educa-tion, and medical services, among other important services.Developers are increasingly attracted to cities, which leadother municipalities in becoming development ready — thatis by removing unnecessary obstacles to approving develop-ment projects. Development that occurs in existing urbancenters, particularly compact, mixed use development neartransit and other services and infrastructure is much morecost-e�cient and environmentally sound than developmentat the urban fringe.

Cities report success in attracting jobs in high tech lightmanufacturing and services, information technology, foodprocessing, hospitality and entertainment, printing andpublishing, retail and wholesale businesses, educationalinstitutions and clusters, health care service and provision,medical and biotech research and manufacturing, andconstruction, including green development. There are syner-gies among these economic activities, with hospital andmedical clusters attracting o�ce and service space, retail,and some educational activities, such as training homehealth aides.

To the extent that new development can be placed in citiesand that cities can be revitalized to become vital centers forregional economic development, numerous bene�ts arerealized:

E Regional economic development is fostered throughstrong centers of culture, education, housing, govern-ment, and medical service;

E Fossil fuel use and CO2 emissions are lowered;E Energy is conserved;E Agricultural lands are preserved;E Natural resources are protected;E Less construction material is utilized;E Urban real property values are strengthened;E Property and sales tax revenues increase;E Municipalities are better able to support themselves

�nancially;



E Service costs are less;E Local jobs are created;E Opportunities for achieving job and housing equity

abound; andE Tax bases for needed municipal services increase.The U.S. Census Bureau projects that the nation's popula-

tion will increase by 100 million—over one-third—by 2039.One hundred million people translates into forty million newhouseholds whose members will live, work, and shop in thesebuildings, traveling from one to the other and beyond, largelyby car. Where the buildings that house and employ these ad-ditional people are located, how energy conserving they are,and how far these new Americans must travel from one tothe other will greatly a�ect the emission of CO2 and howvulnerable new development will be to sea level rise andnatural disasters that accompany climate change. Many ofthese new Americans will be attuned to urban living; manyof them are young households looking for residency invibrant places, others are immigrants whose skills areneeded in urban places, and a large number are agingcouples and individuals among whom there is a growingmarket for urban places to retire.

The positive economic impact on urban real estate marketsof these trends is borne out by a recent study by Public Inter-est Projects, Inc. of Ashville, N.C. This study looked at andcompared property tax revenues on a per acre basis andconcluded that “the urban form consumed less land, cost lessto provide public infrastructure, and had a higher taxreturn.” Mixed use development performed much better“than the strongest shopping mall in the country when itcomes to generating property tax revenue . . . One mixed-use property generated $800,000 in property taxes per acre,compared to $21,732 per acre for the mall.”6 Market projec-tions indicate that urban housing located in compact develop-ments will increase in price more rapidly than single-family,suburban homes.7

These comparative results are pushing planning today

6Andre Shashaty, Cities Discover Economic Bene�ts of Sustainable

Planning, Land Use, Sustainable Communities 18, at 21 (Jan./Feb. 2011)(referencing Sarasota's Smart Growth Dividend, Planning Magazine, at26, (December 2010)).

7See generally Christopher B. Leinberger, the Option of Urbanism:

Investing in a New American Dream (Island Press 2008), describing there-emergence of walkable urban development as the “next Americandream.”



away from green�eld and single use commercial and resi-dential development and toward compact, mixed use develop-ment that reduces sprawl, increases worker and shoppercommuting options, and attracts “the kind of well-educatedworkers whom service businesses look for when decidingwhere to locate.”8

II. Urban Economic Development andComprehensive Planning

Local governments can a�ord to plan while they wait fortheir regional economies to recover. Strong planning visionsand clear implementation plans can help and guide thatrecovery by giving employers and developers a ‘clear’ idea ofthe development that cities want and the tools they willemploy to get it.9 The economic development plan can bememorialized in a mayoral executive order, legislative reso-lution, or, optimally, by being added as a component of thecity's comprehensive land use plan. As such, it then becomesthe predicate for creating incentives, such as density bonusesin zoning ordinances or real property tax abatements, andreforming land use regulations to stimulate needed andfeasible redevelopment and revitalization. Land use plansshould contain the strategies and implementation tools theywill use to accomplish their visions and these include howlocal land use regulations, processes, and protocols will bereformed — the subject covered in Part IV below.

A good local comprehensive land use plan — which shouldbe revisited as change occurs — guides not only the physicaldevelopment of the municipality, but also guides economicdevelopment, accommodating social, environmental, andregional concerns. The comprehensive plan is developed pur-suant to state statutory authority, and state statutes varywidely in terms of directing the content to be covered in localplans. Many states use enabling legislation or administra-tive rules to authorize, encourage, or speci�cally require thateconomic development plans be included in a local compre-hensive plan and coordinated with land use planning


Planning, Land Use, Sustainable Communities 18, at 19 (Jan./Feb. 2011).9Eric Kelly, Community Planning: An Introduction to the

Comprehensive Plan 340 (2d ed. 2010) (“[T]he economic developmentcomponent of a comprehensive plan, reminds the community where itwants to go and even tells it how to get there.”)



strategies.10 The inclusion of such language in the state en-abling legislation often re�ects local, regional and statewide

10See, e.g., N.J. Stat. Ann. § 40:55D-28 (b)(9) (West 2010) (authorizing

as part of municipal comprehensive plan “[a]n economic plan elementconsidering all aspects of economic development and sustained economicvitality); R.I. Gen. Laws § 45-22.2-6 (4) (West 2010) (requiring “theidenti�cation of economic development policies and strategies, either exist-ing or proposed by the municipality, in coordination with the land useplan element”); N.H. Rev. Stat. Ann. § 674:2 (requiring “[a]n economicdevelopment section which proposes actions to suit the community's eco-nomic goals, given its economic strengths and weaknesses in the region”);53 Pa. Stat. Ann. § 10301 (a)(4.1) (West 2010) (requiring “[a] statement ofthe interrelationships among the various plan components, which mayinclude an estimate of the environmental, energy conservation, �scal, eco-nomic development and social consequences on the municipality”); Ore.Admin. Rules § 660-08-015 (April 1987) (“Oregon's administrative rulesfocus on the preparation of an ‘economic opportunities analysis’ that is to:(1) review national and state and local trends for commercial andindustrial uses that could reasonably be expected to locate or expand inthe planning area; (2) identify the types of sites that are likely to beneeded by such uses; (3) estimate the amount of serviceable land for suchuses; and (4) designate additional serviceable land for such uses, if pos-sible depending on public facility limitations.”) (quoting Growing SmartLegislative Guidebook: Model Statutes for Planning and the Managementof Change, 7–129, (Stuart Meck ed., 2002), available at http://www.planning.org/growingsmart/ guidebook/print/pdf/Introductory.pdf); Rules of theGa. Dept. of Community A�airs § 110-3-2.04(5)(b)2.5 (June 11, 1992)(“call[ing] for analysis of the community's economic base, labor force, andlocal economic development resources,” all of which “should result in aplan for economic development . . .”(quoting Growing Smart Legisla-

tive Guidebook: Model Statutes for Planning and the Management

of Change, 7–129, (Stuart Meck ed., 2002), available at http://www.planning.org/growingsmart/ guidebook/print/pdf/Introductory.pdf); Wash. Rev.Code Ann. § 36.70A.070 (7) (West 2011) (“[e]ach comprehensive plan shallinclude a plan, scheme, or design for each of the following: An economicdevelopment element establishing local goals, policies, objectives, and pro-visions for economic growth and vitality and a high quality of life. The el-ement shall include: (a) A summary of the local economy such as popula-tion, employment, payroll, sectors, businesses, sales, and other informationas appropriate; (b) a summary of the strengths and weaknesses of the lo-cal economy de�ned as the commercial and industrial sectors and support-ing factors such as land use, transportation, utilities, education, workforce,housing, and natural/cultural resources; and (c) an identi�cation of poli-cies, programs, and projects to foster economic growth and developmentand to address future needs. A city that has chosen to be a residentialcommunity is exempt from the economic development element require-ment of this subsection; Comprehensive Planning/Growth Management,Municipal Research and Services Center of Washington, http://www.mrsc.org/Subjects/Planning/compplan.aspx (last visited July 19, 2011)(“[i]mplementation of required parks and economic development elementsis on hold until adequate state funding is available”).



concerns with employment, labor, industry, and quality oflife.

The importance of economic development planning cannotbe underestimated. Without an articulated economic develop-ment plan, developers may become disinterested or ap-prehensive about investing in a particular community.Worse, a city may miss a signi�cant opportunity to capturemarket opportunities and guide development in a mannerdesired by businesses and residents. Economic developmentcomponents of local comprehensive plans can be drafted andadopted to create a collaborative vision for an urban com-munity that builds upon the municipality's unique assetsand needs. The economic development policy of a comprehen-sive plan is a core component around which other planningand action should be organized. One way of viewing the eco-nomic development component of a comprehensive plan is asa full and complete economic development policy andimplementation plan for the city. In this respect, it begs thequestion as to what that policy should be, which depends, inturn, upon what is realistic in the current economic market,existing competition, and the economic assets of thecommunity.

To create a truly successful and market-realistic economicdevelopment component, urban planners should supplementtheir economic development knowledge with up-to-dateprivate sector knowledge on local, regional, and nationalmarkets, development trends, and available equity and debt�nancing, including the types of economic development proj-ects that can attract �nancing. With adequate private sectorinput, a local government can create and implement acoordinated, market-realistic jobs and economic developmentcomponent to its comprehensive plan. Often, much of theeconomic development data gathering and analysis that goeson in most cities and regions is done by private sectororganizations: chambers of commerce, construction tradegroups, and utility companies interested in the realities ofthe market and sensitive to opportunities for growth. Com-munities might also consider creating a special task forcecomprising “representatives of local economic developmentorganizations, major employers, commercial and industrial



real estate brokers and developers, and others with similarknowledge.”11

Business leaders and their associations provide excellentlinks to a variety of sources of market information. Develop-ers hire market specialists to determine changes in demo-graphics and economics and make decisions regarding whereand what to build. Appraisers track changes in propertyvalues of various types and can spot sectors that are doingbetter than others. Commercial brokers rely on theireconomists to pitch buildings that they have listed for leaseor sale; they approach companies that are likely to relocatein the locality as prospects because they believe their busi-nesses will do well in the building that is for lease or sale.Some business associations help local, regional, and stategovernments market properties, locations, and municipali-ties to companies and employers in other parts of the countryor in other countries and, to do this, they must have datathat indicates the economic strengths of the place they arefrom, including the work force, market demand, supportiveinfrastructure, services, and other resources. All of this in-formation, generally unavailable to local planners, can becaptured and used in drafting an economic developmentcomponent of a comprehensive plan. This information makesthe component a solid basis for local economic developmentstrategies.

Since cities are thinning out planning sta�s and may nothave historically engaged in this type of planning, thesetimes are ideal for creating a public/private planningpartnership that will invest the private sector in the work ofcities as they might not have been in the past. Bringing thiskind of sophistication in-house might lead to more precisetargeting of city assets and implementation strategies ontargeted sectors whose needs align with urban locations inthe region: sectors such as medical service providers, foodprocessors, training companies, utility headquarters, greenproducts �rms and services, and knowledge-based �rmswhich need the younger, educated workforce seeking urbanliving or the semi-skilled laborers who already live there.12

In addition to the community's vision, the plan should

11Growing Smart Legislative Guidebook: Model Statutes for Planning

and the Management of Change, 7–130, (Stuart Meck ed., 2002), availableat http://www.planning.org/growingsmart/ guidebook/print/pdf/Introductory.pdf.

12See, e.g., id. at 336–37. The Pinellas County, Florida plan provides

the following:



contain an inventory of existing and proposed locations andintensities of various land uses, including public facilities,commercial and industrial facilities, signi�cant natural andenvironmental resources, and existing housing resourcesand future housing needs. Local economic development planscan be assembled from readily available demographic andmarket data, the private sector can help identify sectors thatare recovering and amenable to city locations, and the assetslisted that cities o�er to their regions as cultural, educa-tional, medical, housing, and entertainment centers. Fre-quently, cities have unused water and sewer capacity, whichis an asset considering that suburban growth, particularlyon green�elds, requires new and costly infrastructure.

Baltimore's comprehensive plan provides a good exampleto illustrate what cities can do through the planning process.It pledges to encourage economic growth and to streamlineits regulatory system. The plan states that it “encourageseconomic growth in port- and defense-related industries aswell as six burgeoning employment sectors identi�ed by theWorkforce Investment Board by better articulating thedevelopment process and ensuring development compat-

“Re�ne and integrate current criteria for plan map amendment of industrialland by placement in the Countywide Plan Rules, including such considerationsas:

E Contribution to the economy based on the number and type of jobs to beprovided.

E Site characteristics including size, con�guration, and physical character-istics and opportunity for consolidation.

E Locational characteristics in relationship to the use of and compatibilitywith adjoining properties.

E Transportation and infrastructure features as functions of access, avail-ability, and capacity.

E The extent to which the property is part of a special redevelopment plan.E Unique features such as water-dependent use, working waterfront, or

transit-oriented use.E Related comprehensive plan policies in relationship to key policies of the

local and countywide plans.Establish new/revised plan map categories and processes, including:

E Amend the Planned Redevelopment-Industrial category to allow for resi-dential use based on speci�c criteria related to provision of target industryjobs.

E Create a new employment center overlay category to facilitate targetindustry location and expansion in key locations that provide for �ex-ibility of both the types and intensity of use permitted.

E Establish a target industry bonus system that provides for an administra-tive process to accommodate target industry without requiring a planmap amendment.



ibility in all parts of the City.”13 The plan commits to fostereconomic development by ensuring that local residents aretrained and equipped to �ll the jobs anticipated in the plan.The Baltimore plan readjusts its residential land use “to ac-count for the change in population, aging housing stock, thecritical need for moderately priced, quality housing to at-tract and retain the middle class, the growing market forproviding homes for Washington, DC commuters, theexpanding market for condominiums, the opportunity tocapture an increasing share of the expected 800,000 newresidents who will settle in the region by 2020 and enhanc-ing the wonderful mix of architecture, life styles andneighborhoods that make Baltimore a premier place to live.”14The plan, in addition, contains strategies to “capture andencourage biotech job opportunities, create larger tracts ofland for commercial or industrial development near transpor-tation centers and connect residents to availableemployment. Currently the health, medical, �nancial andconstruction sectors are large and growing. Education andtourism continue to be strong.”15

III. Leveraging Resources: Local Partnerships withDevelopers

In addition to adopting an economic development compo-nent in their comprehensive plans to provide clear signals todevelopers, cities can streamline development approvals,provide supportive infrastructure to sites, and help clean upand prepare sites for development. Through zoning, locali-ties can provide bonus densities, waive certain land userestrictions, and provide expedited project reviews andapprovals. Through proper area-wide master planning,developers that comply with plan provisions can enjoyshovel-ready, as-of-right rezoning and approvals of theirdevelopments.

Incentive zoning awards developers additional density orthe waiver of certain zoning requirements, in exchange forbene�ts provided to the community. In good economic times,this technique allows communities to secure bene�ts fromdevelopers including workforce housing, street improvements(including street furniture, lighting, green appointments), or

13Planning / Comprehensive Master Plan, Baltimore, Maryland,

www.baltimorecity.gov/Government/AgenciesDepartments/Planning/ComprehensiveMasterPlan.aspx (last visited July 22, 2011).

14Id.

15Id.



any other amenity needed to make the greater densitydesired in the area more livable. In more di�cult markets,incentive zoning can be used to induce developers to buildprojects that otherwise would not be economically feasible.Incentives can be provided to developers of raw land or tothose who propose the expansion of existing structures, theadaptive reuse of older buildings, or the redevelopment ofbrown�eld sites and other distressed parcels in older,developed areas.

The incentives that may be o�ered to developers includeadjustments to the density of development — for example,allowing more residential units or a greater building �oorarea ratio than is otherwise permitted under the zoning law.Incentives can also include adjustments to the height, openspace, use, or other requirements of the underlying zoninglaw.

These incentives can be given in exchange for the develop-er's providing one or more community bene�ts, includingopen space or parks, a�ordable housing, day care or eldercare, or any other speci�c physical, social, or culturalamenity of bene�t to the residents of the community. Wherethe community bene�t cannot feasibly or practically beprovided directly by individual developers, the system canprovide for developers to make cash payments to the locality.Such sums must be held in a trust fund to be used exclusivelyfor the community bene�ts speci�ed. All of the amenitiessecured though incentive zoning help create the types of ser-vices, environment, and infrastructure needed to create vi-able urban neighborhoods for economic development.

State legislation in most states enables local governmentsto set up and operate several di�erent quasi-public bodiesthat can become intermediaries for needed public/privatepartnerships. Where localities have a clear economic develop-ment plan and strategy, they can attract and work withprivate developers through their established IndustrialDevelopment Agencies, Urban Renewal Agencies, LocalDevelopment Corporations, and Land Banks and, dependingon state law, provide real property tax abatement and favor-able project �nancing through tax exempt bonds, tax incre-ment �nancing, and other techniques.

Industrial Development Agencies could be engaged inimplementation of comprehensive plan components to o�er(depending upon state law) economic development incentivessuch as tax abatement, sales and use tax waiver, mortgagerecording tax waiver, payment-in-lieu-of-tax agreements,



and tax-exempt bonds to provide �nancing for projects thatfurther local economic development plans and provide jobs.Such �nancing can be used to purchase land, provide sup-portive infrastructure, pay construction costs, and otherwise�nance developments.

Urban renewal agencies (URAs), �rst created to takeadvantage of federal funding that is no longer available, stillhave power in most states to identify renewal areas, adoptspeci�c renewal area plans, acquire land through the powerof eminent domain, and select quali�ed and eligible develop-ers to whom they can convey land at negotiated prices. URAstoo may provide property, sales, and mortgage tax abate-ment under some state laws.

A variety of local development corporations may be set upunder state law, including Economic Development Corpora-tions that have important but more limited powers to helpwith individual projects. Recently, state legislatures havebeen adopting statutes that provide for the creation of localor regional land banks that can take title to in-rem,foreclosed, and other distressed properties, assemble parcelsfor redevelop, and partner with developers to redevelop theseproperties, often providing low cost land and leveraging lo-cal, state, and federal �nancing to help.IV. Implementation Using Land Use Regulations

In Baltimore, following the adoption of the new comprehen-sive plan discussed in Part II above, the Mayor, City Council,and Planning Commission committed to rewriting the zon-ing code in its entirety, in order to streamline zoning anddevelopment procedures, achieve consistency of zoning withexisting land use, and utilize state-of-the-art rezoning andland use approval technology. In amending zoning codes, cit-ies have a number of techniques available to them, in addi-tion to the incentive zoning discussed above. They can createnew zoning districts providing for compact/mixed usedevelopment, �oating zones, special use permits, transitoriented development, neighborhood sustainability stan-dards, waterfront zoning, green infrastructure and urbandesign standards, and the transfer of development rights.

The current energy-conscious economy values proximityand clustering. Balancing “jobs, homes, shops and recreation. . . increases business opportunities, helps create a sense of



place, and can draw in talented workers.”16 When housing isa part of the mix, the additional households accommodatedcan spur demand for business that provides nightlife, ser-vices, and shopping.17 “Creating places with round the clockactivity, as opposed to a nine to �ve atmosphere, allows busi-nesses to spread out their peaks in services.”18 When �rmsare clustered in cities they enjoy economic bene�ts from theinteraction among employees, related businesses, and theircompetitors. This provides companies “access to ideas, sup-pliers and resources. The traditional o�ce park model, withbuildings surrounded by parking and landscaping is inwardfocused and does not easily create opportunities for spontane-ous interaction. Many �rms are �nding that job sitesintegrated with other uses like restaurants, shops and homesprovide employees with choices and amenities rarely foundin o�ce parks. The desirability for o�ce space in mixed-usesettings with access to transportation choices has beenre�ected in higher occupancy rates, property values andlease premiums.”19

In some cities, zoning has not been changed for manyyears. This may be a barrier to economic development thatrelies upon mixed land uses and some density to meet mar-ket conditions. Today's real estate projections indicate thatU.S. population will grow signi�cantly and that many of thenew households will desire housing and jobs in dynamicdowntown neighborhoods, where they can walk to shop, rec-reate, and work. Already this trend is obvious; prior to therecession urban land prices in regions with viable marketswere outpacing suburban land prices and, during the reces-sion, urban prices held value or loss less compared with sub-urban land. To create viable urban neighborhoods wherenew households want to live requires compact, mixed-usezoning.

Compact/mixed-use development increases developmentdensities and mixes land uses to promote the ability to work,shop, and live in one neighborhood and provides economicalopportunities for redevelopment of existing properties. It en-courages building reuse and rehabilitation of existinginfrastructure, conserves land, integrates uses, and fosters a

16Int'l Econ. Dev. Council, Economic Development and Smart Growth

6 (2006), page 6.17

See id.18

Id.19

Id.



sense of place. It creates walkable districts mixing com-mercial, civic, cultural, educational and recreational activi-ties with open space and housing for diverse communities.

By linking commercial development in the district to theprovision of rental and a�ordable housing opportunities, thistype of zoning supports the construction and rehabilitationof housing to meet the needs of people of all abilities, incomelevels, and household types. It coordinates the provision ofhousing with the location of jobs, transit, and services andfosters the development of housing, particularly multifamily,that is compatible with a community's character and vision.

By providing for increased intensities of development andencouraging the creation of new jobs in the urban center,compact, mixed-use zoning attracts businesses with goodjobs to locations near housing, infrastructure, water, andtransportation options and supports the growth of new andexisting local businesses. This type of zoning strengthensthe growth of local businesses, in addition to supporting eco-nomic development in industry clusters, which are consis-tent with regional and local character

Overlay ZoningAn overlay district is created by the local legislature by

identifying a development area and adopting new provisionsthat apply in that area in addition to the provisions of theexisting zoning ordinance which remain in place. The provi-sions of an overlay district can be more permissive thanthose contained in the underlying zoning district; they canimpose restrictions, but also may provide zoning incentivesand waivers to encourage certain types and styles ofdevelopment.

Economic development districts can be designated asoverlay districts, which follow, for example, a major transpor-tation corridor and encompass parts of several underlyingzoning districts. Zoning incentives can be provided todevelopers to build in these districts. (See material infra onincentive zoning.) In exchange for these incentives, develop-ers can be required to provide needed public services andamenities. Local governments have the authority to increasethe number of housing units permitted, or the gross squarefeet of commercial building allowed, in exchange for the pro-vision of community bene�ts, such as parks, playgrounds,water, sewerage, and transportation facilities, or even af-fordable housing and day care. These measures articulate aclear municipal policy that the development district is theappropriate place for higher density development. This policy



can be supported further by the local capital budget, whichcan target development districts for additional or improvedinfrastructure to service the new development.

An overlay law can be used, for example, to accomplishthe redevelopment or rehabilitation of deteriorated buildingsand neighborhoods. Within a designated redevelopmentoverlay district, developers can be given a variety of incen-tives to redevelop contaminated or substandard properties,to rehabilitate substandard structures, or to provide neededcommunity facilities or a�ordable housing. This type ofrevitalization may be critical to making urban neighbor-hoods amenable for economic development and populationgrowth.

Floating ZoningThe �oating zone technique involves the addition of a new

zoning district to the zoning law, but postpones mappingsites for that use until some future date. The zone can be af-�xed to individual parcels upon the application of the parcelowner or the initiative of the local legislative body or plan-ning board. This technique can be used to allow compact,mixed-use development, for example, on sites of certain sizesand in certain locations, as a method of promoting economicdevelopment. This technique is an alternative to simplyrezoning parcels for such uses and is used to allow the com-munity some �exibility in determining where opportunitiesare for such development. Floating zoning also avoids anyimmediate increase in the value of land that might berezoned for greater density and allows the city, parcel own-ers, and developer to negotiate the �nal zoning for eligiblesites and to capture the increased land value as bene�ts forthe neighborhood and community. Local o�cials may beunclear as to where such uses should best be accommodatedand where developers would prefer to locate them to insurethat they are successful economically.

Floating zones allow developers needed �exibility in locat-ing sites and determining how new land uses can be designedand bu�ered to �t into their surroundings. In some com-munities where a�ordable housing is desired, for example, amulti-family district may be created by the legislature butnot located on the zoning map. This allows developers themaximum �exibility to scout out sites and design develop-ments that mix housing types, tenures, and costs to ac-complish the municipality's objective of producing a�ordablehousing while requiring the project to �t properly into theneighborhood. Similarly, a community may want to create a



compact, mixed-use development zone but may not want tolimit its location, in order to give developers ample op-portunity to �nd a site best suited to current market needs.

The �rst case upholding the authority of local governmentsto adopt �oating zones as part of the municipal authority todivide the community into zoning districts was decided bythe New York State Court of Appeals in Rogers v.Tarrytown.20 Sustaining the �oating zone, the court heldthat courts must defer to legislative judgment when “the va-lidity of the legislative classi�cation for zoning purposes [is]fairly debatable” and that the burden of showing that anordinance is not justi�ed under the police power of the staterests with the person attacking the ordinance. Applying thattest to the facts of the case, the court upheld the purposesbehind the creation of the new district as following “soundzoning principles” and as being in accordance with acomprehensive plan. Those purposes included providinghousing for young families in the area, attracting businesses,and protecting the local tax base. Then, addressing the va-lidity of �oating zoning as the method chosen by the villageto achieve those goals, the court held that the village'srequirement for “separate legislative authorization for eachproject present[ed] no obstacle or drawback” and that theboard of trustees' choice of this procedure was “neitherarbitrary nor unreasonable.”

The court also noted that the board had not improperlydivested itself of its legislative power. It reasoned that evenif a property owner met physical standards required for thedistrict, the board could, in the exercise of reasonable discre-tion, refuse to rezone the property. The court dismissed theallegation of illegal spot zoning, stating that if “an ordinanceis enacted in accordance with a comprehensive zoning plan,it is not ‘spot zoning,’ even though it (1) singles out and af-fects but one small plot . . . or (2) creates in the center of alarge zone small areas or districts devoted to a di�erentuse.”21

Special Use PermitsProjects such as compact/mixed use development can be

permitted by adding the use as a specially permitted usethat is allowed in designated zoning districts. Special usepermits are a declaration by the local legislature that the

20See, e.g., Rodgers v. Tarrytown, 96 N.E.2d 731 (1951).

21Id.



use permitted is a valid use in the district a�ected, so longas it meets certain conditions contained in the code regard-ing the special use. Any of the economic development proj-ects discussed in the material above can be made legal byusing a special use approach as opposed to a rezoning, �oat-ing zone, overlay zone, or the use of incentive zoning.

Transit Oriented DevelopmentOne of the best places to mix land uses at greater densi-

ties is in proximity to transit stations, including train andbus services. Transit-oriented development (TOD) land useplans and zoning encourage mixed-use/compact developmentin transit station areas, or transit neighborhoods. Theylocate housing and jobs near transit stops and signi�cantlyreduce the number and distance of vehicle trips.

Mixed-use/compact developments in transit areas can bemade lively, amenable, and healthy places for new Americanhouseholds, the newly retired, immigrant families, and smallhousehold millennials to live. To the extent that these folksare attracted to a place, employers and businesses are likelyto follow, or to be attracted in concert with them. Encourag-ing land use patterns that house and employ more Americansin urban areas will cause a signi�cant reduction in vehiclemiles travelled while placing households in smaller, moreenergy e�cient homes and o�ces, further reducing energyconsumption, household expenditures, fossil fuel consump-tion, and CO2 emissions.

A recent study by the Dallas Area Rapid Transit (DART)analyzed “the �scal impacts of transit-oriented developmentassociated with development of the DART light rail system.The analysis considered development near existing andplanned light rail stations and found that the total value ofprojects attributable to the presence of a DART rail stationsince 1999 is $4.26 billion.” The study also found that“[I]ncreased taxable property values associated with the railstations have the potential to generate ongoing annual taxrevenues totaling $16.8 million for DART member cities andover $46 million for area school districts. Based on a �scalplanning model, the retail component of transit-orienteddevelopment projects in the DART service area will generateover $660 million in annual taxable retail sales, boosting lo-



cal municipal revenues by $6.6 million annually, the agencybelieves.”22

Waterfront ZoningEconomic development has been drawn to river, lake, and

beach fronts notably with industries dependent upon water-borne freight. Recent trends have seen pedestrians, shop-pers, diners, and workers drawn to new and revitalizedwaterfronts. For these trends to work locally, there must bea market for these economic uses and local planning andzoning must accommodate and encourage them.

Local waterfront management is a process by which amunicipality uses applicable local, state, and federal author-ity to manage and protect its waterfront resources. It doesthis by adopting a local waterfront management plan, whichhas signi�cance under local, state, and federal law. A localwaterfront management plan can be viewed as an additionto a municipality's comprehensive plan, applicable to coastalareas. It can contain explicit provisions for furthering neweconomic development activities consistent with waterfrontplanning principles.

Transfer of Development RightsTo achieve economic development objectives, it may be

necessary to give owners of certain properties additionaldensity. To soften this e�ect, densities can be lowered inother more environmentally constrained areas. One tech-nique of accomplishing this objective is through the Transferof Development Rights (TDR). Transfer of developmentrights is the process by which development rights aretransferred from one lot, parcel, or area of land in a sendingdistrict to another lot, parcel, or area of land in one or morereceiving districts. Many states allow local governmentsgreat �exibility in designing a TDR program; they can estab-lish conditions that they deem necessary and appropriate toachieve the purposes of the TDR program. TDR can be usednot only to encourage development in economic developmentdistricts but also to compensate for discouraging or disallow-ing it in environmentally sensitive areas.V. Conclusion: Toward State/Local Partnerships — ACase Study of Success

Cities need partners in the di�cult process of planningand strategizing to confront and surmount tough economic


Planning, Land Use, Sustainable Communities 18, at 19 (Jan./Feb. 2011).



times. This article has demonstrated the critical role thatthe private sector must play in this process: helping to makelocal comprehensive plans market realistic and using theincentives and regulations that cities formulate as leverageand guidelines as to what and where to develop. Stategovernments are crucial partners, as well, and must bebrought to the table.23 States cannot succeed in confrontingtheir budget di�culties and promoting their economicdevelopment plans without the cooperation of cities. The fa-miliar press report of the governor or delegation of statelegislators' trip to China or Brazil to attract employers tothe state fails to explain that there will be no sites availablefor these companies if local land use plans and regulationsdon't accommodate them. Nor will employers be drawn to aregion without strong identities forged by central cities. Cit-ies are now recognized as the centers of economic regionsand key to successful marketing development opportunities.Their tax-exempt hospitals, colleges, and arts institutionsare essential to viable regions. They supply housing forneeded workers in the region and have available infrastruc-ture to support types of development that surrounding com-munities may not accept but need to provide a full range ofeconomic activity in the region.

States can help in many ways. Their transportation, wa-ter, and sewer grant programs can prioritize city centers;they can provide planning grants and sample plan andregulatory language and other technical assistance. Theireconomic development o�ces can help market opportunitiesin cities for new development. State agencies can locate theiro�ces in cities thereby jump-starting redevelopment thereand capture their employees' daytime spending on behalf ofcities. State legislatures can adopt aggressive land bankingstatutes, require smart growth spending by state agencies,and provide greater zoning and land use powers to urbanmunicipalities.

The authors of this article have worked for three years

23That this can happen and how e�ective it can be is illustrated by

the support recently provided to an alliance of six cities in Virginia whosecollaboration inspired the Lt. Governor to attend a meeting of the allianceand present it with a $200.000 check, matched by the private sector, tosupport its unique idea of putting competition aside and working togetherfor economic progress. See, Ti�any Holland, Alliance Aims to Promote Eco-nomic Development, Job Creation, Godanriver.com (March 16, 2011),available at: http://www2.godanriver.com/news/2011/mar/16/alliance-aims-promote-economic-development-job-cre-ar-910092/ (last visited June 1,2011).



with a consortium of ten cities in the lower Hudson Valley inNew York State: cities with gritty neighborhoods, high pov-erty rates, and their share of distressed buildings andneighborhoods, but places with great economic potential.Together these ten cities contain 500,000 people and haveprofessionals—lawyers, planners, economic development of-�cers—who work on their planning, land use, and economicdevelopment strategies. The consortium is called the MayorsRedevelopment Roundtable. It was convened in 2008 by theLand Use Law Center of Pace University School of Law withthe idea that the cities would bene�t from identifying com-mon issues and from working together on their solution —combining resources, knowledge, and energies in the e�ort.The Center and the mayors have been assisted by manyother professional groups, agencies, and organizations thathave readily volunteered their time and expertise as neededin the problem solving process.

In June of 2011, after three years of collaboration, all tenmayors signed a Memorandum of Understanding (MOU)pledging to work together to create a demonstration projectfor regionalism and urban economic development.24 With theassistance of the Center and two major business associa-tions, the cities have agreed through the MOU to create andimplement strategies that demonstrate the critical impor-tance of cities to the larger region and the many economic,energy e�ciency, sustainability, environmental, and equita-ble advantages of promoting city revitalization as a keycomponent of state economic policy. The MOU demonstratesthe mayors' pledge to work together to ensure that their cit-ies are vibrant centers of regional economic development,guided by market-realistic data and advice memorialized incoordinated comprehensive plans that are implementedwisely and cost-e�ectively. Our cities are prepared to bedevelopment-ready and exemplary engines for centeredgrowth and development.

On June 8, 2011, the Roundtable met with New York StateLt. Governor Robert Du�y in his capacity as coordinator of

24The MOU notes that the Roundtable is a partnership of the mayors

of ten cities in the lower Hudson Valley region who have been workingtogether for three years, organized and assisted by the Land Use LawCenter of Pace Law School, on shared revitalization strategies. The initia-tives under the MOU are to be assisted by the Westchester County As-sociation and the Hudson Valley Economic Development Corporation (tworegional private sector economic development groups as signatories), andinclude the key development, planning, and legal sta� of the ten cities.



economic development policy and regional economic develop-ment councils for Governor Andrew Cuomo. The mayorsexplained to the Lt. Governor the organization and work ofthe Roundtable and noted some positive examples of prog-ress among the member cities regarding transit orienteddevelopment, sustainable buildings, energy code enforce-ment and enhancement, development readiness, and dis-tressed property remediation. They also explained the posi-tive planning principles, economic development advantages,and environmental gains by ensuring that population growthand economic development be emphasized in urban centerswhere the public and private sector has invested signi�cantlyin infrastructure and buildings. Finally, they explained theMOU and the interest of all ten mayors in working closelywith the state. In response, the Lt. Governor expressed thestate's support for the Roundtable e�orts, and noted theuniqueness of such a coordinated, self-motivated economicdevelopment e�ort, and the need for similar models through-out the State.

We conclude this article with material taken from theMOU as an example of what cities can do collaboratively topromote economic development and to form partnershipswith their states. After stating in a whereas clause of theMOU that “the mayors have identi�ed urban economicdevelopment as a key priority for the coming years and havepledged to work together with one another, the private sec-tor, and State and federal agencies to develop an integratedurban economic development plan that will take advantageof their individual and collective assets”, the mayors, theLand Use Law Center, and the partnering business associa-tions agreed that they will:

E Work aggressively and cooperatively to create a regionalurban economic development strategy that demon-strates the critical importance of cities to the largerregion and the many economic, energy e�ciency,sustainability, environmental, and equitable advan-tages of promoting city revitalization as a key compo-nent of State economic policy;

E Coordinate with each other to secure data for the cre-ation of regional and city-speci�c economic developmentplans, identify business and industry sectors that areinterested in city and nearby locations, and developstrategies to attract businesses based upon uniqueaspects of each city;

E Cooperate with the private sector to obtain assistance



in determining whether public plans are market realis-tic;

E Demonstrate how cities can adopt and implementformal economic development plans and strategies thatare comprehensive and collaborative and that providethe vision needed to integrate State and local e�orts topromote regional economic development;

E Develop formal economic development plans and engagein a coordinated comprehensive planning e�ort by work-ing to adopt these plans as components of each city's lo-cal comprehensive plan;

E Update zoning codes to adopt innovative land usetechniques, incentives, and development readiness stan-dards that allow the private sector to take advantage ofcost-e�ective, transit oriented, energy conserving, andsustainable mixed-use neighborhoods;

E Implement innovative ideas such as enhancing theenergy conservation code, creating energy conservationdistricts, promoting combined heat and power anddistrict energy systems, facilitating the location of re-newable energy resources, promoting workforce housingand transit oriented development, adopting develop-ment readiness standards, progressively using theState's environmental impact review requirements, andleveraging existing local, State, and federal �nancialincentives to promote sustainable economic develop-ment in the region;

E Seek �nancial and technical assistance from the Stateand private sector in completing the �rst step of a uni-�ed economic development agenda, which is to collectthe data that a�ects the cities' common economicfutures, identify employers seeking urban locations,develop sophisticated and linked local plans that createa unifying vision, and develop implementation plansthat use the full extent of the cities' legal powers andindividual economic advantages, and the leverage ofother State �nancial and technical resources to demon-strate concretely how a regional urban economicdevelopment plan can be created and become e�ective;and

E Market the economic assets and advantages of each cityas part of a regional economic development strategythat unites the Parties and the private sector in a com-mon e�ort to attract jobs, increase the local, regional,and State tax base, and create a sustainable pattern ofland development.



This case study envisions a strategic partnership betweenten cities, already working closely together, and the agenciesof state government whose job it is to promote economicgrowth, energy e�ciency, housing, and infrastructure and toprotect the environment and the state's natural resources.The cities of the lower Hudson Valley are poised to take ef-fective and collaborative action to demonstrate success. TheState has recently taken several positive actions that sup-port and leverage this success. The New York State Gover-nor's new regional economic development council strategyand the administration's emphasis on local governmentcooperation and e�ciency o�er an unparalleled opportunityto create a state/urban cities partnership. The aim of theMayors Redevelopment Roundtable is to leverage state-wideinitiatives with the plenary power of local governments toregulate land development and building. Through the eco-nomic development and planning initiatives outlined in theMOU, a consortium of local governments has set out topartner with its state administration to demonstrate how tobolster and support regional economic development byrejuvenating the urban core.



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