Washington Stimulates Old-Style Growth, But Change May Come Via Legislation

Suddenly, for the first time in 30 years, Washington is the center of the government money world. This is turning things upside down for the planning and development establishment, as local officials, developers, transportation leaders and others flood the nation's capital in search of dough. But what will all the dough do? And how will it shape the growth landscape of California over the next few years?

Local government revenue in California is dropping and is likely to fall further over the next year or two. The state government, having finally passed a budget designed to dodge a $40 billion deficit, is now facing a brand new deficit of at least $8 billion.

Sacramento's fiscal plight shifts the focus to Washington, from which money appears likely to flow out quickly to the hinterlands for the foreseeable future. There is, of course, the stimulus package about $800 billion, which includes an odd bag of tax cuts, social safety net provisions, backfilling of state and local budget cuts, and a few pots of money that might actually stimulate the economy and create jobs that did not exist previously.

In theory, the stimulus money could make a big difference, not just in keeping local governments in California afloat, but also in shaping the future of the built environment because of all the capital projects that could be funded. But the interplay between the stimulus and the state budget creates some conflicting priorities, because the federal money is often designated for capital expenses, while the state cutbacks will likely affect operating expenses.

For example, the stimulus contains almost $7 billion for transit capital projects. This means local transit operators in California can go to the feds for money to buy new buses. At the same time, however, the state budget package eliminated all "State Transit Assistance" money, which is used for both capital and operating expenses, and of course the "Transportation Development Act" revenue sales tax on gasoline which gets sent to the locals primarily for transit is going down. That means local transit service will probably be cut everywhere in the state. So local agencies may be able to buy new buses with federal money and park them. (Now that ought to make it easier to meet those AB 32 greenhouse gas emission reduction goals!)

At the same time, there are a few areas where locals may actually get some additional money to move things forward in a significant way. These include the augmentations to the community development block grants and also the energy conservation block grants.

The energy grants in particular could provide locals with a whole new source of money to pursue smart growth efforts in the short term. Locals can use these funds for a variety of things, including building codes, transportation demand management, and even zoning ordinances that promote smart growth. Most of the money will flow directly to the locals, but some will be given out on a competitive basis by the California Energy Commission.

The stimulus package contains a variety of other pots of money as well that might help in planning and development. For example, every jurisdiction will get additional community development block grant money, which, of course, must be targeted to low-income neighborhoods. And there is a variety of pots of money designed to help the homeless, because there will probably be more homeless people.

The big pot of money, however, is reserved for highway infrastructure almost $30 billion, which will go to the states, though metropolitan planning organizations will have some authority to allocate funds.

The Obama administration is making it very clear that the money has to be spent within 120 days. At the same time, some lobbying groups for example, Smart Growth America and its spin-off organization, Transportation For America are gearing up for a state-level effort in California to put some kind of smart growth "screen" on how the money is spent.

Given the time factor and the idea that the projects being funded are the ones that happen to be "shovel-ready" it is hard to imagine Smart Growth America's approach actually working. For example, it is pretty clear that one of the reasons Gov. Schwarzenegger pushed for environmental review exemptions for certain highway projects (see CP&DR Insight, March 2009) was to clear the way for stimulus money. Few of those projects which include widening stretches of Highway 50 and Highway 99 would likely pass smart growth muster

It is much more plausible to see the inside-the-Beltway smart growth crowd winning some successes on the coming transportation and climate change bills, which are much more policy-driven.

The reauthorization of the federal transportation bill a once-every-six-years event has even more significance this year because the gas tax no longer generates as much revenue as it used to and nobody quite knows where else to turn to get more. Nobody on Capitol Hill wants to propose an increase, though Schwarzenegger did propose it on the Sunday news programs during late March.

Then there is the federal climate change bill. Because it could provide an enormous source of additional money for something, every lobbyist inside the Beltway is jockeying for a piece of it. That is because that in limiting carbon emissions, the federal government will probably auction off at least some of the emissions "allowances," raising as much as a trillion dollars over the next couple of decades for environmental protection.

Finally, there's the possibility of Stimulus Round 2, which most everybody in Washington expects will be pumped out, needed or not, later this year or possibly next year.

Add it all up, and what you have is a return to the 1960s and '70s the pre-Reagan years when everybody expected the federal government to pay for everything and local politics was, in large part, the art of lobbying Washington for dough. Federal money in particular is likely to play an enormous role in funding capital projects over the next five years at least perhaps the next 10. For now, all this money seems likely to simply reinforce existing growth patterns, though in the long run things may change.