You Can’t Build What You Can’t Fund

Yesterday, Rick Cole posted on LinkedIn that the City of Pasadena is working on its third revitalization plan for North Lake Avenue in the past three decades with nothing to show for the planning effort. This gets to a critical point for planning’s ability to improve cities: it won’t matter how good the plan is if it can’t be funded. A planner’s ability to understand where sources of funding come from and what funds are available is critical to creating a successful plan. This is not only true for public realm improvements like North Lake Avenue, but for the private development mandated by zoning codes as well.

City resources are finite. While many cities might have big plan to overhaul the city’s built environment entirely, such as when they do a comprehensive general plan amendment, rarely do cities have the funds for such a large undertaking. Most city funds go towards ongoing basic services like police, or towards routine maintenance like pothole repair. Only a tiny percentage of any city’s budget can be dedicated towards investments in the city’s future. Implementation of long-term plans are exactly that, investment in the city’s future.

In fact, most of these types of investments do not come from ongoing revenue, they are made with one-time funds. There are three primary avenues to deliver these one-time funds. First, many cities apply for competitive grant programs from the State or Federal government that can be used for these types of improvements, such as the Regional Early Access Planning (REAP) Grant Program, the Infill Infrastructure Grant (IIG) Program, or the Community Change Grant Program that was part of the Inflation Reduction Act. Second, cities can issue bonds and take on debt to make public realm improvements that will be paid back from the increase in tax revenue spurred on by these investments. Third and finally, cities can rely upon the private sector to make the improvements to the public realm piecemeal as the adjoining properties are developed.

It is incumbent upon planners to understand these funding mechanisms and to include them in the plans they produce for the public sector. The requirements for housing elements provide a great guide for what should be included in all plans in this respect. Housing element programs must include a timeline and source of funding for implementation. Often times, the source of funding is nothing more than the “City General Fund” or “CDBG Funds,” but it is something that commits the city to how it will spend its limited resources and forces the city to thing through where else funds might come from.

Housing elements provide a good example of the other way cities must think about project funding and the limits financing places on what gets built. One of the questions cities must answer in their housing element is whether the development standards in their zoning code create a constraint on residential development. Part of this is a question about the physical attributes of a property, and whether the allowed density can be achieved given the parking, setback, height, open space, and unit size requirements contained in the zoning code. However, part of this analysis also needs to be a determination whether any of the requirements create a constraint on housing development by creating conditions where new development is not financially viable. It is easy for cities to raise the cost of construction to a point where it no longer makes sense to build new housing through the application of building and development standards, such as requiring fire sprinklers, multiple points of egress, and 360 degree architecture. Combined, these requirements ensure that developers cannot earn a profit and that new housing never gets built.

As zoning codes become increasingly specific regarding what is allowable, cities limit what is feasible. Planners must have a basic understanding of how the requirements they institute drive the cost of construction, and how that in turn impacts the feasibility of anything being built. A zoning code that constrains development to the point where nothing gets built is no better than not allowing any building in the first place.

Every city plan, at the outset, must come from the understanding that what gets financed gets built. As part of the planning effort, planners must identify the sources of funding available to implement their plans. If no funding is available, the plan should be modified so that it can be built as best as possible with the available resources. Failure to do so results in urban planning being nothing more than an exercise in writing speculative fiction.