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Business Observer Thursday, Nov. 5, 2009 10 years ago

Tallahassee Knows Best

How much land is needed for what purposes is not really up to local governments and developers through a tedious planning process, but instead depends heavily on a state agency's belief that it knows best how much land should be used for what, where and when, from Pensacola to Naples.
by: Jay Brady Government Editor

Mounting criticism of a state rule considered by many to be an arbitrary, anti-democratic economy-killer has forced a Nov. 10 workshop that could result in changes.

But don't bet on it.

The rule essentially allows major land-use decisions made by locally elected officials to be overruled by unelected, career bureaucrats in Tallahassee.

Economist Adam Smith's invisible hand of the market (a metaphor describing the self-regulating nature that guides markets) is elbowed aside for this rule when it comes to balancing supply and demand of limited resources — something prices normally do.

Tom Pelham, secretary of the Florida Department of Community Affairs, an attorney and a certified planner, says when there's not enough regulation of the supply of developable land, “It's not just the private sector that suffers, it's the public sector at large that suffers.”

He cites the failed Connerton development in Pasco County as an example where he says the needs analysis was ignored. However, that's a community development district where it's builders and bondholders facing losses.

And many leading economists argue it was restrictions on housing supply that led to affordable housing problems a few years ago and creates the foundation for boom-bust cycles. (See “Ground Zeroes,” 6/5/09 Review.)

A “needs assessment” has come to be a key component of land use planning. Local governments determine what they think DCA will accept as the appropriate supply of land uses necessary to accommodate future demand. They do that because DCA can veto local decisions.

Inherent in the rule is a belief that supply generates demand, a situation economist Henry Fishkind calls “a rare situation.” Indeed, the movie “Field of Dreams” famous line — If you build it, they will come — was fiction.

The agency rule the locals must follow has come increasingly under attack by more than just developers. The reason: The rule has been used to reject proposed land use amendments initiated by both local governments and property owners.

Because land use amendments can be the first step in the development process they can serve as the spark to get the economy rolling again, a concept not lost on state Sen. Mike Bennett, R-Bradenton, chairman of the community affairs committee and a member of the Senate select committee on Florida's economy.

He sees the needs analysis requirement of plan amendments as a roadblock to jumpstarting economic growth and likens it to a state agency, “saying we have too many cars in Florida so we're not going to sell any more cars in Florida.”

He puts it bluntly: “It's a taking of your private property rights.”

And an October staff report from DCA committee office charges that the growth management law that the rule is based on “has not been consistently enforced.”

That shouldn't be too surprising given the statutory language is easily open to interpretation. It may come down to how DCA interprets the word “accommodate”. The word has eight definitions by one dictionary. This is how the relevant part of section 163.3177(6)(a) reads:

“The future land use plan shall be based upon surveys, studies, and data regarding the area, including the amount of land required to accommodate anticipated growth; ....”

But it's a section of Rule 9J-5, part of the Florida Administrative Code, that's at the center of the debate and now scheduled for a rulemaking hearing Nov. 10 in Tallahassee. Here's what it says:

“An analysis of the amount of land needed to accommodate the projected population, including:
1. The categories of land use and their densities or intensities of use,
2. The estimated gross acreage needed by category, and
3. A description of the methodology used.”

Critics claim DCA staff misinterprets the law and the rule to put a ceiling on how much development potential a community should have available.

Floor or ceiling?
Linda Shelley, a former DCA secretary and now a land use law attorney with Fowler, White, Boggs in Tallahassee maintains it only sets a floor meaning a minimum amount of housing units and non-residential acreage needed to accommodate projected growth.

Still, she lost that argument when her clients' plans for a two-unit per acre development on 396 acres in Marion County went down the drain at the hands of the governor and cabinet in September. Pelham passionately pleaded with the cabinet for the denial.

Two citizens appealed the county's plan amendment adopted two years ago, and it was “the lack of an adequate demonstration of need” that killed the plan per the final order.

But a key reason little “need” could be shown was because DCA argued that the county plan had only a 2010 time horizon and even if were extended out to 2015 they argued there was adequate supply beyond then.

Whatever the case, there is agreement that it's not clear, hence the need for the workshop. But free market thinkers shouldn't get their hopes up too much.

“I expect it's going to be more clarification and more spelling out the requirements rather than making any new requirements,” says Merle Bishop, legislative committee chairman and president-elect of the Florida chapter of the American Planning Association. Bishop, a veteran planner in Lakeland with engineering and planning firm Kimley-Horn, calls the rule “problematic ... particularly for counties with big, expansive areas.”

Although Pelham shares Bishop's concerns about needs analysis “myths” floating around, he says he's open to substantive changes that reflect the times. “We really want to hear from people. I know it is an issue out there that people are interested in. It causes us to take a second look at what we're doing.”

'de facto rule'
Planning time horizons are just one of several significant issues Shelley and Fishkind have brought to DCA's attention, but except for the workshop say they've gotten nowhere.

Other big issues include unreliable population projections and DCA's shaky assumption that land will always be used to the maximum allowed — a plan review criteria Pelham says he will consider relaxing.

Fishkind, whose firm is part of a cottage industry preparing needs assessments for private clients and local governments, elaborated on each of these issues in a 141-page memorandum Jan. 13. Pelham says it went to the Legislature and he got it from them, but hasn't responded.

A whopping 45 pages of the memo is Fishkind's “City of Wildwood Residential Needs Analysis for 2008 Comprehensive Plan Rewrite.”

According to Fishkind, “DCA rejects all needs analyses routinely, including Wildwood.” Pelham stands by his department's action, saying Fishkind's Wildwood analysis “was beyond being professionally acceptable. It wouldn't pass anyone's straight face test.”

Fishkind accuses DCA staff of imposing a “de facto rule and methodology for the determination of need” without any supporting data or analysis to justify it.

For population projections, local governments typically default to the medium projection from the University of Florida's Bureau of Economic and Business Research (BEBR) because of the hassle of proving why another method is professionally acceptable only to meet Fishkind's fate with Wildwood.

But BEBR forecasts are only made at the county level, creating issues with allocating numbers to cities. Moreover, the projections “reflect a trend analysis only,” according to Fishkind, though the model is supposed to pick up demographic trends like aging baby boomers and smaller household sizes.

Finally, BEBR projections have a history of being off the mark — by as much as 130%, according to Fishkind.

Professor Chapin, who also oversees FSU's Center for Demography and Population Health well knows the problems with BEBR forecasts. “The BEBR projections are very mechanical,” he says, adding “they tend not to be much forward looking ... so what they end up with is that when they're wrong, they're very wrong. ... They've missed low much more often than they've missed high.”

And Fishkind argues in his memo that BEBR numbers fail to account for so-called “structural changes” as he maintains is the case in Collier County, where major highway and interstate expansions, enhanced airport facilities and corporate locations led to rapid growth. But DCA rejected that analysis, too.

Market factor trump card
Another area of contention is the market factor used as a tool to determine the amount of land use supply needed to accommodate growth. Critics contend it's most often way too low, and even Pelham admits one key reason is that local governments fail to regularly update their plans and thus plan horizons shrink.

DCA staff recommends a market factor of 1.25, meaning a plan allows for land uses supporting 125% of the projected population. The concept is that the added 25% provides some market flexibility and builds in some error cushion for lowball population projections.

Interestingly, Pelham says the rules establish “minimum criteria” for local governments to follow in designing plans.

Although Pelham also says it's just one of several considerations, his staff treats it more like a maximum, according to critics like Shelley, who counters, “It's that factor that trumps everything.”
Asked if there were any studies to justify the factor, Pelham says it's supported by growth management laws and the rules which are approved by the Legislature.

Valerie Hubbard, a certified planner who headed DCA's community planning division from 2003 to 2007 before joining Akerman Senterfitt's Tallahassee law office, says, “It seems DCA is applying a methodology and a number without really being able to demonstrate why that's the right number or the right methodology.”

Todd Pokrywa, a certified planner for Schroeder-Manatee Ranch, developers of Lakewood Ranch at the Manatee-Sarasota border, agrees with Hubbard about the market factor, “I think it's just arbitrary. I haven't seen anything that justifies its use,” he says.

Professor Chapin sees DCA's views this way: “They're so tied up in this emphasis of need and don't see the forest for the trees. We have a lot of planning, but we tend to focus on process rather than outcomes.

But with all due respect to big brother, perhaps Nobel Laureate economist Frederich Hayek said it best, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

How under-allocation can stifle economic growth
“Under allocation occurs when there is not enough land in a land use category, in a specific area, to accommodate demand. If there is a higher demand for land than what is available to build, land prices will increase and development costs will go up. Location problems can also occur because under-allocation may limit a developer's option on where to build a new development. Finally, because development is a job creator, under-allocation has the potential to stifle economic growth.” (The Florida Senate Committee on Community Affairs, October 2009.)

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