Turning NIMBYs Into YIMBYs With a New Tool for Building Infrastructure

I've been thinking a lot recently about how to actually see some change in San Diego that allows us to move towards the ideal city we want to live in.  San Diego tends to stick to the tried and true and doesn't create a hospitable environment for radical change.  In the face of that, incremental change may be the most we can hope for, so long as it is confined to acceptable means.  As the title of this blog suggests, I think one way we do this is to create more YIMBYs.  Of course, one way to do this is to get other like-minded folks involved.  The other way is to either lessen the power of NIMBYs or turn NIMBYs into YIMBYs.  But how could we do that?

One option is to fight the good fight by appealing to reason with the hope of convincing the NIMBYs of the errors in their arguments against development.  If the NIMBYs would only accept that their opinions are wrong, the YIMBYs could rule the world!  Right. A virtuous fight, but a tough slog.

But that doesn't have to be the only option.  As Ben Franklin once said, "if you would persuade, you must appeal to interest rather than intellect."  If we could find something to give to the NIMBYs that directly results from development, we could in effect "buy" their support.

So what can we give to appeal to the interests of those that oppose new development? NIMBYs commonly argue that their neighborhood can't handle more residents without first getting new parks and libraries and sidewalks and all the other nice things we all want.  Of course, it's hard to promise these things given our current state of municipal fiscal affairs.  We have no money for anything beyond the bare essentials.   And requiring developers to pay for niceties messes with the profitability of projects, making them less likely to ever happen.

So what can we do?  Luckily, the state legislature and Governor Brown gave us a possible tool that's been lurking in the Government Code for about a year.  After the fall of redevelopment agencies, a new legislative option emerged: Enhanced Infrastructure Financing Districts.  So how do these "EIFDs" work?

In basic terms, the City and County agree to create a new EIFD for any given geographic area.  Say, Hillcrest or Bay Park.  Or even the Transit-Priority Districts as defined in the Climate Action Plan.  Once formed, the EIFD law allows the District to claim as its own any incremental increase in property tax for all properties in the property.  So, if the properties within the defined District currently generate one million dollars in property tax and then generate two million dollars in property taxes the next year, the District would get that extra million dollars (except the amount of property tax meant for schools).  The District can take all of this additional revenue or any smaller portion thereof.

Once the money starts flowing in, the law allows the EIFD to spend that money on lots of goodies: parks, streets, parking and transit facilities, and affordable housing. To goad developers to move in, the money can also be used to pay for the affordable units included in a private market-rate building.  In effect, it allows the District to benefit from any increase in property taxes.   The increase in money generated by the District stays in the District.  The District can either spend that money or, with a public vote of only 55%, issue bonds to be repaid with future revenue. 

Now, of course, this will take money away from the City as a whole.  Instead of the money going into the General Fund (where it can be spent on basically anything), it will be dedicated to infrastructure in that given District.  In that sense, it is not entirely different from Councilmember Mark Kersey's infrastructure funding proposal.  

Why would we, as a City, be willing to do this?  That's where the carrot comes in: the City should only form the District if the District is willing to take steps to drastically increase property taxes generated by that District.  If the District collects only a portion of the incremental increase, then both the City and the District benefit.  In effect, the City could hold a "race to the top" style incentive: go along with a plan to increase property tax revenue, and we will let you keep a sizable chunk of the increase. 

In California, there are three main ways to spur property tax revenue growth: (1) trigger new and frequent sales of properties (causing a new assessment under Prop 13), (2) increase the value of the land and (3) increasing the value of the improvements, i.e. buildings, on that land.

Each of those options is best achieved by upzoning the land and fostering development.  A community can increase the value of land by limiting the supply of housing, but it is much easier to simply increase the value of land by allowing the owner to do much more with the property, i.e., build more units on the land at as low a cost as possible.  This is a "trick" well known by developers with the time and money to seek an upzoning.  This will also trigger new construction, which results in more property tax revenue: a new condo building is worth more than a parking lot or crumbling old house. If we also wipe out restrictions on development like parking minimums, restrictive setbacks, and onerous review, the land will only increase more in value.

So, in summary: let's offer the "carrot" of a dedicated infrastructure stream for each community contingent on acceptance by that community of development-friendly zoning.  I'm sure some communities won't be interested, but perhaps Hillcrest will change its mind when it sees the beautiful parks, libraries, and sidewalks installed in North Park.  Even if only some communities buy in, it will still be an improvement over current affairs.

Moreover, it's not an unreasonable compromise.  The areas accepting new residents deserve the resources.  If North Park or Barrio Logan is accepting all new development, they shouldn't see the resulting tax revenue shipped off to pave roads in Mira Mesa.  Align the benefits with the costs borne by residents, and we might see some NIMBYs turn into YIMBYs.