What causes sprawl? Urban experts cite many factors, including the following: some people's preference for low-density housing; white flight; lack of effective regional planning; cities competing for jobs and tax base instead of cooperating; "redlining" (geographic and racial discrimination against older areas by banks and insurance companies); crime and perceptions of crime; declining quality of central city schools; contaminated land (brownfields); exclusionary suburban zoning that blocks apartment construction; federal capital-gains rules that used to encourage people to buy ever-larger homes; the historically low price of gasoline; and federal highway spending far exceeding that for public transportation.

But another important factor are economic development subsidies like tax increment financing (TIF) and enterprise zones that have gone awry and are being abused in ways their creators never intended. In essence, taxpayers buy sprawl with the following types of subsidies.

Tax Increment Financing
Tax increment financing (TIF) is an arrangement in which a portion of the property tax (or in some places, sales tax) associated with a redeveloped property is diverted into a subsidy for the developer. TIF is now allowed in 47 states and Washington, DC. Many states originally restricted it to truly needy areas experiencing forms of distress such as widespread property abandonment, rampant building code violations and high levels of poverty. But over the years, about a third of the states have loosened their TIF rules, so that even affluent areas qualify. The wealthy Chicago suburb of Lake Forest, for example, has a TIF district--and a Ferrari dealership! Pennsylvania's TIF statute allows a trout stream near Pittsburgh called Deer Creek to be TIFed because the land has "economically or socially undesirable land uses."

Enterprise Zones
Enterprise zones, another geographically targeted program originally intended to help poor inner-city areas, have also been weakened in many states so that affluent areas can grant lucrative zone subsidies.

New York, for example, allows zones to be gerrymandered non-contiguously. As a result, Buffalo's two original enterprise zones have morphed into more than 130 non-contiguous areas, thus raising questions about favoritism. A scathing Buffalo News investigative series found that "[t]he program, crafted to create business in distressed areas and jobs for the down-and-out, has transmuted here into a subsidy program for the up-and-in."

In an episode that gives new meaning to the term "Philadelphia lawyer," some law firms there are moving a few blocks within the downtown area into a "Keystone Opportunity Zone," which will make the firms' partners exempt from state income tax. Meanwhile, the city's African-American and Latino neighborhoods continue to suffer catastrophic rates of abandonment and unemployment.

Anoka, Minnesota
In 2000 Good Jobs First researched a particularly alarming case of subsidized sprawl in Minnesota. In the report Another Way Sprawl Happens, we examined the movement of companies away from the urban core of Minneapolis and out to the distant suburb of Anoka, about 20 miles up the Mississippi River. Anoka used TIF to give free land to 29 small manufacturing companies with about 1,600 jobs. Half of the companies relocated from Minneapolis or older, ailing suburbs on its edge; all the others came from other suburbs. Most of the companies were moving because they needed to expand, and only one of them had even considered leaving the Twin Cities area.

By staying in the region, the companies got to retain their skilled workers and stay close to their suppliers and customers. Yet, at the same time, they moved many jobs away from the region's poorest neighborhoods and those with the most people of color. The moves also took job opportunities away from low-income families that could not afford a car. More than 70 percent of the jobs had been accessible by public transit, but in Anoka they were not. In essence, the subsidies that were meant to produce new economic activity in Anoka actually just created sprawl by moving jobs from Minneapolis and other suburbs away from the urban core.

How can subsidy reform promote smart growth?
There are several ways that subsidy reform can promote smart growth. The first step is for states and cities to disclose information about each of the subsidy deals they provide to companies. This would allow taxpayers to monitor where the subsidy money is going and use the information to evaluate whether or not subsidies are helping revitalize needy areas, or merely exaggerating the advantages suburbs already have. Disclosure would also help taxpayers find out whether subsidies go to companies that locate out in greenfields (undeveloped, rural land), thereby accelerating the disappearance of farmland. But taxpayers cannot assess whether deals are fueling sprawl until state and local governments disclose them.

Community Benefits Agreements
In addition to disclosure, citizens can push for the adoption of smart growth principles by negotiating directly with a developer seeking public support for a project. Community Benefits Agreements (CBAs) are contracts between developers and coalitions of community organizations that can address a broad range of community needs and act as safeguards to ensure that affected residents share in the benefits of major developments. CBAs may include provisions such as first source hiring, living wages and benefits, affordable housing, and open space and transit accessibility.

Transit Accessibility
Another way of making subsidies more conducive to smart growth is to grant them only when the project is located close to public transit. Go to our section Connecting Jobs to Public Transit for more on that.