Developers don’t need subsidies, just more land

Joe R. B. Hacker
Joe R. B. Hacker

In the past 30 years, I have been a principal in the development of more than 1,000 acres and over 2,000 home sites. I was honored twice with appointment to the task force considering expansion of the Urban Services Area.

In every deliberation about expanding the area, those who object to suburban development as well as some members of the Urban County Council and staff have raised the specious argument that such expansion requires significant public expense in the form of infrastructure. This is not the case.

The $750,000 development subsidy fund now being considered by the council is unnecessary, inequitable with respect to other businesses in Lexington and is an unwarranted fiscal burden on the residents of Fayette County.

But city officials will need to make more land available for development because infill development imposes significant public costs in upgrading services and maintenance.

To properly consider these issues, it is necessary to establish what we mean by development and infrastructure.

When most people think of development they mean the conversion of vacant land, usually farmland, to suburban residential use.

Developing residential land involves the installation of streets, curbs and sidewalks, storm and sanitary sewers, electric service, water, telephone and TV facilities on vacant land. These improvements comprise on-site infrastructure and have never been, and should never be, subsidized with public money.

Other infrastructure necessary for residential development are off-site and include large sanitary and storm sewers serving multiple neighborhoods, parks and open space and streets and roads that connect the subdivision to major traffic arteries.

Until 1998, construction costs for most of these necessary off-site items were incurred by local or state government. In 1998, an ordinance was adopted establishing a development exaction. The exaction is a direct cash payment from developers to cover the entire cost of these improvements.

Since 1998, the cost of all infrastructure both on-site and off-site has been borne solely by the private developer.

Land development is a business and, as a business, it’s purpose is to produce a profit for the developer. It is a lucrative business. No subsidy is required to induce developers to develop.

If the county wants to get the three jobs per house (Eye on Housing 2014 National Association of Home Builders) suburban development creates — as well as the increased property taxes it generates — all it needs do is provide developers enough land to develop.

Activists against more suburban development have long asserted that since infrastructure already exists in the built-up area, new development and redevelopment inside the Urban Services Area are less expensive for the developer and the city.

This is patently false. Inadequacies of infrastructure in the infill areas is universal and expensive to correct.

For example, the $600 million for remedial sanitary and stormwater system in the existing urban area is all public money. In reality infill development puts a tremendous strain on existing facilities and services requiring inordinate public upgrade and maintenance costs.

Another argument from new urbanists is that infill reduces the necessity of increasing the size of the Urban Services Area. This likewise is a fallacy. The limited amount of available redevelopment land for the niche market it serves is only a fraction of that necessary to keep up with housing demand, and does almost nothing to meet the public’s overwhelming demand for suburban housing with backyards on safe streets.

Joe R. B. Hacker of Lexington is owner of Hacker Builders.