From Wayne Senville, Editor of the Planning Comm'rs Journal:
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From Wayne Senville, Editor of the Planning Commissioners Journal
Cities and towns are increasingly recognizing that walkability plays a key role in achieving broader economic and social goals, such as revitalizing urban centers, creating a sense of place in suburbs, and reclaiming the attractiveness of small towns. In our Winter issue, Planning Commissioners Journal columnist Hannah Twaddell reports on the growing interest in walkable communities. Twaddell is a senior transportation planner in the Charlottesville, Virginia, office of Renaissance Planning Group. Her "Forward Motion" column appears regularly in the PCJ.
Here's part of a discussion Betsey Krumholz, our general manager (who has served in Burlington, Vermont, on both the planning commission and school board), had with Hannah Twaddell about her article.
Betsey Krumholz: One of the most interesting aspects of your article is the connection you draw between walkability and economic vitality. For example, in your article you mention Binghamton, New York, where you worked as a consultant, as a city where this link led to a different way of looking at development.
Hannah Twaddell: The Binghamton region, like many others whose economy was based on manufacturing, had fallen on hard times. As part of the effort to shift from traditional industries to smaller high tech and R&D companies, the city was looking to attract the "creative class" of young urban professionals, as well as encouraging the local university students to stay in the region.
The region's Metropolitan Planning Organization wanted to focus its resources on attracting those much-needed urban businesses and residents. A second reason was to support the significant aging population - and make the area safer, more accessible, and more attractive to the long-time residents.
Supported by the MPO, our firm undertook a formal visioning process for the entire region. Through community meetings and workshops, people were encouraged to think about the qualities they wanted to encourage in their neighborhoods and towns, and how they wanted the region to grow.
Betsey Krumholz: How did work on a transportation plan tie in to economic development issues?
Hannah Twaddell: Like most communities, Binghamton had an economic development plan. They had identified special assets, market niches, resources, and so on -- but there was not much in the way of maps and geographic renderings to plan where this new activity should go.
Once we sat down and looked at options for attracting these new uses to various places, we discovered that a good number of them would best fit in core urban areas, rather than in industrial cul-de-sacs or suburban shopping centers. The fact that these areas offered rich pedestrian networks gave them a huge advantage when it came time to identify the most cost-effective, attractive places to locate new jobs and housing.
Many older cities, like Binghamton, are very walkable, but need new activity to draw people back onto the streets. By contrast, many newer cities and thriving suburbs have plenty of activity but suffer from terrible traffic congestion and a lack of personality because they are designed for cars rather than for people. Both of these situations provide opportunities to improve economic vitality by making pedestrian-oriented investments. It's just a lot cheaper and easier to focus on improving the vitality of existing urban areas than on building entirely new infrastructure and redesigning streets and buildings to make walking and transit truly viable travel options.
Betsey Krumholz: So how did you go about this in Binghamton?
Hannah Twaddell: We established a set of building blocks by looking at different types of community development patterns found throughout the region, and talking with people about how they would prefer to see these areas grow. Usually people wanted more pedestrian-friendly places, better connections to the area's beautiful riverfronts, and more options for people to drive short distances, walk or use transit for their daily trips. We drew some "enhanced" patterns that matched these ideas to real places, and then worked with folks to evaluate different regionwide combinations of patterns.
Through this process, it became clear that the region would benefit most from investing transportation dollars primarily on pedestrian, bicycle, and transit improvements in the central cities, rather than on extending freeways out to the suburban areas, a big departure from the current thinking. This fundamental policy shift led the way to a significant update of the regional transportation plan.
Betsey Krumholz: I want to shift to something else you mention in your article, and that's the frustration of parents who drive their children everywhere. Driving kids to sports practice so they can exercise has always struck me as funny -- but today it's serious business. You've also previously written in the Planning Commissioners Journal about Safe Routes to School programs -- one great way to get kids out of the car and parents off the roads -- what else can we do?
Hannah Twaddell: In the planning realm there is a growing interest in school design and location. Older neighborhoods are trying to reuse or build neighborhood schools, and newer developments are looking to locate schools and parks closer to the homes so kids can walk or bike.
One of the biggest barriers many communities face to making this happen is their adopted standards for school size. The amount of acreage typically required for playing fields and parking, not to mention buildings, can make it nearly impossible to site a school in a dense, walkable place. The good news is that most of these requirements are based on national guidelines that have recently been updated to provide for more pedestrian-friendly schools. [note: see the CEPFI, School Building Association website; a background paper (pdf format) School Site Size — How Many Acres Are Necessary? is also available].
Planners need to educate themselves and their school departments about the new standards and examine their own local codes and land use practices to make sure they are in fact encouraging community-centered schools. In addition to the transportation and quality of life benefits that can be gained by more efficient school location and design, towns may well save money by using existing infrastructure rather than building more, such as sharing town parks for school athletic fields.
In addition, planners can look at greenways, sidewalks and bike routes connecting schools, parks, libraries, neighborhoods, and other places kids could potentially go by themselves if they had a safe travel network. We can work with developers to co-locate schools with new housing, and create street connectivity and sidewalk requirements to connect the dots. We can use existing funding devices, like impact fees, to leverage private sector involvement.
The pattern of low-density, dispersed, automobile-oriented development has been gaining momentum across the whole country for more than half a century now. We may not be able to stop this trend and turn the ship around overnight, but we can start improving the walkability of the development we have, and looking more thoughtfully at where we encourage new growth and locate our public facilities.
| Editor's note: Our Fall 2004 issue, available to order by mail or to download, focused on Schools & Planning. Individual articles from the issue can also be ordered and downloaded. We've also posted on our PlannersWeb site a resource page on this topic. |
Betsey Krumholz: Beyond schools is there anything else we should be looking at?
Hannah Twaddell: In the public health arena, there is a growing interest in getting kids moving in order to combat the epidemic of childhood obesity. Organizations like the Centers for Disease Control and the Robert Wood Johnson Foundation have made it clear that the double whammy of high-fat, high-sugar diets and sedentary lifestyles is crippling our nation's children. And the problem is embedded so deeply into our culture that it's really hard to combat.
We will have to tackle the problem from all these angles and more in order to create healthy environments for our children. We got ourselves into this mess in part by separating land uses to the point where residential neighborhoods can't incorporate even small-scale commercial and civic activities that people could walk to, like dance studios, doctor's offices, corner groceries, or public swimming pools. We can start digging ourselves out of trouble by making sure our codes allow for these types of mixed uses and that our requirements for street connectivity and sidewalks make it easy for people, especially children, to access them from home.
"Safety" is also cited as a prime reason parents drive kids everywhere. There are two big factors at play here, both of which can be addressed by encouraging walkability. One is the legitimate fear of high-speed traffic. Slowing down traffic, especially at intersections, is a critical requirement if we hope to get any people out of their cars, especially children.
The second fear is somewhat less rational, but even more powerful -- that our children are certain to be kidnapped, attacked, or otherwise harmed if we let our eyes off them for even a second. Somehow, we've lost our faith in "the village" of other people whose help we really do need to raise our children. Perhaps it's because we've lost the village itself. Providing well-designed public spaces and pedestrian-friendly streets could go a long way toward restoring our villages, literally and figuratively.
Twaddell's article, Let's Plan on Walking can be downloaded for a small fee. You can sample the start of the article (first two pages) at no charge.
From Wayne Senville, Editor of the Planning Commissioners Journal
Many planning commissioners are unfamiliar with the basic financial considerations that go into putting together a development project. In our just published Winter 2007 issue, real estate economist Wayne Lemmon provides an inside look at how developers use the proforma in making their financial analysis.
Lemmon holds a degree in architecture from Cornell University, and urban planning from the City College of New York. He has 30 years of experience with national real estate consulting firms and development organizations, and is currently the Director of Market Research for a regional homebuilder. Lemmon is also a member of the PCJ's Editorial Advisory Board, and previously authored The New "Active Adult" Housing in our Summer 2003 issue. He lives in Somers, NY."
Wayne Senville, Editor: Wayne, can you start us off by briefly describing just what a proforma is?
Wayne Lemmon: The proforma is the basic financial analysis that developers do in deciding whether to move forward with a project. A proforma analysis looks at the financial return that a proposed real estate development is likely to create. It begins by describing the proposed project in quantifiable terms, then estimates revenues likely to be obtained, costs that will have to be incurred, and the net financial return the developer expects to achieve.
Senville: In your article one of the areas you focus on is the impact of uncertainty on the rate of return developers look for in putting together a project. Why is uncertainty an important concern for developers, and why does it affect the needed rate of return?
Lemmon: Reward going with risk is basic to business economics, just like the laws of supply and demand. There are lots of investment opportunities available, including just keeping your money in the bank and earning cash returns. I'm willing to make a slightly riskier investment, say, in a mutual fund, if I can get a better return. I might be willing to take an even greater risk if the possible reward is even higher. The only way that I can contemplate a very high risk venture is if the potential pay-off at the end is equally high.
Developers have to decide how to use their money. A ready-to-go, pre-approved parcel can be bought anticipating modest but nearly certain returns. Where the ability to develop a property to its full potential is at risk and might not be achieved, the potential reward needs to reflect that, or the developer will redirect the investment elsewhere.
Senville: What sort of factors can increase uncertainty for a developer?
Lemmon: In the development process, uncertainty comes from not knowing the timetable for starting a project, the amount of development or size of the project that will be approved, and even if approval itself can be obtained. Sticking to a fixed procedural calendar and approval criteria reduces these risks. Opening up the approval process to new considerations and continuing the approval process over an extended time frame increases these risks.
Senville: I've heard developers complain that some communities are much harder to deal with than others in terms of the review and approval process. Are there things you've found that towns and cities can do to make development review go more smoothly?
Lemmon: Key elements are just as I mentioned -- essentially "sticking to the rules." Public comment and debate needs to have fixed closure times, and approval standards should not change in mid-process. Most builders will willingly work with high and even strict standards as long as they are reasonable and unchanging.
One thing that can help is having frank working meetings with the decision-makers early in the process. If the community's objectives are known from the onset, a builder will typically try to work to fulfill them. Where problems occur is when a community is pursuing an anti-growth agenda using surrogate means, such as vague design criteria, agenda delays, or excessive environmental regulation. In these cases, the communities are playing a game of obstructionism rather than dealing with the need to establish a clear and open policy on growth and land use. Everything always works better when policies are known, and the parties approach the process with clear and honest intentions.
Senville: From my own experience serving on a planning commission, and from what I've heard from other planning commissioners, there are also concerns that some developers are so focused on the bottom line that they fail to take into account the fact that they're creating a residential community that will be there for decades to come. Is there anything local planners can do if they want to maximize their chances of getting high quality development? Do developer's have a responsibility to the broader community they're building in?
Lemmon: Builders come at all levels of competency and quality. Builders with a concern for their long-term image will tend to recognize a higher standard of performance, while smaller construction operations may be more tightly focused on the daily cash flow.
Most of the larger regional and national builders today know that quality sells, and that quality is measured not only in the structures but in the community plan and the entire amenity that is being created. However, zoning laws and building codes are designed to enforce standards that meet minimum requirements, and a development plan that meets the minimums is legally entitled to be built.
In the long term, a builder does better by adhering to high standards, but for some builders, taking the long view is a luxury they can't afford. At the same time, communities also have a responsibility to periodically review their standards to be sure they are producing satisfactory results. If a community is generally unhappy with projects that meet all legal responsibilities, then the responsibility falls to the town to tune up their requirements to better fit what it's trying to achieve.
Senville: One of the most fascinating parts of your article is your explanation of how the proforma can be used, as you put it, "to test other possibilities and 'what if' scenarios." You then set out several different scenarios, including the impact of higher construction costs and the impact of delays in getting the project built -- and what this can mean for the bottom line and the project's financial viability.
You also look at the impacts of including affordable housing in a project. What was most interesting to me was how the proforma identified a way of having a "win-win" solution, where affordable housing could get built, yet the developer still could still make a sufficient profit to proceed. Can you briefly walk us through using a proforma to make this kind of analysis?
Lemmon: If you have any significant experience in development, even in the role of planning and review, you tend to know the factors that most directly affect a project's profitability, and that is where your attention goes first. Factors such as land price, as well as density and development quantities are huge. Factors such as dollar-per-square-foot costs, while very important, are often slightly less significant because of possible savings elsewhere or other mitigating factors.
If you have a moderately sophisticated feasibility template as a computer system or as a spreadsheet, you can easily keep typing in test values in one factor while literally watching the bottom line to get a desired result. Of course, at the end of this testing, you still have to satisfy yourself that your assumptions or test values are realistic, and that you're not pinning your hopes for the project on some windfall savings in costs or some other big "IF" that has little likelihood of actually being achieved.
One example of this type of analysis is called solving for "residual land value." This is where you set your target for rate of return as "fixed," along with your best estimates of sales values and construction costs, and then vary the land purchase costs so that you achieve your target return. This tells you what value the land has in order to achieve the development project envisioned in the proforma, and this type of analysis is typically done while conducting negotiations for purchasing the site.
In a constrained market, you can also set a fixed return target, and vary your sales price assumptions to test for the lowest possible prices that you are willing to accept. Proforma analysis is just a tool, but a very powerful tool. With skill and creativity, balanced by sober reality checks, you can find your way out of a tight situation, or identify new opportunities.
Lemmon's article, Proforma 101: Getting Familiar With a Basic Tool of Real Estate Analysis can be downloaded for a small fee. You can sample the start of the article (first three pages) at no charge.
To Build or Not to Build 
read first 3 pages of article (pdf) read first 2 pages of article (pdf) 
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