Sprawling for dollars

In the Sacramento region, speculators can still purchase outlying agricultural land cheaply, then persuade local governments to approve development there. Once approved, the speculators can then sell the land for 50 to 100 times more than they paid. If these speculators do a deferred tax under the IRS’ like-kind exchange out of their newly valuable land, they do not even pay income tax on that 5,000 to 10,000 percent profit. All they pay the locals is chump change in planning fees. The incentives obviously support ever-expanding edge development—sprawl.

These incentives are as unnecessary as they are outrageous in an era when local governments are financially strapped. Sacramento County has 20 years worth of infill land to develop now. Why do local governments approve annexing more land? Because it’s profitable for land speculators, not because it serves the public.

Proposition 13 was supposed to help grandma keep her house, but it certainly helps speculators hold onto land cheaply.

These incentives to speculate reveal Sacramento’s local governments are at worst corrupt, or at best clueless. Yet our demands for good public policy have dwindled so much that Sacramento residents just re-elected the same business-as-usual county supervisors.

Consider the alternative: In Germany, despite the euro zone troubles, unemployment is at 5 percent and the average wage is $53,000. There, developers must sell land to local governments at the agricultural land price and repurchase it at the development land price. The public gets the profit, not some speculator, and developers have no incentive to build sprawl and lengthen commutes.

Some hopeful signs remain. The Sacramento Area Council of Governments’ Blueprint project may yet persuade local planners to make pedestrian-friendly, mixed-use, nonsprawl developments the rule rather than the exception. After all, that’s what the market wants. The most valuable property per square foot in the region is in such a nonsprawl neighborhood—McKinley Park.

However, the egregious profit from rezoning that enriches land speculators is one dysfunctional public policy that appears to be off the table, at least for this election cycle.