Give existing communities priority for economic development dollars
State leaders can revise the criteria that govern the distribution of economic development funds to encourage development within existing communities. The criteria should favor projects that are near transit, involve the reuse of existing structures, increase the mix of land uses in a neighborhood, have a range of densities, provide affordable housing and support walking.
Economic development spending usually falls into one of three categories: 1) "as of right" spending, or money to which a project or locality simply is entitled; 2) geographically targeted subsidies, such as Enterprise Zones or Tax Increment Financing, for which a project must qualify; and 3) competitive-incentive programs, such as infrastructure revolving loan funds.
The first two categories account for the bulk of economic development spending in most states, and legislative approval usually is required to change the criteria for distributing their funds. Competitive-incentive programs could be easier to change because the criteria often can be tweaked administratively.
Rather than changing the criteria for each program, the State can adopt a policy that targets all state investments, including economic development spending, to existing communities and designated growth areas. This was done in Maryland under the Priority Funding Areas Act and in Massachusetts as part of its Commonwealth Capital Program (See Policy #8, Integrate the state's smart growth criteria into discretionary funding decisions, in the Comprehensive Approaches section). Such a comprehensive approach helps states avoid piecemeal changes to individual subsidy programs.
- California's Smart Investments Program
In 1999, the California State Treasurer's office revised its criteria for the distribution of its investments, along with investments by the state's two pension funds, CalPERS and CalSTRS. The new criteria give priority to investments in existing communities, projects that increase transit use, and those that support historic preservation, the rehabilitation of affordable housing or urban infill.
Between 1999 and 2005, the Smart Investments strategy guided $24 billion in state infrastructure and pension-fund investments toward smart growth projects and increased development in existing communities.
— Smart Investments 2006: Five keys to Smart Investment in California's Future