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Land LinesL I N C O L N I N S T I T U T E O F L A N D P O L I C YOCTOBER 2011

Large Landscape Initiatives l Scenario Planning l Land-Based Financing l State Fiscal Recovery l New Publications


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F E A T U R E S

2 Exploring the Future of Large Landscape Conservation JAMES N. LEVIT T

Notwithstanding evident federal budget constraints, myriad opportunities are availato pursue projects that are expansive in scale, extensive in scope, and able to achievconservation outcomes.

7 Scenario Planning and the Promise of Open Source ToolsJIM HOLWAY

Sustaining local communities will require mechanisms to envision and plan for the and to engage residents effectively in the process. Scenario planning is an increasingway to address these efforts.

14 Land-Based Financing for Brazils MunicipalitiesDAVID MICHAEL VETTER AND MARCIA VETTER Brazils chronically low level of public sector investment has resulted in serious indecits, often cited as an impediment to its economic development. Municipalities to increase their scal space for investment and other priorities.

20 The Long Road to State Fiscal RecoveryDONALD BOYD

The recent recession has been recognized as the worst in memory, and its effects arebeing felt. Less well understood is the fact that this recession has been far worse forstate governments than the drop in GDP would suggest.

D E P A R T M E N T S1 Report from the President

24 Faculty Prole: James R. Follain26 New Lincoln Institute Publications: High-Speed Rail: International Lessons

for U.S. Policy Makers

Property in Land and Other Resources

28 Working Papers/Program Calendar29 Whats New on the Web

25%

Cert no. SCS-COC-001366

DITORAnn LeRoyer

RESIDENT & CEOGregory K. Ingram

HAIR & CHIEFNVESTMENT OFFICER

Kathryn J. Lincoln

OCTOBER 2011 VOLUME 23, NUMBER 4

The Lincoln Institute o Land Policy is a privateperating oundation whose mission is to improvehe quality o public debate and decisions in the areas

land policy and land-related taxation in the Unitedtates and around the world. The Institutes goals are

o integrate theory and practice to better shape landolicy and to provide a nonpartisan orum or discussion

the multidisciplinary orces that infuence public policyoncerning the use, regulation, and taxation o land.

We seek to in orm decision making through education,esearch, demonstration projects, and the dissemina-on o in ormation through publications, our Webite, and other media. Our programs bring togethercholars, practitioners, public o cials, policy advisers,nd involved citizens in a collegial learning environ-

ment. The Lincoln Institute o Land Policy is anqual opportunity institution.

and Lines is published quar terly in January, April, July,nd October to report on Institute-sponsored programs.

or More InformationThe Lincoln Institute Web site (www.lincolninst.edu)rovides a variety o eatures that make it easy orsers to quickly obtain in ormation on land and taxolicy issues and on speci c education programs,esearch, and publications. The e-commerce unctionermits users to order publications and multimediaroducts and to register or courses.

To receive Lincoln Institute mailings and emailnnouncements and to download Land Lines issuesnd articles, working papers, policy ocus reports, andther materials, go to the Web site ( www.lincolninst.edu )nd select Register. A ter you have registered, youan Log In at any time by entering your email addressnd password. To update your pro le, you must logn and then select register.

Copyright 2011. All rights reserved.

incoln Institute of Land Policy13 Brattle Street

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PUBLICATIONS ANDMULTIMEDIA PROJECTCOORDINATORRobyn F. Salbo

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Land Lines

C O N T E N T S

PAGE 7 PAGE 14

Cypress swamp in South Carolina

iStockphoto


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O C T O B E R 2 0 1 1 Land Lines LINCOLN INSTITUTE OF LAND POLICY 1

Report from the President

A Global View of Infrastructure and Its Financing

Gregory K. Ingram

In rastructure (comprising energy, telecom-

munications, transportation, water supply, and

sanitation) plays an important role in urban

land development, and it infuences city and

country productivity. Data on the amount o

in rastructure stocks at the national (but, alas,

not the metropolitan) level are available or

many developing and high-income countries

and support several results summarized here.

The amount o in rastructure stocks per

capita across countries is strongly related to per capita in-

come levelswhen country incomes double, in rastructure

stocks nearly double as well. However, country in rastructure

stocks have essentially no association with a countrys level

o urbanization once country income is taken into account.

This seems surprising because cities have large amounts

o in rastructure. But they also have dense populations that

use the in rastructure intensively, so per capita urban in ra-

structure stocks are similar to national levels.

The composition o in rastructure stocks also varies sys-

tematically with per capita income. Roads have the largest

share o in rastructure stocks in the lowest income coun-

tries, with water systems second and electric power systems

a close third. As country incomes increase, the in rastructure

related to electric power systems increases more rapidly

than income levels. In rastructure or water and sewer sys-

tems increases less rapidly, and or roads the change is in

proportion to income. As a result, in high-income countries

electric power systems are the largest component o in ra-

structure, ollowed by roads, whereas water, sanitation, and

telephone systems comprise only a modest share o their

in rastructure.

Based on recent rates o economic growth, and using

the existing relations between in rastructure and per capita

income, developing countries are likely to need to spend

about 5 percent o their GDP on in rastructure (3 percent or

expansion and 2 percent or maintenance)currently about

$750 billion annuallyto maintain existing ratios between

in rastructure and GDP. For high-income countries, total

spending would be lower, at 1.7 percent o GDP (about

evenly divided between investment and maintenance)

currently about $700 billion annually. Countries growing

aster than average need to invest a higher share o their

GDP so that in rastructure stocks can keep

up with economic growth.

In some countries, improving the e cien-

cy o service production rom existing in ra-

structure is an alternative to new investment.

For example, average electricity losses

across countries range as high as 25 per-

cent, and leakage and unbilled water can

exceed 30 percent. Reducing such high

losses can orestall the need or additional

capacity. Somewhat surprisingly, per ormance within coun-

tries across sectors varies greatlye cient per ormance

by a country in one in rastructure sector is uncorrelated with

per ormance in other sectors.

What sources will provide these investment unds, par-

ticularly or developing countries? Foreign assistance and

development bank nancing o in rastructure in developing

countries currently total about $40 billion annually, and that

gure has more than tripled since 1990 in current dollars.

Private investment in in rastructure in developing countries

has recently reached $160 billion annually and has grown

eight- old since 1990, also in current dollars. Foreign assis-

tance is directed mainly at energy, transport, and water

and sanitation systems, with virtually no unding or tele-

communications.

In contrast, more than hal o private unding goes to tele-

communications (particularly mobile telephony), ollowed by

energy. Telecommunications and energy draw more private

investment in developing countries because their tari rev-

enues cover a large share o operating costs , whereas tari

revenues and user ees cover a much smaller share o costs

or transport and water and sanitation. Private investment

in in rastructure was concentrated in Latin America and East

Asia in the 1990s but has spread more evenly across

global regions in the 2000s.

Despite the growth in international unding, large and

growing metropolitan areas in developing countries still need

to raise signi cant sums to nance in rastructure invest-

ments. This will involve raising tari s charged to users,

increasing taxes (particularly property taxes) on properties

whose value is enhanced by in rastructure investments, and

establishing municipal bond markets such as the one being

developed in South A rica.



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2 LINCOLN INSTITUTE OF LAND POLICY Land Lines O C T O B E R 2 0 1 1

Exploring the Future of LLandscape Conservation

iStockphoto/Denis Tan

James N. Levitt

In the tradition of previous conservation dia-logues, a cross-sectoral, geographically diversegroup of conservationists convened to seek apath forwardin concert with the Obamaadministrations recently released report on

Americas Great Outdoors (Council on EnvironmentalQuality 2011), as well as myriad initiatives at thestate and local level. Their goals were to advancecollaboration on a large landscape scale among landowners, land managers, and citizens from thepublic, private, nonprot, and academic sectorsThey also sought to understand and expand onthe example set by large landscape initiatives thatare achieving measurable, durable conservationoutcomes that will provide benets for generationsto come.

Just as we can now appreciate the revival of theWhite Mountains of New Hampshire from theirbarren, moonscape-like conditions around 1900to their majestic, verdant stature today, twenty-second century Americans ought to be able toappreciate how our foresight in working across

property, jurisdictional, and even national boundaries has become a key element in the nations

multigenerational effort to preserve essential souof clean water, sustainably produced forest products, and expansive recreational opportunities.

Speakers CommentsThe conference speakers emphasized the importance of sustained cooperation across many orgnizations and sectors to achieve lasting results.Proudly recounting how some two million acresMaine forestland has been conserved over the pdozen years, Senator Susan Collins, Republican oMaine, reported that we have done this by builing a partnership among government at all levelthe forest products industry, environmental, foresand recreation groups, and landowners. Throughthis partnership, we have been able to maintain increase productivity for wood and harvest levesupporting a diverse and robust forest productsindustry that employs tens of thousands of workers who produce paper, other wood products, anrenewable energy. At the same time, we have beable to protect biodiversity, old growth and late

White MountainNational Forestnear the Town of Berlin, NewHampshire


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succession forest, and public access to recreation,and also increase opportunities for tourism(Levitt and Chester 2011, 72).

Representatives Peter Welch, Democrat of Vermont, and Rush Holt, Democrat of New Jersey,each stressed the importance of perseverance insuch efforts. Welch remarked on the value of sus-taining land conservation budgets during the cur-rent round of budget negotiations. He remindedthe audience that in 1864 President AbrahamLincoln took his attention off a monumental crisis the Civil Warin order to sign a bill deeding the area of Yosemite to the state of California forpublic use and recreation. If Lincoln could createYosemite in the midst of the Civil War, Welchasserted, we can do our part in a time of tightbudgets and economic volatility.

Holt focused his remarks on achieving a long-standing promise to fully fund the federal andstateside portions of the Land and Water Conser- vation Fund (LWCF), as well as a number of otherlegislative initiatives such as the Wildlife CorridorsConservation Act. Holt was emphatic in urging the conservation community to respond to theneed for urgent action for our own sake, and forthe sake of future generations. He reminded theaudience of the admonition of President Lyndon Johnson, signer of the original LWCF legislationand the Wilderness Act in 1964: If future genera-

tions are to remember us more with gratitude thansorrow, said Johnson, we must achieve morethan just the miracles of technology. We must alsoleave them a glimpse of the world as it was created,not just as it looked when we got through with it(Henry and Armstrong 2004, 123).

It was evident from the discussions that leadersfrom every sector stand ready to help implementthe cooperative conservation aspirations of Collins,Welch, and Holt. Bob Bendick, director of U.S.government relations at The Nature Conservancy,stated that the overall objective of AGO [AmericasGreat Outdoors] should be to create and sustaina national network of large areas of restored andconserved land, water, and coastlines around which Americans can build productive and healthy lives(Levitt and Chester 2011, 74). Accordingly, Bendickshared with the assembled group his personal dreamthat someday his young granddaughters might,as adults, look out from the arch at the gatewayto Yellowstone National Park and note that allacross America, 400 million people have been able

to arrange themselves and their activities acrossthis remarkable country in a way that reconcilestheir lives with the power, grace, beauty and pro-ductivity of the land and water that ultimatelysustain us all (Levitt and Chester 2011, 75).

Will Shafroth, acting assistant secretary forFish and Wildlife and Parks of the U.S. Depart-ment of Interior, and Harris Sherman, under-secretary for Natural Resources and Environmentat the U.S. Department of Agriculture, sharedtheir frank assessments of the current situation.Shafroth described the hard work and extensivecomments that helped shape the Americas Great Outdoors report. While this work serves as a goodfoundation for the effort ahead, Shafroth notedthat it takes considerable creativity and proactivethinking to sustain conservation momentum in

these times of sharp budgetary constraints.Sherman added that the whole idea of land-scape-scale conservation implies that we needto move from performing random acts of conservation to more comprehensive and collaborativelarge-scale initiatives that engage many agenciesand ownership types. Of particular importance,he noted, will be the outcome of the debate on the2012 Farm Bill, because its conservation provisionswill be critically important to the success of large-scale conservation efforts.

The enthusiasm for large landscape conserva-

tion on the part of speakers from large public and

Conservation Leadership Dialogue

O n March 1, 2011, the Lincoln Institute o Land Policy hostedits tenth annual Conservation Leadership Dialogue with a ocuson The Future of Large Landscape Conservation in America. The

session was organized by James N. Levitt, a ellow at the Lincoln

Institute, with support rom Armando Carbonell, senior ellow and

chair o the Department o Planning and Urban Form. Held in the

Members o Congress Room o the Library o Congress, across the

street rom the U.S. Capitol in Washington, DC, the meeting took

place on the 100th anniversary, to the day, o President William

Howard Ta ts signing o the landmark legislation that allowed or

creation o national orests in the eastern part o the country. The

Weeks Act o 1911, named or Congressman (later Senator) John

Wingate Weeks o Massachusetts, changed the nature o coopera-

tive conservation involving citizens active in the public, private,

nonpro t, academic, and research sectors in the United States.


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F E A T U R E Large Landscape Conservation

ern Arizona to Northern Florida. One of thelongest operating and most important cases is inthe ACE Basin in South Carolinas celebratedLowcountry. The ACE Basin, comprised of som350,000 acres that drain into the Ashepoo, Combhee, and South Edisto Rivers between Charlestoand Beaufort, is one of the largest undevelopedestuaries along the U.S. Atlantic seaboard (gure

In the late 1980s, a group of public, private,and nonprot organizations banded together toform a partnership that would protect the remarkable scenic, wildlife, and water resources in theregion. Among members of the ACE Basin Parnership are federal agencies such as the Fish andWildlife Service and the National Oceanic and Atmospheric Administration; state agencies incling the South Carolina Department of Natural

Resources; national nonprots including TheNature Conservancy and Ducks Unlimited; locanonprots including the Coastal ConservationLeague and the Lowcountry Open Land Trust;philanthropic organizations and individualsincluding the Gaylord and Dorothy DonnelleyFoundation; and private interests such asMeadWestvaco Corporation.

Partnership members have conserved morethan 134,000 acres, covering a contiguous core the heart of the ACE Basin that stitches togetheeasements on private land, a National Wildlife

Refuge, South Carolina Wildlife Management Areas, and a Charleston County natural and his-torical interpretive center, among other properti

As a large landscape initiative, the ACE Basitruly stands out from other efforts. Mark Robertsthe executive director of The Nature Conservanin South Carolina, has noted that the effort set standard of how to get conservation done on alarge scale using collaboration between privatelandowners, conservation groups and governmeagencies. Asked about the signicance of theprogress in the ACE Basin to date, Dana Beachdirector of the Coastal Conservation League, isemphatic: Its real importance is that it has givmany people for the rst time hope that a placeof great importance is not inevitably going to bdeveloped (Holleman 2008).

Next StepsThe leadership dialogue concluded with generalagreement that there is a great deal of work to bdone, as well as an historic opportunity to expan

nonprot organizations was strongly reinforcedby Jim Stone, a private landowner and ranchoperator in Montanas Blackfoot Valley. Stonehelped to start the Blackfoot Challenge, a grass-roots organization that has yielded impressive,measurable results over the last three decadesusing a landscape-scale approach.

Stones colleague Jamie Williams of TheNature Conservancy explained that the BlackfootChallenge has achieved remarkable success overthe years because it has taken the time to engageso many landowners and partners in consensus-based approaches to conservation. Initial smallsuccesses were critical to building the foundationof trust that led to larger successes later (Williams2011). In the area of stream restoration alone, theBlackfoot Challenge has helped to engage more

than 200 landowners in some 680 projects involving 42 streams and 600 stream-miles that have con-tributed directly to an 800 percent increase in shpopulations in the 1.5 million acre valley. Stoneis emphatic in saying that, with the right people inthe right places, what has been done in the Black-foot region could be done across the nation.

Complementing the program was a panel of researchers and academic ofcials representing universities, colleges, and research institutions thatare helping to catalyze large landscape initiatives.Matthew McKinney of the University of Montana

moderated a dialogue with David Foster of Har- vard Forest and Harvard University, Perry Brownof the University of Montana, and Karl Flessa of the University of Arizona. They explored how insti-tutions, within their own walls and beyond, can usetheir analytic and convening capacities to advanceinitiatives with extensive impacts.

Perry Brown pointed out that those universitiesthat will play a role in real-world conservation ini-tiatives will not be insular, but rather will cherishtheir relationships with nonacademic partnerssuch as Indian tribes, state and federal governmentagencies, and large national and small local non-prots. David Foster reinforced that idea by describ-ing the Harvard Forests outreach efforts to developand disseminate its recent report onWildlands and Woodlands New England (Foster et al. 2009).

Large Landscape CasesThere are many exemplary cases of on-the-groundprogress in large landscape conservation across thecountry from Maine to Montana and from South-


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F I G U R E 1

The ACE Basin and Coastal South Carolina

on initial progress in the eld of large landscapeconservation. The discussion of next steps wasorganized to focus on four types of initiatives.

Policy DialoguesThere is a need for ongoing policy dialogue,both among conservationists in the public, private,nonprot and academic sectors and between theconservation community and local, state and fed-eral decision makers, regarding the very timelyopportunities to realize landscape-scale conservationinitiatives across the nation. The dialogue shouldcelebrate existing success stories about both cul-tural and nature-oriented properties (both being highly valued by the public), consider ongoing re-gional conservation efforts, and envision new ones.

In the political sphere, these dialogues should

connect with conservation caucuses at multiplelayers of government (local, county, state, federal,and international). In nonprot and academic con-texts, the dialogue should reach across disciplinesand institutional boundaries. Such intersectoral,interdisciplinary discussions are most likely to comeup with creative solutions and novel ideas. Whilethe dialogues may be able to take advantage of the socially neutral nature of universities as con- veners, they nevertheless need to be responsiveto the practical, on-the-ground issues of vitalconcern to eld practitioners and landowners.

Research Another immediate need is to build on existing maps and inventories (e.g., the Regional Plan Asso-ciations Northeast Landscape Partnership database)to offer a more comprehensive picture of existing public, private, and nonprot initiatives. A morecomprehensive overview of nationwide effortsshould be of particular use to groups and networksworking to advance the practice of large landscapeconservation, including the Large LandscapePractitioners Network, a program of the LincolnInstitute, and the U.S. Fish and Wildlife ServicesLandscape Conservation Cooperatives (LCCs).

Such research efforts should be more region-ally relevant and cost-effective if they involvecooperation among a wide assemblage of publicand private organizations. They might also serveto augment environmental education initiativesthat already are spread thin.

Additional research is also needed to measurethe impacts, performance over time, and conserva-

tion outcomes of landscape-scale initiatives, andto identify the key factors of success for initiativesthat are able to show signicant measureableresults. Of particular importance is research thatis able to identify where, when, and how certainefforts are able to yield measurably improved eco-system services, such as improved water quality,

increased wildlife populations, and enhancedsustainable production of forest products.

Networking A number of large landscape networks have beencreated recently or are now emerging, including the Large Landscape Practitioners Network andthe LCCs mentioned above. As they evolve, thenetworks are likely to nest within one another atlarger and larger geographic scales, but they willalso need to focus on sharing knowledge and build-ing capacity at the local level to yield lasting results.Notwithstanding the need to be grounded in localrealities, the networks have an opportunity toreach out to international partners with lessonsto share. Within their own territories, large land-scape conservation networks need to be linkedto diverse constituencies, including philanthropistsinterested in landscape-scale conservation, univer-sity faculty and students, a range of public agen-cies, and, most importantly, property owners andland managers.

Source: South Carolina Coastal Conservation League.

Hilton Head

MyrtleBeach

Charleston

ACE BasinProtected publicand private lands

Charleston, Berkeley,and Dorchester Counties

Urbanized areas


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F E A T U R E Large Landscape Conservation

A B O U T T H E A U T H O R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

JAMES N. LEVITT is a fellow in the Department of Planning and Urban Form at the Lincoln Institute of Land Policy and

director of the Program on Conservation Innovation at the Harvard Forest, Harvard University. Contact: [email protected]

R E F E R E N C E S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Council on Environmental Quality. 2011. Americas greatoutdoors: A promise to future generations. Washington, DC:Government Printing O ce. http://americasgreatoutdoors.

gov/report

Foster, D., D. Kittredge, B. Donahue, K. Fallon Lambert,M. Hunter, L. Irland, B. Hall, D. Orwig, A. Ellison, E. Colburn,A. DAmato, and C. Cogbill. 2009. Wildlands and woodlands: A vision for New England. Harvard Forest Paper 32.Petersham, MA: Harvard Forest.

Henry, Mark, and Leslie Armstrong. 2004. Mapping thefuture of Americas national parks: Stewardship through geographic information systems. Redlands, CA: ESRI.

Holleman, Joey. 2008. Ace Basin: Protected orever.The State, Local/Metro Section, November 10. http:// www.thestate.com/2008/11/10/584599/ace-basinprotected-forever.html#ixzz1W3yQd7KP

Levitt, James N., and Charles N. Chester. 2011. Thefuture of large landscape conservation in America.Cambridge, MA: Lincoln Institute o Land Policy. http:// www.lincolninst.edu/pubs/1916_The-Future-of-Large- Landscape-Conservation-in-America

Williams, Jamie. 2011. Scaling up conservation orlarge landscapes. Land Lines 23(3): 813. https://www.lincolninst.edu/pubs/dl/1923_1246_LLA_071103.pdf.

R E L A T E D R E S O U R C E S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Levitt, James N., ed. 2005. From Walden to Wall Street:Frontiers of conservation nance. Washington, DC:Island Press and the Lincoln Institute o Land Policy.

. 2010. Conservation Capital in the Americas:Exemplary Conservation Finance Initiatives. Cambridge,MA: Lincoln Institute o Land Policy, in collaboration withIsland Press, the Ash Institute or Democratic Governanceand Innovation at the Harvard Kennedy School, and theDavid Rocke eller Center or Latin American Studies atHarvard University.

McKinney Matthew J., and Shawn Johnson. 2009.Working across boundaries: People, nature, and regions.Cambridge, MA: Lincoln Institute o Land Policy.

McKinney, Matthew J., Lynn Scar lett, and Daniel Kemmis.2010. Large landscape conservation: A strategic framework for policy and action. Cambridge, MA: LincolnInstitute o Land Policy.

Demonstration and ImplementationGiven what are expected to be very tight constraints onnew conservation programs at the federal, state, and loclevels over the next few years, participants focused mucof their attention on the creative use of existing budgetlandscape-scale conservation purposes. One noted the snicant role that is already being played by the Departmof Defense to conserve (and limit development on) lanadjacent to active military reservations. Such programsnow being used effectively to protect habitats and worklands from development and to limit landscape fragmention. They also may be used in the future to address wasupply protection issues. Another participant noted thepotential signicance of state and federal transportationbudgets that could be used to mitigate the disruptiveimpact of new roads and highways.

Particularly enthusiastic support came from several

participants for public-private-nonprot partnerships thhave a proven track record for protecting and enhancinglocally valued natural and cultural resources to form thebackbone for a regional green infrastructure. Examplesinclude Santa Fe, New Mexico; the Chattahoochee/ Apalachicola basin in Georgia, Mississippi, and Floridathe Crown of the Continent in Montana, Alberta, andBritish Columbia; and the New Jersey Highlands.

Additional opportunities for funding large landscapeconservation initiatives include state incentives for privland protection that can be used to match selected federprograms (e.g., the matching monies required by funds

provided by the North American Wetlands Conservatio Act); community forest programs that are now gaining momentum around the nation; selected opportunitiesfor foundation Program-Related Investments (PRIs); anemerging ecosystem service markets assisted by federapolicy and public-private partnerships, including mitigation banking and statewide markets for carbon credits,such as those in California.

ConclusionNotwithstanding evident federal budget constraints, myropportunities are available to pursue conservation projethat are expansive in scale, extensive in scope, able toachieve measureable conservation outcomes, and endurThe conference participants themselves offered clear evdence that the concept of large landscape conservation spread to initiatives across the continent. These individand their colleagues at home and abroad are now and wcontinue to be at the forefront of initiatives that protectnature in the context of human values at a scale commesurate with the conservation challenges they face.


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Scenario PlanningTools for SustainableCommunities

Foothills of the SuperstitionMountains in thenortheastern cornerof the SuperstitionVistas parcel.

Courtesy o Superstition Vistas Steering Comm

Jim Holway

Sustaining local communities will requiremechanisms to envision and plan for the

future and to engage residents in the pro-cess. Scenario planning is an increasinglyeffective way to address these efforts, and

Western Lands and Communities, the LincolnInstitute of Land Policys joint venture with theSonoran Institute, is working to advance thenecessary tools.

Scenario Planning to Address UncertaintyLand use decisions and planning efforts are criticalas communities look 20 to 50 years into the futureto guide policy choices and public investments thatare sustainable across economic, social, and envi-ronmental dimensions. As uncertainty increasesand available resources decrease, it becomes evermore important to consider the full range of emerg-ing conditions and to strive to ensure our abilityto respond to those changes, adopt policies, andpursue investments that will be resilient across a variety of potential futures.

Key areas of uncertainty include populationand demographic changes, economic trends,

climatic variability and change, resource costsand availability, land markets, housing preferences,housing affordability, and the scal health of localgovernments. Simultaneous with increasing uncer-

tainty and decreasing resources, or perhaps in partbecause of them, decision makers face conicting perspectives on desired futures and on the role of government in providing services and infrastructureas well as regulation and planning.

Increased polarization means that more civicengagement and an informed and supportive pub-lic are needed to ensure stable policies and adequateinvestments in a communitys future. Scenarioplanning offers a mechanism to address theseneeds and issues of potential uncertainty andconict. Fortunately, as the scope and complexityof planning and the demand for broader engage-ment have increased, advances in computing power and public access to technology are making new and more powerful tools available.

The Lincoln Institute has a long history of supporting the development of planning tools andpublishing the results (Hopkins and Zapata 2007;Campoli and MacLean 2007; Brail 2008; Kwartlerand Longo 2008; Condon, Cavens, and Miller2009). This article covers lessons learned from


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the use of scenario planning tools in severalprojects undertaken by Western Lands and Com-munities (WLC), as well as mechanisms to expandtheir application.

Superstition Vistas

Superstition Vistas is a 275-square-mile expanseof vacant state-owned trust land on the urbanizing edge of the Phoenix metropolitan area (gure 1).State trust lands such as this site in Arizona arekey to future growth patterns because the stateowns 60 percent of the available land in the pathof development. Colorado and New Mexico to alesser degree face similar opportunities with theirstate trust lands (Culp, Laurenzi, and Tuell 2006).Creative thinking about the future of SuperstitionVistas began to gain momentum in 2003, andthe Lincoln Institute, through the WLC joint venture, was an early proponent of these efforts(Propst 2008).

Initial WLC objectives for Superstition Vistascenario planning included capacity building,tool development, and opportunities to catalyze planning process. More specically, we sought t look at the land in a bold, holistic, and

comprehensive manner; advance the Arizona State Land Department

capacity to conduct large-scale planning andestablish an example for other state landagencies facing urban growth opportunities;

design a model sustainable development; advance scenario planning tools and illustrat

their use; catalyze and inform debates about modernizi

state trust land planning and developmentmanagement; and

stimulate a larger discussion about the Arizona Sun Corridor megaregion.

WLC, along with regional partnerships, neighboing jurisdictions, the regional electric and waterutility, two private hospital providers, and a locamining company, formed the Superstition Vistas(SV) Steering Committee to advance the plannieffort, secure funding, and hire a consulting teamThe consultants, working with the committee ova three-year period, conducted extensive publicoutreach and values research, assembled data onSuperstition Vistas, developed and rened a seri

of alternative land use scenarios for the development of a community of 1 million residents,evaluated the impacts of the different scenariosand produced a composite scenario for the site.

The Arizona State Land Department (thelandowner) adapted the consultants work to prepare a draft conceptual plan for Superstition Visin May 2011 and submitted a proposed compre-hensive plan amendment to Pinal County. Thecounty is now considering the proposed amend-ment and its Board of Supervisors is expectedto act in late 2011.

Sustainability LessonsThe scenario analysis, utilizing enhancementssupported by WLC, identied the most importafactors in shaping development patterns andpotential conicts among desired outcomes (gu2). The inclusion of individual building and infstructure costs for the alternative scenarios faciltated examining the sensitivity of varying thesefactors and the cost effectiveness of four increa

F I G U R E 1

The Superstition Vistas Site near Phoenix, Arizona

Source: Fregonese Associates.

F E A T U R E Scenario Planning Tools for Sustainable Communities


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0 0.9 1.8 2.7 Miles

Rail StopRegional RailFreewayArizona ParkwayMajor Road

Study AreaExisting RoadCreeks and WashesCentral Arizona Project100 Year Floodplain

Low

Medium

High

Density

0 5,000 10,000 15,000 Feet

levels of energy and water efciency in eachbuilding type.The scenarios also examined the impact of

urban form on vehicle miles traveled (VMT).Scenario model outputs included land use in-dicators, energy and water use, VMT, carbonemissions, and construction costs. This analysisrevealed the low-hanging fruit for sustainabilityimprovements. The consulting team, working withthe Steering Committee, identied a number of lessons that illustrate the value of scenario plan-ning tools and can be applied to other efforts to

design more sustainable and efcient urban areas(Superstition Vistas Consulting Team 2011).

1. Create mixed-use centers to reduce travel

times, energy use, and the carbon footprint. Mixed-use centers along public transportation routes andclose to homes and neighborhoods are one of themost effective ways to reduce travel times, energyuse, and the resulting carbon footprint. Smallerhomes, more compact forms of urban develop-ment, and multimodal transportation systems all

create similar benets (gure 3). However, thescenario modeling for Superstition Vistas demon-strated that mixed-use centers would be substan-tially more important than increased density inaffecting transportation choices, energy use, andthe carbon footprint.

2. Foster upfront investments and high-quality jobs

to catalyze economic success. A strong local econo-my and a diverse balance of nearby jobs, housing,and shops are critical for a sustainable community,especially when high-quality jobs are provided atthe beginning of development. Signicant upfront

public investment and public-private partnershipscan supply critical infrastructure and have anenormous impact on shaping development andincreasing the value of state trust land. State ownedtrust land could also provide unique opportunitiesfor patient capital, with enhanced trust land man-agement authorities providing access to resourcesfor upfront capital investment and the ability torecapture these investments when the land is soldor leased later at a higher value.

G U R E 2

hree Possible Scenarios for the Development of Superstition Vistas

Three of the six scenarios produced by the SuperstitionVistas consultants illustrate the range of development intensityand developed area. Scenario X is the base case with nocomprehensive planning. Scenario A has a minor densityincrease over current trends in other parts of the region.Scenario D focuses on high-density urban centers.

Source: Superstition Vistas Consulting Team (2011).

enario X Scenario A Scenario D


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3. Provide multimodal transportation infrastructure

and regional connections to facilitate efficient growth. Another critical step is determining how to phasetransportation improvements as the region grows

and the market can support increased services.Phased components may include buses rst, thenBus Rapid Transit (BRT), with rights-of-way setaside for eventual commuter or light-rail corridors.Identifying and building multimodal transportationcorridors and infrastructure prior to sales for resi-dential and commercial development should estab-lish the cohesiveness of the entire area and enablethe evolution to more capital-intensive transpor-tation infrastructure as the community matures.

4. Design efficient buildings that save water and

energy resources and reduce the communitys carbon

footprint. Incorporating construction costs andreturn on investment (ROI) data in resource plan-ning allows for nancial feasibility and cost-benetcalculations. The consulting team modeled fourlevels of water and energy use (baseline, good,better, best) for each scenario and building type.Results demonstrated that investments in energyefciency would be better spent on residentialthan commercial and industrial buildings. An addi-tional nding showed that building centralized

renewable power generation may be a betterinvestment than extreme conservation.

5. Offer housing choices that meet the needs of

a diverse population. Ensuring a viable communitymeans meeting the needs of all potential residewith a broad variety of development types andprices that local workers can afford and that allofor adjustments under future market conditions.

6. Incorporate flexibility to respond to changing

circumstances. A challenge for large-scale masterplans that will take shape in multiple phases ove50 years or more is how to plan so the develop-ment itself can evolve and even redevelop overtime. Plan implementation needs to includemechanisms to limit future NIMBY (not in myback yard) problems for necessary inll andredevelopment projects.

Procedural LessonsThe visioning process for Superstition Vistas in volved planning a completely new city or regionof communities in a vacant area with a single plic landowner and no existing population. Giventhe recent economic downturn, as well as the limited capacity of the state agency to bring land tomarket, development of this area will likely bepostponed for a number of years. Despite theseparticular conditions, procedural lessons learnedin the project to date are relevant to other long-

term and large-scale efforts, and to the expandeuse of scenario planning for community decisiomaking in general.

Agreed-upon procedures and planning proceses become increasingly important as the planninand development time period grows and the number of stakeholders increases. Signicant changin participants, perspectives, and external factorsuch as the recent collapse of the developmenteconomy, should be expected in any long-term,multiparty project. Such challenges need to beconsidered and incorporated into project tasks.

1. Design for change. Long-term projects needto accommodate changes in stakeholders, decisimakers, and even political perspectives during tcourse of planning and implementation. Projectwould benet enormously from anticipating succhanges, agreeing on mechanisms to transferknowledge to new participants, establishing certcriteria and decisions that new stakeholders woube expected to follow, understanding how to deawith political or market conditions that will



F I G U R E 3

Carbon Footprint of Transportation and Building Emissions

T o n s o

f C O

2

E m

i s s

i o n s p e r

Y e a r p e r

C a p

i t a

BaselineGoodBetterBest

2.591.500.950.58

5.473.842.651.04

8.065.343.611.63

Transportation

BuildingTotal

Scenario XScenario A

Scenario D

2.381.380.870.54

6.284.453.131.32

8.665.834.001.85

1.390.800.510.31

3.822,711.980.93

5.213.512.491.25

9

8

7

6

5

4

3

2

1

0

Transportation fueland building energyuse (baseline, withgood, better, andbest improvements)

impact carbonemissions differ-ently in three of sixSuperstition Vistasscenarios.


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change, and building resiliency for such factorsinto the alternative scenarios themselves.

2. Consider governance. This is an issue for plan-ning and implementation efforts and for the politicaldecision-making structure of a new community.In building a new city it is important to considerhow to create a governance system capable of implementing a consistent, comprehensive visionfor a community that does not yet exist.

3. Incorporate new community designs into local

and regional comprehensive plans. It is also critical toconsider how a project at the scale of SuperstitionVistas, with up to 1 million residents and a build-out plan of 50 years or more, can be incorporatedinto the framework of a typical county comprehen-sive plan. Scenarios and visions must reect ideasand plans that local jurisdictions will be politicallywilling and administratively able to incorporateinto their planning processes.

4. Phase development. Communities need toestablish mechanisms that allow the adoption of a long-term buildout vision and then incorporatea series of exible and adaptable phased plansto implement that vision in appropriate stages.

5. Plan for market changes. Market conditions,housing preferences, and employment opportu-nities will evolve, and large-scale projects withcreative and compelling visions may even createtheir own demand. No one knows what future

markets may offer, so consideration of alternativemarkets and adaptable community designs arecritical. Projected housing mixes and estimates of development absorption need to be exible andnot based only on current preferences and trends.

6. Connect to common values. Demonstrating howdevelopment proposals connect to common visionsand values that are shared and stable over time isalso important. For Superstition Vistas, values suchas an opportunity for healthy lifestyles and choicesfor residents across the socioeconomic spectrumwere found to be broadly accepted. Planners also

need to recognize values that are more controver-sial or may be transient and likely to change.

Challenges and OpportunitiesThe WLC experience in planning for SuperstitionVistas has been successful in several respects. Thecommunity came together through the Steering Committee to develop a consensus vision that rep-resented multijurisdictional cooperation aroundsustainable smart growth. Neighboring commu-

nities, at the request of the state land commissioner,deferred any consideration of annexation. Inaddition, the Arizona State Land Departmentdeveloped a plan for a geographic scale, timehorizon, and level of comprehensiveness wellbeyond anything attempted previously. However,the proposed comprehensive plan amendment forSuperstition Vistas is at best a rst step toward a vision for a community of up to 1 million people.

The Arizona State Land Department has beenunable, at least so far, to push the envelope veryfar on new and more creative ways to conceptual-ize large-scale developments that could enhancethe economic value of state trust lands and im-prove regional urban form. The recent collapse of land and housing markets throughout the countryhas also impacted this project and local perceptionsof future growth potential. Since the overall effortto conceptualize and implement developmentplans for Superstition Vistas is just beginning, ini-tial on-the-ground development is not expected forat least a decade. There will be multiple opportu-nities to build on these planning efforts to bring bolder and more comprehensive visions forwardas the real estate economy recovers and the landbecomes ripe for development.

Scenario planning and effective visualizationsbecome both more important and more challeng-ing to achieve when conducting larger and longer-

term visioning exercises. Visualizations that provide compelling depictions of activity centers andhigher-density, mixed-use neighborhoods can helpto gain public acceptance. Effective mechanismsare also needed to convey to current participantsthat the planning process is imagining communitycharacteristics and housing and lifestyle prefer-ences for their grandchildren or great-grand-children many years in the future.

As noted earlier, upfront investments in trans-portation, economic development, education, andutility services can signicantly shape a communi-

ty, serve as a catalyst for higher-level employment,and earn high returns. To achieve this potential,mechanisms are needed to facilitate these invest-ments, whether on private lands or state trustlands. Continued work on the contributory valueof land conservation, infrastructure investment,planning, and ecosystem services, as well as theintegration of this information into scenario plan-ning, would greatly aid efforts to address uncer-tainty and advance community sustainability.


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Other Projects and Lessons LearnedWLC conducted three additional demonstrationprojects to further enhance scenario planning tools and apply them in different situations.

Gallatin County, Montana

Sonoran Institute staff worked with MontanaState University (MSU) to engage local stake-holders in a workshop where each of four teamproduced scenarios for concentrating projectedgrowth within the currently developed triangleregion of Bozeman, Belgrade, and Four CornerThis effort successfully integrated Envision Tomrow scenario planning with housing unit projectifrom the Sonoran Institutes Growth Model anddemonstrated the value of ROI tools as a realitycheck on proposed land use and building types.The project also demonstrated the value of scenario planning to local experts.

Lessons learned include recognizing that (1) many participants working with paper maps wasmore intuitive that the touch screen technology had employed; (2) additional information on lancharacteristics, such as soil productivity and habi values, should be used in preparing growth scenarios; and (3) more effective techniques are neeto visualize the density and design of different luse types, as well as to incorporate political andmarket realities that are not typically captured

with scenario planning tools.Products from this Montana project will incluthe creation of a library of regionally appropriabuilding types for use with ROI and scenario moeling and a report examining the costs and beneincluding sustainability impacts, of directing fugrowth to the triangle area of Gallatin Valley.With WLC support MSU has been able to incorporate the use of scenario planning tools in itsgraduate program.

Gareld County, Colorado

Sonoran Institutes Western Colorado Legacy Area ofce, with support from the Lincoln InstituU.S. Environmental Protection Agency, and othelocal contributors, utilized the Envision Tomorrotool in a new way to advance implementation opreviously adopted plans calling for mixed-useinll and redevelopment in target growth areas.This project focused on stakeholder educationregarding the mechanisms necessary to implemrecently adopted comprehensive plans calling fo

F I G U R E 4

Alternative Visions for Downtown Rie, Colorado


Figure 4a

Figure 4b

Figure 4c

Figure 4a shows the current condition of a site in downtown Rie,Colorado. Figures 4b and 4c are computer-generated visualizationsof redevelopment options for that site.


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A B O U T T H E A U T H O R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

JIM HOLWAY directs Western Lands and Communities, the Lincoln Institutes joint venture with the Sonoran Institute, based in Phoenix, Arizona. He was previouslyassistant director of the Arizona Department of Water Resources and a professor of

practice at Arizona State University. Contact: JHolway@ sonoraninstitute.org

R E F E R E N C E S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Propst, Luther. 2008. A model or sustainable development in ArizonasSun Corridor. Land Lines 20(3).

Superstition Vistas Consulting Team. 2011. Superstition Vistas:Final report and strategic actions. www.superstition-vistas.org

L I N C O L N I N S T I T U T E P U B L I C A T I O N S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Brail, Richard K. 2008. Planning support systems for cities and regions.Campoli, Julie, and Alex S. MacLean. 2007. Visualizing density.

Condon, Patrick M., Duncan Cavens, and Nicole Miller. 2009. Urbanplanning tools for climate change mitigation.

Culp, Peter W., Andy Laurenzi, and Cynthia C. Tuell. 2006. State trustlands in the West: Fiduciary duty in a changing landscape.

Hopkins, Lewis D., and Marisa A. Zapata. 2007. Engaging the future:Forecasts, scenarios, plans, and projects.

Kwartler, Michael, and Gianni Longo. 2008. Visioning and visualization:People, pixels, and plans.

town-centered development, rather than onscenario generation for a comprehensive plan.

Examination of policy and market feasibilityfor redevelopment in downtown Rie, Colorado,was one of three separate efforts undertaken. TheCity of Rie project successfully utilized an ROItool to identify nancial and regulatory factors thatcould impact revitalization efforts and engaged thekey parties necessary for implementation, includ-ing property owners, developers, realtors, planning commissioners, local ofcials, state transportationrepresentatives, and local staff.

Among the lessons learned from this projectwas the importance of grounding bold visionswith market reality. For example, previous plan-ning efforts in Rie had focused on six-to-eight-story mixed-use buildings, but in the currentmarket even three-to-four-story projects are notconsidered feasible (gure 4c). Most attention nowis given to two-story mixed-use projects and town-homes. Visualizations for an underutilized parcelin the center of town illustrated the type of one-story option that may be most feasible for initialcommercial development (gure 4b). Constraintsrelated to parking requirements and high mini-mum lot coverage requirements were also identi-ed as limits on investment. In addition to pin-pointing changes in Ries building code, thesendings spurred discussion about the role of pub-

lic-private partnerships in catalyzing downtowndevelopment.

Morongo Basin, CaliforniaThis area of high open space and wildlife habitat values between Joshua Tree National Park andthe Marine Corps Air Ground Combat Centerin Southern California may be impacted by spill-over from regional growth. This project with theMorongo Basin Open Space Group involves aninnovative effort to link results from the ongoing conservation priority-setting efforts with both a

GIS tool to analyze and predict how land usepatterns impact wildlife habitat and the scenarioplanning capability of Envision Tomorrow.

We are evaluating the environmental impactsof the current and potential alternative develop-ment patterns and location-specic planning and land use options. The tools being developedfor this effort will be useful to land trusts through-out the country that are interested in engaging partners on local and regional planning issues

and incorporating larger landscape conservationand wildlife habitat goals into their projects.

Open Source Planning ToolsWestern Lands and Communities has recentlybeen focusing on efforts to develop open sourceplanning tools as a mechanism to increase the useof scenario planning. Key factors that hinder theiruse include: (1) the cost and complexity of thetools themselves; (2) the cost and availability of data; (3) a lack of standardization, making integra-tion of tools and data difcult; and (4) proprietarytools that may be difcult to adapt to local con-ditions and may impede innovation.

Proponents of open source modeling toolsbelieve open and standardized coding will facilitateincreased transparency and interoperability be-tween models, ultimately resulting in faster innovation and greater utilization. As a result of ourwork with Envision Tomorrow on the SuperstitionVistas project, WLC and other members of anopen source planning tools group are continuing to advance scenario planning tools and pursue thepromise of open source tools that can foster sus-tainable communities in many more locations.


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David Michael Vetter and Marcia Vetter

Brazils chronically low level of publicsector investment has resulted inserious infrastructure decits thatare often cited as an impediment to

its economic development. Brazilsmunicipalities face an urgent need to invest ininfrastructure, but lack the scal space to do sodue to the scal constraints in the countrys macro-economic program. Backlog in municipal infra-structure is estimated at about $40 billion overthe next 10 years (World Bank 2006, xix). Heller(2005, 1) denes scal space as room in a govern-ments budget that allows it to provide resourcesfor a desired purpose without jeopardizing thesustainability of its nancial position or thestability of the economy.

Although public capital formation among countries varies due to their respective public-private divisions of expenditure responsibilities,Brazils average gross formation of public capital(GKP) as a percentage of gross domestic product(GDP) was only 1.8 percent in 20062007, ranking second from the bottom for 28 emerging countriesand last among the BRIC countries: 20.8 percentfor China, 7.3 percent for India, and 4.5 percentfor Russia (Afonso and Junqueira 2009b). The rise

of private nancing for infrastructure in Brazil the 1990s was not enough to compensate for thepublic decline (World Bank 2007). Brazil needsincrease infrastructure investment in order to futher improve its economic and social performan

This article explores how Brazil can provide

funding for much-needed infrastructure invest-ment while controlling the consolidated nationaand subnational public sector decits and debtas required to maintain price stability and aninvestment grade sovereign rating.

The Potential of Land-Based InstrumentsTraditionally Brazils municipalities have beenconsidered more often a potential source of scproblems than of scal space. To maintain nancial sustainability and economic stability, Brazilcontrolled the consolidated public sector debt of

states and municipalities through a complex webof restrictions on borrowing by them or lendingthem, including the Fiscal Responsibility Law o2000. Within this framework of tight scal contand scal discipline, could Brazils municipalitigenerate scal space for investment and provisioof social needs by increased use of land-basednancing? One indication of the potential forcreating such scal space is that municipal invements already are quite substantial, constituting

Gisle

Land-Based Financing

for Brazils Municipalities

Infrastructureinvestmentsare improvingroadways inCuritiba, Brazil.


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40.3 percent of Brazils total public sector invest-ment in 2008 (Afonso and Junqueira 2009a).

Municipalities could further increase their scalspace for investment by (1) increasing expenditureefciency; (2) increasing revenue through moreeffective administration of the real estate propertyand transfer taxes and fees, as well as other own-source revenues; and (3) using other land-basedinstruments that would not involve municipalborrowing, such as the sale of development rightsand underutilized land. In other words, land-basednancing could create scal space for investmentwithout increasing municipal decits or debt.

According to Peterson (2009), land-basednancing is not a practical or desirable way to payfor the entire capital budget, but it has signicantadvantages as part of the mix of capital nancing,especially when the revenues accrue before theinvestment is made. In this case they add exibilityto nancing decisions and reduce the need forlong-term credit, which is often difcult to obtainin developing countries.

In Brazil, these land-based instruments include: real estate property and transfer taxes; impact fees for new developments; betterment levies; sale of development rights; sale of underused public land and buildings; land readjustment (e.g.,consrios urbanos ); and

urban concessions (concesso urbana ), a newinstrument being used to revitalize the NovaLuz neighborhood in So Paulo.

None of these instruments involve public sectorborrowing and therefore would not increase thepublic sector debt or be covered by the restrictionson borrowing by or lending to municipalities.Brazils Federal Constitution of 1988 grantsmunicipalities the power to dene and use suchland-based instruments. The guidelines were sub-sequently regulated by Federal Law No. 10,257

of 2001, known as Urban Development Act orCity Statute (Estatuto da Cidade ).

Incentives to Generate Fiscal SpaceThe municipal development strategy recommendedby the World Bank (2006) gives priority to estab-lishing a sustainable market-based subnational cred-it system and providing assistance to municipalitiesto become creditworthy within a framework of continued scal discipline. A rst step in develop-

ing such a strategy could be to change the way thenational credit allowances for different municipalprograms are distributed among municipalitiesby the federal government.

To lay the foundation for modern credit markets,a modied national credit program could provideincentives to create scal space by imposing per-formance conditions. For instance, credit wouldbe granted to those municipalities that are most creditworthy, as this would provide

incentives to further improve or at least main-tain their nancial performance;

prepare efcient and equitable investmentplans and capital budgets; and

leverage borrowing by using the land-based in-struments so the total scal space created per R$(Brazilian currency=real ) of borrowing is high.

To assess the feasibility of such a strategy, weask: How many Brazilian municipalities would be judged creditworthy by national and internationalcreditworthiness standards? How fully are theyusing their real estate taxes and fees? What aretheir investment levels? Have they passed the legis-lation necessary to fully utilize the land-based in-struments that help create and capture real estate value? In other words, what is the potential of these municipalities to create scal space to nanceinfrastructure and other needed investments?

Methodology and AnalysisTo address these questions, we generated a muni-cipal database that includes the indicators typicallyused by credit rating agencies and other nancialinstitutions to assess municipal creditworthiness.This database enables us to rank municipalities bytheir performance on any of the indicators and toanalyze relationships among variables using corre-lation analysis or other methods. For more detailson the methodology, data, indicators, and analysis,see Vetter and Vetter (2011).

Table 1 shows the indicators and the methodsused to generate them, including our compositeindicators (OECD 2008). The municipalitiesselected for study are those with at least 50,000inhabitants in 2008, because cities of that sizeare more likely to have the will and administrativecapacity to increase their scal effort. In 2008,the 584 municipalities with populations of 50,000or more held over 65 percent of Brazils totalpopulation. We excluded 66 municipalities due


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F E A T U R E Land-Based Financing for Brazils Municipalities

to incomplete nancial data, leaving a nal sampleof 518 municipalities. The rst part of the analysisdeals with this sample and the second part focuseson 130 municipalities that ranked in the top quar-

tile on the Creditworthiness Indicator.

Municipal Financial PerformanceIndicatorsWe developed two composite indicators of muni-cipal nancial performance using data from theNational Secretary of the Treasury (Secretaria doTesouro Nacional , STN 2008): Financial Perfor-mance Score and Financial Performance Rank.These indicators are used to judge municipal

capacity to generate scal surpluses and serviceadditional debt, but do not, of course, show howeffectively or efciently the resources are employ

Most of the 518 municipalities in the sample

(68 percent) meet all ve nancial performancecriteria. The best overall performance is shownin the Total Debt Service/Net Current Revenue(NCR) Indicator, where 99.8 percent of munici-palities spent less than 11.5 percent of NCR ondebt service. The worst overall performance waon Personnel Expenditures/NCR, where only 83percent of the municipalities met the criteria. Among the municipalities meeting all ve critersome are much more creditworthy than others.

T A B L E 1

Financial Performance and Other Indicators Used in Analyzing Brazils Municipalities

TypeNormalizationof Criteria Basic Indicators Used

Indicator/Aggregation

Creditworthiness

Financial Per ormance Score Benchmark Meets 5 di erent nancial per ormance indicators(i yes=1, i no= 0)

Sum o 5 binaryvariables

F inancial Per ormance Rank Ranking Ranks on 5 nancial per ormance indicators Average ranking

Economic Potential Ranking Ranks on 4 economic indicators: Total size o municipalGDP 2007; absolute change in GDP 20022007; relativechange o GDP 20022007; and GDP per capita 2007

Average rankingon the 4indicators

Creditworthiness Ranking De ned in the text using the nancial per ormance andeconomic potential indicators

Ranking

Financial Performance Indicators

Total Debt Service/Net CurrentRevenue (NCR)

< 11.5% Estimated with nancial data rom STN data None

Total Debt Stock/NCR < 75.0% Same as above NoneOperating Surplus/NCR > 10.0% Same as above None

Total Debt Service/ Operating Surplus < 30.0% Same as above None

Personnel Expenditures/NCR < 54.0% Same as above None

Other Indicators

Investment Ranking Municipal investment in plant and equipment as apercentage o municipal GDP

Ranking

Total Real Estate Taxes and Fees(TRE)

Ranking Total revenue rom the urban real estate property andtrans er taxes (IPTU and ITBI) and betterment ees.

Ranking

Passage o Land-Based legislation Benchmark Passage o 8 laws needed to use the land- basedinstruments o the Statute o the City (i yes=1, i no= 0)

Sum o 8 binaryvariables

Municipal Human Development Index(IFDM)

Ranking Annual indicator o municipal human development (IFDM)that is similar to the UNDPs Human Development Index(HDI). IFDM varies between 0 and 1.0, in which 1.0 wouldbe the highest development level.

Based on em-ployment, income,education, andhealth indicators

Population below the Poverty Line Percentage % o populations in households with income per capitao one quarter o a minimum salary or less. This is thede nition o extreme poverty ( indigente ).

% o population


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0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%% o Net Current Revenue (NCR)

Total DebtService/NCR

Total DebtStock/NCR

OperatingSurplus/NCR

Total DebtService/OperatingSurplus

PersonnelExpenditures/NCR

2nd quartile1st quartileTotal sample

To generate the Financial Performance Rank,we ranked them on the average of all ve criteria,with the most favorable performance receiving arank of 518 and the least favorable a rank of 1.

CreditworthinessWe developed the municipal CreditworthinessIndicator in two steps. First, we selected munici-palities in the top three quartiles on the EconomicPotential Indicator with a Financial PerformanceScore of ve (i.e., meet all ve nancial criteria).Then we calculated the average rank of the twoscores. Figure 1 shows that even the municipalitiesranking in the second quartile on creditworthinessdemonstrate relatively good performance on allve nancial performance indicators by nationaland international standards.

Municipal Human Development Indexand CreditworthinessFigure 2 shows a low correlation between theCreditworthiness Indicator and Municipal HumanDevelopment Index (IFDM). In fact, this scatter-gram shows that many municipalities ranking inthe bottom half in terms of the human develop-ment index rank in the top half in terms of theircreditworthiness. The wide dispersion of observa-

tions shows that there is a great deal of diversity(i.e., low correlation and high variance) among Brazils municipalities with regard to creditworthi-ness and human development. As the Creditwor-thiness Indicator is not as highly correlated withthe IFDM as might be expected, a program initial-ly focusing on the most creditworthy municipalitieswould not be as regressive as it might seem.

Analysis of Top Ranking MunicipalitiesTo develop a national program that would provide incentives in the form of access to credit forcreation of scal space, we wanted to identifymunicipalities ranking in the top quartile on theCreditworthiness Indicator. Such a program wouldstimulate investment in municipalities with a rela-tively high potential for future economic develop-ment and superior nancial performance, therebyrewarding responsible nancial performance.Brazils scal federal system already includes manyautomatic transfers to municipalities that are basedon population and other criteria rather than onnancial performance or creditworthiness.

The total 2008 population and 2007 GDP of the 130 municipalities in the top quartile were32.3 million and US$346 billion, respectively.These municipalities held 27.7 percent of the total

F I G U R E 1

Financial Performance Indicators for Municipalities Rankedin the Top Two Quartiles on Creditwor thiness


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250

300

350

400

450

500

0.40 0.50 0.60 0.70 0.80 0.90 1.00

Socio-economic Index (IFDM)

Median IFDM = 0.76

Rank: Bottom Half IFDM Rank: Top Half IFDM

R a n

k :

C r e

d i t w o r t

h i n e s s

F E A T U R E Land-Based Financing for Brazils Municipalities

population in the full sample, 31.7 percent of itsGDP, and 21.9 percent of the total populationliving below the poverty line.

Municipal Investment and Performanceon the Real Estate Taxes and FeesFor the top ranked municipalities, median invest-

ment as a percentage of municipal GDP is 1.03percent and is not correlated with the Creditwor-thiness Indicator (Spearman correlation = -0.01).Bringing all municipalities now below the medianup to 1 percent of municipal GDP would increasetotal annual municipal investment by US$750 mil-lion for this top quartile, that is about a 20 percentincrease over this median investment level.

Bahl and Martinez-Vazquez (2007) estimatedthe average real estate property tax (TRE)/GDPratio for developing countries in their sample to be0.6 percent in 2000. Half of the municipalities in

this top creditworthiness quartile had TRE/GDPmedian ratios below the observed low 0.34 percentlevel indicating how much additional scal spacemight be available.

Our simulation shows that raising TRE/GDPto 0.6 percent for all municipalities in the top quar-tile would increase total annual municipal revenueby over US$700 million. Bringing all the munici-palities below 0.6 percent up to this level wouldinvolve an average annual per capita TRE increase

of only about US$24. Obviously, municipalitieswith TRE revenues above this 0.6 percent levelcould also increase their scal effort. Based onthese results, one could argue that there is roomfor more scal effort with respect to real estate tes and fees by municipalities in this top quartile

Betterment levies account for only 0.4 percenof TRE for all of the municipalities in the sampHowever, the top 20 municipalities ranked by torevenue from betterment levies had collected between US$473,000 and US$2.6 million in 2008with an average collection of US$928,000. Forthese 20 municipalities, these levies representedaverage more than 10 percent of total municipainvestment, but the average levy as a percent of GDP was only 0.18 percent. It would be interesing to analyze why these few municipalities werwilling and able to use betterment levies so mucmore effectively than most others in the sample

Enactment of Land-Based Legislation According to the annual survey of municipalitieby the Brazilian Institute of Geography and Statics (IBGE 2009), only 32 of the 130 municipal(24.6 percent) passed all eight laws needed to fuutilize the land-based scal instruments permittby the Statute of the City, and 43 municipalities(33 percent) had passed four or fewer laws. Sincpassage of such legislation could create addition

scal space for municipal investment without increasing municipal debt or decits, there seems tomuch room for increased use of these instrumen

Sandroni (2011) estimated the total revenuefor the City of So Paulo from the single law thallows charges for the sale of additional development rights(Outoga Onerosa do Direito de Construir OODC) to be over US$300 million for the 20062010 period. This total excludes the more thanUS$1 billion from the municipalitys 13 urban d velopment operations nanced by selling develoment rights (e.g., Faria Lima and gua Espraiad

Summary and Policy ImplicationsThis analysis of municipalities ranking in the toquartile by the Creditworthiness Indicator showthat they often invest at low levels, demonstratelow scal effort on real estate taxes and fees, anhave not passed all of the legislation necessary use the land-based instruments. Simulations alsoindicate that relatively small increases in scaleffort on real estate taxes and fees could generat

F I G U R E 2

Relationship Between the Creditworthiness Rank andMunicipal Human Development Indicator (IFDM) forMunicipalities Ranking in the Top Half on Creditworthiness


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signicant scal space for municipal investmentor other priorities.

Additional real estate value will be created infuture years as Brazils municipalities grow andprovide new infrastructure. For example, the devel-opment plan for the new beltway in Rio de Janeiroincludes major strategic public and private sectorinvestments of more than US$30 billion, including major petrochemical (COMPERJ) and steel facili-ties already being implemented. Such projects arelikely to generate value that could be captured inpart by the land-based instruments to help nanceinfrastructure, and they could provide subsidiesfor housing lower-income families.

Based on these ndings, we argue that anational program allocating at least part of theannual allotment of municipal credit based onperformance criteria could provide incentives forincreased generation of municipal scal spacewhile maintaining scal discipline.

Such a program could be open to all municipal-ities that meet the creditworthiness criteria andhave an acceptable capital budget (i.e., attain thebenchmarks discussed above). To help all munici-palities become eligible, technical assistance couldbe available within the program, including help toimprove collection of real estate taxes and fees(e.g., better cadastres, collection systems, and im-proved valuations), prepare and execute effective

capital budgets, and put the land-based instru-ments into operation.This research demonstrates the utility of a data-

base combining municipal nancial and socio-economic indicators to improve municipal nancialperformance. Periodic publication of such a data-base could complement the information that STNcurrently provides and facilitate future researchand policy analysis. Continuing the estimates of residential capital at the municipal level for thisdatabase using the hedonic price method with the2010 Census data would be most useful.

In summary, a national program could provideincentives for municipalities to increase their scalspace for investment and other priorities. The pro-gram also could encourage municipalities to recog-nize that effectively planning interventions (publicworks and land use regulations) can signicantlyincrease land values that then can be captured inpart by using the available land-base instruments.In short, such a program could help nance abrighter future for Brazils municipalities.

A B O U T T H E A U T H O R S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

DAVID MICHAEL VETTER has worked for nearly four decades on urban nance and economics issues in public and private sectors in Latin America. Contact:

[email protected] VETTER has worked as a consultant with multilateral and multinational organizations and nancial corporations in the United States and Brazil. Contact: [email protected]

R E F E R E N C E S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A onso, J. R., and G. Junqueira. 2009a. Investimento pblico no Brasil mais municipal que ederal. Revista de Administrao Municipal 55(272):1825. Rio de Janeiro: IBAM. http://www.joserobertoafonso.com.br/ attachments/article/1216/IBAM.pdf

. 2009b. A baixa taxa de investimento pblico Brasileira compara-da a dos demais paises em desenvolvimento. Unpublished technical note.http:// www.joserobertoafonso.com.br/attachments/article/1153/FMI.pdf

Bahl, R., and J. Martinez-Vazquez. 2007. The property tax in developingcountries: Current practice and prospects. Working Paper. Cambridge, MA:Lincoln Institute o Land Policy.

Heller, P. 2005. Back to basicsFiscal space: What it is and how to get it. Finance and Development 42(2). http://www.imf.org/external/pubs/ft/ fandd/2005/06/basics.htm

IBGE (Brazilian Institute o Geography and Statistics). 2009. Per l dosmuncipios brasileiros, 2008. http://www.ibge.gov.br/home/estatistica/ economia/perlmunic/2008/munic2008.pdf

OECD (Organisation or Economic Co-operation and Development). 2008.Handbook on constructing composite indicators: Methodology and user

guide. Paris: OECD. http://www.oecd.org/dataoecd/37/42/42495745.pdf

Peterson, G. E. 2009. Unlocking land values to nance urban infrastructure. Washington, DC: World Bank and Public-Private In rastructure

Advisory Facility (PPIAF). http://www.ppiaf.org/ppiaf/sites/ppiaf.org/les/ publication/Trends%20Policy%20Options-7-Unlocking%20Land%20Values%20-GPeterson.pdf

Sandroni, P. H. 2011. Recent experience with land value capture inSo Paulo, Brazil. Land Lines 23(3): 1419.

Secretaria do Tesouro Nacional (STN). 2008. Per l e evoluo dasnanas municipais: 19982007. Braslia: STN. http://www.tesouro.

fazenda.gov.br/estados_municipios/index.asp

Vetter, D. M., and M. Vetter. 2011. Could land-based nancing help createscal space or investment by Brazils municipalities? Working Paper.

Cambridge, MA: Lincoln Institute o Land Policy.

World Bank. 2006. Brazil: Inputs for a strategy for cities: A contribution witha focus on cities and municipalities. Volume I: Main Report No. 35749-BR.Washington, DC: World Bank. http://www-wds.worldbank.org/external/ default/main?pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&theSitePK=523679&entityID=000090341_20061205145849&searchMenuPK=64187283&theSitePK=523679

. 2007. Brazil: How to revitalize infrastructure investments inBrazil: Public policies for better private participation. Report No. 36624-BR.Washington, DC: World Bank, Finance, Private Sector, and In rastructureManagement Unit, Latin America and the Caribbean Region. http://www.planejamento.gov.br/secretarias/upload/Arquivos/seain/Investimentos_InfraEstrutura_ParteI.pdf


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Donald Boyd

he recent recession has been recog-nized as the worst in memory, andits effects are still being felt. Lesswell understood is the fact that thisrecession has been far worse for state

governments than the drop in gross domestic prod-uct (GDP) would suggest. While state governmentnances have stopped falling off a cliff, they arecloser to the bottom of that cliff than the top. Taxreceipts have not returned to their pre-recessionlevels, and new revenue demands may overwhelmany interim improvements in collections. Even if states can avoid these challenges, it will be a long,slow road to scal recovery, with several largerisks along the way.

State and local governments play a major rolein the economy and in our daily lives. They nance

more than 90 percent of K-12 education anddeliver virtually all of it. Public colleges and univer-sities educate three-quarters of students enrolledin degree-granting institutions. State and localgovernments oversee, design, and build more than90 percent of the nations public infrastructure.They nance much of the nations social safetynet and implement much of it as well. In fact,state and local governments spend more on directimplementation of domestic policy than doesthe federal government.

The services nanced and delivered by stateand local governments tend to have stable andgenerally rising demand. When a recession hits,there is no reduction in the numbers of childrenin school or elderly people in nursing homestwoof the most important spending areas for state andlocal governmentsor in the numbers of res orcrimes. For programs such as Medicaid and highereducation, for example, demand for the kinds of services that state and local governments providetypically rises during recessions. Unless and until

states can x their revenue structures or developadequate reserves, public policy will continue togyrate with every turn in the economy.

Decline in State Tax CollectionsThe Great Recession that started in December2007 was the deepest and longest recession sinc

the Great Depression of the 1930s. The unem-ployment rate rose to 10.1 percent and has re-mained stubbornly high, falling only to 9.1 per-cent after two years of recovery. State tax collectioplummeted, falling for ve consecutive quartersbeginning in the fourth quarter of 2008 and continuing through 2009. Tax revenue fell by a dizzing 16.8 percent in the second quarter of 2009,and over the next several years it declined furthand more sharply than it had in any other reces-sion since World War II (gure 1).

The recent drop in GDP has been signicant

in comparison to past recessions, but the declinein taxable consumption and personal income,two components that typically constitute the taxbases of state and local government, have beenfar worse. Taxable consumption fell by about 11percent, while GDP fell by about 5 percent. Taxable components of personal income also fellmuch more sharply than the overall economy anstill languish more than 5 percent below the prerecession peak, reecting the jobless recovery.

Even though this has been the worst post-warrecession by traditional economic measures, themeasures do not tell the whole story. Capital gaian important component of state tax bases, arenot included in personal income as measured inthe nations economic accounts. These gains havincreased in importance and are a major cause oincreased volatility in state nances. Capital gaifell by more than 55 percent, driving down taxcollections in the nal quarter of the 2009 sca year, when tax returns reecting the 2008 stockmarket collapse were led.


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F I G U R E 1

Percent Changes in State Tax Revenue and GDP, 19652011

Source: Prepared by the author using data rom the U.S. Census Bureau and U.S. Bureau o Economic Analysis.

The net result of these and other forces washuge declines in state income, sales, and corporatetaxes. Figure 2 shows that annual income taxesfell by more than 15 percent in ination-adjustedterms, sales taxes fell by more than 10 percent,and corporate income taxes fell by more than 25

percent. Property taxes, which are crucial to localgovernments but generally not a signicant revenuesource for states, remained quite stable throughmuch of the period, although they are beginning to weaken and in some parts of the country havefallen signicantly.

A Slow RecoveryThe recession ended in June 2009 and the economyhas been recovering slowly. State tax collectionsgrew in each quarter of calendar year 2010, andthe character of that growth has improved overtime. In the rst two quarters of 2010, increasedtax rates more than offset declines caused by theweak underlying economy, but in the last twoquarters tax revenue growth was driven primarilyby the improving economy. By the fourth quarter,tax revenue grew by 7.8 percent, but even with-out tax rate increases it would have grown by 7.0percent. Tax revenue in the JanuaryMarch 2011quarter grew 9.3 percent compared to the previous year, and 21 states had double-digit growth.

Preliminary data for the AprilJune quartershow tax revenue up 11.4 percent.

Ination-adjusted state tax revenue for thenation as a whole in the latest four quarters (end-ing in the rst quarter of calendar year 2011) was7.7 percent below the peak attained in 2007. The

heady growth in the rst two quarters of 2011probably cannot be sustained because much of itappears to have been driven by stock market gainsin tax year 2010, boosting income tax returns inthe second quarter. Those gains almost certainlywill not be repeated in 2011.

In addition, turmoil in European debt marketsand the recent Standard & Poors downgrade of U.S. long-term debt have contributed to fears of a double-dip recession. There are indications thateconomic growth will be slower than most stateshave assumed in their current budgets. States arecloser to the bottom of the cliff than the top, andare at risk of falling back down. Meanwhile, thereare some signs that local government tax revenuealso is beginning to weaken.

While tax revenues are now growing in moststates compared to the last years low collectionrates, they have not reached the levels prior tothe recession. After adjusting for ination, taxrevenues for the latest four quarters are below thecalendar year 2007 level in 43 states, and revenues

-18%

-15%

-12%

15%

-9%

-6%

-3%

0%

3%

1949 1270 land lines october 2011 webster

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