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As President, Teddy Roosevelt was in an ideal strategist’s position when he voiced the vision quoted above.

At the time, many of the U.S. regions that are today well-forested (such as New England) were ugly, barren, muddy wastelands. Over a century of rampant, unregulated deforestation to build ships and cities had ensured that outcome.

Too bad Teddy never created a strategy to activate that vision. The U.S. could have started launched its restoration economy a century earlier.

The still-emerging field of regenerative economics was launched in 2002 with the publication of my first book, The Restoration Economy. Today, new approaches to restorative economic development are arising on a regular basis. The “circular economy” trend is one of the best modern iterations of the idea. The Ellen MacArthur Foundation defines a circular economy as “a framework for an economy that is restorative and regenerative by design.”

The Restoration Economy was the first book to document the rapid rise of a broad spectrum of regenerative industries and disciplines.

Some of them were quite new at the time of its publication, such as restoration ecology and brownfields remediation.

In fact, the U.S. Environmental Protection Agency had just launched its revolutionary brownfields program (probably the single most efficient federal program in the nation’s history, in terms of return on investment) in 1995, the year before I started writing The Restoration Economy.

Eight of the book’s twelve chapters created a taxonomy of the restoration economy, categorizing eight sectors of restorative development. These eight sectors involve the regeneration of the natural and built environments.

Revitalization of the socioeconomic environment is a fairly automatic outcome of that work, if restorative development of the natural and built environments is done strategically, and with that goal in mind.

I addressed the global climate fifteen times in that first book, but it obviously wasn’t enough, considering how much worse things are now. Since that book was published, we’ve had 9 of the 10 hottest years in recorded history. As I write this, Category 5 Hurricane Dorian just hours ago obliterated the Abaco Islands and Grand Bahama Island in the Bahamas…while the U.S. President was busy playing golf and denying that there’s a climate crisis.

Here’s that original eight-sector taxonomy of the restoration economy, updated to show its adaptive, carbon-negative relevance to restoring our global climate:

• Ecosystem and biodiversity restoration: restored ecosystems sequester carbon while stopping carbon from being released by dying ecosystems, and—done properly—they leave the land more resilient. So this sector is adaptive, mitigating and restorative vis-a-vis the climate.
• Aquifer recharging and waterway/watershed restoration:  Nothing is more crucial to surviving climate disruption than the ability to generate fresh water when you need it, and absorb it efficiently when you’re getting too much of it. And restoring a watershed is largely based on growing trees (which sequesters carbon), so this sector addresses climate restoration and adaptation.
• Estuary, reef, and pelagic fishery regeneration: the “blue carbon” sequestration approach focuses heavily on mangrove restoration, which also makes coastlines more resilient. So this sector also achieves both climate restoration and adaptation.
• Regenerative agriculture (ranching, farming and aquaculture): Regenerative farming and ranching sequesters about four times as much carbon as reforestation, so that restores the climate. And, since the industrial ag model it replaces is a huge greenhouse gas emitter, that makes it mitigating, as well. It tends to be far more resilient to drought, not to mention more profitable, so it’s a form of climate adaptation. Regenerative mariculture with shellfish or seaweed leaves the water cleaner. Even better, the mollusks sequester carbon in their shells, and seaweed sequesters five times more carbon than land-based plants, so this sector is both adaptive and restorative, climate-wise.
• Brownfields remediation and redevelopment: This is normally a form of infill development, so it mitigates climate change by reducing both commuting and deforestation (from sprawl). Extracting methane from landfills is also climate mitigation, as is the use of brownfields for producing renewable energy (“brightfields”). Removing contamination from riparian areas (many brownfields and Superfund sites are on rivers and lakes) reduces the spread of toxins during climate-related floods, so this sector is adaptive, as well.
• Infrastructure renewal: Nothing is more crucial to the climate crisis than renovating our global energy infrastructure from fossil fuels to renewables. Doing so in an underground and microgrid design is far more resilient that our current centralized, above-ground grids, so this is a form of adaptation. Renovating our transportation infrastructure to focus less on automobiles and more on public transit, walking and bicycling both mitigates climate changes and makes cities more resilient when disasters hit, so this sector is also adaptive.
• Heritage restoration/reuse: Renovating and/or repurposing the structures we already have mitigates climate change both by reusing the embodied energy and by eliminating the very significant emissions of new construction. So, this sector is more relavent to climate restoration than most people might assume.
• Catastrophe reconstruction: This sector is (tragically) a major growth industry, so we need to be sure we accomplish it in a resilient manner that takes all of the above sectors into consideration. The technologies and designs are already present, allowing us to rebuild in a way that adapts to, mitigates and restores our climate.

So, the restoration economy might now be called the climate restoration economy, since that’s Job One, and the modality is virtually identical. The good news is that regeneration of our built, natural and socioeconomic environments exploded after The Restoration Economy first appeared. (I’m not claiming any kind of causal relationship, of course: it would have happened whether or not I put those words to paper. But I enjoy thinking that the book might have accelerated the trend just a teensy bit.) What was exceptional back in 1996 is now pretty much the norm. Everyone wants to get on with restoring nature and regenerating our cities. We just need to add one rather major new agenda to that original mix: restoring our climate.

You say you don’t believe that restoration is now ubiquitous? What’s one of the least-likely industries you can think of as a sponsor of stream restoration? How about professional hockey? The NHL Foundation pledged to restore 1000 gallons of stream flow to the Deschutes River in Oregon for every goal scored during the 2011-2012 regular season. This was in support of the Bonneville Environmental Foundation’s (BEF) Water Restoration Certificate Program…which is itself another indicator of restorative development’s increasing maturity.

Regenerative economics was advanced six years later when McGraw-Hill Professional (a now-defunct division of McGraw-Hill) published my second book, Rewealth.

One way of differentiating the focus of The Restoration Economy from that of Rewealth is that the former was more about the “ingredients” of revitalization (the various types of asset renewal).

The latter, on the other hand, was more about the “recipe” for those ingredients: how one combines them to create economic growth and increased quality of life (revitalization).

The Restoration Economy was documenting a historic shift in the global economy, so it was more theoretical.

Rewealth contains case studies of places coming back to life in a dramatic and unexpected manner—as well as the professionals and businesses that help them do so—so it was more practical.

Regenerative economics was yet advanced again in 2012 by the great Marjorie Kelly with her book Owning Our Future, which was taglined “Journeys to a Generative Economy.”

It was published by Berrett-Koehler Publishers, the same wonderful folks who had published The Restoration Economy a decade earlier.

Although Owning Our Future is more about ownership models, and didn’t focus directly on “re”, it conveyed that message indirectly by categorizing economic activities as being either “generative” or “extractive.”

That mirrored The Restoration Economy‘s “destructive development” mode (based on sprawl and the extraction of non-renewable resources) vs. the “restorative development” mode (based on revitalizing the places we’ve already developed, and restoring the natural resources we damaged along the way).

Here’s an excerpt from the Foreword to Owning Our Future, written by David Korten: “Our well-being, indeed our future as a species, depends on restoring our relationships to one another and with the land, the water, the sky, and the other generative resources of nature that indigenous people traditionally considered it their obligation to hold and manage in sacred trust. The architecture of ownership is key.”

Kelly and Korten were right that affecting the behavior of those who own capital and real assets is crucial to restoring both our planet and confidence in our economies. It’s easy to understand people’s distrust of big business when one looks at the blatant hypocrisy of large corporations. They preach the gospel of free enterprise while they’re small and want unfettered access to markets. But as soon the they’re large enough to pull it off, they use their money to get government to restrict the markets, so others can’t compete with them.

The majority of economic activity worldwide now consists of gambling. It’s called “investing” in polite company, but seldom are any real stocks or bonds involved: people and companies are merely gambling on derivatives, and derivatives of derivatives. There is no effective difference between these derivatives and making a bet at the horse track. They are merely a way for those with access to privileged information to siphon money out of the market. If we want economic restoration, we need to first cleanse the economy of giant parasites. Otherwise, it would be like setting a boat on a new course, while ignoring the gaping holes in its hull.

The remedy for the Ponzi scheme described in Professor Fisher’s above quote isn’t to improve the scheme by making it more “green” and “sustainable”. Only altering the fundamental basis of wealth creation can subvert it. Economic activity that increases our resource base can flip that pyramid on its head, creating ever-greater health, wealth, and happiness for all.

What’s especially encouraging is that the powers-that-be at the top of the current pyramid can maintain their wealth, if they too make this shift. This minimizes disruption to our political structures, since money is the basis of political power. In other words, this is a revolution that can—in theory—be implemented without bloodshed.

RE: A Prefix-based Strategy for Global Revitalization via Policymaking

The regeneration of our planet could be reduced to a change in prefix. We need to replace “de” with “re“. Transitioning to a global (or local) restoration economy happens when we move…
…from development to redevelopment
…from despoilment to remediation
…from depletion to replenishment
…from demolition to reuse
…from destruction to restoration
…from degeneration to regeneration.
In other words, we need to stop being degenerates, and start becoming regenerates.

The de-re shift could be greatly accelerated via a shift to true-cost (AKA: full-cost) accounting, but that would undermine far too many huge corporation with powerful political connections. The lack of true-cost accounting enables many archaic, inappropriate industries to live far past their sell-by date.

Fossil fuel firms continue to claim that renewables are too expensive. In fact, fossil fuels are many times more expensive, but their costs are hidden. Many other authors have written entire books on the subject, so let me just offer one example to the uninitiated.

Canadian tar sands extraction is a top contender for the most criminally-irresponsible industry on the planet. Their political influence enables them to enjoy freedom from normal business costs. For instance, the good people of Toronto pay about $674 annually per household for their water. The tar sands companies pay $0, and they use the same amount of water annually (370 million cubic meters from a single river) as the entire city of Toronto.

A shift to true-cost accounting would automatically shift economies from degenerative to regenerative activities: the numbers would force it. But don’t hold your breath waiting for it to happen: such a structural shift is too terrifying to entrenched power. Instead, the current incremental approach is the only other option; more of a long-term economic gut renovation than sudden demolition and replacement.

Contractor’s sign at redevelopment site in Glasgow, Scotland. Photo credit: Storm Cunningham.

Regarding demolition:

The repurposing, renewing, and reconnecting of existing natural, built, and socioeconomic assets has long been the foundation of my “restoration economy” approach.

That said, not everything is worth saving. Demolition can, in fact, make way for progress. But demolition without a follow-up revitalization strategy can lead to social and economic isolation.

Some buildings are simply too ugly or too badly-constructed to be worth saving, like the FBI headquarters here in Washington, DC. It could have been declared “blight” the day it was commissioned. The hideous architecture is bad enough, but it was also shoddily built, so it’s a maintenance nightmare.

FBI headquarters. Photo: Storm Cunningham.

While I’m a passionate advocate of historic preservation, I don’t believe trash is magically transformed to treasure on its 50th birthday (50 years is the age a building becomes “historic” in the U.S.; a standard seen as ridiculously low in older nations).

Other buildings are rendered un-reusable by water damage from poorly-maintained roofs, or by vandals (such as copper thieves).

But in general, planners and mayors often avoid the complexity of repurposing and renewing existing assets, and just go for the simplistic “wipe it all clean and start afresh” approach of mass demolition. This can sometimes make sense in places that desperately need to downsize their infrastructure maintenance budget to cope with a drastically lower population (like Youngstown, Ohio), but only if they have a strategic renewal process in place. Youngstown’s “city shrinking” vision was both innovative and brilliant, but they apparently lacked a strategy for overcoming the obstacles to it, and/or a process to implement that strategy.

Speaking of Ohio, the Slavic Village neighborhood of Cleveland provides some insights into the relationship of demolition and rehabilitation. Slavic Village was the epicenter of the national foreclosure crisis: it had the highest number of foreclosures of any zip code in the country in 2008 and 2009.

Photo of the Village Market courtesy of Slavic Village Development.

The predominantly African-American neighborhood is now revitalizing nicely, thanks in large part to a not-for-profit organization called Slavic Village Development (SVD). Its Executive Director, Chris Alvarado, credits much of their progress to SVD’s partnership with the Cuyahoga Land Bank, which was created in 2009 specifically to deal with the foreclosure crisis.

The land bank’s economic impact over that decade is estimated $1.43 billion, based on restored property values accomplished via a combination of demolishing and rehabilitating distressed structures so the properties can be returned to Cuyahoga County’s tax rolls, plus the jobs created in the process.

Until recently, federal and state funding assistance focused on demolition, so that’s what they did. Now that these funds are drying up, the Cuyahoga Land Bank is shifting to what often makes far more sense: rehabilitation. They are also adding commercial properties to their historic focus on residential (a shift I’ve recommended to a number of land bank clients over the years).

Wabi-sabi: Some decrepit structures need neither renewal nor demolition to revitalize a place…just some promotion.

In Japan, the aesthetic concept of wabi-sabi (first brought to most Americans’ attention by TV’s Bart Simpson, of all “people”) is one of the characteristics that dramatically sets their culture apart from that of the United States.

In Japan, they tend to appreciate the uniqueness of a flaw or irregularity in a new product (it gives it personality: making it an object only one person owns), and the decrepitude of an old object. Wabi-sabi is a world view centered on the acceptance of transience and imperfection. The aesthetic is sometimes described as one of beauty that is “imperfect, impermanent, and incomplete.”

Characteristics of the wabi-sabi aesthetic include asymmetry, roughness, simplicity, economy, austerity, modesty, intimacy, and appreciation of the ingenuous integrity of natural objects and processes.

Here in the USA, we worship visual perfection. And not just in inanimate objects, either: We warehouse our old people in commercial operations we like to call retirement “homes”, so we don’t have to see their physical deterioration on the street. Those with gross deformities, like goiters or facial cancers, don’t dare go into public if they can’t afford cosmetic surgery (which is common, what with our being in the only industrialized nation without universal health care).

In most other nations, by comparison, the ancient and the afflicted can walk in plain view down the street without drawing looks of disgust, horror or even outright anger at their polluting of our visual environment. In our drugged, commercial American cocoon—where pharmaceuticals and buying new stuff fixes everything—we don’t like to be reminded that death and disease exist.

We Americans waste vast amounts of fresh produce because it isn’t “perfect”. An estimated 25-40 percent of all food grown, processed and transported in the United States is never eaten. We don’t seem to care if it’s loaded with toxic pesticides—or if it’s rendered tasteless, nutrition-less, and potentially carcinogenic by genetic engineering—as long as it looks good.

“Produce is art,” says Jordan Figueiredo, solid waste specialist for the Castro Valley Sanitary District in California’s Bay area. “It’s amazingly nourishing. It should be celebrated.” He uses various social media accounts at @UglyFruitAndVeg to show lovable images of outcast fruit and vegetables. He says this helps people understand the issue better and makes them want to celebrate–rather than waste–produce.

As so often happens, North America trails behind Europe in embracing its love for ugly fruit and vegetables. France’s third-largest supermarket chain, Intermarché, launched a campaign in March of 2014 to get consumers to see the beauty of ugly produce. Television and print ads hailed the attractiveness of “the grotesque apple,” “the failed lemon,” “the disfigured eggplant,” “the ugly carrot” and the “unfortunate clementine.” One aisle of a store just outside Paris is devoted to “inglorious” produce and sold at a 30% discount. It’s hugely successful.

Of course, Americans aren’t alone in demanding that even old things look new. Restoration of historic buildings and old artwork is a multi-billion-dollar per year business worldwide. In most cases, that’s a good thing, since it enables them to enjoy a new life, often with a new, more relevant purpose.

But some ancient art is actually more beautiful in its aged state. And leaving a few well-built abandoned buildings unrestored adds a bit of age diversity to the visual environment.

City Methodist Church .
Photo via Adobe Stock.

In Gary, Indiana, they seem to get this concept. City Methodist Church, a grand, Gothic cathedral, has been abandoned for almost 50 years. Yet you can see it all over the internet, on Flickr and Instagram, and in movies like Transformers 3. It’s billed as “one of the best known and most popular Midwest locations for urban explorers.”

The church, which has been vacant since the 1970s as the steel industry bottomed out in Chicago and northern Indiana, has enjoyed an unlikely second life as a particularly beautiful, even sublime, decaying structure…what some call “ruin porn,” the ugly American name for urban wabi-sabi.

The church was in the news recently after it became 1 of 33 winners of the Knight Foundation’s Cities Challenge, which awards cities around the country with grant money for their best project ideas. Gary’s Redevelopment Commission received $163,333 to transform City Methodist into a safer, more official tourist destination for the city.

The church is one of the most visited places in the city, despite the fact that it’s not safe to explore. “The fact that the building, in its current condition, is not structurally sound has not deterred visitors,” says Sarah Kobetis, Gary’s deputy director of planning.

“So turning the space into a ruins garden felt like a mutually beneficial way to preserve what’s left of one of the city’s most notable structures, while also creating a new public amenity in downtown Gary for both tourists and community residents to enjoy,” she continued.

Gary isn’t the only Rust Belt city that has iconic “ruins” with considerable architectural value. And it’s not the first city whose ruins have become popular tourist destinations in their decay. But Gary might be the first to use these ruins in a purposeful, strategic manner to boost their economy.

As mentioned in Chapter 1, the science of complex adaptive systems  answers some important questions, such as how do living systems arise, how do they evolve, and how do they recover after massive disruption. Today, most of the algorithms that run massively complex tasks (financial trading, weather forecasting, Netflix recommendations, etc.) derive in whole or in part from the insights of complexity science.

Applying these insights at the human level is more of a challenge, but it can be done. For instance, politicians wishing to transform their city or nation should know that complex systems are best altered by changing the most basic decision-making rules of the system. These rules should guide individual “agents” in the desired new direction, while being flexible enough to allow decision makers in the field to adapt them to local needs and challenges.

Most urban planning instead tries to make arbitrary decisions for local agents. This is not a criticism of the concept of planning, only the practice, which is often based on centralized—rather than distributed—control, and on blind obedience to the plan (in those few cases where the plan is actually implemented).

Sometimes, only one local rule needs to be changed. For instance, the struggling downtowns of many small U.S. communities are hampered in their efforts to compete with sprawl malls outside of town by archaic “blue laws” that ban sales of alcohol on Sunday, or that prohibit businesses from being open on Sunday. Eliminating those rules might be all that’s needed to bring some downtowns back to life (though it’s seldom that simple).

Two core problems that undermine sustainability and resilience worldwide are both related to accounting rules: 1) the aforementioned lack of full-cost accounting, and 2) lack of what I dubbed trimodal accounting and policymaking in my first book, The Restoration Economy. Due to the lack of full cost accounting, both natural disasters and fossil fuel extraction go onto the books as economic growth, because we credit the jobs they create. But we don’t debit the lost value in damage or depletion, which violates the basic principle of double-entry bookkeeping. The emerging field of attribution science is a step towards a solution to that problem.

The latter, trimodal accounting, recognizes that there are three basic modes of development:
1) New Development (sprawl and virgin resource extraction);
2) Maintenance/Conservation (maintaining the built environment and conserving what’s left of the natural environment); and
3) Restorative Development (redeveloping existing communities and replenishing natural resources.

Current government reporting only accounts for the first two modes: we’re inundated with figures like “new housing starts”, but redevelopment and restoration activities are largely invisible (or buried in maintenance as “capital improvements”). We can’t manage what we don’t measure. Restorative development is where almost all of the good economic news resides these days.

While we can certainly have too much sprawl and too much virgin resource extraction, we can’t have too much restorative development or revitalization, provided they are done well. I’ve been doing this work all over the world for about two decades, and I have yet to hear someone say “hey, we’ve got to slow down this community revitalization program: our incomes and quality of life are way too high!” I’ve never heard anyone say “hey, we’ve got to slow down this river restoration program: the water is way too clean, and has far too many native fish!” I’ve never heard anyone say “hey, we’ve got to slow down this brownfields redevelopment program: our community is running out of contaminated properties!”

Too many people conflate population growth and economic growth. I’m always careful to specify that unlimited economic growth is possible if based on restorative development, but some people still take me to task, thinking that economic growth and population growth are intrinsically linked.

If there were 100 people on an island, and each person’s income went up 10% annually—based on greater productivity and the enhancement of natural resources—and the population remained at 100, how would that be unsustainable? We could actually have economic growth and population decrease simultaneously, which would be the best of all worlds.

As we enter the Anthropocene Epoch, restorative development will be—directly or indirectly—the source of most economic growth. Embedding simple rules like repurposing, renewing, and reconnecting into policy can accelerate a transition into restorative development.

Many folks rightfully bemoan the plague of obsolete, decrepit, vacant structures and toxic, degraded, depleted lands and water bodies. Here’s a more positive and constructive way of perceiving the situation: we have a wealth of renewable assets.

That massive inventory of renewable assets is fueling the $3 trillion/year global restoration economy.

Strategies and processes aren’t just needed to revitalize cities and regions: entire nations require need them.

For instance, Wales has long been an economic basket case. They were heavily dependent on coal mining for almost three centuries, so the shift to cleaner forms of energy, and cheaper sources of coal, hit them hard.

But that’s been the case for decades. During that period, the European Union repeatedly awarded Wales the highest level of economic aid (called Objective One) in 2000, 2007 and 2014. Since 2000, an additional £5.3 billion has been injected into Wales from the EU, on top of major grants from the British government. But the economic needle hasn’t moved. Why?

I would posit that, while there’s been an unending flow of ideas and tactics designed to revitalize their economy, there’s never been a cohesive vision and strategy, or a process to deliver the fragmented visions they do have.

Ynys Llanddwyn in Anglesey, Wales.
Photo via Adobe Stock

Some good approaches have been suggested, such as keeping the focus on energy, but shifting to renewal sources. But none of these visions were supported by a national strategy: they only had a long string of projects.

The turning point for long-suffering Wales will come when it has a process that links a regenerative program, regenerative vision, regenerative strategy, regenerative policies, regenerative partners and regenerative projects. And they will need an entity to house that program, because—believe it or not—Wales doesn’t have an economic development agency of any sort.

We often hear economists “explaining” economic collapses, both local and national. Where we seldom see economists is in economic rebirth situations; either during or after the fact. Why is that? Most economists are similar to engineers, in both their love of control and their fear of surprises. This is why few degreed economists work in the messy fields of community revitalization or natural resources restoration.

For three decades, well-meaning folks have been in the thrall of sustainable development. Many of the healthiest and most enlightened activities on the planet take place under the rubric of sustainability, but that’s mostly for lack of a better term. Sustainable development was coined as a dialog tool, a compromise designed to bring together the forces of unbridled economic growth and the forces of environmental responsibility.

As a dialog, it has achieved some wonderful things. But that’s all it is: a dialog: it lacks rigor. There’s been no shortage of attempts to create sustainability metrics, but a shortage of such metrics persists.

At my university talks and workshops, I’m increasingly picking up a “sustainability sucks” vibe from students and recent graduates. They are increasingly seeing it as the failed paradigm of their parents and grandparents’ generations.

Many online dialogs have been started in recent years by folks who recognize the problems with sustainable development, and who are looking for a better name. Smart growth, breakthrough economy, clean economy, conscious economy, cooperative economy, capitalism 2.0, sharing economy, experience economy, collaborative economy, information economy, knowledge economy, and so on.

Most of those descriptors exist only in the mind: you can’t see them in action. On the other hand, we’re surrounded by buildings and landscapes that are being—or have been—restored. As is often the case, the terminological solution is hiding in plain sight: restorative (or regenerative, if you prefer) economic development. Reconomics, in other words.

The redevelopment of existing communities and the restoration of damaged natural resources already accounts for at least $4 trillion annually, worldwide. But to tap its full potential, we need policies that establish it as the default mode of economic growth, and that establish some basic quality/ethical controls. The current default—which is encouraged by policy and subsidized in practice—is still mostly sprawl and virgin resource extraction.

Why do we put so much attention on the idea-of-the-month hyped by publishers, and so little on a multi-trillion-dollar reality that’s staring us in the face? Part of the problem is that we assume restorative development is merely an aspect our normal economic paradigm, as opposed to an emerging alternative. As a result, the restoration economy’s numbers are buried. Try to find government reports that break-out the “re” costs and benefits, separating them from the “de” costs and benefits.

You won’t find them. Instead, you’ll find redevelopment, regeneration, renovation, reuse, restoration, etc. buried under budgets categories like “maintenance” and “capital improvement”, where they give the appearance of supporting the status quo, rather than subvert it.

Often times, “redevelopment” is simply used synonymously with “development”, which is like not distinguishing between virgin materials and recycled materials when manufacturing a bag, bottle, or can. We can see the wisdom of defining and measuring the difference between recycled and virgin paper, glass, or metal. So why can’t we see the wisdom of being able to distinguish recycled land from virgin land…a recycled city from one built of virgin farmlands of forests?

Most large, publicly-traded real estate developers don’t want that distinction to be made. They need to make their quarterly growth projections to keep Wall Street happy, and that’s easier to do developing a few large tracts of greenfields than it is redeveloping many infill, adaptive reuse and brownfields projects. They are quite happy being free to make money by sprawling a community in a way that kills its historic downtown and undermines its environmental health and quality of life. When they do take on the occasional redevelopment project, they are just as happy to be able to doff the black hat and don the white hat, playing the role of community hero. Thus, their conflation of the labels “developer” and “redeveloper”. This confusion permeates all of economic theory and policy: academics perpetuate it and politicians implement it.

Complex systems evolve; sometimes incrementally, sometimes discontinuously, spasmodically, and asymmetrically. The incremental approach is the norm, with only occasional bursts of “punctuated equilibrium”. Thus, we should expect the next mode of economic growth to emerge in parallel with the old mode. But politicians want us to believe we can fix everything by tinkering with the old model (thus, not threatening the old money that backs their campaigns).

If we’re not willing to reinvent capitalism, we at least need to measure it accurately (full-cost accounting). If we do that, the insanity of fossil fuels, fission energy, sprawl, and unsustainable resource extraction becomes evident, and the sanity of restorative development and clean tech becomes equally evident. Then, we merely need to shift our policies and efforts from one existing reality to another: no “magic solutions”, “global awakenings”, or improvements to human nature needed.

The primary reason so many governments and major corporations have sustainability initiatives is because they know that it’s just a dialog. It can’t be measured, so government and corporate (and non-profit) sustainability programs can’t fail. They love that.

On the other hand, restoration, reuse, renovation, and most other “re” functions are eminently real. We can measure how much more a restored historic theater is worth. We can measure how many more fish are in a restored river. We can measure how much healthy topsoil has been rebuilt on a restored farm. We can measure how much more biodiversity inhabits a restored meadow. We can measure how much less toxicity is in the ground at a remediated old industrial site.

It’s true that we can measure components of sustainability: waste reduction, energy efficiency, etc. But there’s no metric for sustainability itself. We can’t point to anything and say with surety “that’s sustainable”. Sustainable for how long: 100 years? 10,000 years? Sustainable with what population: 8 billion? 80 billion?

But we can easily point to what’s unsustainable. For instance, as I write this on June 15, 2019, the Amazon rainforest has lost 739 square kilometers just during the past 31 days. That’s equivalent to two football (soccer) fields every minute.

Due to our short life spans, each generation keeps ratcheting-down the notion of what a healthy world looks like: it’s whatever existed when they were young. If we face up to how degraded, depleted, fragmented, and contaminated our planet is now, we would ask “Who wants to sustain this mess?“, as many young folks are now asking.

A major problem is institutional dynamics. The grants supporting many non-profits and academic programs are linked to the words “sustainability” or “sustainable development”. Changing the organization’s mission to “regeneration” or “restorative development” would quite literally threaten their economic survival.

So, they instinctively stop listening—or even go on the attack—when someone questions the efficacy of the sustainability dialog. As Upton Sinclair so famously said: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”  The irony, of course, is that sustainability advocates frequently invoke Sinclair’s insight when explaining the intransigence of fossil fuel executives, dam engineers, big box chains, etc. regarding climate change, river health, and sprawl, respectively.

About 24% of all usable (by humans) land on the planet is considered “degraded”. The estimated economic loss of this degradation is about $40 billion annually, primarily from soil erosion by water and wind. On September 24, 2013, a report was presented to to the UN Convention to Combat Desertification conference in Windhoek, Namibia. It stated that restoration and better management of degraded lands could deliver up to $1.4 trillion (USD) per year in increased crop production.

Sustainable development should have started at least two centuries ago. But it didn’t, so the world is now far too damaged to speak of sustaining as a goal.  The economic and social degradation—and opportunities—presented by this situation don’t get as much attention as one might expect, given its vast size. This is mostly because it’s primarily the rural poor who bear the brunt of the suffering: the 1.2 billion people worldwide who depend on small farms for both their diet and their income. Given the failure of both their national leaders and global NGOs to address it, people are taking arid land restoration into their own hands.

“A more accurate economic evaluation is crucial to prevent and reverse land degradation by raising the profile of the issue with policymakers,” says Richard Thomas, lead author of the study, and assistant director of the drylands ecosystems program at the UN University’s Institute for Water, Environment and Health, based in Hamilton, Ontario, Canada.

Ecological restoration is a powerful economic revitalizer, but its full value is often underestimated because our metrics are too simplistic.  For an example of folks who are trying to take a more intelligent, systemic approach to quantifying ecological restoration’s economic impact, here’s an excerpt from a March 2012 report titled “Economic Impacts of Ecological Restoration in Massachusetts” by the Massachusetts Department of Fish and Game‘s Division of Ecological Restoration:

“Impacts can be observed in two phases:

• Short term effects: These are benefits associated with increased demand for employment, materials, and services in Massachusetts during the Construction / Installation Phase of a project. Examples include: construction labor, materials costs, engineering time, permitting activities.
• Long-term effects: These are benefits associated with the Operational Phase of a project. These may include, for example, expenditures associated with increased boating, hiking, birdwatching, or beach visitation that may result from the project implementation.

Our study uses IMPLAN to examine the regional economic benefits associated with short-term construction/installation phases of restoration projects:

• Direct effects are production changes or expenditures that result from an activity or policy. In this analysis, direct effects are equal to the costs of the MA DER project, which we assign to appropriate economics sectors.
• Indirect effects are the “ripple” impact of local industries buying goods and services from other local industries as a result of the project (e.g., restoration project requires purchasing plant seeds or cement) within Massachusetts. Additional impacts that occur outside of Massachusetts are not included in these effects.
• Induced effects are changes in household consumption arising from changes in employment and associated income (which in turn results from direct and indirect effects) in Massachusetts. For example, these may include additional spending by construction workers with their wages, as well as additional spending by seed growers or cement companies with income received from sales for use in the restoration project.A DER project, which we assign to appropriate economics sectors.”

Our societal learning disability vis a vis the shift from new development to restorative development is producing a societal earning disability, as our resource base crumbles.

Traditional economics is a never-ending search for the unicorns of stasis, equilibrium, and predictability. It arbitrarily assumes linear, mechanical effects in the system, and purely rational behavior in the individual agents. Both assumptions are plainly absurd, but without them, economists wouldn’t be able to create the illusion that they know what they’re talking about.

So, don’t look to economists for insights into economic growth in general, or devitalization and revitalization in particular. As a January 14, 2019 article by Peter Coy in Bloomberg Businessweek stated, “The open secret of the economics profession is that its practitioners don’t have a theory for why expansions die. Or rather they have several theories, each of which contradicts the others, and none of which is fully supported by the data. Because economists don’t know why recessions start, they can’t predict when one will start.”

Like reductionist disciplines, conventional economists are loath to recognize that the whole is more than the sum of its parts. Facing up to that obvious reality messes up the simplicity of their assumptions, and their ability to “explain”. Economists’ inability to make accurate predictions undermines its claim to be a science. That’s why they normally stick to “explaining” what has already happened.

This, in turn, is why most economists either 1) teach economics, or 2) work for government agencies and large corporations. In the latter situations, their primary duties involve justifying whatever course of action has already been decided upon, and legitimizing previous actions.

Conventional economics is designed by economists for economists, and so has little relevance to the chaos and complexities of reality. But an economy—by definition—encompasses natural resources, infrastructure, agriculture, urban societies, information, technology, psychology and much more. This inherent holism makes an economics degree a wonderful background for anyone doing useful, high-level work (i.e. – not economics itself).

The more recent trend towards “complexity economics” is far more courageous. It attempts to understand a world where individuals react to patterns that their decisions have helped create, and how those patterns alter as a result of their reaction, which means individuals must react again.

In complexity science, it’s generally recognized that negative feedback stabilizes systems (that’s “negative” as in reducing, not as in bad). Thermostats offer a simple example of negative feedback. They monitor the temperature in a room, raising or lowering it when the temperature violates an established threshold. Negative feedback thus reduces fluctuations. The supply and demand dynamic in economies is another example. Equilibrium prices are established and maintained thanks to the negative feedback between the price of a product and demand for it (in the idealized world of accepted economic theory).

The feedback-based swarming of starlings takes place without centralized leadership.

On the other hand, positive feedback tends to destabilize systems (that’s “positive” as in enhancing, not as in desirable). The melting of polar icecaps from atmospheric warming is an example of positive feedback. The smaller surface area of ice reduces the albedo (energy-reflecting) effect of the ice, thus accelerating the melt by raising the average atmospheric temperature.

The recruiting process in honeybee hives is also an example of positive feedback. Scout bees dance to advertise a new hive site they find attractive, thus recruiting additional scouts to visit that site. The more bees that are thus recruited, the more will be advertising the new site, which recruits still more. Eventually, the number of scouts promoting a particular site passes a threshold (“tipping point”), and the entire hive swarms to the new site. That’s maximum social disruption, at least in the short term. Long term, it’s an effective resilience-enhancing mechanism.

In terms of community revitalization and resilience, it’s negative feedback that stabilizes the society (such as via policing) or the economy (such as via budgets and policies) when perturbed. But it’s positive feedback that drives the acceleration of either revitalization or devitalization. Positive feedback loops produce both increases and decreases that are far out of proportion to the inputs.

Whereas traditional economic theories only acknowledge negative feedback loops (diminishing returns), complexity economics also accepts the reality of positive feedback loops (increasing returns). These are the primary source of economic surprises, like cities that suddenly spring back to life “for no reason.” Of course, elected leaders usually attribute such scenaria to their own brilliance, and hire economists to prove it.

This emergent property known as an increasing returns situation is a synergistic “whole is greater than the sum of the parts”-type behavior: output increases by a larger proportion than the increase in inputs.

The increasing returns phenomenon has been known of since the time of Adam Smith, but conventional economists closed their minds to it, because it throws all of their most beloved theories for a loop (pun intended).

Brian Arthur at World Economic Forum (2011) Photo credit: World Economic Forum

In 1939, Sir John Hicks, a founder of modern economics, said that acknowledging the reality of increasing returns would wreck established economic theory. It would rob standard economic models of the two qualities most prized by economists: determinism and simplicity. That’s still the case today.

The courageous work of forcing economics to deal with reality was pioneered in the modern age by Stanford economist W. Brian Arthur.

This is similar to the way classical (e.g. Newtonian) physicists choose to believe that the quantum realm can’t affect the physical realm (even though our physical reality is composed entirely of quantum reality). It’s not due to any paucity of intellect to grasp the obvious (that they are just two views of the same universe, at different scales), but due to lack of courage to face the ramifications (which would admittedly shake our society, and many of its most revered institutions, to the core).

For those of you who are familiar with quantum dynamics, one might say that using the RECONOMICS Process (described in more detail later) helps a community select (on some unconscious level) the probability wave leading to a revitalized future.

Intersection of quantum & classical probability. Image credit: R. Nave, Georgia State University

Increasing returns doesn’t just apply to economics, of course. Witness the small amount of “social currency” issued by individuals such as Martin Luther King, Nelson Mandela, or Gandhi, and the vast amount of that social currency that ended up in circulation.

Such movements could be considered “social revitalization”, and they succeed due to the same three dynamics often found in successful economic revitalization: confidence, momentum, and alignment.

The opposite of such movements also arise—those promoting fear, ignorance, and separation—and these produce both social and economic devitalization.

Acknowledgement of the reality of increasing returns thus makes complexity economics the only form of economics that can deal with the dynamics of revitalization.

An obvious factor in devising any successful strategy is basing it on a reasonably accurate perception of the situation one wishes to change. Turning a blind eye to the messy, complex nature of economic revitalization—local, regional, or national—is not an option in the real world, as it is in academia.

In the summer of 1996, Harvard Business Review published one of the most influential articles in its long history: W. Brian Arthur’s Increasing Returns and the New World of Business.

Two decades later, the December 7, 2016 issue of Fast Company magazine featured an article titled
A Short History Of The Most Important Economic Theory In Tech. In it, author Rick Tetzelli says “the theory of increasing returns is as important as ever: It’s at the heart of the success of companies such as Google, Facebook, Uber, Amazon, and Airbnb“.

Business strategists rely on increasing returns, but the theory has yet to make any serious inroads in the practice of community economic revitalization.

A dreamed-of goal of all revitalization efforts is to trigger an increasing returns situation. That’s what the RECONOMICS Process is designed to do. Combine an acceptance of increasing returns with the trimodal development perspective plus full-cost accounting, and one has a solid foundation for a new field of study: resilient economies, or reconomics for short. Its purpose would be to generate useful insights into the process of bringing places back to life, leading to better strategies and management.

Finance and tax policies for resilient prosperity

After strategy and program, policies are the most frequently overlooked aspect of revitalizing a place. When good policy gets translated into legislation, with teeth and/or sufficient funding, it can work wonders. A national policy of supporting the preservation of historic buildings created the federal Historic Tax Credit which—over its first 36 years—created 2.3 million jobs, leveraged $117 billion in investment, and rehabilitated over 41,250 buildings, which helped revitalize many downtowns throughout the U.S.

Any place that launches a revitalization or resilience initiative without creating supportive policies (and eliminating counter-productive policies) is inviting failure in the short term, and virtually guaranteeing failure in the long term. Such failures most commonly affect financing. “Policies” and “budget” are together in the RECONOMICS Process because policies aren’t “real” if not reflected in the budget.

Financing for revitalization and resilience efforts is just as siloed and fragmented as are the many professions, organizational types, and government agencies. There’s a great opportunity for innovative leadership in this area. We’ve so far documented many obstacles faced by those wishing to renew neighborhoods, cities, regions, and natural resources, but one challenge almost everyone shares is funding.

Most folks assume the primary problem is the quantity available, but that’s an illusion: there’s no shortage of money. As stated earlier, of the three sub-trends of the adaptive renewal megatrend—regeneration (revitalization), resilience, and adaptive management—revitalization is the most important focus, since that’s where the majority of the current funding is targeted, usually labelled “redevelopment” or “capital improvements” in the U.S.—or “regeneration” in the UK—when the focus is cities.

Downtown Pittsburgh, PA on October 28, 2019: Mapping decrepit infrastructure so it can be renovated before this happens is a good idea. Photo by anonymous via Twitter.

The problem lies more in finding the appropriate funding when its needed. This is a great opportunity for a tech company. Linking it with mapping would be ideal, so maybe Google or Esri should be looking into this. A single source—localized and global—of information and links to regenerative foundation grants, government grants, community bonds, startup financing, bridge financing, equity investors, impact investors, individual investors, crowdfunding, institutional investors, tax credits, etc. would be magic.

Add in links to relevant tools and models such as land trusts, conservation easements, TIF, CDC, BID—all focused on “re” activities—and the fixers of the world could spend more time actually fixing things, instead of finding resources and reinventing wheels.

The map would allow filtering according to the type of renewable asset: brownfields, historic structures, damaged waterways/ wetlands, forests, degraded farms/ranches, depleted fisheries, obsolete infrastructure, rundown parks, vacant lots, etc. Such a tool would allow organizations like land banks to become far more holistic in their revitalization efforts. And it would enable resilience efforts to more easily integrate with revitalization agendas.

It often seems that there are too many sources of money—which complicates revitalization and resilience—but the real problem is the lack of a good tool for finding them. This is especially problematic in smaller communities lacking local agencies to attract state/provincial and federal funding. For instance, creating a park to revitalize downtown Greenport, NY (population 2200) was a $14.9 million effort that used the following financial tools (thanks to N. David Milder of DANTH and Andrew Dane of SEH for data from their Oct. 23, 2014 “Some More Thoughts on the Economic Revitalization of Small Town Downtowns”):

• $4 million of town money. This included $1.2 million from a general obligation bond offering to buy the foreclose property, $1.5 million from their Capital Improvement Fund, etc.;
• 25 grants from a local, state and federal agencies;
• Private funds from the estate of a local resident; and,
• Donation of a full-sized carousel by Northrop Grumman Corporation (to help fund park operation via $200,000 from the carrousel’s projected 100,000 annual riders).

Many additional funding sources suddenly appear when project leaders climb out of their mental silos. For instance, a historic building is often viewed as just that: a heritage asset. But it’s within a watershed, so installing a green roof—or bioswales in the landscaping—might qualify it for grants or tax credits related to restoring the watershed. It might be in a low-income neighborhood that would entitle it to New Market or other tax credits, depending on how it is going to be repurposed. It might contain hazardous materials, entitling it to brownfield remediation resources. An unused portion of the property might be ideal for an urban farm or a farmers’ market, entitling it to grants related to enhancing a locally-based food system, or fixing a “food desert” situation. It might be an ideal site for affordable housing, which opens up another realm of funding and tax credits.

The list of potentially-connected agendas that could lead to additional design, development, start-up, or operational funding is almost endless. Normally, the people proposing projects are unaware of these overlaps. Even when they are aware of them, they often lack the manpower and expertise to investigate or pursue them. But the kind of integrated funding locator described above would ideally suggest non-obvious agendas and related resources.

This could make all the difference in a project’s financial viability. It would also improve the project’s design and appeal: the more amenities a place offers, the greater the geographic area from which it will pull customers and visitors. A park with beautiful natural features will generally attract more users if it also has historic features.

Many federal and state funding sources focus on programs, not projects. An example in the U.S. is the HUD-DOT-EPA Partnership for Sustainable Communities. So, creating a local process that includes an ongoing program broadens your funding opportunities. This book’s subtitle reads “The path to resilient prosperity” because resilient prosperity should be treated more as a path than a goal. The regenerative process you’ll learn here doesn’t suddenly achieve resilient prosperity at the end of your effort: it produces it in increasing amounts from the very beginning, as you apply the process. There is no “end of your effort,” except maybe on the day you decide you no longer desire resilient prosperity.

Such national programs often focus on clean energy, resilience, poverty, etc. All relate to the creation of resilient prosperity, but most can’t be accessed without creating a relevant local program. Governments and foundations are (finally) realizing that most of these societal and environmental challenges can only be addressed by ongoing programs, not by one-time projects. So the RECONOMICS Process gives you the necessary receptacle for such funding.

Revitalizing Taxation Strategies

The second aspect of attracting new sources of funding is to tax only what you want to reduce in your community or region, so as to increase desirable behaviors. This approach isn’t as simple as grant-writing, but has significantly greater potential for making the structural and policy changes your community needs to create resilient prosperity.

For at least a century, practical economists have recommended taxing those activities we want less of, and using some of the resulting revenue to encourage what we want more of. Using fossil fuel taxes to fund research and development of renewable energy (or the creation of public transit) is an obvious application of this approach. The use of tobacco taxes to fund preventive health care/education is another.

In the same manner, places can reduce sprawl and unsustainable resource extraction—while increasing urban revitalization and natural resource restoration—via sprawl and/or extraction taxes. In most cases, sprawl developers don’t pay the full public cost of providing infrastructure and services to their projects. Even where they do, their projects usually decrease local quality of life by reducing greenspace, damaging watersheds, adding to traffic congestion, increasing air pollution, and devitalizing historic downtowns.

It’s only fitting then, that—in addition to paying for infrastructure and services directly related to their projects—they also pay a “revitalization fee” to boost the local resilience and quality of life in ways that help offset the negative impacts of their sprawl development. Such a fund could boost public transit, brownfields cleanup, infill development, watershed restoration, historic structure renovation, etc.

Likewise, resource extraction companies (lumber, fossil fuel, mining, and ranching, etc.) often pay nothing (or a bare pittance) for the public resources they deplete and damage. They often aren’t required to fund post-extraction restoration. Even when they are, they usually just declare bankruptcy and create a new corporate entity to avoid paying.

Requiring substantial restoration escrow accounts prior to mining, fracking, clear-cutting, etc.—in additional to fair compensation to the public for the value of lost natural capital—could go a long way towards funding resilient prosperity in the region. This has recently become the norm with mining in many U.S. states.

In a January 27, 2015 New York Times Op-Ed, David Brooks said, “The big debate during the 20th century was about the relationship between the market and the state. Both those institutions are now tarnished. The market is prone to devastating crashes and seems to be producing widening inequality. Government is gridlocked, sclerotic or captured by special interests. …many of the most talented people on Earth have tried to transform capitalism itself, to use the market to solve social problems. …Impact investing is probably the most promising of these tools. Impact investing is not socially responsible investing. Socially responsible investing means avoiding certain companies, like tobacco… Impact investors seek out companies that are intentionally designed both to make a profit and provide a measurable and accountable social good.”

Private impact investors (as Brooks mentions above) can undo much of the existing damage, but local governments don’t suffer as greatly from the problems he describes. They are far from helpless.

Property taxes offer an obvious area of reform. Currently, they are based on the entire property, both land and improvements (such as buildings). This has two problems: 1) It “punishes” property owners for adding value to the land; and 2) It rewards property owners for passively sitting on vacant or derelict properties, waiting for overall revitalization to boost their investment. Such “parasitic” real estate speculation thus retards the very revitalization they’re hoping for.

A more intelligent way to tax land is called a “land tax”, variously known as site-value tax, land value tax (LVT), split rate tax, and site-value rating. A few progressive governments around the world have adopted it, such as in New South Wales, Australia, Mexicali, Mexico, and Pittsburgh, Pennsylvania in the U.S.

This is one of the most revitalizing policy changes a place can make. The land value tax levies high rates on the land itself, but none on its structures. Speculators are thus punished for sitting on blight, and redevelopers are thus rewarded for improving their properties.

A fringe benefit is that most homeowners will see their tax bills drop, often by about a third. This helps prevent the negative feedback loop that kills so many places: devitalization reduces city revenues, so they raise property taxes, which drive out more residents, thus accelerating devitalization. The community doesn’t experience a revenue drop when revenue from homeowners drops, because tax receipts from vacant properties go up significantly…often doubling. In other words, you’re rewarding what you want more of, and punishing what you want less of. Put another way, such policy changes help retain the residents and employers you have, while attracting the investors and redevelopers you need.

The concept of a land value tax has been around since 1879, when Henry George suggested in it his book, Progress and Poverty.  But it’s not in wide practice. Why? The usual story: the influence of money on politics. Commercial and industrial property owners are normally among the wealthiest people in any community, and are thus major campaign contributors to mayors an city council members. Doing what’s right takes more courage than one usually finds in elected officials.

“Tax policy has always encouraged land speculators,” said Ed Dodson, a former market analyst with Fannie Mae and professor at Temple University in a September 2019 GOVERNING article by J. Brian Charles. “It makes it easy for speculators to acquire and hold land and wait for public-private partnerships to come along with funds to pay them their profit for speculating.”

In the places where it has been tried and abandoned, the usual cause (other than lobbying by land speculators) is failure to reassess land values on a regular basis. Homeowners expect taxes to go up incrementally, and don’t complain much when they do. But if a city or county only reassesses land once every 10 or 20 years, land-based taxes suddenly shoot up, causing voter backlash. Structures often lose value as they age, but land almost always rises in value.

In the places where it’s still in use, the results have been spectacular. Pittsburgh has used land value tax in its Central Business District since 1997. Between 2009 and 2019, some $8.5 billion worth of downtown redevelopment has been completed or announced. But the major champion of land value taxation in Pennsylvania was Harrisburg mayor Stephen R. Reed.

Harrisburg, Pennsylvania.
Photo credit: Adobe Stock.

Between 1960-1980, Harrisburg lost 800 businesses and a third of its population. In 1980, the U.S. Dept. of Housing and Urban Development (HUD) called it “One of America’s most distressed cities.” But by 2010, Forbes magazine was calling it “The second best place in the U.S. to raise a family.” The single most important factor in that dramatic turnaround was the adoption of 2-tiered property taxation.

This was pioneered by Reed, who was Harrisburg’s mayor from 1981-2010. He was frequently called “Pennsylvania’s most popular and successful mayor.” By reducing the “penalty” for improving property, Harrisburg catalyzed $3 billion of new investment. Rehabilitation of existing structures increased the city’s taxable real estate from $212 million to over $1.6 billion.

It should be noted that Mayor Reed also borrowed hugely for many dubious projects like sports stadiums and an incinerator, which ended up bankrupting the city. But that was in no way the fault of the land value tax, whose success led to that “irrational exuberance” (as Alan Greenspan might have called it). More recently, Minneapolis has been considering it.

Why don’t more cities use land value taxation? Once again, fear. Middle class and lower income property owners—in others words, most voters—are happy enough with the reduction in taxes the two-tiered system brings to them. But the wealthiest property owners/political campaign contributors see it (correctly) as a constraint on their speculative land investments. Value-capture funds and land taxes could go into the general tax revenues to fund education, police, fire services, etc. Or, they could go directly towards organizations doing revitalizing work.

For instance, Tybee Island, Georgia funds local non-profits from their 6% hotel/motel tax. The program has been so successful that—in January 2015—their mayor, Jason Buelterman, suggested raising the city’s annual contributions from $57,902 to over $100,000. He says activities of groups like the Tybee Island Historical Society attract tourists, while enhancing the quality of life for year-round residents.

Tax Increment Financing (TIF)

Tax increment financing (TIF) has financed far more redevelopment and revitalization work in the U.S. than any other tool or source. It’s probably the only financial tool that is fundamentally rooted in revitalization. TIF allows communities to borrow from the value of future revitalization in order to fund the work needed to make that revitalization happen now. If that sounds circular and self-referential, that’s because it is.

TIF chart courtesy of the City of Omaha Planning Department.

The basic process is this: the community draws a border around a blighted area and calls it a “TIF District”. A baseline of current tax revenues (if any) from that area is documented.  Then, an estimate is made of the tax revenues that the District would be generating in 20 or 30 years if it were successfully revitalized. The difference between that figure and the baseline is the “increment”. The community then borrows against a portion of that increment, and uses the money to stimulate that revitalization.

Ideally, TIF funds don’t fund actual redevelopment itself: that’s mostly the role of the private sector. TIF funds are best used to pave the way for the private sector; performing infrastructure improvements and brownfields assessments (even remediation) that make a dead section of town more attractive to redevelopers.

One of the great benefits of tax increment financing: it enables “broke” communities to come to the public-private partnership negotiating table with cash. It also helps small places do large projects when necessary.

The first TIF was created in California in 1952. By 2004, all 50 American States had authorized the use of TIF. Due mostly to perceived risk, TIF has been slow to catch on in more-cautious nations.

As with any other good tool, people will find a way to twist it to their own selfish purposes over time. The practice of tax increment financing currently suffers from tremendous abuse, misuse and overuse. Political leaders abuse it by directing the funds to their friends, mostly in the form of unnecessary subsidies. Places misuse it to fund sprawl, rather than redevelopment. And some places overuse it to the point where their general tax revenues are depleted, making it harder to pay for essential services like schools and police. But none that malpractice detracts from TIF’s intrinsic value.

All three of those problems tend to result from a combination of insufficient transparency and revitalization ignorance. TIF is what’s known as a “value capture” mechanism. It’s unique in that it captures enhanced future value, and makes it available to spend in the present, so as to make that future value enhancement happen. It’s like economic time travel.

Many cities complain that overuse of TIF has damaged their school funding. But the Union Township of greater Cincinnati—recognizing the role of quality education in revitalization—announced in January of 2015 that a new high school would be constructed with TIF funding, using no taxpayer money. Sounds simple, but it’s a revolutionary innovation. Here’s a slogan that should guide all TIFs: “No taxation without revitalization!”

Each state has their own flavor of TIF. Some establish different qualifying conditions to allow for the creation of different types of TIF districts. Minnesota, for instance, allows for six district types: economic development, housing, redevelopment, renewal and renovation, soil condition, and hazardous waste substance subdivisions. Illinois allows TIF to be used for remediating blight, for conserving areas with many structures older than 35 years, and for promoting industrial parks in areas of high unemployment. With such definitional diversity, it’s little wonder that the unscrupulous find so many ways to subvert it for personal gain.

Another reason TIF is so commonly misused is that the enabling state legislation often fails to define “blight” in a rigorous manner. They are careful to use hard numbers in reference to blight, such as requiring that 60% of buildings in a prospective TIF District be substandard, or that 90% of the tax increment needs to be used to remediate blight. But they often forget to actually define blight well enough to avoid its being used for sprawl.

For an example of abuse, look at the billionaire Koch brothers. They’ve funded several foundations that extol the social benefits of free enterprise, while decrying government regulation, socialized medicine, public transit (they’re in the oil business) and public assistance to the poor. But even with their vast wealth, they aren’t above demanding unnecessary taxpayer subsidies to expand their businesses: they receive some $50 million in such handouts in an average year. Many see this as corporate socialism.

What does this have to do with TIF, you ask? In Enid, Oklahoma (population: 50,000), the Kochs planned to spend $1 billion expanding their Koch Nitrogen Plant (fertilizer). But they wanted the taxpayers of this small, working-class city to help them do it.

To accomplish that, the Kochs turned their private plant into a TIF District . This means that taxes which would have gone towards paying for schools, roads, police, etc. will go towards renovating their for-profit factory. This was blatant abuse of TIF, which should only be used to fund community redevelopment and revitalization. Large employers across America use similar forms of extortion. They threaten to leave communities that are desperate for jobs, demanding tax breaks, free land and subsidies…hardly the behavior of good corporate citizens.

In the old days, when most newspapers had investigative reporters, they would have blown the whistle on such a scheme. The only “exposé” of the Koch’s TIF abuse I know of was a lonely tweet from me to my 26,000+ Twitter followers, which is a pretty pathetic excuse for investigative reporting.

The only newspaper coverage I could find was in the local Enid News and Eagle, which ran a puff piece extolling the virtues of the plan (without explaining the cost to citizens). The article sounded like it came straight from the Koch’s PR team, sans editing. (It’s estimated that between 80-90% of all articles in the U.S. news media come from corporate and government PR agencies.)

The Hop. Photo credit: The Hop MKE.

Most cities spend TIF funds on repurposing and renewing properties. When they spend it on reconnecting the TIF District, it’s usually in the form of roads and telecommunications. That’s sometimes best, but Milwaukee, Wisconsin took an approach that’s often smarter: public transit. While it’s not unprecedented, using TIF for public transit certainly isn’t common.

They used $59 million worth of TIF funding to build the first phase of their $124 million “Hop” streetcar system. In May of 2019, Milwaukee Mayor Tom Barrett presented his plan to add another 2.4 miles to the 2.1-mile system, using another $51.8 million of TIF funds.

To fund the first phase, Milwaukee simply extended the lifespan of existing TIF districts. For the second phase, which extends it to their lakefront, a new TIF district is being formed. $47 million of the $51.8 million  would extend the streetcar. The remaining $5 million would create a new public plaza connected to their downtown convention.

Jeff Fleming, spokesman for Milwaukee’s development department, explained that the city used federal grant dollars and TIF financing for the streetcar in order to keep local taxpayers from paying the costs. “Doing so tapped into the increased property values immediately surrounding the streetcar,” Fleming said in a September 13, 2019 Wisconsin Public Radio article. “There’s no question that property values are increasing within a quarter mile within the streetcar line.”

GreenTIF

Green Bonds and other new tools for funding the restoration/creation of green infrastructure (often for climate change resilience) are obvious candidates for funding such projects on a large scale. But the most overlooked source is that well-proven revitalization tool described above: tax increment financing (TIF).

We’ve talked about TIF’s longstanding role in funding community redevelopment (its original purpose). But I believe it has tremendous potential for funding the restoration of natural resources and green urban infrastructure.

Now, with the rise of metrics for monetizing ecosystem services—combined with the growth of resilience programs that require greater integration of our built, natural, and socioeconomic environments—the time has come for a new breed of TIF to emerge, which I’ll dub “GreenTIF™”.

Instead of—or in addition to—the usual property and sales tax base of urban TIFs, the GreenTIF could be funded by a combination of specific natural resource industry taxes, water fees, climate disaster insurance, and/or a new disaster prevention tax. The latter will likely emerge soon, in these days of climate change-related superstorms, floods, droughts, etc.

In December of 2014, the U.S. EPA published an excellent guide, “Getting To Green: Paying for Green Infrastructure.” Financing options and resources for local decision-makers.” But it contained not a single reference to value-capture mechanisms in general, or to TIF in particular.

A GreenTIF would differ from a regular TIF in three basic ways:

1. It would generate its incremental value increase in large part from renewing the natural environment;
2. It would be applicable to far larger areas, possibly entire watersheds or estuaries (such as Chesapeake Bay); and
3. It would derive revenue from sources other than property and sales taxes.

There’s one more key differentiator: a GreenTIF would need to define “blight” in a different manner from the normal urban TIF. It might be based, for instance, on resource depletion, such as current oyster or crab harvest levels from a bay compared to historical levels.

Some major projects in the U.S. are already looking to apply TIF towards renewing the natural environment, though it’s usually in an urban setting. The billion-dollar-plus Los Angeles River Restoration Project is one. The aforementioned 11th Street Bridge project here in Washington, DC is also looking at TIF-like value-capture mechanisms to fund the bridge repurposing, as well as nearby ecological restoration and park creation along the Anacostia River shoreline.

Just as urban TIF funding sets the stage for increased private redevelopment via infrastructure and brownfields renewal, so too would GreenTIF funding set the stage for increased commercial usage via environmental restoration. Of course, the performance specifications would need to call for the restoration of the diverse ecosystem in which those commercial species or ecosystem services are found, not just for the increased production of commercial species (like blue crabs or striped bass in the Chesapeake) themselves. In addition to simply being the right thing to do, this would help ensure the resilience of the harvest.

One current project that moves the TIF needle a bit in this GreenTIF direction is in Maine. As you probably know, salmon farms—whether based in rivers, estuaries or the open ocean—are usually environmental disasters. They pollute the water with excess food, concentrated fish excrement, antibiotics and growth hormones. They also contaminate wild salmon stocks with genetically-modified fish that inevitably escape. And, their food comprises vast quantities of smaller wild fish, thus depleting food stocks for wild salmon, mackerel and other species.

A new company called Whole Oceans wants to become America’s premier, land-based producer of sustainable farm-raised Atlantic salmon.  Their model is more sustainable than a normal salmon farm because it’s a closed system: no pollution—or fish—can escape. In 2019, they started building a state-of-the-art Atlantic salmon recirculating aquaculture system (RAS) facility in Bucksport, Maine.

Whole Oceans’ proposed facility on old paper mill site. Image: Whole Oceans

This project will be one of the largest land-based aquaculture projects in the world. On July 12, 2019 the Town Council of Bucksport voted unanimously to create a TIF for the site of the former Verso Paper Mill, where the Whole Ocean facility is being built.

Whole Oceans’ development on a 90-acre portion of that site is expected to increase the property’s value by $42.2 million. If taxed at the town’s current tax rate of $16.30 for every $1,000 in property value, that increased value would translate into $13.7 million in new taxes paid by Whole Oceans in their first two decades of operation, amounting to $687,000 annually.

But with the TIF, the town will reimburse about 70% of the new taxes — $473,000 a year on average. That reimbursement would work out to $9.45 million over the 20 years. Whole Oceans will not have to pay property taxes for the first five years of the 20-year agreement on any new property value it creates from developing the salmon farm. It will pay 25 percent of its new property tax obligations over the subsequent five years and 50 percent for the remaining 10 years.

The first phase of the salmon farm’s development, estimated at $180.6 million, could create as many as 75 jobs. So, this should be a win for the town, the company and the environment (although their website doesn’t say what the salmon will be fed.) Granted, this isn’t a GreenTIF as described above, but it might help people start thinking of using TIFs for natural resources, rather than just urban redevelopment.

The ideal host for a GreenTIF would be an organization that has already embraced a holistic approach to environmental restoration, regenerative agriculture and rural economic revitalization. There aren’t any, you say? Take a look in Amsterdam, where a non-profit called Commonland was founded in 2013 by the IUCN Commission on Ecosystem Management, the Rotterdam School of Management of the Erasmus University, and a private foundation.

Commonland facilitates long term support to local people to restore degraded landscapes and ecosystems, generating inspirational, social, natural, and sustainable financial returns: what they call the “4 returns framework”. Commonland is closely aligned to the UN Decade on Ecosystem Restoration. Its focus is on developing Landscape Restoration Partnerships, and on developing businesses that are regenerative and nature-restorative, while capturing carbon and beautifying landscapes.

Over the past five years or so, they have focused in the field on building a “proof of concept” track record in four landscapes in South Africa, Spain, Australia and Netherlands. In 2018, the first “4 returns” company was listed on the Australian Stock Exchange.

In an email to this author, the CEO of Commonland, Willem Ferwerda said “Our strategy is to build bridges among farmers and local landowners, investors, companies and governments. That is our way to restore living and productive landscapes. It is not an easy way, but after six years of testing we believe that this 4 Returns approach is the best way to achieve long-term landscape restoration successes.” Of course, Europe isn’t yet TIF-friendly, so if the GreenTIF ever takes off as a concept, it will more likely do so here in the U.S, the home of TIF. But Commonland shows that restoration economy organizations are emerging that aren’t restricted to the usual silos.

It’s too early to go into any more detail about this nascent GreenTIF™ effort, but I intend to assemble a team to develop a basic, replicable, customizable model for just such a funding mechanism. Interested individuals and institutions are invited to inquire about involvement.

Adaptive Funding

There’s one advantage to the fuzziness surrounding the definitions of revitalization and resilience: it makes it easier to “adapt” money from well-funded sectors to important under-funded sectors.

Just as repurposing, renewing and reconnecting physical assets revitalizes communities, so too can repurposing narrowly-targeted, short-term financial assets and reconnecting them to serve broader, long-term agendas. In the process, we can also renew and expand project funding to serve programmatic goals.

The majority of such opportunities arise with infrastructure funding. This is partly because infrastructure projects are typically large, so earmarking 1% for resilience, for example, could yield millions of dollars. It’s also because infrastructure is the connective tissue of the urban and regional bodies, so it’s often a direct path to a strategy for renewing, repurposing, and reconnecting distressed or vulnerable properties and neighborhoods.

In 2012, U.S. Conference of Mayors estimated that American cities will invest some $4.8 trillion on water and wastewater infrastructure renewal in the coming 20 years. If just 1% of that got “repurposed” to more effectively connect to local resilience and revitalization agendas, the ROI of this money could easily be doubled.

As noted earlier, with the right strategy, many types of revitalization activities can also build resilience: infrastructure renewal, brownfields remediation / redevelopment, heritage renewal / reuse; watershed restoration; restorative agriculture; etc. Whenever natural, built, and socioeconomic assets are renewed, repurposed, or reconnected to create a greener, more inclusive economy, both revitalization and resilience are advanced.

In the February 2015 issue of Municipal World, an article titled “Heritage Builds Resilience” by Natalie Bull said, “…if infrastructure includes ‘the range of structures that enable, sustain, or enhance societal living conditions’ then governments need to think—and invest—more broadly. In fact, funds earmarked for infrastructure can and should include funding envelopes for investments in a community’s heritage assets. Certainly, Canada’s towns and cities are full of examples where investment in ‘heritage infrastructure’ has successfully generated economic vibrancy, as well as cultural and social benefits—all part of the recipe for resilient communities.”

An “adaptive funding” approach could help create a local resilient prosperity process with serious funding. If resilient prosperity is (as described earlier) “a feedback loop of rising levels of optimism, equitable wealth, quality of life, and environmental health, usually deriving from an ongoing, adaptive process of regeneration,” then it’s obvious that budgets focused on renewing virtually anything could fall within its purview.

This wouldn’t necessarily mean defunding any existing agency. But the adaptive renewal megatrend will make it easier rectify some of the inefficiencies and dysfunctions arising from the current fragmentation of urban and regional governance and management.

A resilient prosperity agency, department, and/or director could be given some level of oversight over all such funding, helping to ensure that they comply with the strategic vision and goals.

Adaptive funding isn’t yet a formal practice: it’s currently just a practical expedient…something intelligent, creative people do when the project they love is starving. This lack of formal recognition doesn’t mean it’s small potatoes, though. Hundreds of billions of “re”-oriented dollars per year are “up for grabs” for managers of adaptive renewal.

A climate restoration economy based on numbers, assets and people.

Since The Restoration Economy came out in 2002, I’ve had some clients—like Montana governor Brian Schweitzer—who grasped the need to quantify the economic and employment benefits of restoring watersheds and brownfields. He published the landmark Montana Restoration Economy report in 2009.

But that was primarily focused on watershed, fishery and brownfield regeneration: no one has properly documented the holistic revitalization of whole communities or regions, which would also include the regeneration of heritage, infrastructure, agriculture, ecosystems and disaster zones.

In 2012, The Nature Conservancy and Oxfam America held a Restoration Economy summit in Thibodeau, Louisiana for over 100 local leaders. Its purpose was to explore the job creation and economic revitalization potential of the post-BP oil spill restoration activities. In 2013, researchers at Yale and the University of North Carolina published a Restoration Economy report. So did US Fish & Wildlife in 2014. But it wasn’t until resilience joined the agenda that places worldwide finally started getting the message.

On a finite planet with a growing population, basing economic growth primarily on renewing the capacity of our existing natural and urban assets is obvious. Restoring our climate is an equally-obvious agenda (and growth industry), since not doing so will undermine virtually every investment we make. Since it might already be too late to reverse the cycle (no one knows for sure) then adapting to climate change and making places more resilient is a logical adjunct.

But the shift to healing and rebuilding is primarily happening locally, not at state or national levels. Restorative economics is gaining momentum, hopefully leading eventually to a rigorous “Revitalization On Investment” (ReOI?) metric. But we can’t capture those values until we climb out of our silos and get a better handle on that mysterious—but oh-so-desirable— outcome called “revitalization”.

Some cities run out of room for sprawl before others. Some countries (especially small island nations) run out of natural resources before others. In both cases, they are forced to switch to regenerative economic growth. If they go into adaptive renewal mode—using a reliable process for resilient prosperity—such places will become our “windows on the future.”

This doesn’t always mean renewing natural and built assets, however. Tiny, natural resource-poor Singapore became a global model of sustainable economic growth by regenerating their governance—making it more transparent and competent (accomplished in part by paying public servants very well, which reduces corruption)—and by regenerating the capacity of their citizens (via universal, high-quality education).

So let’s review what a non-resilient economy looks like. If your economic growth…

• …isn’t inclusive and equitable, it’s not resilient: lack of economic justice foments social unrest and crime;
• …isn’t based on regenerating natural resources and agricultural lands, it’s neither resilient nor growth: the productivity of watersheds, fisheries, biodiversity (such as pollinators), and topsoil must be restored to drive economic growth, not merely sustained. (“Fortunately,” most are already so damaged and deleted that significant improvements are readily attainable by even modest restoration efforts);
• …isn’t supported by good infrastructure and connectivity, it’s not resilient: the global economy is changing too fast to forgive inefficiency; and
• …is based on tax incentives, subsidies, and marketing, it’s not resilient: artificially-induced economic growth is usually ephemeral.

All of the above factors, when missing, lead to instability, insecurity, and inertia. This reduces confidence in the future, thus undermining economic growth. Merely tweaking the current economic and political system—rather than overhauling it into a regenerative model—is like having someone pointing a gun at your head, and trying to remedy the situation by making sure the gun is in good working order.

Regenerative Capitalism

Adam Smith’s widely misunderstood concept of the “invisible hand” of the market—a Godlike force he tossed into his book to mollify the Church, which ran the government and the economy at the time—has led most cities to believe, consciously or not, in a “magic hand of revitalization”.

They hope it will miraculously transform their haphazard renewal activities into revitalization, without their having to put any overt focus on achieving that outcome. In other words, they work for redevelopment, but pray for revitalization. As it says in the Bhagavad Gita, “We are kept from our goal not by obstacles, but by a clear path to a lesser goal.”

For decades, business leaders (especially Americans) have hewn to the gospel of the high priest of dollar-worship: the Nobel prize-winning economist, Milton Friedman. In response to activists who were calling on corporations to do less social and environmental harm, he said in 1970, “There is only one one and only one social responsibility of business: to engage in activities designed to increase its profits.”

Over the past decade or so, as business leaders have been forced to adopt at least the appearance of real social and environmental responsibility, myriad modifiers for the word “capitalism” have been suggested: “compassionate capitalism”, “conscious capitalism”, “shared value capitalism”, “green capitalism”, etc. My contribution to that ingredient-rich stew is “regenerative capitalism”.

Why? Because, as pointed out in The Restoration Economy, basing profit-making on activities that restore natural resources and revitalize communities doesn’t require any change of consciousness or human nature in order to do good. If they are done well, it’s an automatic outcome.

All Together Now

We’ll touch on various aspects of creating crisis recovery, economic revitalization and community resilience as a single coordinated, synergistic effort throughout this book, and will show how best to achieve in in Chapter 12.

For now, let’s end this chapter with a story. In June of 2016, much of the town of White Sulphur Springs, West Virginia (pop. 2444) was devastated by a historic flood.

Existing damage from previous floods, combined with an already-down economy, made this the last straw for many downtown business owners. They closed-up shop and left, seemingly sealing the fate of the community.
But a February 24, 2020 article by Tina Alvey in the The Register-Herald (Beckley, WV) said this: “…in the midst of the devastation, the people of White Sulphur Springs regrouped as a community, forming new bonds as they mourned their losses and found fresh determination not to simply rebuild, but to revitalize their town.”

The article continued, “Mayor Bruce Bowling, a lifelong resident of the town, isn’t surprised by the citizenry’s resilience and resolve to rebuild, but he is amazed at the pace of revitalization. ‘I never thought it’d happen this fast,‘ he said. ‘There have been so many people working together, so many people with resources that they’ve committed to White Sulphur.‘”