Expensive housing, crowded schools, long commutes. How can CEOs attract top talent?
April 1 2005 by Chief Executive
Spectacular views of greater Atlanta dominate the 16th floor headquarters of Cousins Properties, a major real estate firm. Stone Mountain, a local landmark, rises as a purple smudge on the eastern horizon. The Atlanta skyline looms 10 miles to the south surrounded by crowded rings of freeways. Just below the oversized windows is a thick jungle of trees on either side of the narrow Chattahoochee River, the dominant drinking water source for this booming metropolis of nearly 4 million people.
Taken together, these vistas bespeak the tremendous draw that has fueled big population growth in Atlanta and much of the rest of the Sun Belt. And, taken together, they represent its worst enemies€¦quot;traffic jams and water and air pollution.
That message is keenly evident to Thomas D. Bell Jr., CEO, vice chairman and president of Cousins, which, ironically, has helped build the congested sprawl that is Atlanta. Bell, a recent import from New York City, where he was chairman and CEO of the Young & Rubicam advertising agency, is leading an unusual, business-oriented drive to contain urban sprawl. “We’ve never seen business and local government attack these problems head-on in this way,” says Bell, who leads the Quality Growth Task Force, an initiative of local officials and the Metro Atlanta Chamber of Commerce. The goal is to stem sprawl by directing future development closer to the center city, create more affordable housing and boost urban transit.
Up until now, the hodgepodge, unguided expansion typical of Atlanta became a dominant land-use pattern during the latter 20th century. For CEOs interested in expanding or relocating in a booming area, sprawl was just something that went with the territory.
Now, it is abundantly evident that this pattern of growth has created major, far-reaching problems. Locations once considered desirable by CEOs are becoming nightmares as the very attributes that attracted companies to them in the first place are being destroyed. Workers can’t operate at peak efficiency if they face two-hour commutes. Schools become overcrowded, housing more expensive and relaxation time more difficult, making it harder to attract top talent. “Many CEOs are just beginning to understand what is at stake for them,” says George P. Mitchell, a longtime Texas oil baron and CEO of a Houston real estate firm. He has spent the past 30 years building a 27,000-acre, mixed use project hailed because it will eventually cut 7 million car trips a year in the Houston area.
Worst Sprawl in America?
Sprawl conditions appear to be worse in the Southeast than anywhere else in the country. Of the 10 states that are chewing up forests and fields the quickest, five of them€¦quot;Georgia, Florida, North and South Carolina and Tennessee€¦quot;are in the South. Virginia ranks No. 12. In the 10 counties around Nashville, land is being developed at the rate of 60 acres a day, says Trip Pollard, director of the Charlottesville, Va.-based Southern Environmental Law Center. In Florida, growth has endangered water supplies and such natural treasures as the Everglades and Lake Okeechobee. The Interstate 85 corridor stretching across most major business centers has become such a jammed mess that the cities along it seemingly jell into one. Wags joke about “Charlantingham” for the glopped-together cities of Charlotte, Atlanta and Birmingham.
This out-of-control spiral has assumed a political force of its own in some spots. Loudoun County, Va., just outside of Washington, D.C., has become the single fastest-growing county in the U.S. as attempts to slow the pace have failed. Several years ago, the county Board of Supervisors adopted “smart growth” policies, such as limiting lot size for houses. In 2003, the real estate community retaliated, pouring in thousands of dollars to elect a pro-growth majority that has since reopened the doors for rampant development.
The dearth of regional and state planning troubles other local leaders. Take Kannapolis, N.C., a modest mill town of 40,000 that has been devastated by the decline of its textile industry. Now, town residents are worried about a new threat. Despite its economic woes, Kannapolis has long enjoyed a relaxed atmosphere reminiscent of the 1960s-era “Andy Griffith Show.” That’s now in jeopardy because suburban sprawl is metastasizing from Charlotte, 20 miles to the southwest.
Kannapolis and surrounding Cabarrus County are seeing an intrusion of high-priced, cookie-cutter houses that many Kannapolis residents can’t afford. Some longtime residents are forced to live farther away from their jobs as highways become clogged and public services suffer since residential property taxes alone don’t come close to paying for them. What worries Kannapolis City Manager Mike Legg is the lack of planning by regional and state officials. “They are not enlightened on growth management at all,” he says.
Of all places in the region, none has a worse or more longstanding problem than Atlanta and no area seems to be doing more to alleviate it. Atlanta positioned itself as a growth center in the 1960s, in part by calming racial tensions and offering lucrative incentives for industries to relocate there. Supercharging the effort was the vast expansion of the Hartsfield International Airport, making it a true global hub, according to Ben Johnson III, managing director of the Alston & Bird law firm, based in downtown Atlanta. Speeding the city’s modernization was the expansion of the Metropolitan Atlanta Rapid Transit Authority and the 1996 Summer Olympics, giving Atlanta more international panache.
The improving climate induced a vast influx of outsiders. As novelist Tom Wolfe wrote in his 1998 novel, A Man in Full: “By the hundred of thousands they had come, from all over Georgia, all over the South, all over America, all over the world, into those subdivided hills and downs and glens and glades beneath the trees, until the population of Greater Atlanta was now more than 3.5 million, and they were still pouring in.”
Atlanta has added two million people to its population in the past 25 years. That could make it “the fastest-growing human settlement in history,” according to lawyer Pollard. The strains of growth soon became clear as Atlanta’s roads got the reputation of being among the most congested in the U.S. Fouled by car exhaust, levels of airborne ozone are among the worst in the country.
Even drinking water is at risk. Atlanta’s only sources are the slender Chattahoochee River and a few reservoirs. The metro area is above a gigantic sheet of underground granite, so drilling wells isn’t an option. Experts expect Atlanta to run out of potable water for new development in 10 to 12 years if growth rates continue and no corrective steps are taken. “This is all the unintended consequence of success,” says Sam William, director the Metro Atlanta Chamber of Commerce. “If you go back 25 years, no one in Atlanta would believe that we would add 2 million people. We outstripped our infrastructure.”
To help turn things around, the chamber launched its Quality Growth Task Force two years ago. The mission? To educate the population about the dangers of unfettered growth and build a level of cooperation among the city of Atlanta and about 165 smaller localities. Besides Cousins Properties, spearheading the effort are local county officials, Southern Company and Bell South, among others. Heading its water study group is Lee Thomas, former director of the U.S. Environmental Protection Agency and now president and chief operating officer of Georgia-Pacific Corp.
The chamber contracted with The Boston Consulting Group to come up with a report on the water issues and has published a frank newspaper insert that tries to educate the public on just how serious Atlanta’s problems are. In many ways, says Thomas, the business community is the only group able to assume leadership because there are so many suburban public officials who are in office only a few years and solving the problems will take many more. “We asked 47 people to come together when no one agreed with each other,” says Cousins CEO Bell.
For starters, the Metro Atlanta effort has to turn some of the axioms of modern development on their heads. For years, developers bought and subdivided land far from traditional areas and erected expensive houses on large lots. They then pressured for roads to connect to them. Strip malls with retail and other services sprouted up nearby. But the effects were clogged roads and overcrowded schools as counties found that residential developments alone generated nowhere near the tax revenue needed to increase services adequately. In the process, a kind of suburban underclass was born because too little affordable housing was built in these new areas. “There were retail corridors created with tens of thousands of workers, but they couldn’t afford housing nearby and have to drive 20 to 30 miles twice a day each day just to work,” Bell says. “No wonder the roads are clogged.”
Finding Homes Closer to Work
The solution, according to Bell’s group, is to try to move development closer to the city, where there is actually available land. Instead of $400,000 or $500,000 five-bedroom houses on one-acre lots, developments would include townhouses and retail shops.
Already, real estate developers are sensing a shift in tastes. “There’s a lot of market demand right now for $100,000 houses,” says Bell. Moreover, as baby boomers age and their children move away, many want to downscale to smaller living units where they can walk to stores and restaurants. “Our studies show that the number of our people 55 and older will double and that our region was the No. 1 or No. 2 choice nationally for college grads. These people have a different lifestyle, and town houses are being snapped up.”
Members of the task force say restrictive zoning is not the answer because it’s too unwieldy. “What is not working in our favor is that we have to deal with so many jurisdictions,” Bell says. The favored approach is a more positive one in which the task force works on a model zoning ordinance and encourages all of the public entities to follow it. Tax abatements and other rewards in transportation funding would funnel development into desired areas.
Traffic congestion and air pollution would decrease because these new multi-use entities will be close to the Metropolitan Atlanta Rapid Transit Authority trains and buses. Water pollution would decrease because promoting construction closer to the city means that sewer systems, rather than more polluting septic tanks, would be used more often and storm runoff could be better contained. That might not answer Atlanta’s increasingly desperate need for more water sources, but it would help.
A big question is whether this light-touch, free market approach can work better than strong-arm methods such as stricter zoning and stricter growth boundaries. More rules can be off-putting and tend to encourage lawsuits and political retaliation, as it did in Virginia. Members of the Atlanta effort believe that directing just 10 percent of future development into a “smart growth” pattern will have tangible rewards.
The experience of other parts of the country can be instructive, such as in Portland, Ore. That city began planning for urban growth boundaries around it in the 1970s. Development beyond them is prohibited by law, sparking battles with real estate interests.
Portland’s experience has been held up nationally as a model of what can go right with smart growth. But conservative groups, such as the Heritage Foundation, claim that by restricting free-market growth, the prices of choice land have ballooned making Portland a much less affordable place to live than it was before the initiative began.
Atlanta is getting attention for basing its smart growth more on free-market principles and having the business community, led by the head of a major real estate company, leading the charge. But it is far from certain that Atlanta’s approach will be adopted by other areas of the South. The state of Tennessee recently passed legislation forcing cities and counties to come up with regional plans that would eventually establish growth boundaries.
There’s another approach to stemming growth and preserving green space. In the horse country of Northern Virginia, for example, wealthy landowners have deeded open spaces to the state to preserve them forever. That works where there are enough rich people, says John B. Adams Jr., former CEO of A. Smith Bowman Distilleries, maker of “Virginia Gentleman” bourbon in Fredericksburg. But without them, preservation deeds are moot, notes Adams, now CEO of a small development company.
Meanwhile, problems fester. Charlotte, which has boomed in recent years and has become the nation’s No. 2 banking center in terms of assets, also ranks as the worst in the nation in using up rural land for subdivisions, according to a recent national study. Kannapolis City Manager Legg says there is no real effort in the Charlotte metro area to address such problems.
That’s why the Atlanta initiative is encouraging. If it works, it will demonstrate that CEOs can be facilitators for real solutions. Similar initiatives have worked before in cities such as Cleveland, where a discouraged business community made the Rust Belt city into a tourism destination. But other Southern cities are just starting to catch on€¦quot;and it remains to be seen if the soft touch can work.