The Tragedy of Outlying Development

(c) by Mark Dempsey

On August 20, 2025, the Sacramento County Board of Supervisors will hear a proposal to develop even more of the North Natomas basin, the Airport South Industrial Project. As the map indicates, other proposals are still pending too, and all are bad ideas.

 

North Natomas is directly north and west of Sacramento's downtown, and has already been developed east of Interstate 5. It remains a floodplain surrounded by levees that were originally so weak that a grant to expand regional sewer contained a $6 million penalty if that capacity were used to serve North Natomas.

The land speculators controlling North Natomas were unfazed by the penalty and went all the way to then-vice-president G.H.W. Bush, who made it pay-as-you-develop installments rather than the prohibitive up-front charge. They also got $43 million in levee improvement grants to bring levees up to pre-Katrina standards. 

The residents of North Natomas must now pay to improve levees to post-Katrina standards. Meanwhile, the speculators got $43 million for $6 million in installment payments. Gosh, I wonder who this arrangement favors!

What motivated these political maneuvers? The land speculators, often referred to as "developers," purchased North Natomas land for approximately $2,000 per acre. Once they got the rights to develop it, they were able to sell to builders for as much as $200,000 per acre. That egregious 10,000% profit is called the "unearned increment," and it can be completely untaxed if they exchange their stake in the land they're selling for other income-producing real estate.

In Germany, if they want to build on outlying land, the developers must sell the agricultural land to the local government at the ag land price, then repurchase it at the development land price. All of the unearned increment accrues to the benefit of the public rather than enriching a few speculators, as it does here. And Germany has excellent infrastructure, not collapsing bridges, and free college tuition. Just the arts budget for the City of Berlin exceeds the National Endowment for the Arts for the USA.

But never mind enriching the plutocrats and impoverishing the public realm, developing that outlying land is bad for other reasons. First, the longer roads, pipes, wires, etc. in the infrastructure are roughly twice as expensive to maintain as infill. Second, the Sacramento region has roughly 20 years of unbuilt infill. And third, the longer commutes contribute to global warming.

In other words, outlying development is harmful now and in the future, and we have plenty of alternatives within the current urban form. Let's do something sensible and reject this development.