Mandating negotiations to solve the NIMBY problem: a creative regulatory response.

• Author: Richman, Barak D.
• Position: "not in my backyard"

The NIMBY ("not in my backyard") syndrome has long frustrated the efforts of policy makers, land use planners, and developers to site locally undesirable but socially beneficial facilities. This paper discusses and evaluates an innovative generation of regulations that employ negotiation strategies to resolve NIMBY problems.

NIMBY conflicts arise from projects that typically generate widely dispersed benefits while imposing concentrated costs, such as homeless shelters, prisons, airports, sports stadiums, and waste disposal sites. (1) Despite the social desirability of such projects, they often provoke intense local resistance that harnesses the political process to block construction of the proposed facility.

Since the mid-1970s, NIMBY opposition has been particularly fierce in confronting efforts to site waste disposal facilities. (2) Organized and persistent public opposition has scored consistent victories over attempts to construct facilities that are essential to an industrialized society. Noteworthy illustrations include enduring opposition to develop new landfills to meet the demands of expanding urbanization, an alarming inability to build electric power plants that is partially responsible for recent electricity crises in western states, and the Department of Energy's persistent difficulties in locating a permanent site for high-level radioactive waste. (3) For solid and hazardous waste facilities, the siting problem has become so acute that one policy maker has suggested that the "NIMBY" syndrome is perhaps better characterized as "BANANA"--"build absolutely nothing anywhere near anything." (4)

The persistence of NIMBY disputes represents a failure of the political process. NIMBY fights are too bitter and divisive for public institutions to deliberate and devise careful legislative and regulatory solutions. Political leaders thus tend to defend the targeted neighborhoods instead of implementing responsible land use policy. To counter this NIMBY impasse, some states have enacted innovative regulations to help site waste facilities using procedures that bypass the standard political fight. Moving away from traditional siting strategies that relied chiefly on aggressive and combative tactics, (5) these regulations use negotiation strategies to resolve NIBMY problems. Site developers and local community leaders are required to bargain directly with each other. They enter into a structured negotiation process designed to induce agreements that will site regionally needed facilities while addressing local concerns.

This paper seeks to understand NIMBY disputes as a contracting problem where developers and communities struggle to reach an agreement to site a waste facility. It explores the underlying challenges that have motivated policy makers to institute mandated negotiations and examines the early results of their implementation. This approach begins with a simple model and then introduces complexities: the first section characterizes the contracting problem as a simple transaction, and the second identifies the specific contracting difficulties that explain why NIMBY disputes emerge instead of easy agreements. Regulations that mandate negotiations, discussed in the third section, can then be understood as responses to these particular contracting difficulties, and the final section reviews two case studies to evaluate the preliminary impact of these regulations.

The central objective of this paper is to understand how NIMBY problems emerge and understand the logic that motivates this new generation of siting regulations. Understanding the problem, however, does not necessarily translate into a simple regulatory solution. While this analysis speaks to the efficacy of relying on negotiations as a vehicle to resolve NIMBY disputes, it also addresses the effectiveness and limitations of employing regulatory solutions.

NIMBY AS A CONTRACTING PROBLEM

Underlying a NIMBY dispute over siting a waste facility is a contracting problem between a developer and a host community. (6) A developer proposes to build a facility that will benefit a broad population, but local residents who will disproportionately bear the costs of maintaining that facility object to the proposal. The objective then becomes for the developer and the community to devise an agreement that can channel benefits generated by the facility into the adversely affected neighborhood. If the facility proposal is wise and represents an overall social gain, then, theoretically, there should be sufficient benefits to make the neighborhood better off with the completed facility. (7)

The contracting challenge is for the developer and the local residents to negotiate the terms and conditions that will reliably secure these transfer payments and other benefits so all parties will support the facility proposal. Such siting agreements will likely include both direct benefits to the host community as well as commitments made by the developer to address specific neighborhood concerns. (8) In a world of efficient bargaining and zero transaction costs, a developer and the disaffected neighborhood will bargain directly and easily reach an agreement. Such a hypothetical world would have both parties communicate effectively, make and keep credible promises and efficiently transfer benefits. (9) A host community would be perfectly compensated for all costs that a facility would impose.

Of course, such perfectly efficient negotiations are not a part of our human world (if such bargaining were possible, then there would not be any NIMBY problems). In order to understand why developers and host communities do not easily reach mutually beneficial agreements, one must understand specifically how the world of NIMBY problems differs from the hypothetical world of efficient bargaining.

DIFFICULTIES IN NEGOTIATING ENVIRONMENTAL AGREEMENT

In the hypothetical world of efficient bargaining, all parties negotiate seamlessly, enjoy full information and credibly commit to enforceable promises. In the real world, however, a variety of burdensome contracting complexities confront developers and prospective site communities in their effort to reach an agreement. These complexities impose significant transaction costs that preclude efficient bargaining.

One problem is that while constructive negotiations require stable participation from its participants, multi-party negotiations are difficult to organize. A developer may be eager to offer generous concessions in order to win the support of local residents, but it is often unclear who represents the community in negotiations. Neighborhood residents have diverse interests, and a developer who responds to one set of community concerns may not meet the demands of other neighbors. This is particularly troublesome since every individual resident arguably has standing to file a lawsuit to block the facility's construction. Consequently, negotiations will not progress unless a community can organize itself to deliver a comprehensive set of demands to a developer, and in return, the developer is assured that additional parties will not invade the negotiations with additional demands.

Even if the parties are efficiently organized for negotiations, they often find great difficulties in communicating effectively with each other. One cause of poor communication is the lack of credible mechanisms to share information about...