Monday, December 17th, 2012

Replay: This is Why We’re Broke

I part ways with many urbanists in that I don’t hate suburbs. In fact, I think we need to start with a basic acknowledgment of the fact that most people like owning single family homes and like living in the suburbs. I might live in the city and not own a car, but that doesn’t mean other people necessarily do. Did subsidies and public policy contribute to sprawl? Of course, as we’ve recently been examining here. But I do believe there’s a legitimate consumer preference for the suburbs.

I do think we should invest in cities and can build urban environments that attract a lot more people. But equally if not more important is to build better suburbs. What we see in America today is a suburban form that is unsustainable. I don’t mean that in the traditional sense of the word when it comes to the environment. I mean that it is simply financially unsustainable. Unlike urban environments, all too many suburbs have proven tragically unable to reinvent themselves. Thus as soon as they get old and lose the advantages of greenfield economics, they are abandoned in favor of new edge development. Plenty of these places are going to be in big trouble when their aging in place residents pass on with no next generation in the wings. The vast tracts of decaying inner ring suburbs across America may prove to be our most vexing “urban” problem of the next few decades.

The current development poses less of a problem in places that are growing strongly like Houston. There we really do need to built a lot of stuff to accommodate the million+ new residents that move there every decade. They are seeing new blood fill in the gaps even as other folks move to the edge. Even in a place like Indianapolis, the region added 230,000 people. Their core is still too weak, but only lost 25,000 people. Thus their suburban “sprawl” cannot be driven primarily by outmigration.

But this is a huge problem in places that are growing slowly or shrinking. Think Chicago (where the region only gained 362,000 people and the city lost 200,000), or Detroit or Cleveland. In these places sprawl is simply sucking the life out of the heart of the region. This was perhaps best shown in Buffalo, which Chuck Banas described as an example of “sprawl in its purest form.” Between 1950 and 2000, the Buffalo region tripled its urban footprint, but added effectively no population.

Plain and simple, this is why we’re broke. As Banas put it, “same number of people, three times as much stuff” (to pay for).

Wonder why Illinois and Chicago are in such a horrible fiscal crisis? Yes, Springfield is dysfunctional. Yes, there are massive unfunded pensions. This is all true and I don’t want to minimize it. But the massive exurbanization of the region while the core (excepting the “core of the core”) declines is a massive drain on the treasury. Huge sums of money are being pumped into serving these areas, whether that be a Metra line extension to Elburn or brand new Ogden Ave. in Oswego. This investment is being made at a time when the existing infrastructure cannot be maintained. And that new urbanized footprint has to be maintained itself and operated in perpetuity. Plus, the rump suburbs and neighborhoods being left behind get turned into de facto wards of the state or federal government, a costly enterprise in its own right. It should be totally unsurprising that we’re in a fiscal mess here.

Michigan and Ohio are even worse. Michigan as a whole lost population. The Detroit region did as well, yet there are still all sorts of highway expansion projects on the books there. In Ohio, the state is widening roads in Cleveland while the population on a regional basis dropped. As Ed Glaeser noted, the problem with shrinking cities is that they have too much infrastructure relative to population, so why build even more infrastructure you have to maintain? During the stimulus, Ohio’s #1 highway project was a $150 million bypass around a town of 5,000. With decisions like these, it is any wonder these states are in trouble?

I guess if we want to pay people to just move around in an area, we can keep doing that. It doesn’t seem very wise to me though. I’m not saying we should ban people from moving to the exurbs in stagnant or declining regions, but at a minimum it should be made very clear to those who do that they have to pay 100% of the freight on their own, and that no state or federal funds are going to be expended in support of that.

This might seem like a political pipe dream, and maybe that’s right. But the fiscal inevitable end result of the current ways of doing business will ultimately force some change. I just hope some things happen before a lot places end up going bust.

This post originally appeared on April 18, 2011.

33 Comments
Topics: Public Policy, Sustainability

33 Responses to “Replay: This is Why We’re Broke”

  1. Jonathan R. says:

    Aaron, perhaps when you repost these chestnuts you can summarize the comments that the original post generated.

    I went back to the old post’s comments and was reminded that your arguments that there was some kind of “sustainable” out there were pretty convincingly rebutted. It’s been 20 months since that original post and I have yet to see you, Aaron Renn, or any other blogger or deep thinker present a realistic plan to pay for the total “lifecycle” costs of suburban development, including the full infrastructure costs and the full pension costs, through taxes that fall on those suburban residents, be they sales taxes, income taxes, or property taxes.

  2. Alex says:

    Aaron, I’m sure you’re aware, but for anyone interested in more information on why this is absolutely true, visit http://www.strongtowns.org . Chuck does a great job explaining this financial unsustainability in our built environment.

    I agree that the idea of the suburbs obviously has a market preference. Bigger, more space, owning cars, etc etc are things people want. We need to end the subsidies of this lifestyle (mortgage deductions, extremely low gas-tax, etc etc) to make the market want and market cost more equivalent. We need to re-tool the “American Dream” while minimizing the negative perceived and real effects of living in places that have less private space and increased walking/transit as opposed to driving by subsidizing (yes) more sustainable and equitable forms of transit (and public spaces).

    I’m not saying no more single family homes – people wanted detached homes with a garage for many reasons. But we can do better. We need a cultural shift away from buying more and better things all the time as the goal to one where time (living close to work and activities), health (not sitting/driving for 2+ hours a day), and community are the important things.

  3. Neil21 says:

    I wish articles and comments like these used the vocabulary of Transects. What we’re all saying is that some people like T3 but that we should ensure there’s some T4 & 5 nearby too. We also need to name & shame pesdestrian connectivity in street layout.

    Just saying “suburbs” conjours up images of residential cul-de-sacs and strip malls, i.e. sprawl. We should be working to get back the old T3, first-ring suburb definition into the public imagination, where you walk easily from your T3 SFH past some mixed-use T4/5 to a transit square that is the hub of your community.

    We’re ready for specifics, and those specifics help point to the solutions: zoning reform, and updated AASHTO street design guidelines (mostly narrow and shared or, if wide, complete)

  4. Jonathan R. says:

    Aaron, I would like to suggest that the reason you did not include these “building suburbs that last” ideas in your original 2011 post (after all, you had already written the referenced posts about them by the time of that blogpost) is that you knew they were complete blue-sky fantasies.

    Unlikely suburban governments can command fees to fully fund road and sewer improvements (your no. 3), given that developers can move their capital investments in housing somewhere else, even to another metro area, where governments are willing to pay more of those improvement costs.

  5. Jonathan, they may be blue sky fantasies as you say, but many pubic policy innovations began as such. Perhaps you could think about this topic and contribute ideas you see as more practical. I will admit the problem is hard to solve. Part of my goal with this blog is to put ideas into the people who can refine them further and may be able to implement something that works politically and practically after further development.

  6. jbcmh81 says:

    Is Ohio really in all that bad of shape these days?

  7. the urban politician says:

    One can extrapolate your argument that the Houstons and Dallases of the world are essentially one giant exurb.

    If you took the core of Chicago out of the mix and just studied the exurbs of the region alone, your growth numbers would look great (McHenry county, I believe, was one of the fastest growing counties in the nation from 2000-2010).

    That’s essentially what’s happening in Texas. Texas is America’s grand exurb, similar to what California cities were a few generations ago.

    How is Houston going to maintain that collossally wasteful infrastructure 30 years from now?

    Also, much of Chicago’s infrastructure has little to do with suburbia, but instead to do with its legacy as a transportation hub. Airports, freight rail lines, and highways being worn down for purposes other than transporting individuals around the region come to mind.

  8. Chris Barnett says:

    Jonathan, my mind went straight to Aaron’s “The Mother of All Impact Fees” when I read your initial comment.

    How is it a bad thing for a municipality to lose out on investment that doesn’t carry itself past the first few years, that they would have to make an upfront capital investment in? Growth for growth’s sake at the municipal level, with infrastructure incentives for developers, approaches a Ponzi scheme.

    In Indiana, the tax base has largely shifted to income taxes…and those are paid where people sleep at night, not where they work during the day. So here, there is still tremendous incentive to lure suburban tract housing development to beanfields. This is a case of a perverse public policy structure (we want houses because of the local income taxes that come with them) that both front-end and back-end loads the lifecycle costs of new development.

    THAT is clearly unsustainable, in a financial sense, and an upfront impact fee would/should fund the capital costs associated with the new development. Then the ongoing taxes would come closer to paying the full lifecycle costs, instead of just P+I on the bonds for the new streets, sewers, and schools. (Bonding new infrastructure creates ongoing maintenance expense, and it leaves a “fiscal cliff” when it all has to be replaced.)

  9. Jason Burk says:

    First, I never really thought of the burbs this way. It hasn’t come up in conversation in my 17+ years in secondary education / the architectural industry. Shame on me I guess!

    To keep it short and sweet, I can imagine the benefit of saving money on not expanding for the sake of expansion. We all kind of have an impression that as things are developed, the infrastructure will just magically be maintained. I don’t think the average person gives a second thought to how it’s funded, because if they did, and they could do math, they’d probably decide on a different place to live. This quick assessment makes a lot of assumptions, but it does put into perspective the cost associated with new development these days (of which I am intimately familiar in Westfield anyway).

  10. EJ says:

    jbcmh81,

    The one investment that might have helped Ohio quite a bit was rejected with a speed I have never seen by the state’s current governor, John Kaisch. That was the 3Cs rail, which would have heavily supported reinvestment in the urban cores of Cincinnati, Columbus, and Cleveland. Of course, Kasich being a typical conservative Republican doesn’t have much interest in urban anything. But for some reason, he started pumping money into the widening of I-71. Go figure.

  11. James says:

    I will point out that the costs of the suburbs are not why we are broke. Suburbs and their infrastructure pale in comparison to health care costs and the military. Just crunch the numbers you know I’m right. Heck even Illinois’ budget is mostly health care and labor costs. Which is why this post is devoid of dollars but replete with platitudes.

  12. James, it may not be the entire reason we’re broke, but it is why nearly all local governments are. That does creep up the chain to state and federal levels as well, but more indirectly, because most of our economy nowadays is about supporting sprawl building. That’s the financial industry and mortgages, the actual housing construction industry, car companies, road builders and auto insurers, consumer products to fill up the suburban houses, architects, servicemen, etc. It’s how we shifted our economy after the Great Depression and WWII to try to reallocate all the productivity gains that technological advancement had allowed. Unfortunately though, it’s been so oversupplied, and the long-term expenses of all the infrastructure are coming due, that it’s crushing us. The last 30-40 years of sprawl was financed mostly with debt because we couldn’t find any other legitimate way to keep the ball rolling. All this stuff is lurking in the background of the economy and dragging it down.

  13. James says:

    Jeffrey,

    I’d like to see a financial breakdown of that claim.

  14. Chris Barnett says:

    James, while it’s true that health care costs are crushing state and local budgets, those entities are generally required by law to run balanced budgets. So it might be more accurate to suggest that state and local government can’t afford BOTH sprawl-driven infrastructure expansion/maintenance (on the one hand), and healthcare costs for current employees, retirees, and the poor (on the other hand).

    In the suburban city where I work, the mayor just eliminated 24 EMT positions and eliminated family medical coverage. He did this to balance the city budget…because he couldn’t continue to serve the sprawling suburb at the same level AND provide health benefits to workers’ families.

    Did this happen because of healthcare costs, or sprawl costs, or (I would maintain) both? There are real costs to providing good public safety response times over bigger, less-dense areas.

    This is pure math, and obvious: when you make the denominator (number of units per square mile) smaller, the (fixed) capital and service cost per unit goes up if service levels are held constant. Or service level goes down as cost per unit is held constant.

  15. James says:

    Chris,

    Can you provide more details? I mean a few cuts for a municipality doesn’t prove anything. After all Chicago has made drastic cuts over the last few years. Is this because the city of Chicago is full of sprawl? And why then has Chicago had bigger cuts than more auto centric suburbs like Schaumburg? Or if you look at the budget for Illinois, one of the most broke states in America, the budget is mostly education and human services. Can you really pinpoint sprawl as the culprit here?

    http://www.state.il.us/budget/FY2012/FY12_Budget_Briefing_Presentation.pdf

    I am no fan of sprawl but when you make pernicious arguments it undermines the case against sprawl.

  16. Chris Barnett says:

    James, the Mr. Obvious in me is compelled to point out that most of Schaumburg is way newer than most of Chicago. It does not yet have an overhang of entitled municpal retirees, nor aging streets, alleys, water lines, and sewers. Exurbs have not really considered or faced the long term costs of their form. Exurban school systems have yet to tackle their first wave of shrinkage/consolidation, since they have been built to serve the largest American generation (“Baby Boom Echo”/GenY/Millenials born 1982-2000).

    And state budgets are a far different animal that municipal ones. The main sprawl costs to a state are interstate highways and healthcare for fat people who drive instead of walking, and to the extent that the state funds K-12 education and local pensions, downsizing in the big urban district school systems while maintaining generous pension and health benefits for people who would be considered young retirees by today’s standards.

    Lawrence, IN is a former outlying town that became a first-ring suburb in the 1970’s with the construction of the interstate outer-loop. Because the town started in the mid-1800’s and has a mix of pre-automotive urban form and postwar strip-mall sprawl, it has the best and worst of both worlds. The cost of sprawl is now being seen: maintaining the old infrastructure as well as the new sprawl-induced public-safety costs is a real strain.

    This is, I admit, anecdotal. But I think Lawrence is a decent representation of an older suburb and its challenges.

    And this is Aaron’s point: in too many places, all those future costs are invisible, seemingly discounted to zero by the new suburban fringes. They are still “building new” (roads, schools, fire stations, sewer lines and plants, recreational facilities) and not thinking about the long-term costs of maintaining and replacing them. They don’t yet really have a can to kick further down the road.

    I will leave it to academic urbanist/suburbanists to do the study. I see the beginning of the trend and the need to act now.

  17. A problem with Chicago specifically and other rust belt cities with similar issues (Detroit, Cleveland, Dayton, St. Louis, etc.) is that while they may be more or less urban compared to recent suburbs, they also have a huge amount of depopulated neighborhoods. Chicago’s Loop and north and northwest sides can’t overcome the enormous abandonments of much of the west and south sides of the city. There’s whole blocks that have only one or two houses left, but the city still has to maintain all the streets, sewers, water lines, lights, and sidewalks. Those empty lots, because of the way property taxes are calculated, bring in barely any taxes to the city, certainly not enough to cover the millions of dollars of infrastructure that is near or past the end of its life cycle. Also, as population is decanted out into the suburbs, the core city is forced to build more roads through their neighborhoods to either serve commuters to downtown or residents who no longer have nearby jobs or shopping options. Sewer and water systems that get extended out to the periphery also need expansion and augmentation which, even if most of the cost is distributed among rate payers, still tears up the city’s streets and puts more of a burden on the older parts of the system than on the newer ones farther out.

    Here’s some analyses on a small scale that show how the suburban development pattern is not only a lot less remunerative than even fairly lightweight urbanism, but simply doesn’t work financially in the long term.

    http://www.strongtowns.org/journal/2012/1/4/the-lost-opportunity-of-auto-orientation.html
    http://www.strongtowns.org/journal/2012/1/2/the-cost-of-auto-orientation.html
    http://www.strongtowns.org/journal/2010/3/17/the-cost-of-development-walker-industrial-park.html
    http://www.strongtowns.org/journal/2011/6/13/the-growth-ponzi-scheme-part-1.html
    http://www.strongtowns.org/journal/2011/6/13/the-growth-ponzi-scheme-part-1.html

  18. James says:

    Jeffrey,

    Chicago is still a densely populated city. Compare Chicago to everyone’s favorite Houston. Chicago still has more than 10,000 people per square mile, far more dense than most other big cities like LA. So the argument that Chicago has sprawl problems is really devoid of evidence. Can you show me the budget in Chicago and the huge increase over the years in road and sewer costs? I don’t see any evidence. In fact Chicago has some of the lowest water rates in America.

    Again I would like to see this evidence. You see, while I believe there are a lot of problems and disadvantages associated with sprawl, there are a lot of sprawled, auto centric communities that have seen success for over 50 years. Places like Houston and Dallas as well as Nashville and Raleigh. Many suburban communities have long term success like Sandy Springs. I haven’t seen any good evidence that these places will be crushed by the burden of maintaining roads and sewers.

  19. James says:

    Chris,

    I would point out that transit agencies in municipalities get much of their money from the state. From building bridges to repairing highways to the CTA. So I don’t see how you can divorce the state budget with the municipal. Or, if you can break down the funding I would like to see it.

    As far as Schaumburg goes, how old does a place have to be to qualify? By the early 80s most of the city was developed. That is 30 years ago. If sprawl hasn’t caught up with them by now why would it ever?

  20. I said nothing about Chicago having a sprawl problem. I said the problem is depopulation and aging infrastructure. The road and sewer costs don’t have to increase over the years to cause a problem because revenues can’t keep up with regular expenses due to a diminished tax base. The water rates are unusually low due to a history of not metering single-family residences, among others, but the Department of Water Management is squeezed by the low rates and is generally unable to make major capital improvements that are needed.

    Also, you mention the relatively successful sprawling cities that are all quite young. Yes they’ve had some infrastructure that needs replacing/updating, like streets, but the sewers and water systems and other parts of the road network haven’t reached their end-of-life yet, so those costs haven’t come due yet. Generally the only suburbs have remained financially stable over a long period of time are the highly affluent ones, and many end up having pretty darn high taxes because of it. Much of the North Shore for example has quite high property tax rates. Some of those suburbs, including those sunbelt cities, can hide their long-term liabilities through new growth and the influx of taxes they bring in. Those new developments bring in a lot of cash now, and have very low expenses since everything is new, but that’s only barely enough to cover all the older stuff in other places, not put anything away for its own future maintenance. That’s the ponzi scheme. There’s plenty of evidence in those links I gave above.

  21. James says:

    Jeffrey,

    The problem is that you are wrong. Aging infrastructure is not what is bankrupting Chicago. You suggested that depopulation in the south and west sides and increased traffic from the suburbs have caused Chicago’s financial woes. But look at the city’s budget:

    http://www.cityofchicago.org/dam/city/depts/obm/supp_info/2012%20Budget/2012BudgetOverview.pdf

    Less than 7% of the budget is infrastructure services. The real culprit is paying for a large police force in a violen city, expensive labor costs and pensions, as well as debt overhang.

    Like I said there are problems from sprawl but it isn’t that we can afford the roads and sewers.

    In fact I suspect that the problems of sprawl is the opposite. Though I don’t have all the evidence I suspect that the costs of living in sprawl have exceed the ability of many people, especially young people, to pay. As young people are paid less, gas prices increase, and congestion and commuting times increase, it ceases to be an affordable place to live. Which isn’t to say that sprawl is unaffordable to maintain. The costs of concrete are pretty low. Sewer lines are cheap to maintain in the long run. Even poor rural communities can afford paved roads, sewers, and electricity. What is more sprawly than a rural community with one church, one bar, and one Walmart?

    Anti-sprawl arguments need to be better than 50 years from now you will have to pass a millage to repave your streets.

  22. It’s not just about infrastructure, but all the municipal services that need to be provided. Police and fire costs don’t go down linearly with population decreases, and in fact they may even go up. Abandoned/dilapidated buildings are problems for fire and crime, for example. I don’t have the time to get into all that budget info, but that 6.1% of “infrastructure services” can be anything. What about community services and city development? Ok that’s small potatoes, but it’s something. How much of the huge debt service (23.9%, ouch!) is for previous development costs? What’s public enterprises? They also break out their “all funds expenditures” and “corporate fund expenditures” into different categories, which I don’t quite follow. They have transportation, streets and sanitation, and other departments in one set but not the other. Either way, these things all add up. There’s billions of dollars of infrastructure sitting on and in the ground, on top of municipal services, all serving empty lots and otherwise underutilized property.

  23. Chris Barnett says:

    James, I’d underline Jeffrey’s point: in order to maintain a set level of service for public safety, coverage area comes into play. Response time is largely driving time. To a degree, density doesn’t matter so much as sheer distance and area served.

    And municipal debt is often incurred when deferred maintenance (or worn-out infrastructure) turns into new capital expenditure. That’s the “kick the can down the road” argument that I made above. Places with worn-out infrastructure face that regularly, where much newer suburbs/exurbs don’t.

    Municipalities have had about a five-year break on debt costs. Just like homeowners, they’ve been able to refinance debt at lower interest rates…so the same monthly payment supports more debt. For a few years, older municipalities have been able to spend more capital dollars by re-bonding. This will end in the next year or so as the Fed lets interest rates rise again.

    Also, larger/older Midwestern cities with combined-sewer systems are spending huge sums on fixing those systems to comply with EPA settlements; that kind of buried concrete (often a Deep Tunnel) is NOT cheap. I suspect that’s a chunk of Chicago’s debt service. This is something that newer ‘burbs think they will never face…until some kind of new threat (pharmaceuticals in municipal wastewater?) requires an expensive municpal solution.

  24. TMLutas says:

    If you want to watch the nickel and dime costs of infrastructure, count it. It really isn’t more complicated than that. Stick the numbers in relevant, easy to read reports, summarize the reports with a simple overarching set of graphics that almost instantly give the big picture of whether things are great, all right, worrisome, or dangerous, and make these reports available to everybody as part of their daily news feed in a cspan like arrangement (all news outlets pay and link to it so it’s everywhere).

    None of this information is secret. It’s all public record. All that is missing is the attractive info-packaging that allows this to be part of the general news feed. Over the course of decades, it will influence the success of bond issues and master plans and things will improve.

  25. Chris Barnett says:

    All that’s missing is the army of grad students to do the data mining and standardization, municipality by municipality, file cabinet by file cabinet.

    This stuff isn’t typically online outside of big cities. And the budget line items can be opaque to outsiders, especially pertaining to capital versus maintenance/repair costs.

  26. One of the biggest problems is the use of cash accounting in government finance. This creates massive incentives to shift spending to non-current items such as depreciation or future pension problems that are extremely difficult for outsiders to estimate. Starting with a set of private sector GAAP books would do wonders. Government accounting is one of the sickest jokes I’ve ever seen.

  27. James says:

    Chris and Jeffrey,

    What I am reading is forget about the numbers. It is true because we feel it to be true. Or am I missing something?

  28. Chris Barnett says:

    James, you are missing what Aaron wrote above: government accounting isn’t accounting and it most certainly is not transparent or comparable across entities. Especially state to state.

    Depending on state laws and municipal practices, capex might be separately budgeted and bonded, with only the P&I paid out of the municipal budget. Or NO P&I might hit the municipal budget if a special entity is used. And NO municipality depreciates its capital expenditures, to create a cash reserve for replacement.

    So it’s far less about what’s in the numbers than what isn’t.

  29. James says:

    No Chris, I didn’t miss anything. The government doesn’t put depreciation of capital assets into the budget. It is pay as you go for roads and sewers. I don’t see how this changes the argument. Roads and sewers are expensive but even rural America can afford them so the argument that the costs of maintaining sprawl are bankrupting America doesn’t seem realistic and doesn’t fit any of the numbers I’ve seen. Not federal, state, or city budgets appear busted because of core infrastructure. I know that you think the true expenses are hidden. That they aren’t fully accounted. I used to think along the same lines but when I looked at the numbers it appeared that broke municipalities had their budgets busted by pensions and high labor costs (Baumol’s cost disease, etc). I think there are problems with sprawl but I don’t think this line of reasoning will convince a community developing an old farm into tract homes.

  30. Rural America absolutely cannot afford their sewer systems. In fact they’re one of the most expensive pieces of infrastructure out there. The small town systems were built mostly in the 50s and 60s as part of federal and state grant and infrastructure programs for public health reasons. These towns couldn’t afford to build these systems themselves, and with no ability to maintain them they’re starting to fail. That’s even a specific example given by Chuck at Strong Towns:

    “Back in my early engineering days, I had a project where it was going to cost around $300,000 to fix a leaking pipe. It needed to happen because the city’s wastewater plant was about to overflow and potentially catastrophically flood a river. Not good. But the total city budget was $150,000. That’s annual. They had absolutely no financial means to do the basic maintenance on their system.”

    “Unfortunately, no state or federal grant program would bother with such a small project. The answer I came up with, and was roundly applauded for, was to make the project huge. We came up with all kinds of “needed” expansions and upgrades until the total cost was $2.6 million. Perfect for the grant programs. The community would up taking on a $130,000 USDA loan financed over 40 years as their “fair share”, politicians got some nice press releases and a grip-and-grin photo op, and the engineer (me) got a nice bonus. And the city now had all of this room for new growth. Everyone wins, right?”

    http://www.strongtowns.org/journal/2011/12/7/best-of-blog-our-unfaithful-partner.html

    So this little town which had no capacity to fix even a small problem like a leaking sewer pipe under a rural highway was able to get by with a 40 year loan for less than half the value of the repairs. Except now they have $2.6 million more infrastructure to maintain. If this new sewer work is expected to last about 70 years (which is longer than the previous system) the town will have to set aside over $37,000 per year, or 1/4 of their total annual budget, just to save up for the future replacement of that sewer system. Will they do that, or raise their taxes by 25%? Of course not, they’ll just go out for another grant when the time comes. The only thing that shows up on their books is the payments on that $130,000 loan, filed under “debt service” most likely.

    It’s these grants and loans and special projects that come from higher up, whether at the state or federal level, that really distort the situation. It’s exactly the same as the new housing development on the outskirts of town. It’s all built and paid for by the developer and first homeowners, but the taxes collected by the city can take 70+ years to recover the full cost of maintaining the infrastructure that isn’t going to last 70 years. A similar story is Staples, MN, which got TIGER and other federal and state funding to build a $10 million overpass over the railroad tracks. This is for a town of 3,000 people. When it comes time to replace that overpass in 50 or 60 years it could take the entire town’s budget for a whole year to do so. How many other projects of a similar scope are there for them to fund?

    It’s getting to the point that there’s so many of these kinds of projects that the money just bleeds out from all directions, since they’re never funded from a strictly local level. Even simple road paving can get state funds as part of some state-aid highway program, or from federal stimulus packages, or some sort of transfer payment scheme that some states use. Big capital costs never seem to come out of the regular budget anymore, they’re a mishmash of city, county, state, and federal sources.

    As mentioned by others, even internal accounting is never clear. Many cities charge for services to other city departments and vice versa, or they put revenues into a different pot from expenses for accounting reasons. Some of the big capital projects may or may not show up, but they’re usually a one-time thing. The more mundane stuff like cleaning out sewers, patching potholes, street cleaning and salting in the winter, is likely to be filed under some general “operations” budget rather than streets or infrastructure.

  31. Nathanael says:

    …in the old days….the 19th century…

    Suburbs — spread-out rural areas which still had city services — were for the rich. They paid more for their further-out services. They could afford to pay more.

    Cities were a weird combination. The rich had to go there to do business, but they were primarily occupied by the poor, and they were full of factories and pollution. (University towns were different.)

    This was a fairly sustainable pattern, even though the rich didn’t like it. Unfortunately, it created an anti-urban psychology which gave us the sprawl of the 50s.

    Since the environmental movement of the 70s, the moderately rich have started to realize that cities are the nicest place to be and are moving back. The factories have moved to the countryside. The poor are driving to the factories…. which isn’t sustainable. Hmm.

    Rural areas mostly should be operating “low concrete” infrastructure: septic systems rather than sewers, open swamp settling and cleaning ponds rather than big-concrete wastewater treatment plants.

    Urban areas which are dense can afford to maintain the “big concrete” sewers.

    The problem comes with the intermediate density, the suburbs. They’re too dense to use the true rural methods for waste management — no room for all those leach fields — but they have to be very rich to pay for their own sewer costs. The idea that everyone should live in Levittowns was a disaster.

  32. Nathanael says:

    “Also, larger/older Midwestern cities with combined-sewer systems are spending huge sums on fixing those systems to comply with EPA settlements; that kind of buried concrete (often a Deep Tunnel) is NOT cheap”

    They’re doing it the dumb way, which is why it’s so expensive. The “smart way” involves a lot of reconstruction of swamps, natural filters, as well as a lot of removal of impervious surface to increase infiltration.

    Obviously Chicago would have trouble doing this. There’s no unoccupied coastline left, and the river outlets in NW Indiana are so full of industrial toxins that nobody can do anything to them. And Chicago is in a terrible position to increase infiltration, being densely built with a high water table.

    But most of the other Midwestern cities *could* do this. If they wanted to.

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