Friday
Jul302010

Friday Debate on MPR's Insight

Minnesota Public Radio has asked me to participate in an online debate about whether or not Minnesota should end local government aid now. Strong Towns released a report here earlier this year on local government aid and the impact of its eventual phasing out, which seems inevitable given its relative priority compared to other budget items. I've agreed to argue the "yes" side in this debate, which starts at noon today. You can follow it here live - and participate if you choose - or you can read the recap any time after we are done. Don Reeder with the League of Minnesota Cities will be arguing the other side and Michael Caputo of MPR will be moderating. They are both good guys and so this should be fun and hopefully informative.

I'm going to use the following as my opening statement for this discussion:

Whether or not we should end local government aid (LGA), it is going away. The state's budget problems are too big and stretch too far into the future for aid to cities to survive for much longer. Ending it now, or at least acknowledging that we need to think post-LGA, frees us up to have a deeper discussion on what is going on financially with our cities.

Most of them are long-term financially insolvent; that is they have more liabilities and obligations for things like infrastructure maintenance than revenue is created from those investments. Our cities today are not very strong, which is a function of the inefficient way in which they have developed. Instead of pinning our hopes to a volatile and dwindling funding source, our cities need to look at ways to shore up their balance sheets by getting a higher return off of their public investments; growing more efficiently and investing in growth more strategically.

LGA in its current form only postpones this discussion. It is doing more harm than good and should go away.

 

Want to bring the Strong Towns team to your community to talk about the Strong Towns movement with public officials and local leaders? Sign up for a Curbside Chat, our initiative to bring the Strong Towns message to towns and neighborhoods across America. You can also join us on Facebook and Twitter.

Wednesday
Jul282010

The delusion of easy money (aka: nothing is really free)

In Boca Raton, Fla., which faces a budget gap of more than $7 million, leaders are thinking about expanding the city’s size and annexing neighborhoods as an antidote. Sure, more residents would cost more in services, but officials hope the added tax revenues will more than make up for it.

A colleague of mine sent this quote to me on Monday from an article in the NY Times. Needless to say, I am aware of this level of ignorance, but it is a rare thing to see it displayed so clearly. It has compelled me to take a break from our ongoing Brainerd/Baxter Strong Towns laboratory to hopefully point out the folly here in terms that will dissuade other communities from such a short-sighted act of desperation. 

Let's first take a look at the motivation for the city, which is simple. Land is brought under city jurisdiction through annexation. The tax revenue from this land then flows to the city. The amount of revenue brought into the city exceeds the expenses the city will incur and, like magic, everyone is better off.

Or at least that is the standard dogma of engineers, planners and financial consultants. In fact, this is such standard orthodoxy it is stated as fact (no attribution) by the reporter from the Boca Raton Tribune in an article covering the city's discussion.

Annexation is the process of bringing county land into Boca city limits. Normally, it yields additional revenue because providing services to largely residential areas is less expensive than the amount of taxes generated. Also, many Boca city services are not as costly as county utilities.

Let me ask the obvious question nobody here seems to be asking. If "normally" it holds that "providing services to largely residential areas is less expensive than the amount of taxes generated", then why does Boca Raton have a $7 million budget deficit?

Boca Raton is largely a residential community. Their comprehensive plan shows that to be the case. If this development pattern generates a surplus, why do they have a deficit?

Currently the population density of Boca Raton is 4.8 people per acres (3,063 people per square mile). While not super-efficient, it is certainly a more cost-effective density than the area they are looking to add, which has only 2.1 people per acre.

Deputy City Manager George S. Brown explained to the council at a recent workshop that the total annexation package contains $1.575 billion in taxable property; 2,018 acres; a population of 4,319; 1,720 employed people; 2,478 homes and 48 commercial properties.

The maps I have been able to find here do not clearly designate this area and unfortunately I cannot find the annexation report online, but it is hard to imagine that this new land could cost less per household to service than the denser existing city (which is running a deficit).

So how are they determining that they will have excess revenue from this move? That is simple. Their consultants are looking at the immediate cost of service only. One side of the ledger is the new revenue - an easy number to calculate. The other side of the ledger are the new expenses, which likely assume an extension of services (some additional police, fire protection, transit service, etc...). The difference in this analysis is ostensibly "profit".

What is not included is the long-term cost of infrastructure maintenance that the city is assuming.

  • How many miles of street are there?
  • What is the condition of those streets? Do they meet the city's standards?
  • What is the cost for maintaining, repairing and upgrading those streets and when is that going to come due?
  • Ditto for sewer and water systems. I read somewhere that these areas have individual sewage systems...what is the cost to upgrade?
  • Factoring in maintenance and budgeting for long-term capital improvements required to actually service this area, does the city actually have a long-term gain as projected?

From a different article in the Palm Beach Post News:

The combined taxable value of the nine areas being considered for annexation is $1.5 billion. That would bring in about $6.7 million to city coffers under the current tax rate. But it would cost about $4.2 million to provide services to those areas.

Plus, the city would have to set aside about $400,000 a year for five years to upgrade the medians near the communities.

"Maybe that will be the trade-off," said Edward Haymes, president of the St. Andrews Country Club Property Owners Association.

His community has been asking Boca Raton to fix up the medians on Clint Moore Road for awhile, but the city said it didn't have the money to put in trees and shrubs, Haymes said.

What Boca Raton is doing, and what many cities routinely do to solve near-term budget problems, is engage in the Growth Ponzi Scheme. An increase in near-term revenue is traded for a greater, long-term liability. If Boca Raton's consultants pushed themselves a little bit harder and tried to honestly assess the long-term financial implications of this transaction, they would be forced to admit that the same underlying financial deficiencies that exist within the current city limits - deficiencies that add up to a $7 million deficit - exist outside as well. 

Getting bigger does not solve their problem, unless they measure the problem in months and not years. Only a Strong Towns approach, where the underlying financial disparities are corrected through an improved use of the urban space, can solve their long-term financial shortfalls. 

(As a final note, in reading through some of the documents produced by Boca Raton, I am impressed with their overall approach and a little puzzled as this annexation move seems inconsistent with their overall prudence. For example, in their recent financial presentation, the staff recommends such sound strategies as "continue emphasis on efficient use of existing resources" and "be very selective about service additions". This may just be happy-thoughts they have sprinkled throughout their work to sound intelligent, but hopefully not. We wish those in Boca Raton the best of luck and, if I've overlooked something unique to Florida, where I know they have exactions, please let me and our readers here at STB know what it is.)

 

Want to bring the Strong Towns team to your community to talk about the Strong Towns movement with public officials and local leaders? Sign up for a Curbside Chat, our initiative to bring the Strong Towns message to towns and neighborhoods across America. You can also join us on Facebook and Twitter.

Monday
Jul262010

Archeology of a Neighborhood

Last week we looked at how cities like my hometown of Brainerd, MN have invested millions of dollars trying to retrofit their traditional development pattern - a pattern that was originally a collection of walkable neighborhoods - to an auto-oriented development model. We examined not only the massive expense this created, both in the initial investment and in the ongoing maintenance, but also how this shift to an auto-centric pattern has driven commercial investment out of these neighborhoods to regional strip malls and big box centers (which, incidentally, are located in a neighboring community).

Before we discuss a new set of Strong Town values that need to be applied for the future of these places, it is important that we first examine the residential components of the traditional development pattern.

For this I am going to start with one house, a house that struck me as being a decent representation of the home that people would look down their nose at as they pined for this neighborhood to redevelop. Instead of being an eyesore though, this house actually personifies the best hope for this neighborhood and the thousands like them across the nation.

This house is "old" Brainerd, the part it is trying to rid itself of with all this investment in wider streets. It is a small house that, if you look closely at this photo and the one later on that shows the rear of the building, was at one point even smaller (there have likely been at least two additions).

Here are some things to note about this house. First and foremost is the way it addresses the public realm with a big window and a front door. It is telling the world, "People live here." While the window is boarded up now (probably to help that cheap window AC unit do its job), when this neighborhood used to be vibrant that window was part of the Jane Jacob's model of community self-policing (the eyes on the street). The front window communicates to people walking through here that they belong and that they do not have to compete with cars in this space.

The setback from the street here is also nominal. It is not the deep, suburban setback but a setback designed to frame the public realm. The original development pattern of this traditional neighborhood used a "build-to" mark to line up the homes and create the sense-of-place this approach is known for. (That differs from a setback line used in a suburban code where homes are set far back and "anything goes" behind the line.) 

There are some other subtle features that make this house friendly to the public realm. It is articulated to face the street with the crown of the roof running perpendicular to the public space. The sidewalk is positioned to provide room for some modest front yard landscaping (which would be more prevalent if the streets were walkable and people actually inhabited these spaces, not just cars). There is also a boulevard for shade trees along the street.

Also notice that, besides the TV dish on the roof, there are no TV pedestals, electric boxes, cleanout pipes or any of the other grunge we have come to tolerate in the modern public realm. That stuff you will find in the alley behind the house.

An alley is an amazing, but simple, concept. We put the disgusting stuff that we don't want to interact with behind the house in the alley. That allows us to preserve the public realm in front of the house as a tranquil, friendly, inviting space that, when done right, becomes an extension of the living room. At least that is how it was designed to work. In this alley you will still find all of the utilities we'd rather not see along with garbage collection and, take note, cars. This is where cars are stored in a traditional neighborhood (except for guests - we want them to park in front and experience the beauty of the neighborhood upon their arrival).

In the backyard there is not only storage but also a lawn and even a clothes line. This is private space - a little disheveled, but not in a way that impacts the overall look and feel of the neighborhood. Notice also in the back how the architecture gets a little awkward with the rear addition being wider than the front and asymmetrical as well. While I would have hoped it had been built differently, that funkiness matters little in the rear.

You can tell that, while this house may have - as a realtor would say - "potential", it suffers from neglect. This is a consistent pattern you see throughout this neighborhood. This is a small home. The value of this home is not in the structure itself or the location but in the neighborhood. If two homes were of equal value, one in this location and one two miles out of town on a lot four times as big, the only reason you would choose this home would be because it is in a neighborhood that provides things of value.

Parks, shops, gathering places, schools, jobs, etc... A public realm that is walkable and inviting. These are the things that used to give this home value (and could again).

When the streets in front of this house and the others in this neighborhood were converted from a walkable, neighborhood-oriented design to wide, auto-centric thoroughfares, not only did the city spend a fortune, but they massively devalued these homes in the process. The neglect apparent in these neighborhoods is a direct result of the misapplication of suburban development standards to the traditional framework.

Southeast Brainerd has some of the lowest valued neighborhoods in the entire area (and ironically, some of the most expensive and extensive infrastructure investments). Since anyone living here (or two miles out of town) has to drive everywhere for everything, the competitive advantage of these neighborhoods is lost. One might as well live two miles out of town on some acreage - if you have the means - than move into a neighborhood in decline, where the schools are closing, the businesses have been forced out and you can't let the kids play in the street, or even walk to the park, because the cars drive too fast. Either locations forces a drive of five or ten minutes to get everywhere you are going anyway!

When you are forced to drive everywhere, when the public realm is taken away from people and given over to cars, traditional neighborhoods lose their charm. In an auto-dominated mindset, these places do not fare well. They quickly become economically uncompetitive. Subsequently, these neighborhoods do not create anything near the tax value necessary to cover the ongoing maintenance costs they require. Cities that have gone down this route can never build enough new, shiny stuff on the periphery to make up for the revenue gap they have created in their old, traditional neighborhoods.

That does not mean these places are void of new investment. Wednesday we'll examine the types of investments that neighborhoods like this actually get in their new, auto-centric form.

 

Want to bring the Strong Towns team to your community to talk about the Strong Towns movement with public officials and local leaders? Sign up for a Curbside Chat, our initiative to bring the Strong Towns message to towns and neighborhoods across America. You can also join us on Facebook and Twitter.