The land of the FREE


Our current approach to infrastructure spending - and to promoting growth and development in general - is impoverishing us as a country. Our poor investments have not only an extremely low return, but are financially damaging to many of the communities they are designed to assist. We will not see sustained prosperity as a nation until we solve this problem, a problem that can be better understood by examining one small town.

The city of Backus is a small town in Central Minnesota. The 2000 census indicated that there were 123 households in Backus, a total population of 311. Backus is a typical small town that grew around an old railroad stop. Like many small towns, it is inertia - the fact that they once existed for a reason - that keeps them on the map today. If the landscape were wiped clean of human settlement and we started anew with modern technology, there is little likelihood that Backus would exist.

Unfortunately, like many small towns, Backus has done little to perpetuate its own existence. As opposed to building on the strengths of its development pattern - an efficient, pedestrian-oriented grid system - Backus has been slowly devolving to an auto-based model. Not only has this imposed huge costs on the community, but it is correspondingly stifled investment and tax-base growth. Thanks also to the county's zoning system, most of the growth in this area over the past two decades is just outside the city limits using an auto-only model that further detracts from the existing community.

Let's look ourselves in the collective mirror here. As a nation, we are:

  • Short of money in the near-term,
  • Deep in debt in the long-term, and
  • Desperately in need of jobs.

Let me offer you what, in our current framework, is a Backus-based solution.

The Minnesota Management and Budget office collects capital improvements requests from cities, counties and townships across the state. These are requests for grants - "free" money from the state. The city of Backus has requested money for "Wastewater Treatment Facility Improvements." In their own words:

This request is for $980,000 in state funding to acquire land, predesign, design, construct, and equip a new wastewater treatment facility to be located in Cass County, in Backus, MN. The facility will consist of three facultative stabilization ponds with rapid infiltration basin (RIB) disposal. In addition, the City will have to upgrade their existing life station in order to pump the wastewater to the new facility.

The City has been put on notice by the Minnesota Pollution Control Agency that they need to replace their existing drainfield treatment facility. They are having severe groundwater mounding problems and are having trouble, at times, with higher than allowed nitrogen levels. 

The residents of Backus cannot afford to take on this project. They have less than 200 households, with a median household income of $26,875. The $3.3 million project is desperately needed to comply with MPCA's order to bring down the nitrogen levels but will not be able to do so without assistance.

Here is how the city of Backus is proposing to pay for this project that they "desperately" need, a project that will cost $26,830 per Backus family.

Federal Government: $2,320,000

State Government: $980,000

City of Backus: $0

Now to be fair, some of the federal money will certainly be in the form of a loan, albeit a low interest loan financed at below-market rates over an extended period of time. To say the city's share will be nothing is a little misleading. To say it will be insignificant would be more accurate.

There are a few important things that need to be noted about this project in Backus.

First, in our current system of intergovernmental transfer subsidies, the Backus project will be funded. If not through the state bonding process, than through some other grant program. They meet all the requisite criteria. Specifically, they pose an imminent public health threat and they have a low household income. In the business, this is a good project.

Second, the funding of this project will not create any wealth or prosperity for the community, the region or the state. Yes, it will help them maintain their current system (which they currently can't afford to do) and help them not drink some of their own sewage. But it will not create a job, grow a business, attract an investment or induce any new growth or development. This is a maintenance project.

Third, because it does not induce any new prosperity but will require some local contribution in the form of a loan, it will actually make the citizens of Backus poorer. There is no increase in local wealth, no growth in the community from this project, no new investment, yet the cost to run the system will increase. The citizens of Backus are not even treading water. They have no money to pay the debt on their small share of the project, properly maintain the system over the long run AND invest in their future. They are locked into a cycle of slow, painful and inevitable decline.

Fourth, and most tragically, it needs to be understood that this example with the city of Backus is not at all uncommon. On the current request list, there are many similar projects. Statewide, there are hundreds of similar requests. Nationwide, thousands. Projects that are essentially subsidizing something - is it a lifestyle, an obligation, the American dream...I'm not sure - that does not in any way make financial sense. And it costs us billions nationwide each year.

This type of project did not make financial sense when we were a rich country. It certainly does not make any sense now that we are not. The sooner we wake up to that reality, the sooner we embrace a Strong Towns approach, the sooner we can start turning the country around.

 

You can continue this Strong Towns conversation by posting a comment or by joining us on Facebook. You can also follow Strong Towns on Twitter. We appreciate all of the feedback and support.