Last week we wrote about the city of Tower and their plan to revitalize their town with a $9 million (largely federal and state) investment to dredge a river, create a harbor and induce new residential and commercial development in a configuration they describe as being similar to San Antonio's River Walk. If you have not read that posting, we recommend that you do before you read this follow up.

Towards the end of the article I wrote the following:

It is clear that the good people of Tower would never make this investment, even if their lofty projected returns were guaranteed, because it does not make any sense. But they are not making the investment. The American people are. This is a really neat project. I like the concept. But as a country, is this the type of speculative investment we want to make? Is doing more of this really going to bring us prosperity, even if it works out exactly as they dream it will?

Of course not, but the tragedy here is not the fact that this project is a bad public investment. The real tragedy is how the beautifully-designed town of Tower has been left to decay while the politicians and professionals focus everyone on the next big idea.

Like many small towns that have lost their primary export industry (mining in this case), Tower has decayed at a rate that is greater than the community can overcome. Their tax base and revenue structure are not generating enough revenue to cover the costs of maintaining their existing systems. One sign of this is to look at Minnesota's project priority list, a list of communities requesting state funding for water and sewer projects. On this list, Tower is asking for $4.2 million to serve its existing population.

For maintaining its existing system, Tower is requesting $2.8 as follows:

  • Sewer Replacement and I&I Correction - $490,000
  • Rehab Collection and Treatment System - $2,327,300

And for extending the system to cover areas where service is needed, another $1.4 million.

  • Sewer System Extension to Unsewered Area - $627,300
  • Sewer System Extension to Unsewered Area - $787,000

This amounts to $14,300 per household just for sewer service. Tower is not able to pay for this with its own tax base or revenue structure. It is up to the general taxpayer to maintain their systems.

Let's take a step back for a second and apply some business principles to the operation of Tower, understanding that Tower is not a business but that doing this analysis will illuminate the core problem here.

If a business were not generating enough revenue to maintain its current operation, which of the following alternatives would be most advisable?

a) The business should look at ways to reduce costs within its existing operation.

b) The business should look for ways to increase revenue within its existing operation.

c) The business should do both a) and b).

d) The business should double its current operation in the hopes that new revenue from the expansion will allow it to maintain the current operation.

Obviously, in the context of a business, Option d) is ridiculous. A business that was not making money is not going to get a loan to simply do double of the same thing. No Board of Directors would approve that course of action. But for a city, Option d) is conventional wisdom. So much so that we label it "economic development" and spend billions of federal dollars on it annually. 

In the name of economic development, we are going to spend $9 million building Tower new systems designed to double the city's size. At the same time, we are being asked for an additional $4.2 million just to maintain their current sewer infrastructure. What leap of logic gives us any hope that this will make Tower financially self-sufficient? Or even better off, however that might be measured?

Let's assume for an instant that we are going to give Tower $13 million (that is $45,000 per family) regardless of whether or not it makes sense. It is probably a safe assumption. What could be done with that money that could make them self-sufficient? How could we make Tower more prosperous?

The answer to that begins with an understanding that the development pattern of Tower fails to fully utilize the large infrastructure investments that have already been made. Consider the following:

  • Large stretches of property with expensive infrastructure that has little or no development.

  • Significant parts of the city that is fully served with utilities devoted to the storage of cars. No tax revenue or jobs created in this space.

 

  • Significant populations located to the outskirts of town.

 

  • New growth located outside of town on a completely different development model than the existing infrastructure investments call for.

 

These are just a few quick examples made possible by the imagery of Google Earth. There are many, many more.

If Tower, their engineers, planners, politicians and citizens decided to develop in underdeveloped areas, convert parking areas to tax-generating businesses, zone to create vibrant neighborhoods on a pattern consistent with their community's DNA (to name just a few ideas), they would grow in time to be in a much stronger position. We do not need to create a new Tower. Tower needs an approach to growth that builds on its strengths and makes it more successful.

Tower does not need a riverwalk. It simply needs to restore its downtown and neighborhoods. Not only would this cost less and actually have a chance of succeeding, it would benefit the people that live there now, as opposed to some theoretical person that is going to move to New Tower once it is built around this unnatural harbor.

Tower cannot maintain what it currently has without our help. They will certainly not be able to maintain a whole new city right next door either. The excellent work that has been done developing the principles of design for New Tower should be used to rejuvenate Old Tower before any money is spent on expansion. Doing so would benefit the people of Tower in the long run. It would also be a Strong Towns thing to do.

 

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