"But *My* City Doesn't Spend Very Much on Infrastructure!"
The core insight that led to the formation of Strong Towns is that the prevailing development pattern of North America is slowly bankrupting us. We are not generating the wealth in our places needed to sustain them over the long term. And this is evident when you analyze the costs to maintain the world we have built, both in the micro (such as a cul-de-sac that would take 79 years to generate the revenue to pay for its own repaving) and the macro (such as the case of Lafayette, Louisiana, where the total replacement cost of public infrastructure exceeds all of the private wealth in the city and parish by a factor of two).
There is a very common skeptical reaction to this insight—common enough that it warrants a response. In a nutshell, it's, "But I checked and my city doesn't actually spend very much on infrastructure, so if our budget is strained, that can't be the thing causing it."
There are lots of long answers to this objection, but consider this post more of a "Cliff’s Notes" answer. Here are two questions you can ask yourself about your place that might help you see beyond the spin that says, "We balanced this year's budget, so we're fine."
1. Where are you in the infrastructure life cycle?
A recent example of the "My city doesn't budget much for roads" objection comes from a commenter on an online forum from McKinney, Texas:
Expenditures for McKinney TX show streets as the third lowest cost department, accounting for under 5% of the city budget. The largest expense, like most other cities, is the police department, at nearly 25%. While smart spending is important, it's hard to see street paving as something which threatens to bankrupt this municipality.
The key here is the kind of place McKinney is. An outer-ring suburb of Dallas, McKinney is an extremely new city of 200,000 inhabitants that had only one-fourth that population as recently as the year 2000—and about one-fourth the number of local streets as well! It's likely the city didn't pay for the initial construction of many of its residential streets: the developer of a subdivision usually does that. And the maintenance bills—which will fall to the city—haven't begun to come due.
In young cities, you won't find high maintenance expenditures (though building up reserve funds now for that purpose would be a fiscally prudent thing to do). Instead, you're more likely to find an aggressive focus on expanding infrastructure without regard to future maintenance, driven by the dual priorities of inducing more growth and winning the arms race with traffic congestion. Collin County, of which McKinney is the county seat, is in the thick of this: we wrote about its “Texas-sized pavement problem” in 2018, when the County was seeking $12.6 billion for new roads over the course of 30 years. We estimated that Collin County’s existing road network already has a replacement cost of $13 billion, a number equal to over 10% of the combined value of all private real-estate value in the county.
2. What is the difference between what your city is setting aside and what it should be setting aside?
Again, the important point is that Collin County is not currently spending anywhere near this replacement cost on street maintenance. They don’t have to: their streets are new.
If you want to see how the infrastructure picture differs in older cities, you don't have to go far from McKinney or Collin County: just drive down the road to Dallas. This screenshot is from Dallas's Fiscal Year 2019-20 budget:
Note the colossal sum for “Mobility Solutions, Infrastructure, and Sustainability.” There's a lot of complexity to what that number means—you can see a breakdown of what comprises it here. But it is largely not coming from the city’s general fund: only about 10% of the $1.4 billion general fund budget for this year falls into the “Mobility, Infrastructure, and Sustainability” category. Much of the rest appears to be from taking on debt:
In November 2017, Dallas voters approved 10 bond propositions totaling $1.05 billion and showed strong support for investing more in many City service areas, including infrastructure, parks, and cultural facilities. Residents expect the 2017 Bond Program to be implemented swiftly, and they expect the City to take additional steps to enhance our infrastructure.
The latest budget includes $86 million in bonds and cash for street maintenance, and $141 million for water and wastewater mains. Dallas's maintenance woes have been well reported: two years ago, a City Council member indicated the city had a backlog of $1.5 billion in stormwater mitigation projects. The city grades its streets a “C” on average. There is also a dramatic backlog in less obvious needs such as traffic signals, more than half of which have equipment older than 1980. (The expected lifespan is 25 years.)
Some older cities have a large line item for infrastructure, but others don’t, because the costs are buried in other places, such as debt service for past projects, or a water authority that is separate from the municipal government. What is true, though, is that nearly every large U.S. city is struggling with its maintenance backlog. A few examples include St. Paul, Tampa, and Phoenix.
As we've covered before, local governments do not follow the accounting best practices used in the private sector. Specifically, cities and states almost never practice what's called accrual accounting, in which liabilities are recorded at the time they are taken on, not at the time they are paid off. When a publicly-traded company acquires an asset that is going to depreciate and will need replacement, it must account for that future need and demonstrate a plan to have the money set aside. Governments aren’t held to the same standard: when a city builds a road, it gets to treat that road as an asset and pretend the asphalt will last forever, even though in reality, the city will be on the hook in 20 or 30 years for repaving.
The result of this is that you can have a ticking time bomb of infrastructure needs—roads, sidewalks, pipes, pumps, streetlights, and so forth—that will eventually need replacement, and yet it shows up nowhere on a balance sheet, nowhere in a capital improvement plan, and nowhere in your debt service. It is simply wrong to conclude from this that infrastructure is not a problem for your city. You can systematically underfund maintenance for years, decades even, but eventually time will catch up to you.
And by the way, the bond rating agencies aren't adequately looking at unfunded liabilities or hidden debt burdens either. So don’t count on them for peace of mind.
America’s Growth Ponzi Scheme is a pervasive problem. The fact is, the way we do municipal accounting often just serves to allow us to lie to ourselves about it.
Cover image via Jamar Penny on Unsplash.
Daniel Herriges has been a regular contributor to Strong Towns since 2015 and is also a founding member of the organization. His work at Strong Towns focuses on housing issues, small-scale and incremental development, urban design, and lowering the barriers to entry for people to participate in creating resilient and prosperous neighborhoods. Daniel has a Masters in Urban and Regional Planning from the University of Minnesota, with a concentration in Housing and Community Development.
Daniel’s work with Strong Towns reflects a lifelong fascination with cities and how they work. When he’s not perusing maps (for work or pleasure), he can be found exploring out-of-the-way neighborhoods on foot or bicycle. Daniel has lived in Northern California and Southwest Florida, and he now resides back in his hometown of St. Paul, Minnesota, along with his wife and two children.