Is it really grow or die?

The world has changed, and so must we. The idea of growth as something that must be induced through large public investments in infrastructure needs to go away. Not only is it not true, we've made ourselves broke proving it. We could't do it much longer if we wanted.

For at least two generations we have adopted the idea that a community needs to grow to be successful. How many times have we heard?...Grow or die....If you are not moving, you are standing still...If you build it, they will come.

In our current economic desperation (the term "desperation" kept in context by recent events in Haiti), we see a number of cities and towns growing increasingly frantic that they have only these two choices - grow or die. Since they are no longer "growing", they must be heading the other direction.

Perhaps we need to broaden the idea of "growth"?

If we were to drive across the country today, we could easily identify "growing" communities. Those would be the ones that:

• Had bulldozers and earth moving equipment running full throttle, turning dirt and building new stuff.
• Had major, visible infrastructure like newly-paved streets or a new water tower.
• Had new private-sector investments, like strip malls, convenience food shops or big box retailers.

Let's ponder some other, not-so-visible types of growth that may be happening in a community. How about:

• A new business launched in the study of a private home.
• A house modified to have a rental apartment in the basement so the owner can lease that space and use the money to stay in their house.
• A person moving into a basement rental unit, now able to afford to live and work locally.
• A stay-at-home parent getting a college degree online.
• An established business that develops a new product or service that they can sell virtually.

By committing our towns and neighborhoods to the maintenance of bloated and inefficient infrastructure systems, we have put a heavy financial burden on ourselves that threatens our future prosperity. In this time of economic transition, we need to step back and ponder the long-term ramifications of continuing to develop in this way. The only way we are going to grow Strong Towns is to trade the approach of growing bigger for one that has us grow better.

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. 

Friday News Digest, NFC Championship Version

I apologize in advance to any STB reader from New Orleans for what I expect to happen to your home football team this weekend. Understand, I've been where you are at. In 1998 the Vikings were the best team in football and were hosting the NFC Championship game in the Metrodome. A trip to the Super Bowl was assured until, NO!, the only missed field goal of the year by Gary Anderson and the game slipped away. Your former kicker, Morton Anderson, broke our hearts with a successful field goal in OT sending Atlanta to the Big Game. 

I hope to meet some of you this spring at the American Planning Association conference, which is being hosted in New Orleans. I promise not to pronounce your city's name like a Minnesotan (New Ore Leens) but instead say it like a local (Nor-lens). The last time the conference was there I was introduced to blackened food (oh my - yummy) and playing craps (paid for my trip). You've been good to me, Norlens, but this is our year. I'm truly sorry it had to be you.

Enjoy this week's news.

• Here is a brief excerpt about our changing transportation priorities from CNU's John Norquist. These guys are all brilliant (I joined CNU just to have that karma).

"Defeating congestion is the wrong goal. All the high-value locations are both urban and congested—congested with not only traffic but with money, people, great food, art, and music." 

• I have not quite decided if my representative, Chairman of the House Transportation Committee Democrat James Oberstar, is the greatest problem we face in building Strong Towns or the only man who can possibly solve the problem. This week it is the former.

"The congressman voiced criticism of both former President George W. Bush and President Barack Obama for being too concerned with how transportation projects would be paid for."

• And while Representative Oberstar indicates that billions in road building has somehow reduced unemployment, there is a growing consensus that this is simply not true. Can we wean ourselves from road-building-mania yet?

• Our friends Bruce Katz and Robert Puentes from Brookings gave the Obama administration's approach to infrastructure an A- (which is pretty good), despite offering this dead-on critique:

"Unfortunately, the need for fast action meant the nation had to rely on existing “business-as-usual” delivery systems. As a result it thwarted any conversation about real reform and reinforced the approach of spreading money around instead of targeting investments. The administration’s one spatial directive of investing in so-called economically distressed areas only made a bad situation worse."

• This was a great column from Thomas Friedman about knowledge flows and the nature of value in today's marketplace. China was the backdrop for the article, but the analysis of the Command and Control approach versus the Network Approach could be applied to many aspects of America's evolving economy as well.

"We are shifting from a world where the key source of strategic advantage was in protecting and extracting value from a given set of knowledge stocks — the sum total of what we know at any point in time, which is now depreciating at an accelerating pace — into a world in which the focus of value creation is effective participation in knowledgeflows, which are constantly being renewed."

• We've been labeled "negative" here at times for suggesting that communities should be striving for stagnation in their housing markets because the only other alternative at the moment is decline. Say hello to fellow negative-thinker Edward Glaeser of the Harvard School of Economics.

"There is no reason to expect a big post-slump jump, and every reason to expect that prices and construction levels will continue to muddle along for quite some time. Don’t expect prices to return to their boom levels for years, if not decades."

• Nationwide, while new home construction was down slightly, the Commerce Department is happy to report that permits for new construction were up by 11%. Great news, until you consider that the 11% is growth off of the lowest level of permitting since 1959. This is like having a dollar, losing ninety cents of it, gaining back a penny and calling the penny 10% growth. Of course that might just be me being negative....think happy thoughts....think happy thoughts....

• As long as we are into happy thoughts, here is some peaceful optimism from James Howard Kunstler. The article is titled, "Six Months to Live."

"Why would anybody think that the housing market is going to keep levitating? A big fat "pig" of adjustable rate mortgages (i.e. mortgages that will never be "serviced") is about to move through the "python" of the housing scene, shoving millions more households into default and foreclosure. Meanwhile, local and regional banks are choking on real estate already in default that they are afraid to foreclose on and have been keeping off the market through 2009 in order to not send the price of houses down further and put even more households "under water" for houses worth much less than the face value of their mortgage. I doubt that the banks are doing this out of the goodness of their hearts, but whatever the motive, this racket of just sucking up bad loans can't go on forever. At some point, a banking system has to be based on credibility, on loans actually being paid back, or it will break, and we are close to the breaking point."

• As long as we are tripping on good vibes, might as well add this "rant" from Andres Duany. Read it - it is brilliant analysis. In fact, the best of it (IMO) is in this video if you want to listen:

•  I'm not sure where this is going, but it is better than what we find right now.

• This almost makes me want to switch my beverage of choice from Mountain Dew to freshly ground, deep, slow-roasted coffee. My goodness, do we need to rid the world of ridiculous zoning codes or what?

• Better idea: Drink slow-roasted coffee and "rock out" to John Denver.

• And finally - go Vikes. Put your money where my mouth is.

Doing More of the Same

The City of Rogers, Minnesota, is one of the last places the federal government should look to invest more money. The recent announcement that Rogers has received $800,000 to begin the groundwork for a future $34 million interchange is evidence that we have failed to learn the lessons of the current recession. There couldn't be fewer public investments that would provide a lower rate of return than an interchange that facilitates more Rogers-style development.

My wife and I lived in neighboring Elk River while I went to graduate school ten years ago. It was quite evident to me what was happening in this area long before it became one of Minnesota's epicenters for the housing crisis. All four of our Mechanisms of Growth (transactions of decline) are in full play, particularly Demand-driven Transportation Spending.

Highway 94 runs west from Minneapolis/St. Paul through Rogers on the way to North Dakota. When I was young, Rogers used to be a trucker stop with a McDonalds, Burger King and gas station. As Highway 94 was improved around the Twin Cities, Rogers became more accessible. The improved accessibility opened up more opportunity for development.

We’ve seen this pattern before. Rogers gave lots and lots of Tax Increment Financing (public subsidy) to attract businesses like Cabela's, a large sporting goods store. The state stepped up with further public subsidy for municipal utilities. In anticipation of improvements to Highway 94, developers bought up farms and built residential developments, all on debt-financed utilities. Strips malls, gas stations, restaurants, service shops – some subsidized, some not – sprouted at intersections with publically-funded traffic lights and along publicly-funded frontage roads.

This explosion in growth has outpaced the DOT’s ability to react to it. There are some evenings when it takes 20+ minutes just to exit the highway at Rogers, while the adjacent non-exit lanes are moving at free-flow speeds. The main collector streets in Rogers were never built to handle the amount of traffic they now carry. Dangerous congestion is the rule.

Is this a sign of success or failure? Did we grow beyond our expectations or did we just over-subsidize a lifestyle that we can't really afford?

Rogers’ city tax rate is reasonable – 39% of tax capacity in 2009 compared to a state average of 36%. It should be since Rogers is in the early phases of the growth Ponzi scheme. It has not had to pay the full cost of its growth and, subsequently, the growth that has occurred there is not very efficient. When the Ponzi scheme catches up with Rogers, it will have to deal with the imbalances between their costs to maintain infrastructure and the comparatively minimal amount of tax base that infrastructure has created.

But why wait? What if Rogers had to pay the cost of this interchange? Would they? Would it be a good investment? Would the local taxpayer be willing to front $34 million for the anticipated benefit?

If the cost of the interchange was paid locally, and the $34 million could be bonded at 4% over 50 years, the City of Rogers would need to come up with $1.6 million each year for the next five decades. The current budget is only $3.6 million, so a 44% tax increase would be necessary to cover the debt service. I seriously doubt the people of Rogers would be willing to make such an investment just to get on and off the highway more quickly.

They would also likely object to a toll, a way to share costs with other exurban-dwellers that make use of this exit. After all, they pay taxes too and moved to the area in anticipation of the improvements being made (even though the taxes they pay do not come near covering the expenses this type of development induces, as we know).

But when it is someone else’s money, the "investment" suddenly becomes good economic development policy. Republican U.S. Representative Erik Paulsen, whose district includes Rogers, said in a statement:

"Not only will a new interchange reduce congestion in one of the metro area's busiest travel corridors, it will also improve safety, reduce emissions and ultimately allow for further economic development in the region."

While there is no arguing with the fact that it will allow for "further economic development", that can be said just about any time the federal government is willing to drop $34+ million on a single community. The real question is not whether or not this will induce growth, but at what cost?

Representative Paulsen rightly identified the 2009 "stimulus" bill as having a low return on investment. He voted against it. We don't want to single out Rep. Paulsen because nearly every federal-level politician seemingly has the same approach, but the reality is this system is not going to change until enough of them look at this type of spending as providing too low of a return on what is essentially borrowed public money.

Roger's is an epicenter of failed mortgages and over-leveraged neighborhoods. If Rogers' style of development were a stock, wise investors would be selling, not investing millions of dollars. If there is any return on the investment at all, it is much, much less than the return the public would get from investing in transportation systems that would move more people, more quickly to more places. Getting exurban dwellers home 15 minutes earlier (or ultimately allowing them to live 15 minutes further out) is certainly not worth additional federal debt.

A Strong Towns approach would mean putting our resources into the projects that have the highest ROI, not spreading them around so each politician can have a press release in their own district. 

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.