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Monday
Jan022012

The cost of auto orientation

In the United States we've proceeded for sixty years with reconfiguring our public spaces to accommodate the automobile. The built in assumption of this approach, especially when it comes to commercial property, is that the more cars driving by the better. What we've overlooked in our haste to "modernize" is the lower return on investment we get from this approach, even under ideal conditions. Today we need the humility to acknowledge that our ancestors -- who built in the traditional style -- may have known what they were doing after all.

After a nice break, we want to welcome everyone back and wish you all a fantastic 2012. We're still dedicated to publishing this blog at least three days a week (typically Monday, Wednesday and Friday) as well as releasing a podcast every week or two. We've got one other channel here we'll be starting next week, so stay tuned. If you'd like to stay informed with what's going on with the Strong Towns movement, sign up for our newsletter. We don't share your address and we don't spam. We do bite though, at least rhetorically.

Highway 210 runs east/west through downtown Brainerd. In the hierarchical road system, it is the top of the pyramid and would be classified in most places as a "major arterial". It is designed as a STROAD (a street/road hybrid), attempting to apply highway design standards to what otherwise would be an urban street. In doing so, it has dramatically transformed the land use pattern of the area.

The picture below highlights two blocks that front the highway corridor. The one on the left, which we've labeled "old and blighted", is a block that has retained its traditional development pattern. To the right we have identified the "shiny and new" area, the block that has recently been transformed to an auto-oriented development style, to the glee of city officials and local economic development advocates. In between is a hybrid of the two; part traditional and part auto-oriented.

The old and blighted area is a collection of run down, marginal establishments. There are two liquor stores, a pawn shop, a barber shop, a bankruptcy attorney, a campaign headquarters, a retail establishment, a cafe and a vacant building. This is not a desirable area. If the adjacent highway didn't already ensure decline, local "improvements" have degraded what little pedestrian connectivity may have existed to the adjacent areas. None of it that remains is easy, natural or inviting. In the community's eyes, this is an area that is waiting to redevelop, to transform itself fully into an auto-oriented pattern. That transformation has begun; note that the very westerly building, which is a liquor store, has turned two lots into a parking lot.

By contrast, the shiny and new area contains only one business, that being a new Taco John's drive through fast food restaurant. The modern facility contains two drive-through lanes, good access to the adjacent streets and all the parking that would ever be needed. They've done on-site stormwater retention (the environmentalists applaud) and modern signage. It meets all of the city's design and zoning codes. The restaurant replaced some buildings that were, themselves, part of an evolution from the original, traditional development to the auto-oriented. With the new Taco John's, the transformation is complete.

If there was any question regarding the public's opinion on these two lots, the city of Brainerd's comprehensive plan specifically calls for the transformation of areas that we've labeled "old and blighted" into "shiny and new". The city has designated this area General Commercial, expressing a desire to see the development along this corridor become highway-oriented. This they describe on page 93 of their plan.

General Commercial 

The purpose of this category is to identify portions of Brainerd that should contain general retail commercial uses adjacent to the arterial highway system.  The intent of this designation is to provide areas for highway-oriented businesses.  Consequently, having a strong general commercial base in the city helps the downtown as well.  Having a strong highway commercial area helps draw consumers to the city and provides for a healthy downtown. Examples of these could include highway-oriented businesses such as fast food restaurants, convenience stores, gas stations and other auto-oriented businesses as well as a number of large retailers.

In that definition of General Commercial, it is stated that a "strong highway commercial area....provides for a healthy downtown." The problem is that "strong" and "highway commercial" are -- in almost all cases -- mutually exclusive terms. The numbers prove the point in this case.

The eleven old and blighted lots -- some of the most undesirable commercial property in the city -- arranged in the traditional development pattern along the incompatible, major arterial of Highway 210 have a combined tax base of $1,136,500.

To compare, the Taco John's property -- the one that is not only shiny and new but configured precisely as the city of Brainerd desires the old and blighted properties to someday be -- has a total valuation of only $803,200.

At its nastiest and most decrepit, fighting the negative auto traffic speeding by and the absence of pedestrian connectivity, lacking all natural advantage from the neighboring land uses that would ideally accompany a traditional neighborhood design, the old and blighted traditional commercial block still outperforms the new, auto-oriented development by 41%

Imagine how much more valuable this traditonal block would be if the businesses were simply given some relief from the speed of the STROAD-induced traffic and/or provided some connectivity to the adjacent neighborhood, two things that could be done far cheaper than the millions the city has spent to make this area the dominion of cars.

Imagine how much more prosperous we would all be if we started building Strong Towns.

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There is much more to report on this case study. Check back later this week. In the meantime, here is some related information:

 

If you find this material interesting and would like to know more about how to apply this thinking to your community, join us at the Strong Towns Network, a social enterprise for those working to implement a Strong Towns approach.

Friday
Dec232011

Peace on Earth...

....and good will to all.

May the peace of the season be with you and those you hold most dear. We wish you all a blessed end to the year and the very best for 2012.

The Strong Towns Blog will be back on January 2.

Friday
Dec162011

Best of Blog: The Growth Ponzi Scheme

Prompted by a reader, I spent a week last June elaborating on the assertion that the post World War II development pattern in the United States operates like a financial Ponzi scheme. It is an observation I'd made quite a while back and had referred to often but, up to that point, had only described in passing. The response was overwhelming.

I certainly was not anticipating at the time that the Ponzi Scheme articles would draw that much attention. They went viral pretty quickly and are still the biggest source of new traffic to our website each month. The summary piece that appeared in Grist, amongst other reprintings, has been posted on Facebook nearly 3,000 separate times and I've seen it translated into both French and Spanish.

While I find the Ponzi scheme description to be very accurate and I stand by it fully, I do lament that so many people automatically associate Ponzi scheme with a malicous intent. I can't tell you how many people have emailed me with outrage that I would suggest America's mayors and council members are trying to defraud their constituents. I'm not suggesting that, and in the Curbside Chat booklet I made sure and explained that the Ponzi scheme description applied to the underlying financial mechanisms, not the intentions of those involved. We've all been suckered in this one.

This post is the last of our Best of Blog series. We're going to take the next couple of weeks off here to let our brains rest, spend some time with our families and enjoy a beautiful end to the year. Thank you for reading, for sharing our stuff with others and for everything you do to make your town a Strong Town. I'm looking forward to much more of this in 2012.

-Chuck

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We often forget that the American pattern of suburban development is an experiment, one that has never been tried anywhere before. We assume it is the natural order because it is what we see all around us. But our own history -- let alone a tour of other parts of the world -- reveals a different reality. Across cultures, over thousands of years, people have traditionally built places scaled to the individual. It is only the last two generations that we have scaled places to the automobile.

How is our experiment working?

At Strong Towns, the nonprofit, nonpartisan organization I cofounded in 2009, we are most interested in understanding the intersection between local finance and land use. How does the design of our places impact their financial success or failure?

What we have found is that the underlying financing mechanisms of the suburban era -- our post-World War II pattern of development -- operates like a classic Ponzi scheme, with ever-increasing rates of growth necessary to sustain long-term liabilities.

Since the end of World War II, our cities and towns have experienced growth using three primary mechanisms:

  1. Transfer payments between governments: where the federal or state government makes a direct investment in growth at the local level, such as funding a water or sewer system expansion.
  2. Transportation spending: where transportation infrastructure is used to improve access to a site that can then be developed.
  3. Public and private-sector debt: where cities, developers, companies, and individuals take on debt as part of the development process, whether during construction or through the assumption of a mortgage.

In each of these mechanisms, the local unit of government benefits from the enhanced revenues associated with new growth. But it also typically assumes the long-term liability for maintaining the new infrastructure. This exchange -- a near-term cash advantage for a long-term financial obligation -- is one element of a Ponzi scheme.

The other is the realization that the revenue collected does not come near to covering the costs of maintaining the infrastructure. In America, we have a ticking time bomb of unfunded liability for infrastructure maintenance. The American Society of Civil Engineers (ASCE) estimates the cost at $5 trillion -- but that's just for major infrastructure, not the minor streets, curbs, walks, and pipes that serve our homes.

The reason we have this gap is because the public yield from the suburban development pattern -- the amount of tax revenue obtained per increment of liability assumed -- is ridiculously low. Over a life cycle, a city frequently receives just a dime or two of revenue for each dollar of liability. The engineering profession will argue, as ASCE does, that we're simply not making the investments necessary to maintain this infrastructure. This is nonsense. We've simply built in a way that is not financially productive.

We've done this because, as with any Ponzi scheme, new growth provides the illusion of prosperity. In the near term, revenue grows, while the corresponding maintenance obligations -- which are not counted on the public balance sheet -- are a generation away.

In the late 1970s and early 1980s, we completed one life cycle of the suburban experiment, and at the same time, growth in America slowed. There were many reasons involved, but one significant factor was that our suburban cities were now starting to experience cash outflows for infrastructure maintenance. We'd reached the "long term," and the end of easy money.

It took us a while to work through what to do, but we ultimately decided to go "all in" using leverage. In the second life cycle of the suburban experiment, we financed new growth by borrowing staggering sums of money, both in the public and private sectors. By the time we crossed into the third life cycle and flamed out in the foreclosure crisis, our financing mechanisms had, out of necessity, become exotic, even predatory.

One of humanity's greatest strengths -- our ability to innovate solutions to complex problems -- can be a detriment when we misdiagnose the problem. Our problem was not, and is not, a lack of growth. Our problem is 60 years of unproductive growth -- growth that has buried us in financial liabilities. The American pattern of development does not create real wealth. It creates the illusion of wealth. Today we are in the process of seeing that illusion destroyed, and with it the prosperity we have come to take for granted.

That is now our greatest immediate challenge. We've actually embedded this experiment of suburbanization into our collective psyche as the "American dream," a non-negotiable way of life that must be maintained at all costs. What will we throw away trying to sustain the unsustainable? How much of our dwindling wealth will be poured into propping up this experiment gone awry?

We need to end our investments in the suburban pattern of development, along with the multitude of direct and indirect subsidies that make it all possible. Further, we need to intentionally return to our traditional pattern of development, one based on creating neighborhoods of value, scaled to actual people. When we do this, we will inevitably rediscover our traditional values of prudence and thrift as well as the value of community and place.

The way we achieve real, enduring prosperity is by building an America full of what we call Strong Towns.

 

This article is a summary of a larger series on the Growth Ponzi Scheme. The complete series can be read by following these links: