Mechanisms of Growth
Today, there are four primary mechanisms that have fueled the current growth pattern within our towns and neighborhoods. None of these are financially sustainable.
1. Transfer payments between governments.
Nearly every city in America is reliant, to one degree or another, on intergovernmental subsidies to finance infrastructure. Whether the money comes through an established program, an earmark or a block grant, the result is the same: a land use pattern that does not reflect local economic realities. Local values and priorities are distorted when there is little pressure to generate a return on public infrastructure investments. The result: inefficient growth patterns that cannot be financially sustained.
At the same time our infrastructure maintenance liabilities are ballooning, our federal and state legislatures are struggling to reconcile huge budget shortfalls. Even if it were good policy, the reality is that we do not have the ability to build Strong Towns with intergovernmental transfer payments as they are currently designed.
2. Demand-driven transportation spending.
Transportation improvements today are made primarily to increase safety and reduce congestion. After two generations of trying to build our way out of congestion, we not only have massive maintenance liabilities but congestion is actually worse. An approach to transportation spending that pits federal and state priorities (transportation) against local priorities (land use) when we should be linking them is a recipe for waste and inefficiency.
To add to this disconnect, federal transportation policy actually rewards states with additional funds for building additional roads, regardless of their efficiency. Political meddling, often in the form of earmarks, further distorts transportation spending by prioritizing improvements based on political clout, not overall return on the public investment.
3. Debt, both public and private.
Where we once paid for infrastructure improvements through direct taxation, we have increasingly shifted to debt to finance maintenance and improvements. While the policy implications of indebtedness may be debated on many levels, it is clear that the ability to easily wrap the cost of infrastructure into government bonds and home mortgages has allowed us to make inefficient decisions about how to grow our towns and neighborhoods. As our ability to leverage is diminished, we are left with fewer options for maintaining the bloated systems debt has allowed us to create.
4. The Growth Ponzi Scheme.
New growth is often thought of as the salvation for a struggling town, but when that growth is fueled by new and inefficient infrastructure, it is simply a Ponzi Scheme waiting to collapse. Whether it is the town or a developer that fronts the cost of infrastructure, the catch is always that the public assumes the long-term maintenance liability. This gives local governments a short-term revenue boost in exchange for greater, long-term maintenance liabilities. The cycle demands ever-increasing growth rates to maintain bloated and inefficient infrastructure systems, a pattern that cannot be maintained. (Read more on the Growth Ponzi Scheme).
America will not have continued prosperity using these mechanisms for growth. We need to come to grips with how they induce inefficient development patterns that may provide a short-term gain but, in the end, severely limit America's long-term potential. Reliance on these four growth mechanisms has committed us to maintaining costly and inefficient systems, with incredibly low rates of return on the ongoing public investment. We have, ironically, grown our way into stagnation and decline.
We must find the courage to systematically address the problems of our current approach to growth if we want to have competitive, Strong Towns in the future.