Does Merging With its Suburbs Make St. Louis a Strong Town?

Strong Towns member Richard Bose writes for NextSTL and is a frequent guest contributor. Bose wrote this piece in response to our recent Upzoned podcast episode about Better Together, a St. Louis-area initiative to reunite the City of St. Louis with St. Louis County. (The two have been separate since 1876, and St. Louis County is fragmented into a large number of small suburban cities.)

The issue is complicated, and not unique to St. Louis: many cities have grappled with the questions we raise while weighing mergers or annexations. Better together, or more fragile together? We’re happy to keep the conversation going with Bose’s thoughtful take. –Strong Towns staff.

Would merging with its suburbs make St. Louis a strong town? No, and on that I agree with Chuck Marohn and Kea Wilson (a St. Louis resident) of Strong Towns. However, they were too quick on a recent podcast to dismiss the Better Together plan as tangential to the bigger issue of whether the region is developing in a financially productive way.

The podcast discussion focuses on efficiency as a key argument for the merger: reducing the redundant costs of providing duplicate services across many small cities. This is important, but there’s another reason to consider merging the city and its suburbs: it can incentivize more productive, less fragile development patterns. Strong Towns stresses asking the right questions. So here’s another one: Does the Better Together proposal make St. Louis stronger? Yes.

Our fragmentation adds to the fragility of St. Louis. St. Louis City and County have about the same assessed value per unit land area. If you take out the farmland and forests in St. Louis County, they’re both about $50M per square mile. Each has its share of high and low-productivity places. There’s no cut-and-dry narrative of a financially productive city taking on low-productivity suburbs here. Reducing fragmentation is not just about squeezing out efficiency to buy time. It is also about reducing the fragility that fragmentation promotes.

4 Reasons Fragmentation Promotes Unproductive Development

This TIF-financed proposal in University City exemplifies how fragmentation induces municipalities to subsidize low-returning retail development. (Click to view larger.)

1. Cities pursue the quick high of retail development.

Our spread-out development pattern is unproductive, and fragmentation exacerbates the forces that encourage that, tipping the scale further towards insolvency. St. Louis County’s many small suburban municipalities—our “fragments”—don’t have the land productivity to meet their infrastructure and service promises. Changing their approach is hard. It’s easier to fall for the seduction of the quick high of retail development.

Developers leverage this dynamic to obtain tax incentives. Tax increment financing (TIF) allows the use of 100% of the property tax increment for the TIF and typically 50% of the sales tax increment. It’s a perfect storm—the development is all about the sales taxes, which go to the municipality, while screwing the school district.

We’ve set up a game where each city tries to shift taxable sales to within its borders. We’re left with more low-productivity land uses than otherwise would have come to be. Our municipalities are ever more dependent on taxable sales. This weakens the feedback mechanisms that used to promote building up, more intensely, and out. We’ve seen this movie play over and over again—right now in University City and Olivette. [Strong Towns has written about University City’s use of TIF to lure a Costco-anchored development, and the broader “arms race” mentality that drives this practice throughout the region.]

Cities set their own zoning and subdivision rules, but many utilities are common across borders. As a result of this Tragedy of the Commons situation, small lots subsidize the infrastructure for large lots.

2. Cities face perverse incentives to freeload on infrastructure costs.

Fragmented municipalities set their own zoning policy but have common utilities. This sets up another flow of wealth from high-productivity places to low-productivity places. A house on a 30′ wide lot in one jurisdiction is subsidizing water pipes for a house on a 100′ in another jurisdiction. The ratepayer in the home on the 30′ lot had no say in the decision to build neighborhoods next door with money-losing development patterns. [See more on this at NextSTL: How We Subsidize Spread-out Places Via Utilities.]

Each fragmented city seeks to maximize development within its own borders, while outsourcing costs outside its borders. Development next to existing already-paid-for infrastructure in another fragment is of no interest. These places are riding the illusion of wealth wave. Each city builds infrastructure to serve almost-always-unproductive greenfield development, taking on more liabilities in the process. The abandoned areas endure in their low-productivity state. The dynamic promotes more fragility.

Do we have any idea what infrastructure liabilities are across the region? Fragmentation makes it hard to know and encourages us not to care to know.

3. Fragmentation allows cities a “get out of jail free” card.

Under the Metro City proposal, it will be easier to #dothemath. Right now, one can take the St. Louis County Assessor’s database and calculate the assessed value per acre of most of their land. But do we have any idea what our infrastructure liabilities are across the whole region? Fragmentation makes it hard to know and encourages us not to care to know. Those liabilities—a lot, I suspect—are hidden in the fragments.

If fragmented municipalities are ticketing and fining people to death just to make payroll, what does that tell you about the condition of their infrastructure? We pretend we’re insulated by municipal borders, but municipalities have a get-out-of-jail-free card. They can pull the plug and dump all those liabilities onto the County through disincorporation. We saw that with St. George [Stltoday: St. George Residents Get Rid of Their Town]. They had $1.2M in street repairs looming before they let it go in 2011.

4. Fragmentation allows cities to defer the consequences of an unproductive development pattern by taxing non-residents.

Blue highlighted roads are St. Louis County-maintained roads. Blue dots with lines are County and City-maintained Metrolink. Numbered and lettered roads are state-maintained roads. (Click to view larger.)

The stages of the post-World War II development approach according to Strong Towns are these: growth with the illusion of wealth, debt accumulation, and decline. Fragmentation allows for another stage: raise revenue from non-residents, preferably by leveraging assets that are some other government’s responsibility. St. Louis city does this mostly with the earnings tax. Municipalities in St. Louis County do it by taxable sales and/or fines and fees stemming from traffic violations.

There are winners and losers in these games. For example, the “winning” municipalities in the sales tax chase, those with higher per capita sales-and-use tax revenue than the city-county as a whole, have 23.5% of the residents and 48.7% of the taxable sales. The top 17 cities have only 11.7% of the population, but 33% of the taxable sales.

Those on the losing end when it comes to sales tax resort to other means, such as fines and tickets, to raise revenue. Before the scrutiny that #Ferguson brought, some cities had more outstanding warrants and issued more tickets in a year than they had residents. This was how some fragments made it through the recession. And after getting their hand caught in the cookie jar, they have been raising their taxes to the max.

We have fragments in all stages of the life cycle. They are taking advantage of fragmentation to avoid changing their approach and to buy time.

A Merger Doesn’t Solve All Our Problems

After merger, it is still incumbent upon us to change our approach to make St. Louis a strong town. We will still have stadium fever and silver-bulletitis. We have to make sure Metro City doesn’t turn it into a pandemic. Our highway-carcinoma could come out of remission. The forces at the federal, state, and regional level encouraging the spreading-out of places with negative return-on-investment development will still be at work.

The plan calls for a robust Metro City planning department. We will still have to make sure our elected officials and staff get it. And strong citizens at the block and neighborhood level have to keep working to build strong communities. If not, then yes, we are just buying time.