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Mistakes A Town Makes

Let's End "Entertainment Districts"

Let's End "Entertainment Districts"

Paris and Florence don’t have entertainment districts. Neither does San Francisco. What these cities have are spaces for people. Let's focus on building more of that.

Streets with no cars

I'm in Kansas City, MO, today at the International Association of Assessing Officers where my friend Joe Minicozzi and I are scheduled to give a presentation tomorrow. I had an open day yesterday and, after getting a little caught up on sleep, I spent a large portion of the day out and about. I walked the streets and I biked the streets in an effort to get to know downtown KC a little bit better.

I wish I could report I am impressed because I really want to like it here.

While there are many things that really depress me about America's cities, particularly those in the Midwest, there is one thing that stands out above the rest: our misunderstanding of what a street is. If you were from Kansas City, you would be excused for believing that streets are corridors for moving automobiles quickly from one parking lot to another. You would be excused because that is all you see.

Except for the fact that there are virtually no cars. That is another component of this entire mess: there is really no traffic to speak of. We're fighting a beast that does not exist. Let me elaborate.

Like many cities, the streets of downtown Kansas City are unnecessarily wide. In addition, parking along the streets is mostly prohibited, ostensibly so there are ample driving lanes for all of the traffic. In many places, the streets have been configured in what is known as a "one-way coupling" where traffic flows in one direction on every other street. This, too, is to provide for a fast flow of high volumes of traffic.

After devoting all of this effort and valuable real estate to moving automobiles quickly, Kansas City then does what every city does: they install traffic signals everywhere. Cars are forced to stop every block or two and wait while the signal cycles from red to green.

Here's what is most odd about all of this: there's virtually no traffic.

I was out around lunch time and then again during rush hour. In the latter, Joe and I are biking down the street and, in the couple of miles we went, we were passed by no more than three cars. There was just nobody out there. On the way back to the hotel, we were just walking down the middle of the street laughing about how there was literally nobody here in a car.

This is a city of nearly half a million people. The city has spent billions on getting them in their cars. Where are they? 

Joe Minicozzi in KC2.jpg

Joe Minicozzi recklessly dodging the traffic on our walk back to the hotel in Kansas City.I quite frankly don't know the answer to this question, but I understand the ramifications. By adopting the approach that they have, Kansas City and other cities like it have:

  • Created a public realm where someone (pedestrian or driver) does not have to worry about the volume of cars but their excessive speed due to the needlessly wide lanes.
  • Forced themselves and their business community to pay for expensive off-street parking by needlessly restricting on-street parking.
  • Given up the value of all of the development space that is currently devoted to parking cars, all while the streets are vacant.
  • Needlessly spent tens of millions of dollars or more on traffic signals.
  • Needlessly delayed millions of motorists who sit at signals while no cars approach from any direction.
  • Limit the overall desirability of the downtown by making the public realm, and the corresponding adjacent land use pattern, auto dominated.
  • Built a system of transport that is inefficient and unsafe.

I'm willing to bet that downtown Kansas City has a rate (incident per capita, incident per vehicle-miles-traveled) of fatal car car accidents and a rate of insurance claims for auto accidents higher than New York City. I'll bet it is far, far higher. Anyone who has access to such data, please prove me right or wrong.

And let me talk about efficiency, which seems to be the metric we want to use to judge success. Who is this system efficient for? If it is the driver, then we need to do something about the traffic lights. If it is the taxpayer, then we should do something about the hierarchical road network because, as is obvious from watching the traffic patterns today, the capacity that has been paid for is not being used efficiently. It is largely being wasted.

Here are the immediate things I would do tomorrow if I were put in charge of renovating Kansas City's downtown:

  1. Remove all one-way couplings. Every street will have two way traffic.
  2. Allow parking on every street.
  3. Where streets are too wide for two travel lanes and two parking lanes, stripe for bike lanes and/or buffers. The lane widths must be narrowed.
  4. Change all signalized intersections into a shared space area. As a temporary transition, shut off the traffic lights and paint the intersections to alert everyone that this is shared space.
  5. Deploy aggressive traffic calming devices where the highways and major arterial STROADs empty into the downtown.
  6. Sit back and watch the downtown prosper.

Now there are many more things that would need to be done -- a regulatory framework and tax system that supported vertical expansion and good urbanism would be paramount -- but these steps would remove the major obstacles this downtown faces.

Oh, and did I mention that this would be far less expensive than the current approach. Like vastly cheaper. I believe that makes this approach more financially viable than what the local engineer and public works departments likely have planned in their fantasy wish list of projects to theoretically be funded by someone else. Let's see a credible, locally-funded alternative from them.

And remember, it is not like there are that many cars today that would even notice.

 

The next big idea is small

The next big idea is small ... This isn’t a call to end long-range comprehensive plans. In lots of circumstances, they are necessary. This is a call to consider that many small players can be much more effective, and more risk-adverse than one large project. Large plans like Elk Run expose us to tremendous risk if they fail. The future of our plans need to be everything that Elk Run isn’t: small, numerous, and nimble.

The Projections Fallacy

We spend billions every year in this country on our transportation network, large percentages of it based on traffic projections. This despite the fact that we have a long record of not being able to accurately project traffic. The answer isn't better projections but a better transportation system, one that is robust to modeling error.

If you are in Pennsylvania and would like to have the Strong Towns message brought to your community, we have an ongoing fundraiser to help us visit your state and hold 8 to 10 Curbside Chats. Please consider supporting this effort and pass it along to those you know in PA. We'd love to bring this message back to the Keystone State and change the conversation on growth statewide. 

My home town newspaper recently ran the standard repeat-what-the-engineer-says article on traffic projections. Essentially, the report indicated that we're going to be inundated with traffic. As things continue to "full build out" (it was in quotes so I'm assuming it is an engineering term), traffic is going to increase by 75%, an astounding amount since most locals will attest we are already drowning in traffic (we're not, but most would attest that we are). The recommendation for dealing with all this traffic seems sensible: make some prudent investments today to acquire more land for future road expansion and then, as they are built, oversize the roads to meet this future demand.

A lot of the rationale for these projections -- as well as the public's acceptance of them -- comes from the fact that growth has been robust. In fact, if you go back decades and look at the projections that were made for the present time, they are laughable in how dramatically they underestimated the amount of traffic. We projected out based on what our experience had taught us to anticipate, but we were wrong, and it cost the city a lot of money to retrofit all of the places that were inundated with cars.

This reality fits a national trend. My experience is backed up by studies demonstrating that, the higher the functional classification and the larger the traffic volumes, the greater the degree of underestimate. This correlates with work by Patron Saint of Strong Towns Thinking, Nassim Taleb, who has made the same observations of economic systems, governments, etc... (For one example, go to the 5:10 mark of this recent video.)

Amazingly, the fact the we have been so consistently wrong doesn't make us any less confident today, either in my hometown or nationwide. We've "enhanced" our models now and believe we have it figured out this time, revising the data upward to reflect what we have experienced in the "real" world. This is the essence of modeling, and what else could be more rational?

Or more foolish. In these models, we've taken something that is unpredictable -- driver behavior -- and treated it as if it were actuarial science, akin to estimating life expectancy or your odds of drawing a face card when the dealer is showing fifteen. The idea behind our hubris is that, while one driver may be unpredictable, the average driver will react in a predictable way and, thus, we can model based on a normal distribution. These models are failing to account for things like consumer preference, the ability to access financing, overall market growth, cost of construction materials, gas prices, government employment levels, and on and on and on.... We assume all drivers make predictible traffic decisions. They don't.

I'll take my hometown as an example. Our old traffic projection models assumed that cars multiply like people (I guess that's what's going on in all those two car garages), so we projected traffic based on historical growth rates the same way we projected population. Then what happened? I live in a resort/tourist area with cheap, abundant land and lots of natural resources, just the kind of place retirees and near-retirees wanted to move to starting in roughly 1990. Fuel that desire with a stock market bubble (I wrote a lot of permits for people who paid cash for their new lake home after selling stocks) and then with a cheap credit housing bubble, and -- unexpectedly -- we are inundated with traffic.

Today we already have Super Walmart, Super Target, Home Depot, Menards, Fleet Farm, Kohls, JC Penny's, Best Buy, CostCo (under construction) and a myriad of chain restaurants, gas stations and other highway parasites sucking off of the hundreds of millions we've invested in the adjacent high-capacity highway system STROAD (street/road hybrid). The baby booomers are stuck in their existing homes, which are now worth much less than they had hoped, while many are also stuck in their job as their retirement savings suffers much the same fate. The cheap shoreline is gone, sold off decades ago to people who are now reaching the age where maintaining a lake home may not be worth the effort. The cheap gas is gone too and it doesn't seem too likely that the state is going to throw hundreds of millions more into shortening travel times from the Twin Cities.

Has any of this new reality informed our projections? Of course not. Like a mad scientist adding random chemicals to a potion they just don't understand (and then testing it on unwilling human guinea pigs), we've tinkered with our models now, convinced ourselves that this time will be different. And you can bet that there is no way we'll be caught underestimating. We've "seen" what happens and so we've "fixed" that problem. The new answer is simple: estimate high (which is, in the perverse vernacular of the trade, called being "conservative" with the estimate).

We have a couple of discussions going on right now at the Strong Towns Network about traffic projections. One of my friends there sent me the following: 

We're working on a traffic study for a small development. According to their comp plan (from 2007) we need to offer recommendations for a county road equivalent assuming 4 percent annual growth. We looked up the numbers and found that VMT has (of course) declined steadily in the area since 2003/4. Someone at our firm contacted the county about the growth rate (a 26 yr old traffic engineer by the way) and, from the message that was relayed back to me, we were instructed to just proceed with the Comp Plan's assumptions. Long story short, we're probably going to have to recommend a turning lane. 

In another conversation, one of our members from California is knee deep in the debate over widening I-710 to 14 lanes. In a note to the spokesman for the Los Angeles County Metropolitan Transit Authority, he asked:

I know that the analysis of vehicle trips and container traffic for this project were done prior to the global financial system collapse in 2008, and so the idea of traffic volumes or container shipment volumes decreasing by 2035 were not considered.

 However, when the Panama Canal is open, it looks like our region will be receiving less cargo simply because going through Panama is much cheaper than shipping to LA or Long Beach and moving via trucks, trains, etc.

 Is anyone at Metro thinking about this project differently now? Shouldn't the "No Build" alternative for this project (and all the alternatives) be revised?

Here is the answer he received:

The Ports re-evaluated their growth projections after the recession and made adjustments. The revised projections show slower growth in Port activity in the next decade, but the 2035 total TEU estimate remains the same: 42.7 Million. In other words, the Ports anticipate to handle 42.7 Million TEUs by 2035, even if growth is slower in the next few years.

In other words, it might slow down for a while, but we're confident it will go back up ultimately because our projections say it will.

There is a certain contingent out there that is already pounding out their email to me demanding that, if I'm so smart, I provide a better way of estimating. There's the fatal flaw in our current system. I'm not so smart, but neither is anybody else. The big difference here is that I'm not pretending to be able to predict the future.

Inherent with the auto-centric pattern of development that defines the Suburban Experiment is the hierarchical road network. Like a river swelling during a steady rain, changes on the periphery have an enormous impact on the trunk components of the network, as do many other things that have nothing to do with driver behavior. The reason we put so much time and effort into projections that we know will be wrong -- that we have no consistent history of getting right -- is because the cost of being wrong is so great. When the projection is off by even 10%, the level of service on major roadways can plummet. Since nearly every trip is funnelled into this network, failure is catastrophic. This is an incredibly fragile approach.

We don't need better projections, we need a system that is robust to modeling error. We need a system of growth and development where we don't need to project correctly in order to succeed. We need a system where we build incrementally in a replicable and evolving pattern, one where each fractal evolves continually and naturally over time. We need a system where we're not required to place huge bets on the future, oversizing infrastructure in service of projections, but instead can invest in high return endeavors where the likelihood of success is great.

We need a strong towns approach which, if you stop and look, is a lot like the pre-automobile approach that served us well for thousands of years. I'm not saying we get rid of the automobile, but when we build our entire environment around its propagation, we are slave to our own hubris and lack of understanding.

 

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Convention Centers: It's a race to the bottom

The desire for convention centers is simple: it brings in visitors with outside money who consume things that are taxed at higher rates (alcohol, hotel rooms, rental cars, etc). From the city’s perspective, it appears to be a win-win. But, these investments come at a cost. In this case, the cost is increased competition. The number of conventions and total number of people going to conventions has decreased since it peaked in the mid-1990s. The situation we have now is that of more cities are competing for fewer dollars. It's a classic race to the bottom.

The pitfalls of "Entertainment Districts"

The pitfalls of "Entertainment Districts"

Kansas City's Power & Light District is an infill project in an urban area that connects with the street grid and brings people downtown. It sounds like a success story, but in reality, it’s a financial drain.

Assessing our Future

The concept of a special assessment contains little dark secrets that city officials like to keep to themselves. The ability to assess the cost of maintenance -- a questionable concept at best -- is the only thing allowing many cities to avoid facing their true reality. Elected officials and the public need to understand assessments, their legal and practical implications, and the dramatic shift that is likely to happen as more taxpayers resist paying them.

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Last Friday, I received a couple of boisterous reactions by email to the Baxter assessment story I linked to. These guys were livid, and I suspect many others will be as I discuss it more fully here today. I too often forget that people don't know this stuff. I've been immersed in it for years and have, as a mostly powerless bystander, become numb to it. Thanks for the reminder -- this will be eye opening for many.

As we've discussed here for years, almost all of America's cities are financially insolvent. They have far, far more liabilities than they have revenue that they can tap into to pay for those commitments. This is the result of 60 years of the Suburban Experiment, a development pattern that creates (for a while) the illusion of wealth by allowing cities to exchange near term cash benefits associated with new growth for long term liabilities associated with infrastructure maintenance. We're now in the long term and, financially, everything is breaking down.

City managers and other public officials that argue with me on that last paragraph (and there are getting to be fewer and fewer that do) almost universally depend on one funding mechanism as the key to remaining solvent: the special assessment. 

For many cities, the special assessment is a magic money machine. The idea is simple. The city does a project. The costs of that project are assessed (charged) to the property owners that benefit from the project. To make things go smoothly, the city generously finances the project at reasonable terms and collects the money "painlessly" in the same way that property taxes are collected.

If it were only this simple.

Anyone who listened last week to the health care testimony at the U.S. Supreme Court knows that a big deal was made over the government's ability to tax versus the government's ability to collect money in other ways. Among other things, the 5th Amendment to the Constitution states that individuals may not:

...be deprived of life, liberty, or property, without due process of law...

The 14th Amendment ensured that states (and by extension, cities) would be bound by these same provisions. At the time it was adopted, the Obama administration argued to us -- the masses -- that the health care impact fee was not a tax, but to the court last week they insisted that it was. Why? Because the government has the authority to tax citizens but it can't take your property (money) by other means without due process (nor can they delegate that authority to others, aka: insurance companies). This is not a small nuance; it is the basis of our government.

What if the government decided that you should pay an extra $20,000 in taxes this year. Not anyone else, just you. That would be illegal, a violation of your rights to equal treatment under the law and due process. Now, if the government decided to tax every family an extra $20,000 in taxes this year, they may have a revolt, but the tax would not single out any one person (or specific individuals) and would thus be legal. There is a lot of legal nuance here and attorneys can and will argue over this for as long as we are a country, but in a broad sense, the government can't take your money unless they tax you or go through a process that affords you the right to appeal (like a fine you can argue in court or, in this case, a special assessment).

So special assessments are not taxes. It is a charge in exchange for a benefit. I'm going to go back and quote the 5th Amendment again.

...nor shall private property be taken for public use, without just compensation.

Here's how this applies: If the city takes your money to build a street -- not through taxing everyone but through a special assessment on you -- you have to receive "just" compensation. Is your compensation that you get to drive on the street? No, everyone has that right since it is a public street. So what is your compensation?

It is the value that is added to your property from the improvement. That is it. Period. End of discussion.

Let's put some real numbers on this. Your property is worth $200,000. The city goes out and improves the street in front of your house. The cost is $14,000 per property. After the project, your property is now worth $205,000. What is the maximum your special assessment can be?

The answer: $5,000. That is the amount that your property increased in value due to the project.

But the cost was $14,000 per property. Who pays the rest? That is where the general taxpayer comes in. If the project is for the public good, then tax everyone to pay for it. If the project benefits just you and a few others, that benefit will be reflected in the increased value of your property and can be captured through the special assessment process.

I actually find that Wikipedia (bless their souls) do an awesome job of explaining this. From their entry for special assessment (my emphasis added):

The property tax most citizens are aware of is known as an ad valorem tax. This tax is used to fund general or day-to-day government operations. An ad valorem tax is commonly levied on both real and personal property. A property tax is based upon a property's market value. The ad valorem tax levy is based upon a "millage rate" which never varies from parcel to parcel. The foundation principles for ad valorem taxes are that each property is valued according to its market value (equity) and that each property is taxed based upon a single millage rate that applies to everyone (uniformity).

Special assessment levies are not ad valorem property taxes even though they may be collected on a property tax bill. A special assessment is based strictly upon the concepts of "need" and "benefit." Special assessments require a finding that the public improvement is "needed" for a reason consistent with the law which permits the special assessment and that each property specially assessed receives a unique, measurable and direct benefit from the public improvement that was needed. The basic idea is, if government funds make a property more valuable, the government has the right to get money back from a property owner. This contrasts significantly with the ad valorem tax which is extracted to fund government operations that are designed to benefit all citizens.

If I could underline "measurable" twice, I would.

There are some of you that see the clear problem at this point, but for those that don't, let me point it out to you. You live on a paved road. You are refinancing your home and get an appraisal that says it is worth $200,000. The road in front of your house is in rough shape and the city needs to fix it, which they do in the weeks after your appraisal. The cost they want to assess you is $14,000. In light of the assessment, the bank requests a new appraisal. You had a paved road with cracks and potholes before and now you have a smooth, paved road. How much is your house worth?

Very likely, it is still going to be worth $200,000. If you had gone from a gravel road to a paved road, maybe you would have seen an increase in value. Maybe, but the form that appraisers use and the comparables they review don't get into the quality of the pavement. There is an inherent assumption that, since a property fronts a paved road and since the property owner pays taxes, that road is going to be maintained. It is a rare case that a simple maintenance project is going increase the value of a property.

Let me give you another example to drive this point home and show you that roads and streets are the least of our problems. Look at that water pipe buried in the ground. The one you've been paying a water bill for decades supposedly to maintain. Let's say the city knows that pipe is old and needs to be replaced before it becomes a costly maintenance burden and so they dig it up and put in a new pipe. How much more is your property worth now that it gets water from a shiny new pipe instead of an old, worn out pipe? Pretend you were out of the country for the six months that this happened and arrived home without knowing. Would you notice a difference? It is really hard to argue that something adds value when it is imperceptible.

Now the city managers, engineers and finance directors are all hopping mad at me. Let me ask their question for them: If there are four homes on a cul-de-sac and the city has to go in and fix the street, replace the sidewalk, replace the sewer pipe and the water pipe, and the cost is $400,000, who, Mr. Marohn, are you suggesting pays for that? Nobody is using that infrastructure except for those four homes. Shouldn't they each pay $100,000? Isn't that fair since they are the only property owners that benefit?

My answer is simple: It is public infrastructure, taken over by the city for maintenance through a public process, and it is now the city's to maintain at full cost of that maintenance, minus any increase in property value the project might create. If the city did not think this infrastructure served a public purpose, it should not have taken it over and assumed the maintenance liability.

Now that is very inconvenient -- in fact it is devastating -- to the wishes of city officials. As we've demonstrated many times, the amount they are collecting through property taxes and fees pays only a tiny fraction of the cost of maintaining this infrastructure. The rest they assume they can make up through government transfer payments, taking on debt and through special assessments. If they can't -- and they really can't, if they are challenged -- it destroys their budget and the gig is up.

I've found that there is an art to assessing improvements that keeps this all from turning too ugly for a city. Let me again go back to the Wikipedia entry for special assessments:

Among the unique characteristics of the special assessment is one that makes a special assessment particularly onerous for ordinary citizens. A special assessment levy enjoys a legal benefit known as a "presumption of validity." This means that it is much harder and usually, much more difficult to appeal than the ad valorem property tax most citizens are familiar with. This happens because it is difficult for the ordinary citizen to recognize that an error in the special assessment procedure or methodology has occurred and the resources a taxpayer must use to fight a special assessment levy are more expansive and costly than resources to fight an improper ad valorem tax on their real estate.

If your real estate taxes are messed up, you go to a hearing with some proof of that and there is a board that, while not always accommodating, will typically hear reasoned arguments. If your special assessment is messed up, you have to go court. Not only that, before you go to court you have to file proper objections with the city indicating that you are contesting the assessment. This all has to be done within certain time frames or your right to appeal is lost.

To fight your assessment, you will need to hire an attorney and an appraiser willing to testify in court. This is going to cost you between $6,000 and $10,000. Let's say that your assessment is $14,000 -- are you going to pay $10,000 in hopes of getting a verdict, at the district court level, that is 100% in your favor and that the city -- with more resources and more to lose -- won't appeal to higher levels? Not likely.

So there is an incentive for the city's approach to become devious. Keep the assessment low enough to where it is more expensive to fight it than to simply pay it. Make the project complicated -- don't simply fix the infrastructure but improve it in some marginal way, like a wider shoulder or something -- so that more expertise is needed to ascertain what is going on. Make the assessment process as prefunctory and opaque as legally permissible to avoid the opportunity for substantive objection. Of course, since this is all being done for the "greater good", the deviousness is justified as what is needed to "get things done". At least that is what we tell ourselves.

I've seen poor, uneducated people living in trailer houses assessed more than their home was worth. I've seen well-heeled property owners negotiate their own "insider" terms of assessment. I've seen citizens forced, through the assessment process, to pay for improvements that actually devalue their property and their neighborhood. The end of our video, Conversation with an Engineer, lays out this irony of ironies.

In recent years when property values were rising and the real estate market was liquid, the special assessment process ran into few objections. If the assessment was too high, people could sell their property, typically make a lot of money, and buy something else. Progress was not worth fighting over since all seemed to be benefiting. Today is a much different story. Add to rising property taxes to falling home values and a frozen housing market, and I anticipate there will be some aggressive resistance to the special assessment process.

And when that happens, even the smug city officials that believe they have everything under control, that they need not be concerned with the public return on investment, that special assessments are the perfect tool for routine maintenance -- even they will need to acknowledge that we've long passed the time when we need to start building strong towns.

 

For those of you visiting us today, you'll notice some dramatic changes to the website. Let's call it StrongTowns.org, Version 3. While it is still a work in progress, you can see where we are headed with getting our message out there. The website is such an important tool for that. We hope you find it helpful. I want to acknowledge my friend, Jen Krouse of Steepletown Studios, whose brilliance has not only orchestrated this transition but I believe pulled out more of the substance in our message than I thought was possible. If you need web site assistance, I can't recommend her highly enough.

Why resilience, not growth

Do we really need growth? If you listen to anyone of prominence today, from the president on down to nearly every town council member, the answer is a resounding: YES! And they are right. The ponzi-scheme system of growth we have created demands, like all such schemes, more growth. But we need to stop and ask ourselves an important question: Why have we created a system that we know will ultimately fail? Why have we made ourselves reliant on ever-increasing rates of growth?

I want to pause here and thank Nathanial Hood for his generous contribution to Strong Towns. I understand that Nate is an enthusiastic planner currently seeking a position to further his career. From our correspondence, I can verify that he writes well (you can also read his blog to see that) and, since he is a regular reader of this blog and others, you know he has a good grasp on emerging thoughts in the planning profession. He has lived and worked abroad, so he has some good real-world experience, and he is currently living here in Minnesota. If you might be interested in hiring Nate, or know someone who could be, here is his resume and contact information. And once again, Nate, thank you for your support of the Strong Towns movement. It means a lot to us and we deeply appreciate it.

One of the frequent criticisms of Strong Towns that we hear, especially from those vested in the current system such as engineers, city planners, economic development advisors and financial advisors and especially that same group here in my own home towns of Brainerd and Baxter (you are never a prophet in your own land), goes something like this:

What makes these guys think that they know what is going to happen? What makes them so confident that they have it all figured out? 

This criticism belies one of the fundamental principles of the Strong Towns movement and, in doing so, highlights the oxymoronic beliefs inherent in those that promote our current approach. If there is one thing we inherently understand here at Strong Towns it is this:

We don't know what is going to happen.

You will never find Jon, Ben or me predicting the inflation rate, the GDP growth rate, the level of unemployment, the number of new housing starts or any other myriad of statistics currently used to project the future.

Will the foreclosure rate go up? Sure looks like it will, based on the trends, but would it shock us if it did not? Nope.

The reason why the criticism is so revealing is that the current crop of professionals advising most cities in the United States are retained because it is widely believed that they are able to accurately predict the future. And they believe it themselves. They look back and take account of what has happened in the past, what their data and statistics tell them, and then confidently project out into the future.

(There are a bunch of people reading this blog right now that are saying, "Yeah Chuck, of course that is what we do. Are you suggesting there is a different way?" Hang on.)  

Doing projections like this is natural for modern Americans. The environment around us is relatively stable and has been for decades. We can be excused, to a degree, for wanting to believe that the future will always represent an improved version of the past. How else can you explain our massive credit card debts?

This Pollyanna-like view is especially true for all of those zoning officials and transportation planners that were caught off guard with the last boom. They spent a decade or more in shell-shocked reaction mode. Today they are the generals feverishly making their plans and writing their codes, preparing to fight the last war. And if you ask them, they have the projections -- thanks to MS Excel -- to make the case that soon 2005 will return with a vengeance.

Consider one of my twin home towns, Baxter, MN, which last year indicated that they were going to double their population from 8,200 to over 16,000 in the next twenty years. Nobody questions the projection even though responding to it requires millions of dollars of investments to "get ahead" of the growth.

(We'll refrain today from a detailed discussion on how those making these projections seem to always be the ones lined up to benefit from seeing them come to fruition.) 

Or you could consider the city of Princeton, MN, a small town just past the far exurbs of the Twin Cities metropolitan area. This city of 4,800 is finalizing a 40-year loan (subsidized by the federal government) for nearly $16 million to pay for a tripling of their wastewater treatment capacity. Such a multi-generational commitment is done relying on significant growth in the total number of users. From the article:

Lee Steinbrecher, who was on the council last March, had made the motion to triple the plant by stating that he was banking on the work of Princeton Community Development Director Jay Blake to bring in more development.

One only need to look at the city of Avon - another local example from here in Minnesota - for a place that gambled RED on the future and rolled BLACK. They leverage $6.4 million on a development called Avon Estates, banking on growth projections. That's nearly $20,000 of debt for an Avon family of four.

How many cities in the United States have built an industrial park to try and attract that big manufacturer? How many of those lots are now sold on the cheap to the local church (which was zoned out of every other district) or to a service business that could easily have, if the conditions had been different, located in a thriving downtown?

How many transportation investments have been made betting on new growth? We had a vigorous discussion about one here last fall, an overpass in the city of Staples funded by TIGER II monies. We were assured by a local professional that it means jobs and business expansion. My other twin hometown of Brainerd is currently spending nearly $7 million on a road expansion project. They are likewise projecting growth from the project even though they have one of the highest unemployment rates in Minnesota and they are so desperate that they adjourned their last council meeting to "brainstorm" strategies for kickstarting growth.

Shut off the television cameras, the microphones and broke into two groups to discuss community marketing and the possibility of not charging certain city fees for a select time in an effort to spur growth. 

On fees, one group — Cumberland, Bevans, Koep — suggested giving them up with certain criteria and evaluating it after a time to see if it’s working. On marketing, the group said budgeting was a concern as marketing came with a cost; what the role of the council should be; being proactive and knowing in advance what the city should offer for incentives before a developer came before the council; focus on commercial, industrial and general business; evaluate the city’s economic development policy; and discuss the issue with legislators. 

The second group — Nesheim, Parks and Mayor James Wallin — said in order to stimulate construction to provide job growth, the city should reduce building fees for three months at a rate of 75 percent for residential and 50 percent for commercial. 

Seriously, this is what our mania for growth has reduced our public officials to. A delusion that another $7 million spent on expanding another local shortcut, combined with giving up a few thousand dollars on permit fees, suffices as a sound strategy for the future.

With an approach based on building resiliency instead of growth, we don't have any of these problems. Will a resilient town see a lot of growth? Perhaps, but while it won't capture every job or maximize all of the revenue potential, it will get a healthy amount and be better off afterwards. Will a resilient town see no growth? Perhaps, and if that happens it will be okay because it will have kept its debt down, kept its commitments manageable and lived within its means.

It's the tortoise, not the hare, that wins the race, remember? There used to be virtue and wisdom in that tale. Now the modern economist, planner or community development director would laugh at the turtle for not understanding their collective wisdom and the power of their projections.

The Strong Towns movement is not one based on arrogance or over-confidence in predicting a future that is complex and, ultimately, unknowable. That is the essence of the current system. In contrast, a Strong Towns approach emphasizes resilience in the face of the unknown. Our confidence, if you call it that, comes from our understanding that, at the end of the day, we really don't know what is going to happen. All we know is that, if we spend our time and efforts building places that are fundamentally strong, we'll be able to handle whatever it is that the future reveals.

Resilience, not growth. That is the first lesson of building a Strong Town.

Related Reading

 

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The delusion of easy money (aka: nothing is really free)

In Boca Raton, Fla., which faces a budget gap of more than $7 million, leaders are thinking about expanding the city’s size and annexing neighborhoods as an antidote. Sure, more residents would cost more in services, but officials hope the added tax revenues will more than make up for it.

A colleague of mine sent this quote to me on Monday from an article in the NY Times. Needless to say, I am aware of this level of ignorance, but it is a rare thing to see it displayed so clearly. It has compelled me to take a break from our ongoing Brainerd/Baxter Strong Towns laboratory to hopefully point out the folly here in terms that will dissuade other communities from such a short-sighted act of desperation. 

Let's first take a look at the motivation for the city, which is simple. Land is brought under city jurisdiction through annexation. The tax revenue from this land then flows to the city. The amount of revenue brought into the city exceeds the expenses the city will incur and, like magic, everyone is better off.

Or at least that is the standard dogma of engineers, planners and financial consultants. In fact, this is such standard orthodoxy it is stated as fact (no attribution) by the reporter from the Boca Raton Tribune in an article covering the city's discussion.

Annexation is the process of bringing county land into Boca city limits. Normally, it yields additional revenue because providing services to largely residential areas is less expensive than the amount of taxes generated. Also, many Boca city services are not as costly as county utilities.

Let me ask the obvious question nobody here seems to be asking. If "normally" it holds that "providing services to largely residential areas is less expensive than the amount of taxes generated", then why does Boca Raton have a $7 million budget deficit?

Boca Raton is largely a residential community. Their comprehensive plan shows that to be the case. If this development pattern generates a surplus, why do they have a deficit?

Currently the population density of Boca Raton is 4.8 people per acres (3,063 people per square mile). While not super-efficient, it is certainly a more cost-effective density than the area they are looking to add, which has only 2.1 people per acre.

Deputy City Manager George S. Brown explained to the council at a recent workshop that the total annexation package contains $1.575 billion in taxable property; 2,018 acres; a population of 4,319; 1,720 employed people; 2,478 homes and 48 commercial properties.

The maps I have been able to find here do not clearly designate this area and unfortunately I cannot find the annexation report online, but it is hard to imagine that this new land could cost less per household to service than the denser existing city (which is running a deficit).

So how are they determining that they will have excess revenue from this move? That is simple. Their consultants are looking at the immediate cost of service only. One side of the ledger is the new revenue - an easy number to calculate. The other side of the ledger are the new expenses, which likely assume an extension of services (some additional police, fire protection, transit service, etc...). The difference in this analysis is ostensibly "profit".

What is not included is the long-term cost of infrastructure maintenance that the city is assuming.

  • How many miles of street are there?
  • What is the condition of those streets? Do they meet the city's standards?
  • What is the cost for maintaining, repairing and upgrading those streets and when is that going to come due?
  • Ditto for sewer and water systems. I read somewhere that these areas have individual sewage systems...what is the cost to upgrade?
  • Factoring in maintenance and budgeting for long-term capital improvements required to actually service this area, does the city actually have a long-term gain as projected?

From a different article in the Palm Beach Post News:

The combined taxable value of the nine areas being considered for annexation is $1.5 billion. That would bring in about $6.7 million to city coffers under the current tax rate. But it would cost about $4.2 million to provide services to those areas.

Plus, the city would have to set aside about $400,000 a year for five years to upgrade the medians near the communities.

"Maybe that will be the trade-off," said Edward Haymes, president of the St. Andrews Country Club Property Owners Association.

His community has been asking Boca Raton to fix up the medians on Clint Moore Road for awhile, but the city said it didn't have the money to put in trees and shrubs, Haymes said.

What Boca Raton is doing, and what many cities routinely do to solve near-term budget problems, is engage in the Growth Ponzi Scheme. An increase in near-term revenue is traded for a greater, long-term liability. If Boca Raton's consultants pushed themselves a little bit harder and tried to honestly assess the long-term financial implications of this transaction, they would be forced to admit that the same underlying financial deficiencies that exist within the current city limits - deficiencies that add up to a $7 million deficit - exist outside as well. 

Getting bigger does not solve their problem, unless they measure the problem in months and not years. Only a Strong Towns approach, where the underlying financial disparities are corrected through an improved use of the urban space, can solve their long-term financial shortfalls. 

(As a final note, in reading through some of the documents produced by Boca Raton, I am impressed with their overall approach and a little puzzled as this annexation move seems inconsistent with their overall prudence. For example, in their recent financial presentation, the staff recommends such sound strategies as "continue emphasis on efficient use of existing resources" and "be very selective about service additions". This may just be happy-thoughts they have sprinkled throughout their work to sound intelligent, but hopefully not. We wish those in Boca Raton the best of luck and, if I've overlooked something unique to Florida, where I know they have exactions, please let me and our readers here at STB know what it is.)

 

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Gambling on Growth

This week the St. Cloud Times, a daily newspaper from St. Cloud, Minnesota, ran the most insightful and revealing series I have read on the impact of the housing crisis on towns and neighborhoods. 

Photo by Kimm Anderson of the St. Cloud Times

I start this post with a disclaimer. My wife is a reporter with the St. Cloud Times and was a principle author of this series. She heads up their investigative team as well as reporting on county government and environmental issues. Outside of being the person I have chosen to spend my life with, I can dispassionately say that she is professionally very good at what she does. She is also incredibly smart and, as such, does not need her husband to tell her how the world works. In fact, more times than not, it is she informing me.

We have two little girls, ages five and three. A few months ago between the continuous adolescent questions, endless giggles and squealing, book reading, baths and food preparation (all of which we love), she told me that she was working on a series on failed developments. We talked a little bit and, in the intervening months, swapped stories occasionally as her life and mine overlapped more than usual.

When I went to Las Vegas with her earlier this month for the Investigative Reporters and Editors Conference (and some R&R for me), I was able to meet her partner in this investigation, Britt Johnsen. It was interesting to get a glimpse into their thought process as they prepared to finalize the series, especially juxtaposed with our location in a city that hyper-reflected the trends they were uncovering.

I am reading this series for the first time this week just like everyone else, only I am giddy because finally someone is starting to scratch the surface on this Ponzi scheme we call "growth". Unfortunately for this blog, my wife is a big part of it putting the story together. It would be unfair to her, her sources (which she does not share with me) and her career for me to comment thoroughly on the series. Her professionalism and journalistic-ethic is something I am in awe of. I do not want to diminish her amazing work here by commenting in a way that may get mixed up with what she has produced.

So, as someone who is immersed in land use policy (but also as a husband who is very proud to be married to someone so brilliant), I am going to pass along to our readers this amazing investigative series. A quote from one of the articles will set this up for our readers:

Almost every community financial adviser David Drown works with has made some improvements to infrastructure, such as roads and sewer treatment plants. When the expected growth doesn’t happen, it puts financial strain on the city, Drown said.

Almost every city can handle a year or two of little or no growth, Drown said. “But if this were to linger three or four or five years, it’s going to be a significant problem for a great number of communities,” he said.

Cities should be looking three to five years down the road and restructuring debt if necessary, Couri said.

“If they don’t start working on it now, they’re going to be behind the eight ball,” he said.

 

Gambling on Growth from the St. Cloud Times

Photo by Jason Wachter of the St. Cloud Times

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Common Mistakes a Small Town Makes

(I spent last evening running back and forth to the police office during the Pequot Lakes Council meeting to catch the extra innings of the Twins game on TV. I can not help but add a little note at the beginning of this entry - GO TWINS! Let's show them Yankees what a team with The MVP on it can do in the postseason. Don't tear down that right field baggy just yet.)

The current development model used by almost all of Small Town America is a variation on the standard suburban theme. It is bankrupting our small towns, destroying their character and social fabric in the process. One of the challenges we face in promoting Strong Towns is helping community leaders see beyond the accepted norm to a new reality.

In this series we are going to review the most common practices small towns engage in that are considered "good business" but, in the end, undermine the values of their community.

Common Mistake #1: Blurring the line between roads and streets.

Roads should be high-capacity and designed exclusively for moving automobiles. They should be simple in design so as to facilitate high traffic speeds and volumes. A properly designed road will have highway geometries, limited intersections, wide lanes and long sight distances.

In contrast, streets must be more complex. They must have urban geometries including narrower lane widths to slow traffic, on-street parking to protect pedestrian areas, sidewalks and aesthetic vegetation. Streets must be designed to enhance the public realm and thus add value to the neighborhoods they traverse.

Roads that include street elements add complexity to high-speed traffic areas and thus are very dangerous. In my engineer days my peers would say that it is not "speed that kills, but the difference in speed." Adding intersections, accesses, pedestrian crossings, aesthetic vegetation, parked cars, etc... all create objects in or near the driving lane that exist at speeds and directions of travel different from the traffic. Roads dedicated to moving traffic quickly from one destination to the next are made dangerous and ineffective by adding complexity.

On the other hand, streets that are designed as roads inject high-speed traffic into a complex, urban environment. This is very dangerous as well, but also destructive to neighborhood connectivity, economic vitality and property values. When we remove parking, add and widen lanes, channel traffic into "collectors" and "arterials", focus on "Level of Service" and other highway-terms, we are simplifying streets that, by their nature, should be complex. By design, this speeds up traffic, but in a complex urban environment that has too many obstacles for safe high-speed travel.

When run through neighborhoods, the highway road design has a negative impact on property values - who wants to live on the high-speed street? And by elevating auto trips over all other forms of travel, the economic vitality of the community and the social vitality of neighborhoods is compromised.

To top it all off, it is prohibitively expensive to build high-capacity roads where there should be complex streets. The converse is true as well: a highway is simple and affordable until complexity is added to it.

Roads should be reserved exclusively for travel between towns. Streets must be used exclusively within towns. Having a clear distinction between a town's roads and its streets is critical to being a Strong Town.

 

In upcoming editions of this series, we will look at the following Common Mistakes a Small Town Makes:

2. Engaging in the Small Town Ponzi Scheme. 

3. Accepting the developer's Poison Gift.

4. Accepting the government-subsidized Poison Gift.

5. Zoning for separation of uses.

6. Actively working towards de-densification of the community.

7. Coding for suburban-style architecture.