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> The way this happened is pretty simple. At Strong Towns, we call it the Growth Ponzi Scheme. Through a combination of federal incentives, state programs and p

• rayiner 6y ago
  The federal new starts transit programs are an example of this.
• hmahncke 6y ago
  Isn’t the reason those few districts have big “profits” because they are the central business district where all the people from the outlying areas with big “losses” come in to work and shop? This feels like looking at a company by division and deciding that R&D and HR a make huge losses and all the profits are in sales.
  • CydeWeys 6y ago
    In this analogy the entire company as a whole is still making a large loss overall. So it will go bankrupt just like the city.
  • theptip 6y ago
    The article discusses this in some detail. Some of the districts with high profits are “downtown” areas as you say. Some are “poor” or “bad” neighborhoods, contrary to your (and I suspect most people’s) intuition. The article’s main thesis is that these poor areas have the best ROI for development.
  • bobthepanda 6y ago
    In traditional cities people usually also live in the downtown. The main issue is that free parking lots associated with big box stores are incredibly unproductive uses of land, and the tax value of the property reflects that.
• paganel 6y ago
  > subsidies from higher levels of governments (e.g., federal) to lower levels (e.g., cities) for infrastructure The same thing is happening right now with EU grant money given for "development" to some of its Eastern European members. Lots of mayors and local officials use that money for grand local infrastructure projects for which they won't have any reasonable money to maintain even in the near future (let alone 30 to 50 years from now), because we have a numerically declining tax-base that is getting older and older (I live in one of those Eastern European countries). But mentioning that issue gets you labeled as a person "against progress" or an anti-European (or worse, a Russian shill who doesn't trust the European project). We have a saying in Romanian that roughly translates as: "you should stretch out only as much as your blanket allows you to", i.e. one should only consume the resources he/she thinks are reasonably available to him/her, but right at this moment we are "stretching out" further than the bed itself and getting out of the bedroom altogether.
  • pram 6y ago
    Doesn't seem dissimilar from all the rotting Soviet prestige projects/infrastructure sitting around eastern Europe lol.
    • jbay808 6y ago
      If the Soviets could afford to build it, shouldn't the presumably wealthier post-Soviet governments be able to afford maintaining it?
      • novok 6y ago
        Often economies run on star cities, and if your country's economy is disconnected from those star cities because of a breakup, your country's economy will also suffer. There was also the entire communist central planning thing that made resources misallocated.
        • jbay808 6y ago
          Thank you for an explanation that makes sense!
• tremon 6y ago
  the source of America's infrastructure problems is subsidies from higher levels of governments (e.g., federal) to lower levels (e.g., cities) for infrastructure That doesn't follow from your quote. The quote says that the problem is that those subsidies were used for horizontal development (i.e. sprawl), which rapidly expanded the infrastructure. You are correct that future maintenance wasn't budgeted, but if the city had expanded vertically (i.e. denser urban cores), the infrastructure costs wouldn't have risen quite so dramatically.
  • cle 6y ago
    This is an interesting claim, do you know of anything I can read for more info?
  • cwp 6y ago
    From the author's follow-up article [1]: How is this possible? Some of my planner colleagues will say it is density, but I've long rejected that simplistic explanation. There is a lot more to it than a simple division problem. He goes on to explain that the poorer areas tend to have smaller houses and narrower streets built on higher ground, all of which leads to lower maintenance costs. They were built with more frugality and risk aversion than the more affluent areas. This supports the thesis that Lafayette's predicament stems from extravagant infrastructure in affluent areas that wouldn't have been built without subsidies. [1] https://www.strongtowns.org/journal/2017/1/10/poor-neighborhoods-make-the-best-investment https://www.strongtowns.org/journal/2017/1/10/poor-neighborh...
    • owenmarshall 6y ago
      Wow. That new graph of “poor neighborhood vs rich neighborhood” was not at all what I expected it to be.
    • treis 6y ago
      >What we're really talking about is taking a neighborhood of $50,000 homes and making them $55,000 homes. That's a solid 10% increase in the tax base. This is just such a fundamental misunderstanding of how the world works. Land doesn't pay tax. People do. And they pay it out of the things that they produce. Planting trees or painting crosswalks doesn't increase their productivity and therefore does not grow the tax base. Increased property values simply represent an increase in the tax rate. You can get this same "return" by cutting out the beautification and simply raising the millage. Sure, if you make your city more attractive rich people from other areas may move there. But nationally that is a zero sum game. If a rich person moving to the beautified city from an ugly one the net change is 0 as the ugly city loses as much as the rich one gains. The only way for cities to actually get richer is to increase the productivity of their citizens. This means spending on education, infrastructure, and public health.
• redtexture 6y ago
  Joy of less costly is the measure. Wake up to the developer perspective.
• treis 6y ago
  >It's also falsifiable. And the world does prove it false. If you look at municipal budgets infrastructure is usually around 10%. There isn't one out there that spends a majority of their budget on infrastructure. The expensive things are cops and schools and fire and other labor intensive services. The municipalities that have gone bankrupt the issue has almost always been an inability to pay pensions. With the other ones caused by financial fraud and/or mismanagement. For the life of me I can't understand why people keep posting this Strongtowns nonsense. Their core hypothesis is easily probable wrong and they post the silliest numbers. Like this one pegs Lafayette's infrastructure replacement at 32 billion. Yet Lafayette's entire budget is only 0.6 billion. Since they haven't spent the entire budget for last 50+ years on infrastructure that 32 billion is obviously nonsense.
  • ebg13 6y ago
    I think you're misinterpreting both the numbers and the argument and then taking away a backwards conclusion from that misinterpretation. > If you look at municipal budgets infrastructure is usually around 10%. The article says exactly this. > There isn't one out there that spends a majority of their budget on infrastructure. So what you're saying is that the city doesn't spend what it would cost to actually keep up with maintenance. They're saying exactly the same thing. Unless you think that the city is pocketing billions in profits from unspent tax money (they aren't), it's hard to see how they could possibly spend more on infrastructure without majorly cutting other services and/or taxing more than the people can afford, which is the premise of the article. > The expensive things are cops and schools and fire and other labor intensive services. These costs scale most directly with population, not land area. You'd have these same expenses if the city were built such that the road infrastructure cost less to maintain, so pointing at them makes no sense. > Like this one pegs Lafayette's infrastructure replacement at 32 billion. Yet Lafayette's entire budget is only 0.6 billion. The article is about how Lafayette cannot keep up with maintenance because it would cost too much. Literally exactly the same thing as what you just said, and yet your conclusion is that they have it wrong? Why?
    • treis 6y ago
      >So what you're saying is that the city doesn't spend what it would cost to actually keep up with maintenance. They're saying exactly the same thing. We've had sprawling suburbs in this country since at least the 50s. In that time we haven't really seen any municipality go bankrupt from infrastructure or have infrastructure costs come to dominate the budget. And we continue to have roads and sewers and so forth. The only conclusion from those set of facts is that Strongtown's argument is fundamentally flawed. And indeed it is. For all their case studies and imaginative math they have one glaring and fatal flaw. They can't point to one city or town and say this city is no more because they couldn't afford their infrastructure.
• daniellarusso 6y ago
  How different things could be if municipalities could run deficits? Municipal bonds are almost like student loans in the US.
  • bradlys 6y ago
    I think there is another article about a road being constructed for $30 mil or something absolutely crazy when it’s not needed at all (and the road would fall apart before they could repay the loan). The basic gist I got was: when loans become more available, things start getting constructed when they aren’t needed at all and costs balloon fast. Like student loans, easier access means they can charge more.
• dragonwriter 6y ago
  > The growth Ponzi scheme hypothesis says that the source of America's infrastructure problems is subsidies from higher levels of governments (e.g., federal) to lower levels (e.g., cities) for infrastructure. This is pretty clearly false; the main cause of infrastructure maintenance neglect is that politicians, like many leaders in other fields, get more career boost from new projects than making sure existing things are maintained. That's true from top to bottom. There's policy contributions (e.g., California Prop. 13 makes local jurisdictions dependent on development fees and other growth-related revenue because property taxes are limited to a low nominal level and decline in real terms as property is held because of the limitations on assessed value increases to significantly below the historical average rate of inflation), but new-project subsidies aren't a root cause but a symptom of the cause which would exist even without the subsidies.
• lumost 6y ago
  While I agree with the strong towns assesment overrall, I think this analysis may rely on some assumptions on the distribution of wealth and tax revenue within a population. Ultimately the "once per generation expense" in all of these towns was funded once per generation in the past. This money came from the federal government, and not the local tax payer - ultimately with the federal government taking on long-term debt to fund it. While this seems like a ponzi scheme of perpetual growth, there is nothing that would prevent the federal government ( or the local government ) from repeating this exercise to rebuild the infrastructure. If we can't redo this exercise it means that - Despite economic growth, the cost of replacing existing infrastructure is higher than it was a generation ago e.g. Cost disease: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease - The balance of payments in the economy is not well calibrated on a generational scale, profitable economic activity is not attributed on a local scale with free cash flows diverted elsewhere by rentiers/global financial flows e.g. a factory in annaheim california sees all profits recognized in Delaware/Ireland. The federal government/central bank may have more capability to provide local governments with finances than we would expect in such a scenario by rebalancing payments. - The current US city landscape has real long-term economic costs that drain capital on unprofitable activities, immediate pivots in city planning are required to avoid economic fallout. I suspect a little bit of all three options are at play, but I would be curious for more exploration on items 1&2. A great irony of the modern world is that the City of Flynn borders several pipe manufacturers.
  • xyzzyz 6y ago
    > This money came from the federal government, and not the local tax payer - ultimately with the federal government taking on long-term debt to fund it. It did not, this is completely false. Federal government by and large didn't fund local roads and sewers. Federal government did often help with interstate highways and large water works, but those would be built just the same even with the Strong Towns preferred high density development model. By the way, the money that federal government spends is not created out of thin air. It comes mostly from federal income tax, which is overwhelmingly paid by the people living in exactly the kind of suburbs Strong Towns hates.
• JJMcJ 6y ago
  This has been understood since at least the 1950s, when the Interstate system was 90% subsidized by the Federal government, but maintenance was a local responsibility.
• cratermoon 6y ago
  Building new stuff while never taking into account maintenance costs happens in computer programming, too. At least in some places I've worked, they have more to maintain than people or time to maintain it, but there's always someone with a budget and an idea.
• WalterBright 6y ago
  Isn't it ironic that people constantly charge corporations with short-term thinking as some failure of capitalism, when the real disaster is the local government? Here's another one. In Seattle, the city has seen enormous growth in tax revenue, far outpacing population growth. But the money just seems to disappear. Where it's going are public employee pensions, which were enacted long ago by politicians to garner the support of the unions. But the math on these is unsustainable and a looming crisis, but the politicians couldn't care less as the bill was far into the future and the election was just around the corner.
  • bumby 6y ago
    >when the real disaster is the local government I think the “public vs private” take is a false dichotomy. I think there is a decent amount of evidence to show this short-term biases are a general human problem
    • WalterBright 6y ago
      > I think there is a decent amount of evidence to show this short-term biases are a general human problem The fundamental difference with corporations is their finances are regularly examined by professional investors and if they're playing the short term game, their stocks get dumped. There are people who are aware of the looming fiscal catastrophes of local government, but there's no way to "dump" the stock of them, while efforts are made to obfuscate these liabilities and the heavy influence of public unions pretty much ensure there's no accountability. Furthermore, it's illegal for corporations to hide this stuff on their accounts, stuff that governments do routinely. If you can identify a corporation that artificially boosts quarterly profits with short term thinking, and still has a rising stock price year after year, I'd like to hear about it. The ones I know of that did this went right down the sewer shortly after the professional investors discovered it.
      • bumby 6y ago
        >If you can identify a corporation that artificially boosts quarterly profits with short term thinking, and still has a rising stock price year after year, I'd like to hear about it. The classic example is Enron. They took credit for VOD sales that hadn’t happened but were just optimistic projections. Your point still holds though that there are different checks and balances between public and private organizations. Public checks are at the voting booth, private (publicly traded) companies checks are at the stock exchange. Your claim is no different for public orgs, the time-scale is just different. It’s like challenging for an example of an unsustainable govt keeping its prominence for centuries. Unsustainable practices eventually have their reckoning regardless if they are public or private. Are there examples of governments hiding account details that are illegal yet allowed to continue once uncovered?
• baybal2 6y ago
  > The way this happened is pretty simple. At Strong Towns, we call it the Growth Ponzi Scheme. Through a combination of federal incentives, state programs and private capital, cities were able to rapidly grow by expanding horizontally. This provided the local government with the immediate revenues that come from new growth -- permit fees, utility fees, property tax increases, sales tax -- and, in exchange, the city takes on the long term responsibility of servicing and maintaining all the new infrastructure. The money comes in handy in the present while the future obligation is, well....a long time in the future. Believe me or not, this to an even bigger extend plagues China. I think more than half of major cities in China are fully consciously running a Ponzi scheme with their own land leases, as they have really no other revenue source to sustain them long term, and this is why they are ready to go to any extremes to do this. Effectively, private loans are financing municipalities through overpriced land leases. Everybody who ever dealt with real estate in China will tell that land auctions are rigged using every trick imaginable.
• hitekker 6y ago
  > Infrastructure that can't be maintained because its costs were never accounted for. I like that you used the phrase "accounted for". It implies in my mind that the politicians doling out the cash did not monitor how that cash was used. In management-speak, it's the classic phrase "delegation without follow-up to abdictation" I initially thought about it in terms of accountability "the lower levels should have wrote down their expenses, their decisions, and sent it upward for review" but then I thought "why would most people do that if the people at top aren't mandating the record-keeping, let alone looking at it?" The higher levels didn't attach real strings to the funds and only kept abreast of developments by looking at the end results. Which were positive and attractive, but camouflaged very real deficiencies in the system that produced it. It's plain irresponsibility.
• wasdfff 6y ago
  I saw a road in my neighborhood go from trenches along the road to full storm drains and sidewalks, for seemingly zero reason but to let the existing owners appraise their homes for $10k more. The trenches were fine in practice and never spilled over even in the worst storms. This suburb of 15 thousand people is currently millions of dollars in the hole doling out shortsighted handouts like this, and there are thousands of suburbs just like this one.
  • scrose 6y ago
    I’m not sure where you are, but I can’t imagine anywhere where sidewalks don’t make sense. Upkeep is orders of magnitudes cheaper than maintaining a street, and provides incentives for people to leave their cars behind, especially for shorter trips, further reducing wear and tear on roads. Keeping roads in shape for multi-ton vehicles to barrel down them is expensive. Keeping them in shape for humans, not so much.
    • jfim 6y ago
      There's no reason to have sidewalks in suburbs or rural areas where anything you'd reasonably want to walk to is miles away.
      • smallnamespace 6y ago
        As a suburban kid I walked a few miles a day to school and back and so did a good number of classmates. It would have been far more dangerous without sidewalks.
      • scrose 6y ago
        The thought process of your post forms a self-fulfilling prophecy. Of course if you build with only a single mode of transport in mind, the majority of people will opt towards that mode of transportation. Unfortunately, many suburbs and small cities have made that mistake and also chose the most expensive mode, hence the article.