4 ms·

When you are looking at your city budget... you're probably looking at cash-based accounting: https://www.investopedia.com/terms/c/cashaccounting.asp https://w

by scoofy 8mo ago

When you are looking at your city budget... you're probably looking at cash-based accounting: https://www.investopedia.com/terms/c/cashaccounting.asp https://www.investopedia.com/terms/c/cashaccounting.asp This looks at current costs. The school is a cost every year, so every year that cost shows up on the budget. The problem is that road/water/sewer maintenance often doesn't show up on these budgets because these systems are usually built all at once. Because of this they usually also need to be replaced all at once. To see those costs before they happen, you need to use accrual accounting: https://www.investopedia.com/terms/a/accrualaccounting.asp https://www.investopedia.com/terms/a/accrualaccounting.asp The entire message from Strong Towns is exactly that because cities often use cash accounting instead of accrual accounting in their budgetary processes these lingering issues of deferred maintenance don't show up until they do, and when they do, those costs will simply be too large for the city to cover without very politically unpopular interventions.

ndriscoll 8mo ago
Capital improvements don't need to be paid all at once; that's what financing is for. And debt service does appear on budgets. In any case, why are we to believe that e.g. $1B in maintenance that's been deferred for decades is "the" problem when the school budget is $500M/year?
- scoofy 8mo ago
  You’re making an argument about school budgets being too high. That’s fine. I’m arguing that, our school budgets are set, in large part, by our available resources. Viewing our resources from a long run perspective helps us set our current budgets. If we cut the school budget only when we need to repave roads, we are playing fast and loose with our children’s future. When we set our budgets to be sustainable, we don’t rug pull parents who are trying to build a life in our cities.
  - ndriscoll 8mo ago
    I'm not even saying school budgets are necessarily too high. I'm just saying that if someone is claiming that what amounts to 5-10% of the budget is why cities go bankrupt, and that's why they need to entirely reshape how they develop to fit some idyllic vision of a pedestrian city, then I'm going to go ahead and doubt their analysis. Like I'm happy that my (suburban) city requires new developments to connect to a city-wide bike trail network. That's great. I just don't think Strong Towns/Not Just Bikes presents a realistic mental model of the world. They seem to clearly be pushing for a specific vision regardless of facts.
    - imtringued 8mo ago
      I'm not sure I understand your argument. You can defer maintenance but school, police, firefighter, etc spending is constant. If your infrastructure is in trouble and your budget can't pay for the maintenance, you can limit the costs to 5% or 10% of the budget, but your infrastructure will continue decaying. Los Angeles has about 7500 miles of roads. At a reasonable cost of $5 million per mile that is 37.5 billion USD. Assuming a lifespan of 35 years, that is basically a billion USD per year spent on servicing road infrastructure costs. If they don't spend that billion every year or put it aside for future repairs, their road infrastructure is going to decay. It might not sound like much in comparison to the full budget, but since the road network is the largest man made structure in the city, it will affect everyone and be the most noticeable failure on part of the government. Lack of police or fire fighting can show up in the form of stochastic damage that doesn't necessarily impact every citizen directly.
      - ndriscoll 8mo ago
        Sure, if you treat all other things as impossible to tweak except the thing you want to argue is the problem, I guess. But taking a quick look at the city budget, I see they spent $200M on overtime for police. So there's a place where they could save like $70M with no change to service with correct staffing? I'm sure there are other places where they are not currently 100% efficient. Or, since they have ~4M residents in the city, they could raise taxes by $250/person-year. That doesn't sound unsustainable to me. Certainly not a "suburbs are a fundamentally broken model" level problem. Lots of suburban cities in the US are really nice, well run places. LA even as an example of a poorly run area doesn't actually seem to be in much of a financial pickle. The point is > you can limit the costs to 5% or 10% of the budget, but your infrastructure will continue decaying Is just confused. The $1B/year you came up with as sufficient is ~7% of the LA city budget (~$14B), and that's excluding major expenses like schools since that's the county budget. If you look more holistically at just "what's the local government spending", the amount you say is needed to properly maintain the roads is more like 3-4%. Roads are just not a financial problem. Strongtowns guy just doesn't like them.
Spooky23 8mo ago
That’s absolutely untrue. The only reason companies track depreciation as they do is because it allows them to defer taxation. Public works projects are not paid out of current cash. Strong Towns makes good arguments about certain things and are critical in a reasonable way of how civil engineering organizations rate the need for more civil engineering works. But the budget discussion makes zero sense. The biggest expenses for county, city, town, village government are: schools, police & fire, Medicaid share in states that do that, and employee retirement and health. A small/midsize city spends 60% of its budget on police. Capital projects are capitalized with bonds. Governments have the lowest bond expenses due to tax exemptions. Roadwork is not done in a cash basis. It’s bonded for 10-30 years depending on the job.
- scoofy 8mo ago
  Yes, the problem is that our cities are already leveraged up to their eyeballs. At some point, the actual humans buying those bonds start becoming skeptical of the city’s ability to pay them back. LA currently has about a billion dollars of outstanding general obligation bonds (edit: but that does not include all their future liabilities). They're still rated AA, but I presume that is because the credit writing agencies understand how many untapped revenue streams LA has, but again, those will require unpalatable political change. You can’t keep refinancing forever. Philadelphia, Miami, and Chicago are getting close to junk bond status, and when that happens, the option to refinance starts evaporating very quickly.
  - ndriscoll 8mo ago
    Wikipedia says the GDP of the LA metro is ~1.5T. I think they could handle 1B in bonds. If they choose not to, it's not because it's some impossibility. Certainly not because roads are impossibly expensive.
    - scoofy 8mo ago
      I said general obligation bonds, not general liabilities. These technically are what makes this discussion so difficult. My point is that much of what the city can tax has little to do with the city's GDP. Either the landscape of the city will have to change or the current taxation paradigm will have to change.
danudey 8mo ago
So you get 40 years of "sewers cost us almost nothing to maintain woo" and then five years of "sewer maintenance is costing us hundreds of millions of dollars this year".

by scoofy 8mo ago

ndriscoll 8mo ago

Capital improvements don't need to be paid all at once; that's what financing is for. And debt service does appear on budgets. In any case, why are we to believe that e.g. $1B in maintenance that's been deferred for decades is "the" problem when the school budget is $500M/year?

scoofy 8mo ago
You’re making an argument about school budgets being too high. That’s fine. I’m arguing that, our school budgets are set, in large part, by our available resources. Viewing our resources from a long run perspective helps us set our current budgets. If we cut the school budget only when we need to repave roads, we are playing fast and loose with our children’s future. When we set our budgets to be sustainable, we don’t rug pull parents who are trying to build a life in our cities.
- ndriscoll 8mo ago
  I'm not even saying school budgets are necessarily too high. I'm just saying that if someone is claiming that what amounts to 5-10% of the budget is why cities go bankrupt, and that's why they need to entirely reshape how they develop to fit some idyllic vision of a pedestrian city, then I'm going to go ahead and doubt their analysis. Like I'm happy that my (suburban) city requires new developments to connect to a city-wide bike trail network. That's great. I just don't think Strong Towns/Not Just Bikes presents a realistic mental model of the world. They seem to clearly be pushing for a specific vision regardless of facts.
  - imtringued 8mo ago
    I'm not sure I understand your argument. You can defer maintenance but school, police, firefighter, etc spending is constant. If your infrastructure is in trouble and your budget can't pay for the maintenance, you can limit the costs to 5% or 10% of the budget, but your infrastructure will continue decaying. Los Angeles has about 7500 miles of roads. At a reasonable cost of $5 million per mile that is 37.5 billion USD. Assuming a lifespan of 35 years, that is basically a billion USD per year spent on servicing road infrastructure costs. If they don't spend that billion every year or put it aside for future repairs, their road infrastructure is going to decay. It might not sound like much in comparison to the full budget, but since the road network is the largest man made structure in the city, it will affect everyone and be the most noticeable failure on part of the government. Lack of police or fire fighting can show up in the form of stochastic damage that doesn't necessarily impact every citizen directly.
    - ndriscoll 8mo ago
      Sure, if you treat all other things as impossible to tweak except the thing you want to argue is the problem, I guess. But taking a quick look at the city budget, I see they spent $200M on overtime for police. So there's a place where they could save like $70M with no change to service with correct staffing? I'm sure there are other places where they are not currently 100% efficient. Or, since they have ~4M residents in the city, they could raise taxes by $250/person-year. That doesn't sound unsustainable to me. Certainly not a "suburbs are a fundamentally broken model" level problem. Lots of suburban cities in the US are really nice, well run places. LA even as an example of a poorly run area doesn't actually seem to be in much of a financial pickle. The point is > you can limit the costs to 5% or 10% of the budget, but your infrastructure will continue decaying Is just confused. The $1B/year you came up with as sufficient is ~7% of the LA city budget (~$14B), and that's excluding major expenses like schools since that's the county budget. If you look more holistically at just "what's the local government spending", the amount you say is needed to properly maintain the roads is more like 3-4%. Roads are just not a financial problem. Strongtowns guy just doesn't like them.

Spooky23 8mo ago

That’s absolutely untrue. The only reason companies track depreciation as they do is because it allows them to defer taxation. Public works projects are not paid out of current cash. Strong Towns makes good arguments about certain things and are critical in a reasonable way of how civil engineering organizations rate the need for more civil engineering works. But the budget discussion makes zero sense. The biggest expenses for county, city, town, village government are: schools, police & fire, Medicaid share in states that do that, and employee retirement and health. A small/midsize city spends 60% of its budget on police. Capital projects are capitalized with bonds. Governments have the lowest bond expenses due to tax exemptions. Roadwork is not done in a cash basis. It’s bonded for 10-30 years depending on the job.

scoofy 8mo ago
Yes, the problem is that our cities are already leveraged up to their eyeballs. At some point, the actual humans buying those bonds start becoming skeptical of the city’s ability to pay them back. LA currently has about a billion dollars of outstanding general obligation bonds (edit: but that does not include all their future liabilities). They're still rated AA, but I presume that is because the credit writing agencies understand how many untapped revenue streams LA has, but again, those will require unpalatable political change. You can’t keep refinancing forever. Philadelphia, Miami, and Chicago are getting close to junk bond status, and when that happens, the option to refinance starts evaporating very quickly.
- ndriscoll 8mo ago
  Wikipedia says the GDP of the LA metro is ~1.5T. I think they could handle 1B in bonds. If they choose not to, it's not because it's some impossibility. Certainly not because roads are impossibly expensive.
  - scoofy 8mo ago
    I said general obligation bonds, not general liabilities. These technically are what makes this discussion so difficult. My point is that much of what the city can tax has little to do with the city's GDP. Either the landscape of the city will have to change or the current taxation paradigm will have to change.

danudey 8mo ago

So you get 40 years of "sewers cost us almost nothing to maintain woo" and then five years of "sewer maintenance is costing us hundreds of millions of dollars this year".