How to Build Strong, Resilient Cities and Towns

Chuck Marohn

Cities and counties across the United States are experiencing chronic fiscal stress, and the reason has nothing to do with Republicans or Democrats and everything to do with what Chuck Marohn calls the “growth Ponzi scheme.”

“Why are cities going broke?” he asked at a forum hosted by the Partnership for Smarter Growth, Coalition for Hanover’s Future, and the Virginia Conservation Network at Randolph-Macon College last night. “We can’t we keep the grass in the parks mowed? Why can’t we keep the library open past 5 o’clock?”

After World War II, the United States embarked upon a massive, society-changing experiment that departed from the accumulated wisdom of millennia of experience of building cities. That experiment, commonly referred to as suburban sprawl, changed the growth paradigm from building places with a pedestrian orientation to building places with an automobile orientation. Over the course of just two or three decades new zoning codes and highway construction transformed the character of cities across the country. Initially, that experiment seemed to work out well. Now the fiscal flaws are evident for all to see, and the system is on the verge of collapse.

In the post-World War II era, developers and government struck a deal: Developers would build a subdivision or shopping center, including roads and utilities, and then would turn over the infrastructure for local government to maintain. Early on, the arrangement seemed like a great deal for government. Taxes on the houses and commercial buildings generated loads of cash flow while the infrastructure cost almost nothing to maintain. In a typical cul de sac development in the mid-1990s, infrastructure would cost the builder $6,600 per development. Less visibly, localities had to spend thousands more on infrastructure outside the subdivision, such as arterial roads and highway interchanges. Everyone ignored the fact that it would take, say, 37 years to recoup the cost of all that infrastructure through property tax revenues. Because infrastructure costs little to maintain when it’s new, new subdivisions proved to be revenue gushers. But over time, roads required more and more maintenance and subdivisions began operating tax-wise at a net loss.

What was the solution? Build more new subdivisions and use the surplus revenues to cover deficits from the old subdivisions. Use good money to cover bad, like a Ponzi scheme. But at some point it’s impossible to build enough new subdivisions (strip malls, office parks, etc.) to cover the deficits. That’s where the nation is now, said Marohn. For thirty years, local governments enjoyed the “illusion of growth.” Now they’re facing the reality of chronic fiscal stress. Absent changed policies, they’ll follow Detroit into the abyss. For many, it is too late.

“We need growth so bad today that we’ll do all sorts of crazy stuff,” Marohn said. “We’re lending money to people we know can’t pay it back. We’re desperate for growth. We have to have it or everything falls apart.”

The United States is hitting the limits of its ability to fund more growth. There is no rabbit to pull out of the hat to rescue the nation from its predicament.

As an example, Marohn cited Lafayette, La., a city that is reasonably well run administratively yet experiences chronic fiscal stress. An in-depth analysis of its development patterns revealed that its downtown and older neighborhoods, which are compact and densely developed, net out fiscally positive but that the majority of the city, especially newer areas built according to suburban zoning codes, net out negatively. The median family in Lafayette makes $45,000 a year and pays $1,500 in local taxes. To cover the cost of the its growing infrastructure liability, the city would have to raise taxes to $9,000. “That will never happen,” he said. “Lafayette will have to make some very hard decisions about what to maintain and what to let go.”

Not all cities are in equally bad shape. Some grew more slowly and built less hop-scotch, low-density sprawl that inflated the expense-to-revenue ratio of its neighborhoods. Some have more flexible zoning codes that allow more adaptive reuse. And some are more willing to change than others.

“We should not accept decline as normal,” Marohn said. The answer is not some top-down Marshall plan. It’s the opposite — a bottom-up approach that emphasizes small, low-risk, high-return investments based on intimate local knowledge. Over time, small incremental improvements — bike lanes, cross walks, tree plantings, sidewalk widenings — can go a long way to rebuilding the tax base. The highest-return investments, he suggests, are those that enhance pedestrian and bicycle mobility. They make places feel safe and inviting. Their scale is a single block or intersection at a time.

The advantage of making small, safe bets is that if nothing gets better, you haven’t squandered much money. You haven’t mortgaged the farm, so to speak. But if the small bets do work out, you learn from experience and replicate the successes. In every community, Marohn says, there is a abundance of “pennies, nickels and dimes laying on the ground.” Over time, small improvements, leveraged by private investment, can create enormous value. “This is how we build wealth: slowly and incrementally.”

Marohn also abhors the rigidity of zoning codes and preaches the virtue of flexibility. Municipal planners suffer from the illusion that they can divine the future and anticipate the proper mix and location of residential, commercial and industrial property for the foreseeable future. But markets are too dynamic for anyone to predict long-term demand for different categories of real estate with consistent accuracy. A resilient city, he says, is flexible. A big-box building surrounded by a huge parking lot, typical of suburban development, is difficult to recycle into a different use. A single building set in a downtown street grid is very easy to switch from one use to another. Flexible development patterns like those found in downtown areas will prove more resilient in times of change than inflexible patterns. “Zoning codes are some of the most destructive things we have,” he said. “We need to rethink them.”

Thirdly, Marohn suggests that cities need to make it easier for entrepreneurs to bootstrap new businesses. While some 240 cities and regions across North America decided to chase the Amazon second headquarters, the economic-development deal of the decade, only one can win. Will Amazon HQ2 be a net gain to a community after a realistic accounting of costs and tax revenues and adjustments for incentives? Color him skeptical. It is more prudent, he says, to foster new business formation, which can be helped through a prudent relaxation of building codes, zoning codes and other regulations.

“If we play the Wall Street game, if we play the Washington game, we’ll get wiped out,” he said. By embracing new fiscal analytics, relaxing zoning codes, and embracing a philosophy of making small, low-risk, high-return public investments, America’s cities and towns can prosper.

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10 responses to “How to Build Strong, Resilient Cities and Towns

  1. Ahh … another high priest of human settlement patterns has come by to peddle a little snake oil. Why is it that these high priests never utter numbers? Mahron thinks Lafayette, La has a mix of proper human settlement densities and sprawl-like densities. The combination leaves poor Lafayette too lightly populated to make ends meet. But Lafayette has a population density of about 2,300 per sq mi. About the same as the City of Fredricksburg. What is the population density of those areas in Lafayette that are sustainable? 5,000 per sq mi? At what point on the “density meter” does an area of Lafayette become un-sustainable? Obviously and average of 2,300 per sq mi isn’t working out.

    Mahron asks, “Why are cities going broke?” Good question, especially when “suburban sprawl” is the supposed culprit. If suburban sprawl was the issue it should be the counties surrounding the cities that are going broke not the cities.

    You reference to Detroit is bizarre. In 1950 Detroit (the city) had a population of 1.8m and a density of about 15,000 per sq mi. By your logic the City of Detroit should have been perfectly positioned for success. Even today Detroit has a density of 5,000 per sq mi. I guess that’s “suburban sprawl” levels?

    The high priests of human settlement patterns also struggle to cite positive examples. Lafayette is a mess, Detroit is bankrupt, blah, blah, blah. What works? Where is there an example of a US city that is flourishing, solvent, stable, exemplifying good human settlement patterns? Are these the cities with the highest population densities?

    Time for the human settlement pattern crowd to discover math.

    • Don, I think you make some valid points… but also miss the bigger point.

      Marohn focuses on the amount of investment it takes to build and maintain infrastructure as a ratio of the tax revenue it generates. His maps (similar to some that I have published on this blog) show conclusively that density is correlated with a higher revenue per acre and a lower infrastructure cost per acre. I don’t think there is any arguing with this.

      Marohn’s problem (at least in his curbside chat) was leaving the impression that infrastructure is the driving force behind fiscal stress at the local level. It is one factor, but there are others, such as the cost of schools, the cost of pensions, the cost of public safety, and the cost of other municipal services. For some cities like Detroit, Baltimore, Chicago, you can overlay the cost of corruption. You can have great density and low infrastructure costs per household but still have a screwed up city if the other factors are out of control — which, in fact, they often are. Likewise, you can have sucky infrastructure ratios but hang in there fiscally if you do everything else right.

      But here’s where I think Marohn is right. Two decades ago, suburban counties were kicking ass. They’re not anymore. The growth Ponzi scheme has caught up with them. They’re not generating enough tax revenue to pay for all the infrastructure they need to build and maintain.

      Also, as you seem to agree with below, I agree with his philosophy of making lots of small investments rather than rolling the dice with big investments that could compromise the locality’s fiscal health if it doesn’t pan out. I’m thinking of things like golf courses, Redskins training parks, convention centers, and the like.

      • If the cost of infrastructure per resident is too high in suburban counties what must it be in rural areas? This is why Mahron needs to start using numbers along with his words. High density places like Manhattan undoubtedly have lower infrastructure costs / resident than mid-density places like Henrico County. However, they also have sky high tax rates. And eye popping, jaw dropping real estate prices. So, the density / walkability / mass transit combination does not create affordability.

        As for making lots of small improvements – absolutely. Yet another reason to back down Virginia’s Medieval love of a strong implementation of Dillon’s Rule. Let the localities own both the land use decisions and the local transportation decisions.

      • I agree with both of you. And would add that for me Marohn is far more than the typical theorist. His “solutions” seem based on hard practical experience, on trying to understand how suburban and urban things really work over substantial lengths of time in real time. His insights thus hold real value, on “Stroads” for example.

        As to his maps that “show conclusively that density is correlated with a higher revenue per acre and a lower infrastructure cost per acre” that is often true it seems, but also sometimes false, yet a fundamental plank of Smart Growth as well. Numbers help keep everyone focused, and serious efforts have been done in that direction here too.

        Perhaps what we need more of is trying to understand and appreciate what’s going on when “our solutions” don’t meet our expectations, and why. Like what are the living exceptions to our quest for true solutions, and why? Things like how does Courthouse to Ballston fail over decades, and the who, what, why of it all, in that place and its surrounds? There are four decades of proof there. Same for suburbs. Avidly studying exceptions too and failures arising from our solutions, despite what we’d expect, then we might get lot closer to understanding the realities we face. And perhaps better dealing with all of them, rather than perhaps just a few.

  2. yeah.. I’m not buying it either. I don’t see Henrico nor Chesterfield going broke from “sprawl”.

    I agree that there is a cost to sprawl -but it’s not in the local budgets .Henrico, Chesterfield, Prince William, Stafford, Loudoun – are all AAA rated, fiscally conservative and responsible , and they’re all classic auto-centric exurban counties who could give two hoots about walkability …

    The counties that are often in trouble – are the ones that have lost their economic base – which in turn,, invariably craters the local property tax. You can rattle off the counties/towns/cities in Va that are in fiscal stress and few, if any of them are “sprawlers” gone bad…

    Detroit? well heckfire .. why not throw in Petersburg, Richmond, Puerto Rico? there you go… the buzzards have come home to roost on the walkability sinners…

    geeze…

    I just had a 4 mile walk today – …but I had to drive to get there… shame…shame…

  3. Like other times before, I think Mr. Mahron makes an important and practical point. Have not we seen it at work before. The process of attention to thoughtful details by residents who work successfully in numerous small towns and in some select urban areas. Typically this success appears to be by reason of special demographics working in special places at particular times and markets that compliment the needs and desires of those demographics. Educated affluent retirees or city dwellers rebuilding a certain places at a certain times, often jump started by local leaders whose wisdom, skills and hard work harness the towns charms, hidden or otherwise, to their own local advantage.

    So reasons for this success, however, are often driven by cultural attitudes and habits and selected demographics flourishing in places deemed special at particular times in their history.

    Unfortunately, however, are not many cultural and workaday lifestyles going in opposite directions for vast numbers of people caught up, or joining, in a great variety of trends that are driven by enormous change that too often destroy communities, and are unable to either save or replace them with workable solutions, except for a few fortunate people, typically the affluent running in the narrow lanes of success of the era. This also can easily be nothing new, just another rearrangement of deck chairs into old or new configurations hip at the time.

    Hence I also agree with Don. And don’t know how to counter his point with any particular bromide. History is moving so fast we’re often only guessing, or at a loss altogether.

    • I should have mentioned … I completely agree with Mahron’s contention that a series of small, locally managed changes can make a huge difference over time. I’ve watched it happen in the East Village in New York City over the 5 years I’ve been regularly traveling up there for work. I hate to give a Commie credit for anything but the mayor’s revitalization program seems to be working.

      Many of my neighbors in Great Falls drive me up a wall. I say we should widen the roads to allow for sidewalks and bike lanes. We could do it one block at a time or one road at a time. But some neighbors come back with some poppycock about “preserving the semi-rural character” of Great Falls. Semi-rural? What does that even mean? I have a second home in the middle of a 200 hundred acre soybean / corn field. That’s rural. There’s nothing semi-rural about Great Falls. Sidewalks and bike lanes would increase, not decrease, the property values in Great Falls.

      • re: semi-rural… I’ll bet you guys get your share of bike riders and joggers …. and probably curse them from here to Tipperary…

        The argument down our way is that if you improve the rural roads – it will attract more cars – driving faster..

        probably better than a sidewalk – a bike/walk trail.. but pretty sure none of your neighbors want to give up any frontage … for right-of-way…

        • We get very few joggers and bikers. The roads are dangerous to drive on let alone run or bike on. They have no shoulders. Zero. And the trees are right next to the roads. Every year there are horrific, fatal car crashes due to the hopelessly dangerous roads.

          There was another horrible crash about a month ago – http://www.fox5dc.com/news/fairfax-co-police-investigating-double-fatal-car-crash-in-great-falls

          Most of the time these crashes are single car. You’re going too fast or a deer runs in front of you and you’re into the trees or rolling through a ditch in the blink of an eye.

          Bike lanes and sidewalks wouldn’t just bring in joggers and cyclists it would give drives enough buffer that I’ve got to believe the fatal crashes would decline.

          Hey, but dead kids or “semi rural” … which one really matters?

          • And the frontage is irrelevant. With no public sewer the lots are huge – typically 3+ acres so that the septic field will percolate. Taking away a bike lane and a sidewalk would be a non-issue. Now, cutting down all the trees that grow right next to the road would be a problem but if new trees were planted I don’t see the mid to long term issue.

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