
Why Many Cities Have No Money - cassieramen
http://www.strongtowns.org/journal/2017/1/9/the-real-reason-your-city-has-no-money
======
vvpan
I can't say much about mathematics of taxes described in the article, but I
always thought that Soviet Union got a lot of it's city planning very much
right. Even a small town is built as a relatively tight formation of high-
rises, yet leaving plenty of public space and greenery in the middle. The
quality of life in the town that I grew up in is super high, because
everything one might need: school, hospital, store, swimming pool, park, woods
is an easy _walk_ away. The traffic through the town was even disallowed,
which opened up a giant traffic-free area for us to play around as kids and
elderly to use for socializing and to run their errands. For ease of
visualizing here's an aerial photo of said town in early 00s:
[http://i.imgur.com/sj9t3Jy.jpg](http://i.imgur.com/sj9t3Jy.jpg)

~~~
davidw
Part of the problem in the US is too much planning, alongside too many
subsidies for cars. Look at a zoning map of any city: there's an incredible
level of detail about what's permitted where. The local zoning code here in
Bend, until recently, had a section on how many parking spots per customer for
barber shops. As if, in a competitive market, those businesses couldn't figure
out for themselves the optimal amount of parking to pay for to keep their
customers happy.

Most of Europe is pretty walkable and it doesn't have that 'planned' look
either.

~~~
hackuser
> As if, in a competitive market, those businesses couldn't figure out for
> themselves the optimal amount of parking to pay for to keep their customers
> happy.

I don't know anything about Bend, but speaking generally ...

There are many ways that markets are inefficient and flawed; I wouldn't assume
they would yield a good result. For example, the barbershops may be
incentivized to push the parking costs onto others. It may be that every
business has that incentive, nobody wants to pay for other people's parking,
and thus nobody makes the first move. In situations like that, people succeed
by coordinating their activities through democratic government and laws.

People living in cities, elbow-to-elbow and sharing large numbers of resources
(such as parking), may need to coordinate more than people in rural areas.

Also, as they say, don't tear down a fence until you know the reason for which
it was built. It's like that odd, useless-looking bit of code in that old
application - maybe do some research before you delete it.

~~~
davidw
"Externalities" is how economists describe those costs.

Realistically speaking, the barber shop could only really push people to park:

* On the street. And you know what? That's fine. If the street was built to have parking, and people are parking there, it's not a problem. It might be more of a PITA for the clients. If it's too much of a PITA, the business may suffer. But that's how markets work.

* In some other business' parking spots: that can easily be solved by other means, rather than having city-wide laws covering all barbers in the city, some of which may cater to hipsters riding fixies who do not need car parking, and others who have elderly patrons who will not tolerate being forced to walk more than they absolutely have to.

I'm not a "markets solve all the problems kind of guy" because externalities
are real things. But I feel that our cities are way too regulated. Zoning
didn't even exist in Bend until 1947. Some of the first zoning regulations
didn't come about until the early 20th century in the rest of the US.

How would we react if there were a "planning commission" that dictated how
much of each kind of restaurant (Vietnamese, Mexican, Burgers, etc..) at what
kind of price point could exist in a city? Zoning should be to keep truly
noxious things away from where people live, not to keep duplexes away from
single family homes, or barber shops outside of residential areas.

~~~
LordKano
This desire of urban planners to regulate virtually every aspect of city life
is precisely why I live in the suburbs.

I like to remind budding conservatives and libertarians that the free market
is an ideal, not a mandate. The situation you describe is one that it perfect
to be handled by the market. It's a cliche but it's also true that what
matters is "Location, Location, Location". If you locate a business in an area
where the people who would normally patronize it do not often travel or where
they can't obtain adequate parking, that business will suffer.

~~~
davidw
> regulate virtually every aspect of city life is precisely why I live in the
> suburbs.

You could easily get the same thing out of a HOA in a city with fewer city-
wide rules and regulations.

~~~
LordKano
You are absolutely right about that, I also would never buy a home in a
community with a HOA.

~~~
davidw
Ah, I see what you are saying: you think that suburbs are _not_ planned down
to the most minute of details?

I don't know where you live, but I bet if you read a copy of your local zoning
code, and have a look at the zoning map, you will probably find that yes, your
suburb is very, very heavily regulated, including parking minimums, minimum
floor/area ratios, setbacks, uses, and so on and so forth.

Probably less than some HOA's demand, but still a lot of details. I too am not
the kind of person who relishes that level of control, but I suppose some
people like it.

~~~
LordKano
You raise a valid point. I just looked at my local code book of ordinances and
they do cover a lot, including the number of parking spaces by square footage.

In my experience, in a smaller town, these things are primarily used as a
weapon to punish otherwise bad businesses.

For example, we had a bar whose patrons became a neighborhood nuisance. They
began to enforce the letter of the law for every violation until the bar
closed.

~~~
WWLink
That sounds pretty bad. If you make everything illegal then only selectively
enforce the laws...

~~~
LordKano
In the USA, that seems to be the model at all levels of government.

------
windlep
I've seen the infrastructure thing come up for awhile now, and it's definitely
true. In my area, as in others I've read of, they're smashing paved roads into
gravel roads as the paved are too expensive.

The thing that fascinates me is that it feels like a forgone conclusion that
infrastructure costs cannot be made cheaper. Have we really hit the most cost
effective, cheapest, most sustainable method of laying/replacing
sewer/gas/water lines and roads?

There's no innovation left at all when it comes to making pipes that are more
easily replaceable without digging the entire road up? There's no brilliant
ideas left at all on how to 'pave' roads so they're smooth enough in a way
that costs less money, or lasts way longer? Heck, while we're talking
improvements maybe we should have a way to pave a road such that we don't have
such massive runoff and its more resilient to minor settling underneath
without opening large potholes.

I do wonder whether the shit really hitting the fan, and massive chunks of the
population having their roads smashed back to gravel might shake a few new
ideas out.

~~~
jaggederest
As the article says, there are plenty of solutions for these problems,
individually.

The predicament, as a whole, is that we cannot afford them.

Infrastructure quality is, like so many things, directly proportionate to
investment. You can trade off future maintenance by spending more initially,
or vice versa, but you can't magically reduce both at the same time while
providing the same level of service.

This is precisely the same problem as Terry Pratchett talked about in the
boots theory of economics: [http://www.goodreads.com/quotes/72745-the-reason-
that-the-ri...](http://www.goodreads.com/quotes/72745-the-reason-that-the-
rich-were-so-rich-vimes-reasoned)

The problem is that the level of economic productivity supported by (for
example) a strip mall is so low that it cannot support the ongoing maintenance
of the infrastructure that is required to allow it to exist. This is also true
for many suburban homes and office buildings.

You must either extract more productive value from the same land area and
population, reduce service quality, or invest massive quantities of capital in
maintenance cost reduction, which has virtually the same effect as either of
the previous.

~~~
rubber_duck
>You can trade off future maintenance by spending more initially, or vice
versa

Umm is that really true ? Maybe it is I just don't see why this would be - if
anything I would guess spending more would lead to more expensive maintenance
as well

> but you can't magically reduce both at the same time while providing the
> same level of service.

Not magic - innovation.

~~~
michaelt

      if anything I would guess spending more would lead to
      more expensive maintenance as well
    

The idea is to buy a $100 thing that lasts 10 years, instead of a $20 thing
that lasts one year, thus halving your long-term spending.

Of course, not all more expensive products last longer, so careful attention
to value for money is a must.

~~~
rubber_duck
I get the concept in theory I'm just not sure it's a given in practice - the
way I've seen people spend extra money on projects isn't really for long term
cost reduction but features that make it look flashy (increasing the scope and
making it more expensive to maintain).

~~~
jaggederest
Take, for example, road surfacing. You can use gravel, which requires multiple
maintenance visits per year to remain functional and definitely has knock-on
costs in terms of car damage and such.

Or you can upgrade to asphalt - lasts much longer, much lower maintenance in
terms of required manpower and visits to remain functional, etc.

Or, if you want to go the whole way, you can use reinforced concrete or a slab
paver setup, they will last ~30-50 years depending largely on traffic (asphalt
tends to degrade even with little traffic).

That's what I mean. It's about a 3x initial cost difference between each of
the tiers, but your long term maintenance costs go down the more you spend.
It's not a strict one-to-one, but still.

------
sfifs
It seems to be a uniquely American practice to expect infrastructure
maintenance and renewal to be funded by cities exclusively using property
taxes.

Cities generally act not only as trading hubs providing services to the region
surrounding them, they also act as tax revenue sweeteners due to higher
concentration of high income residents. Ie. they have positive externalities
for the region, province or nation.

While I'm certain there would be a level of corruption in city administration,
it seems to be incredibly short sighted to force cities to fund infrastructure
through only property taxes and such without funding from income tax the
province/nation collects as what happens in other parts of the world.

~~~
maxsilver
> it seems to be incredibly short sighted to force cities to fund
> infrastructure through only property taxes and such without funding from
> income tax the province/nation collects as what happens in other parts of
> the world.

In America, many cities get some revenues like that as well.

Many cities levy their own income or sales taxes, in addition to the state
income/sales taxes. (NYC has a 2.9-3.6% income tax itself, Seattle has a 2.7%
sales tax itself, many small cities in the Midwest have their own income
taxes, etc)

Cities typically also get some amount of revenue back from state taxes --
although it has unfortunately become common for some state governments to take
city/road/school funding to cover spending in other places.

------
devb
There's a blog I enjoy that covers this sort of issue very frequently. It's
interesting to see a hard data approach to explaining some of the municipal
funding problems that are brewing nationwide.

[https://granolashotgun.com/2016/08/31/a-thousand-hidden-
subs...](https://granolashotgun.com/2016/08/31/a-thousand-hidden-subsidies/)

~~~
bookmarkacc
I wish they would add some figures. They keep saying "doing you know how much
these roads cost?". No I dont. Please tell. But they never do.

------
erikb
Sorry if that hurts some American self-respect, but what's the difference
between this and the Chinese housing bubble that American media always
complain about? Sure some details are different, but the basic layout is the
same from what I can see: Politicians had about 20 years long time of
incentives to grow without really building self sustaining cities. Now the
current generation is at a point were it nearly doesn't know any more what to
do. Seems quite similar, doesn't it?

~~~
caseysoftware
Yes, and it's the same with public employee pensions.

It's great to be able to spend (or at least commit) tomorrow's dollars today
and then be long gone by the time the bill comes due.

~~~
pjc50
No, public employee pensions are supposed to be paid with today's dollars into
a _separate entity_ which manages the money in the same way private pensions
do. This is why CalPERS has $300bn assets. Those are yesterday's dollars saved
for today.

~~~
caseysoftware
That's a great sentiment but that is not what happened. Or (at minimum), it
was massively underfunded.

With regards to CalPERS specifically, it was covered here two weeks ago:
[https://news.ycombinator.com/item?id=13287078](https://news.ycombinator.com/item?id=13287078)
and from that article:

 _" For every $100 the city paid a police officer in 2016, it had to pay an
additional $71 to CalPERS to fund payments to current and future retirees."_

------
twblalock
There are some cities that get around this by requiring HOAs in new
subdivisions, and requiring those HOAs to pay for maintenance of much of the
infrastructure. The homeowners pay the same property tax they would pay
anywhere else in the same city. There are a number of cities in the Sacramento
area that have been doing this kind of thing for over a decade now.

That approach brings in another set of problems, but it's worth mentioning.

~~~
jdavis703
I'd love to see a more local approach where say a couple hundred of my
neighbors from the few blocks around me could vote to raise taxes for
something specific, like repaving a street, or rehabbing a park. It's local
money that you know stays local.

~~~
r00fus
These already exist where I live (CA), there are line items for things like
city-wide storm sewer, improvements to local parks, levies for specific work.

It's managed by the city, so I'm not sure if it hits the general fund, but it
is a tax specifically for those things.

------
Gustomaximus
> When we added up the replacement cost of all of the city's infrastructure --
> an expense we would anticipate them cumulatively experiencing roughly once a
> generation -- it came to $32 billion.

A generation is what, 25 years? If you expect to replace all roads/electricity
poles/sewers etc every 25 years you seriously need to look a quality. For this
I feel this whole article is off.

> Humans are predisposed to highly value pleasure today and to deeply discount
> future pain

This is not true. One of the best test for predicting a child success is
seeing if they will defer a treat now for more treats later. Many people have
the sacrifice now for a better future instinct.

This article seems to make some vastly incorrect assumptions. Personally I
think where cities are overspending 3 things could really help.

1) Making asset sales/tenders/expenditure very public and show comparable cost
ratios. E.g. cost per km of sewer

2) Bringing more work back in-house. I feel this 'privatise everything is
better' mentality is simply not true and does things that leads to
infrastructure that needs replacement every 25 years and cost blowouts.

3) If you are going to privatise services price them on points of quality that
you can enforce. E.g. Rather than jails getting a straight fee, they should
get a small per convict allowance but a generous bonus for each released
convict that spends 5 years crime free after release.

~~~
flukus
> Making asset sales/tenders/expenditure very public and show comparable cost
> ratios. E.g. cost per km of sewer

I think this is one of the main drivers in favoring cheap and punishing
quality. I agree with 2 and 3, though I'd argue that private jails are one of
the things that should be bought back in house.

~~~
pyre
> I think this is one of the main drivers in favoring cheap and punishing
> quality.

The problem comes with evaluating quality. There are issues with over-valuing
cheapness, but there are equally issues with using high-cost as an indicator
of quality too.

~~~
socialist_coder
Could cities not do something where they pay 50% of the construction bill over
the expected lifetime of the project, with a big chunk of it at the end? The
cost of unexpected repairs would simply get deducted from this money.

It would mean that only big companies could take on these projects (because
they'd only be making 50% of their money right away), but they could still
subcontract out to smaller companies and pay them 100%.

~~~
flukus
If >50% of the cost is maintenance then those companies could still build it
cheaply then laugh all the way to the bank.

------
aurizon
City governments are parasitised by three groups. One is the body professional
politicians that manage to get elected.The second is the construction
companies they use to build/repair their infrastructure The other is the work
force they employ. All three arrange matters so they get twice as much money
on average as the voters that pay their wages/ The politicians do it by simple
theft by vote. They vote themselves large salaries/ The civil serpents form
unions and strike and strike and get 3-5 year contracts with cost of living
allowances (COLAS) AND 1 to 3% wage increase, for that 3-5 years. The
politicians pay it - to buy peace at the expense of the taxpayers. The
construction companies are similarly unionised and do somewhat the same.

Compare the wages of the average city employee with the average non union tax
payer.

Now you see why this insoluble problem has emerged over the past 30 years or
so.

One year contracts. No signing bonus AT ALL (why reward strikers), so a one
month strike costs ~~8% of your annual wage, 2 months ~~17% etc.

Why should these people get more than the tax payers? They are not more
skilled.

They are in power or in the union.

Look at how much teachers wages have made books and equipment a vanishingly
small % of their budget and how much they force the taxpayers to pay them.

These factors wrecked Detroit. They will wreck Chicago and all other cities as
union wage and pension demands take so much money that people move away.
Newark died this way years ago.

~~~
tomcam
Can someone explain the downvotes?

~~~
pja
It’s completely irrelevant to the topic at hand: Cities are not having
problems maintaining their infrastructure because of politicians & building
firms lining each others pockets - they are having problems maintaining their
infrastructure because it is economically impossible for them to do so.

Self-serving hand-wringing about corruption in politics does nothing to solve
this problem. It’s just an excuse to justify not doing anything.

~~~
ChrisBland
While I'm not taking a side, what I believe OP was referring to were
'Prevailing Wage Laws' that prevent the city from using contractors that are
paid below the set union wage. If the cites are unable to reduce one of the
two main drivers (labor costs) then it makes infrastructure projects more
expensive for repair and maintenance.

------
bufordsharkley
The author, Chuck Marohn, has previously made this video that explains how a
Land Value Tax would affect the fiscal situation of a city (for the better):

[https://www.youtube.com/watch?v=ok2uR3btMrE](https://www.youtube.com/watch?v=ok2uR3btMrE)

~~~
fragsworth
He says at the end that nobody switches from Property Tax to Land Tax, because
people who own underdeveloped land would vote against it due to an immediate
increase in their taxes.

Are there no ways to make it happen? Maybe propose to switch it gradually over
a long period of time? Or would that end just as poorly?

~~~
bufordsharkley
It's a classic story of special interests-- they're inherently more motivated
than those championing the common good.

There are incremental solutions towards this, such as "split level" property
tax in which the rates for land can be shaded upward. Pennsylvania has had
this for decades.

But when you implement them, plan to see the special interests make their
case. For instance, a recent proposal to implement LVT in Hartford, CT:[0]

> "We do have an important parcel," said Cheryl Chase, general counsel at
> Hartford-based Chase Enterprises. "We are developers. If we think there is a
> project to be built, we would build it."

> Chase, which developed downtown's Gold Building and two other downtown
> skyscrapers in the 1970s and 1980s, owns the parking lot where the Parkview
> Hilton stood until it was demolished in 1990.

One would think 26 years would be quite enough time to find a suitable use for
a valuable downtown parcel, but this parking lot owner disagrees...

[0] [http://www.courant.com/community/hartford/hc-hartford-
downto...](http://www.courant.com/community/hartford/hc-hartford-downtown-
taxing-district-20161122-story.html)

------
leodeid
In the intro, it is stated that "literally five or less" cities do not have
these monetary problems. I'm curious what those cities are, and why are they
special. If the answer isn't "they've always used accrual accounting", I don't
buy that most cities are doomed due to accounting problems.

~~~
otoburb
The article author Charles Marohn addresses this question in the comments
section. His entire comment response:

" _They are the ones with a very dominant urban core, where the urban fabric
overwhelms the horizontal, auto-oriented stuff. I 'm not saying these places
won't struggle for the same reasons Lafayette will, but I suspect their
decline/contraction will be less pronounced, less a defining characteristic.

_ _NYC, Boston, San Francisco, Vancouver, maybe Chicago_ _.... I 'm not an
expert on this scale of a place by any means so I could be very wrong but they
don't seem to have the same underlying forces as a Lafayette (or even a
Detroit or Memphis) where 80%+ of their infrastructure serves unproductive
land use patterns. Might be 20-40% in these places._"

~~~
bbarn
The Author should spend time in Chicago. We've got ridiculous taxes on
everything, general sales tax itself is almost 11% now, and nothing in this
city works. The trains barely function close to on time, the streets are
riddled with potholes, and the police are afraid of PR problems so much crime
is escalating.

Also, the weather sucks.

~~~
brianwawok
Chicago is fantastic. You should try a few other cities and report back.

Source: Moved out and now want to go back.

~~~
arcticfox
Really? I mean, if you have money and can make sure you're in specific areas
of the city enjoying specific things, I can see it being great.

But a blanket statement like that about Chicago is very surprising given all
of the negative things about its situation (unbelievable gun violence, for
one).

Also I can never get over the hilariously bad 75-year lease of its parking
meters where they got $1B up front in exchange for eschewing massive amounts
of ongoing revenue (the lessees have made $650M+ in revenue in 6 years while
sapping the populace dry). Now Chicago actually has to lose money and pay Abu
Dhabi any time they want to shut down a street for maintenance or public
festivals. Fantastic!

~~~
brianwawok
> (unbelievable gun violence, for one).

Gun violence does NOT happen in the "good" parts of the city to "good" people.
I mean yes I am sure it happens. But the good parts of Chicago have being shot
by a gun odds as lower or lower as any other major American city. (Look at say
the Violent crime rate in Lincoln Park or Oldtown).

Deal with drugs or live in a bad area? Yes, not that safe. But I am lucky to
avoid both of those.

Parking meter was total robbery. But Chicago has good income. The small town I
moved to is like the city in this story. Too many roads that cannot be paid to
maintain. My city literally has 0 debt. Not low debt, but like literally 0
debt. But he average salary is 35k, and each year the city crumbles a little
bit more. Chicago with the average salary double that, even with debt, is a
more attractive place to live.

------
ideonexus
This problem can be projected out to Federal Spending as well. We can see this
in the taxes paid versus tax revenue spent on urban states compared to rural
[1]. Alaska gets $1.84 back in federal spending for every dollar they pay in
taxes compared to the $0.79 New York gets back on its federal taxes.

[1] [http://taxfoundation.org/article/federal-spending-
received-d...](http://taxfoundation.org/article/federal-spending-received-
dollar-taxes-paid-state-2005)

One quibble I have with the article though is that suburban communities did
not start out as luxuries or inventions of convenience. Suburban growth was
actually promoted by the federal government with tax incentives in response to
the threat of nuclear war. The idea was to spread populations out away from
the cities, where a single bomb could kill millions. Shawn Otto's book _The
War on Science_ covers this development in great detail, which I've clipped
here:

[http://mxplx.com/meme/2504/](http://mxplx.com/meme/2504/)

------
h4nkoslo
Summary: infrastructure costs to maintain spread out exurb style development
end up being more than the incremental tax revenue, especially when you
consider replacement costs and the potential for future higher borrowing
costs.

Property developers (along with car dealerships) are by far the strongest
advocacy groups in many areas. It's not totally surprising that they've
managed to capture the local government and push them towards
counterproductive development that ends up being a massive subsidy from the
taxpayers.

~~~
davidw
Developers will build whatever they're allowed to. They'll do dense if that's
where the money is, or single family homes if that's all that zoning allows.

There's probably some bias to what they know, and all we've allowed (zoning)
is single family homes, strip malls and that kind of thing, so there is that,
but if more were allowed, it'd probably end up being built, sooner or later.

------
davidw
As elsewhere: I'm a member of Strong Towns, and think they're doing good
things. Another one I like is the 'Market Urbanism' group - although some of
the people there are very, very libertarian, there's still a mix of us so that
it's not really a partisan thing. Then there are the various YIMBY groups, led
by the one in the SF bay area.

This is one area where I think that people can move the needle some. The
issues are not partisan in the way that so many others are, and I think
there's a growing movement interested in doing things differently, that's more
financially and environmentally sustainable.

------
nradov
This article seems to focus overmuch on infrastructure maintenance costs.
While those are certainly an important factor, most of the actual municipal
bankruptcies in recent years were caused primarily by expensive union
contracts and pension obligations. Declining populations and financial
malfeasance were also factors in some cases.

Perhaps an explosion in infrastructure maintenance costs will cause a new wave
of municipal bankruptcies within the next few years but so far it's just not
happening.

~~~
AstralStorm
Both are intertwined. When there is not enough money, pension funds tend to
take a hit. Population will move to greener pastures.

The bankruptcies are not happening, because a lot of the infrastructure can
withstand 50 or a bunch more years. It has been built in say 50s - 70s so
never had to be completely overhauled.

In EU, the problems with replacing infrastructure built in 1940s have already
hit a few times, but it was better planned after the war.

------
crashedsnow
32 Billion for 125K people.. feels like a lot. ~250K for each and every
person? I wonder what that calculation looks like.

~~~
pyre
That calculation is for fully replacing all existing infrastructure on the
basis that over the course of a single generation most infrastructure will
need to be replaced at least once due to maintenance/upkeep. So basically it
will cost something like $32b _per generation_ just for the upkeep of the
existing infrastructure.

~~~
flukus
That's still 10K per person per year (assuming a 25 years generation), which
seems on the high side. I wonder how much of that is roads alone?

~~~
Salgat
Doesn't business taxes come into play?

~~~
randomdata
Doesn't business tax still get paid by people?

~~~
theandrewbailey
Yes, but business tax gets paid with business money, which is (often) not
attributed to a single person.

~~~
randomdata
Does that really make any difference? The original calculation was just an
average amount per person. It already accounts for the fact that multiple
people are paying into the public coffers.

A exception to that is if the location has a meaningful number of businesses
held by non-residents. But even then, the businesses are not operating as a
charity, and the tax they pay locally is going to come from the local
customers.

If you dig deep enough in specific cases, I'm sure you can find exceptions to
all of this, where neither the owners or the customers are within the local
population. But, the original claim was just an estimated average anyway,
including people like children who are unlikely to be paying tax at all in the
window of their childhood.

~~~
flukus
> and the tax they pay locally is going to come from the local customers.

That's going to depend on the business. I doubt a significant fraction of
googles revenues come from the city it's located in for instance.

------
acveilleux
There's a followup article pointing out that the track of green on their
revenue graph is actyually the poor part of town and going over some reason
why that may be:

[http://www.strongtowns.org/journal/2017/1/10/poor-
neighborho...](http://www.strongtowns.org/journal/2017/1/10/poor-
neighborhoods-make-the-best-investment)

------
En_gr_Student
This suggests that China has an amazing infrastructure time-bomb waiting
perhaps a generation to mow it from the pinnacle of the world to the ground.
As a nation that is "in it for the long game" I am going to watch and see what
they do there.

-EngrStudent

------
amai
Before saying no to higher taxes think about the value of your own property.
If the infrastructure (streets, water, electricity, internet, schools, ...)
becomes broken in the area around your house and garden, the value of your
property will go down, too. In that sense paying higher taxes for
infrastructure is also good for preserving the value of your property.

~~~
j_m_b
Illinois pays some of the highest taxes in the country. The property taxes are
extremely high with some counties having the highest rates in the entire
country (second only to some New Jersey counties). Yet property values have
been the worse to recover since the great recession.

------
mirekrusin
Wait, what? He's saying that horizontal expansion is bad? Is he really
advocating vertical expansion (concentrated tall buildings)?

Just compare London (horizontal) to any vertical city. London feels like so
much better place to live. Low traffic (in comparison to vertical cities),
parks everywhere etc. - you feel like you can breathe, not cramped in concrete
walls.

~~~
epistasis
London is on the extreme side of "vertical" compared to the "bad" parts under
discussion here. London is at least 5x more "vertical" (meaning dense) than
the hugely expensive horizontal under discussion in the post.

------
Spooky23
This is a problem, but not the problem.

Like schools, local public safety and other core government functions in
incorporated cities are provided by municipal government.

Broken streets and infrastructure are expensive, but engineers always
overstate the costs of maintenance and replacement when they are waving the
tin cup around. The acute problem is that opex is driven by police and fire
salaries, pensions and workers compensation. Take those numbers and divide by
3 or 4 to get a realistic number, especially for things like water pipes that
have very long service lives.

The more fundamental problem is that post-war America focused investment and
tax bad growth on towns and other places outside of cities, and left the costs
in the cities. If the average suburban/exurban community requires 1
police/fire visit per 100 household, and urban environment requires 15-20 per
100 households.

------
the_gastropod
This sums up the main reason I'm not all that excited about electric/self-
driving cars. The only scenario I see remedying our sprawling city is for
gasoline prices to increase, making current levels of car travel financially
painful. If we can continue driving cars cost effectively (with electric
cars), I don't know if there will be enough political motivation to address
our need to stop expanding cities.

------
a3n
The followup article linked on the same page is telling. It shows that the
green areas, where positive revenue comes from, is the _poor_ part of town.

[http://www.strongtowns.org/journal/2017/1/10/poor-
neighborho...](http://www.strongtowns.org/journal/2017/1/10/poor-
neighborhoods-make-the-best-investment)

------
crawfordcomeaux
Lafayette is my hometown. The article says this isn't a cultural issue, but
when a majority of cities shares the problem, that speaks to a national
culture of scarcity. The desire for growth stemming from feeling there isn't
enough to do, land to build on, people living there, etc. was definitely
prominent in Lafayette. It's that shared mindset driving this phenomenon.

------
ShabbyDoo
I've always been opposed to folks who grumble about suburbs and urban sprawl.
I thought that new developments and neighbourhoods meant a growing population
and a bigger tax base. I've always lived in the suburbs and love it. I still
think there's lots of great things about living in the suburbs, and there will
always be demand for it.

I like how the author says that sprawl isn't the problem, the problem is that
new developments are large scale, single-purpose, and with no room for
improvement or addition.

The graph/map showing how downtown and poorer areas bring in more tax is what
did it though. Even just thinking about ploughing in the winter makes it
pretty clear that winding suburbian roadscapes are costing the city a lot more
than we pay them. That's without mentioning schools, fire halls, garbage
collection, etc.

I guess one of the more difficult issues is convincing North Americans that
they don't need a private single-family house, large yard, 2+ cars, etc.

------
ffjffsfr
OK so the reason why US cities have no money is that they have grown
horizontally instead of growing vertically and horizontal growth means high
infrastructure cost. That's all very well, but I still dont understand why it
happened. Does anyone know why US cities expanded horizontally instead of
following growth patterns similar to Europe?

~~~
lhopki01
They expanded after car ownership became widespread. The older the city the
more compact it is generally.

------
gozur88
I'm not sure they're drawing the right conclusions from that winning/losing
graph. That area downtown is green because that's where all the toniest
businesses are located, and you can't have a city that consists of only
upscale businesses.

~~~
elgenie
There are significant economies of scale for infrastructure that happen with
density.

The amount of road surface a tall, mixed-use building requires per occupant is
dramatically less than what a detached single family home does, but the latter
road needs more maintenance than what the taxes on that single-family home
provide for.

~~~
gozur88
Density brings costs of its own, though. There's a reason everything is more
expensive in dense areas.

~~~
CalRobert
"There's a reason everything is more expensive in dense areas."

Often, that reason is "there's a strong market preference for density, but
supply is artificially restricted by parking minimums and zoning regulations
put in place by property owners who wish to maximize the value of their asset"

~~~
gozur88
If that were actually true there would be housing shortages in cities that
aren't trendy, and that's not the case. There's not a lot of "preference for
density" in places like Kansas City and Cleveland.

------
ilaksh
Extreme density is overrated. See
[http://tinyvillages.org](http://tinyvillages.org)

~~~
AstralStorm
How do you move around in these neighborhoods? Take a daily stroll on foot for
a few hours? It does not work when you want to do anything big, say a few
thousand people in approximately the same place. Those people have to get to
this place, which would require efficient mass transit. The large area makes
both road and fuel costs go up.

~~~
tropo
Outside of huge cities, it isn't normal to put a few thousand people in
approximately the same place. It just doesn't happen.

A moderate-sized city of 50000 people might put 1500 people at the main high
school on graduation day. Aside from high school events like that, and the
normal daily high school operation (also 1500 people), it's super-rare to get
a real crowd. If you also exclude middle schools and elementary schools, crowd
sizes probably top out around 100. That would be the crowd at a significant
employer. In case you were thinking of night life and entertainment, that
might get up to a few dozen people.

It's peaceful. It's very peaceful.

------
tn13
Other there is another reason : Wasteful expenditure.

At least in case of San Bernandino that was the case.

------
turc1656
Good piece, but there is another major factor that is missing entirely - the
impact of debt financing and continuously rolling bonds. In addition to what
the article mentions, this is the other factor contributing to the slow death
of our cities. What nearly every municipality in the US has done (all
municipalities BTW, not just the "cities") is to take on a debt load to
finance their desired expenditure, whether it be for infrastructure or
otherwise - very similar to what our Federal government has done. And at first
glance, it makes sense. It's a huge expenditure so let's finance it and pay it
off over time in accordance with tax revenues. The problem is that they almost
never pay it off. I know that statement sounds crazy at first, but it's not.
Sure, they pay off bonds as they come due. But they pay them off and roll them
into new bonds - that's the problem. This has been fueled by steadily
decreasing bond rates over the past 30-33 years. This allows the
municipalities to roll over their debt at a lower rate when it comes due,
which reduces their interest payment and also allows them to borrow more at
the same time.

Here's an example - It's 1/1/1985 and the rate on the 10 year treasury note is
11.65% (yes, that was the real rate), so our city was able to get a rate of,
say, 12%. They issue a 10 year bond for $5 million to build a school and some
road maintenance. They make the required coupon payments (usually semi-
annually) using tax revenues - and that amounts to $600,000 each year. They
keep doing that until just before the principal comes due in full on
1/1/1995\. The idiots running the city haven't saved the 5 million required to
pay off the principal so what do they do? Well they take a look at the market
and see that the 10 year treasury note is now 7.19% so they can get around
7.5%. So they issue a new bond for $5 million for another 10 years and now
only have to pay $375,000 in interest coupons every year. But they are still
collecting 600k at the given tax rates which leaves them 225k in the green. So
they can either spend that every year or they can use that as the coupon
payment on an addition $3 million bond and they get it right now! Even if some
scrupulous treasurer or township board member were to say that they should
just spend the 225k and not take on any additional debt, someone will point
out to them that over 10 years that's $2.25 million and here they get to
instead use that money to spend a total of $3 million - these guys feel like
they are making money taking on debt. And as long as interest rates keep going
down and they don't need to repay principal, it all works so they agree. Now
1/1/2005 rolls around - they owe $8 million but rates are 4.5% so they can get
4.75%. So they rollover the $8 million for a yearly coupon of 380k. They also
use the remaining 220k to open up a new bond for ~$4.6 million (4,631,578.95
to be precise) - and now they can still pay the same 600k in interest that
they have been for decades but they have an outstanding debt issuance of $12.6
million.

Now, if you are still reading this far and fully grasp the horror of the
above, you can begin to understand one of the many reasons rates can't go too
far up anytime soon. We have been Japan'ed, and this is just part of the
reason of how it happened. Also, I want to point out that in the above example
no increase in the tax rate is needed to help pay for this, even without
population growth at all. Tack on population growth, productivity and
technological progress, as well as the increase of the money supply by the
federal reserve over that time period and in real terms it becomes even less.
Now think about how much your taxes have increased on a percentage basis over
the same period on the state and municipal levels and it should become clear
just how horribly mismanaged everything has been for quite some time. Rates
can't really go much further south so even if they hold constant and never
increase...all of our broke ass cities and towns will only be able to
refinance at the same rate (best case scenario). This means they can't
increase expenditure at all for anything unless they make taxes sky high to
support the spending. The free money game is over.

------
stmfreak
This article embodies a lot of magic thinking and completely avoids asking the
questions about _why_ things cost so much vs. when the infrastructure was
first built.

Here is a clue: defined benefit pensions

------
jaddood
So what's the main reason?

------
miltonfriedman
too many overpaid city employees?

------
miltonfriedman
too many city employees?

------
ebbv
What a crock. This is an extremely biased presentation meant to prime the
reader for the awful right wing plan he's going to unveil in his next blog
post. No doubt privatizing the infrastructure to "relieve" the taxpayer of the
burden. Never mind that somehow it is still going to have to be paid for and
if it's privatized we will have to pay more so the new owner can make a
profit.

The reality is cities are insolvent because of decades of tax breaks for
businesses and the stagnant wages of the middle class.

~~~
milesskorpen
I don't read Strong Towns much, but I don't think you've read much of the
stuff they put out. The blog definitely isn't in favor of mass privatization —
that wouldn't help much, since the infrastructure is still crazy expensive and
not worth paying for.

The model of development that gets us out of this mess probably is one of much
greater density + changes in accounting practices.

~~~
avn2109
The model that gets us out of this predicament is trivially simple and
literally fits on one line:

Really Narrow Streets

Unfortunately most North American local government has a savagely visceral
hatred of that idea.

Full disclosure I stole this idea from [0].

[0]
[http://www.newworldeconomics.com/archives/2006/032606.htm](http://www.newworldeconomics.com/archives/2006/032606.htm)

~~~
krakensden
I feel like urbanists should talk about Mexico more. They have really narrow
streets, as-of-right construction, and they are much closer than Vienna or
Hong Kong.

~~~
ceras
As someone with a city planning hobbyist interest, I've visited Mexico City
and greatly disliked it. It's a miserable city to get around in, though I can
see its potential if it ever decides to move away from heavy car
infrastructure (some core neighborhoods are pretty nice so long as you don't
want to leave them). Were you thinking of somewhere else in Mexico, or
specific parts of Mexico City?

~~~
krakensden
I was further north- Guanajuato, San Luis Potosi, Zacatecas.

------
known
Solution
[http://marshallbrain.com/manna1.htm](http://marshallbrain.com/manna1.htm)

------
zkhalique
It's the same reason Greece was going bankrupt ... they couldn't print their
own currency and run their own fiscal policy after they joined the Eurozone.

------
spectrum1234
"This isn't a political, cultural or social failing." \- Wrong this is 100% a
political failing. This doesn't happen in the private sector.

~~~
wahern
The author chooses to describe the phenomenon like,

    
    
      Psychologists call this temporal discounting. Humans are
      predisposed to highly value pleasure today and to deeply
      discount future pain, especially the more distant it is.
    

I'm not sure that's the best way to describe it. And there are other ways to
describe the basic phenomenon. But in any event the private sector is not at
all immune. But because the tasks we delegate to private companies are
different from those we delegate to public institutions, manifestations of the
phenomenon tend to cluster into seemingly distinct categories.

In the private sphere a similar phenomenon (if not conceptually identical at
some level of abstraction) more often encountered is pollution. Or in Silicon
Valley think of "technical debt". Both of these are costs that private actors
accrue and that, because they do not need to internalize them immediately, are
discounted inaccurately because of the temporal bias of the agents. In both
cases, when the private actor eventually goes belly-up, other actors (public
and private) are often left holding the bag to clean up the mess. And thus the
original private actor has effectively imposed a hidden cost on others,
intentionally or unintentionally, producing globally suboptimal results.

It's easy to see how an enormous network of pavement and pipes could be
created and then left to rot and blight the environment by both private and
public entities. Detroit is a prime example of both.

It's worth pointing out that like phenomena described by prospect theory, this
temporal bias likely evolved as a heuristic device. Nothing in the future is
certain--not even in probabilistic terms--and so it's not possible to foresee
and accurately price all future costs today. There's no obvious alternative to
the bias as a general matter, only in specific circumstances.

At the end of the day, to aliens arriving on planet earth and watching the
machinations of our civilization, distinctions between private and public
would really be quite artificial and perhaps not even the most informative
axis on which to bifurcate our economy. Both private and public actors are
subject to market forces, just like both boats and airplanes are subject to
gravity. The normative mechanisms we choose in our attempts to optimize how
actors respond to preferences and to internalize costs are different, but
rarely singular--it's always some mix of policy and currency, among other
things. The so-called "free market" approach is hardly, if ever, the best
answer alone.

------
sliken
Why are high rises so much more profitable to the city? Is it just that a
larger part of the infrastructure (stairwells, elevators, power distribution,
water supply, sewage, and related) are privatized and managed by someone with
an eye on the bottom line?

Cities seem extremely poor paying for infrastructure based on performance.
Water supplies should be paid for uptime, percent of the population they
deliver water to, and quality of the water. Road companies should be paid by
lanes * miles * years they last (according to some quality metric for common
road failure methods). Bridges similar. If someone builds a building for the
city they should be paid by the usable square foot and an incentive for
delivery time.

------
jcoffland
The median house in Lafayette costs roughly > $150,000. A family living in
this house would currently pay about $1,500 per year in taxes to the local
government of which 10%, approximately $150, goes to maintenance of
infrastructure (more is paid to the schools and regional government).

I'm sorry but this kind of calculation is, I believe, the real reason
infrastructure in America is suffering. If only 10% of my property tax is
going to infrastructure then I don't need to pay 6 times as much, I just need
my local government to cut the crap and spend 60% of my property tax on
infrastructure. I understand that means less government jobs but we are
already kidding ourselves if we think it's a good idea to grow government to
reduce unemployment.

~~~
Daishiman
Someone still has to pay for education, law enforcement, and firefighter.

There's not way around it; people are paying much less for infrastructure than
they should be. Sorry to you but that's the price of civilization.

~~~
goda90
Does law enforcement really need that military equipment though? And the
training for that stuff can't be cheap.

~~~
slfnflctd
I live in a city I would consider fairly low-crime. The police hand out a lot
of traffic tickets. My fellow citizens recently voted in a measure to hugely
increase the police budget (in part for some of that shiny military equipment)
while denying one to expand our small library. This seems like a pretty big
waste of money to me, since the police don't add much to quality of life past
a certain point while a library definitely does. Too many voters seem to act
against their own interests too often these days.

