Monday, November 13, 2017

The Invisible Bankruptcy of Cities

If you're looking for a short read that will rattle your basic assumptions about how things work in cities on an operational level, check out this from Chuck Marohn over at Strong Towns: the Real Reason Your City Has No Money.

It's about Lafayette, Louisiana, a city of 125,000 people, but the principles apply much more broadly across the U.S. In short, the replacement cost of city-owned infrastructure is twice as large as the private wealth of the entire tax base. And that infrastructure needs to be replaced once a generation or so.

In Lafayette, paying for what the city needs would mean increasing property taxes on a median-value house from $1,500 a year to $9,200 a year, which is never going to happen, of course.

All of the programs and incentives put in place by the federal and state governments to induce higher levels of growth by building more infrastructure has made the city of Lafayette functionally insolvent.... If they operated on accrual accounting — where you account for your long term liabilities — instead of a cash basis, where you don't — they would have been bankrupt decades ago. This is a pattern we see in every city we've examined. It is a byproduct of the American pattern of development we adopted everywhere after World War II.
Psychologically, this predicament happens because of a human phenomenon called "temporal discounting." We value a short-term pleasure and deeply undervalue a future pain. Sounds like... climate change, right?

Our brains are wired to do this. "Modernity removed most physical restraints, government removed the financial, and we did the rest."

What we need are constraints that nudge us in the right direction instead of the wrong one. I look forward to Chuck's next couple of installments.

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