The Growth Ponzi Scheme

[Morris816]

The title of the thread is the same as the title of this Strong Towns post:

http://www.strongtowns.org/the-growth-ponzi-scheme/

It pretty much explains how the suburban model has been developed and why the suburbs are stuck in a vicious cycle of racking up debt to pay for infrastructure, then having to promote more growth to pay for that debt, which leads to the need for more infrastructure, which leads to more debt taken on to pay for it.

Thought it might be worth some discussion here. I may pull others over from time to time.

 

[Football_Bat]

Pretty dry stuff, but absolutely important and relevant. This is happening all over suburban Dallas. Particularly with schools, where nine-digit bond issues are common to keep up with growth. If the boom goes bust, a lot of school districts will be left hanging. Not to mention the cities.

 

[Pancamo]

Pretty dry stuff, but absolutely important and relevant. This is happening all over suburban Dallas. Particularly with schools, where nine-digit bond issues are common to keep up with growth. If the boom goes bust, a lot of school districts will be left hanging. Not to mention the cities.

Kind of like Detroit? If boom goes bust, most places are left hanging.

 

[Evil ... Thy name is Orville Redenbacher!!]

I think they have the problem Id'd, but I disagree with the cause.

Boom always goes bust.
Things grow until they don't. They either stay the same or regress. The Roman Empire grew and grew and grew ....

Detroit's problems, for example, were not the fault of city of Detroit.

 

[User 11148]

People ... if they'd just quit trying to live their lives the way they want to, all these problems could be avoided.

 

[Morris816]

As far as alternatives to the suburban model go, the Strong Towns website founder has these suggestions:

http://www.strongtowns.org/placemaking-principles/

Example:

A Strong Town is designed with a physical layout that enhances the public realm and thus adds value to each property that fronts it. New growth and development must improve the public realm.

Always remember it's better to find ways to raise property values, because that raises your tax base, and thus raises more revenue, without having to raise the rates.

 

[YankeeFan]

Detroit's problems, for example, were not the fault of city of Detroit.

Really? They couldn't have done things any differently, which would have resulted in different results?

 

[Evil ... Thy name is Orville Redenbacher!!]

Detroit's problems, for example, were not the fault of city of Detroit.

Really? They couldn't have done things any differently, which would have resulted in different results?

What could they have done?
The American car industry there died . As a result the ancillary and supporting businesses were choked off. ... The jobs left, which means the tax base left. You can't run a water system or garbage service or municipal services with such a significant revenue loss, i.e. population decline.

Are there things the city could have done differently? Yes, but its akin to stacking deck chairs on the Titantic as opposed to folding them. The end result was the same: a catastrophic loss of jobs and tax base. Once the tax base is gone, it's game over.
The jobs aren't coming back. And neither is the city.

Underfunded pensions, bad deals with Wall Street and political corruption did NOT lead the toppling of Detroit.

The decline in population ruined the city. That was THE cause. Everything else was a contributing factor, but the end result would have remained the same.

 

[Pancamo]

"The decline in population ruined the city. That was THE cause. Everything else was a contributing factor, but the end result would have remained the same."

So when the boom ended, the bust began. Same for any other city, shopping center, office park or anything else built for a specific industry or economy.

 

[YankeeFan]

What could they have done?
The American car industry there died .

Any town/city that depends on one company or industry knows they are vulnerable.

The same thing is true for any company that relies on one product or one customer.

Detroit knew this all along. What steps did they take to diversify their industrial or corporate base?

And, the car industry is of course far from dead in America. What was it about Detroit, despite an experienced workforce, and infrastructure, that prevented it from competing with other cities/states for new manufacturing plants?

 

[3_Octave_Fart]

Decades of inept liberal leadership is what killed Detroit and other cities in the rust belt.

 

[Morris816]

Since Detroit was brought up, I'll share this with you:

http://www.strongtowns.org/journal/2013/7/15/detroit-an-american-autopsy.html

Now, before people get tuned up over what the writer says, I don't believe Mahorn is arguing that Detroit solely focusing on the auto industry wasn't a factor, but there was more to it than that... , that the way Detroit grew was the same way other cities and towns grew, on a model that couldn't be sustained.

If anything, Detroit focusing on one industry accelerated its path.

And here's a surprise for you... Detroit's bankruptcy might be a good thing.

http://www.theamericanconservative.com/urbs/as-detroit-prepares-for-clear-cutting-signs-of-hope/

Because of its bankruptcy, Detroit simply doesn’t have the bureaucratic capacity to enforce its own accumulated tangle of once well-intentioned zoning codes, land-use regulations, and other assortments of red tape. And because the city has been so depressed, for so long, the institutional and financial barriers to entry are remarkably low. As Marohn mentions, “there aren’t the large corporations that are competing and kind of raising up the initial cost of entry. So downtown–like the very core of Detroit–has some really fascinating things going on right now in terms of business startup and economics.” Duany agrees: “Detroit is now the city where the risk-oblivious millennials can get things done.”

 

[Evil ... Thy name is Orville Redenbacher!!]

What could they have done?
The American car industry there died .

Any town/city that depends on one company or industry knows they are vulnerable.

The same thing is true for any company that relies on one product or one customer.

Detroit knew this all along. What steps did they take to diversify their industrial or corporate base?

And, the car industry is of course far from dead in America. What was it about Detroit, despite an experienced workforce, and infrastructure, that prevented it from competing with other cities/states for new manufacturing plants?

You right about the towns and city that depend on one industry. Anyone who thinks most town fathers are comfortable with a one-horse town powering its economy must have grown up in Shelbyville. Officials are usually working to attract other entities, but its not easy.

I didn't say the American Industry is dead. Only in Detroit. Sorry. Thank the UAW. It's not completely the UAW's fault, once the tail started wagging the dog it was only a matter of time before the industry there collapsed.
Toyota is doing really well in Tennessee and West Virginia (Non-Union plants BTW).

No doubt they tried to diversify the economy. I'm sorry, I don't believe for a second they didn't. But governments and development authorities can only do so much. (I covered city government for several years and now work for a development authority). You can't just go out and bring in a Wal-Mart, a light manufacturing plant and a chemical company. They have to want to come. There is a need, the resources and the other factors they need to be there. Could a chemical come in set up shop and go to work? I dunno. Maybe. But they would have to pay comparable wages to maintain staff.
Given that the automakers were housed in the area, it would make sense companion companies would build and locate there. The people who think Munis and can wave a magic tax-break wand and - poof! - a whole new industry springs up are mistaken.
Why didn't more things pop up? Perhaps they ran out of developable space.
The experienced workforce came at literally a high price. The infrastructure? Like what? The 3 Rs (River, Roads and Rails) you can find a lot of places. Places that don't already have established plants and a low workforce.
By workforce, companies will look for areas with an available and cheap workforce. Detroit likely did not have a lot of that. That's not the necessarily the government's fault.

 

[Baron Scicluna]

To add to the discussion, weather is also a factor. Why build in an area in which the weather is poor when you can build in an area that doesn't get buried under a few feet of snow each year?

 

[User 11148]

Jeezus ... you folks act like creationists when it comes to cities. Here's a fact: Cities aren't made, they happen. Detroit, New York, Dallas, San Francisco ... no government, no experts, no committee designed 'em. They emerged as the result of countless millions of individuals living their lives the way they want. And their passing, if it comes to that, will be the result of ... countless millions of individuals living their lives the way they want. The ONLY way to "preserve" a city is to interfere with those countless millions, to stop them from living their lives the way they want.

 

[YankeeFan]

Jeezus ... you folks act like creationists when it comes to cities. Here's a fact: Cities aren't made, they happen. Detroit, New York, Dallas, San Francisco ... no government, no experts, no committee designed 'em. They emerged as the result of countless millions of individuals living their lives the way they want. And their passing, if it comes to that, will be the result of ... countless millions of individuals living their lives the way they want. The ONLY way to "preserve" a city is to interfere with those countless millions, to stop them from living their lives the way they want.

Of course.

The success of a city like Seattle has a lot more to do with folks like William Boeing and Bill Gates than it does to do with government policy.

And that's just luck.

But, a city like San Francisco has benefited from its proximity to Stanford, while Detroit really hasn't benefited from it's proximity to University of Michigan.

Attracting and keeping young talent does seem like something a city could work on.

 

[Songbird]

Not for nothing (or maybe it's just nothing) but 3-4 customers from Detroit have been in the gallery lately. I ask them about Detroit's death and whether it will ever emerge and all of them gave a resounding Yes! Apparently a ton of investment money has begun to flow in. I don't know if this is true or if stories have been written yet but the fact all of these guys said the same thing led me to believe there's a movement afoot to rebuild and reshape.

 

[Starman]

Decades of inept liberal leadership is what killed Detroit and other cities in the rust belt.

Combined with decades of cross-burning rightwingers in the state legislature hell-bent to make sure Detroit slides under the waves.

 

[Morris816]

Jeezus ... you folks act like creationists when it comes to cities. Here's a fact: Cities aren't made, they happen. Detroit, New York, Dallas, San Francisco ... no government, no experts, no committee designed 'em. They emerged as the result of countless millions of individuals living their lives the way they want. And their passing, if it comes to that, will be the result of ... countless millions of individuals living their lives the way they want. The ONLY way to "preserve" a city is to interfere with those countless millions, to stop them from living their lives the way they want.

Correct... but would it not make sense that city planning should allow for multiple options for where they could live, where they could shop, and how they can access those places?

When a city zones an area for low-density residential housing, that's the only option available to a person in that area unless the person applies for a variance. They can't just open a neighborhood coffee shop without city approval, which requires multiple forms and multiple hearings.

On top of that, the streets are mainly designed to move traffic quickly, with little thought given to pedestrians. What if somebody wants to walk to work or the store? Regardless of where they live, if the street is designed to move traffic quickly, they are basically told they have to take their chances in negotiating the street and parking lots.

Removing or relaxing zoning laws doesn't mean a Wal-Mart is going to plop itself down in the middle of a residential neighborhood. But if it allows a neighborhood coffee shop that is primarily aiming to get business from the neighbors, that can only be a good thing, because now more people can just walk a short distance to buy a cup of coffee, instead of feeling they have no choice but to drive a longer distance.

And if you make sure all streets have sidewalks, and the streets are designed so they encourage people to reduce their speeds, and businesses are allowed to develop without having to comply with parking and setback requirements, people are more likely to view walking as a viable option.

If you allow more options, there will be those people who will take a chance on them. Not everyone will succeed, but some will. And allowing more options does not mean we want to get rid of everyone's favorite option... it means we want people to believe the additional options are truly worth considering.

 

[Morris816]

Today's food for thought comes from James Kunstler, who has a long writeup about why property tax works better when it taxes the land, not the building.

http://www.earthrights.net/docs/kunstler.html

One of the more likely results of such a system would be buildings of much higher quality and generosity, for example, apartments with higher ceilings, larger rooms, and attractive entrances. As anyone knows who ever lived in New York City, the luxuriousness of middle-class apartments dating from the early decades of the twentieth century seems incredible. In contrast, many East Side co-ops built in recent decades have apartments with small rooms and dinky eight-foot ceilings. The latter buildings were designed primarily for tax depreciation and secondarily for the comfort of their inhabitants.

The effect of our current system of taxing buildings is one of the prime causes of our affordable housing crisis. Because it rewards decay and punishes new, high-quality construction close to the center, almost no middle-class housing has been built since early in the twentieth century. Also, under the current system, high taxes on buildings tend to be shifted to renters. This is precisely what caused the perverse conditions at the end of World War Two in which the rent for Ralph Kramden's apartment was higher than the monthly mortgage payment of a house in Levittown, leading ultimately to the complete abandonment of the city by the middle class.

Under the alternative system of taxing land, not buildings, much more middle-class-market housing could be profitably built in cities, increasing the supply and lowering rental prices, as landlords compete for tenants. Since the site-value tax would have to be paid whether the land was used productively or not, there would be much more incentive for owners to build rentable housing at the highest densities allowable under the city codes. With a healthy supply of apartments, the market would bid down rents while increasing the standards of quality in rental housing stock as landlords compete to fill their buildings. Almost all economists agree that a tax on land alone stays with the land and cannot be passed along to renters.