Why American cities can’t keep up with infrastructure maintenance (2017)

The same thing is happening right now with EU grant money given for "development" to some of its Eastern European members. Lots of mayors and local officials use that money for grand local infrastructure projects for which they won't have any reasonable money to maintain even in the near future (let alone 30 to 50 years from now), because we have a numerically declining tax-base that is getting older and older (I live in one of those Eastern European countries).

But mentioning that issue gets you labeled as a person "against progress" or an anti-European (or worse, a Russian shill who doesn't trust the European project). We have a saying in Romanian that roughly translates as: "you should stretch out only as much as your blanket allows you to", i.e. one should only consume the resources he/she thinks are reasonably available to him/her, but right at this moment we are "stretching out" further than the bed itself and getting out of the bedroom altogether.

And the world does prove it false. If you look at municipal budgets infrastructure is usually around 10%. There isn't one out there that spends a majority of their budget on infrastructure. The expensive things are cops and schools and fire and other labor intensive services.

The municipalities that have gone bankrupt the issue has almost always been an inability to pay pensions. With the other ones caused by financial fraud and/or mismanagement.

For the life of me I can't understand why people keep posting this Strongtowns nonsense. Their core hypothesis is easily probable wrong and they post the silliest numbers. Like this one pegs Lafayette's infrastructure replacement at 32 billion. Yet Lafayette's entire budget is only 0.6 billion. Since they haven't spent the entire budget for last 50+ years on infrastructure that 32 billion is obviously nonsense.

Believe me or not, this to an even bigger extend plagues China.

I think more than half of major cities in China are fully consciously running a Ponzi scheme with their own land leases, as they have really no other revenue source to sustain them long term, and this is why they are ready to go to any extremes to do this.

Effectively, private loans are financing municipalities through overpriced land leases. Everybody who ever dealt with real estate in China will tell that land auctions are rigged using every trick imaginable.

This feels like looking at a company by division and deciding that R&D and HR a make huge losses and all the profits are in sales.

That doesn't follow from your quote. The quote says that the problem is that those subsidies were used for horizontal development (i.e. sprawl), which rapidly expanded the infrastructure. You are correct that future maintenance wasn't budgeted, but if the city had expanded vertically (i.e. denser urban cores), the infrastructure costs wouldn't have risen quite so dramatically.

While this seems like a ponzi scheme of perpetual growth, there is nothing that would prevent the federal government ( or the local government ) from repeating this exercise to rebuild the infrastructure. If we can't redo this exercise it means that

- Despite economic growth, the cost of replacing existing infrastructure is higher than it was a generation ago e.g. Cost disease: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

- The balance of payments in the economy is not well calibrated on a generational scale, profitable economic activity is not attributed on a local scale with free cash flows diverted elsewhere by rentiers/global financial flows e.g. a factory in annaheim california sees all profits recognized in Delaware/Ireland. The federal government/central bank may have more capability to provide local governments with finances than we would expect in such a scenario by rebalancing payments.

- The current US city landscape has real long-term economic costs that drain capital on unprofitable activities, immediate pivots in city planning are required to avoid economic fallout.

I suspect a little bit of all three options are at play, but I would be curious for more exploration on items 1&2. A great irony of the modern world is that the City of Flynn borders several pipe manufacturers.

I like that you used the phrase "accounted for". It implies in my mind that the politicians doling out the cash did not monitor how that cash was used.

In management-speak, it's the classic phrase "delegation without follow-up to abdictation"

I initially thought about it in terms of accountability "the lower levels should have wrote down their expenses, their decisions, and sent it upward for review" but then I thought "why would most people do that if the people at top aren't mandating the record-keeping, let alone looking at it?" The higher levels didn't attach real strings to the funds and only kept abreast of developments by looking at the end results. Which were positive and attractive, but camouflaged very real deficiencies in the system that produced it.

It's plain irresponsibility.

This is pretty clearly false; the main cause of infrastructure maintenance neglect is that politicians, like many leaders in other fields, get more career boost from new projects than making sure existing things are maintained. That's true from top to bottom.

There's policy contributions (e.g., California Prop. 13 makes local jurisdictions dependent on development fees and other growth-related revenue because property taxes are limited to a low nominal level and decline in real terms as property is held because of the limitations on assessed value increases to significantly below the historical average rate of inflation), but new-project subsidies aren't a root cause but a symptom of the cause which would exist even without the subsidies.

Here's another one. In Seattle, the city has seen enormous growth in tax revenue, far outpacing population growth. But the money just seems to disappear. Where it's going are public employee pensions, which were enacted long ago by politicians to garner the support of the unions. But the math on these is unsustainable and a looming crisis, but the politicians couldn't care less as the bill was far into the future and the election was just around the corner.

Municipal bonds are almost like student loans in the US.

Wake up to the developer perspective.

There was a Subway station called Runnymede that took about 5-7 years and when completely you couldn't tell they did anything. I am sure it cost 10's of millions of dollars and could have been completely started and finished by a private contractor in a couple months.

The city has never been manage properly because there are no consequences to the ineptness of the Politicians and bureaucracy that run it. You could complain (a lawyer friend did) and they basically either ignore or make up some story how difficult it is to lay 200 sq/ft of tile and clean an escalator...These things take years of hard work and planning....

Surprised the city doesn't come crashing down under it's own weight of dysfunction but they seem to prop it up by the endless tax or fee increases.

The answer is always the same for local governments. ~70% of expenditure is for operations, and 60% of that is for cops and fire.

The winner completed it far faster than similar projects, and under projected budget, taking it all in from the bonus. Every day he was slow, he lost money. So the incentives were great, and the winning contractor did a great job. So we have the construction technology and we have the policy technology.

But similar projects frequently take forever. Why is that? We know how to make them fast, cheap, and good, clearly. We know how to set up the incentives on a per-task basis so we will do that as well. So I suspect it is because they actually aren't crucial. So you sell the buyer (the populace) on the price tag based on the supposed importance, but you actually do the work on the real importance. The gap between the two allows for profit for politically connected contractors like Tutor Perini and also for make-work for powerful groups like construction unions. What we don't know is how to set up the incentives such that good per-task incentives will be put in place.

In fact, I'd say that the true importance of any slow project is likely very low. In California, the following projects should not have started:

* CA HSR

* SF Central Line

During their lifetimes they will not yield positive economic utility.

Sum($Z) >> Sum($Y) with $X paid for my subsidies.

We need construction robots.

But how they get the money and from who is a factor too.

This always happens when real property is taxed rather than commerce, and the amount of land available for development is limited or fixed.

To start with all land is taxed according to its initial assessment, after that revenues can not increase without raising rates and/or further developing parcels to increase their taxable value.

Both of which are unsustainable in the face of any inflation at all.

Each of which have their staunch supporters at odds with the other.

If only rate increases are considered, rate increases will have to outpace inflation or the taxing authority will go bankrupt.

The taxing authority can not be allowed to fail especially since the original purpose of this type tax is for the taxpayer to go bankrupt before the nobility does.

Eventually the _landowner_ will be assessed more tax than the land itself brings in, and will require _owners_ having outsized wealth from other sources, often only multigenerational prosperity will be sufficient.

At the other extreme where revenue growth comes only from further property development, pressure is greatest on undeveloped properties having the biggest upside potential.

New infrastructure is built at the expense of the old, spread more widely, and naturally not yet having future inflated maintenance costs incurred.

Little hand-waving is needed when a tax payer & collector are all prospering over the deal in the short term and there is some plausibility to behave as if future prosperity for all taxpayers will increase at the rate enjoyed by those involved with the development. Surely making costly things easier by then.

Inflation makes it impossible to know for sure anyway.

Mix and match these growing costs across citizenry which is not becoming more prosperous, and eventually there is no discretionary wealth except among the few who overcame the inflationary toll.

Taxing commerce instead of property allows revenue to grow at the rate of real prosperity unlimited. With the risk that revenue will drop when prosperity drops, or the authority will go bankrupt at the same time as the general citizenry in such a case.

Not a realistic risk since the authority will have enough credit to delay its own bankruptcy until after the majority of the citizens are ruined.

I guess the point of view about what kind of tax could ideally fund infrastructure indefinitely depends on whether you are a lowly taxable subject or a high-born guv'nor.

In Denmark parcels are often sold for $50-100.000 in popular areas. This gives the town a significant amount of one-shot money.

If they use that one-shot money for running expenses rather than investments (in e.g. subways), then the town will go bankrupt when there are no new buyers of parcels.

It's somewhat like a ponzi scheme.

Although it is still implausible, it is certainly possible to miss 95% of the cost if they spend very little on monthly maintenance (ie, under-maintain). Then at some point in the near future, the road will need to be ripped up and replaced. Not cheap.

That would make the current percentage 150/(330+150) = ~31% not ~4%.

https://www.sfchronicle.com/crime/article/SF-corruption-scan...

https://www.sfchronicle.com/opinion/editorials/article/Edito...

https://www.kqed.org/news/11839531/report-corrupt-sf-officia...

https://la.curbed.com/2020/6/18/21279345/los-angeles-corrupt...

There is local representation but in many states legislative districts are allocated by population not geography so often areas with higher population density have more control.

And, State-wide elections, such as, Governor, Attorney General, state supreme court justices (where elected, such as, WA), initiatives, referendums, and so on, are often dominated by the high population centers.

The problem with most of suburban America is that it's completely unsustainable. Almost all suburban cities in the US require a constant injection of Federal funds to maintain infrastructure. Most people don't realize this because it's really something politicians score brownie points for, hence the accounting subterfuge they engage in (as mentioned in the article), as do most small cities in the USA.

We have no idea how long this Federal subsidy will be maintain, making it difficult to plan for. So many Americans want this idyllic, unsustainable suburban life-style that no politician will keep their job if they try to "take it away" (read: address the issue). But the longer we wait to build more sustainable cities, the worse things will be during the inevitable implosion.

America needs to be building medium-density, car-adverse cities now. The country can't afford to continue subsidizing driving to the degree that it has post-WWII. If this doesn't happen, most of the country is going to enter a serious depression.

How well would such a thing scale, though, especially in a suburban/urban setting? IIRC sceptic systems need a certain amount/type of land to drain correctly, so that wouldn't work particularly well outside of relatively rural areas. Wells might not work beyond a certain population density due to insufficient groundwater recharge rate. And dirt roads still would require maintenance, especially if you want to support nontrivial traffic levels, not to mention relatively high-speed travel.

Cities, small towns and rural locals have different costs. Rural areas maintain more kms of road per home, for example. Power/Data lines also cost more per home. Maybe these won't be necessary in the future, but they are for now. Obsolete is a strong word, still.

Like you though, the $10k price tag seems high to me. Is it really this high for the right reasons?

Similar question with dirt road - how long is the dirt road before it reaches a non-dirt road? How much traffic is on it? If you dispersed a major population center this way and still needed to deliver groceries and ship out garbage and septic, how quickly would any given segment go between needing to be regraded?

The 10k amount doesn't come about because they built a large community and infrastructure. It came because they built their large community in an unwise manner resulting in high infrastructure cost. While moving to individual or smaller communities reduces to possible scope of screwing up your planning, it doesn't reduce your ability to screw it up.

Seriously?

Of course we should build less of it, but we can't unbuild what's already been built, and we can't account for city managers who aren't aware of this future problem.

If someone can solve the problem of the future being here, but being unevenly distributed...

It definitely takes ~10-15 mins longer than if I just drove, but goodness it's just so much more enjoyable. I get to sit and look around at the city I'm in instead of focusing on driving.

I've dragged quite a few friends and family along and most people don't like it because: 1. it takes longer (have to wait for transport to arrive, it makes stops you don't need) 2. "iffy people" are on the streetcar

I laugh a bit at #2 because compared to almost any other non-car transport in the US I've ever seen, the occupants of the streetcar are just comically gentrified. Yeah there's one guy who's probably homeless, but everyone else is clearly out for a business dinner or a bunch of yuppies all dressed up to take the family out to dinner, and so on.

Thanks for bearing through me with this anecdote. But I hope it demonstrates two issues: 1. americans will put up with a lot if it makes their trip any amount shorter 2. americans vastly prefer to be annoyed and in control, versus less annoyed but not in control. e.g. they prefer car traffic where they're "in control" (can honk/drive aggressively?) vs waiting for public transport to arrive or waiting at stops they don't need 3. americans associate public transport with lower classes, the poor and homeless.

It'll take a lot of work to flip these around.

Strong towns I'm pretty sure intentionally chooses it's rhetoric to try to be more Republican compatible. (Strength, budgets, irresponsibility, etc.) But ultimately they are asking for a big pile of federal dollars, to rebuild cities/towns to be more compact and efficient, just like most everyone left of center.

I think it's good to point out we shouldn't just densify everything --- we already use too much land area. Some places need to densified, and others need to de-densified (remove housing and use for other purpose).

The problem with wide spread innumeracy is random numbers can be printed for propaganda or other purposes and the vast majority of people will simply accept them. Combined with sophistry techniques such as anecdote proves the general rule, etc.

Ironically, while people get in arms about how the federal budget is being spent almost no one knows what’s going on in their city or county budget. And that determines your quality of life just as much.

At this point I can't tell if the politicians fund the DOD because they want to, or because they're afraid of the lengths it might go to protect its cashflow.

It's to even really true in cities that people perceive to be growing and vital. New York City, for example, would be shrinking if it wasn't for the influx of foreign immigrants: https://zicklin.baruch.cuny.edu/wp-content/uploads/sites/10/....

> The City of New York grew by over 362,000 residents between 2010 and 2016, a growth rate of 4.4% (Table 1). City officials consider this to be among the strongest periods of growth in the last half century (NYC Planning, 2017a). The population grew by 402,000 people through natural increase, and net foreign migration added an additional 500,000 residents. Net domestic migration was -524,000, as more people moved out of the city than moved in.

At least in the US, I doubt this is true, by and large. Given the sheer number of people in them, it seems to strain credulity that most don't want to.

Usually the tax values of properties are available to the public, as well as digital maps of plots. You can combine the two to do a coarse analysis of how much each property is worth per acre.

Urban 3, the firm that did the analysis in the article, goes much further and includes things like where people take trips and which roads are the most valuable, that sort of thing. But even a basic analysis can be quite telling.

Also, do you think the people will just abandon their land if no one else buys it? "Nature" won't pay for it. They bought it from someone else and will therefore expect to be paid before relinquishing it.