Five No-Cost Solutions for Small Towns

Following my statement that we need to be innovative and find ways to do more with less, I have been challenged to give some examples of ways Small Towns can do just so (easy for you to say, Chuck - now tell me how to do it).  Gladly.

1. Zone for higher density where there is existing infrastructure.

Most small-towns got their ordinances from the slightly larger town up the road.  Those slightly larger towns had already done the same thing.  At the end of the day, our brilliant efficiency / lack of creativity (two sides of the same coin) has created a situation where most small-town zoning codes today mirror a suburban regulatory framework.  Bad fit.

Identify those areas where you have sewer and water service.  If you are like most towns, you can take those areas and easily increase the allowed density there by a factor of 10 to 20.  Those areas where you have only roads and no sewer/water, take those areas and increase the density by a factor of four.  Now your density is starting to approach levels where, as development happens, the tax base created will generate enough revenue to pay for the maintenance of those investments.

Think of it this way.  If it costs $250,000 to maintain a mile of road, does it make more economic sense to have 10 homes ($25,000/home) or 100 homes on that road ($2,500/home).  The investment has been made in your community - start taking advantage of it.

2. Create a Downtown Mixed Use (DMU) zone.

The historic downtown in most small towns is the forgotten gem that zoning, combined with advances in transportation and large government subsidy, has helped to destroy.  It is very likely that the historic downtown in your small town has bizarre zoning that requires large lots sizes, large setbacks, low impervious coverage amounts and excludes all but a few commercial uses (aka: suburban zoning).  

Thow that ordinance away!

The first step towards restoring your historic downtown to the vibrant economic engine it onces was is to adopt a mixed-use zone.  Make the lot sizes small, no setbacks, get rid of the coverage limits and crazy parking requirements and, most importantly, allow a mix of commercial and residential uses.  

If people can't live in your historic downtown and, without being "non-conforming", walk from their residence to the bank, the coffee shop, the grocery store and then back home, your zoning code is financially undermining your community.

3. Zone for Low Density outside of DMU and areas with infrastructure.

The first two zoning approaches encourage growth where it is most financially advantagous to the community.  The third approach is to actually discourage new development in areas where it is financially damaging to the community.  This is done by a dramatic downzoning of lands not identified in the first two approaches.

Take all the land that is not currently served by infrastructure and multiply the minimum lot size by a factor of four.  If you have 2.5-acre lots, make the minimum lot size 10-acres.  If you have 10-acre lots, make the minimum lot size 40 acres.  

This land is the costliest for the community to develop and maintain.  In nearly every circumstance imaginable, there is not going to be enough tax base generated by a development in this area to pay for the maintenance of the new infrastructure that will serve the area.  The result: higher taxes, lower services or both.  

If a small town wants to do more with less, it should stop encouraging people to do less with more.

4. Stop building roads/infrastructure.  Just stop.

Just stop.  I'll say it one more time - stop.

You have enough roads, water mains, sewer laterals and infrastructure right now in the ground for a population at least 10 times your current population.  I say this with confidence because we have seen this again and again and again.

The infrastructure systems in most small towns have been built with large federal and state subsidies.  As a result, their layout has been based more on personal desires than affordability.  In short - these systems are not very efficient.

Stop building more roads, sewer and water systems until you can grow a tax base on your current infrastructure that can financially support that investment.  To fail to do so is just digging the hole you are in that much deeper, especially if you are borrowing money to do it.

5. Stop using TIF for businesses that compete with your existing businesses.

It has always amazed us how many communities use Tax Increment Financing (TIF) to undermine their own economic condition.  This is typically done in the name of "free market competition", apparently overlooking the irony that a tax subsidy is not exactly one of Adam Smith's components of a free market.

Consider this example:

Business A is an existing business.  Business B comes to down and asks for a TIF subsidy.  Business B would be a direct competitor of Business A.  City grants TIF to Business B.  Business B builds and competes, with a subsidy, with Business A.  Business A and Business B compete, to the disadvantage of both until one of the two goes out of business.

If Business A goes out of business, the city has replaced a tax-paying business with a non-tax-paying business.  Not smart.  If Business B is the one that fails, the city likely has a debt to pay that is now not being paid by the tax increment.  Double not smart.

Only use TIF where it adds a business that not only creates jobs, but has positive spinoff effects and does not undermine existing investments in the community.

Of course, there will be a number of communities that will not want to follow these ideas.  That is okay. Just understand that those are lifestyle decisions.  Lifestyle decisions come at a cost and that cost is rising.

A very good man in a small town recently told me that people move to his town for a large lot outside of the city and proposals like these five here were not what people were looking for.  My response was to tell him that I loved to eat lobster.  If someone would pay the bulk of the price of lobster for me, I would eat it every day.  That would be my choice.  But since nobody is subsidizing my lobster, I typically eat Oscar Meyer hot dogs.

Our system of tax and subsidy has not allowed small towns to eat lobster, but it has allowed them to grow beyond their ability to maintain their own infrastructure systems.  These five proposals will begin to alleviate that and help small towns grow stronger, doing more with less.

(Note: To see examples of communities implementing these strategies, check out the City of Pequot Lakes, City of Emily and Crow Wing Township).