The more we build, the poorer we get.

We recently came across a headline from the Illinois News Network that might shock you but didn't surprise us at all. It read, "Report: Illinois needs $21 billion annually to repair infrastructure." A local reporter asked us for comment on the situation. What follows is my response.

$21 billion annually to repair Illinois' infrastructure might sound like a massive figure, but in all likelihood, it's actually an underestimate. It's also not unique to Illinois. The backward way that governments nationwide account for their assets and liabilities means that these ticking time bombs are hidden away, visible nowhere, even on public balance sheets. The numbers we see in reports like this are merely the urgent items—the ones that are in, or nearing, a critical state. That’s a small portion of all the infrastructure we have built and have nominally obligated the public to pay to maintain.

This graph shows the value generated from a particular infrastructure investment. In the first several years of the the life of the investment, it generates positive value and that value accumulates. But when, in year 25, the infrastructure needs maintenance — the "maintenance echo" — suddenly the picture changes dramatically and the value generated from the investment isn't even enough to cover its maintenance.

Infrastructure stress comes in echoes. We tend to build in surges and so there is a maintenance echo to each surge a generation or so later, when many promises come due all at once. Historically, these echoes create their own surge in spending that, ironically, results in even more infrastructure being built. This all makes the next echo even worse. We’ve been doing this for over 75 years and our surges are now reaching the level of a tsunami.

The finances of governments in Illinois—from the state down to local governments—are a disaster. No government leader I’ve ever spoken with has a clue how big the bill for routine maintenance actually is. And these people are not clueless as in dumb; they are clueless as in they really don’t know. Nobody is accurately tracking this stuff.

A 57% increase in your total budget just to maintain what you have? Illinois has been printing IOU’s to pay routine bills for years and now we’re being told we need to increase infrastructure spending by 650%. That’s bizarre, and sheer size of it should shake the faith of everyone involved in these decisions.

But it doesn't. Because those decision makers don't know what’s going on. The people advising them don’t know how bad it is, either. If you want to try to grasp it yourself, do this: take the most credible estimate you can find, and know that it’s almost certainly much, much worse.

Show Me the Money

Where will Illinois get the money for this $21 billion in maintenance? It’s not going to. Not even close. And imagining that they will—that there is even a way that they could if they wanted to—is a huge part of the problem.

Illinois is going to have fewer roads, bridges, pipes and public buildings a decade from now than it does today. That’s the consequence of having an annual maintenance backlog of $21 billion in a $38 billion budget.

When you ponder this consequence for a while, some things become overwhelmingly obvious. First, there is no justification for building another foot of road, pipe, sidewalk or any other infrastructure. Period. Whatever negative consequence is perceived to be driving such an investment, it is overwhelmed by the reality that a significant portion of the stuff we’ve already collectively built is going to fall apart and never be properly maintained.

Stop building new infrastructure!

This shift in thinking is critical because, once we realize we have more public investments than can be supported by our level of private wealth, the math becomes pretty simple. We need to increase our productivity by (a) reducing our public obligations and (b) increasing our private wealth.

In this tax value map of Lafayette, Louisiana, the green spikes are positive tax value per acre generated by properties, while the red spikes are negative (i.e. costs). The poorest neighborhoods are, in essence, subsidizing the rich ones. Read more about this example.

In other words: we need to figure out ways to get more out of our existing infrastructure investments. How do we make these investments more productive—far more so than anyone is imagining they could possibly be today? Doing that is going to require a brand new approach to government, one less fixated on generating short term growth and more obsessed with long term financial stability.

And we’re going to need to figure out how to make this transition in a way that is consistent with our values. Today, the most financially productive places in most cities tend to be their core downtowns, as well as those neighborhoods built prior to the Great Depression. These places also highly correlate with poverty.

Such neighborhoods don’t respond well to the massive, top-down investments we’ve grown used to. Instead of attempting to transform these places overnight, we need to make modest investments, incrementally improving things, bringing the people there along for the ride while newcomers are gradually integrated into an evolving fabric.

There’s no playbook for this. If Illinois is now ready to get serious, it will have to create one.

What Kind of Problem is This?

There’s a tendency to want to look at this as a maintenance problem, but that’s misdirected. It should more accurately be thought of as a productivity problem.

The infrastructure investments we’ve made have not created enough wealth and prosperity to sustain them. From an accounting standpoint, these were mostly negative-returning investments. Governments—which, unlike private-sector actors, cannot just walk away from this stuff after a life cycle—just made some really bad investments. Decades after decades worth.

This will come as a surprise to many people conditioned to believe that building new roads, installing new pipe and making other capital investments will stimulate the economy, create growth and provide jobs. Don't get me wrong: the spending it takes to get those projects off the ground may do all of that. But it also creates a future obligation for the government to maintain a road, a pipe or a building that people now depend on. Do the math; in our current development pattern, it never adds up.

Spreading homes and businesses out across the landscape is really expensive. Driving for every daily need is really expensive. Allocating space for storing vehicles is really expensive. We’ve locked ourselves into an incredibly expensive way of living without any real fallback position.

All these public capital investments create jobs and growth in the short term, but they also create tremendous long-term maintenance obligations, enormous future bills that are never accounted for when we do these projects.

Here’s the catch: the wealth from all those homes, big box stores, strip malls, gas stations, franchise restaurants and shopping centers is not anywhere near what is needed to cover the really high financial burn rate of this development approach.

The math doesn’t work; the more we build, the poorer we get. It’s not a maintenance problem; it’s a productivity problem.

How Can We Fix It?

The problem will be “fixed” in the sense that there will be a resolution to it, but that fix will not involve keeping everything that has already been built.

To balance the very simple infrastructure math equation Illinois faces, the amount of infrastructure will be reduced—whether intentionally or through neglect—and the tax base will consolidate in places where financial productivity can be increased. There are no other options.

We only need to look to Detroit to see how brutally painful this transition can be. Detroit was the first city to experiment with the auto-oriented development pattern that now dominates North America, doing so aggressively following World War I and through the 1920’s. In a sense, American cities copied the Motor City, just not aggressively until after World War II. This puts most cities in Illinois a decade or two behind Detroit.

Despite all evidence to the contrary, Detroit leaders throughout the era of decline promised every neighborhood they would not be abandoned. The relentless math suggested otherwise, a reality we’ve seen play out on the ground.

The cities of Illinois need not experience this level of desperation, but it will be avoided only if they are willing to be more deliberate about dealing with decline than Detroit proved to be.

If you can’t meet every promise, you won’t. That’s not difficult to comprehend, but the implications are. Illinois is not alone in this reality. States all over North America, and the cities within them, are experiencing similar stress.

At Strong Towns, we have started an international movement of people to help examine and understand the many implications of these challenges, to develop a new set of practices and understandings for supporting communities caught in this cycle and to advocate for change. If you want to see your town start doing the math on its infrastructure costs and invest in truly productive growth, join our movement. 

(Top photo source: Peter Pelisek)

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