My City Has Massive Infrastructure Liabilities. So Do 99% of the Cities in America.

Today’s guest post is by Strong Towns member Alex Zhang. It was originally published on Medium, and is republished here with permission. It has been lightly edited for style and clarity. –Strong Towns staff.

On the surface, my hometown of Plano, Texas seems to be on solid footing. Its officials often tout that we have both low taxes and good public services. Its AAA bond rating [the highest credit rating a city can have] is mentioned 10 times in its most recent budget report. The city held a per capita debt of $1,303 in September 2017; of North Texas cities, only Allen and Garland have lower debt levels per capita.

There’s just one problem: Plano, like almost all of the cities in this country, has a staggering amount of long-term infrastructural liabilities that it cannot pay for. And because Plano doesn’t practice accrual accounting — where the long-term liabilities and the replacement cost of infrastructure are recorded up front, rather than the year they are due — much of this is invisible to the public eye, or even to city officials themselves.

Here are some figures estimating the replacement costs of Plano’s roads alone:

By comparison, Plano’s revenues and tax base:

  • Plano’s 2018–2019 general fund revenues: $304.3 million (page 28 of Program of Service)

  • Plano’s total taxable real estate: $42.7 billion (page 17 of Program of Service)

  • Public investment to private wealth ratio (roads only): 11.65 : 1 (for reference, a sustainable ratio is at least 20:1 and ideally 40:1)

  • Annual property tax burden for road replacement alone on a $300,000 house: $858.94
     ($3.67 billion road replacement cost / $42.7 billion taxable real estate * $300,000 house value / 30 year average lifespan of infrastructure)

Of course, roads aren’t the only infrastructural obligations a city has. In pages 97–98 of the report, the city reports the following inventory:

While the lifespan of (waste)water services is mercifully longer, there still needs to be an effort to catalog the replacement cost and prepare accordingly on how to fund it. Estimates are much more difficult to obtain here and they are influenced by many factors, but a replacement cost of $1 million per mile or more would not be unusual.

If the actual replacement costs are anywhere close to the rough estimates provided above, Plano is in deep fiscal trouble. The full bill may be decades away, but so is climate change! And good luck asking for a property tax increase of that magnitude after boasting about low tax rates for so long and after residents are already complaining that their taxes are too high.

Growing Into More Debt

When cities faced similar crossroads at the end of the first infrastructure life-cycle in post-WWII development, they turned towards growth. However, the forms of growth they pursued were often terrible public investments that pushed cities deeper into debt and long-term unfunded liabilities. Strong Towns, a nonprofit media and advocacy organization that promotes financially resilient patterns of development, calls this The Growth Ponzi Scheme.

Plano has already been the beneficiary of much of that illusory “growth.” Between 1980 and 1990, Plano’s population grew from 72,000 to 128,000, and between 1990 and 2000, the city’s population ballooned from 128,000 to 222,000. Much of the infrastructure developed during that time period will soon be approaching the end of its lifespan. Since 2010, Plano’s population growth has hovered between 1 and 2% annually.

While Plano may be able to grow further, it won’t get out of this fiscal hole with its current development pattern. So many cities have tried the same thing, only delaying and exacerbating the later corrections. To point to a recent example, Cobb County, Georgia, is a cautionary tale.

Plano’s root problem is that we have built too much infrastructure to sustain. As cited above, we have an excessively high ratio of public investment to private wealth. Plano needs to change course quickly to avoid drowning in debt in the decades ahead and declining as a city. Thankfully, there is a tried-and-true method: the kind of traditional development that prevailed for centuries, featuring incremental growth one block at a time.

To return towards more sustainable development, Strong Towns offers two key principles:

Incremental Development

No place should be exempt from change, but no place should be forced to dramatically change. That means that all places should be allowed to upzone to the next logical level by right. For single-family home neighborhoods, which represent the vast majority of the city’s land use (and which Plano Tomorrow’s zoning largely ignored), this could mean spacing them closer together, reducing lot sizes, and allowing conversions into duplexes. Duplexes can become fourplexes, and fourplexes can become small apartment blocks. Such a model can still provide substantial changes quickly while preserving the overall look of a neighborhood to a surprising extent.

Current restrictive zoning in many cities allows for no greater evolution than turning single-family homes into… McMansion single-family homes. At the same time, transforming empty lots or modest homes into 10-story apartment buildings is not the answer. It invites land speculation, distorting housing prices.

Even when they contain attractive features like multi-family housing or walkability (that you need to drive to), megaprojects like the $1 billion Collin Creek Mall revitalization or the $3 billion construction of Legacy Hall are speculative gambles. They are build-it-and-they-will-come projects whose long-term outcomes are uncertain and probabilistically risky. And only city officials (probably) know exactly how much in subsidies and tax breaks Plano threw to jumpstart the projects.

Walkable Towns and Cities

Auto-oriented development means that a car is required to get just about anywhere. Not only does this have obvious negative effects on the environment (cars and trucks contribute to 20% of US emissions), but it also significantly cuts down on chance interactions and erodes a sense of neighborhood and community.

A combination of incremental upzoning and mixed use development can make car trips less necessary, with a bonus of cutting congestion. It also means sharper distinctions between streets and roads, rather than the stroads we build everywhere, and a street grid structure (like New York or downtown Plano) instead of the existing arterial one.

Suburban poverty has exploded in recent years: most people living in poverty are now in suburbs as opposed to inner cities. The sheer costs of owning and maintaining a car (and/or the time costs of not having one) present yet another unnecessary burden on financially strapped Americans. In Plano, the poverty rate among those over 75 is about 12%. Not only do they face those expenses, many of them may also have difficulty driving from declining vision or reaction time.

Finally, to have better intelligence about the full scope of infrastructural obligations, Plano should move towards accrual accounting. While Plano does have information about the mile lengths of its majority infrastructure, it should also more comprehensively inventory all its infrastructure, including each section’s estimated remaining lifespan and approximate replacement costs.

Moving Forward

Plano is the midst of a bubble. Everything seems fine! Taxes are low. The city provides great services and good maintenance. It has an AAA bond rating. Its budgets get commendations. The music is still playing, and therefore everyone must remain dancing.

As long as everything seems fine, there will be little incentive to change course. To my knowledge, not a single city council candidate has proposed allowing more incremental development, such as the ability to build duplexes by-right in the wide swaths of single-family zoning. (And perhaps for good reason: propose a policy like that in Plano and you will have trouble winning 20% of the vote!) Nor has anyone proposed incremental but consistent investments to resuscitate and expand the downtown area. Even as a fight rages between NIMBYism and big multi-family housing projects, mega-projects sail through City Council virtually unopposed.

It is when change seems unnecessary that it will be very difficult to push through. But now is realistically the only viable time to avert the oncoming fiscal crisis.

About the Author

Alex Zhang (Twitter: aHumanAlexa) is an IT Consultant and a resident of Plano, Texas since he was 2. Since a friend shared The Growth Ponzi Scheme a year ago, he has been an avid fan of Strong Towns and periodically binge-reads its posts. He enjoys reading, social dancing, and taking long, pensive walks.

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