This is why we need to #DoTheMath, even on "small" projects.
When I received a letter saying that the little neighborhood street I live on was scheduled for some improvements, I wasn’t surprised, as other streets in the area were being resurfaced. The stated intent of the project is to upgrade the street to the City Standard. However, as I read further, something jumped off the page at me: $2.1 million.
While it is critical to maintain what you have, I wanted to use this project to point out that doing it requires restraint as well. As we've seen many times on Strong Towns, "maintain" can quickly become "upgrade" in the presence of available money. Especially, as is often the case, when that money is borrowed.
Let’s take a look at the area to see why this number is so surprising:
Pre-WWII Neighborhood in McKinney, TX
The project in question will reconstruct two streets, Griffin and Pine, highlighted yellow in the above map:
The roads will be rebuilt to the city's standard width (26 feet), along with a new ADA compliant sidewalk (4 feet).
To accommodate the increased width, the existing ditch systems will need to be replaced with underground drainage. There are no performance issues with the current ditches.
Additional utilities improvements will be required due to the two above items.
The total distance of the two streets is about 1700 feet (0.32 miles)
Cole Street, to the north and marked with "Ex." in red above, was rebuilt to the same specifications last year. Let's take a look at it on Streetview:
Cole Street: Nice sidewalk, a little bit too wide when on-street parking is not used. Some people will drive too fast here since it is a long straightaway with no stop signs.
Cole Street: Better with some vehicles parked on the street. Most everyone would drive at a safe speed here.
Now, let's take a look at a portion of Pine Street, which the project will upgrade, on Streetview:
Pine Street: Ditches in blue, vehicles parked partially on the road highlighted in green.
I walk both of these streets every single day with my dog and have not had any issues on either. Cole Street handles a bit more traffic, so the sidewalks are helpful. Pine Street is only used by people accessing the homes on adjoining streets, and rarely do I see more than five cars parked on it. Walking in the street here is perfectly safe.
Overall, I think many people would consider Cole Street to be "nicer". As a property owner adjacent to the project, I would like my street to be newer and upgraded. However, if I take off my property owner hat and put on my taxpayer hat things start to look a lot different.
For this analysis, I'm going to focus solely on the cost of Streets & Drainage. This simplifies the illustration without changing the takeaway. The cost for this portion of the project is $1.5M and will be financed entirely by general obligation bonds. These bonds are repaid by property taxes.
Now, let's do the math:
Streets & Drainage Cost: $1,500,000
Yearly Property Tax Paid to City in Project Area: $44,030
% of Property Taxes allocated for Bond Repayment: 31%
Yearly Bond Repayment: $13,681
Number of Years to Repay Bond: 110
*Note: Tax records are lagging behind recent construction, so I assumed high values for those properties. One vacant lot was also assumed to be filled with a high value home.
These lots also face other streets and alleys, so in this scenario the money to maintain them would have to come from elsewhere.
The percentage of property tax revenue that is allocated to bond repayment is set by the budget/council, so let's assume that they approved allocating 100% of the taxes to paying this bond:
Streets & Drainage Cost: $1,500,000
Yearly Property Tax Paid to City in Project Area: $44,030
% of Property Taxes allocated for Bond Repayment: 100%
Yearly Bond Repayment: $44,030
Number of Years to Repay Bond: 35
This project is still outside the means of the taxpayers to support it. Life expectation for the road is around 30 years, per my discussions with city staff. This also would not allow for the accrual of funds to replace the road, meaning another bond will be required. This also assumes the city has sufficient debt capacity available 30 years from now, which is not guaranteed.
So, if we can't stop the project from happening, what can we do?
1. Do nothing. Assume that you will be able to grow and borrow forever.
2. Increase tax revenue by 14% to pay off the bond over the life of the road. This would still require the city to issue another bond for future replacement.
Under the current zoning, this is possible as older homes are replaced with larger ones, but it will take many years.
Raise the tax rate by 14%. I don't think any elected official would sign on for this.
Update the zoning and allow for incremental development. Best potential option, but still requires time.
3. Increase tax revenue by 70% to pay off the bond and accrue for replacement in the life of the road.
Allow incremental development, incentivize it so that it happens very quickly, raise taxes, and…
No option that achieves this in a very short period of time would be gentle.
As you can see, none of the three options above are good ones. By doing what looks like a simple road upgrade, we have put one small area of a neighborhood into an unsustainable position. What happens when we repeat this on every street in the city?
That’s why we need Strong Towns thinking, even on the small projects.
Editor’s Note: A version of this article first appeared on the Strong Towns community site. We liked it so much we asked Jared if we could republish it here. If you haven’t already, join our free community site today—and make sure to connect with Jared when you’re inside.
About the Author
Jared Wright is Strong Towns member and concerned citizen of McKinney, TX. You can find him on the Strong Towns Community site.
Local governments often use terms that downplay, minimize or obscure the severity of a situation. While this isn’t a malicious or even conscious decision, using language that is inaccurate or that the general population doesn’t understand makes it very difficult to build a strong town.