Tuesday, January 31, 2017

Marohn: The Real Reason Your City Has No Money

If you haven't tuned into the writing of Charles Marohn over on StrongTowns.org, you should drop what you are doing and head over there to get immersed.  If nothing else, he'll make your mind race and turn some of the things you think you knew about government, financing and taxpaying citizens on it's end.  The first place to start on your journey there is this piece:  The Real Reason Your City Has No Money.  We were turned onto Mr. Marohn by a FotB (Friend of the Blog) recently.   And we've had his stuff open in our Chrome Tabs ever since.

In this first piece, he examines the ordinary city of Lafayette, Lousiana.  And uses the 'predicament' - as he calls it - to shine a light on one of the current dynamics playing out across America: what to do about infrastructure and infrastructure investment.

The median house in Lafayette costs roughly $150,000. A family living in this house would currently pay about $1,500 per year in taxes to the local government of which 10%, approximately $150, goes to maintenance of infrastructure (more is paid to the schools and regional government). A fraction of that $150 – it varies by year – is spent on actual pavement. 
To maintain just the roads and drainage systems that have already been built, the family in that median house would need to have their taxes increase by $3,300 per year. That assumes no new roads are built and existing roadways are not widened or substantively improved. That is $3,300 in additional local taxes just to tread water. 
That does not include underground utilities – sewer and water – or major facilities such as treatment plants, water towers and public buildings. Using ratios we’ve experienced from other communities, it is likely that the total infrastructure revenue gap for that median home is closer to $8,000 per year. 
The median household income in Lafayette is $41,000. With the wealth that has been created by all this infrastructure investment, a median family living in the median house would need to have their city taxes go from $1,500 per year to $9,200 per year. To just take care of what they now have, one out of every five dollars this family makes would need to go to fixing roads, ditches and pipes. That will never happen. 
Thus, Lafayette has a predicament. Infrastructure was supposed to serve them. Now they serve it.

He goes on to lay blame for the insolvency of municipalities large and small on the programs and incentives that were put in place and championed by the federal and state government to induce growth through infrastructure spending.

Got your attention, yet?

He closes with this provocative positioning while tying together new President Donald Trump's promise for increased infrastructure spending.
So what do we do now? Well, we're about to create a huge pot of money at the federal level that we can spread around to try and solve this problem. Only, it's not a problem. It's a predicament; it has no solution, only outcomes. 
It's a predicament that nearly every American city, with very few exceptions, finds itself in. Even if there was enough wealth and productivity to fix all of this -- and there isn't anything close to that amount -- we would be fools to spend it so unproductively. 
All this infrastructure is a bad investment. America needs a different model of growth and development.

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