Lecy ∙ Urban Policy

LECTURE 06Funding Urban

Infrastructure

HOUSEKEEPING

• Updated Syllabus

• Policy in Action – Readings Assigned

• Cities Case Study Assignment

• Final Exam – take home format?

• March 4: Robert Doucette

• March 25: Katelyn Wright

• April 15: Elizabeth Mercer

• April 8: In-Class Debate

• April 22: Student Presentations on City Case Study

http://fathom.info/allstreets

U.S. INFRASTRUCTURE

https://www.youtube.com/watch?v=Wpzvaqypav8

CONGESTIONTraffic

http://flowingdata.com/2015/01/20/how-americans-get-to-work/

http://www.ted.com/talks/jonas_eliasson_how_to_solve_traffic_jams?language=en

Does congestion pricing affect the rich and the poor equally?

PARKINGThe Cost of

http://freakonomics.com/2013/03/13/parking-is-hell-a-new-freakonomics-radio-podcast/

Does changing the price of parking assumes that people can reach the destination in ways other than driving?

When would increasing costs of parking reduces business for shops / restaurants?

When a minimum parking requirement is imposed by a city, who pays for the infrastructure?

If I were going to open a restaurant in the Memphis / Nashville area, which location should I choose?

How Too Much Parking Strangled the Motor City

http://www.citylab.com/commute/2013/08/how-too-much-parking-helped-strangle-motor-city/6585/

PONZIThe Infrastructure

Scheme

ggmap( get_map( "syracuse, ny", zoom=16, maptype="satellite" ), extent="device" )ggmap( get_map( “cambridge, ma", zoom=16, maptype="satellite" ), extent="device" )

CAMBRIDGE, MA: DENSITY 16,685/SQ MILE SYRACUSE, NY: DENSITY 5,583/SQ MILE

FAYETTEVILLE, NY: DENSITY 1,333/SQ MILE MANLIUS, NY: DENSITY 652/SQ MILE

Total Taxes for houses assessed at $100,000

City of Syracuse ~ $4,835

Fayetteville-Manlius ~ $3,525

TAX IMPLICATIONS:

How often does someone in Manlius use Syracuse infrastructure?

How often does someone from Syracuse use Manlius infrastructure?

Do transportation subsidies benefit urban populations or suburbs more?

COSTS OF SPRAWL

The costs of sprawl are many and diverse. Some of these costs are counted, meaning they show up on financial statements. Other costs are hidden – they don’t show up on financial statements, but they are real and substantial. Different stakeholders pay for sprawl in different ways, either directly or indirectly. However, it is important to realize that we all—businesses, governments, and homeowners-- bear the costs in the end.

Governments and their taxpayers absorb many of the costs of development directly and in future infrastructure liabilities. Municipalities can pay a significant financial cost for sprawling development. Sprawling suburban development requires new infrastructure and thus new capital spending. When a new development is approved on the fringes, municipalities get additional property tax revenues, but they also pick up new costs, including liability for future infrastructure maintenance and replacement costs that continue indefinitely, and rise over time. In the initial wave of sprawl, these costs were not understood.http://thecostofsprawl.com/report/SP_SuburbanSprawl_Oct2013_opt.pdf

A PONZI SCHEME is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

http://www.strongtowns.org/the-growth-ponzi-scheme/

STRONG TOWNS: THE GROWTH PONZI SCHEME

Cost of lot: $3,000Cost to build infrastructure: $50,000Cost to build house: $150,000Sale Price: $240,000 (15% profit)

DEVELOPER COSTS

Revenues: $240,000 x 0.035 = $8,400 / year in taxes

Costs: Schools, garbage, police…etc. = $7,000 / year

Remainder: $1,400 / year in new city revenues!

MUNICIPAL REVENUES YEARS 1-20

A $50k municipal bond at 3% for a new road:

Repayment rate of $3324 / year over 20 yearsRevenues: $240,000 x 0.035 = $8,400 / year in taxes

Costs: Schools, garbage, police…etc. = $7,000 / year Payment of bond: $3,324 Total: $10,324

Remainder: $1,924 / year in losses

MUNICIPAL REVENUES YEARS 21-40

THE PONZI SCHEME

New Development: $1,200 in revenues

New Development: $1,200 in revenues

Old Development: $1,924 / year in losses

A $50k municipal bond at 3% for a new road:

Repayment rate of $3324 / year over 20 yearsRevenues: $240,000 x 0.035 = $8,400 / year in taxes

Costs: Schools, garbage, police…etc. = $7,000 / year Payment of bond: $3,324 Total: $10,324

Remainder: $1,924 / year in losses

MUNICIPAL REVENUES YEARS 21-40

The homeowner also gets the mortgage interest rate deduction! In the first year that means a loss of roughly $3,800 in federal taxes ($9,500 in interest at a 40% tax bracket).

If you want a simple explanation for why our economy is stalled and cannot be restarted, it is this: Our places do not create wealth, they destroy wealth. Our development pattern -- the American style of building our places -- is simply not productive enough to sustain itself. It creates modest short-term benefits and massive long-term costs. We're now sixty years into this experiment, basically through two complete life cycles. We've reached the "long-term", and you can clearly see we've run out of options for keeping this Ponzi scheme going.

STRONG TOWNS: THE GROWTH PONZI SCHEME

http://www.strongtowns.org/journal/2011/6/14/the-growth-ponzi-scheme-part-2.html

TEXAS' LOCAL DEBT HITS $328 BILLION -- THAT'S $12,400 PER PERSON Forbes

Cities, counties, school districts, and special districts in Texas are drowning in debt. The latest information from the Texas Bond Review Board suggests that total local debt, including principal plus interest, in the Lone Star State grew by $5 billion in fiscal year 2013 to roughly $328 billion. In only the last five years, local debt has increased by a staggering $30 billion.

Texas’ local debt per person—ranked as the 2nd highest among the top 10 most populous states in a September 2012 Texas Comptroller report—is more than $12,400 per Texan. Yet even with such large obligations, past trends suggest this local debt will likely get much, much bigger on its own. From 2001 to 2011, the compounded growth rate of population and inflation increased by just 53 percent. By comparison, local government debt outstanding (principal only) rose by 122 percent over the same period, meaning that local debt growth is outpacing population and inflation by a factor of almost 2.5-to-1.

The evidence is clear when it comes to local debt: we have a Texas-sized debt problem, and it’s unlikely to get better without key reforms. If there is no meaningful change to the status quo, then Texans can expect that local property taxes will continue to rise—necessarily so in order to pay for higher debt service. These higher taxes will be a strain on family budgets and slow future economic growth.

http://www.forbes.com/sites/realspin/2014/09/02/texas-local-debt-hits-328-billion-thats-12400-per-person/

Many local governments across the U.S. face steep budget deficits as they struggle to pay off debts accumulated over a number of years. As a last resort, some filed for bankruptcy.

Governing is tracking the issue, and will update this page as more municipalities seek bankruptcy protection.

BANKRUPT CITIES, MUNICIPALITIES LIST AND MAP

As cities try to manage crushing debt from pension obligations, some municipalities are turning to bankruptcy as a last resort. NewsHour Weekend reports from Vallejo, Calif., with a cautionary tale for cities looking to bankruptcy as the solution.

http://www.pbs.org/newshour/updates/municipalities-declared-bankruptcy/

SPRAWLSocializing Costs of

Do transportation subsidies benefit urban populations or suburbs more?

What types of transit should be subsidized?

What other types of infrastructure should be subsidized?

At what levels?

SUMMARYIn

SUMMARY OF MAIN POINTS

• To fix congestion we need to price road usage better.

• To fix parking we need to price spaces better.

• To make suburbs sustainable we need to price infrastructure better.

If someone else bears the cost of an activity, you will do more of it (negative externalities).

How do we design urban policy so that costs are internalized?