The dark side of City debt
How accumulated debt will break your town
By Erica Aitken and Mark D. Lee
A contemporary urban planning magazine called Strong Towns has identified a problem that few of us have been able to articulate. This concerns the growth of our towns, new roads, new buildings, tons of money into infrastructures, without consideration for how these towns will be maintained by future generations. We vote for bonds, we allow our City Council to approve countless constructions and we are, in fact, bankrupting our communities.
When cities take on long-term liabilities and risk for short-term growth, as our city is doing without reserve and caution, they buy into what is called America’s Growth Ponzi Scheme.
America's Growth Ponzi Scheme can wreak havoc on a city's finances if not timed properly and allowing growth for growth's sake becomes an urban economic trap for its residents. As developers continue to lobby its planners and elected officials to approve permits for their projects and the required infrastructure, city budgets quickly go from black to red because the city is not adequately calculating the true costs of ballooning compounding debt service obligations. Time and time again, they fail to calculate the declining employment base and the resulting loss of income as well as the lack of new businesses needed to provide a sufficient tax base to pay for all the debt the City is accumulating.
America's Growth Ponzi scheme places local residents in financial jeopardy, driving up the cost of living, rents, and housing, leaving units in brand new building vacant because the cost to rent or to own are so exorbitant that no one can afford them. And so the city leaves its residents holding a huge bag of long-term, thirty-year debt as it has no other recourse but to pass all the development-related debt on to its citizens in the form of higher finance charges, higher property taxes, higher rents, and higher sales taxes, and even higher permit fees. Does that seem like a familiar situation to you?
And, like with all ponzi schemes, we end up deep into a situation that is not sustainable economically nor environmentally.
In a pamphlet published by Strong Towns, we found a few points that will fill you with optimism and purpose. For instance, they call for four objectives:
1. Focus on your downtown and on an ecosystem of neighborhoods. Maintain traditional neighborhoods around a thriving commercial center safely accessible by pedestrians and cyclists
2. Focus on neighborhood compatibility and not simply use, in contrast with what we typically do, separating our human habitat in monoculture pods. We should focus on overall compatibility
3. Focus on expanding housing opportunity. Although that may not currently be the case in Santa Cruz, most towns have an abundance of single homes and of high-density apartments. Strong Towns advocates for the middle: affordable housing that is not high density but integrated in the neighborhoods
4. Focus on transportation as a means, not an end. Direct our capital to maintenance rather than new transportation (and structures like parking garages) and use the rest of the funds to analyze and implement a neighborhood-focused approach to transportation.
Find out more about how to develop sustainably and get out from under crippling debt. Here are links to two articles from Strong Towns that expand more on the concept of Growth Ponzi Scheme and ways to organize so we can stop and change how we grow.