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Why Many Cities Have No Money

• miltonfriedman 10y ago
  too many city employees?
• miltonfriedman 10y ago
  too many overpaid city employees?
• berry_sortoro 10y ago
  I don't even need to read the article to know that the real reason is not mentioned in there. The real reason is the FIAT debt based money system. The criminal private enterprise called the FED. Thats the real reason, everything else is a distraction from the truth.
  • owebmaster 10y ago
    I upvoted your comment after I read because I agree with you and the text goes in the opposite direction.
  • jakewins 10y ago
    Can you expand on this? I don't follow how fiat currency pertains to city budgets and the net cost/benefit of public infrastructure.
    • battlebot 10y ago
      Simple: It creates misguided incentives in all kinds of directions. The simple idea that money is limitless has led to municipalities over-promising on pension benefits for just one example. Who got these developments approved? The developers who made millions and extracted the wealth in partnership with the taxpayers. Same as it ever was.
      • jakewins 10y ago
        > The simple idea that money is limitless has led to municipalities over-promising on pension benefits for just one example. Would I be right in restating your argument like this? "A fiat currency allows the state to inflate away loans. That incentivizes taking very large loans, which in turn means the state builds infrastructure it cannot actually afford." Assuming it is, I'd like to note at least a few things. On fiat currency This is implicitly, in my reading of it, arguing fiat currency is distinct from commodity currency vis-a-vis inflation: If we had the gold standard, the state would not be able to inflate loans away, and the issue would go away. As I'm sure you're aware, this is not the case - every major state in existence have inflated their commodity currencies away to pay state debt. If you had tried to buy a pound (lb) sterling silver using a Pound (£) Sterling in 1913, you'd be sorely disappointed. If you're not aware of this, Adam Smiths extensive exposition on policy and inflation through dilution of metal currency in Roman, French and British history is a fascinating part of Wealth of Nations, albeit dreadfully boring due to Adams use of prose instead of tables to present his data. On inflation Independent of this - the argument is nonsensical to me. Yes, the state can pay off loans through inflating currency. There is a crucial aspect missing to the argument: This would only be a problem if the state acted as if this were true, but it in fact was not. The fact is that the state can pay off debt by inflating the currency. Hence, the argument must be restated as "1) The state can pay loans through inflation, 2) the state takes on loans, because it knows it can pay them off through (1), and 3) the state is then unable to pay these loans". This is obviously a logical error. On loans And finally - this is not about loans. The article is a simple calculation saying "here's how much this infrastructure costs to maintain, and here is now much the tax base around it can pay for". It's not about the cities inability to pay off the initial leverage it used to first build the infrastructure, it's about building and paying off infrastructure that is incorrectly dimensioned for it's tax base. The fact that the initial construction can be discounted through inflation does not remove the cities incentive to build infrastructure it can then pay for in perpetuity.
        • battlebot 10y ago
          My point was they don't have to pay off all those loans at one time, which is what accrual accounting assumes. It is a false argument, in other words. As far as inflation goes--you're making the original commenter's point about why the Fed is bad. They inflate away debt, in other words, it was all a confidence game. We get paid in deflated dollars and wonder aloud why the change in our pockets is worthless.
  • yosito 10y ago
    Can you recommend a book for me to read? I ask because I completely agree and I'd love to be more educated about the issue.
    • clarkmoody 10y ago
      "What Has Government Done to Our Money?" by Rothbard https://mises.org/library/what-has-government-done-our-money https://mises.org/library/what-has-government-done-our-money
    • berry_sortoro 10y ago
      "The Creature from Jekyll Island : A Second Look at the Federal Reserve" by G. Edward Griffin "End the FED" by Ron Paul.
  • elastic_church 10y ago
    When a state sponsored institution is granted a privilege that would be illegal for everyone else, it is called plunder. The Federal Reserve fits the bill, but thats not what this article is about.
  • badsock 10y ago
    It's not the Federal Reserve. That's one of the few institutions left that are run by humans! The lizard people are spreading conspiracy theories about it because that's the last unimpeachable bulwark of human resistance. And you fell for it! There is no complex situation that can't simply be explained by humanoid, human-skin-wearing alien creatures. For example: * Bad economy: Lizard people siphoning off a secret "lizard tax" at the highest levels of government which they then spend on their giant underground lizard carnivals. Fun for them, but disasterous for our jobs. * Crime: Lizard people sneak into toddler's bedrooms at night and tell them story after story of heroic muggers. They brainwash children to believe that people who take others money at gunpoint are in fact the ones who will end up saving civilization. From what? The very same problems that the lizard people create! * Global warming: Doesn't exist! The lizards have been stealing mercury from thermometers for centuries. See, it's obvious if you just think for yourself and do some searches on the internet for "simple theories that explain everything".
    • chiaro 10y ago
      Christ, tell me about it. The presence of one fiat/debt conspiracy theorist in the comments is far less troubling than the collection of commenters seemingly amazed at his insight. Let's not even get into the the smug myopia of Murray "legal obligations to feed and clothe children are state oppression" Rothbard that is also getting trotted out. Fiat currency is, of course, an improvement over previous precious metal-backed currencies. When you can't control the price of gold (or worse, leave the value of your currency as subject to private or foreign manipulation) prices become much more volatile, making it difficult to operate in the economy with much certainty. Fiat currencies also allow for the impact of recessions to be lessened by (for example) lowering the interest rates for the inter-bank loans it provides thus encouraging savings to be redistributed as consumption. The fact that the bank is privately owned is both due to a need for independence from the political process (see Zimbabwe for exhibit A why this is a bad idea), and a relic due to the fact that banknotes were issued by a number of different institutions until it was decided that these competing standards should be replaced by one with authority vested in and financially backed by the state. The Ascent of Money by Niall Ferguson is an easy book to get acquainted with the story and evidence supporting fiat currencies today.
• leodeid 10y ago
  In the intro, it is stated that "literally five or less" cities do not have these monetary problems. I'm curious what those cities are, and why are they special. If the answer isn't "they've always used accrual accounting", I don't buy that most cities are doomed due to accounting problems.
  • johnloeber 10y ago
    I don't know which the cities are, but I'd guess they're among the wealthiest ones. Maybe you'll find this useful: https://en.wikipedia.org/wiki/List_of_U.S._metropolitan_areas_by_GDP https://en.wikipedia.org/wiki/List_of_U.S._metropolitan_area...
    • milesskorpen 10y ago
      Probably wealthy + dense — I'd guess NYC, SF, Seattle, Chicago are on the list. Not sure what else would get up there.
      • nhebb 10y ago
        According to this ranking, Chicago and NYC are at the bottom: http://www.thefiscaltimes.com/2017/01/09/How-Strong-Are-Your-Citys-Finances-116-US-Cities-Ranked http://www.thefiscaltimes.com/2017/01/09/How-Strong-Are-Your...
        • milesskorpen 10y ago
          The includes pensions, which are separate issues — the Strong Towns piece is basically looking at property tax annually / cost of maintaining infrastructure annually (and ignores deferments and the like)
  • whorleater 10y ago
    Spitballing here, but I assume once cities with large enough density, e.g. skyscrapers, reach past a certain threshold, the amount of revenue as a result of high density overtakes the cost of horizontal expansion. Highly concentrated cities, such as NYC/LA/Chicago, are examples of these.
• h4nkoslo 10y ago
  Summary: infrastructure costs to maintain spread out exurb style development end up being more than the incremental tax revenue, especially when you consider replacement costs and the potential for future higher borrowing costs. Property developers (along with car dealerships) are by far the strongest advocacy groups in many areas. It's not totally surprising that they've managed to capture the local government and push them towards counterproductive development that ends up being a massive subsidy from the taxpayers.
  • battlebot 10y ago
    Not sure "exurb" is a real thing--most people living that far out have wells and leech fields and the density is pretty low. Practically every person who sits on our city council is involved with real estate--either sales or development. It is rotten to the core because of their conflicts of interest.
  • davidw 10y ago
    Developers will build whatever they're allowed to. They'll do dense if that's where the money is, or single family homes if that's all that zoning allows. There's probably some bias to what they know, and all we've allowed (zoning) is single family homes, strip malls and that kind of thing, so there is that, but if more were allowed, it'd probably end up being built, sooner or later.
  • TulliusCicero 10y ago
    In most parts of the country, zoning regulations force developers to build low density. Just look at the fights in the SF bay area where developers want to build tall and local NIMBYs fight them tooth and nail.
• devb 10y ago
  There's a blog I enjoy that covers this sort of issue very frequently. It's interesting to see a hard data approach to explaining some of the municipal funding problems that are brewing nationwide. https://granolashotgun.com/2016/08/31/a-thousand-hidden-subsidies/ https://granolashotgun.com/2016/08/31/a-thousand-hidden-subs...
  • astronautjones 10y ago
    thanks for this, the blog is quite interesting
  • davidw 10y ago
    His stuff is frequently featured on Strong Towns as well, if I recall correctly.
  • bookmarkacc 10y ago
    I wish they would add some figures. They keep saying "doing you know how much these roads cost?". No I dont. Please tell. But they never do.
• ebbv 10y ago
  What a crock. This is an extremely biased presentation meant to prime the reader for the awful right wing plan he's going to unveil in his next blog post. No doubt privatizing the infrastructure to "relieve" the taxpayer of the burden. Never mind that somehow it is still going to have to be paid for and if it's privatized we will have to pay more so the new owner can make a profit. The reality is cities are insolvent because of decades of tax breaks for businesses and the stagnant wages of the middle class.
  • foota 10y ago
    My guess would be more along the lines of calling for more centralized development and less horizontal expansion?
  • milesskorpen 10y ago
    I don't read Strong Towns much, but I don't think you've read much of the stuff they put out. The blog definitely isn't in favor of mass privatization — that wouldn't help much, since the infrastructure is still crazy expensive and not worth paying for. The model of development that gets us out of this mess probably is one of much greater density + changes in accounting practices.
    • avn2109 10y ago
      The model that gets us out of this predicament is trivially simple and literally fits on one line: Really Narrow Streets Unfortunately most North American local government has a savagely visceral hatred of that idea. Full disclosure I stole this idea from [0]. [0] http://www.newworldeconomics.com/archives/2006/032606.htm http://www.newworldeconomics.com/archives/2006/032606.htm
      • sdenton4 10y ago
        Pretty good article; the metric that more fully captures the idea is the ratio of land used for cars instead of people. Narrow streets takes care of the on street parking idiocy, which is the worst of it, but the number of parking structure where there could be residential buildings is also helpful to track. And the six lane highways cutting through the middle of town takes a huge amount of space...
• twblalock 10y ago
  There are some cities that get around this by requiring HOAs in new subdivisions, and requiring those HOAs to pay for maintenance of much of the infrastructure. The homeowners pay the same property tax they would pay anywhere else in the same city. There are a number of cities in the Sacramento area that have been doing this kind of thing for over a decade now. That approach brings in another set of problems, but it's worth mentioning.
  • jdavis703 10y ago
    I'd love to see a more local approach where say a couple hundred of my neighbors from the few blocks around me could vote to raise taxes for something specific, like repaving a street, or rehabbing a park. It's local money that you know stays local.
    • nitrogen 10y ago
      In some areas it might be possible to set up a local special tax district that does just that.
    • r00fus 10y ago
      These already exist where I live (CA), there are line items for things like city-wide storm sewer, improvements to local parks, levies for specific work. It's managed by the city, so I'm not sure if it hits the general fund, but it is a tax specifically for those things.
  • driverdan 10y ago
    Curing cancer with AIDS? No thanks.
    • gohrt 10y ago
      You prefer that your local neighborhood be administered by a national bureau of neighborhood affairs?
      • jimmaswell 10y ago
• vvpan 10y ago
  I can't say much about mathematics of taxes described in the article, but I always thought that Soviet Union got a lot of it's city planning very much right. Even a small town is built as a relatively tight formation of high-rises, yet leaving plenty of public space and greenery in the middle. The quality of life in the town that I grew up in is super high, because everything one might need: school, hospital, store, swimming pool, park, woods is an easy _walk_ away. The traffic through the town was even disallowed, which opened up a giant traffic-free area for us to play around as kids and elderly to use for socializing and to run their errands. For ease of visualizing here's an aerial photo of said town in early 00s: http://i.imgur.com/sj9t3Jy.jpg http://i.imgur.com/sj9t3Jy.jpg
  • Something1234 10y ago
    Is it still the same way now?
    • patmcguire 10y ago
      They've got fewer people, so probably. Outside of the boomtowns and the capital, almost certainly.
    • vvpan 10y ago
      It has grown, and more sprawly type of development has been accumulating around it, sadly. This is Moscow region and the population has been growing very fast. Parking space has become an issue as well.
      • lucaspiller 10y ago
        Here in Vilnius parking is an issue two. As I understand (I'm originally from the UK), in an apartment building of maybe 30 units there would be maybe 2 cars during Soviet times, where as now its more like 30 :D The buildings here aren't that big (I went to Kiev a couple of years ago and was surprised how much taller they are) so there is usually just about enough space between the buildings to fit all the cars in. New buildings almost exclusively have underground parking, which is nice to recover the green space.
• aurizon 10y ago
  City governments are parasitised by three groups. One is the body professional politicians that manage to get elected.The second is the construction companies they use to build/repair their infrastructure The other is the work force they employ. All three arrange matters so they get twice as much money on average as the voters that pay their wages/ The politicians do it by simple theft by vote. They vote themselves large salaries/ The civil serpents form unions and strike and strike and get 3-5 year contracts with cost of living allowances (COLAS) AND 1 to 3% wage increase, for that 3-5 years. The politicians pay it - to buy peace at the expense of the taxpayers. The construction companies are similarly unionised and do somewhat the same. Compare the wages of the average city employee with the average non union tax payer. Now you see why this insoluble problem has emerged over the past 30 years or so. One year contracts. No signing bonus AT ALL (why reward strikers), so a one month strike costs ~~8% of your annual wage, 2 months ~~17% etc. Why should these people get more than the tax payers? They are not more skilled. They are in power or in the union. Look at how much teachers wages have made books and equipment a vanishingly small % of their budget and how much they force the taxpayers to pay them. These factors wrecked Detroit. They will wreck Chicago and all other cities as union wage and pension demands take so much money that people move away. Newark died this way years ago.
  • tomcam 10y ago
    Can someone explain the downvotes?
    • aurizon 10y ago
      union slaveys...
    • pja 10y ago
      It’s completely irrelevant to the topic at hand: Cities are not having problems maintaining their infrastructure because of politicians & building firms lining each others pockets - they are having problems maintaining their infrastructure because it is economically impossible for them to do so. Self-serving hand-wringing about corruption in politics does nothing to solve this problem. It’s just an excuse to justify not doing anything.
• crashedsnow 10y ago
  32 Billion for 125K people.. feels like a lot. ~250K for each and every person? I wonder what that calculation looks like.
  • pyre 10y ago
    That calculation is for fully replacing all existing infrastructure on the basis that over the course of a single generation most infrastructure will need to be replaced at least once due to maintenance/upkeep. So basically it will cost something like $32b per generation just for the upkeep of the existing infrastructure.
    • deleted 10y ago
      [deleted]
    • flukus 10y ago
      That's still 10K per person per year (assuming a 25 years generation), which seems on the high side. I wonder how much of that is roads alone?
      • Salgat 10y ago
        Doesn't business taxes come into play?
        • randomdata 10y ago
          Doesn't business tax still get paid by people?
          • theandrewbailey 10y ago
            Yes, but business tax gets paid with business money, which is (often) not attributed to a single person.
            • randomdata 10y ago
• Gustomaximus 10y ago
  > When we added up the replacement cost of all of the city's infrastructure -- an expense we would anticipate them cumulatively experiencing roughly once a generation -- it came to $32 billion. A generation is what, 25 years? If you expect to replace all roads/electricity poles/sewers etc every 25 years you seriously need to look a quality. For this I feel this whole article is off. > Humans are predisposed to highly value pleasure today and to deeply discount future pain This is not true. One of the best test for predicting a child success is seeing if they will defer a treat now for more treats later. Many people have the sacrifice now for a better future instinct. This article seems to make some vastly incorrect assumptions. Personally I think where cities are overspending 3 things could really help. 1) Making asset sales/tenders/expenditure very public and show comparable cost ratios. E.g. cost per km of sewer 2) Bringing more work back in-house. I feel this 'privatise everything is better' mentality is simply not true and does things that leads to infrastructure that needs replacement every 25 years and cost blowouts. 3) If you are going to privatise services price them on points of quality that you can enforce. E.g. Rather than jails getting a straight fee, they should get a small per convict allowance but a generous bonus for each released convict that spends 5 years crime free after release.
  • flukus 10y ago
    > Making asset sales/tenders/expenditure very public and show comparable cost ratios. E.g. cost per km of sewer I think this is one of the main drivers in favoring cheap and punishing quality. I agree with 2 and 3, though I'd argue that private jails are one of the things that should be bought back in house.
    • pyre 10y ago
      > I think this is one of the main drivers in favoring cheap and punishing quality. The problem comes with evaluating quality. There are issues with over-valuing cheapness, but there are equally issues with using high-cost as an indicator of quality too.
      • socialist_coder 10y ago
• bufordsharkley 10y ago
  The author, Chuck Marohn, has previously made this video that explains how a Land Value Tax would affect the fiscal situation of a city (for the better): https://www.youtube.com/watch?v=ok2uR3btMrE https://www.youtube.com/watch?v=ok2uR3btMrE
  • fragsworth 10y ago
    He says at the end that nobody switches from Property Tax to Land Tax, because people who own underdeveloped land would vote against it due to an immediate increase in their taxes. Are there no ways to make it happen? Maybe propose to switch it gradually over a long period of time? Or would that end just as poorly?
    • bufordsharkley 10y ago
      It's a classic story of special interests-- they're inherently more motivated than those championing the common good. There are incremental solutions towards this, such as "split level" property tax in which the rates for land can be shaded upward. Pennsylvania has had this for decades. But when you implement them, plan to see the special interests make their case. For instance, a recent proposal to implement LVT in Hartford, CT:[0] > "We do have an important parcel," said Cheryl Chase, general counsel at Hartford-based Chase Enterprises. "We are developers. If we think there is a project to be built, we would build it." > Chase, which developed downtown's Gold Building and two other downtown skyscrapers in the 1970s and 1980s, owns the parking lot where the Parkview Hilton stood until it was demolished in 1990. One would think 26 years would be quite enough time to find a suitable use for a valuable downtown parcel, but this parking lot owner disagrees... [0] http://www.courant.com/community/hartford/hc-hartford-downtown-taxing-district-20161122-story.html http://www.courant.com/community/hartford/hc-hartford-downto...
    • spangry 10y ago
      Ah LVTs, my favourite hobby horse. It can be done. Where I live, the 'state-level' government survived going to an election with an explicit policy of replacing 'stamp duty' (a tax on the value of property sales) with a land value tax increase. Actually, they've survived two so far. They approached it exactly as you supposed: the tax will be phased in over something like 10 years. FWIW, the two 'political' lessons I got out of it were: (a) Surprisingly, builders' associations (and the like) should theoretically be very supportive of a switch to LVT, particularly if it's replacing property value taxes (which tax the total value of land and improvements, rather than just the unimproved value of land). They were supportive in our case at any rate. Because a LVT results in high-value land being put to its most productive use (e.g. 'land-banking' becomes profit negative, it incentivises inner-city redevelopment etc.), it means more business for builders (and this would be sustained in the long-run). (b) Special measures have to be taken to protect people on fixed incomes who occupy high-value land (i.e. pensioners/retirees still living in the family home). This is partially for political reasons: the most effective way to 'negatively campaign' on the issue is to talk about how the LVT will force granny out of the family home. But there are also legitimate fairness concerns too: people who happen to own high-value land during a switch-over will suffer a 'windfall loss'. Although there's a perfectly reasonable counter-argument to this (IMHO), it's way too complex to be politically useful (and far too long to go into here). I think one approach could be a sort of 'reverse mortgage until death' transitional arrangment: anyone on a retirement pension (or whatever reasonable criteria) prior to the LVT becoming 'official policy' would only have to pay some manageable proportion of the total land-tax due each year. The rest would accrue as a liability against the person's property, to be collected either at time of sale (which would now be voluntary), or from their estate (i.e. when they die). Obviously it would have to be carefully worded, but I think it's a fair compromise that the public could understand. The downside to this (or any other 'transitional arrangment') is that it would delay some of the economic efficiency gains from a LVT: namely, the efficient reallocation of land (i.e. a retired couple would otherwise have an incentive to 'downsize' from their mostly empty 5 bedroom house to a townhouse or apartment, allowing a family currently crammed into a 2 bedroom flat to move somewhere more appropriately sized). On the purely 'heartless economic side', it's such a great tax because: - It's one of the few taxes that results in a more efficient allocation of resources (most other 'large' taxes usually generate some amount of dead-weight loss e.g. income tax, company tax etc.) - It's a very stable tax base, as the base is completely immobile (you can't live in the US from a property located in India) and the tax is very difficult to avoid (it's pretty difficult to hide a large block of land or sneak it off to a tax haven somewhere). Also, if the rate is set so that it only taxes 'land rents' (unearned profits that accrue to landholders, in the form of higher land prices, due to improved amenities in the surrounding area), then it can actually increase economically activity due to the improved allocative efficiency discussed above. Again, most other taxes do the opposite (excluding Pigovian taxes, most commonly known as 'sin' taxes). - LVTs are also a 'cycle-neutral' tax. Property taxes and stamp duties, on the other-hand, are pro-cyclical (i.e. when the economy is booming, tax receipts rise considerably, and when the economy is in recession, tax receipts fall). In practice, I think this results in boom-bust cycles that have much higher peaks and much lower troughs, simply because politicians will spend the money if it's there, but seem to be highly averse to taking on debt (so pro-cyclical taxes mean the economy is more overheated during boom-times, and more depressed during busts because of the contraction in government spending). - [This is my own crazy opinion that other LVT proponents may very well disagree with] I think LVTs would improve macroeconomic-stability and increase economic productivity in the long-run. So much private capital investment gets poured into totally unproductive property speculation; capital that could otherwise be put towards some productive use (e.g. business investment via loans of equities etc.). And if you look at the past-century of economic history, you'll notice that an alarming number of recessions and depressions occurred because speculative bubbles in property markets popped (the 1890s depression, for example). Although speculative bubbles can form for other reasons, my view is that rising land prices are one of the primary triggers of property market speculation (or, at the very least, these rising land prices cause speculation to be more intense and prolonged). So yer. LVT.
• gozur88 10y ago
  I'm not sure they're drawing the right conclusions from that winning/losing graph. That area downtown is green because that's where all the toniest businesses are located, and you can't have a city that consists of only upscale businesses.
  • elgenie 10y ago
    There are significant economies of scale for infrastructure that happen with density. The amount of road surface a tall, mixed-use building requires per occupant is dramatically less than what a detached single family home does, but the latter road needs more maintenance than what the taxes on that single-family home provide for.
    • gozur88 10y ago
      Density brings costs of its own, though. There's a reason everything is more expensive in dense areas.
      • xenadu02 10y ago
        >Density brings costs of its own, though That's very self-evident. What matters is that density means costs rise at a slower rate than income and because density tends to raise prices (the area is more desirable all else equal). Most of the cost of installing water pipes is in digging up the street and paying people to lay the pipes. By comparison putting in a small pipe costs the same as a huge one. Suburbs need small pipes spread over a larger distance to reach X people. High-rises need large pipes over a much smaller distance to reach the same number of people. Even if you assume property values per person were identical and taxes identical the dense area has a massive cost advantage.
      • JamesBarney 10y ago
        And this article brings up that one reason it is more expensive is that dense areas subsidize less dense areas of a city.
        • 10y ago
• spectrum1234 10y ago
  "This isn't a political, cultural or social failing." - Wrong this is 100% a political failing. This doesn't happen in the private sector.
  • wahern 10y ago
    The author chooses to describe the phenomenon like, Psychologists call this temporal discounting. Humans are predisposed to highly value pleasure today and to deeply discount future pain, especially the more distant it is. I'm not sure that's the best way to describe it. And there are other ways to describe the basic phenomenon. But in any event the private sector is not at all immune. But because the tasks we delegate to private companies are different from those we delegate to public institutions, manifestations of the phenomenon tend to cluster into seemingly distinct categories. In the private sphere a similar phenomenon (if not conceptually identical at some level of abstraction) more often encountered is pollution. Or in Silicon Valley think of "technical debt". Both of these are costs that private actors accrue and that, because they do not need to internalize them immediately, are discounted inaccurately because of the temporal bias of the agents. In both cases, when the private actor eventually goes belly-up, other actors (public and private) are often left holding the bag to clean up the mess. And thus the original private actor has effectively imposed a hidden cost on others, intentionally or unintentionally, producing globally suboptimal results. It's easy to see how an enormous network of pavement and pipes could be created and then left to rot and blight the environment by both private and public entities. Detroit is a prime example of both. It's worth pointing out that like phenomena described by prospect theory, this temporal bias likely evolved as a heuristic device. Nothing in the future is certain--not even in probabilistic terms--and so it's not possible to foresee and accurately price all future costs today. There's no obvious alternative to the bias as a general matter, only in specific circumstances. At the end of the day, to aliens arriving on planet earth and watching the machinations of our civilization, distinctions between private and public would really be quite artificial and perhaps not even the most informative axis on which to bifurcate our economy. Both private and public actors are subject to market forces, just like both boats and airplanes are subject to gravity. The normative mechanisms we choose in our attempts to optimize how actors respond to preferences and to internalize costs are different, but rarely singular--it's always some mix of policy and currency, among other things. The so-called "free market" approach is hardly, if ever, the best answer alone.
• sliken 10y ago
  Why are high rises so much more profitable to the city? Is it just that a larger part of the infrastructure (stairwells, elevators, power distribution, water supply, sewage, and related) are privatized and managed by someone with an eye on the bottom line? Cities seem extremely poor paying for infrastructure based on performance. Water supplies should be paid for uptime, percent of the population they deliver water to, and quality of the water. Road companies should be paid by lanes * miles * years they last (according to some quality metric for common road failure methods). Bridges similar. If someone builds a building for the city they should be paid by the usable square foot and an incentive for delivery time.
• jcoffland 10y ago
  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). I'm sorry but this kind of calculation is, I believe, the real reason infrastructure in America is suffering. If only 10% of my property tax is going to infrastructure then I don't need to pay 6 times as much, I just need my local government to cut the crap and spend 60% of my property tax on infrastructure. I understand that means less government jobs but we are already kidding ourselves if we think it's a good idea to grow government to reduce unemployment.
  • Daishiman 10y ago
    Someone still has to pay for education, law enforcement, and firefighter. There's not way around it; people are paying much less for infrastructure than they should be. Sorry to you but that's the price of civilization.
    • goda90 10y ago
      Does law enforcement really need that military equipment though? And the training for that stuff can't be cheap.
      • Daishiman 10y ago
        They get it a very good discounts. Salaries and buildings are expensive.
      • slfnflctd 10y ago
        I live in a city I would consider fairly low-crime. The police hand out a lot of traffic tickets. My fellow citizens recently voted in a measure to hugely increase the police budget (in part for some of that shiny military equipment) while denying one to expand our small library. This seems like a pretty big waste of money to me, since the police don't add much to quality of life past a certain point while a library definitely does. Too many voters seem to act against their own interests too often these days.
• davidw 10y ago
  As elsewhere: I'm a member of Strong Towns, and think they're doing good things. Another one I like is the 'Market Urbanism' group - although some of the people there are very, very libertarian, there's still a mix of us so that it's not really a partisan thing. Then there are the various YIMBY groups, led by the one in the SF bay area. This is one area where I think that people can move the needle some. The issues are not partisan in the way that so many others are, and I think there's a growing movement interested in doing things differently, that's more financially and environmentally sustainable.
• erikb 10y ago
  Sorry if that hurts some American self-respect, but what's the difference between this and the Chinese housing bubble that American media always complain about? Sure some details are different, but the basic layout is the same from what I can see: Politicians had about 20 years long time of incentives to grow without really building self sustaining cities. Now the current generation is at a point were it nearly doesn't know any more what to do. Seems quite similar, doesn't it?
  • caseysoftware 10y ago
    Yes, and it's the same with public employee pensions. It's great to be able to spend (or at least commit) tomorrow's dollars today and then be long gone by the time the bill comes due.
    • pjc50 10y ago
      No, public employee pensions are supposed to be paid with today's dollars into a separate entity which manages the money in the same way private pensions do. This is why CalPERS has $300bn assets. Those are yesterday's dollars saved for today.
      • caseysoftware 10y ago
        That's a great sentiment but that is not what happened. Or (at minimum), it was massively underfunded. With regards to CalPERS specifically, it was covered here two weeks ago: https://news.ycombinator.com/item?id=13287078 https://news.ycombinator.com/item?id=13287078 and from that article: "For every $100 the city paid a police officer in 2016, it had to pay an additional $71 to CalPERS to fund payments to current and future retirees."
  • ianai 10y ago
    The everything. In the US, those cities were built in the past for uses that are now outdated or outsourced. In China, the government appears to want "the city" to fulfill some sort of ego trip. They perceive cities as more valuable than rural towns despite their culture not really being at that point. Overtime US cities have become outdated while Chinese cities are a solution in search of a problem.
• ilaksh 10y ago
  Extreme density is overrated. See http://tinyvillages.org http://tinyvillages.org
  • AstralStorm 10y ago
    How do you move around in these neighborhoods? Take a daily stroll on foot for a few hours? It does not work when you want to do anything big, say a few thousand people in approximately the same place. Those people have to get to this place, which would require efficient mass transit. The large area makes both road and fuel costs go up.
    • tropo 10y ago
      Outside of huge cities, it isn't normal to put a few thousand people in approximately the same place. It just doesn't happen. A moderate-sized city of 50000 people might put 1500 people at the main high school on graduation day. Aside from high school events like that, and the normal daily high school operation (also 1500 people), it's super-rare to get a real crowd. If you also exclude middle schools and elementary schools, crowd sizes probably top out around 100. That would be the crowd at a significant employer. In case you were thinking of night life and entertainment, that might get up to a few dozen people. It's peaceful. It's very peaceful.
  • tropo 10y ago
    It says: "maximum vehicle weight including passengers and cargo is 300 pounds" Dear my. Americans will often need vehicles with negative weight. Does buoyancy count, or would a helium balloon just be more weight? (can you deduct the weight of displaced air?)
• nradov 10y ago
  This article seems to focus overmuch on infrastructure maintenance costs. While those are certainly an important factor, most of the actual municipal bankruptcies in recent years were caused primarily by expensive union contracts and pension obligations. Declining populations and financial malfeasance were also factors in some cases. Perhaps an explosion in infrastructure maintenance costs will cause a new wave of municipal bankruptcies within the next few years but so far it's just not happening.
  • AstralStorm 10y ago
    Both are intertwined. When there is not enough money, pension funds tend to take a hit. Population will move to greener pastures. The bankruptcies are not happening, because a lot of the infrastructure can withstand 50 or a bunch more years. It has been built in say 50s - 70s so never had to be completely overhauled. In EU, the problems with replacing infrastructure built in 1940s have already hit a few times, but it was better planned after the war.
• mirekrusin 10y ago
  Wait, what? He's saying that horizontal expansion is bad? Is he really advocating vertical expansion (concentrated tall buildings)? Just compare London (horizontal) to any vertical city. London feels like so much better place to live. Low traffic (in comparison to vertical cities), parks everywhere etc. - you feel like you can breathe, not cramped in concrete walls.
  • epistasis 10y ago
    London is on the extreme side of "vertical" compared to the "bad" parts under discussion here. London is at least 5x more "vertical" (meaning dense) than the hugely expensive horizontal under discussion in the post.
  • dangjc 10y ago
    He's advocating greater density than the typical American suburb but far less than a Manhattan. More like old fashioned main streets, with mixed commercial and residential and less driveways and parking lots. Stores and apartments generate tax revenue. Pavement for cars doesn't.
  • sbierwagen 10y ago
    Lafayette has a population density of 934.5/km^2. London is 5,518/km^2.
• zkhalique 10y ago
  It's the same reason Greece was going bankrupt ... they couldn't print their own currency and run their own fiscal policy after they joined the Eurozone.
• tn13 10y ago
  Other there is another reason : Wasteful expenditure. At least in case of San Bernandino that was the case.
• windlep 10y ago
  I've seen the infrastructure thing come up for awhile now, and it's definitely true. In my area, as in others I've read of, they're smashing paved roads into gravel roads as the paved are too expensive. The thing that fascinates me is that it feels like a forgone conclusion that infrastructure costs cannot be made cheaper. Have we really hit the most cost effective, cheapest, most sustainable method of laying/replacing sewer/gas/water lines and roads? There's no innovation left at all when it comes to making pipes that are more easily replaceable without digging the entire road up? There's no brilliant ideas left at all on how to 'pave' roads so they're smooth enough in a way that costs less money, or lasts way longer? Heck, while we're talking improvements maybe we should have a way to pave a road such that we don't have such massive runoff and its more resilient to minor settling underneath without opening large potholes. I do wonder whether the shit really hitting the fan, and massive chunks of the population having their roads smashed back to gravel might shake a few new ideas out.
  • jaggederest 10y ago
    As the article says, there are plenty of solutions for these problems, individually. The predicament, as a whole, is that we cannot afford them. Infrastructure quality is, like so many things, directly proportionate to investment. You can trade off future maintenance by spending more initially, or vice versa, but you can't magically reduce both at the same time while providing the same level of service. This is precisely the same problem as Terry Pratchett talked about in the boots theory of economics: http://www.goodreads.com/quotes/72745-the-reason-that-the-rich-were-so-rich-vimes-reasoned http://www.goodreads.com/quotes/72745-the-reason-that-the-ri... The problem is that the level of economic productivity supported by (for example) a strip mall is so low that it cannot support the ongoing maintenance of the infrastructure that is required to allow it to exist. This is also true for many suburban homes and office buildings. You must either extract more productive value from the same land area and population, reduce service quality, or invest massive quantities of capital in maintenance cost reduction, which has virtually the same effect as either of the previous.
    • rubber_duck 10y ago
      >You can trade off future maintenance by spending more initially, or vice versa Umm is that really true ? Maybe it is I just don't see why this would be - if anything I would guess spending more would lead to more expensive maintenance as well > but you can't magically reduce both at the same time while providing the same level of service. Not magic - innovation.
• stmfreak 10y ago
  This article embodies a lot of magic thinking and completely avoids asking the questions about _why_ things cost so much vs. when the infrastructure was first built. Here is a clue: defined benefit pensions
• crawfordcomeaux 10y ago
  Lafayette is my hometown. The article says this isn't a cultural issue, but when a majority of cities shares the problem, that speaks to a national culture of scarcity. The desire for growth stemming from feeling there isn't enough to do, land to build on, people living there, etc. was definitely prominent in Lafayette. It's that shared mindset driving this phenomenon.
• sfifs 10y ago
  It seems to be a uniquely American practice to expect infrastructure maintenance and renewal to be funded by cities exclusively using property taxes. Cities generally act not only as trading hubs providing services to the region surrounding them, they also act as tax revenue sweeteners due to higher concentration of high income residents. Ie. they have positive externalities for the region, province or nation. While I'm certain there would be a level of corruption in city administration, it seems to be incredibly short sighted to force cities to fund infrastructure through only property taxes and such without funding from income tax the province/nation collects as what happens in other parts of the world.
  • seanalltogether 10y ago
    Cities have access to money from property taxes and sales taxes. States have access to sales tax and income tax. The state should be assisting with local budgets to level the playing field but that isn't really detailed in this article for some reason.
  • maxsilver 10y ago
    > it seems to be incredibly short sighted to force cities to fund infrastructure through only property taxes and such without funding from income tax the province/nation collects as what happens in other parts of the world. In America, many cities get some revenues like that as well. Many cities levy their own income or sales taxes, in addition to the state income/sales taxes. (NYC has a 2.9-3.6% income tax itself, Seattle has a 2.7% sales tax itself, many small cities in the Midwest have their own income taxes, etc) Cities typically also get some amount of revenue back from state taxes -- although it has unfortunately become common for some state governments to take city/road/school funding to cover spending in other places.
  • ensignavenger 10y ago
    States and the federal government certainly do help fund city infrastructure. Often it comes in the form of grants (used for capitol costs) and matching funds.
• known 10y ago
  Solution http://marshallbrain.com/manna1.htm http://marshallbrain.com/manna1.htm
• En_gr_Student 10y ago
  This suggests that China has an amazing infrastructure time-bomb waiting perhaps a generation to mow it from the pinnacle of the world to the ground. As a nation that is "in it for the long game" I am going to watch and see what they do there. -EngrStudent
• ideonexus 10y ago
  This problem can be projected out to Federal Spending as well. We can see this in the taxes paid versus tax revenue spent on urban states compared to rural [1]. Alaska gets $1.84 back in federal spending for every dollar they pay in taxes compared to the $0.79 New York gets back on its federal taxes. [1] http://taxfoundation.org/article/federal-spending-received-dollar-taxes-paid-state-2005 http://taxfoundation.org/article/federal-spending-received-d... One quibble I have with the article though is that suburban communities did not start out as luxuries or inventions of convenience. Suburban growth was actually promoted by the federal government with tax incentives in response to the threat of nuclear war. The idea was to spread populations out away from the cities, where a single bomb could kill millions. Shawn Otto's book The War on Science covers this development in great detail, which I've clipped here: http://mxplx.com/meme/2504/ http://mxplx.com/meme/2504/
• ffjffsfr 10y ago
  OK so the reason why US cities have no money is that they have grown horizontally instead of growing vertically and horizontal growth means high infrastructure cost. That's all very well, but I still dont understand why it happened. Does anyone know why US cities expanded horizontally instead of following growth patterns similar to Europe?
  • lhopki01 10y ago
    They expanded after car ownership became widespread. The older the city the more compact it is generally.
  • voxic11 10y ago
    The federal government gave cities money under the condition that they spend it on infrastructure. They did this to grab the money in the short term and their backwards accounting practices allowed them to ignore the long term costs, which are catching up to them now.
• the_gastropod 10y ago
  This sums up the main reason I'm not all that excited about electric/self-driving cars. The only scenario I see remedying our sprawling city is for gasoline prices to increase, making current levels of car travel financially painful. If we can continue driving cars cost effectively (with electric cars), I don't know if there will be enough political motivation to address our need to stop expanding cities.
• amai 10y ago
  Before saying no to higher taxes think about the value of your own property. If the infrastructure (streets, water, electricity, internet, schools, ...) becomes broken in the area around your house and garden, the value of your property will go down, too. In that sense paying higher taxes for infrastructure is also good for preserving the value of your property.
  • j_m_b 10y ago
    Illinois pays some of the highest taxes in the country. The property taxes are extremely high with some counties having the highest rates in the entire country (second only to some New Jersey counties). Yet property values have been the worse to recover since the great recession.
  • ensignavenger 10y ago
    If the value of my land goes down, the amount I pay in taxes goes down too :) That being said, I always look to get the best value for my dollars, and the way folks run government around here, it is rarely worth it to feed the beast anymore than I have to.
• Spooky23 10y ago
  This is a problem, but not the problem. Like schools, local public safety and other core government functions in incorporated cities are provided by municipal government. Broken streets and infrastructure are expensive, but engineers always overstate the costs of maintenance and replacement when they are waving the tin cup around. The acute problem is that opex is driven by police and fire salaries, pensions and workers compensation. Take those numbers and divide by 3 or 4 to get a realistic number, especially for things like water pipes that have very long service lives. The more fundamental problem is that post-war America focused investment and tax bad growth on towns and other places outside of cities, and left the costs in the cities. If the average suburban/exurban community requires 1 police/fire visit per 100 household, and urban environment requires 15-20 per 100 households.
• acveilleux 10y ago
  There's a followup article pointing out that the track of green on their revenue graph is actyually the poor part of town and going over some reason why that may be: http://www.strongtowns.org/journal/2017/1/10/poor-neighborhoods-make-the-best-investment http://www.strongtowns.org/journal/2017/1/10/poor-neighborho...
• a3n 10y ago
  The followup article linked on the same page is telling. It shows that the green areas, where positive revenue comes from, is the poor part of town. http://www.strongtowns.org/journal/2017/1/10/poor-neighborhoods-make-the-best-investment http://www.strongtowns.org/journal/2017/1/10/poor-neighborho...
• turc1656 10y ago
  Good piece, but there is another major factor that is missing entirely - the impact of debt financing and continuously rolling bonds. In addition to what the article mentions, this is the other factor contributing to the slow death of our cities. What nearly every municipality in the US has done (all municipalities BTW, not just the "cities") is to take on a debt load to finance their desired expenditure, whether it be for infrastructure or otherwise - very similar to what our Federal government has done. And at first glance, it makes sense. It's a huge expenditure so let's finance it and pay it off over time in accordance with tax revenues. The problem is that they almost never pay it off. I know that statement sounds crazy at first, but it's not. Sure, they pay off bonds as they come due. But they pay them off and roll them into new bonds - that's the problem. This has been fueled by steadily decreasing bond rates over the past 30-33 years. This allows the municipalities to roll over their debt at a lower rate when it comes due, which reduces their interest payment and also allows them to borrow more at the same time. Here's an example - It's 1/1/1985 and the rate on the 10 year treasury note is 11.65% (yes, that was the real rate), so our city was able to get a rate of, say, 12%. They issue a 10 year bond for $5 million to build a school and some road maintenance. They make the required coupon payments (usually semi-annually) using tax revenues - and that amounts to $600,000 each year. They keep doing that until just before the principal comes due in full on 1/1/1995. The idiots running the city haven't saved the 5 million required to pay off the principal so what do they do? Well they take a look at the market and see that the 10 year treasury note is now 7.19% so they can get around 7.5%. So they issue a new bond for $5 million for another 10 years and now only have to pay $375,000 in interest coupons every year. But they are still collecting 600k at the given tax rates which leaves them 225k in the green. So they can either spend that every year or they can use that as the coupon payment on an addition $3 million bond and they get it right now! Even if some scrupulous treasurer or township board member were to say that they should just spend the 225k and not take on any additional debt, someone will point out to them that over 10 years that's $2.25 million and here they get to instead use that money to spend a total of $3 million - these guys feel like they are making money taking on debt. And as long as interest rates keep going down and they don't need to repay principal, it all works so they agree. Now 1/1/2005 rolls around - they owe $8 million but rates are 4.5% so they can get 4.75%. So they rollover the $8 million for a yearly coupon of 380k. They also use the remaining 220k to open up a new bond for ~$4.6 million (4,631,578.95 to be precise) - and now they can still pay the same 600k in interest that they have been for decades but they have an outstanding debt issuance of $12.6 million. Now, if you are still reading this far and fully grasp the horror of the above, you can begin to understand one of the many reasons rates can't go too far up anytime soon. We have been Japan'ed, and this is just part of the reason of how it happened. Also, I want to point out that in the above example no increase in the tax rate is needed to help pay for this, even without population growth at all. Tack on population growth, productivity and technological progress, as well as the increase of the money supply by the federal reserve over that time period and in real terms it becomes even less. Now think about how much your taxes have increased on a percentage basis over the same period on the state and municipal levels and it should become clear just how horribly mismanaged everything has been for quite some time. Rates can't really go much further south so even if they hold constant and never increase...all of our broke ass cities and towns will only be able to refinance at the same rate (best case scenario). This means they can't increase expenditure at all for anything unless they make taxes sky high to support the spending. The free money game is over.
• jaddood 10y ago
  So what's the main reason?
• ShabbyDoo 10y ago
  I've always been opposed to folks who grumble about suburbs and urban sprawl. I thought that new developments and neighbourhoods meant a growing population and a bigger tax base. I've always lived in the suburbs and love it. I still think there's lots of great things about living in the suburbs, and there will always be demand for it. I like how the author says that sprawl isn't the problem, the problem is that new developments are large scale, single-purpose, and with no room for improvement or addition. The graph/map showing how downtown and poorer areas bring in more tax is what did it though. Even just thinking about ploughing in the winter makes it pretty clear that winding suburbian roadscapes are costing the city a lot more than we pay them. That's without mentioning schools, fire halls, garbage collection, etc. I guess one of the more difficult issues is convincing North Americans that they don't need a private single-family house, large yard, 2+ cars, etc.