A Memo from Minnesota: Cities need to rethink growthGuest column by Samuel Western — October 22, 2013
When it comes to pouring new concrete, curb and gutter, Charles “Chuck” Marohn wants municipalities across America to slow down and do the math.
Cities and counties, said Marohn, have gotten so far ahead of themselves in funding new roads, sewer and water projects that they are hopelessly in debt.
The nation is culturally trained to look at development in a positive way, he said. “When we get new development, our public coffers suddenly seem very flush. The catch is that we agree to maintain all of that stuff … forever. We agree we will fix the roads, replace the sewer systems, and keep those pumps running indefinitely.”
“It’s a Ponzi scheme. Don’t get seduced by those annual (city or county) audits,” he said.
Marohn is co-founder and CEO of Strong Towns, a Minnesota-based organization that describes itself as non-profit, non-partisan, and focused on helping America’s towns achieve “financial strength and resiliency.”
Marohn spent the second week of October in Wyoming, speaking in Jackson, Lander, Saratoga, Laramie, and Douglas, bent on dispelling what he sees as certain mythical financial assumptions, primarily the idea that growth increases a city’s tax revenue.
It’s just the opposite, posits Marohn. The current pattern of development “is to build places that cost us more in the long run than what it generates in wealth for the community.” If this continues, “there’s no way we can avoid becoming insolvent or defaulting on our obligation.” The University of Wyoming in 2002 did a study that similarly suggested that communities need to pay more attention to the costs of community services to proposed new development.
Marohn’s ideas generally found a warm reception during his Wyoming tour, but not total acceptance. “His presentation was interesting, but I’m not sure how useful it was,” said Mike Glode who runs Shively Hardware in Saratoga. “It was too simple. He’s basing his math on assessed valuation alone, not sales tax or other economic considerations. That might be a proxy in Minnesota, but not here in Wyoming.”
Marohn also discredits the penchant for building out-of-town business parks. Daniel Furphy, chief executive officer for the Laramie area Chamber of Commerce took exception to that idea, during Marohn’s presentation at Laramie City Hall.
“About five years ago, GE came here and wanted to build a research center,” said Furphy. “They said, ‘show us sites where we could build.’ We had nothing. Nothing. We found a site on the north side of town and told them we could have site ready in two and one half years. They (GE) said, ‘no, you don’t understand, we’re ready now.’ So we’ve got to do some (business park development) like this.”
Questioning development logic
Marohn took on the broad picture of current development gospel. He said that, over the long term, there’s only two ways the current development model could pencil out: “Either growth will continue at an ever accelerating rate with low cost to the taxpayer or the pattern of development will cause general overall prosperity and exceed long-term cost.”
The first solution is a mathematical impossibility, said Marohn, and the second is highly unlikely.
Marohn received a degree in civil engineering and went on to get a master’s in urban planning. These two disciplines are “the ying and yang of city building. You would think – if you weren’t involved in (either of) them – they would be intricately involved. But they (engineering and planning) don’t talk to each other at all. They have completely different priorities and completely different objectives.”
Although what Marohn espouses is unorthodox, even modestly radical, he hardly comes across as a bomb thrower. He’s married to his childhood sweetheart, a 40-year-old father of two girls, a church-goer who says he’s never voted for a Democrat in a national election. He favors argyle sweaters and a modified flattop for a haircut.
To prove his point about the un-sustainability of development, Marohn goes through real examples – he proclaims a deep adversity to theoretical models – in his native Minnesota of what development actually costs. In one residential development, the city spent $354,000 in repairing roads. “Based on the property taxes collected from these residents of that development, it will take 79 years to recoup the expenses. That road will never last 79 years,” he said.
Then he skewers what he considers another shibboleth: the profitability of commercial property. It’s generally accepted that residential property development loses money: i.e., the property tax revenue rarely pays for the development costs. To offset the infrastructure bill, municipalities often mix in commercial development, but that long-term math is also suspect, says Marohn.
“We traditionally look at commercial properties as our cash cow,” he said, then gave an example of a commercial park that required upfront infrastructure costs of $2.1 million but, using the revenue generated from the park’s occupants, was burdened with a 29-year payback schedule.
Even if the finances seem sound on commercial endeavors, municipalities need to re-think the basic idea of justifying a development on the basis that the residential development will lose money but the commercial property recoup the cost. “I’ve never known any corporation that loses money on 90 percent of its transactions but makes it up on the last 10 percent,” he said.
Marohn entertains a low opinion of conventional or Euclidian (as it’s called in planner parlance) zoning. During his presentation, he showed a PowerPoint slide of his hometown of Brainerd, Minnesota, circa early 1900s, designed and built, he said, by lumberjacks. But from a planning and design standpoint, “These people were brilliant. The placement and symmetry of the buildings are beautiful. Financially, it’s very strong and resilient. You would kill to have a place that looks like this.”
Then he asked the audience: “how thick was their zoning code? How many committees and commissions did they have to go to get permission to build something? How much tax subsidy did they have to give out to attract businesses to town? How many linear feet of sewer pipe did they have lay in order to attract new growth?”
Instead, said Marohn, jettison micro-managed land planning rules, as in: you can have 29 lots, not to exceed five acres and the access road must be paved. “Get rid of those lot sizes and road dimensions. Instead, say the long-term costs of the subdivision must balance. In all likelihood, it will end up as one big lot.”
Avoid business parks and build anew in town
Marohn took on the idea of out-of-town development, including business parks, in his discussion with Furphy, chief of Laramie’s Chamber of Commerce.
Furphy said, “We don’t have any place in the city to build a technology park, so we’ve got to do it a little bit on the edge. So what do we do? We’ve got all these graduates coming out of the University of Wyoming and they would like to stay here. We don’t have the jobs. So we’ve got to try to create some to keep them here,” said Furphy.
Marohn disagreed on two counts. “My first gut reaction to anyone who wants to come in is (to ask), OK, how much is this investment going to be worth? How much are we going to get back from this project versus how much are we’re going to spend? Industries – especially high tech industry – change so fast. So am I going to make this huge multi-generational investment?”
Secondly, “It’s not true that you (in Laramie) have no place to put technological innovation centers in your downtown. We’ve driven around Laramie. You have tons of underutilized space in the city,” he said.
Marohn calls these underutilized areas in downtowns, “missing teeth.”
“Jobs,” said Marohn, “are result of productivity in place, not the other way around. You don’t create jobs and get productivity. You create productivity then you get jobs.”
Even in Wyoming where state generosity towards new companies runs high (for example, the state has given $12.25 million thus far in grants to Microsoft for the construction of its data center in Laramie County) communities are going to be stuck paying the maintenance on the infrastructure, said Marohn.
Isolated technology parks are a modern planning fad and fading fast, said Marohn. “The old model is to build a huge (tech center) campus out on the edge of town. Yet all these national tech companies – with the exception of Apple and they’ve taken a lot of heat from it – are locating in core downtowns. They are building their neighborhood campus. The idea of building an isolated campus for a bunch of high tech employees who like hanging around in coffee shops and bike around town – that’s not a successful model,” said Marohn.
Instead, Marohn suggests that municipalities build in small, incremental stages that avoid long-term debt.
Mike Glode of Saratoga, while he objected to some of Marohn’s arguments, painted a picture that in some ways supported Marohn’s conclusion.
Glode cited his hardware store in downtown Saratoga as an example of how Marohn’s calculations based on assessed valuation miss a lot of what he believes economic development can mean in Wyoming.
Glode defines the assessed valuation of his store as “mild.” But the economic influence on “downtown Saratoga is huge. We’ve got 10 employees. We provide payroll and those people turn around and spend that money in other shops in the downtown,” he said.
It sounds like investing little by little, over time, in downtown.
“No family builds a wealth by going to a casino and putting it all on red. Neither do communities. The way to build wealth is to save and invest a little bit, all the time, over many years,” said Marohn.
— Samuel Western of Sheridan is a university lecturer, poet and U.S. regional correspondent for The Economist. Author: Pushed Off the Mountain Sold Down the River: Wyoming’s Search for Its Soul (2003) and A Random Census of Souls (2009). He is currently on contract with the former director of the Sonoran Institute, and the Institute paid for Marohn’s tour.
REPUBLISH THIS: For details on how you can republish this or other WyoFile content for free, click here. If you enjoyed this story and would like to see more quality Wyoming journalism, please consider supporting WyoFile: a non-partisan, non-profit news organization dedicated to in-depth reporting on Wyoming’s people, places and policy.