The Fiscal Unsustainability Of Sprawl

Almost a year ago, I described how Omaha, Nebraska was turning some of its paved roads back to gravel:

I bear no ill will towards Omaha: I used to have relatives there, and visited often many moons ago. But much of the growth in Omaha, even though it is a city, is exactly like that of a suburb. So you’ll never believe what happened next! (boldface mine)

It’s a model of comfortable mid-American living, with one unusual exception: thanks to a quirk in how Omaha developed, about 300 miles of streets in these nice neighborhoods are pitted with potholes almost big enough to swallow an SUV.

The bad roads have been both an anomaly and a source of complaints for years. But recently, they’ve become the center of a mini-crisis after local officials began dispatching crews to tear up the asphalt in the neighborhoods and turn the streets back into dirt roads, much like what existed in the city’s frontier days…

Nearly every U.S. city faces a backlog of needed roadwork as streets built decades ago wear out, but the situation is especially vexing in Omaha, a sprawling city of 435,000 people with 4,800 miles of road and not enough tax revenue to maintain them.

Decades ago, a number of developers sought permission to lay down asphalt roads, rather than longer-lasting concrete, in several sections in the middle of town, and to skip installing curbs and gutters preferred by the city. The city agreed, with the understanding that homeowners be responsible for occasional repaving. Some substandard roads also were in areas once outside the city but that were later annexed.

For years, the arrangement held up. But as the roads began to age and crumble, and as new residents replaced the original homeowners, resentment intensified about a city government that maintained some neighborhoods while ignoring others.

“It’s a matter of fairness,” said Omaha streets superintendent Austin Rowser. “Some property owners paid for better streets and a minority didn’t.”

He added that the city simply can’t afford the roughly $300 million bill to fix all the substandard streets.

That doesn’t fly with residents who say that dirt roads or crumbling pavement are unworthy of a well-off community with a growing population, a tiny unemployment rate and four Fortune 500 companies

According to urban planners, the dispute is a case study in how short-term deals that cities make about seemingly minor issues can backfire when the cities and circumstances change.

I’ll say. Keep in mind, Omaha is a reasonably prosperous city in a low-cost state. And it still can’t afford the current costs of road maintenance. What chance do less affluent areas have?

By the way, how do you think those property values are doing along those dirt roads…

Well, the New York Times finally got around to covering this, but they portrayed as an example of ‘urban’ decay. That’s ridiculous as this part of Omaha has a suburban density–as is the case with many cities that sprawl as much as some suburbs do. Because this is exactly what happened in too many suburbs:

Omaha’s most problematic streets were mostly built by developers decades ago who skimped on costs by paving with asphalt instead of concrete, and by forgoing sidewalks and sewers. In other cases, Omaha annexed suburban-looking neighborhoods with roads not built to city standards.

They are not ‘suburban looking’, they are suburban density. Which means they are fiscally unsustainable:

Something that’s lurking in the background of the U.S. economy, and which will erupt with a fury in ten years or so is the need to replace suburban infrastructure: underground wires, pipes, and so on. This is something new that most suburbs, unlike cities, haven’t had to confront. A suburb that was built in 1970 is long in the tooth today, and time only makes things worse. No suburbs that I’m aware of ever decided to amortize the future cost of repairs over a forty year period–that would require an increase in property taxes. In fact, many suburbs never even covered the expenses of building new subdivisions, never mind worried about expenses decades down the road.

Worse, there’s a tax base problem. That is, the value of property per unit of infrastructure (e.g., the property tax base per square foot of water main) is much lower in the suburbs than it is in cities. Relatives who live in a wealthy suburb close to D.C. (homes go for $900,000 give or take) are in a subdivision with about 40 homes on 25 acres, with a rough property value of $45 million. In D.C., I live in a building assessed at a little over $50 million that covers a quarter of an acre (the population of these two groups is about the same). Once suburbs start having to repair their infrastructure, it’s going to get very expensive to live there (and that doesn’t even include the transportation ‘tax’ of suburban living). Keep in mind, the suburban development I’ve described is definitely on the high end of things–many places will be worse off.

…While Paul Krugman’s recent column about urban inequality and gentrification has been lighting up the internet, to a considerable extent, it’s irrelevant. As I’ve discussed before, cities–not metro areas, but actual cities–will never hold but a fraction of the U.S.’s population (though hopefully an increasing fraction). The problem we will face is how to keep suburbs economically viable, both in terms of infrastructure and quality of life. Part of that will have to involve increasing ‘urbanization’ of the suburbs, while other suburbs will be left to decline. But this, not gentrification (which can be reduced with progressive taxation) is a much more difficult problem. Not only will there be resistance by homeowners to changes, but the very, well, infrastructure of the suburbs doesn’t lend itself to increasing density. Very basic and expensive things like altering the road grid (or, more accurately, turning the suburban knot into a grid) will meet a lot of political resistance, even if the funds to do this can be found.

Most people really don’t care about cities, except as a way to discuss their sentiments about those people (never mind that many of those people live in suburban areas). But this looming suburban crisis will hit many people literally where they live. People will have to change, in very fundamental ways, how they live and work. It will be nasty and brutal.

And somehow I think massive tax cuts for the wealthy and for corporations aren’t really going to solve this problem.

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