The case against infrastructure

STRONG TOWNS: A bottom-up revolution to rebuild American prosperity by Charles L. Marohn Jr. (2020)

I wish I’d read this book before I posted anything on my blog about infrastructure.  Charles L. Marohn Jr., an engineer and land-use planner, calls attention to something important and obvious, once pointed out, but which I overlooked.

It is that infrastructure involves a maintenance cost as well as a benefit, and the cost can and often does exceed the benefit.

When you buy a house or a car, the longer you have it, the more it costs to keep it in repair.  The same is true of public roads, water and sewerage systems,  and other physical infrastructure.

The long-range cost of maintaining a road or a water and sewerage system can exceed the economic benefit of the system.  Benefit can be measured in the willingness of the property-owner to pay taxes and fees in return for the benefit, or in the revenue per acre from the land whose value is enhanced by the infrastructure.

Neglect of this truth is a main reason why so many American cities are in financial trouble these days.  The other reason is the financial obligations, such as employee pension funds, that they’ve taken on over the years.

Something beneficial was done, or some problem was solved, in the short term by taking on a long-term obligation.  Future growth was supposed to take care of the long-term obligation.  For many decades, it did.

I’ve posted a good bit on my blog about declining infrastructure.  I’ve quoted estimates by the American Society of Civil Engineers about the huge cost to bring existing U.S. infrastructure up to snuff.

But I failed to make a distinction between spending to maintain existing infrastructure and spending to build new infrastructure.  As I’ve said, it’s not feasible to be constantly building new stuff if you can’t afford to keep up the old stuff.  I can’t figure out from news accounts how much of President Biden’s infrastructure bill is for maintenance and how much is for new construction.  

Marohn wrote that the USA doesn’t need one brick of new infrastructure, but only to maintain what it’s got.  I wouldn’t go so far, but I understand what he’s getting at.

We in the USA have come to the end of the era of growth, Marohn wrote.  U.S. cities are limited by what they can afford, and should not make capital investments that do not produce a return.

Now, this kind of reasoning sounds like the rationale given for red-lining poor and majority-black neighborhoods in the bad old days.  The decision to disinvest became a self-fulfilling prophecy.  Nowadays this is understood to have been a terrible wrong, whose consequences continue today..

But Marohn argued that the poor neighborhoods aren’t usually the ones that don’t pay their way.  He gave examples from his home city of Brainerd, Minnesota.  

On one side of a street is an Old and Blighted Block, on the other a New and Shiny one.  On one side are  nine marginal businesses, including a pawn shop, a bankruptcy attorney, a couple of liquor stores, a barbershop and a neighborhood restaurant.  On the other is a Taco John restaurant franchise, with plenty of green space and off-street parking.

But the assessed value of Old and Blighted is $1.1 million.  New and Shiny is only $620,000.  Furthermore the Old and Blighted businesses hire local accountants, attorneys, printing shops and other services; it’s not known whether Taco John does.  And the nine marginal businesses may well employ as many full-time equivalent workers as Taco John.

Furthermore Taco John wasn’t always at its current location.  It left behind a building some blocks away that is now in a state of disrepair.  After failures of several previous occupants, it now houses a restaurant serving Asian food.    

Why did Taco John move?  It got tax subsidies to build on the new location.  When the present property runs down, it will very likely move again and, if so, will very likely ask for new tax subsidies. 

One of Brainerd’s biggest and most thriving businesses is the Mills Fleet Farms complex on the edge of town, which houses a big box store, an auto dealership and a gas station.  Its assessed value is $14.4 million, but that is spread over 17.4 acres.  

The nine square blocks of downtown Brainerd have 132 businesses with a combined assessed value of $18.9 million.

In terms of value per acre, that’s $1.1 million per acre for downtown vs. $630,00 per acre for the shopping complex.  So what should Brainerd’s priorities be in terms of helping business?

This pattern is not unusual.  In terms of tax revenue per acre, Marohn wrote, a study by the Urban3 team showed that on average:

  • Older neighborhoods outperform newer neighborhoods.  That’s especially true if the older neighborhood was built before 1930 or the newer one after 1950.
  • Poorer neighborhoods generally outperform richer neighborhoods, although highly gentrified areas can be exceptions.
  • “Blight” is no indicator of lack of revenue per acre.
  • Developments close to a city’s traditional neighborhood core outperform those further out.
  • The more stories a building has, the higher the revenue per acre.
  • The more dependent on auto traffic a development is, the less the revenue per acre.

A city’s investment priority should be the properties that generate the most revenue per acre. Marohn said.  This means that infrastructure in some neighborhoods will be abandoned.  Most North American cities are going to contract within the next 30 years, he wrote.

Marohn said it took him a long time to come to this realization. He first applied it to his own home. He lived in a house on a large lot in a cul-de-sac at the end of a leafy street.

He calculated the cost of providing services to his home, and realized that it could never be covered by taxes in an amount he can afford, but only by cross-subsidies.

He has since moved closer to downtown, where, he says, he enjoys a higher quality of life. He has lost weight because he does more walking and bicycling.

Keep in mind that a city’s income must exceed its outgo, he said.  That doesn’t mean a city must maximize profit, but that the cost of anything must be justified by its benefit and must be paid for.  The national government can print money, he said.  A municipality can’t.

Improvements should be in small, incremental, low-risk steps, not major projects, he wrote.  City officials should figure out what to do by walking through neighborhoods and talking to people, not be conducting expensive studies or conducting public meetings which few attend.  

Think of the easiest, cheapest thing you can do that will make things better, then do it right away, he said; then think of the next easiest, next cheapest things and do that.

He said cities should’t demand property-owners spend more than they can afford.  Building codes must prohibit obvious threats to safety and health (i.e., dangling bare electric wires).  Beyond that, prioritize code requirements and require contributions of, say, 3 percent of income to an escrow fund to pay for needed long-range improvements (i.e., sprinkler systems).  The idea is to make it possible for someone to start with virtually nothing and end up with something.

As for the unproductive large-lot residential neighborhoods, Marohn said homeowners should be allowed to incrementally increase the intensity of land use.  This includes construction of starter homes on empty spaces, and allowing single-family homes to add apartments or be converted into duplexes, without special permits or the neighbors’ approval. 

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Charles Marohn wrote that he started out in life as a typical conservative Republican.  Now, he said, he is a libertarian on the federal level, a conservative on the state level, a progressive on the county and municipal level and a socialist on the neighborhood level and at home.  

The lower the level of government, the more responsive it is likely to be to the needs of the people.

I understand his reasoning, but there are some things that only the national government can. do.  Just on the level of infrastructure:

  • Federal land grants made the transcontinental railroads possible.
  • Federal law authorized the REA co-ops, which extended the electrical grid to rural America.
  • The federal government created the interstate highway system.
  • Federal action is probably necessary to create universal broadband Internet service.

Rebuilding American prosperity, if it is possible at all, will require some sort of national industrial policy. 

I respect Marohn.  He is an intelligent man who pays attention to what’s going on around him, draws conclusions from what he sees, and makes decisions based on those observations, whether or not it agrees with what everybody else thinks.  Also, he is willing to change his mind based on facts.  

These are unusual qualities.  As George Orwell once wrote, to see what is in front of your nose requires a constant struggle.

I thank my friend Perette for recommending and lending me this book.

LINKS

Strong Towns web site.

My Journey from Free-Market Ideologue to Strong Towns Advocate by Charles Marohn for Strong Towns.  This is a readable seven-part series about the learning experiences that led to his book.  

The Smart Math of Mixed-Use Development by Joseph Minicozzi for Planetizen Features.

The great suburban Ponzi infrastructure development by Robert Steuteville for Public Square.

The Infrastructure Bill Has Passed | What Now? on Strong Towns.

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