Is Olympia’s Capital Facilities Plan Unsustainable?

Updated at 18:00 PST. (See below under the Mahler embedded video.)

I came upon a document produced by Strongtowns.org last week—linked via the Atlantic Cities Place Matters feed (which is absolutely terrific by the way)—that is timely given our recent deliberation on the draft of the 2012 Capital Facilities Plan. The document discusses the very issues on which the Olympia Planning Commission will advise the City Council. This is of crucial importance because the planning commission is the one group of people whose only job it is to consider the long term growth management issues. While that is arguably ultimately the purview of the city council, the council’s political life depends on shorter term political success. Events occurring in 10 or 15 years will not likely the sink the career of a currently elected city council member, although that certainly happens from time to time.

The basic premise of the document is local infrastructure project finance is unsustainable or is a Ponzi scheme. In exchange for short term benefits (e.g. increased tax base for a new development) every city in the country takes on long term liabilities (e.g. street maintenance on the roads that lead to the development). The calculus is entirely flawed because the debt taken on is much greater than the assets created.

In any case, there are a couple of noteworthy points in this document. See e.g. page 18

A suburban subdivision has a paved street that has deteriorated and needs replacement. The street serves the subdivision only; there is no through access. A project is commissioned to remove the existing surfacing, fix the underlying street base and resurface the street. The total cost of the project is $354,000.

We asked the question: Based on the taxes being paid by the property owners on this street, how long will it take the city to recoup its half of the project cost?

The answer: 79 years.

We then asked: If the city were to raise taxes to cover these costs within the expected life cycle of the street, how much would the local tax rate need to go up?

The answer: 46% immediately with an additional 3% annual increase for each of the next 25 years.

Having made points similar to this, the document progresses:

American cities and towns have long sought to create new growth as a way to increase the local tax base and enhance tax revenues. The way we have financed growth—exchanging near-term gains for long-term liabilities—has encouraged an inefficient use of our infrastructure investments. More than two generations into this approach, local governments are overwhelmed with infrastructure to maintain. Doing more of the same approach will only make the long-term problem worse.

Olympia’s 2012 Capital Facilities Plan’s largest line item is maintenance—road maintenance. In fact, the plan is putting everything else on the back burner in order to accommodate maintenance that can no longer be put off. One of Olympia School District’s largest line item is parking area re-pavement.  Another point made elsewhere in the document is the erroneous but commonly accepted notion that it is the developer’s job to develop private property while the local tax base’s job is to maintain the infrastructure. This point is explored in greater depth than I need to do so here, but needless to say there are flaws in the sustainability of that practice.

StrongTowns.org offered several strategies for overcoming these critical issues. (I’ll leave aside the impact fee discussion which is Olympia’s response to bridging the gap and has been well fleshed out elsewhere.) Though they did offer these suggestions, they did acknowledge that there isn’t a cookie cutter solution—they don’t buy the notion that any town would be able to overcome the problems they articulate by some one size fits all approach. That is comforting or frightening depending on your personal Uncertainty Avoidance Index (disclaimer: UAI describes cultures, not individuals).

Some of these strategies are:

Develop a Real Capital Improvement Plan

The first step is to compile a complete inventory of all infrastructures the community is currently obligated to maintain, their condition, an estimate of their remaining life and approximate replacement/maintenance costs. With modern GIS and database systems and a cadre of trained volunteers, most of this information is reasonably obtainable.

We call this a real Capital Improvements Plan to contrast it with the standard approach to CIP’s, which is more of a wish list of future projects than a balance sheet of the public’s future obligations.

Adopt strategies to increase the public return on investment

Instead of a standard zoning map, the community should create a map that establishes “high amenity” and “low amenity” areas. Areas of “high amenity” are those where an increase in the level of public investment will create a proportional increase in private sector value. These are places where the ROI can be increased by making incremental improvements to the public realm beyond simple maintenance.

Prioritize Walkability

*Sigh*

The entire document and the RSS feed contain terrific analysis—well worth a subscription to anyone who has an interest in these issues. As luck would have it, most recently there is a wonderful piece on the fact that we no longer walk to school. Why would we?

We don’t want to walk because, at a conscious or unconscious level, we realize that the stuff we’ve built isn’t worth walking by.

We can’t think about these issues on the fly. If we want to create communities that we want to live in, it requires planning, dedication, and gulp sitting through and participating in meetings that are hardly worth sitting through. At least I console myself with those thoughts as some of the meetings grind slowly to a depressing nadir like Mahler’s Lieder.

**** Update ****

A commentator was kind enough to point out that my impact fee line above was misleading. To be clear, impact fees do not cover, and are not contemplated to cover ongoing maintenance costs that new development requires. They are designed only for the initial capital expense (e.g. new roads). The long term maintenance is the local government’s obligation.

I didn’t want to get into impact fees with this post and I mentioned them only because I wanted to avoid accusations of leaving them out. Damned if you do; damned if you don’t, I suppose.

For more information on impact fees generally and their specific authorization in the Revised Code of Washington (as well as the local statutes governing them), see the Municipal Research and Services Center of Washington.

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