OmahaMarch 21, 2012

The mission of Strong Towns is to support a model for growth that allows America's towns to become financially strong and

resilient.

Curbside Chat BIG Concepts1. The current path cities are on

is not financially stable.2. The future for most cities is

not going to resemble the recent past.

3. The main determinant of future prosperity for cities will be the ability of local leaders to transform their communities.

Macro Trends - Housing

Macro Trends - Housing

Macro Trends - Housing

Commercial Real Estate

Commercial Real Estate

Retail: A glut of excess spaceBetween 1990 and 2005,

consumer spending per capita rose 14% (inflation adjusted), yet retail space per capita rose 100%.

We have six times the retail space per capita of any European country.

Vacant retail space is up 42% since 2006.

Source: Redfields to Greenfields

Mechanisms of Growth

Can we grow our way out of this?

The “Mechanisms of Growth” we have used during the modern era:

Government Transfer PaymentsFederal/State Transportation SpendingDebt, both private and publicThe Growth Ponzi Scheme

Gov’t Transfer Payments

Federal Transportation Spending

Federal Transportation Spending

Federal Transportation Spending

Private Sector Debt

Private Sector Debt

Growth Ponzi Scheme

Revenue from new development…..

…is used to pay for existing liabilities.

The “pain free” solution: New Growth

Growth Ponzi Scheme

Investment in the community….

…creates new growth……which increases property tax revenue.

Strong Incentives• Initial cost to the public for new growth: minimal• Benefit to the public budget for new growth: substantial

The catch is that the public agrees to maintain the improvement forever.

Growth Ponzi Scheme

The critical assumptions to this strategy:

1. Either growth continues at ever accelerating rates, or

2. The pattern of development ultimately generates more revenue than it costs to maintain.

Invalid

Assumptions

Local Street Project

Road Improvement Project

• $6,600 cost per property

• 50% of costs assessed• 37 years to recoup public contribution from adjoining tax base

Local Road Rehabilitation

Road Maintenance Project

• $354,000 total cost• 79 years to recoup public expense from tax base• To break even requires a 46% increase in property tax rates

Local Road Project

Road Improvement Project• Costs to be 100% assessed (no public cost)• Long-term maintenance paid by the public• $154,000 estimated long-term maintenance cost• $79,000 estimated long-term revenue from served properties• To break even requires a 25% increase in property tax rates

Industrial Park Investment

Sewer and Water Extension• $1.9 million total cost• 25 lots served• $76,640 per lot• $8 million of new commercial/industrial development needed immediately to break even

Industrial Development

Industrial Park Development

• $2.1 million inflation-adjusted total

cost• $6.6 million in improvements induced• Payback from current conditions happens in 29 years if all revenue devoted only to debt

Small Town Wastewater System

Sewer Rehab Project

• $3.3 million total cost• $26,830 per Backus family• Median household income: $26,875

Investment in New Growth

Harbor Rehabilitation Project• $9 million dredging and infrastructure project• $4.2 million additional for infrastructure rehab• Total investment of $45,000 per family• Payoff in 71 years – if all $32 million in new development happens immediately

Growth Ponzi Scheme

Growth Ponzi Scheme

Growth Ponzi Scheme

Private Sector Debt

Implications

Serious implications for the futureThe “Mechanisms of Growth” we have

become accustomed to are waning.Local governments are going to be forced

to absorb the local costs of the current development pattern.

This can’t be done in the current pattern of development without large tax increases and/or large cuts in services.

Future Risks and Volatility

Fuel Prices

Interest Rates

Currency Fluctuation

Black Swan Event

The New Economy

1950’s – 1980’s: Emphasis on growth through savings and investment.

1980’s – 2010: Emphasis on growth through debt accumulation.

New Economy: Emphasis on building resiliency.

What’s the solution?

Strategies

Don’t double down.

Strategies

Adopt strategies to increase the public’s Return on Investment for infrastructure

Low Amenity Area

High Amenity

Area

High Return Investments

$1,136,500

$803,200

Placemaking Principle

Within neighborhoods and urban areas, a Strong Town uses complex streets to equally accommodate the full range of transportation options available to residents.

Del Prado BlvdCape Coral

Length: 2.6 milesCost: $42 million

$3,059/ft

Placemaking Principle

A Strong Town utilizes a system of interconnected parks and civic structures to provide value to property owners within the community.

Placemaking Principle

Parks, greens, squares and civic buildings provide value when they enhance the public realm, create memorable landscapes and provide for spontaneous gatherings.

Placemaking Principle

A Strong Town requires age diversity in order to sustain itself. Designing neighborhoods for safe, independent living at all stages of life is critical for a Strong Town.

Curbside Chat BIG Concepts1. The current path cities are on

is not financially stable.2. The future for most cities is

not going to resemble the recent past.

3. The main determinant of future prosperity for cities will be the ability of local leaders to transform their communities.

How you can help us…

1. Read, listen and watch our stuff. Put it to work. Pass it on.

2. Sign up and fill out a survey we send you.

3. We are a 501(c)3 funded by donations.

4. Work to build Strong Towns.

www.StrongTowns.org

www.CurbsideChat.org

www.StrongTowns.net