Strong Towns Presentation for CommunityMatters in Newport Vermont

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

to become financially strong and resilient.

• Why are our cities and towns so short of resources despite decades of robust growth?

• Why do we struggle at the local level just to maintain our basic infrastructure?

• What do we do now that the economy has changed so dramatically?

3 Questions

BIG Concepts

1. The current path cities are 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.

Even if it market returns, we can’t grow our way out of it

Macro Trends - Housing

Macro Trends - Housing

Commercial Real Estate

Commercial Real Estate

Retail: A glut of excess space • Between 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

4 Mechanisms of Growth

Can we grow our way out of this?

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

1. Government Transfer Payments

2. Federal/State Transportation Spending

3. Debt, both private and public

4. The Growth Ponzi Scheme

1. Gov’t Transfer Payments

2. Federal Transportation Spending

Mn/DOT Statewide Transportation Plan

August 2009

• $65 billion in projected needs

• $15 billion in projected revenue

• $50 billion 20-year shortfall ($2.5 billion/year)

*Shortfall equates to an $0.83/gal gas tax increase

2. State Transportation Spending

3. Private & Public Sector Debt

4. Growth Ponzi Scheme

Revenue from new development…..

…is used to pay for existing liabilities.

The “pain free” solution … New Growth

4. 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.


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.


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Cumulative Cash Flow - One Life Cycle

Afton Hills 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

North Sleuter 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

Backus Wastewater System

Sewer Rehab Project

• $3.3 million total cost

• $26,830 per Backus family • Median household income: $26,875

Tower Historic Harbor

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

Bemidji Convention Center

Convention Center & Hockey Rink • $75 million clean-up, & infrastructure (State, TIF, local sales tax & debt) • Total investment of $5,500 per family • After 2 years of missed projections, bailed out by local businesses

Elk Run @ Pine Island

Bio Business Park in a Small Town • $34 million for DDI intersection to development • $600k local infrastructure in the ground • Total investment of $11,500 per family • Payoff in 12 years – if they dropped everything & dedicated to infrastructure

Implications

Serious implications for the future

• The “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 service.

Future Risks and Volatility

Fuel Prices Interest Rates

Currency Fluctuation Black Swan Event

Dead Ideas

• We can continue the current development pattern and not care about the Return on Investment (ROI).

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Cumulative Cash Flow - One Life Cycle

Dead Ideas

• Our local financial problems can be solved by bringing in more growth.

Dead Ideas

• A large employer, particularly a manufacturer, will solve our financial problems.

Dead Ideas

• Property owners have a right to develop their property and the public then has an obligation to maintain the infrastructure.

What does a resilient community look like?

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.

STEP 1:

Building an environment that captures a positive ROI

$1,136,500

$803,200

$317,992 Total

$23,284 Per acre

$28,744 Total

$82,125 Per acre

You can fit 40 Pub500s in Target footprint

Mankato - 1870

STEP 2:

Leveraging Public Infrastructure

• New “Justice Center”

• $X million

• County Gov’t & DOT Offices

• $X Million

STEP 3:

Revitalizing is about Incremental Urbanism

What is incremental urbanism?

• Small is beautiful

– Little Projects have a Big Impact

• Many Projects & Experiments

– Some will succeed. Some will fail

What we’ve been doing …

This is what we should be doing …

Learn how to DIY.

These are great, but …

It needs to goes beyond yoga & bike lanes …

This is what we should be doing …

STEP 4:

Connect

Strong Towns Network

Peer collaboration

Expert advice

Strong Towns University

BIG Concepts

1. The current path cities are 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.

Strong Towns Presentation for CommunityMatters in Newport Vermont

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