Marohn: Most cities are on a financially unsustainable path

Chuck Marohn spent three hours Thursday morning (April 3) denuding decades-long accepted conventional wisdom of local government investment in infrastructure and economic development. His message was simple: If you don’t stop doing that, you’ll go broke.

His “Strong Towns” presentation was attended by more than 160 representatives of local governments and municipal development groups from around Arkansas, and was held in the auditorium of the Donald W. Reynolds Center on the University of Arkansas campus.

“Strong Towns” is a concept founded and promoted by Marohn. His work is focused on helping city’s improve their budgets, budgeting process, bolster local tax bases, reduce taxpayer burdens, promote economic diversity and help community leaders “plan for long-term viability.” The official title of the workshop is, “Strong Towns: The Intersection of Land Use, Transportation, and Financial Resilience.” Marohn is a professional engineer, member of the American Institute of Certified Planners and earned a master’s degree in urban and regional planning from the University of Minnesota.

Michelle Halsell, managing director of the UA Applied Sustainability Center, said the conference “brought together a broad array of cities and counties representing many people around the state.” Communities represented included Bentonville, Clarksville, Conway, Fayetteville, Fort Smith, Greenwood, Harrison, Hot Springs, Texarkana and Van Buren. Officials attending included Van Buren Mayor Bob Freeman, Fort Smith Mayor Sandy Sanders, Springdale Mayor Doug Sprouse and Conway Mayor Tab Townsell. The event also was sponsored by the Center for Community and Economic Development with the University of Central Arkansas.

‘GROWTH PONZI SCHEME’
Marohn opened the conference by getting to the point, noting that the “current path” of local government spending and economic development incentives “is not financially stable” for the long term. He said in the 1950s the average debt service for cities was 2% of their budget. That has risen to 16% in recent years, he said.

More than 90 minutes into his message he said most in the audience are probably asking, “‘Are you saying that nothing we are doing makes financial sense?’ No, it doesn’t.”

The primary problem, Marohn said, is that federal, state or private sector funding will result in a large outlay of money – to build a road, building or some type of facility – that appears to be an economic benefit. And it may be in the short term. The problem is that the local government is then on the hook for the future maintenance and service – police, fire, water, sewer, etc. – of the infrastructure.

“We are in a sense exchanging a short term benefit for an unknown long-term liability,” Marohn said, adding that the liability is more costly when the upfront spending pushed outward the geographical boundary of the city or county.

He said what followed World War II was a local government policy that “more is better” in terms of growth, infrastructure and economic development. He called it a “growth ponzi scheme” that “creates the illusion of wealth” until the long-term costs begin to exceed the upfront benefits.

“Cities have now become the dumb money at the card table,” and are expected to throw around subsidies, build infrastructure, provide tax exemptions and do other things to recruit businesses, Marohn said.

He also said individual and local government growth has shifted from growth through savings and investments to growth from debt accumulation.

“We needed the growth so bad, we encouraged folks who could not afford homes to buy homes,” Marohn said in a reference to the housing bubble that hit the U.S. in 2007-2008.

RETURN TO TRADITIONAL DEVELOPMENT
To control costs and better manage growth, Marohn said local governments must move away from the build-it-and-they-will-come model – “It’s a horrible economic development strategy.” – and return to something closer to one-block-at-a-time development patterns prior to WWII. He said that type of growth was “highly adaptable and very flexible and resilient” to socio-economic change.

“There is a reason our ancestors built this way. They built this way because it was foolproof,” he added.

Marohn said government investments do create economic return, but officials have to ask and answer “a more sophisticated question” about how the return best recovers costs so the local government may remain solvent and fund future projects. He encouraged government officials to quit “chasing these elusive developments at the edge” of the city and instead “look inward for developments” that might also improve quality of life and deliver more financial bang for the buck.

“We do not lack for growth. What we lack is productive growth – growth that creates wealth generation after generation,” Marohn said.

Part of that return requires local governments to adopt different policies toward highway infrastructure. Marohn argued that too often cities expand roads and streets for purposes of safety or efficiency, but the result is negative in terms of return on investment. He said spending millions of dollars to shave a minute or two from transit time may not be worth other impacts of widening streets – loss of neighborhoods, reduced pedestrian access, higher future maintenance costs, etc.

He said most highway development policies emphasize accommodating people within an auto-dominated environment. He said “productive places” accommodate autos within an environment dominated by people.

“The tragedy today is that we’ve spent so much money moving cars, and gotten so little in return for it. … When we design places around people, we get enormous wealth and success,” Marohn said.

Marohn specifically cited the decision in most communities to build new schools “on the outskirts of town” to take advantage of cheap land and possibly have room for large athletic facilities.

“That doesn’t make sense,” Marohn argued. “Instead, we need to retrofit our places so our kids can walk to school again,” instead of building public facilities that “move people away from core neighborhoods.”

OTHER ‘STRONG TOWNS’ ASSERTIONS
• Sometimes cities need to allow citizens to make changes outside existing protocols. Citing neighborhood actions in Memphis in which citizens made slight changes without city approval, Marohn said local governments “don’t need better engineers and better planners,” they need more citizens “with the ability and the freedom to step up” with their innovative ideas outside the confines of government control.

“You will never identify the high-return investments in your city with a visioning session,” Marohn said, adding that no amount of public hearings with flip charts and priority stickers would have discovered the small block renovation in Memphis that the citizens made happen without city permission.

• Local governments have to do a better job of looking within their borders to support smaller projects that may have a smaller impact than a big economic development deal, but will not be a financial burden on the city in the long run. He said many cities “overlook the nickels and the dimes” of small but beneficial projects and instead pursue big ticket items.

• Local governments need to focus on “rational responses,” to complex problems, Marohn said. He said the thickness of a building code book or the number of boards and commissions related to growth and development should be re-evaluated.

“We have reached this point where we have a complexity of problems facing us … Instead of kicking the can down the road for a couple of years, we need to have rational responses,” Marohn said.

AUDIENCE RESPONSE
Michael Lejong, a resident of Greenwood, and an architect with Fort Smith-based MAHG Architecture, was one of seven from Greenwood to attend the audience. All seven, according to Lejong, are members of an economic development group newly formed by the city of Greenwood.

“It really causes you to look at how you revitalize existing areas rather than just look for the next new big infrastructure thing,” Lejong said after Marohn’s lecture.

Springdale Mayor Doug Sprouse said Marohn’s comments may prove helpful in how the city approaches development plans in the downtown area and older neighborhoods.

“I really got some good information that we can use to look at some things we are doing and maybe do them in a really different way,” Sprouse said. “Maybe we need to look at a better way to utilize the assets we already have.”

Van Buren Mayor Bob Freeman agreed with Marohn’s assessment that change is needed, but noted that it will not be easy.

“It is really a different change in thinking from what the culture is. … And so it is easy to listen and talk through it (but) difficult in implementation because of that culture,” Freeman said.

He also said having a large group of people at the presentation from Fort Smith, Greenwood and Van Buren could help with a regional focus on smarter development.

“I think by having all those folks there, it’s not somebody, you know, a lone voice crying out there. It can cause some discussions to happen. … I think those discussions will continue and they have to continue,” Freeman said.

Lejong said a regional focus would be ideal outcome.

“I would love for this (conference) to kickstart a regional discussion,” he said.