Purpose

To consolidate, disseminate, and gather information concerning the 710 expansion into our San Rafael neighborhood and into our surrounding neighborhoods. If you have an item that you would like posted on this blog, please e-mail the item to Peggy Drouet at pdrouet@earthlink.net

Wednesday, September 3, 2014

The Growth Ponzi Scheme in L.A.

http://pricetags.wordpress.com/2014/09/02/the-growth-ponzi-scheme-in-l-a/

September 2, 2014

Strong Towns advocate Charles Marohn maintains that “our post-World War II pattern of development operates like a classic Ponzi scheme, with ever-increasing rates of growth necessary to sustain long-term liabilities.”
… government benefits from the enhanced revenues associated with new growth. But it also typically assumes the long-term liability for maintaining the new infrastructure.  This exchange — a near-term cash advantage for a long-term financial obligation — is one element of a Ponzi scheme.

The other is the realization that the revenue collected does not come near to covering the costs of maintaining the infrastructure. … In America, we have a ticking time bomb of unfunded liability for infrastructure maintenance. The American Society of Civil Engineers (ASCE) estimates the cost at $5 trillion — but that’s just for major infrastructure, not the minor streets, curbs, walks, and pipes that serve our homes.

The reason we have this gap is because the public yield from the suburban development pattern — the amount of tax revenue obtained per increment of liability assumed — is ridiculously low. Over a life cycle, a city frequently receives just a dime or two of revenue for each dollar of liability. The engineering profession will argue, as ASCE does, that we’re simply not making the investments necessary to maintain this infrastructure. This is nonsense. We’ve simply built in a way that is not financially productive.
Every so often, an article comes along that pretty much proves his point.  For example, in the New York Times of Sep 1: Infrastructure Cracks as Los Angeles Defers Repairs.
LA

With each day, it seems, another accident illustrates the cost of deferred maintenance on public works, while offering a frustrating reminder to this cash-strained municipality of the daunting task it faces in dealing with the estimated $8.1 billion it would take to do the necessary repairs. The city’s total annual budget is about $26 billion.

… the sheer size of Los Angeles, its reliance on the automobile and, perhaps most important, the stringent voter-imposed restrictions on the government’s ability to raise taxes have turned the region into a symbol of the nation’s infrastructure woes.
Even fiscal conservatives eventually see the problem:
Kevin James, a conservative talk-show host who ran for mayor last year and was appointed by (LA mayor) Mr. Garcetti to lead the Board of Public Works, said a sales-tax increase was needed to deal with a serious threat to the city’s well-being.

“A lot of people are going to say they feel overtaxed,” Mr. James said. “I’m not saying we’re not. But it means going to the voters, as I am prepared to do on behalf of Mayor Garcetti, to make the economic argument that $26 a year, which is what you would spend on a half-cent sales tax increase, is a lot better than $830 a year to fix your car.”
Unfortunately, they’re still missing Marohn’s point: it’s not failing to make the investment; it’s failing to build the right kind of community that can pay its way in the long run – maintenance costs included.