Monthly Archives: July 2008
Back in May, CEO’s for Cities released a report entitled “Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs.” The report is available on the “resources” page of the RenewLV website.
A brief companion video is now available on YouTube. As of this posting, the video has generated 120,000+ views and 800 comments.
Municipal fiscal health is a MEGO issue. I had not heard of MEGO issues prior to a class with Representative/Professor Bob Freeman (PA,136th). MEGO. My eyes glaze over. A MEGO issue is either so witheringly dull or seemingly irrelevant that most people simply doze off at its mention. I suspect that municipal fiscal health is just such an issue for a great many people.
In March 2007, the Pennsylvania Economy League (PEL) released Structuring Healthly Communities: Revenue Generation and Fiscal Health. PEL analyzed the fiscal health of municipalities across the state from 1970 to 2003 and reached conclusions that should seriously disturbing.
Perhaps most importantly, the results dispell the myth that somehow only older municipalities -our cities and boroughs – are the only municipalities that will face this challenge. Given PA’s current structure of local government and methods of generating municipal revenue, the question is not IF, but WHEN fiscal distress will hit a particular city, borough or township.
PEL’s examination of statewide data over a 33-year period revealed a path toward municipal fiscal distress that can be broken down roughly into 5 steps:
1. Prosperity with low taxes.
2. Increasing demand for [municipal] services and gradually rising tax rates and service fees.
3. Reduction in non-core services.
4. Reduction in core services.
5. Loss of tax base and distress.
Think about municipalities in the Lehigh Valley. What is their current state of fiscal health? Where was it 10, 20, 30 years ago? Where will it be in 10, 20, 30 more?
The question about future fiscal health cannot be answered with complete precision, but a bit of common sense seems to get us quite far. For instance:
- Development and growth result in property and income tax revenue for a city/borough/township. Fees for things like permits and water/sewer connections also provide municipal revenue.
- Development and growth also bring with them demand for municipal services and infrastructure expansion.
- Both the physical layout and the type of development impact the demand for municipal services and the cost of providing those services.
- Once a municipality is built-out and no longer flush with revenue from new development, the only place to turn for revenue to cover the cost of municipal services and infrastructure is to current residents, the existing tax-base — here begins the descent described in the PEL report.
This report highlights both the need to change the way our cities/boroughs/townships generate revenue and pay for services as well as the need to ensure that our pattern of development serves to minimize the cost of municipal services and infrastructure. Doing so would improve the fiscal health of our cities/boroughs/townships. Providing municipal services (water/sewer, public health, police, planning, etc.) on a regional scale is an attractive solution because it saves money and frees up resources to address issues of interest to the community (farmland and open space preservation, school improvements, more police officers, property tax relief, etc.)
The collapse of housing bubble, the credit crisis, and rising energy costs are calling greater national attention to the benefits of smart growth.
John Norquist, head of the Congress for the New Urbanism (CNU), was featured on CNN’s “Issue #1” discussing the numerous benefits of mixed-use, walkable urbanism.
Christopher Leinberger of the Brookings Institution and Arcadia Land Company and an expert on real estate and housing issues. He has been tapped for comments for comment in numerous articles across the country (from the NY Times to the Morning Call) following the publication of an article in The Atlantic Monthly entitled “The Next Slum?”.
Forbes and the Wall Street Journal are starting to take notice as well:
Forbes recently profiled the 10 most fuel-efficient neighborhoods across the country.
The Wall Street Journal article, “Suburbs a Mile too Far for Some: Demographic Changes, Higher Gasoline Prices may Hasten Demand for Urban Living,” is an indication that they are slowly getting on board.
While high gas prices are a boon to New Urbanism and other “smart-growth” planning concepts, in practice such mixed-use projects often are harder to execute — from acquiring local approval to securing Wall Street financing — than the traditional suburban tract-housing model. The challenges for cities are considerable, from investing in public-transportation systems to creating incentives for developers to accommodate the new urban housing demand.
While zoning and subdivision ordinances have provided (and still do in many cases) disincentives for mixed-use walkable development, a recent report produced for Standard and Poor’s indicates that progress is being made on the financing front. The report concludes with the following statement:
So, even as overall sales volume drops, relatively stronger demand for housing will limit price declines in neighborhoods with shorter workcommutes, better schools, and easier access to parks, recreation, and retail centers. Because of sharp increases in gasoline prices, living closer to work has become an even more important consideration in the location decisions of homebuyers. When combined with large inventories of unsold housing on the edges of urban areas, this shift in preferences will mean that prices for homes in outlying neighborhoods will continue their more rapid decline and will be slower to rebound when housing markets finally start to recover.
These articles are a small sampling of the increasing light that current energy, credit and housing troubles are shining on the causes and symptoms of sprawling development.