Kansas GOP Insider (wannabe): Subsidizing Growth -- Probably Not an Awesome Idea

Tuesday, April 19, 2016

Subsidizing Growth -- Probably Not an Awesome Idea

This is something our elected officials need to consider -- the Growth Ponzi Scheme -- especially in this upcoming state legislature election season.

It appears the upcoming state races are shaping up to be races between education spenders and conservatives (ex. Dinah Sykes vs. Sen. Greg Smith), and races between people who are going to take the approach that the state government needs to step out of city affairs and conservatives. (Ex.Tom Cox vs. Brett Hildabrand). 

Cox is also probably going to use the "Give ALL the Money to Fund School Administrator's Vacation Homes" approach. I am not going to belabor this campaign issue much. It's been tried and failed, practically last week, but liberals gotta lib, so expect the pigs at the public school funding trough to be hangry this summer and fall.

Cox's secondary issue will be local control. We're going to see a lot of local control-issue candidates this cycle, and this is why I am linking to a series of articles about what the Growth Ponzi scheme, penned by Charles Marohn, a civil engineer and found of Strong Towns. 

Conservatives are going to need to be able to discuss these local control issues, or so-called lack of local control issues, with a dumbed down populace. 

In this series of articles, Marohn theorizes that Americans grew cities after World War II through 1. government transfer payments; 2. transportation spending; 3. debt; and 4. the Growth Ponzi Scheme.

"Cities routinely trade near-term cash advantages associated with new growth for long-term financial obligations associated with maintenance of infrastructure," he writes in the first article.

The second article showcases a number of case studies.

"(Initial growth) costs (cities) relatively little. If the growth happens, they get the tax revenue. If it does not happen, they are out relatively little. This all works find until the end of one life cycle, when large-scale maintenance or replacement is needed. At that point, the costs vastly exceed the ability of the city to pay. And this is where they Ponzi scheme aspect kicks in, because what is the solution to his unsolvable problem? In American of the post-WWII era, that's easy: The solution is more growth."

The third article -- complete with graphics -- models how the cash flow of a well-run city with steady, continuous growth appears. It's not a pretty picture in the long term, and it's the model of a well-run city.

"In reality, that is not the pattern most cities experience," he writes. "Most cities have a phase of rapid growth followed by stagnation and decline..."superimpose the financial underpinnings of the American model of development, and the results are even more devastating -- a flood of liabilities all coming due right at the time that growth is starting to wane."

In the fourth article, Marohn, shows how the first generation of suburbia was built on savings and investment. The second generation was built on debt -- unprecedented levels of it. He theorizes that the cult of growth has shifted the U.S. economy from an industrial one to a consumption based one.

He notes: "When you take away the suburban growth related jobs from our economy, what you are left with is heart surgery and KFC workers."

It's a little frightening.

The fifth article in the series wraps a bow on the first four: "Will this public project generate enough tax revenue to sustain its maintenance over several life cycles?" 

He writes that it's time we start insisting that our places show a positive financial return, which will require a completely different approach to building our cities.

Most of what Marohn writes is a little over my head, but after watching the Cult of Growth become more and more cult-like and watching city and state officials give away the farm in return for the promise of jobs! jobs! jobs! and growth! growth! growth! I think it's probably past time to have a real discussion about the ways in which we grow our economy. We place almost no value on sustained, reasonable growth, and instead place all value on new things-- new roads, new buildings (that may be vacant within 20 years). 

All that glitters isn't gold, and this election cycle, I think we're going to see plenty of people campaigning on how the state needs to step aside and allow cities to subsidize growth in more and more expensive ways. It will be an ironic discussion, considering we have a Governor (and by extension, sorry friends, the incumbents in his party) hell bent on subsidizing growth in the form of a horse arena in Kansas City, Kan.

I don't necessarily agree with all of Marohn's conclusions, but this is definitely a discussion worth having.  Unfortunately, I think we'll be hard pressed to see any officials saying it may be time to halt the great tax giveaways for growth's sake.


  1. For a better look at what this means in action, you can visit www.astrongerhays.com. Some of us are paying attention and trying to change, but when the state (with the blessings of conservatives I might add) created TIFs and CIDs and STAR bonds, etc... Communities are forced to use them even if they don't want to. Tell a developer no once and all of the sudden you hear about how everyone else is willing to give them x, y and z and then they go to the media and get the public all whipped into a frenzy about how great their business will be for the town. Then when you say no all of the sudden you're evil because you're anti-business.

    Then the flip side of this conservatives right now really don't want to talk about is the property tax cap and how it IS anti-local control and long term, really doesn't fix the high property tax problem in our state... And really may make it worse. If local property taxes are high, you fix it by changing your local leaders. That's the only sure way to fix pretty much anything.

    1. Anonymous is right. IMO the truth is somewhere in the middle between Marohn and the local officials that don't have a clue.

  2. http://www.strongtowns.org/journal/2016/5/4/the-hays-document

    Just thought I'd leave this here. Again, I'm not 100% in the tank for Strong Towns, but I think Hays is onto something others are not. This document was created by government officials... normally something like this would come from Kansas Policy Institute or the like...