How Strong Towns Principles Relate to Sioux Falls — Municipal Ponzi Scheme

I was sent this article, that I found very interesting relating to the urban sprawl of our city;

Since 2010 the City of Sioux Falls has annexed 3996 acres of land into the city. That is almost 400 acres per year. How much tax revenue did that additional property bring in? How much did it cost to annex those areas? How much will it cost to replace all the associated infrastructure when it needs replacement? The answers to those questions are hard to piece together (maybe a good use of tax dollars would be to hire a company specializing in this kind of data to pull it together for us). In the meantime, we have some anecdotal data to look at.

So Detroit is a cautionary tale for cities caught up in a municipal Ponzi scheme. Here in River City things look pretty good . Sales tax revenue is floating our boat right now. We have money in the budget. Marohn refers to this as the illusion of wealth. It looks like we have money but the residential developments on the edge of town — which don’t generate sales tax directly — are new and don’t require replacement. When that infrastructure requires replacement the property tax revenue collected in those areas probably isn’t going to be enough to pay for it. Other areas of the city that are generating revenue will have to subsidize those areas — until they can’t. It happens slowly then all at once. Welcome to Detroit.

Ironically, several years ago when I got into Strongtowns, one of the main reasons I was drawn to it’s message was what they were saying about Urban Sprawl. It soon will be very expensive to live in Sioux Falls, if we are not already there.



4 comments ↓

#1 D@ily Spin on 03.25.20 at 12:14 pm

Sioux Falls must find more revenue. It comes from sales tax. Sales are weak. I suspect there will be another point from 7 to 8 percent. It’s enough to justify a 6% Walmart in Brandon or Tea. Gas is cheap now and there’s more economical housing in the burbs. Sioux Falls has exorbitant bond debt. There’s nothing left for infrastructure and social services. Crime is high. Quality of life has become better outside city limits.

#2 "Very Stable Genius" on 03.25.20 at 12:47 pm

This is actually an indictment of pure capitalism. Capitalism is dependent upon a strong planned obsolescence and or finding new markets. Else, it all collapses.

The only way to prevent this is by defining the revenue intensity of a given neighborhood or the distance from the city core of substantial revenue collecting, then correspondently raise property taxes in those areas that are most distant to the core area of substantial revenue collecting.

But, good luck getting that one passed. The enactment of such an idea would make school boundary issues look like a piece of cake. Plus, it would make it harder to build affordable housing outside of the core area of substantial revenue collecting due to higher property taxes in the outer areas.

#3 rufusx on 03.25.20 at 2:05 pm

VSG “…The only way…” is an overstatement. There are other ways. Here’s one – front foot fee. An infrastructure maintenance fee is charged on the basis of the number of feet a property has adjacent to a street. The fee rate is the same for everyone – so people on big sprawling properties pay more to those in small-lot compact neighborhoods. Unlike one-time charges assessed against a property for street reconstruction – as is dome now, expenditures of this FF fee is NOT restricted to the street adjacent to the property collected from – and can be spent throughout the city on an as-needed basis.

It is not only “suburban sprawl” (face it – the nature of sprawl is not really “urban”) that leads to a great expense to repair/replace infrastructure. Smaller towns around SF have the same replacement cost problems – without the growth – because they don’t collect as much per capita sales tax as does SF – AND the properties in those small towns are not as highly valued/taxed. But there they are – having to deal with paying to replace – in some cases – 100 + years old infrastructure and not the $$$ to do it with.

#4 "Very Stable Genius" on 03.25.20 at 3:05 pm

rufusx,

I appreciate your constructive criticism, but you are assuming that outer-lying properties are bigger. My home , which is a part of the old sw side of town, or now, sw core, has a lot more feet adjacent to the street, then most new developments, with many of these developments having a value per house, which is greater than mine. So their taxes would even be higher, and also higher for affordable housing in the outer-lying areas that have smaller lots, too. Thus, making affordable housing less affordable.

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