Of Ponzi Schemes and Urbanism

You’re probably scratching your head over “Ponzi schemes”, wondering how urbanism and Bernie Madoff might fit together.  Well, they don’t.  Actually, they probably do, but it’s not the point I intend to make today.

Instead, I want to explore a different Ponzi scheme, one that the website StrongTowns.org argues is even more dangerous to the commonweal than anything Madoff conceived.

StrongTowns.org contends that many drivable suburban developments are well-disguised Ponzi schemes.  That cities need new projects at the urban fringe to collect impact fees and new tax revenues to maintain the existing infrastructure of previous projects at the urban fringe.  And that in a few years, the same cities will need yet more new development at the urban fringe to maintain the infrastructure being built for the current development.

And if their contention is correct, yeah, that does look pretty much like a Ponzi scheme.

Nathaniel Hood of StrongTowns recently published a blog post that made this argument regarding a shopping mall development in Mankato, Minnesota.  It’s an odd blog post, beginning as an election commentary before veering into an argument that Hood seemed to have made many times before and was now incapable of not making.

At first, I had intended to include the link in my post on election results and wish lists for the next four years.  But, I decided that this link needed its own blog post.  I made that decision mostly because the argument made by Hood, if true, would be profoundly insightful and should impact the way we view land-use decisions.  I also had another reason, but I’ll hold that for the bottom of this post.

I wrote “if true” because I have reservations.  Not that I have any grounds to think that the writer is wrong, but because, if his hypothesis is true, it’s game-changing.  And also because he may have made a misstep.

In his condemnation of a past land-use decision by Mankato, he describes the additional cost to the city as “upwards of $1 billion”.  I agree that poor land-decisions can impact a community in its pocketbook, but $1 billion for a Minnesota city of fewer than 40,000 residents?  Really?  That’s an awfully big number.  I’ll need some proof of that number before I’ll buy into the hypothesis.  And until that proof is received, I’ll withhold a full embrace.

But Hood described the land-use dynamic in Mankato in a way that justified further investigation of the theory.  He noted that the city wished to encourage a downtown renaissance and had therefore adopted mixed-use zoning and aggressive marketing of the downtown amenities.  But at the same time, Hood reported that the city was encouraging development at the urban fringe that would divert the economic vitality needed to sustain a revitalized downtown.

That description of the Mankato land-use approach should seem eerily familiar.  I suspect virtually all cities with historic downtowns have taken the same split philosophy, nominally supporting downtown rebirth while encouraging drivable suburban developments that sap downtown.  It’s an almost unavoidable trap for most city councils.

And that gets to the other reason why this StrongTowns blog post deserved a separate blog post.  The implications of the StrongTowns hypothesis and the $1 billion price tag Hood puts on the impact of a bad decision justifies a careful consideration of the StrongTowns arguments.  Petaluma Urban Chat, a monthly gathering of folks interested in urbanism, will be doing exactly that.

StrongTowns offers a “Curbside Chat” to present their philosophy and the justifications behind it.  And the Curbside Chat comes with a supporting booklet.  The booklet will be the first selection of the bookclub component of Petaluma Urban Chat.

If you’d like to explore the reasoning behind the $1 billion estimate and more of what StrongTowns has to offer, you may join us at our December 11 meeting.  Or you may read the booklet on your own.  Either way, I encourage the effort.

The booklet can be found here.   You can read it on your screen.  You can print a copy at home.  Or I’ll be printing copies at minimal cost for some folks and would be happy to add you to the list.  Email me if you’d like to have me print a copy for you.

I’m eagerly awaiting the discussion.  And I’m looking forward to all of us expanding our knowledge of urbanism.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (davealden53@comcast.net)