Gambling with the Future of a City

The Rohnert Park City Council recently made an interesting and gutsy decision.   They drained their public improvement reserve account to build a new sewer main.  They didn’t just draw down the reserve fund, they drained it.

Like most cities, Rohnert Park requires developers to pay for the infrastructure needed to support new projects.  But with lending for new development still constrained during the economic recovery, developers found they couldn’t borrow the money to build the sewer main.  Therefore, they couldn’t proceed with development.  This was a problem for Rohnert Park because the city relies on impact fees from new development to maintain existing infrastructure.

Against that backdrop, the City Council decided to fund the sewer themselves in the expectation that the resulting impact fees will replenish the reserve fund and provide the additional impact fees to maintain the infrastructure.

It’s a fine example of what StrongTowns calls the Ponzi scheme of municipal infrastructure finance.

As city halls have struggled with municipal finances in recent years, a frequent refrain of critics is that cities “should act like households” and adjust expenses to match income.  In general, I agree with the argument, but perhaps not in the way that the critics have intended it.

As just one example, all households to which I’ve belonged have put aside money for rainy days.  Strictly balancing the budget wasn’t good enough, having a surplus in most years was the goal.  Along with having a realistic expectation of what those rainy days might look like.  But most electorates aren’t willing to give cities enough funds to put aside for the future.  Nor can a city look for a better paying job.

But if we accept the analogy of city hall as a household, how should we view the Rohnert Park decision to risk the entire capital improvement reserve funds on a new sewer main?

To me, it’s the equivalent of borrowing cash from the till where one works and catching a flight to Las Vegas to put the funds on red.  If a household made the decision that the City Council made, a referral to Gamblers Anonymous might be in order.

But with that said, it’s possible that the City Council made a rational, albeit unfortunate, decision.  Given the development history of the city and the financial straits in which it finds itself, gambling city funds on a sewer main might have been reasonable.

But even if that’s the case, I hope that at least one councilmember looked at the decision they were making and asked the city came to gamble so heavily on a single decision.  And whether a different model might have avoided the situation.

Of course, the answer to that question is urbanism.  As a Smart Growth America study recently confirmed, urbanist development requires less infrastructure to support development.   A stronger commitment by Rohnert Park a decade ago, or even two decades ago, might have prevented the need for the current gamble.

As of now, the City Council needs to hope that ball comes to rest on red.  But with a commitment to more urbanism, perhaps they can avoid gambling again.

(Note: I’m aware that the new sewer main will allow continued development of Sonoma Mountain Village, which has a strong urbanist flavor.  However, there remains a deep irony between an urbanist project and the need for a huge city infrastructure risk to kickstart the project.)

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