I shared a chart yesterday in Part One without including a clear explanation. The chart was borrowed from a recent op-ed by Charles Marohn published on the MarketWatch website:
Like some urban planners, Mr. Marohn thinks deeply about how our communities are growing here in America, and perhaps how communities grow in other parts of the world, and he wonders what we are getting ourselves into. Are we building communities that are sustainable, or are we making massive investments in infrastructure that we will never be able to maintain over the long haul?
Mr. Marohn explained one of the basic problems of insolvent communities this way:
The explanation has much to do with the pattern of development we adopted in the mid-20th century. We began to build in a manner oriented toward cars, not people on foot. All the acres needed for traffic flow, buffering, and parking are wasted, non-performing space. They cost us a lot of money, yet yield a pitifully low ROI.
This is never clearer than when we look at the apex species of the car-centric development pattern: the big-box retail store. Many cities are eager to land one of these. Yet when we examine their financial productivity in value-per-acre terms, we see that these stores — generally cheaply built, one-story buildings with a parking lot that dwarfs the store itself — produce a tiny fraction of the concentrated value of traditional, mixed-use downtown development.
These numbers from Asheville, N.C., make the contrast clear. One is for a typical Walmart store near the edge of town; the other is for a six-story mixed-use building, once home to a JC Penney store, that is in the heart of downtown.
The basic argument here is that communities all across America have embraced automobile-centric sprawl — suburban homes, shopping malls with massive parking lots, and a vast network of water and sewer lines, and gas lines, and other infrastructure — and that this development pattern amounts to an unsustainable Ponzi scheme. With each new piece of “economic development” (and with each new “tax incentive”) our cities and towns and government districts are digging us deeper and deeper into debt, instead of getting us out of debt.
Do Mr. Marohn’s numbers accurately reflect the situation in Archuleta County?
A friend of mine commented on Mr. Marohn’s article yesterday, in reference to our own automobile-centric suburban core area, Pagosa Lakes — described by its own property owners association as “6,600 properties situated in 27 unique subdivisions encompassing 21 square miles.” This is an area of Archuleta County where, for example, the Pagosa Area Water and Sanitation District (PAWSD) installed 300 miles of water lines with expected 40 year service lives.
Many of those water lines are now 40 years old, and the network is now beginning to show signs of failure. According to current PAWSD estimates, replacement of its water lines will ultimately cost the community $200 million.
“Functional insolvency indeed!” my friend concluded.
Ten years ago, the Town of Pagosa Springs was struggling with declining tax revenue, thanks to the Great Recession… after almost two decades of steady revenue growth. Sales tax revenues were falling; property values and property taxes were on the decline. Of course, it wasn’t merely a Town government problem; nearly every business owner and nearly every employee was feeling the pinch, especially those involved in our faltering construction industry.
To address the problem, the Town Council, under the leadership of Mayor Ross Aragon, let go of their interim Town Manager, Tamra Allen — an experienced urban planner who was also heading the Town Planning Department — and hired a curious replacement. The new Town Manager was a college professor named David Mitchem, a person with no previous experience as a municipal administrator, but at least a little bit of experience with “economic development” in Castle Rock, Colorado. And what the Town Council wanted most, in 2009, was “economic development.” Hell, the entire country was desperate for “economic development” in 2009.
Following the departure of Ms. Allen and her assistant Joe Nigg, the Town’s Planning Department was left without a single employee… which was perhaps not such a horrible thing, because at that time almost no one was building anything in Archuleta County. But it did leave our municipal “planning” in the hands of an administrator with little or no planning experience. The planning, however, was rather simple and straightforward.
Attract a Walmart store.
As far as I can tell, that was David Mitchem’s main assignment. Three years later, the Town Planning Commission approved the plans for a new Walmart store in Aspen Village. According to the County Assessor website, the Pagosa Walmart occupies about 10.6 acres and has an assessed property tax valuation of just under $2.2 million. That’s an assessed value of about $208,000 per acre.
For comparison, one of the oldest businesses in Pagosa, Goodman’s Department Store, occupies about 0.17 acres in the middle of downtown, and has an assessed property tax value of $105,000. That comes to about $630,000 per acre.
Both Walmart and Goodman’s are one-story retail stores. Goodman’s, however, does not provide parking on its own property. Shoppers typically park on the street or in the overlook parking lot, and walk to the store. The walk is about the same distance, from the overlook parking lot to Goodman’s, as from the middle of the Walmart parking lot to its front door.
Although Mr. Marohn is essentially accurate — that American communities are involved in a massive growth-funded Ponzi scheme that’s ultimately unsustainable — one thing was left out of his calculations if we want to relate them directly to Archuleta County.
Yes, the oldest store in Pagosa Springs — Goodman’s Department Store — pays a property tax rate, per acre, that’s six times the rate paid by Walmart.
But the Town of Pagosa Springs does not run on property taxes. The Town government runs on the collection of local sales taxes, and the arrival of Walmart provided a huge boost in those tax revenues.
All the other governmental entities in the community, however — the Fire District, the School District, the County government, the various water districts, the Health Service District, the Library District — rely heavily upon property taxes.
But we’ve created a town that discourages property taxes.