I wanted to share with you some analysis of a capital improvement project happening in my town, on my own street actually. While I firmly believe in the principle of maintaining what you have, I wanted to use this project to point out that practicing it requires restraint as well. As we've seen many times on Strong Towns, "maintain" can quickly become "upgrade" in the presence of available money.

Pre-WWII Neighborhood in McKinney, TX
Pre-WWII Neighborhood in McKinney, TX

The project in question will reconstruct two streets, Griffin and Pine, highlighted yellow in the above map:

  1. The roads will be rebuilt to the city's standard  width (26 feet), along with a new ADA compliant sidewalk (4 feet).
  2. To accommodate the increased width, the existing ditch systems will need to be replaced with underground drainage. There are no performance issues with the current ditches.
  3. Additional utilities improvements will be required due to the two above items.
  4. The total distance of the two streets is about 800 feet.

Cole Street, to the north and marked with "Ex." in red above, was rebuilt to the same specifications last year. Let's take a look at it on Streetview:

Cole Street: Nice sidewalk, a little bit too wide when on-street parking is not used. Some people will drive too fast here since it is a long straight with no stop signs.
Cole Street: Nice sidewalk, a little bit too wide when on-street parking is not used. Some people will drive too fast here since it is a long straight with no stop signs.
Cole Street: Better with some vehicles parked on the street. Most everyone would drive at a safe speed here. Trash cans on the sidewalk isn't ideal though.
Cole Street: Better with some vehicles parked on the street. Most everyone would drive at a safe speed here. Trash cans on the sidewalk isn't ideal though.

Now, let's take a look at a portion of Pine Street which the project will upgrade on Streetview:

Pine Street: Ditches in blue, vehicles parked partially on the road highlighted in green.
Pine Street: Ditches in blue, vehicles parked partially on the road highlighted in green.

I walk both of these streets every single day with my dog, and have not had any issues on either. Cole Street handles a bit more traffic, so the sidewalks are helpful. Pine Street is only used by people accessing the homes on adjoining streets, and rarely do I see more than 5 cars parked on it. Walking in the street here is perfectly safe.

Overall, I think many people would consider Cole Street to be "nicer". As a property owner adjacent to the project, I would like having my house on a street like that. But, if I take off my property owner hat and put on my taxpayer hat things start to look a lot different.

For this analysis, I'm going to focus solely on the cost of Streets & Drainage. This simplifies the illustration without changing the takeaway. The cost for this portion of the project is $1.5M and will be financed entirely by general obligation bonds. These bonds are repaid by property taxes.

Now, let's do the math:

Streets & Drainage Cost:$1,500,000
Yearly Property Tax Paid to City in Project Area:$44,030
% of Property Taxes allocated for Bond Repayment:31%
Yearly Bond Repayment:$13,681
Number of Years to Repay Bond:110
*Note: Tax records are lagging behind recent construction, so I assumed high values for those properties. One vacant lot was also assumed to be filled with a high value home. 

These lots also face other streets and alleys, so in this scenario the money to maintain them would have to come from elsewhere.

The % of property tax revenue that is allocated to bond repayment is set by the budget/council, so let's assume that they approved allocating 100% of the taxes to paying this bond:

Streets & Drainage Cost:$1,500,000
Yearly Property Tax Paid to City in Project Area:$44,030
% of Property Taxes allocated for Bond Repayment:100%
Yearly Bond Repayment:$44,030
Number of Years to Repay Bond:35

This project is still outside the means of the taxpayers to support it. Life expectation for the road is around 30 years per my discussions with city staff. This also would not allow for the accrual of funds to replace the road meaning another bond will be required, if the city even has the debt capacity for it 30 years from now.

So, if we can't stop the project from happening, what can we do?

  1. Increase tax revenue by 14% to pay off the bond in the life of the road.
    • Under the current zoning, this would be possible if you kicked everyone out of the least valuable homes, demolished them, and replaced them with larger homes. I'm not sure this is a good option.
    • Or, we could change the zoning to allow for incremental development.
    • Raise the tax rate by 14%. I'm don't think any elected official would sign on for this.
    • Any of this would still require the city to issue another bond for replacement as soon as this one is paid.
  2. Increase tax revenue by 70% to pay off the bond AND accrue for replacement in the life of the road.
    • Allow incremental development, make it happen quickly, and maybe raise taxes too?

I think there are lots of good points still to be made on the cost ($1.5M for 800 feet?!?!) and whether this is actually needed, but I've already typed far too much for one post.

Thanks for reading!