http://www.businessinsider.com/suburban-america-ponzi-scheme-case-study-2011-10?op=1#ixzz2IqCx5w7T
A Complete Guide To The Ponzi Scheme That Is Suburban America
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A report out today from Strong Towns makes this bold claim.
It argues that the mass migration from cities to suburban areas following World War II has seen two cycles of growth and maintenance. The first cycle was paid for outright, the second is heavily financed, and the third cycle is poised at the brink of an abyss.
Like Bernie Madoff, city planners swapped long-term obligations for short-term cash, expanding at an unsustainable rate and developing land they could never afford to maintain.
Strong Towns backs up this argument with real-world case studies from the following U.S. municipal projects.
The first generation of suburbia was built on savings and investment, but the second was built and maintained using tons of borrowed money - we are now in the third cycle.
Cash flow for a single city street is fine until the end of its life when cost of repairs outweigh revenue. If a town had only one street it would be insolvent.
Because a city has many streets, its growth during the first cycle solves the insolvency problem. The Ponzi cycle.
In the second life-cycle when private-sector investment fails to bring in sufficient taxes for maintenance the framework crumbles
Case Study: Dredging a river in Northeastern Minnesota
Case Study: Minnesota property taxes are not remotely sufficient to pay for road maintenance
Case study: 'Free roads' are a myth
Case study: It will take almost 80-years for Afton, Mn to pay for road repairs that will last only 25 years
Case study: Taxes will cover only one-third the maintenance costs in suburban Minnesota
Case study: Investments will need to double to improve sewage utilities in this Minnesota industrial park
Case study: To keep its sewer running Backus, Minn. will need to become a ward of the state
Under the American pattern of growth the only way to pay for these projects is more growth
The national psyche is based in the 'American Dream' an auto-based fantasy where everyone lives like aristocracy on their own mini-estate
The suburbs do not create wealth, they destroy it. The American style of building our places is simply not productive enough to continue.
Suburban maintenance relies on homeowner tax revenue which could be all but drying up
Housing prices continue to fall, but the correction has yet to hit bottom
As foreclosures increase, new construction also declines
America will not have a productive economy while we ignore the financial productivity of our places
Is the collapse happening now?
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