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The costs of infrastructure development.

February 18, 2012

Suburbia: A new report from “Strong Towns” a development think tank maintains that the first generation of Suburbia was built on and maintained by savings and investment, but the second was built and maintained by borrowing tons of money. We are now entering the third generation. We are out of savings and investment and easy money, now what do we do?

They also point out that in every case they have studied the useful life of an infrastructure investment paid for by borrowing from the private market was less than the time it took to pay back the loans. What this means is that almost every community that invested in infrastructure by borrowing will likely face bankruptcy should growth slow or stop.

Finally the report found that, in almost every case, where a developer paid for or otherwise donated infrastructure improvements as part of its development in return for the community assuming responsibility for operation and maintenance of the improvements eventually the community required a tax increase to pay for their continued maintenance and replacement.

It used to be that in embarking on an infrastructure project, the costs for operation and maintenance were budgeted for. One of the centerpieces of the Reagan Revolution was the abolishing of this practice so that his administration could appear to have cut spending in the budget. Not only did this practice push-off the burden onto to future generations (like ours today) but by masking the true long-term costs it encouraged the orgy of borrowing that marks current governmental policy world-wide. This was neither traditional liberal nor conservative orthodoxy, but a cynical ploy to obtain and hold power by pandering to the economic elite.

If in comes either to pandering to the rich or pandering to the average person, I know which side of the street I would prefer my elected politicians to set up their cribs.

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