The Urbanophile has an interesting post that discusses, among other things, the impact of development externalities on suburban communities. Developers create suburban subdivisions with externalized costs and pocket the profits.
For example, the Indianapolis suburb of Westfield is reportedly on its way to 75,000; up from 3,000 in 1990 (and was up to about 20,500 as of 2007). Despite this, no real accounting has been done for development of roads to service the new developments. Instead, Westfield relies on unimproved county roads. The Urbanophile estimates it will take something on the order of $3.5 million per mile to improve two lane arterial roads. The Urbanophile goes on to consider the road construction needs the growth of Westfield is creating and states:
It probably isn’t totally off base to suggest that Westfield alone is probably generating a billion or so in road construction needs as a result of its projected buildout. Maybe more. Is it going to build these roads with impact fees from developers? It doesn’t seem likely given that there are over 20,000 people there and we’ve yet to see any serious road improvements. In effect, these developers have been able to get the taxpayers of the future to subsidize their developments to the tune of a billion or more in roads alone, to say nothing of all the other services above. And that’s just to build them, not maintain them.
So, the suggestion goes, perhaps “the mother of all impact fees” would be in order – charging developers up front the full cost of the total infrastructure buildout their developments create. The ability to run up deferred infrastructure liabilities creates an artificially attractive incentive to build in places were such development costs do not have to be internalized into the price of development.
Well worth a read.
I know in Champaign, IL they are now charging developers impact fees to cover the cost of building parks and libraries to support new developments.
Another one of those externalities that gets overlooked is dealing with the increased water runoff that comes from development – instead of being absorbed into the ground, the rain water runs off all the new driveways, parking lots, cul-de-sacs, and other developed areas. All that water then has to be processed before it is returned to streams, ponds, etc.
It’s actually creating a problem here in Monroe County, since those of us who live in the city of Bloomington are subsidizing the development of neighborhoods and shopping centers just outside the city limit. We actually had one County Council member run (and win) on the platform of creating a board that would charge appropriate user fees to these new developments, so the rest of us don’t pay for their water runoff.
Charging developers impact fees just means that those fees get passed on in the form of higher prices to the consumer (who deserve to pay them, to be fair). The developer profits one way or another.
The thing is, a city like Westfield balances the desire to grow (and garner higher taxes for salaries, etc) with the long term requirements for infrastructure maintenance.
In Indiana, it appears that the long term is almost always abandoned for the short term gains for localities.
That’s why our infrastructure is crumbling. Nobody thinks about anything more than what they are getting today, whether it be more tax monies or a shiny new house.
A simpler solution is to levy sufficient property taxes to support adequate infrastructure. The key is uniformity, otherwise developers gravitate to jurisdictions where have minimal upfront costs. Anyway, to me, it’s the homeowners that are actually causing these expenses, not the developer.
Simpler in theory, perhaps, but not practice. No incentive or constraints for localities to maintain those tax monies until the new infrastructure needs repair/replacement.
True, it is the homeowners who cause these costs. But, it is a vicious circle between the wants/needs of individuals, developers and local government.
Too complex for a blog, but the American system of suburbanization is ass-backwards and unsustainable (although, we are just beginning to realize it) due to the mass marketing of the automobile. Technology and infrastructure lifespan have mitigated the problems, but increases in gasoline prices, a downturn in the economy, and the like introduce increasing stresses on the whole system.
Well, sure, but if the purchase prices of newly constructed homes actually reflected the cost, it might make staying “closer in” much more attractive and might help curb the ridiculous sprawl in central Indiana, which is, as you note, unsustainable.
Doug, that was a really good find. Good stuff and more good links.
You da man (even if you don’t sleep in neighborhood trash containers).
Interesting comments about the west side boom of suburban Indianapolis. I remember as a kid stopping with my family in Brownsburg at a tastee freeze on our way to and from Indy.Westfield and Brownsburg probably have similar histories with development.
A couple years ago I was looking at property in the general area and was frankly overwhelmed by the scope and size of much of the new construction.Everything was just built;nothing was old.Perhaps the lack of impact fees allows for larger houses? Like who needs a 4-car garage?
I will be driving through Indiana this Sunday and will make it a point to stop and look around again for more modest neighborhoods.It’s a convenient area to Champaign-Urbana and to the airport,and just far enough away but also close enough to family.
Thanks to this blog for keeping me in tune with Indiana.
Lord, I lived in the old town of Castleton in the late 70s, used to bicycle through the farmland of Fishers and Westfield. Moved downtown for fifteen years. I cannot tell you what it was like to turn down 96th Street a decade and a half later. It’s a strip mall from 421 to the Reservoir. Shocking, ugly, and enormously popular with white people. I’d as soon step in front of a train as bicycle there.
And I may get the chance, since they want the state, and the city of Indianapolis, to build light rail that there aren’t even theoretically enough riders to ever make pay, to help alleviate the ungodly congestion caused by their flocking to the place. Decades of single-party rule and laissez-faire zoning “restrictions”, the result of an ideology which has already proven itself remarkably flexible when it comes to demanding money from other localities’ taxpayers, or to annexing the unwilling and unincorporated onto its own rolls, soon to be picking a pocket near you.
Recommending viewing, if you get the chance: “Blueprint America: Road to the Future” on PBS.