The 'next big thing' is a dead idea
- Blog Post by: Nathaniel Hood
- August 28, 2012 - 7:09 PM
One of the few podcast I’m still listening to on a regular basis is NPR’s Planet Money (it’s one of the few NPR shows that doesn’t put me to sleep). They have great reporting, analysis and commentary on economic and financial news. Rarely, however, do they dive into the micro-pool of local municipal government.
Let’s get over the notion that any one person, no matter how smart or qualified, could “save” a city. This plays into the notion that there are “solutions” as opposed to rationale responses given a set of unique circumstances. I’ve forgive this, as it’s a headline looking to attract as many listeners as possible.
Harrisburg is that broke. The City took a gamble on a big project (a $350m garbage incinerator) and lost. They wanted to be the garbage burning capital of Pennsylvania and make some money is the process (from Planet Money):
There was always the promise that the incinerator would pay for itself real soon — if only they could get it exactly right. Every time the debt came due, the city borrowed new money to pay back the old money.
“Basically, every time something goes wrong with the incinerator, [they] say, ‘Let’s just make it better,’ ” he says. ” ‘Borrow twice as much money; we could burn twice as much trash.’ “
Right around the millennium, the Environmental Protection Agency shut the incinerator down. The city could have cut its losses. It didn’t.
“This is when they say, ‘We will double the debt and expand the incinerator,’ ” Papenfuse says.
All along, the city kept saying the debt it was taking on was “self-liquidating.” In other words, the trash fees from the incinerator would bring in enough money to pay back the money it was borrowing.
The garbage burner is a bad for a number of reasons; including a poorly constructed deal, lack of foresight into potential debt service payments, political hubris and well, sprinkle in some criminal activity (under investigation at the moment). These are all bad, but they are minor details to the real problem: If we build it, they will come.
Harrisburg thought that if they built a huge garbage burner they’d be flush with cash. Lots of cash. They built, overbuilt and then built some more. The problems of Harrisburg are extensive, but the idea that caused the problem is more or less the status quo. We’ve got them all over, even in our own backyard.
Let’s take Elk Run. This is a proposed development in Pine Island, Minnesota, a town of around 3,000 people. Pine Island is a nice small town, but one with some overly ambitious plans (you can view them here). It’s looking to bring a 2,325 acre development to the edge of town that includes a 200 acre “bio-business park” (thanks to “aggressive incentives”), 1.5 million square feet of commercial / retail, over 1,500 single family houses and a brand new high school. It’s a classic old economy “make no little plans” styled project that refuses to die.
To accommodate the new proposed growth, the State government sunk $34 million into a new intersection and a collection of frontage roads where nothing exists beyond countless rows of bean stalks (locals are already starting to refer to it as a “bridge to nowhere”). All this money is being allocated under a plan to get numerous large companies to relocate bio-research facilities, headquarters and jobs to a small town in southern Minnesota. All while doubling the existing housing stock and adding the commercial and retail space equivalent of 14 Wal-Mart stores.
This is a bloated plan operating under the assumption that ‘if build it and they will come’.
My question is: what happens when they don’t come?
In the case of Harrisburg, the ‘they’ is referring to dump trucks. In Elk Run, ‘they‘ is referring to people and businesses. There are a number of differences between the two examples, including public vs. public-private partnership financing, but one thing is similar: the idea that governments should be in the business of growth for the sake of growth, and take on excessive risk in the process.
Governments can and should be creative with financing and try to spur growth. They should even take on some risk, but not $350 million dollars worth of risk. Imagine if Pine Island were to create a “small” growth plan – or if Harrisburg were to build a small garbage burner and then tier up the production facility as the need increased. Instead of a new $34 million interchange to induce growth (or a $350 million plus dollar garbage burner), what if they would have updated an aging sewer system? Or, used it for civic or school improvements? In fact, in Pine Island, they could have given each man, woman and child in town over $10,000 (or used it on a dozen other more productive initiatives). If they were more realistic about economic development, Pine Island could have taken the money and given out low-or-no interest loans to existing businesses looking to expand. Same thing goes for Harrisburg.
This isn’t a call to end long-range comprehensive plans or innovative government projects. It’s a suggestion that small can be beautiful. In lots of circumstances, these plans and projects are necessary. This is a call to consider that many small plans can be much more effective, and more risk-adverse than one large project. Large plans like Elk Run or the Harrisburg burner expose us to tremendous risk if they fail.
The future of our plans need to be everything that Elk Run and Harrisburg aren’t: small, numerous and nimble.
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