News from the Top

Lessons from the past


The advent of smart growth appeared in the late nineties upon the realization that constant expansion into suburban and rural areas would prove to be, among other things, fiscally unsustainable. Alongside these sprawl debates, which continue today, the first two decades of the 21st century gave rise to the prominence of dense urban centers with thriving adjacent neighborhoods that illustrated how vibrant center cities are the ultimate economic engine of a city and its region. So much so that political pressures mounted for more investment outside the center city and into the far-reaching neighborhoods of many communities. The rally cry prior to the pandemic was often “downtown has gotten enough attention, it’s time to invest in the neighborhoods.” 

Lessons learned from sprawling development also help illustrate the importance of its corollary–dense mixed-use developments like IDA member districts. We have seen how walkable places served by multi-modal transportation can deliver unique and authentic experiences for a mix of people simultaneously living, working, and visiting the center city. We know what vibrant successful places look like and how successful performing centers of commerce support sustainable communities. We also know how quickly calculus can change. In just a few years, circumstances have changed, and I sense we are at a tipping point. We can choose to abandon downtowns and expand on the suburban experiment, or we can retrench, targeting critical investment back into the center city and commercial neighborhoods.  

It’s time to recapture the narrative and advocate at all levels of government to refocus on the core so downtowns will continue functioning at peak performance, delivering both quality of life and the financial returns necessary for municipalities to survive. Charles Marohn illustrates well how continual growth outward can lead to the long-term collapse of municipal solvency. How the future financial health of cities, especially more suburban ones, was built on what he calls the Growth Ponzi scheme. He brings to light the long-term implications of new infrastructure being considered a financial asset for cities, rather than of a maintenance liability it most certainly becomes.  

Stories are emerging about municipal budget deficits in the year ahead. Cities of all sizes will be struggling with a variety of issues stemming from looming deficits driven in part from reduction in commercial property values and associated declining property tax. Truth in Accounting, a think tank analyzing the financial health of states & municipalities, expands on Marohn’s teachings and further illustrates the true financial challenges ahead of us in their State of the Cities report. When examining the ability of a municipality to pay its debts, after removing capital assets which Marohn points out, often the true result is much worse. In their most recent assessment over 2/3rds of the most populated cities fell short of cash, a result which equates to an added tax burden placed on each citizen.  

There is certainly more to this picture and unfunded retirement benefits play a significant role. However, what is important from an IDA perspective is how the financial challenges of cities will affect their budget decisions going forward which will affect IDA members in myriad ways. IDA members with city contracts may see a reduction in those contracts. More predictively, as cities reduce services it’s typically to see service demand shift toward t. place management organization who is left to fill the gap.   

I recall a similar time after the Great Recession, followed by the Occupy Wall Street movement and slow economic recovery throughout 2012/13. IDA members remember these years as the “austere times” when municipalities were cutting back. Our member survey that year looked to understand the impact austerity would have on members and I was certain the results would show member budgets falling while service demands increased. Surprisingly instead of do more with less condition, the resulting theme was more of a doing different with the same. We learned that most members had resilient budgets, but demand for services was varied, often falling into new areas as cities pulled back. 

So, what does the past suggest for us today? I submit we must reengage even more vigorously to advocate for increased urban investment. Even as municipal resources are strained, we must reinforce the longer-term benefits of investing in the core just as was done in the late 90s and early 2000s. We should highlight the inefficient and ineffective strategy of growing by building outside the core and heed the lessons shared from Charles Marohn. We should build a lot of housing; we know we need it and districts with strong residential based proved most resilient during the pandemic. Cities should make disciplined decisions to invest in maintaining and enhancing existing infrastructure, especially in the heart of the city which serves the greatest number of people per land area.  

Whether you are already a thriving mixed-use district, declining city center, or viable Main Street, advocating for human centered, dense, mixed-use development in the core will produce the strongest places in the future. We have demonstrated in the past how investment in the center cities builds strong, fiscally healthy, communities. The time is now to reenergize the narrative of investing downtown first if we expect to be successful in the decade ahead.