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Marohn: Big-box investments have long-term costsPrint

Thriving Communities | October 17, 2012 | By James Bruckbauer

Chuck Marohn discussed how traditional economic development—big box retail, strip malls, industrial parks, and convention centers—usually creates impressive short-term financial gains for cities but almost always ends up crippling them with long-term debt.

On a recent sunny Thursday on Mackinac Island, Chuck Marohn gave an important TED-talk-style speech to a crowd of about 500 elected officials from Michigan’s large, midsize, and small towns.

His topic: How traditional economic development—big box retail, strip malls, industrial parks, and convention centers—usually creates impressive short-term financial gains for cities but almost always ends up crippling them with long-term debt.

Coming from a conservative former civil engineer, the talk resonated with the audience at the Michigan Municipal League’s Annual Convention. Many of the city leaders are trying to figure out what to do with things that leave a lasting impression on their towns back home: empty Kmarts, Best Buys, and industrial warehouses.

Marohn said one of the reasons cities are in such financial turmoil is because we don’t consider the long-term maintenance costs and the life-cycles of our big infrastructure investments. He said we need to build our towns in more financially responsible ways, something that we have failed to do since the 1950s.

He also gave concrete examples of how cities will have to take on fiscally draining long-term liability.

Take, for example, the typical “economic development” deal. A big-box commercial development is compelling at first glance. The initial cost to the community is usually minimal because of federal and state tax incentives, and the benefits can be substantial: jobs, some property taxes, a new place of business, and a new place to shop.

But we often forget the catch: the community agrees to maintain and improve things like water and sewer lines forever, even when it needs to be replaced, and even when the big-box store moves on.

Check out the numbers on a typical sewer and water extension project for an industrial park:

The $1.9 million total cost, combined with the right tax incentives, doesn’t look so bad. But when it only serves 25 lots, the numbers don’t add up. It would require $8 million in property taxes from new development just to break even with the initial cost. And that doesn’t include the long-term maintenance costs. Unless those costs can be covered by new additional development forever, the community loses.

Instead Marohn said that cities should keep striving for a pattern of development that follows traditional principles: build things close together around people, strive for thrift, and use high standards for quality. These principles have stood the test of time, he said, and made communities resilient for thousands of years.

The Institute reported on the unsustainable long-term costs of sprawl back in its 2003 report titled Follow the Money. But often the messenger is just as important as the message. And small-town civil engineer turned sprawl critic Chuck Marohn nails it with commissioners, mayors, and other public officials who may be quick to embrace the status quo.

Here’s a link to his presentation at the Michigan Municipal League’s Annual Convention.

Check out the Strong Towns website for more information on Marohn and his writing.

James Bruckbauer is the Michigan Land Use Institute’s transportation policy specialist. Follow him on Twitter at @jimbruckb. Reach him at james@mlui.org.