Thursday, April 26, 2012

The Price of Sprawl - Germantown Parkway Corky's

The Corky's on Germantown Parkway seemed like the most fitting place for me to eat Wednesday night after I spent several hours hearing the true costs of suburban growth laid out in depressing detail during a presentation at the nearby Ducks Unlimited building next to the Agricenter, which are ironically located near one of the worst stretches of suburban sprawl in the Mid-south.

I can't blame businesses like Corky's for locating in areas with plenty of nearby customers. The pulled pork, beans and slaw I had at the Germantown Parkway Corky's could be offered up as the very definition of Memphis average in the most positive sense of the term. When the nearest competition is the the Jim 'N Nick's chain's Wolfchase store, appreciative customers are going to flock to a place offering good Memphis barbecue as an alternative.


On top of offering up good barbecue, I discovered on a recent visit to the Poplar Avenue Corky's that the company has Abita brew a Corky's-branded beer designed to go with its barbecue that is only offered in the restaurants. After the presentation I'd heard by Chuck Marohn, the executive director of the Minneapolis-based nonprofit Strong Towns, I felt like I needed to reflect on all the information I'd just absorbed over a cold beer and a plate of barbecue.

The people at Abita did a great job with this beer. It really is a perfect match for the Corky's barbecue.

From a business's perspective opening a store somewhere like Germantown Parkway that has a large customer base ready and waiting makes perfect sense. The problem for local governments is that they are responsible for the infrastructure needs of new homes and businesses. And while new development seems like a great way to increase tax revenues Marohn works to help government leaders see the unaffordable financial obligations they are making when they decide to subsidize outward growth.

As I visit restaurants throughout the Mid-south I spend a lot of time noting the life cycles neighborhoods go through as suburban sprawl almost inevitably transitions into blight. A new suburb can create the illusion of prosperity but most new development over the past several decades has been funded by a foolhardy mix of public and private debt. For municipal governments a big new development is like a leased luxury car. It may look like a symbol of wealth at first glance but it is actually a giant liability.  

In a post about a barbecue joint on Goodman Road in Southaven, MS, I discussed the hidden, unsustainable cost of sprawl that turns it into a net drain on tax revenues. I've spent years traveling throughout the neighborhoods of the Mid-South, and it is obvious that our pattern of growth is devastatingly wasteful. I said that the simple truth most communities fail to recognize is that the average multi-child family moving into a newly constructed subdivision will end up costing more in municipal tax revenue than they will ever pay in.


As a civil engineer and urban planner Marohn was able to lay out the numbers for just how true that statement is. Even more shocking was the extent to which overaggressive growth creates a system where even shopping centers and industrial parks fail to pay for their own infrastructure requirements. The Strong Towns website includes a fascinating PDF file full of real world examples of the negative return on investment new developments can generate. It's a long document but Marohn joked that, "We wrote it for public officials, so the fonts are big and the words are simple."  
 
The knee-jerk response of many people around here is to blame blight on "inefficient Memphis government." But that doesn't explain the blight that is starting to appear on Stateline Road in Southaven, MS, or that already dominates Broadway in West Memphis, AR, and the abandoned Mall in Lakeland.

Interestingly Marohn mentioned that while several of the places he has visited in states like California, Texas and Florida initially seemed a lot better than Memphis on paper, they ultimately left him feeling, "bad about them and myself." Meanwhile, spending a few days in Memphis left him, "pleasantly surprised by how great of a place it is."

In a blog post about his visit he elaborated by explaining that, "this city has a strong core, great bones, a rich history and -- to a person that I have met -- a tremendous inner spirit." Meanwhile, many of the more affluent cities he visited are now suffering from a severe "growth hangover." They went on massive building sprees during the recent economic bubble and dedicated themselves to an unsustainable development model that requires a constant increase in new growth to cover the upkeep costs created by previous growth. As Marohn noted, that is the very definition of a Ponzi scheme and many of the municipalities that benefited the most from it still refuse to accept the fact that the economy of seven years ago isn't going to come roaring back and bail everyone out.

"There is a narrative that we are in a cyclical downturn," he said. "We are in a whole new economic era. We can't go back to 2005 any more than we can go back to 1950."

The concept that the post-World War II suburban experiment is really just a failed Ponzi scheme was a major theme of Marohn's presentation. Suburban sprawl only seems natural to most Americans because it has been spreading here for over 60 years. He said the the average development has about a 25 year life cycle before major maintenance, to both buildings and infrastructure, becomes necessary.

Our suburban experiment started around 1950, when we started a 25 year growth cycle with very little debt and massive amounts of entirely new construction that paid off significantly in increased productivity. That cycle ended around the mid-1970s, around the same time, Marohn said, that growth in private debt began to outstrip growth in government debt as we shifted, "from a layaway economy to a credit economy."

While that first cycle was primarily funded by savings and investment the newly established pattern of development wasn't generating enough wealth to sustain itself so the second cycle was funded by debt. By the year 2000, Marohn said, debt had "become so important that in the third cycle we allowed it to become predatory." In fact when compared to historical ratios between wages and home prices, between 2000 and the start of the real estate downturn, housing prices reached a level that was 214 percent of what history says wages can support.

While the media has been focusing on foreclosures and the declining values of residential homes, combined with the huge drop in new housing starts, Marohn suggested that the commercial real estate market could be in for an even uglier correction. Between 1999 and 2005 consumer spending grew 14 percent while per capita retail space expanded by 100 percent. We now have six times the retail space of any European country. Marohn didn't mention it but I couldn't help but note that this dramatic increase has occurred at the same time that Internet retailers have been steadily putting brick and mortar stores out of business. He did note that vacant retail space has increased by 42 percent since 2006. 

Anyone who has driven down Winchester in Hickory Hill knows that vacant retail space is a major eyesore that severely depresses surrounding property values in a seemingly self-perpetuating cycle. What really keeps the cycle perpetuating is the new growth government money subsidizes further out in the suburbs, actively destroying the value of previous infrastructure investments.

The growth in suburban sprawl over the last several decades has finally reached a tipping point where that outward growth is beginning to slow and stop, Marohn said. There is too much debt, in both at the government and private sector, for the wild spending to continue. The PDF file I linked earlier in this post details how bleak the finances look for the traditional funding sources for suburban growth. Our cities' future development patterns can't continue along their same path. Their futures will depend on their leaders' abilities to adapt to the reality staring them in the face.

Despite the depressing numbers "Memphis has a chance to be prosperous in the new economy," Marohn said during the presentation, which was hosted by the Memphis Urban Land Institute, Livable Memphis and the Memphis Regional Design Center.

When it came time to talk about solutions he laughingly pointed out that someone asking for a "solution" actually wants to know, "What can someone else change so that I don't have to change what I am doing?" By that standard, "there is no solution; only rational and irrational responses."

At this point he was interrupted by an angry libertarian in the audience who proclaimed that he didn't need to live in a city when he could just live on a large ranch in the country and build his own roads far cheaper than the government could. I have strong libertarian leanings on a lot of issues but I found it interesting that the man in the audience was basically illustrating why pure libertarianism, when taken to extremes, can't meet the needs of a modern society.

While the obvious first step in changing direction is to have the government stop subsidizing self-destructive growth; there are still existing roads, sewers and bridges that have to be maintained. From suburban sprawl to soybean oil and high fructose corn syrup, most of the really bad ideas inflicted on our society are directly fueled by government subsidies. But to really have smaller government we have to demand more efficient and locally-guided government. Size and bureaucracy don't just breed inept incompetence in government, as anyone who has flown Delta Airlines or used Comcast for cable TV service can attest to. The answer isn't to have a nation where the ultra-rich blow their fortunes trying to insulate themselves from a world that is falling apart around them. That's the nightmare world the Dead Kennedys envisioned in Moon Over Marin.

If you just came here to read about Corky's barbecue you are probably wondering how this post got so far off the rails at this point.


The average person isn't going to be ready to grab their wallet and chip in when the overpass on the way to their house needs $3 million in maintenance. Unfortunately the average municipal government isn't ready for it either, and the Federal Highway Trust Fund that disperses fuel tax revenues to local governments is already insolvent from trying to meet our highway system's current needs.

So after we stop subsidizing unsustainable growth, Marohn said the next step is to take stock of the spending needed just to maintain what we have. That is the only way we can start triage on our cities to determine where spending can generate the most return on investment.

He used the recent turn around of Broad Avenue, where a fifty percent increase in property values followed a low-buck repainting of the streets to take them from four lanes to two with street parking and bike lanes added in.

Photo from one of the recent Broad Avenue art walks, where the crowds made it hard to to navigate the sidewalks of the once-desolate strip. The newly-opened Jack Magoo's Sports Bar invited me and several fellow gearheads to bring our cars out to the event. As someone who loves old cars I found it interesting when Marohn noted that the first cycle of suburban expansion lasted from roughly 1950 until 1975. In other words, a period where automobiles went through a huge series of innovations right up until they point where they went to crap.

Another example was the new Greater Memphis Greenline. Projects like this can generate a huge return in property values compare to their relatively low cost. Especially when compared to flashy, high-dollar schemes like spending $65 million to build a Pyramid Arena Downtown. Then, when the pyramid is mothballed after just 13 years with millions of dollars still owed on its construction cost, promising to spend an additional $30 millions in subsidies to try to lure Bass Pro Shops into converting the Pyramid into a giant store. 

Politicians are drawn to big flashy scheme, since a politician loves nothing else in life more than throwing a big press conference to announce doing something, even if that something eventually does more harm than good. And we have been locked into our current pattern of development for so long that the Federal government systematically pushes money towards "big" ideas.

It's frighteningly easy to get a giant pile of money from Washington to do something really expensive and stupid. No one pays any attention to really smart ideas that don't involve a lot of money changing hands. The only thing central planning seems to actually do well is spread and institutionalize ideas so bad that they can only survive when shielded from common sense.

At least the Bass Pro idea involves an existing structure with plans to revitalize the surrounding historic neighborhood, as opposed to an entirely new development. But it is still an example of what Marohn referred to as economic hunting, where community leaders try to use incentives to lure outside businesses. He said this creates "transactions of decline," as communities compete over who can drive wages the lowest while offering the most subsidies.

We witnessed this recently in Memphis as the city offered huge incentives to keep Pinnacle Airlines, which is currently going through bankruptcy, here when our suburb of Olive Branch, MS, tried to lure them away. Olive Branch has been steadily attempting to poach businesses away from Memphis in recent years to meet the unfunded demands of its recent growth surge. It offered to build a major development for Pinnacle if it relocated there. This parasitic leaching by a suburb in another state is obviously bad for Memphis. But Marohn had the numbers to illustrate why, if successful, it would have also been a terrible deal for Olive Branch's tax payers.

We have turned city halls into, "machines set up to attract and build commercial property," he said. But once new infrastructure is developed, "the catch is that the public agrees to maintain the improvement forever." 

Instead of economic hunting Marohn said cities need to engage in economic gardening. Work with existing businesses and instead of trying to bag a new company that will employ 50 people, try to find cheap but effective ways to let 50 businesses each add one person.  

Cities often fail to recognize the value of the businesses they already have. Marohn gave the example of large Wal-Mart that was constructed in the outskirts of Asheville, NC, with plenty of development help from the city compared to a small mixed use development in the city's Downtown where all the costs were covered by the owner.

The Wal-Mart ended up covering 34 acres while the Downtown property covered 0.2. When their economic impact was averaged out per acre, the Wal-Mart was paying $6,500 per acre in property taxes and  $47,500 per acre in retail tax, had zero residents and just 5.9 jobs per acre. The Downtown property paid $634,000 per acre in property taxes, $83,600 per acre in retail taxes, housed 90 residents per acre and provided 73.7 jobs per acre. The city would have done far better to promote more of the Downtown developments instead of the one Wal-Mart.
 
He also provided examples from Minnesota where, because of their density, aging urban commercial strips; even when blighted and filled with pawn shops, liquor stores and check cashing places; were paying greatly more in property taxes than newly developed and heavily subsidized low-density commercial property on the same size lots on the same street. For far less money than that city put into heavy redevelopment it could have provided incentives to improve existing properties and make them even more valuable.

A big part of the problem is one-size-fits-all Federal, state and local guidelines. Marohn stressed the need for systems to devolve to more local control. Instead of having large, separate departments overseeing parks, roads, buildings, etc., have separate teams that address the overall needs of East Memphis, South Memphis, etc., since the challenges and needs of different areas can vary so greatly. It is always more cost effective to find effective reuse for things that already exist geared towards the actual needs and wants of the community.

Marohn spent several days here and met with a lot of public officials, including the mayor, so hopefully his ideas made an impact on other people the way they did me. We have been doing things wrong for so long, not just here but across the nation, that cleaning up the mess is going to involve some painful decisions. And it is going to require that people in the Mid-south realize how tied together we are. The idea that suburbs in Fayette County, TN, or DeSoto County, MS, can continually grow at Memphis's expense is as suicidal to them as it is destructive to the city.


Corky's Bar-B-Q (Cordova) on Urbanspoon

8 comments:

  1. Thanks for posting this Craig. I saw Chuck speak at at breakfast last Tuesday, but couldn't make it to the larger presentation. He is right on track.

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    1. Glad to hear that. Hopefully his message really got through to people in our local governments.

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  2. Hey, I came here to read about BBQ....what's going on?

    Actually, thanks so much for this great recap. You nailed it 100%. I'm so happy there are people like you in Memphis that can keep this message in the public arena. Thanks for doing this post.

    -Chuck Marohn of Strong Towns

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    1. Thank you for coming here. It is a message that everyone needs to hear.

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  3. This is very interesting. Would it be possible to post some links to supporting data?

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  4. Especially about the information on downtown development vs. Wal-Mart. The city planners are the ones requesting it. Thanks.

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    1. The PDF document I link in the article is full of data. Also, if you contact Chuck Marohn through the Strong Towns website he should be able to point you to additional data.

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  5. Thanks for the review. I had no idea Chuck would be around, and I hate I missed him. At least it's good to know that folks in Memphis are listening...

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