$1.4 Billion unfunded streets liability & 40% tax increase!

Sprawl is really expensive as it turns out. We are close to the geographical size of Minneapolis with less than 1/3 of the population. Who do we expect is going to pay for all that infrastructure?

After 8 years of prodding, staff finally reported on how far we are behind in maintaining our road infrastructure. While I am a passionate environmentalist (this is my favorite planet), sustainability is equally about financial responsibility.

If we do nothing (which has been what the city has done for the last 8 years) we will lose our ability to fund public safety, transit, parks, library, arts, and everything else that the city does.

Here is that report.

What it says that is that we built roads that require 31.9 million annually to maintain. We currently pay $9 million annually, leaving a $22.9 million gap. Further we have built up maintenance needs of about $235 million. Using some basic finance to calculate our current unfunded liability over 50 years, I calculate an unfunded liability of about $1.4 Billion dollars.

What does this mean? Over the next 50 years we have $1.4 Billion more in expenses than revenues to pay for it (in today’s dollars).

If we were to immediately close the annual gap that would mean a 40% tax increase for all tax paying properties in Rochester. Ouch..

NPV Streets Liability photo Screen Shot 2016-08-10 at 1.47.58 PM_zpsig6riccl.png

What do we have to do to fix this? Probably many things.

  1. Quit digging the hole bigger. Do not accept new roads as public infrastructure unless we are relatively certain they will generate more in tax revenues than costs. This is actually pretty easy, just look at Fox Hill Villas, 30 new singly family homes but the road is private. We have a few leaders in particular have kept digging the hole bigger.
  2. Start chipping away at the costs. While I don’t want a 40% tax increase we need to put more money into maintaining what we already have. I suggested a longer term plan of increasing road funding by a couple million a year over 10 years. That is still a big tax increase, but it is spread out over time and hopefully over more payers.
  3. Smart Growth. Do Projects like the uptown project that increases property values, density, and tax collections. There will be a future post on just how successful the Uptown project has been in terms of increasing values beyond what is happening elsewhere in the community. The means more revenue coming in to maintain that same quantity of road (even after figuring in the added costs that made that area so attractive).
  4. Stop unnecessary degradation. A top state expert on road maintenance explained to the city council on Monday how reducing the number of garbage haulers in the roads would reduce premature road expenses to the city by millions of dollars annually. A similar move in Bloomington is projected to save residents an addition $13 million over the next 5 years just on their bills. But do we have the courage to do it?
  5. Street Utilities. Nonprofits don’t pay property taxes and don’t help pay for roads. Further commercial properties pay excess taxes to help subsidize residential properties in Minnesota. A utility would allow us to pay for some or all of road maintenance with a fee on adjacent properties. This is far more fair & equitable, but requires state action. This option is supported by the League of Minnesota Cities & Coalition of Greater Minnesota Cities.

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