Politicians claim we can improve our fiscal health by promoting more development. When the red ink turns up we are told to “grow ourselves out of debt.” And when asked how, the same voices invoke the sobriquet of “smart growth.” Whether we really can “grow out of debt” is another matter and whether our growth has been “smart” or “dumb” is also up for contention.
Smart growth has become a buzzword, loosely thrown around by developers, but it does have a real meaning. For one it signifies that development is commensurate with the fabric of a neighborhood; next, it means that growth does not overpower the capacity of a neighborhood to absorb new residents; and, it also means that new development does not mar or exhaust the immediate environment. Not the least, a central component of smart growth is its cost efficiency and whether it deepens our fiscal hole. We should consider whether our current growth really has been smart and question assumptions about “growing out of debt.”
Let’s look at what we do know about Alexandria’s budgets and its development. Over the past decade budgets have tracked upward. With the exception of the great fiscal crisis during the years 2008-2009, debt service has moved upward along with recent development (calculated as the value of new construction). The table above shows that pattern.
The solid line shows mounting budgets, beginning at a modest $521 million just 10 years ago and rising to well over $625 million as of last year. Development also rose from $480 million to $546 million. These statistics tell us that increased budgets are associated with the dollar value of new construction (development). Digging more deeply, we know from the numbers that 18 percent of the city’s budget can be accounted for by new construction. Development does incur costs. For every million dollar increase in development we have a corresponding rise of $180,000 in budgets. Even more important, debt service has risen over this period from 8.4 percent of the budget a decade ago to 12.7 percent by last year. The simple fact is that Alexandria is in the midst of rising budgets, rising development and rising debt service –– all occurring together.
This is not necessarily bad. Supporters of the “grow out of debt” theory would point out that population and business have also increased; that debt service is still a small proportion of Alexandria’s assessed property values; and that increased expenditures are investments in the future. They would be right on the first count and largely misleading or irrelevant on the others. For one, the question is not only whether our tax base has increased, but whether those increases lagged behind expenditures. Second, increases in assessed properties also mean higher taxes. The issue here is not whether Alexandrians can handle higher taxes, but are we willing to incur the costs of growth. Third, all this begs the greater question of whether our current pattern is an investment in the future or a disinvestment in the real assets of our city.
Certainly, growth can be good if it is done smartly, but it can be bad when done dumbly. Smart growth means that we should examine every stick and brick about to be constructed to determine whether it really adds value to the city. Budgets that grow without enhancing capital infrastructure or improving services should be suspect. Increases in the proportion of budgets consumed by debt services should be worrying. Even on these points we are not simply dealing with numbers but with quality of life. 21st century congestion choking 18th and 19th century streets does not make for a better city; nor do modern buildings that block sunlight and obstruct waterfronts help us. Most especially for Alexandria, the relationships between numbers and quality of life are interdependent. We should not make the mistake of believing we can compromise our quality of life without this coming back to haunt our fiscal health.
Hank Savitch is Emeritus Brown and Williamson Distinguished Professor of Urban and Public Affairs at the University of Louisville and a Visiting Fellow at the Metropolitan Institute, Virginia Tech. He lives in Alexandria and can be reached at hvsavi01@vt.edu