Suburban growth in the United States is a devil’s bargain. The prevailing post-World War II development approach is based on the rapid outward expansion of automobile-oriented suburbia. Such development, enabled by costly new roads and utilities, produces short-term growth and an infusion of cash for local governments. But it does so at the expense of unpayable long-term liabilities once that infrastructure requires maintenance.
This dynamic—call it the Growth Ponzi Scheme—has been fueling the breathtaking expansion of North Texas for decades now. The superlatives write themselves. While Dallas defers road maintenance and has a $1.5 billion backlog in flood mitigation projects, the region’s suburbs spend eye-popping amounts to facilitate outward expansion. This expansion, in turn, spreads North Texas’ wealth ever outward, hastening the decline of poorer parts of the region. In 2018, voters in Collin County (whose population has tripled since 1990) approved a $750 million bond issue for new roads, described by backers as “a start” toward raising the $12.6 billion officials say they will need over the next few decades. That is only for projected new roads, not maintenance of existing ones.
At some point, the forces that have buoyed the region’s expansion will slow or reverse, and residents will be left with a bloated infrastructure and a tax base spread too thinly across the landscape to support it. Then come the difficult choices.
“This financial distress is the inevitable endgame of a development pattern that doesn’t generate enough private wealth to sustain the public investment that supports it.”
What does it take to stand against this tide and choose a different, more resilient path? Strong Towns, a nonprofit that advocates for smarter urban growth in North America, has been closely watching the tiny suburb of Fate, Texas, as the town seeks to answer that question. With a population of about 12,000, Fate lies about 30 miles northeast of Dallas, in Rockwall County. It is the site of a remarkable effort by local leadership to incorporate meaningful financial resilience analysis into the city’s planning process. It is one of only a few communities nationwide putting Strong Towns’ principles into action in an innovative way.
There’s a problem, though. There is still a large disconnect between the current development pattern and the fiscally productive growth that Fate needs. It turns out that doing the math is the easy part of changing a community’s business model. The profoundly difficult part is telling a different story of what the community ought to be.
At some point, you have to, shall we say, choose your fate.
Fate’s planning staff saw the writing on the wall. It wasn’t just the region’s core cities like Dallas drowning under unpayable maintenance obligations. The signs of trouble are there, not far under the surface, if you know how to interpret a municipal budget, even in other nearby suburbs like Richardson. In 2012, Richardson began a 10-year campaign to address the conditions of every residential street. For the past six years, Richardson has increased its annual contribution to street and alley maintenance by approximately 319 percent, to $4.4 million. But, according to the city’s most recent Comprehensive Annual Financial Report, Richardson has more than $500 million of infrastructure assets, of which, according to a recent article, the majority has exceeded its useful life. At the rate of $4.4 million a year, it would take 114 years to amass enough money to replace all of that infrastructure (and that’s not accounting for inflation).
This financial distress is the inevitable endgame of a development pattern that doesn’t generate enough private wealth to sustain the public investment that supports it. So Fate planning staff began asking developers to document the ratio of public to private investment for every proposed project. This process lends itself to difficult, adult conversations about the long-term fiscal impacts of near-term growth. And elected officials in Fate have proved willing to have those conversations. The next challenge: bringing the public along with an affirmative vision of a financially resilient future for the small city.
Fate’s assistant city manager, Justin Weiss, told me, “We didn’t have time to do a big grassroots buy-in campaign, because of the urgency of development pressure. In addition, our demographic is constantly changing with the rapid influx of new residents.” These new arrivals to Fate bring their own ideas about growth and development, as well as their own visions of what a desirable suburban community looks like. They are not as familiar with the issues their City Council has been grappling with or why.
A truly robust, public consensus-building effort, aimed at helping the voters of Fate to understand the city’s financial situation and the potential outcomes it faces depending on how it chooses to grow, is coming this year with the update to the city’s comprehensive plan and educational efforts kicked off in November, with Strong Towns founder Chuck Marohn’s leading a session at Fate City Hall.
What’s difficult is fostering such a conversation while the continued booming growth of North Texas drives developers to seek permission to build in Fate now, not a decade from now. One approach the city has taken is to work with the developers of in-progress or phased projects to alter their M.O. moving forward.
“In some of these entitled [Ed: meaning the builder has already obtained legal permission to build] neighborhoods that are really causing a financial constraint on the city of Fate, we’ve been trying where possible to amend the development agreements to make them more fiscally sustainable,” Weiss says. “This may include the diversification of the housing stock, narrowing roads, or adding a maintenance tax.”
The city finds developers amenable to such voluntary amendments, because there is usually some overlap in interests. A more compact development pattern that integrates single-family homes with townhomes, apartments, or mixed-use development, for example, can simultaneously shore up the city’s revenues and render development more profitable in the long run. Still, residents are struggling with getting more and more neighbors, and with the high taxes they have to pay to special districts that facilitated the first waves of growth.
These special districts also lead to confusion about how the development and maintenance of Fate’s neighborhoods are actually financed. Weiss says, “Our property tax rate is one of the lowest in Texas. But everyone perceives it as high because they’re part of a Municipal Utility District or a Public Improvement District.” These districts are quasi-governmental entities that can take on debt to pay for the construction of infrastructure for new development—such as the streets and utilities that serve a new neighborhood on what was formerly rural land. The fees paid to MUDs and PIDs appear on a property tax statement, but they do not go to the local government. They are used instead to pay back the developer’s infrastructure debt.
Meanwhile, Fate has neighborhoods within its borders that it knows will be long-term money losers. The property taxes barely cover the expenditures for the public safety department alone. Sales tax revenues have grown substantially, but the bulk of Fate’s budget still comes from one-time development permit revenue.
This puts Fate’s municipal government in a predicament. It has to approve development to pay staff and keep the lights on. If it approves new development that is financially unproductive, such as a neighborhood of large-lot detached homes with wide streets, Fate will surely find itself insolvent a generation from now. (For this reason, it hasn’t done so in the last five years.) If, on the other hand, the city pushes for a more compact and financially productive pattern of development too quickly, without citizen education and buy-in, it risks losing public support.
Weiss is clear about the stakes: “The epitome of the Growth Ponzi Scheme is taking place right before our eyes.”
What Will It Take to Lead by Example?
There is no easy solution for Fate. But the answer may, in part, involve persuading residents that there is a better way forward by example. Fate’s nascent downtown is a bright spot for the city. In 2000, Fate had a population of only 600. Now, downtown is home to a three-story, mixed-use building with a restaurant on the way, the first full-service sit-down restaurant in town. The city’s leaders are also actively negotiating five other agreements within downtown, including a brewpub, a standalone restaurant, and three additional three-story, mixed-use developments.
This path forward, if the city can manage it, entails actively pursuing high-quality, compact downtown development that pays its bills—now and in the long run—as a proof of concept, a way to demonstrate to residents that this path can lead to a desirable, prosperous community. It would be a gamble on the proposition that most people, in North Texas or elsewhere, aren’t unshakably anti-walkability or anti-urbanism. It would be a bet that the right kind of strong neighborhood will change some hearts and minds. Fate’s plan to attract new residents to the city—people looking for something different than what Richardson or other nearby towns have to offer—might just work in the long run.
Fate can still be a model for North Texas of how to grow a strong town in a resilient way. But the path forward isn’t going to be simple and straight. It isn’t for any place, anywhere.
We’re rooting for you, Fate.