It's Not Even About the Streets

Financial Strength Matters

Quick note: I have added a spoken audio version of this article. If you you prefer to listen than to read give it a try!

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In modern writing about cities there’s often a lot of discussion about the cost of road maintenance. While it is often the focus of a lot of our analysis, the point isn’t really about the roads.

For instance, the Galesburg City Council recently decided that half the $5 million bond that was taken out for the community center is instead going to go toward street maintenance projects. In the coming future we’ll have an extra $2.5 million going toward fixing our streets.

While it is good to maintain our streets and road maintenance is a big issue on citizen’s minds, I don’t think this is the smartest investment possible. Not that it’s a bad investment, but definitely not one with high returns. 

For almost any street or road the greatest return on investment is when it was first paved. After that any maintenance, widening, upgrade, or any other investment has GREATLY diminished returns. Taking a residential street that is crumbling and repaving it does not necessarily create additional city revenues.

At best the most return on investment you get from road maintenance is the perception that there is wealth in the city. It can instill confidence in the people that the government can do the things we want it to do. This confidence turns into a better local culture, which could then turn into a greater appeal for the city. 

So while increasing our road maintenance is good and something I want to have for our city, I just can’t help but wonder if there were projects that could be invested in that could’ve yielded more real dollar and cents returns. 

House too Big

In my article “Why Galesburg Has No Money” the main focus of the article was the cost of city street maintenance and how we don’t have nearly enough money to fully maintain our streets. 

The point of the article was neither to say our city is broke nor that we should be focusing on road maintenance over everything else. The point was that we do not have nearly enough financial resources to fully afford the upkeep of the city we already have.

It’s similar to when someone buys a house that’s more expensive than what they can really afford. Sure, the family brings in enough money to pay for the mortgage but doesn’t leave room for much else. A family paying half their income for their housing is often not going to have much money to spend on anything else. 

What happens in that situation? Typically the family buys the too-expensive house and they don’t have much budget for furnishings so the house is rather bare. Over time they don’t do much maintenance to the house because there isn’t any extra money for it. They don’t put a ton of money in because a fully maintained building is not the first priority, the functioning of the family comes first and foremost. When they’re not able to pay for maintenance the condition of the house worsens. If they do put money in, it’s only when it’s most urgent. And if they really don’t have money they’ll stick with the deteriorating house as long as possible until it is uninhabitable. 

Buying a house that’s too big and having a city that is too sprawled out are both financially burdensome and take much more real wealth to fully support than just the sticker price.

Financial Strength Matters

From Strong Towns we get the insight that one way to look at a city’s financial strength is to look at the ratio of a city’s property values divided by the cost of the infrastructure. This measurement can relatively measure the financial strength of a city. It’s similar to how looking at someone’s income to housing ratio can assess a family’s financial health. 

Normally if you spend more that 33% of your income on housing then it’s considered financially burdensome. That ratio would be 3:1, and the bigger the first number the better you can afford the housing. For Cities the ratio should be around 30:1 where the bigger the first number the more the citizens can afford the city. 

I’ve taken to calling this the City Financial Strength Indicator. To be a very financially strong city we would have an indicator score of 30 to 40. For the financial year of 2022 Galesburg had a City Financial Strength Indicator score of 10.3.

I went back through the city’s financial reporting for the last twenty years and looked at how it changed:

While exact decimal changes aren’t meaningful, the trend is clear. Around 2000 we had a financial strength of 20+ and we now have a financial strength of 10.3. We are half as financially strong as we were 20 years ago.

This graph is everything! It’s Maytag leaving, residents leaving, streets getting worse, empty storefronts, houses falling apart. Not to say we have a hellhole of a town, but that it’s far from the ideal financial picture. Our relative wealth has decreased by half in our living memory. 

This is what I truly meant when I posted “Why Galesburg Has No Money”. Not to say that we don’t have money, but that the amount of money we have RELATIVE to the amount of stuff we have has gone down drastically. This has come from two decades of stagnant property values and a doubling of city assets.

In general, if there’s something you want but also want it to be more affordable you can:

1. Decrease the amount you need to spend on it

2. Increase the amount of money you have

3. Or both

In the example of the family with the house that’s too expensive there’s an obvious solution, you could downsize so you don’t have to spend as much. Cities don’t readily have that option. You can’t just sell off streets and water/sewage systems, once they’re in the ground the city is responsible for them for theoretically forever.

The best we can do to better afford the city we already have is to increase our wealth. Our investments should be focused on increasing our property wealth so we can better afford the city we already have. We should also refrain from making big new infrastructure investments unless they provide substantially more wealth than the cost of the infrastructure.

When we increase our financial strength we don’t even need to use it on road maintenance. While it would be nice, it wouldn’t need to be anywhere near our top priority. Greater financial strength means more money readily available for anything we want to do; police, fire, government services, parks, and whatever else we want. 

The cost of road maintenance is just a tool to show the financial commitments a city already has on the books. Road maintenance in of itself isn’t anywhere near the most important aspect of managing a city. But if we’re better able to afford our road maintenance through increased wealth we’d also be able to afford anything else we want to do.

The approach I and the Galesburg Revival Society proposes is that in order to have a more thriving Galesburg we need to increase the number of people and increase our financial strength. And in order to achieve those goals we need to make the city a place more people want to be, keep the cost of living low, and make it easier to develop our land and start businesses. 

As far as I see spending an extra $2.5 million on road maintenance at best makes a small small difference in making Galesburg a place more people want to be. If we’re going to be investing money from a bond I think there must be better options that would yield better returns for everyone.