How We Subsidize Suburban Growth By Providing The Roads It Requires
There's not much direct subsidy of suburban subdivisions -- developers pay for all interior roads and sidewalks, sewer and water hookups to City lines, and drainage and water retention facilities. They pay steep fees for City reviews and inspections. Depending on the size of the project, the City might require the developer to build on-site facilities like wastewater treatment plants. The City charges impact fees on top of these costs, and also can make developers pay the cost of off-site improvements that are roughly proportionate to the development's impact.
The real subsidies are the large amounts of money we spend to construct and improve the arterials that serve the suburban developments. Travis County has just proposed another such subsidy -- $133 million in bonds, mostly for new and expanded roads in the City's suburban fringes, particularly the rapidly developing northeastern part of the county:
"Precinct 1 is where most of the action is occurring, and it has the greatest need," said Steve Manilla , county executive for transportation and natural resources. "Typically what happens is that development moves in, they do minimal improvement to the roads and then all hell breaks loose. We're trying to get ahead of the game."
The bond projects, which would be built over the next seven years, include six new roads and the design of a seventh; widening of seven other roads, typically from two lanes to four; rehabilitation of three aging bridges; and raising several other roads and low-water crossings to make it less likely that water will overtop the pavement.
The Statesman's graphic makes the point more vividly:
It is theoretically possible that these improvements could pay for themselves. The roads will increase property values in these areas; higher property values mean higher property taxes. But Travis County collects just 47 cents per $100 of assessed value. Using reasonable assumptions, the present value of the future stream of county taxes generated by $100 assessed value is $9.4. Thus, the roads must increase property values by around $1.4 billion to pay for the cost of construction. But that doesn't include the annual cost of maintaining these roads. If we assume the lifetime cost of maintenance equals the cost of construction, these roads must generate a net increase of $2.8 billion in property value to pay for themselves. That's the equivalent of 15,000 $180,000 homes that would not be built but for the new roads.
According to a rigorous analysis I conducted by staring at the ceiling with my eyes closed, these roads won't yield anything close to that value. This means the roads won't pay for themselves and the average Austine will be kicking in money to make up the difference. I.e., a subsidy.