Recently the Antiplanner recounted some of the consequences of Portland’s race to become the nation’s best-planned city: failing schools; crumbling streets; lack of funding for building maintenance; and declining transit service. Now we have more information on the street situation plus one more example of mismanagement.
Portland’s city auditor has released two new reports showing that the city’s priorities are screwed up. A January report found that, even though the city’s transportation budget has been growing, spending on street maintenance, traffic signals, and structural maintenance” has been declining. A more recent report specifically criticized the city for neglecting its streets, saying nearly half need “significant rehabilitation or reconstruction” to put them in acceptable condition. “Despite knowing the inevitable and costly consequences of failing to maintain streets,” the city “limited street maintenance work in recent years, choosing instead to focus on other priorities.”
This is underscored by the city’s own report card showing that maintenance of pavement, traffic signals, bridges, and street signs fail to meet the city’s own standards.
Meanwhile, Pew Charitable Trusts has released a report on city pension and health care funds showing that Portland has funded only 50 percent of its pension obligations, making it worse than all 50 states and all but 3 of the 61 cities in the Pew study. Portland’s health-care fund is even worse: only 4 percent of future health-care obligations are funded. But at least they have a streetcar!
I wondered if other smart-growth cities such as Denver, Los Angeles, San Francisco, San Jose, and Seattle were in the same condition. But no, these cities have funded 79 to 97 percent of their pension obligations. Health care is not quite as good, but Denver and L.A. have the best-funded employee health-care systems.
A recent paper by one of Edward Glaeser’s PhD students suggests why these cities may be doing so well. Housing Supply Elasticity and Rent Extraction by State and Local Governments argues that one of the effects of land-use regulation is that it allows states and cities to increase taxes, and in turn increase municipal worker pay, with less fear of losing population to regions with lower taxes.
Land-use regulation makes home prices more volatile, and one of the sources of that volatility, says Rebecca Diamond, is tax rates: when taxes go up, home prices go down, so homeowners are less likely to feel the effects of higher taxes than in less regulated areas, where higher taxes do not reduce home prices as much. Diamond found “the public-private sector wage gap is higher in areas with less elastic housing supplies,” meaning, in general, areas with more land-use regulation.
What this means is that the government planners who try to impose land-use regulation on regions end up being one of the big beneficiaries of that regulation, as the cities that employe them can boost their pay to be well above that earned in the private sector. So smart growth may be an ideology, but it is also corrupt. Without attacking planners in particular, the point is that state and local governments that do more land-use regulation can eventually benefit by collecting more taxes without driving taxpayers away. Of course, if they go too far, as California seems to have done, then the high housing prices alone may be enough to drive people away.
So why hasn’t Portland been able to drive up taxes to pay for its rail plans along with schools, streets, pension, and health-care funds? Perhaps it is easier for Portland taxpayers to vote with their feet than those in California and other places. After all, San Francisco Bay Area residents disgruntled with taxes and housing costs have to go at least 80 miles to Stockton, if not a lot further, to find anything affordable. Portlanders only have to cross the Columbia River to Vancouver, Washington. This may be one reason why Portland seems so eager to shove light rail down Vancouver’s throat: by making Vancouver a high-tax city, Portland can raise its taxes too.