The Story of Scottsdale

The Story of Scottsdale is the story of every residential street in Richardson. The story of Scottsdale is the story of almost every suburban residential street in America. I pick this example because it is a practical real-world example with dollars, places, bids, and votes and not merely a piece of theory.

I start with this first post after relaunch because it is an example of something I want to emphasize through The Richardson Echo. An important point about cities that is often overlooked is that, of the things a city can control, land use policy is possibly the most important key to a city’s health and well-being.   More after the jump.

Scottsdale Dr. - January 2021 (photo by Google)

Scottsdale Drive for the uninitiated is one of the streets in the original section of Richardson Heights. The earliest Scottsdale homes were built in 1954: the first year of Richardson Heights and Heights starts Richardson's accelerated growth. In other words, it marks the beginning of mass suburban growth north of what would become I-635 and the northward suburbanization out of Dallas.

Last June, the Richardson City Council voted on an innocuous item to approve a repaving of 2900 linear feet Scottsdale Drive along with replacement of other related infrastructure. This item appeared on what is called a “consent agenda.” A consent agenda contains routine items that usually require no debate. As such, this vote had no debate or discussion and required none because it is unavoidable.

There is buried meaning in this routine action - from the staff of the City of Richardson to the City Council and to the wallets of the property-owning taxpayers of Richardson - as an example of the frailty and inherent problems of our great neighborhoods .

Broader than that, it turns out it is not special. Almost every suburb that grew from post-WWII America shows the same level of fragility in the same way. There is nothing wrong with Scottsdale as a street with homes. Quite the opposite in fact as they are well maintained and sell well. There is no magic in the city management, its operations, or the City Council that caused the issues we are going to discuss. The scenarios I will discuss while eye-opening or surprising to many are normal.

You might ask, "What fragility?" Eventually, everything we build has to be maintained, which comes at a cost. What pays for that cost? In American cities, primarily it is property taxes. Cities have other revenue sources like franchise fees, or sales tax but property tax is directly connected to infrastructure because the properties are directly connected to that infrastructure. In other words, every property on Scottsdale (and every other street for that matter) is serviced by roads, water, and other infrastructure and that infrastructure must be maintained. If the infrastructure is not maintained, then those properties are worthless.

Let’s pose this question: What can the property taxes of a house with a residential lot pay for? To answer this, I propose a different hypothetical question: If we applied ALL of the property taxes from all Scottsdale houses to only the cost of this reconstruction bid, then how long would it take to pay for it? Before I answer that question with real numbers and costs, I want to perform a little experiment.

Before you read on, I am going to ask you a question. I want you to stop reading and guess an answer.

Here is the question: If you contributed all of your city property tax to pay for only the concrete, sidewalk, and the city water main in front of your house and nothing else, how many years would it take to pay for it? I’ve given you a handy picture to illustrate what you are being asked to pay for. Stop and try to come up with an answer. Remember it because we will come back to it. 

Your hypothetical house.

Let us take a look at the facts and then the math for three scenarios. The winning bid for the entire project was $2,255,525.00 for “replacing approximately 2,900 linear feet of existing street, sidewalks, driveways approaches, alley connections, as well as water line reconstruction and storm drain improvements for Blocks 600 & 700 of Scottsdale Drive.”

Scenarios 1 & 2. In these scenarios, we ask how long it would take to pay for the project if each home paid for an equal share. With 75 homes, it works out like this.

Cost divided by number of homes =
$2,255,525.00 / 75  = $30,073.67  per home

Scenario 1: Homes that do not have a senior exemption.

I took a large enough representative sample of the 75 that fall in that category. So if we applied the entire yearly City of Richardson property tax to that $30,073.67 share then it looks like this

Cost per home divided by property tax =
$30,073.67  / $1649.23 (average per home)
          =  18 years 3 months to pay that share.

Scenario 2: Homes with a senior exemption.

Again, I took a large enough representative sample of the 75 that use the senior exemption provided by the City of Richardson. So if we applied the entire yearly City of Richardson property tax to that $30,073.67 share then it looks like this

Cost per home divided by property tax =
$30,076.67  / $696.47 (average per home)
          =  43 years 2 months to pay that share.

Scenario 3: All of the property taxes applied to the entire project.

In this case, I simply took all the property taxes raised for the 600 and 700 blocks of Scottsdale and applied it to the total project bid and that looks like this:

Cost of total repair divided by sum of all property tax =
$2,255,525.00 / $100,983.97 (Total Property Tax)
          =  22 years 4 months to pay for everything.

Why did I pick these scenarios? The third is somewhat self-explanatory. It addresses the ability of a street to pay for only its repairs. The first and second are chosen to illustrate how much an individual home contributes given their circumstances.

Keep in mind that in all scenarios I am not predicting or accounting for changes in tax rates, tax valuation of properties, inflation, or other factors. Different numbers would be generated but they would not change the overall scale of the answers but merely move the needle around a bit.

Further part of the funding comes from the water and drainage fund. While that might seem to solve the property tax issues, it actually points out that property taxes are not sufficient. Part of our ever increasing water bills goes to pay for this project.

Remember when I asked you to guess how long it would take? How did your answer compare to the scenarios? I have asked many people this question over the years and the answers range all over the place. An easy majority says between 8 and 15 years and the rest are outliers below and above that range. The implicit lesson is that a clear majority of people underestimate the expensive nature of the cities in which we live and how taxes pay to keep them functional.

I am going to throw in one more question that will sharply put the Story of Scottsdale in perspective. I am going to ask, “If a home’s property taxes go to pay for nothing but that repair then what percentage of their TOTAL taxes over the course of time pay ONLY for that repair and nothing else?”

Depending on who you ask you will find that residential streets will last between 25 and 40 years with most answers being in the middle of that range. After they degrade, then they have to be replaced or repaired again. To answer the question with this range I have created a table below.

Percentage of Time taxes pay only for street and infrastructure replacement.
	Street Lifetime in Years
	25	32.5	40
	Short	Midway	Long
Scenario 1	73.0%	56.2%	45.6%
Scenario 2	172.7%	132.8%	107.9%
Scenario 3	89.3%	68.7%	55.8%

What you can see is that if we apply the entire city property tax for a single home (scenarios 1 & 2) or an entire street only to the “concrete in front of them” (so to speak in Scenario 3) it does not pay for much else. Even in the optimistic case of the street lasting 40 years, over half the taxes of the combined street goes to paying for nothing but the street and other infrastructure items. While they are paying only for that rectangle of concrete, the sidewalk, and other stuff right out front, they are not paying for fire personnel, police, parks, major roads, or street signals, or much of anything else.

Someone might object and say, “Well there is no construction on my street so my house is paying for part of the Scottsdale repair.” In reality, there is some truth to that. Your property taxes go into buckets called “funds” that are part of the financial and budgetary management of the City. However, your street will soon enough fall into disrepair (just like Scottsdale) or maybe it already has. When that happens or happened in the past, it will be subject to a bid just like this. When we analyze that repair then it will look remarkably similar to the numbers above. 

At the beginning, I made a comment about the importance of land use policy. That is one point about all of this. Your taxes don't go as far as you might think and that is a function of land use. All of this is a result of how Americans have built cities and neighborhoods that were set in motion many decades ago. We enjoy our detached homes on these ample lots with wide and easily accessible streets that are located far from other uses like jobs and retail stores. This is one of the prices we pay to enjoy that. Furthermore, this is only one kind of land use inefficiency that our cities have. (I will get to more in other posts.)

There is no magic bullet. No city council or management including ours is going to mystically rearrange budget spending and make all this more efficient. There is no hidden irresponsible spending where "if they just wouldn't spend that money" it can be applied to make this better. 

We can gradually make better land use choices especially with new development or redevelopment. When those choices are structured correctly, then an analysis like this might show those choices are more adept at supporting their own infrastructure. When you hear someone in favor of a zoning change across town, one reason they might oppose or be in favor of it is because they want to mitigate inefficiencies like this one in order to make the city more resilient in the long run. That is why I, for example, oppose most pad drive thru restaurants.

In the future, I am going to discuss other land uses with their strengths or shortcomings but for now we are all inside the Story of Scottsdale.