In historic Lisbon. In historic Lisbon — definitely not paid for by newer developments.

In our last installment in this three part series we showed how an assertion heard around here, “The new developments pay for the old ones,” implies an unwitting admission on the part of those in the growth machine, an admission that nearly all our residential development fails to pay for itself. Now that’s something the Small Town Project and the growth machine agree on! Continued residential development costs more to serve than the revenues it generates, and creates a deficit, sucking up the revenues generated by farmland, open land, and commercial property. Ultimately it leads to tax increases for all of us, and diverts money away from beneficial community projects. We covered much of this in the first of our myth-debunking essays.

What do they mean by that?
Now let’s look at this assertion itself. Is it true that the new developments “pay for the old ones”? To find out, let’s consider how residential development is paid for, and look at exactly what this assertion is saying.

First, by “pay for” it’s referring to paying for the services required by the older developments. Those include road, sewer, and water main repair, police and fire protection, educational expenses, and many other demands. These are paid for by our taxes — mainly property taxes, state taxes, and some miscellaneous levies. These revenues “pay for” all residential development; they pay for the services required.

Now, when someone says. “The new developments pay for the old ones,” they’re trying to claim revenues from the former pay for the services required by the latter. The idea is that brand new developments haven’t decayed yet and so need little maintenance (things like water main repair). The tax revenues from their residents therefore supposedly pay for the services they do require, with money left over. That left over money is said to “pay for the older developments,” which are more decayed and so unable to pay for themselves.

Let’s pause for a reality check.
Before continuing I should mention that the only people from whom you’ll ever hear anything about new developments paying for old ones are those in the growth industry. More serious analyses simply refer instead to the taxpayers of an area subsidizing growth. You and I, all of us in our area, subsidize continued residential development. That said, let’s move on as though the growth machine’s assertion were not the twisted idea it is.

Wrong on more than one level
Taken at face value, the claim that new developments pay for the old ones is certainly wrong. Residents of the older developments pay their taxes like everyone else. If, for some period, those developments fall, say, 15% short of paying for themselves (a plausible figure from what I’ve seen of the COCS data), then their revenues go 85% of the way toward paying for their services. The growth machine obviously favors an exaggerated statement — “The new developments pay for the old ones.” — making it sound at first blush as though new development carries the whole load, like the hero saving the day. This, when in fact it can’t possibly be paying for more than that final 15%. They might claim they’re just using a simplified statement, but it certainly makes new development sound less dispensable than it actually is, doesn’t it?

That leads to the next question: Does new development indeed pay for itself with enough left over to pay that final 15% (or whatever our actual figure is) for the older developments? Those in the growth industry will tell you it does. Pure propaganda. A little logic reveals it doesn’t. Recall the data from the COCS studies discussed in that first myth-busting article. They show that residential development as a whole costs more in services than it generates in revenues. It doesn’t pay for itself. Clearly, therefore, the new developments do not generate enough revenue both to pay for themselves and cover the deficit from the older areas.

Now we come to the question of whether the newest developments even succeed for a time in paying for themselves. On this we have no data. Local officials have conducted no study on anything like the scale of a standard COCS study, much less one in which areas of development are broken down by age. But COCS studies have found that a very few towns come close to breaking even on their residential development as a whole. Therefore, I will tentatively say it seems possible that the very newest portions of residential growth might indeed pay for themselves. (Before long, as they begin to require more services to maintain, that of course changes.) Yet even that is open to question, as lower density development, such as we see in the newer projects here, tends to be especially expensive to service. So the best answer I can offer is, “We don’t know.”

In any event, that last question is of little significance. Having separated truth from falsehood, however, in the growth industy’s effort to bamboozle us, we’ve now learned something new that does matter. Just as we learned that residential development rarely pays for itself, we now know it’s certainly false that “the new developments pay for the old ones.”

In Part III we’ll look at a horrible implication concerning the growth industry’s attitude as reflected in this false claim.