Wednesday, August 6, 2008

Option of Urbanism: Real Development Subsidization

Another interesting quote from the book. We've covered the costs of sprawl, but there are some fun analogies in here.
A 2004 Albuquerque assessment of the marginal cost of drivable sub-urban development found that it was twenty-two times more costly than walkable urban development for four categories(roads, drainage, public safety, and parks). Yet generally the taxes and fees mandated by municipal law dictate that all development, high-density or low-density, has to pay about the same. The result is that high-density development, as well as the general taxpayer is subsidizing drivable suburbanism. It is just as if by law all restaurants have to be all-you-can eat; those customers who eat very little subsidize those who eat a lot.

During a dinner conversation, a power company CEO was asked what it cost the company to build and service low-density development versus high-density development. He at first looked confused, then responded, "we don't look at our cost structure that way." Because his company is regulated by the state public utility commission, it adds up its costs and divides them evenly across the housing units that it serves, charging all residential users the same per kilowatt. There is no reason for the company to even worry about its marginal cost of doing business, something taught in accounting 101 during the first year of business school.

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