November 5, 2018
In our last podcast, I spoke with Aaron Renn, the Urbanophile, about the city of Carmel, Indiana. It was an opportunity to learn more about Carmel's controversial experiment in large-scale, debt-driven suburban retrofit, and an opportunity to hear, though the voice of an authentic supporter, about what Carmel is doing. It is different than other North American suburbs, and while Strong Towns has not delved deeply into what is happening there, we’ve been prompted to do so many times.
Some podcast listeners were upset that the podcast with Aaron wasn’t more of a debate, with me aggressively challenging the points being made. Others were thankful for the opportunity to have Carmel’s case made unmolested. Having heard the pro-Carmel narrative, this week we’re following up and offering a different perspective.
Aaron called Carmel the anti-Strong Town, and there are some fundamental reasons why that is true. We ask the questions: How will you know that you’re wrong? When will you know?
What Carmel has done is to—by Aaron’s own admission—build all the happy, pleasant, comfortable amenities today to attract people counting on future growth to cover the cost. In a sense, it’s a go for broke mentality. It’s impossible today to know if this will work. Furthermore, it’s disconcertingly self-affirming for people to convince themselves that they can today enjoy all of the fruits of a community’s future labor.
What Carmel has done, in a very modern American way, is invert the time-tested process of making sacrifices today for a better tomorrow. A fiscally prudent approach to the same vision of tomorrow might involve Carmel's raising taxes on its residents, in order to make investments in things those residents want, based on a vision that these investments will ultimately pay off. What Carmel’s leadership has done instead is delivered on the amenities today, without requiring anything in terms of real sacrifice for a community that is currently wealthy. Carmel residents of today have no real skin in the game, at least not into proportion to the benefit they enjoy. Carmel residents of tomorrow, on the other hand, inherit a huge risk when that debt has to be repaid.
That’s standard operating procedure for America’s suburbs; it’s just that Carmel has taken it to the next level. And then some. The incentives here are backwards.
This ties into the concept of something being “built out,” that the things we are working on have a finished state that will ultimately be reached. The concept of “build out” is the ultimate hubris, the somehow our vision today is the correct one for all time. That we use our vision of the built-out condition to justify wild expenditures and massive debt so we can live with the benefits, without experiencing the difficulty of getting there, only makes the concept more suspect.
In a place going for broke, where is the rigorous return-on-investment analysis? Where are the spreadsheets and special meetings going back and analyzing the assumptions of past investments, comparing those to the reality that has emerged, and using that rigor to inform future investments? Where is the estimate of the amount of growth and tax base needed to make the investments being made today successful?
These don’t exist, and their absence is not a confirmation of competence. This is especially true in a city that has gone to great lengths to make expensive investments that intentionally signal, "This is a high-quality place run by highly competent people." Where we do have data, it is the blinking-red-light variety, where money is being shifted from one account to another to cover emergency shortfalls, debt is being rolled over without being retired, all with assurances that things are under control. In the absence of rigor on return-on-investment, those assurances ring hollow.
If we were to have confidence in Carmel, there would be signals that things under the hood—stuff that only the insiders can know—are operating well. Some of those include:
1. Debt being retired, not merely rolled over.
2. Return-on-investment analysis, especially backward-looking introspection. What were the assumptions we had and did they hold?
3. Hyper-transparency and challenging of assumptions, a systematic commitment to listing the assumptions of these large gambles, and ongoing scrutiny of their validity.
4. Leadership turnover with continuity of policy and vision.
5. Beyond the big and flashy, evidence of rigor about attention to detail.
None of these things are apparent. Carmel feels like a place where a Robert Moses acolyte combined with a Wall Street hedge fund manager and an AICP planner who took a crash course in New Urbanism to build a city. Despite the outward signs of success today—which are easy to generate, but much more difficult to sustain—this is a place that seems fragile at its core.
History tells us that when wealthy people come together to build fragile things, the public is ultimately called upon to bail them out when the predictable tragedy strikes. While it’s never clear what truck will collapse the fragile bridge, a combination of leverage, rosy projections, and a go-for-broke mentality suggests that someday, things won't look so optimistic in Carmel, and that bailout request will happen.