Recently, Gallatin, Tennessee’s 20-year-old Urban Growth Boundary (UGB) has come up for renewal, and elected officials and city staff have been talking about whether it should be enlarged, shrunk, or kept the same. UGBs are required in Tennessee by Title 6, Chapter 58 of the Tennessee Code, passed by the General Assembly as Public Chapter 1101 in 1998. One of the stated purposes of the UGB according to state law is to “identify territory in which the municipality is better able and prepared than other municipalities to efficiently and effectively provide urban services.”

Below you’ll see the boundaries that were set back in 1999 as the “territory that a reasonable and prudent person would project as the likely site of high density commercial, industrial and/or residential growth over the next twenty (20) years” (from Section 106).

That red line encompasses a lot of rural land outside the city (53.2 square miles, to be exact). Gallatin’s city limits alone encompass a massive, sprawling area of relatively low-density development. I’ve looked at the problem from a couple directions, and in each case I’ve concluded that we just aren’t bringing in enough money to sustain this much infrastructure over the long term.

But there are many who insist that to #DotheMath actually doesn’t work because somehow the math is more like alchemy than, well, math. According to this view, there are all kinds of externalities and hidden compensations that render any straightforward accounting method null and void. And they have a point: in some ways, cities are more like Jane Jacobs’ problems of “organized complexity” than the more linear problems we see in disciplines like accounting.

But at the end of the day, in the same way that complex systems like living organisms are not immune to the laws of chemistry and gravity, cities are not exempted from the iron laws of accounting: if you’re spending more than you make, eventually, you will be underwater.

Even granting that much, however, many people would still quibble with where the limits are: at what point do our liabilities overtake our ability to stay afloat? Surely we’re not there, right? There’s prosperity all around us!

To answer that question, and to shed light on whether Gallatin needs to be loosening or tightening the belt on horizontal growth, I perused the 2019 audit of the city’s finances with Chuck Marohn’s article about Cobb County in mind. There I found a familiar statistic:

From page 95 of the 2019 City of Gallatin Comprehensive Annual Financial Report. Source: gallatintn.gov.

As you can see on the first line above, general obligation fund debt is calculated as being merely 1.52% of the total assessed valuation of taxable property in the city ($1,379,876,000). But of course that’s only what our General Fund is on the hook for. What about total indebtedness—revenue and tax bonds? Adding those in gives us a total government debt of $58,799,334—still only 4.26%. Pretty good, right?

Not so fast. As Chuck pointed out in the Cobb article, the more important question is not the total debt to tax base ratio, but the annual debt service to annual tax revenue ratio. In other words, it’s the difference between me figuring out how big of a truck loan I can take out based on my net worth (which might be tied up in a bunch of assets not easily liquidated) versus figuring out how big a loan I want based on the monthly payment and my monthly income. The second is a better measure of how much truck I can truly afford.

And the revenue we’re going to count on to make these payments—it shouldn’t be just any old revenue, but stable, locally-produced revenue. “Grants, permit fees, fines and other one-time revenues are not cash streams a prudent government should back debt with.” Those things can come and go much more easily than property taxes, as 2020 has amply proven.

From page 90 of the 2019 City of Gallatin Comprehensive Annual Financial Report. Source: gallatintn.gov.

With all this in mind, consider these revised numbers. Locally produced, stable tax revenue in Gallatin in 2019 amounted to $23,082,274. If we’re generous, we might also add to that “Charges for services,” because as the Cobb article states, portions of this fund could be conceived of as stable and locally sourced. With that amount added in, we’re at $28,558,908 in annual local revenue.

From page 90 of the 2019 City of Gallatin Comprehensive Annual Financial Report t. Source: gallatintn.gov.

Annual debt service was $2,603,775 in 2019 ($1,795,000 going toward principal and $808,775 for interest). This amounts to 9.12% of local revenue. The Strong Towns standard for maximum debt service is 10%. This means that, even allowing for a generous understanding of what our stable local revenues are, we are still less than a percentage point away from failing the Strong Towns indebtedness test.

At this point it might look like we’re doing okay—we’re right at that 10% limit, even if 10% is considered the high side for a strong town, and even if some of that revenue may not actually be the type we think it is. But this picture ignores the type of city that we’ve become—and the even larger city we apparently want to become, if the UGB map is any indicator. We’re a city of many miles of expensive roads, sidewalks, and curbs (to say nothing of all the underground and overhead electric, stormwater, water and sewer, and gas infrastructure). As I’ve indicated in my last two articles, we’re not allocating enough revenue to pay for these things.

Let’s run through one more time some of the elements of our infrastructure that the General Fund is responsible for fixing or replacing (if you’ll remember, that’s that $888,000 amount from our Public Works and Engineering budgets). That’s the annual amount of money we spend fixing and replacing roads on average.

Table 1 shows how much we’re estimating road repair to be in Gallatin based on road type. Buck Dwyer, PE, formerly of the Gallatin Engineering Division, is to thank for these estimates.

Table 2 calculates how much these roads would cost us per year if we budgeted money for their eventual replacement. I’ve adjusted these numbers from my last article to reflect a 20-year lifespan for roads instead of 14. I’m trying to use numbers on the generous side so that the results won’t be dismissed as overly pessimistic. The annual total for roads is $1,941,455.

Next let’s add sidewalks, because the 2019 audit includes the city’s total sidewalk mileage (78 miles, or 411,840 feet). The City estimates sidewalk replacement at $37.50 per foot. As many of you have let me know, that seems high, but Zach Wilkinson, PE, of Gallatin Public Works, vouches for it: sidewalk replacement always requires demo, which increases the cost. Anyway, the total cost to replace every sidewalk in Gallatin is $15,444,000. I’m going to be very generous again and say that we’re only going to do replacement every 50 years. 30 years is probably a more accurate figure for sidewalk lifespan, but let’s be honest: replacing cracked sidewalks is far down the list of priorities for most municipalities. So divided by 50, we get an annual sidewalk maintenance bill of $308,880.

Finally, for curb and gutter, we’ll have to do a little estimating, but again I want to be conservative. Let’s say that only a tenth of our road miles have curb and gutter sections. That’s 24.34 miles, or 128,531 feet. Estimated at $25.20 per foot, that comes out to $3,238,981. Dividing by an estimated lifespan of thirty years gives us an annual cost of $107,966.

After subtracting out the $888,000 we do spend every year on roads from the general fund, the annual road, sidewalk, and curb and gutter maintenance comes to $1,470,301. And here’s the crucial point: this number needs to be added to our yearly debt service number. Why? Because they’re both dollar amounts that directly relate to things we will absolutely have to pay for either now or in the future. If we don’t set aside this amount for road and sidewalk repair and replacement, then when these things break, we will have to—you guessed it—take on more debt. Then the debt service will grow anyway, except this time with interest.

So the annual debt service plus road infrastructure service totals $4,074,076. This jumps us way over the 10% limit: it represents 14% of local revenue. And what’s worse, it almost tips us over the 10% limit even when we include all annual revenue ($44,442,181): it’s 9.17% of that larger number. So any way you slice it, we are at (but really quite a bit over) our maximum prudent debt level.

So that brings us back to the original question: if we are already in too much debt and too saddled with unfunded future liabilities, what effect would doubling the land area we’re responsible for over the next twenty years have? Probably not a good one.

However, the situation isn’t quite as dire as it seems. In 2014 and 2015, the Tennessee General Assembly passed new statutes that required annexations to be expressly approved by the affected property owners either by petition or referendum. This means that Tennessee cities can’t go gobbling up the countryside anymore. Recent annexations have all taken the form of planned developments, which is good: they’re more purposeful and usually denser.

For this reason, the UGB is a much more innocuous thing these days. Shrinking it actually wouldn’t do much at all. The danger it presents is not that the city might consume it entirely (that’s pretty much impossible), but that the portions of it we do consume might not be good deals for us. My previous articles showed what type of development seems to be financially productive for the city: commercial, industrial, and high-density residential. The new comprehensive plan we’re writing (Plan Gallatin) needs to frame the UGB as a potential source for revenue-positive developments rather than the city’s inevitable manifest destiny. Plan Gallatin must recommend that any future annexations be brought to the bar of the balance sheet. (And if we’re really lucky, maybe this idea will make it into the subsequent zoning code rewrite.)

If we want to ensure that territory in the UGB is actually area that the City of Gallatin “is better able and prepared than other municipalities to efficiently and effectively provide urban services” to, then it is imperative we #DotheMath.

About the Author

Dustin Shane, AICP, is an urban planner interested in exploring the intersection of philosophy, culture, and city building. He blogs about these and other topics at placeandtheory.com. He and his wife Maude are natives of Nashville and Middle Tennessee and enjoy fishing, local history, house spotting, and cooking.

No Manifest Destiny: Doing the Math on Urban Growth Boundaries

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