Greetings, and welcome back to ZacCast. I am Chad, that is Patrick, and this is your podcast, the official podcast for local government nerdery, and boy, are we going to get nerdy today. Um, Pat, before we introduce the topic, I just want to throw out a little disclaimer here, um, because this podcast has always been sort of about our thoughts and ideas about local government and not so much about the job that we have and the product that we sell. Today we're going to talk about a concept that we've been working through, um, for a while now. We are going to be adding this to our platform, um, but we're gonna do our best to just talk about the concepts and not make this, like a sales pitch. So I wanna throw that disclaimer out there just because we kind of have a style for this show and I, I really don't want to, um, to change that, uh, you know, if, if we can help it. So we're gonna do our best, uh, just to focus on the ideas and the information and the research and all that kind of stuff. Um, so just a little heads-up, uh, as far as how we're gonna do this. So anyway, before, how are you doing, Pat?

I'm good, man. I'm good. I, I mean, you know, look, at the end of the day, the topic that we're talking about is a topic that we would normally talk about, it's just, it so happens to be something that we've built into our software platform. Uh, so I don't think it will be salesy, but if you don't wanna hear about it, you can turn us off and go to the next episode. But the reality is, is that this is something from a city perspective that we feel very strongly about the city should be looking at, um, and assessing, and we have just created a tool to make it easier to look at that.

Yeah. So what are we talking about? Profitability.

Mm. Yeah.

Which is a dirty word in local government, kind of, right? Like-

Sort of

... you've been to city council meetings, right? And we talk about we're not focused on a profit motive. Like when, when you hear about, um, you know, arguments that cities should be run more like a business, like that was-

Mm-hmm

... a huge half a semester discussion in grad school, right?

Yes.

Uh, new, new, uh, new public service and different types of management styles and, and should government be run like a business. I think that kinda misses the point, right? Profitability for a public... I'm sorry, for a private sector entity has a very specific meaning that most people understand. Profitability for a local government is, is just different, and it's something that I think local managers, um, they get wrong.

Mm-hmm.

Right? When we're, when we're doing a development, say you're gonna get a new, uh, power center, retail shopping center. A lot of times you're gonna be looking at just the nominal increase in revenue, right? So even if you're throwing out abatements and sales tax rebates and stuff like that, you're still looking at the fact that you have a net increase in your nominal revenue generation.

Yeah.

Right? You're looking at a new single family neighborhood with, say, 200 homes. You're still, you're just looking at the net revenue increase from property tax, and probably from sales tax from those new shoppers that are gonna be located in your city. What we don't often look at, uh, at least in a really in-depth and serious way, is the actual expenditure obligations that come with those new developments. You know, um, I mean, we've been in council meetings where you've heard people say, "We have all these new people, we're gonna have," you know. Well, w- I say one of the arguments, uh, that a lot of existing residents and, and people use against new development is this is gonna add traffic congestion, this is going to add demands on our police service and our fire service, right? So, so we, we, we touch on them, uh, just from a conceptual standpoint, but we don't actually dig into those numbers to see, um, what our development patterns are impacting for our actual long-term fiscal health.

Yeah, most of the time we just ask a department director, like a police chief or a fire chief, uh, "Chief, you think you can handle these, these things? Like, this new population is gonna be okay?" There's no, like, financial fiscal analysis of the impact and what that cost will be over time, right? Um, now to be fair, I think that's for a couple of reasons. One, the data is not regularly available or has not been regularly available to be able to understand historical trends and how those impact future trends, right? I mean, it, you know, that kind of big data revolution that's occurred within the private sector and has now entered into government is, is, is changed that. And then I gotta be honest, the second reason is vanity. At the end of the day, a lot of city managers, uh, myself included at times, wanted to get deals done because we, we liked the vanity of the deal. We liked how pretty it was. We liked how glamorous the development was, you know? Um, and so w- I, I needed people like you and Doug in my, in my office. You know, I needed a, I needed a team in the back office to basically tell me, "Okay, hey, I know this is cool and I know this is a great idea, but we're gonna lose money on this for like the next 20 years, so you gotta stop." You know, uh, and, and the reality is most cities just don't have that, right? They, they, they're not working through that. So, you know, those two things, both the, the lack of available data to do analysis and then also just how cool something is. And not only do city managers attach to that, but city council's really attach to that, right?

Yeah. Mm-hmm.

They really attach to the cool and the-

They like the ribbon cuttings, they like the, the big street widening-

The gold shovels

... projects, right?

Yeah, absolutely.

Yes.

They like all those types of things, so, uh-

So, so let's, let's se- kind of set the groundwork here, do some level setting here, okay?

Mm-hmm.

Um, when, when cities are evaluating their fiscal health, you know, there's a lot of things that they're looking at. But at the end of the day I think if you were to ask pretty much any finance director, any city manager, "Do you actually have enough money right now to do all of the things that you know you need to do?"The answer is almost entirely, like across the board, gonna be no.

Yeah.

Right? There are always, there are always things that departments are asking for that are superfluous, right? They're always trying to play games with the budget process, right? Asking for more than they need, hoping that maybe it'll get cut and they'll get what they actually want, you know. But at the end of the day, we all know that there are things that we are not capable of funding adequately.

Yeah.

Especially streets. Streets are just one of those things that are perpetually underfunded, and one of the reasons for that is that we have a lot of streets.

Right.

We have a lot of street infrastructure, and streets are expensive. Um, but the other problem with this is that when you come up in the middle of the year, maybe you have to ... Maybe your revenue's down, maybe something, some kind of exogenous shock to your economy, and you have to do some kind of budget cut. Guess what's gonna get cut first? Is that big chunk of money that's still sitting out there because street maintenance season hasn't started yet.

Yeah.

Right? So now you're deferring maintenance into the, the upcoming years, which is just going to make it more and more expensive, and this is just sort of a snowball. So, um, so just to sort of set the bar, right? We all understand that we don't already have enough money to do the things that we know we need to do, uh, let alone the things that we may want to do. So, uh, so when a new development is sort of on the horizon, one thing that we're looking at is this is new money coming in, right? This new money is gonna help us do the things that we already have gaps with. The question that isn't asked is, "Where's the money gonna come from to pay for the new obligations with that development?" Right? So we're building 500 homes. We're gonna get, you know, a million dollars in property taxes. That's gonna help us close this gap on these other things. But that's a new obligation that we are going to undertake, and have to figure out some way to pay for in the next 15 to 20 years, all of those, uh, obligations too. And so, um, Strong Towns calls this the growth Ponzi scheme, right? Strong Towns is, uh, as an organization, has talked about this. Uh, there's several others. There's Urban3. They do a lot of this research. Um, locally here in the DFW area is Fortunity. We've had, uh, we've had Kevin on the podcast before. So this is not sort of a unique idea to us, but once we started looking at property tax data a couple of years ago, and we started to have ... You talk about not having this data accessible-

Yeah, I think that's-

Once we s-

Yeah, that's extremely-

Yeah

... important to talk about. You know, you got 254 appraisal districts in the state of Texas, and they all use different data formats. And they all, you know, I, I don't wanna say make it difficult, but it is difficult, um, to, to get that data and analyze it and really look at it broadly, right?

Yeah. If, if you're, uh, one of the many counties in Texas or cities in Texas whose county appraisal district uses, like, iSouthwest data, right?

Mm-hmm. Correct.

Good luck getting that information-

Yeah

... in a usable format. We've dealt directly with them, and it was extremely difficult to get that information in a usable format.

Yeah. My love was the fact that they illegally charge for that data. That was always my-

Yeah

... you know, my rub there. We, we, on our end, have figured out a way to streamline that process and made it a lot easier on ourselves but, you know, the, the reality is, is that if a city wanted to get that data, and if a city wanted to analyze that data, I mean, it's, it's just like the sales tax side, right? The bigger cities, uh, they, they don't really have computers sizable enough to analyze that data, you know. We used to joke all the time, it's one of the greatest things about, about our product on the sales tax side is that it doesn't crash your computer. So I mean, uh, but the, the reality is, is property tax data is, I mean, it's just lines and lines and lines and lines of data and historical data. And you're just trying to get through that so that you can make a decision, you know, in, in a short window of time. 'Cause let's look at a development process, especially in Texas, you have the development shot clocks. You've got 30 days and then 45 days. I mean, basically within 60, you know, 75 days, right? You've got to make a final decision on a development. That's a lot of work to do for a major development to figure out is this good or bad for the city without that data already being at your fingertips.

Okay. So what kind of data do you need to actually look at this? Um, and why is this so hard, especially for smaller cities? Um, uh, ultimately, you need some kind of geographical system, right?

Yeah.

A GIS department in most cases is, is necessary. People who can, um, who understand how to use that software, how to get the data and clean it. Um, because, I mean, ultimately, what you're looking at, if you're looking at a specific neighborhood, you need to be able to pull all the parcel information. You need to be able to pull all of the infrastructure information, and then you need to be able to analyze, like, how many lane miles of road do I have? What's my actual value per acre? Um, you know, uh, what is my drainage infrastructure? What is the, uh, what is the revenue generated in this area from other types of, uh, revenue sources, right? And so, like, you can't really just do this in Excel at scale.

Yeah.

Uh, because you, you're potentially talking about hundreds and hundreds of parcels just for a single neighborhood. Um, you're talking about going ... Like, let's just assume that you wanted to do this manually. You're talking about- ... drawing lines on Google Earth, right?

Yeah, yeah.

And trying to get lengths of roads and, and widths of roads. And then-

I think that's important, that's important to state. Like, w-we, this is assuming that you're not using a software package that's doing this for you, right? Like, how would you do it on your own is what we're talking about.

Yeah.

So, and, and it, it is. I mean, keep going. You're only, like, you know, one tenth of the way there.

Yeah. So, so assume that you have the staff for a GIS team, right?

Yeah.

Who's not al-already doing a bunch of other things, and so now you've gotta pull them away from those things and, a-and run this kind of an analysis. Y-you also have to know what, what you're looking for, and make sure that that data is up to date. And, and again, getting that information from the appraisal districts has historically been difficult. Now, if you're in a bigger county-Um, it's much easier. Like, right, I'm, I'm in Tarrant County. Tarrant County has pretty good publicly accessible data. Um, lots of, lots of other counties do, not the county to the north, unfortunately, right now. Uh, they're going through some issues. Um, but, you know, if you're lucky enough to have that data, then, uh, you're still talking about gigabytes worth of information that you have to sort of parse through just for a single year. And, and so it... Without that sort of expertise, it becomes prohibitibly- prohibitively difficult to actually look at this information, even if you know what you're trying to look for.

Yeah. No, absolutely. I think, I think that's, you know, a really good way to put it. You talk about that county to the north, by the way. I do have to chime in that they just released their certified data, but apparently it-

Yes

... has fake values in it.

Ghost values.

Ghost values, yeah. So if anybody really wants to know what we're talking about, you could just google ghost values in Texas. I think it will probably come up for you. But, um, you know, look, I mean, you know, the question is, is okay, so you, you get all this, you get all this data in front of you, and so then what do you do with it after the fact, right? So now you have it. Now you know. You know what you're... You can go and look at your historical. You can do some analysis on what that cost. Every city's gonna have different cost parameters. Every police officer in every different community's gonna cost a little more or a little less, right? Same thing with fire departments, same thing with public works departments, same thing with administrative costs, those type of things. The fact is, we standardize just a couple of costs, right? E- even though we allow people to add additional costs, we kinda standardize a couple of costs. And even just standardizing a couple of costs, we've yet to find very profitable development in today's development patterns. Can you talk a little bit about that, Chad, and like what you have found as you've really kind of created, you know, this, this new module and, and what, what you're finding from that?

Okay. So we talked about this a little bit, just sort of in passing on the last episode. But for a talk that we gave to a GFOAT meetup a couple of weeks ago, we looked at 11 different neighborhoods in Tarrant County. So we pull all of their parcel data, pull all their property tax data. Uh, we make some assumptions about sales tax per capita based on household spending, things like that. Um-

Which is very friendly

... and assuming that all of that-

Yeah, assuming it stays within your community

... spending occurs in your city, right?

Yeah.

It doesn't get exported out.

Yeah.

Most of those neighborhoods couldn't even pay for the roads inside the neighborhoods, right? And that's the biggest challenge is you've got... In any normal residential development, you're gonna have between 10 to 13, 14% of the land area is occupied by roads, right? And those roads, especially when you're building a new neighborhood, and it's most likely in concrete, that's really, really expensive. And the wider your roads are, that's more, uh, more concrete that you've gotta maintain, uh, and at some point replace, right? And so that's sort of the biggest challenge. It's one thing to just maintain a concrete road-

Yeah

... over a 20, 25-year period, right? You can cut out a section and replace it. You know, you can do minor things to, to maintain it. That expense is not so, uh, unbearable. But the problem is that eventually that road's gonna fail and have to be replaced, and at that point, are you generating enough revenue in this neighborhood to pay for that? And if not, do you have enough excess revenue in other parts of your city that can cover that cost? And sort of, to me, this is the biggest reason why our streets are so perpetually underfunded is 'cause we just don't have the capacity to maintain all of that infrastructure that we've built. So, so-

But it starts at the beginning, right? I think that, I think that's the point we missed is it, it, the reason we don't have it is because it starts in the very beginning with how we've approved development patterns.

Yes.

We've approved unsustainable development patterns which then put us in a position to where those roads cannot be funded 25 years or 30 years from now if the... depending on the material they're built out of. And, and so then we just continue, and then we kinda take from the new development, and we... Which is, which is why Strong Towns calls it the growth Ponzi scheme, right?

Right.

'Cause then we take the new revenue that we won't need for 25 years, right? And we try to supplement that to the old, the old roads that are there, right?

Yeah.

Um, and, and I, I distinctly remember in grad school, I don't remember the terminology for it, but I distinctly remember in grad school, and I think it was in Dr. Bland's class. Shout out to Dr. Bland, uh, who, who is seriously helping run the program at this point. Um, and Dr. Andrew, by the way.

Mm-hmm.

Heteroscedasticity. I can still not pronounce the word. Um, but there was this topic of conversation about why it was more important to take debt out, right, for an asset, for like a new road, than it was to pay all cash for that new road, right? Because you wanted taxpayers to pay over time, and there may be different taxpayers that land in your cities during that time, and so debt was the more fair process to do that with. I think the problem looking back on that now that I see is, yeah, that's great, but we're using the new value that hits the ground to pay for the improvements that have to happen in the old value areas, right?

Yeah. Most cities' debt rate's a lot lower than their O&M rate.

Oh, yeah. Yeah.

Which means that if you can't even cover it with your O&M rate, you're certainly not with your debt rate.

Correct. And, and that's the argument is, is that, you know, from a development pattern standpoint, every city should set its threshold, right? It, it... We're not, we're not saying that every city should, should be, you know, 100%. You know, there, there, there are some political reasons and feasibilities for where you set your, you know, quote-unquote, "profitability threshold", right? But one thing we do know is that-Development patterns significantly impact that, and when you have a historical view of those development patterns, maybe you'll make a different decision for future development. That's what we can fix now.

Yeah. So, so going back to those neighborhoods, um, 11 single fa- largely single family residential neighborhoods-

Mm-hmm

... across Tarrant County, just to pay for the roads in those neighborhoods, you needed about... So basically the, the, the revenue that they generated covered about 67% of the infrastructure cost, right? You would need essentially $1.5 billion worth of new value to be added onto the ground without adding any infrastructure.

For 11 neighborhoods.

For just 11 neighborhoods in Tarrant County.

Do we remember what the estimated population of those 11 neighborhoods was?

Uh, no.

Okay.

I could probably pull it, but I don't have it off, offhand. So...

That's okay. Yeah.

So, so, I mean, there's no way that that's gonna happen, right? You're not gonna be adding that much value in a single family neighborhood, and the reason is largely because when we build single family neighborhoods, we build them so that, in a way that they, they aren't expected to ever really change, right? We build them sort of all at once, and they build them to a finished state, and that's just, that's what they are, right? They're, they're, they're kind of capped from a value standpoint at that existing use.

Yeah, it's-

And the only value or the only mitigating circumstance that we have there is that because we don't have enough housing, the value of that housing is going, is appreciating very rapidly.

Yeah.

Right? 10, 15, 20% per year. Um, that's the only mitigating factor, uh, that's kind of helping offset that. The problem with that is it has compounding effects, which we've talked about many times, which is that-

Yep

... nobody wants to have their property taxes increased 15, 20% every year. So now the legislature has to step in and try to find ways to control this, right? And so this is just a cascade of problems where, uh, it's, it's just limiting our ability to actually manage our affairs here because now the state's stepping in and trying to restrict how we're handling things.

Well, since, so since the early 2000s, right, as the housing market really went up and obviously, you know, hit, you know, like peak bubble status in '08 and then dropped, you know, kind of stabilized and then went up again after we got through that process. But from that period on, cities really had this ability to kinda catch up, right? They were, they were able to kinda capture that new value and do it 'cause in, in our state law, you know, the rollback rate was 8%.

Yeah.

And so they could, they could go back and, uh, and really capture that money, which would allow those older developments to eventually pay for themselves. In today's world, that's no longer the case, right? So if you put development on the ground today with the rules that are in place now, I mean, the voter approval rate of 3.5%, you're, you're not gonna be able to sustain that, right? At, at 3.5%, you're still not gonna catch up. That'd be a really good measurement for us to think about showing. Like, if you had a 3.5% increase at max, like over the years, like what would it... Would it get any better, like a future?

What would that gap be? Yeah.

Yeah, what would that gap be?

You have to make some assumptions about the cost, the increased cost of road materials.

Yeah, which we don't really as- we don't really assume now. We kind of just establish what the cost of that road is today, and we assume that-

Yeah

... you have to collect that by year 20. But, um, you know, the, that, that would be really interesting. But I... You know, when we have this conversation, I always think to myself that the, the electorate, people, they don't really know what it is. Uh, just every time we pass some type of major legislation at the federal level that is, you know, some type of stimulus, right, what's the one thing that always comes out from that process? How much is it going to cost each taxpayer in the national debt, right? What's your share of that stimulus? That's, that always gets released. So like my, you know, my share of the COVID stimulus was like $5,000, right? Like, it, it's gonna cost me $5,000 over my lifetime, uh, for that COVID stimulus bill. We don't share with people, "Hey, if we approve this development, right, your share of the city's debt is..." You know what I mean?

Right.

Like, that would be a really interesting thing to, to kinda flip the script of conversation and actually talk like that, tell people, you know, "Hey, this is... There are, there are detrimental impacts to this getting done." Um-

Yeah

... you know.

So let's look at then at some of the... So one thing that we've got here is sort of a... I'm using the phrase almanac. You don't really like that phrase.

It's nice, you know.

But essentially it's, it's like a development pattern reference guide, okay?

Mm-hmm.

So assume that you have a tax rate of about 28 cents per $100. You have a neighborhood-

It's pretty low. It's pretty low.

It's not that low on average-

Man

... for O&M, at least here in-

Yeah

... in Tarrant County.

Okay.

Um, there are some cities with much higher tax rates, right? And those, those cities tended to have closer to break-even levels of profitability on their developments.

They did.

Um-

Those cities are also trying to get their property tax rate downs vigorously.

Yeah. So let's say 28 cents, uh, just 'cause that's the screenshot that I have in front of me. If, if a neighborhood that you're putting in the ground has a road density of 10%, right? So 10% of the land area is a concrete road. You need on average $1.9 million of value per acre, okay, just to pay for that road replacement. That's sort of an annualized cost, right? That's assuming that you're taking that money and you're putting it into some kind of trust fund that will ultimately repair the roads in that neighborhood or replace the roads in that neighborhood.Right. So quarter acre

So the average value of a, yeah

... quarter acre lots

So even a quarter acre, okay

... half a million dollar house, right?

Yeah.

And that's assuming that every non-road inch of land is a taxable property.

So 60s, 50s and 60s by 120s, which would be like one-fifth acre lots, would need-

400,000

... an average value, 400,000?

Yeah.

Yeah. Like 380, 400,000. So-

And that's assuming that you don't have any schools or parks or anything else, or, you know, just green space that's not taxable. That, that, that's an average value per acre requirement. If you go up to 13%, which is, which is a pretty reasonable amount, pretty common amount is about 13%, like that's sort of the kind of just ballpark estimate that w- that we tended to use was 13%, two and a half million dollars of value per acre.

Wow.

Right? So I mean, obviously this-

Road diets go a long way, people.

Right. Yeah. So like instead of a 28-foot wide road, two-lane road, a 24-foot two-lane road is gonna save you significant amounts of money and reduce that stress that you're putting on your development pattern.

So I had this conversation with a city the other day after a conversation that you and I had, and it was actually, I think, technically your idea. I may have taken credit for it, though.

That wouldn't be the first time.

But the city was talking about road width, and they were, you know, talking about building a, a 32-foot residential road section, and the reason they were talking about that is because the road was pretty busy, and there was a lot of density there and, and, you know, they, they felt like they needed to accommodate some on-street parking. And I made the comment to them, I said, "But that's gonna cost you a significant amount of money, which is probably gonna make this development unprofitable over the term, you know, of its useful life." And they, they said, "Well, uh, I, I just... You know, I don't know." I said, "Well, why don't you rent those parking spaces on your, on your street? If you're gonna, you know, do that, you should just rent it. You should, you should make people pay or permit that parking." Which it does, to be fair, it doesn't really happen in Texas very often.

Mm-hmm.

You don't see it very often. It happens all the time in the Northeast, right? People pay for parking permits, on-street parking permits. But I, I really wasn't saying that because I wanted them to implement a parking permit program. I was saying that so that they would understand that that concrete has value.

Right.

Right? That they're putting that there, and that concrete has value, and when you put concrete there that goes unused, it, it, it doesn't recover its value.

Right. It's, it's a subsidized... its a subsidy, is what it is.

It's a, oh, 100%.

Yeah.

100% a subsidy. Yeah.

So, uh, so a concrete road costs about almost 16 bucks per square foot.

Mm-hmm.

Okay? The aver- say, a car that's seven by 18, that's $2,000 worth of concrete that that car is sitting on.

Yep.

Right? Not able to transport people in any capacity-

Mm-hmm

... whether it be a car, bicycle, skateboard, whatever, walking, right? It's an unusable piece of road from a transportation standpoint, and you s- you're spending $2,000 on it so that someone-

Right

... can park for free, right? Now, that's just one, literally one, the space underneath one car.

Yeah. What we should, we should be asking though, every time we talk about designing a road, we should be asking our engineers a very important question: why? So when they come to you with a 28-foot road, you should ask them the question, "Why 28?"

Fire trucks.

Why not 24? Why not 22? Fire truck can get through on 22-foot road.

Well, if it, yeah.

Curve to curve.

No, no, I understand. But the argument is the fire, the fire trucks are so massive that they need wider roads with wider turn radiuses. Radii.

That's some... Yeah, radii.

Right?

Yeah. I mean, I- y- but, but even then you could-

But the que- the question is never asked, "Well, why can't we have smaller fire trucks?"

There you go. Yeah.

Right?

Fire truck costs a million bucks. A smaller fire truck costs $600,000.

Not only that, it's smaller, right?

Yeah.

So we-

Shout, shout out. We, we actually need to, we actually need to get a fire chief on our show, and we, we have a couple friends who are fire chiefs that, uh, we need to bring on and have that conversation with. But, um, and, and there are a couple of very creative fire folks out there that, that talk about, you know, the change of the fire services and, and, and what that looks like. But the reality is, um, we just don't ask why enough.

Yeah.

I mean, if, if we, we, we could save ourselves so much money just by asking why.

Yeah.

I cannot stand driving through residential road sections that are 28 or 32 foot wide. I, I just don't understand it. And then not only that, if you look in the zoning code, they require off-street parking in their zoning code. So they build this road to allow people the capacity to park on the street, but then they say, "Well, you're not actually supposed to park on the street in this SF neighborhood," right? "You have to have capacity for at least two cars in your driveway or in a garage," right? So your driveway has to have two cars of capacity, and your garage has to have two cars of capacity, for a total of four vehicles.

Yeah. And you can fit three vehicles on the street in front.

Yeah, and you can fit three vehicles on the street. So I mean, you know, what, what are we encouraging through our zoning code, but yet we're building this road a little extra... And I'll say this again, not hating on all my engineer friends, but they're making a percentage of everything they design for you. So of course they wanna design a bigger road. You just have to ask the question why.

Yep. So, um-

But that 10 to 13%, Chad, is, is that difference maker, right? I mean, you talk about the 10% of road coverage in that neighborhood and the 1.9 million per acre that has to be made versus the 13% with that just ginormous number. How big was that number again? It was wild.

Two and a half.

Two and a half. So $600,000 in difference per acre.

On average across the whole development.

Yeah. So, so that, if you do fifth acre lots, right, you don't have to build a $400,000 home, you have to build a $520,000 home. Um, which, you know, is just, it's a, it's a huge affordability gap for anybody who wants to live in that neighborhood, right? Um, and then man, you get to quarter acre homes instead of fifth acres and, and you're just...

Yeah. So you know what?

What?

I'm just realizing this now, which I, I hate to have like a, an epiphany while we're actually recording.

We did not pre-rehearse this epiphany.

No.That value per acre includes the road area.

Oh.

I didn't actually subtract out the road surface. It would be much higher.

Okay. It would be higher.

Wha, wha.

Yeah. Wha.

That, that just makes it even worse.

Yeah. Makes it even worse.

So, so all this to say, now, um, what we're, what we're doing is sort of providing a high-level directional look at this information, right? Um, there are firms that will go very deep into all of your cost inputs.

Mm-hmm.

Um, neighborhoods that, uh, you know, uh, the impact, uh, on your fire system. Are you gonna have to build a new fire station? You know, uh, like, what are those sort of, uh, cost allocations, uh, administrative overhead, all of these different things that, that they'll get really granular into if you want to have a very specific number. Uh, our goal with this, because we're not charging for it, is to give you a sense of where are you right now, and are you pointed north, or are you pointed, like, southeast, right?

North. Yeah.

Like, are you pointed in the right direction? Um-

Yeah

... so, so it's a higher level view, but it's important to sort of understand what you've done in the past and where that situated you. Uh, and then sort of how you can move forward from there in a way that is going to allow you to not make up for the gap in volume when you're losing on every new piece, right?

Yeah.

You don't wanna make up a deficit on a unit basis and volume 'cause that's just gonna put you at a further deficit.

And it, and let's be clear, this doesn't mean, uh, we, we, we are not coming out and saying, "The only way you can develop profitably is by density," right? I, I wanna be, I wanna be super clear with people. But what we are saying is, when you look at the numbers, it's pretty clear that if you're gonna build a half-acre lot community, you really shouldn't do it with curb and gutter, and you really shouldn't do it with concrete roads.

No. You should do it with chip seal roads.

Yes.

Right?

So-

You should do it with a minimal amount of infrastructure, right?

Yeah.

'Cause this, the- these numbers assume concrete, right?

Right.

A chip seal road is gonna be replaced more frequently, but it's gonna probably cost you less in the long run.

Yes. So I mean, we, we, it's not probably. We know it costs you significantly less in the long run.

Right.

Especially with proper maintenance.

Mm-hmm.

Um, but, you know, ultimately, it's, we've put rules in place. I mean, there are many communities in DFW, many, many, many, that require concrete roads on one acre lot communities, right? And require curb and gutter on one acre lot communities. Lot of communities out there that do that. I don't care how expensive that house is.

Yeah.

I don't care if you're selling $3 million homes, you are not going to recoup the cost of that road. It's just that simple. And, uh, but I, I wanna make sure that people understand, this is not, you know, just a push to go, "You know, well, you should build apartment complexes and fourplexes and duplexes and things like that." It, it's, it's not that. You know, it, it's a, you know, people in the multifamily industry like to co- you know, call it cost per door or cost per key, right? Um, and, and that's basically what we're saying is based on the infrastructure that you should put in, based on, on what, you know, you have to provide service-wise, you should at least know what your necessary cost per door is. And we do the basic work to get you there, and at least show you what, you know, the north pole looks like, right? Um, that being said, there are firms that we will happily recommend, like, if you really wanna get into the weeds and, and do some, some stuff. We, we have, you know, some firms that we would use for that, uh, to do that, that do great work. Um, but we're trying to use that data to do this a little bit more on the fly so that you can use it as a decision-making tool, another decision-making tool, uh, for how you develop and where you, where you do things and where you ask good questions-

Yeah

... at the end of the day.

So let's put a pin in that one real quick so we can come back to it, right? 'Cause there's technically a little bit more to what we're doing here, um, as opposed to just always looking backwards, right? Looking forwards as well.

Yep. Mm-hmm.

But I just wanna reiterate what you said. This is not, everything in life is a trade-off, right?

Mm-hmm.

There are no actual, like, ideal solutions that require no trade-offs and everyone's gonna be happy. Um, density, for its own sake, is not necessarily the answer. The problem that we encounter with the development patterns that we've experienced is that they're not priced properly, right? We talk about a $2,000 subsidy for that parking space on the road. By not pricing that subsidy, you're encouraging a certain type of development, okay? There is nothing wrong per se with a single family neighborhood that we're all accustomed to, right? There's nothing, like, morally wrong-

Right

... with it or ethically wrong with it of any kind. It just isn't profitable the way that we're doing it, okay? So it's not just that we're saying you should never do that, but if you're going to, you should try to find a way to make it break even at least, right? If that's-

Mm-hmm

... parking permit fees, like residential on-street parking permits. If that's changing the road materials, if that's reducing the road widths, if that's, uh, reducing setbacks, right, so that you can put more properties on, um, but still have that sort of single family, uh, style, right? There's lots of things that you can do besides just going immediately to huge apartment complexes, right?

Mm-hmm.

There's, there's just this gap in our thinking, um, that sort of limits our ability to problem solve.Uh, on, on these questions. But having the data in front of you gives you the ability to, to understand what all of those components are, and then hopefully make better decisions.

Yeah, absolutely. Uh, and, and, you know, it's that look forward that's important. Okay, hey, you can, you can look back and you can see, you know, your historical development processes and, you know, your development patterns have done this for you financially. But most importantly, it's the ability to also take that historical data and look forward to see, okay, if I do this development that's coming through my pipeline right now, what does that look like?

Hmm. The pipeline.

Uh, and, and you did it... Yeah. Your- Oh, yeah, I said it out loud, sorry. If, if you look at that and, and you get a better understanding of where your money's gonna be made, not only are you assisting yourself from a development pattern standpoint, but you're also assisting yourself in a future budgetary projection standpoint as well, right? Um, that disconnect between the finance department and the development part- department, it doesn't matter what city you go to, they all feel disconnected from each other, right? They're just totally different personalities of people. The people in the finance department don't really talk to the people in the planning department. And frankly, planning doesn't really talk to anybody else, right? I mean, it's just, it, it is what it is. But this process allows you to start looking at things and understanding and scoring or how, you know, putting it into pro forma, however you wanna say it, but it, it allows you to make a decision based on what your threshold is. It's just that simple. But establishing what you want to achieve in your organization is extremely important. And, um, if that takes you, you know, a, a reimbursement TIF, if it takes you a PID district overlay, if it, whatever it may take you to get there, we strong- The, the one thing I can say is, look, we're, we're not gonna tell you what your winner or loser is, but we are gonna, uh, uh... For me personally, I am gonna tell you that you have to be able to justify the way that a development comes into your community. You need to be able to justify to your existing taxpayers, your existing residents, that what you're bringing into the community has a beneficial return on it.

Yeah. It's not gonna be subsidized by e- either what's there now or what's gonna be coming in the future.

Yeah. And I, and I would say it has to have a quality return not only on the financial side of the investment, right, but it has to have a quality return on the, the overall livability side of the investment. Does it make my community more livable, yes or no? That's a lot harder to measure than the numbers are. But y- you really have to look at, look at both of those and, and make a, a determination as, as to where it goes. But I think profitability is gonna become just a, a very important term that gets used in city government. It's, it's really starting to filter in that we have this data, we should be able to look at this data, and we should make decisions based on this data. Um, and, you know, for those city managers who have city councils that just, or better yet, have developers that reach out directly to city councils because they don't like the answer they get from a city manager a lot of times, right? You will have data at your fingertips, or you can create data at your fingertips to show your council, "Hey, I know this is pretty, and I know it's great, and I know they want a 100% ten-year tax abatement, and they want a three 80 agreement for 15 years. You know, I know they want all of that, and they'll do this development if you give it all to them." But it doesn't matter how pretty that lagoon is, it's never gonna make the money back for your residents. You're, you're just gonna lose this deal at the end of the deal. At, at the end, sorry, end of deal. At the end of the day, it's not gonna make enough money. And if you're loaded with that ammunition, you can have that conversation.

Yeah.

And just historically, we just haven't been loaded with that ammunition.

Right. Because the analysis that you can do on your historical development patterns can obviously be flipped-

Mm-hmm

... and you can do pro formas on future developments.

Correct.

Right?

Yeah. Absolutely. I don't think your almanac term is nerdy. I just, it's, it's very, uh-

It may not be right.

No, I mean, it, it'll, it'll work for a little while. I just, I've... It- it's, it's like the most traditional terminology we've probably ever used in, in our software platform. I mean-

Maybe.

The almanac is like, you know, it... I'm not gonna say it's the oldest book, but it's one of the oldest books around, right? I mean, the, the Farmer's Almanac was, was it originally written by Ben Franklin? Am I wrong on that?

Well, this sounds like something we have to fact check right now.

We're gonna have to fact check it. We did this last, last time where I was totally off on something, and Chad was kind enough not to publish it.

I cut it out. Yeah, I can tell you what it was though.

Yeah.

It was... No, let's just leave it.

So I, I feel like Ben Franklin was in charge of the original Farmer's Almanac.

It was founded in 1818, so I don't think that Ben Franklin was still alive.

Oh. Yeah. Sorry.

He had already-

I got that one

... retired from the presidency and was living back at home and That's a joke. Everyone thinks Ben Franklin was president.

Oh, my. That's correct, yes. So anyways, what else do we got to add to this profitability conversation? I feel like we've done a pretty good job of-

I hope so. The biggest thing for me is that, uh, it's just the conversation is important. I've been in a lot of discussions, and I know you have too, where that nominal increase in revenue is all that matters, right? That's revenue that we're don't have, that we don't have today, is like the phrase that you hear.

Yeah.

This is revenue we don't have today, so, you know, who cares if we're not getting 100% of it? You should care, right? 'Cause 100% is still probably not sufficient for these obligations. The other thing is to flip the way that we think. Like when you talked about Dr. Bland, you said taking out debt to cover these assets. These aren't assets.

Ah, that's true.

They're not assets at all. They're, they're long-term liabilities because at some point they're going to have to be replaced. Um, now we, we book them as assets partly because we have to, right?

Yeah.

'Cause we have cor, uh, corresponding debt associated with them, uh, often, especially for new projectsUm, but even when a developer comes in and builds the roads and gifts it to the city, like that's a new asset, right? We just added 15 lane miles of road. So that's a ton of money on our books, right? We're not accounting for the fact that it does have to be totally replaced at some point in the future, probably sooner than we anticipated. Um, because in my opinion, honestly, concrete roads are terrible. I, I do not like driving on concrete roads because after the first little while and those panels start to shift and they just chunk, chunk, chunk, chunk, chunk, uh, it's just awful. But-

Driving, driving in Louisiana on the bridges.

No, I mean, you should-

If you ever drive the I-10, I-10 in Louisiana is just ba-ba-ba-ba-ba-ba

... you should drive on Heritage Trace Parkway between Harmon and 35 in Fort Worth.

Uh.

That road is awful.

Yeah.

Um-

The soils, the soils, to be fair though, the soils in that area are just... They're tough to design with.

Yeah. So let's do something different then.

There's lots of soil challenges.

So-

No, I, I don't disagree

... so having the conversation about, uh, about profitability, having the conversation about assets versus obligations and liabilities, like these are just important things that can kinda help, help us all make better decisions. Uh, because again, it's not just about... Like, you could use this as an argument for more density, sure, but that's not the point.

Yeah.

The point is we should be developing in a way that's sustainable fi- fiscally, and we should... In order to understand that, we need to be looking at all of these cost factors and obligations-

Yeah

... and not just the revenue that's coming in that we didn't have before. And we need to find ways to make these things work for us that, that meet whatever your community needs, right? Every city is different. Everyone's gonna have different requirements, different desires for it from their council, from their staff, from their residents. So it's not a one-size-fits-all solution. It's just important to have the conversation, have the data so that you can make a decision that's going to help you stay fiscally healthy for the long haul, right? 'Cause at the end of the day, w- the cities exist to continue existing and to continue providing places for people to live and work. Um, and if you don't, if you aren't generating enough money to pay for the obligations that you're putting on the ground, then that's not gonna happen.

Yeah.

Now-

And like-

Go ahead.

No, no, you're good. Go.

I was gonna say, speaking of not being able to afford things, you know, we've had a, we've had an interesting couple of weeks here, Patrick. Uh, Texas is 2-1, A&M is 2-1, but I wanna ask you how you feel about the state of Aggie football right now. You guys pulled off the upset. Or were you favored?

No, I guess Miami-

I didn't think so

... they were. Yeah.

Okay. You pulled off the upset.

Got the win with very little offense, by the way.

Yeah, I was gonna say, I think you're averaging, like, 17 points a game.

It's pretty bad. And then, uh, you know, I, I think Miami had, what, three field goals? Four field goals, I think. Something like that. It was, yeah, it was rough, man. And they missed two, so, um, no, no, no doubt, offensively we have a lot, uh, to, to, to conquer. Defensively, we're a pretty good football team. I mean, even, even against App State, you know, the famous App State loss where we paid them a million and a half dollars to come and beat us. Um-

The only ATM where you can withdraw $1.5 million.

That's pretty funny. So, you know, we lost game day, right?

Yes.

Game day was supposed to be in Aggie land-

Supposed to be

... and yeah, and when we, when we lost to App State, they took game day to App State.

And you know what that meant?

There's something special-

You know what that meant, though, is that for three hours they talked about how you lost to App State.

That's true, and that's okay. We're, we're, we're, we're okay with that.

Hey, at least you didn't lose to Kansas.

App State- Hey, that's true. I didn't lose to Kansas, and I, I will say this, App State is a good football team. But game day went there, and I did find it interesting that, uh, you know, they, they ended up winning on a Hail Mary.

Mm-hmm.

Right? Did you see that pass?

I did.

Incredible. Um, there's something special about that App State team this year. I'm just saying it out loud. Uh, it doesn't really matter 'cause they're in, they're an FBS team, right? So, uh, so it's not like they'll, like, make it into a playoff or anything like that. They will go through the FBS ranks. Uh, but yeah, that, that game against Troy was actually a really good football game. I'm not worried about A&M. We are gonna have a full stadium every time. It's not like Texas where everybody's a little bit more fair weather. You know, you gotta take your T-shirts back to Walmart. It just is what it is. You know, at A&M we're, you know, we understand loss. We've had it for a very long time. We know how to deal with these things, Chad.

So I only... Yeah, that's true. You, you're used to being mediocre.

But you did send me a text message as you were losing to Alabama that you were back, so.

Yeah, that was ironic.

Yeah.

That was, it was after the game. Uh-

It was after

... I only bring this up because, um, as part of this, the rollout of this-

You almost lost to UTSA.

I mean, we beat them by three scores, uh, but it was closer-

But it was close for a while

... it was closer than it should have been.

Yeah.

But UTSA is a good team too, and their quarterback is incredible.

Yeah, he's pretty good.

Um, uh, the most disappointing thing about that for me was for the first half we weren't able to get a lot of push on their offensive line, which I think they're missing four starters. Um, but they had a, they had a, uh, an onside kick and then a trick play double pass to get that, that second touchdown, go up by 10. So I mean, little bit fluky. They had a couple of, uh, opportunities to stay in the game, but we kind of pulled ahead. The only reason I bring this up at all though is because as we're trying to roll this out, like there's a lot of sort of GIS operations that we're doing in this new module, this profitability stuff, and that requires some special software to be installed on our production servers. And so on Friday I spent about seven and a half hours beating my head against the wall not being able to get this software installed on production. Like, it works great on our development environments, but I just couldn't get it installed in production. And if this doesn't, if I can't get this to work, like the whole, the last six weeks of development is just gone, right? And this whole-

The Tita- the Titanic lady, uh-GIF that you sent me was pretty funny.

So, so Saturday after I just set it aside, I come back, I figured out a way to get it working, right? Which just involves spinning up a brand new server, and I'm just gonna create a microservice to do this, right? For now-

Mm-hmm

... until we can get it all integrated. So I s- I sent you my debugging statement. I was like, "I got it working." I sent you the Titanic lady, "It's been 84 years." And you say to me, "I may be more proud of you than I am of my offensive line," which is just the lowest bar you could possibly set. Or-

Oh, I wasn't talking about my Aggie offensive line.

You were talking about your kids' offensive line?

I was talking about my fifth-grade team.

Okay.

Who-

I thought you were talking about your Aggie offensive line-

No, no

... who's-

Oh, now, oh now I understand

... are road grading for like 100 yards-

Your text message

... of passing and, and rushing per game.

No.

Meanwhile, I'm over here, like, literally saving this project in my, on my weekend. So okay, that makes me feel less-

I actually, actually kind of, yeah, I actually kind of feel bad. L- let me, let me give you just a synopsis of, of my fifth-grade football game. We played Weatherford this week, which, uh, you know, anybody who's from Parker County understands, you know, it's jokingly called the Peach Bowl, right? Uh, but we, we played our cross-town rival. And we went down 12 to zero in the first, like, minute and a half of the game. And I, I, I, I call them my fat children. It's probably not politically correct, but I s- I asked my fat children to come over. My son is the center. And I said, "Hey, I need y'all to come over here." And I, and I sat them down and I said, "Look, I tell you right now this is gonna be a long game. It's gonna be a grind. And we are gonna win behind you five big body kids. And I need you guys to blow these guys off the line three to four yards every single play."

Is this your eldest?

And we did, we ground it out. Yeah, this is my eldest.

Your... He's a center?

He's a s- yeah, he's really good too.

Really?

So, yeah, yeah.

I figured he'd be like a quarterback or receiver or something.

No. Uh, you know, in baseball, he's, you know, he's, he's that kid, right? He's, he's, you know, he's, he's always kind of clutch hitter and, you know, plays a great infield and plays outfield. Loves to catch and pitch and all that jazz. But in football, man, he really loves being a center. Like, he just, he likes the offensive line. That's ... It, just a little bit of tidbit of offensive line, the center is the smartest guy on the line, right? It's, you're basically calling what your blocking scheme is gonna be when you come to line based on where the defense sets up. You're the guy pointing around, showing people where to go, that type of stuff. So you can also audible as a center, which is fun. If you have a really good football team, you can let your center audible, which we do. Uh, but here nor there, I say this to these guys, "Hey, we are going to win this game, and the way we're going to win it is because you guys are gonna help us win it." And we did, man. We did. We, we had two drives of, like, 70 yards a piece and drove that ball all the way down. Went up on them, um, I think we were up, like, 13 to 12 and, uh, you know, took the lead. Got to halftime, we're up by a touchdown, and then bam, we ended up beating them 40 to 18 at the end of the game. And I mean, we ran the ball just straight up the gut the entire game. And it was smash mouth, big kid football. I loved every bit of it. So when I made that comment to you, it was actually-

It was actually-

You know

... meant out of a place of love.

It was, it was meant out of a place of love, yeah. I, I-

Do, uh, do y'all not kick extra points, or do they just not make them?

Uh, we don't kick at all in fifth grade.

You just go for two?

We just go for two.

Okay.

And, uh, we're not always successful in going for two. It, sometimes it evens out towards the end. So at the end of the day, you know, it was like four-eight... I think it was 40 to 18 instead of 42 to 18, right? So yeah, not too bad.

Very cool.

But yeah.

All right, man. Well, let's wrap this up. I'm out of town next week, and then we have TML. So if you guys are at TML, please stop by the booth and come say hi. Uh-

Yeah

... we'd love to chat with you. Uh, but otherwise, it may be a couple weeks. So Pat, I hope you, uh, stay healthy and hope your Aggies can keep you from having a heart attack. Maybe-

Oh, we're about to start the season

... maybe put some numbers on the board.

It's about, it's about to get real.

It's gonna be a grind, right?

You guys have Texas Tech this week.

You have... We have Texas Tech. You have-

Yep

... you have Bama in two weeks or three?

Uh, Bama, I think Bama's two weeks. Um, yeah, but I- I'm more worried about you and Texas Tech this week.

Well, uh-

Tech, Tech played really well against Houston.

Yeah. I don't know. We'll see. The biggest challenge is it's in Lubbock, but the problem is, and don't tell Allison this, but even though Texas has been in one of the worst 10, 12 year periods, we've still only lost to Tech, I think, twice.

Yeah. Even, you've been in a slump since King of the Hill went off the air.

Yeah, this is a new... I've not, I hadn't heard that before.

Yeah.

Seems like it's definitely-

While King of the, while King of the Hill was on the air, Texas won, like, uh, I think it was like 92% of its games, right? And since King of the Hill has been off the air, they've won like 70% of their games or something like that, like 68%. It was a, a really funny comment that was made. That was actually on that Aggie, Aggie board.

Yeah. Well, if there's one thing I know for a fact, it's that correlation and causation are the same thing.

Until they're impacted by heteroscedasticity.

Heteroscedasticity.

Yeah, absolutely. So, well, all right, Chad, man, have a great vacation. I know you're gonna get a couple weeks off here and, uh, take some time to relax, and you deserve it, especially after the amount of coding you've done. I think our, uh, our folks will be able to see that when they open up the platform here in a couple of days. But, uh, yeah, absolutely.

All right, bud.

Have, have a great vacation.

When, when I get back, we're gonna talk about walkability in Italy.

Oh, I'm sure. Yeah, have fun with that. Um, that country is not my favorite country in the-

I know

... on the planet. So um, well, hey, we'll... Oh, yeah, like Chad said, we'll be at TML, so we hope to see everybody there.

All right, man. Have a good one.

See ya. Stop recording.