On today’s show we’re talking about the evolution of many cities. You will find pockets of development outside the urban core. These pockets are disconnected from each other in one very important respect. They don’t have city supplied utilities.
The cost of extending roads, water, sewer, electricity, internet, gas can be incredibly high. You might have two similar sized properties with the same entitlements. One has utilities at the property line. The second has the utilities a mile away. The cost of ripping up the streets and laying the new infrastructure can be prohibitive. I recently went through a costing exercise for one of our projects. The real cost of each foot of roadway is not the expensive part. Bringing the utilities to your property from far away is by far the most expensive. In the language of developers, we call these “offsite improvements”. Offsite improvements are among the most painful expenses for a developer. They ultimately are donated to the city. If the city is sympathetic, they will give you a credit against property taxes or a credit against development impact fees for any offsite improvements that you make. But in a lot of cases, you end up making those improvements at your own cost for the benefit of the city and other developers that come behind you.
Just how much can those costs add up to? On today’s show we’re going to construction a budget per linear foot of roadway that you can use to estimate the cost of those offsite improvements.