Tuesday, May 5th, 2015
Privatization done right can be a great boon. Done poorly, it can harm the public for decades. We see another example of the latter ongoing in North Carolina (h/t @mihirpshah). The Charlotte Observer reports:
The N.C. Department of Transportation’s contract with a private developer to build toll lanes on Interstate 77 includes a controversial noncompete clause that could hinder plans to build new free lanes on the highway for 50 years.
The clause has long been part of the proposed contract. But it was changed in late 2013 or early 2014 to also include two new free lanes around Lake Norman – an important $431 million project supported by local transportation planners.
Some area officials were surprised that under the contract with I-77 Mobility Partners, the developer would likely collect damages if the state added two new general-purpose lanes from Exit 28 to Exit 36 at the lake.
Many of these long term privatization contracts are loaded with “submarine” clauses like non-competes that lurk underwater ready to rise up torpedo the public without warning. Did the people of North Carolina know that they were signing away their right to make public policy for the next 50 years when they did this deal?
What raises serious a red flag is that the clause that incorporated the I-77 added lanes project was added late in the game, which suggests that the current impact were not an accident:
Bill Coxe, a transportation planner with Huntersville, said he doesn’t know who lobbied for the revision. The new language wasn’t part of the draft contract from 2013, but it was added before the final deal was signed in June. “We saw that late in the game,” he said. “We aren’t sure who modified that.”
Mooresville’s representative on an advisory committee that helps make transportation recommendations said she didn’t know about the change to the contract with the developer. Neither did Andrew Grant, a Cornelius assistant town manager who helps shape regional transportation policy.
So many of these deals have less to do with bringing in private capital to finance infrastructure improvements than they do contractually creating a decades long stream of monopoly rents for the contractor.
Chicago got burned when an arbitrator ruled it owed $58 million to the group that leased the city’s lakefront parking garages. The city had promised it would not allow anyone else to build a garage open to the public to compete with the lessee. But it did anyway and they had to pay damages.
Contra the claim in the article that these clauses are necessary to attract investment, simply look around and see that businesses take huge investment risks every single day in markets with no barriers to entry for competitors. You don’t see Walgreens going to city governments and telling them they won’t open a store unless the city promises not to approve a CVS within a two mile radius, for example. We often see retail competitors right across the street from each other
But why invest in the actual marketplace when you can sign a sweetheart deal that grants you a five decade monopoly?
In this case, it appears to be free lanes and toll lanes side by side on the same facility. So there’s some justification for some sort of agreement on the state’s plans for the free lanes. But given that the free lane expansion was already on the books and supported by transportation planners, to have the project de facto killed through a clause slipped into a private contract in a way that does not appear to have been vetted by the public is dubious. If the residents of the area had known the free lane project they were banking on would be basically taken off the table for 50 years, it might have created protests that could potentially derail the contract. So by simply adding a non-compete clause, the state and contractor could do the same thing without stirring up the public until it was too late. It’s all the more reason why there needs to be much, much more scrutiny on the terms of these deals.
Thursday, April 30th, 2015
My latest piece is online over at the Guardian. It’s called “Have we actually reached peak car?”
My piece is quite different from the typical US consumer preference change story. Rather, it draws on research from the UK that’s not widely publicized here in which traffic experts going back as far as the 50s and 60s predicted a saturation in demand for driving. In short, while total driving levels may grow with increasing population, individual (per capita) demand for driving may be at or close to its peak.
Here’s an excerpt:
What’s frequently lost in the debate is that traffic experts themselves predicted a driving peak long ago. Models developed as far back as the 1950s and 60s anticipated that at some point the demand for driving would reach saturation point. A 1974 report in the UK predicted that point would be reached in 2010, a remarkably prescient view. As Goodwin points out: “In fact, the 1970s predictions were official government forecasts by its own research laboratory … The institutional memory collapsed and the generation who remembered or were involved in those forecasts is now only a few elderly specialists, like me. I was as surprised as anybody when I re-examined the old reports: I had no idea that the forecasts were turning out so accurate 30 to 40 years later. Mind you, that does not prove the method is right, of course, but it is food for thought and certainly demonstrates that the idea of eventual saturation is not alien.”
UCL’s David Metz, formerly chief scientist of the UK Department for Transport and author of Peak Car: The Future of Travel, has taken up the saturation theme. “Saturation of daily travel demand is to be expected and is a likely explanation for the observed cessation of per capita growth of personal travel.”
There’s a lot in this piece, so click through to read the whole thing.
Wednesday, April 29th, 2015
My latest column is out in the May issue of Governing Magazine. It’s called “The Other Digital Divide” and talks about the potential gap between how larger cities can be better positioned to take advantage of civic technology than smaller ones. It’s an emerging area I think we should keep an eye on. Here’s an excerpt:
Harvard professor Stephen Goldsmith co-wrote a book titled The Responsive City to highlight the promise of data- and tech-enabled innovation to improve government service delivery and citizen engagement. He sees the potential for new tech to actually reduce the large-small city digital divide. “There definitely was a danger just a few years ago where cities with resources could buy expensive technology and then use their scale to rationalize the purchase,” he says. “I think in the next few years that will shift dramatically. Cloud computing allows mid-sized and small cities to purchase the best computing with a new pricing system.”
Santiago Garces, chief innovation officer of the mid-sized city of South Bend, Ind. (population around 100,000), agrees on the potential of cloud computing. “Tech is being commoditized,” he says. With today’s cloud offerings, there’s less need for cities to roll out their own in many areas. What he worries about, however, is talent. “It’s a ‘who,’ not a ‘what’ issue,” Garces says. Small cities have to work hard to ensure they get access to the talent to implement this technology.
Click through to read the whole thing.
Thursday, April 23rd, 2015
My latest post is online over at The Guardian. It’s called “What’s the perfect size for a city?” It is an expanded look at the right scale of regional governance – small box cities, large regional governments, etc. This goes beyond the United States to take a more expanded global view, incorporating some recent findings from the OECD and World Bank. Here’s an excerpt:
“Often, administrative boundaries between municipalities are based on centuries-old borders that do not correspond to contemporary patterns of human settlement and economic activity,” the OECD observed in a recent report. The thinktank argued that governance structures failed to reflect modern realities of metropolitan life into account.
Behind the report’s dry prose lies a real problem. Fragmentation affects a whole range of things, including the economy. The OECD estimates that for regions of equal population, doubling the number of governments reduces productivity by 6%. It recommends reducing this effect with a regional coordinating body, which can also reduce sprawl, increase public transport satisfaction (by 14 percentage points, apparently) and improve air quality.
The World Bank, meanwhile, is worried about the way rapid growth in developing cities has created fragmentation there, too. Metropolises often sprawl well beyond government boundaries: Jakarta, for example, has spread into three separate provinces. The World Bank calls fragmentation “a significant challenge in the East Asia region”.
Click through to read the whole thing.
Thursday, April 16th, 2015
Here’s another post from the London School of Economics’ USA Politics and Policy site. Thanks to the LSE and Julie Cidell for permission to repost – Aaron. ]
Airports are a key part of our globalized world, and calls for their expansion and development are becoming increasingly common. But airports can have negative effects on their local areas– air and noise pollution, and traffic congestion. Do airports’ benefits outweigh their costs to local areas? In new research that examines the 25 largest airports in the U.S., Julie Cidell finds that while airports may drive economic activity within a region, more often than not, that activity is occurring outside the vicinity of the airport. She writes that aspects of an airport’s location, such as nearby industry and transport links often serve as job creators, rather than the airport itself.
It is rare to find an article or report about a major US airport that doesn’t describe it as the “economic engine” of its metropolitan region (see Figure 1). Indeed, there are many studies that indicate a positive connection between increasing air traffic capacity or air traffic and the number of firms in a region. Such studies are commonly used to justify airport expansion and the development of an “aerotropolis” or “airport city” through increasing the airport footprint and/or building new runways and terminals, under the logic that the region as a whole will benefit from the expansion. However, breaking down the connection between transportation and economic development across time and/or space can lead to different results. For example, in peripheral European regions, the causality arrow goes from air traffic to economic development, but in core cities, it’s the other way around.
We know that the negative effects of airports—air pollution, noise pollution, labor competition, and traffic congestion—occur at a local scale, within 5-6 miles of the airport boundary. While the argument is often made that “you knew there was an airport there when you moved,” that argument is usually wrong for two reasons: a) many airport-adjacent neighborhoods predate jet aircraft, and b) despite their vast, fixed infrastructure, airports move. For example, a study of Phoenix concluded that it was the airport and its disamenities that moved into residential neighborhoods, not the other way around. Nevertheless, very few studies of the air transportation-economic development relationship are broken down at finer scales to enable an equitable comparison to the negative effects of airports.
That was the purpose of my recent study. I focused on the largest 25 airports in the US and carried out two different kinds of spatial analyses as described below. For both, I found that more often than not, the economic development an airport brings to its region is not only equally spatially clustered as the negative environmental effects, but that development is occurring somewhere other than the vicinity of the airport. In other words, airport neighbors are not sacrificing for the good of the region as a whole, but for other neighborhoods equivalent in size to their own, raising questions of spatial equity regarding facilities that draw on a great deal of government money and yet are not producing benefits region-wide.
Airports As Urban Infrastructure
Previous studies have argued that airports are significant job generators using a simple methodology: drawing circles of 2.5, 5, and 10 mile radii around the airport, counting the number of jobs within, and comparing that number to the central business district (CBD). I used the same methodology to draw rings around two major pieces of infrastructure found in every US metropolitan area: the largest shopping mall and the largest wastewater treatment plant. I also chose the point in the metropolitan area directly opposite from the airport across the CBD to act as a control. I then compared those numbers to the jobs in the CBD (all data were taken from the 2007 US Economic Census), with the results in Figure 2, below.
Surprisingly, at all distances studied, a wastewater treatment plant is a more important “job generator” than the airport. Is a wastewater treatment plant therefore the “economic engine” of its region? Such a facility generates relatively few jobs, either directly or indirectly. Presumably, this finding does not have to do with the characteristics of the plant itself as a job generator, but with its surroundings. Such plants are often located on major waterways and can be considered a locally unwanted land use much as the airport. For both these reasons, they are likely to be surrounded by industrial land rather than residential. Similarly, of course, one could argue that it is not the airport qua airport that is generating jobs, but rather other features of its immediate location such as ground transportation access—features which potentially could be reproduced in other locations without the hazards of noise and air pollution.
Regional Spatial Analyses
The second part of this study focused on the specific categories of firms that have been shown to be attracted to metropolitan areas by air service—professional and administrative services—and determined their spatial distribution in comparison to the airport. Figure 3 is an example of how the four different spatial analyses look in one metro region, plus the major pieces of infrastructure I discussed earlier.
The weighted mean center analyses of key infrastructure and professional services, indicated that for only 8 of the 25 airports studied (including Phoenix as pictured), that the center is within 5-6 miles of the airport. In other words, for two-thirds of the airports studied, the economic benefits are occurring at a greater distance from the airport than the negative effects. The standard deviational ellipses showed that this distance might not be too far: 76 percent of the airports were within the ellipse, suggesting that even if airports are not in close proximity to the center of airport-related development, they are within one standard deviation of it. However, that distribution might not be even across space. Local and global Moran’s I analyses showed that professional service firms and their associated jobs are clustered in space—but of the 25 airports studied, only 8 were in or adjacent to a “hot spot” of these firms. Six were in a “cold spot.” The airport may be driving economic activity within the region—but more often than not, that activity is occurring outside the vicinity of the airport.
The goal of my research was to empirically explore the frequently-made statement that airports are the “economic engines” of their regions. There are two parts to this: to what extent are airports drivers of local employment as compared to other large pieces of infrastructure, and what is the spatial distribution of the firms brought to a region by its air service? In both cases, I found that the “economic engine” claims are probably overstated, at least when we compare their spatial distribution to the distribution of the airport’s negative effects. Other major pieces of infrastructure such as shopping malls and wastewater treatment plants have as many or more jobs in their vicinity as airports do. The professional services firms that have been shown to be attracted to metropolitan regions are clustered in space rather than being evenly spread throughout the region, and those clusters are more often than not outside the range of where negative environmental and economic effects occur.
Any large piece of infrastructure, whether an airport, a shopping mall, or a wastewater treatment plant, will have positive and negative effects both within the immediate vicinity and across the entire region. Nevertheless, such infrastructure has to be sited somewhere. Taking into account the spatial distribution of that infrastructure’s effects, both positive and negative, can make clearer the questions of who benefits and who pays—as well as what might be done to offset the costs for those who suffer the negative effects of such infrastructure without reaping the economic benefits.
This article is based on the paper ‘The role of major infrastructure in subregional economic development: an empirical study of airports and cities’, in the Journal of Economic Geography.
Note: This article gives the views of the author, and not the position of USApp– American Politics and Policy, nor of the London School of Economics.
About the Author
Julie Cidell – University of Illinois at Urbana-Champaign
Julie Cidell is an associate professor at the University of Illinois at Urbana-Champaign, where her work focuses on two main areas: the political economy of transportation, and green buildings and public policy. She has also worked as a transportation engineer in Boston and taught physical geography in northern and southern California
This post originally appeared at the London School of Economics USA Politics and Policy site on November 4, 2014.
Friday, April 10th, 2015
Awareness of Chicago’s massive financial hole seems to dawned on the public fairly recently. Crain’s did a story on the debt 2010. The Tribune did a big series on Chicago’s recently. There’s been a ton of national analysis of it. But a hole this big didn’t get dug overnight. Were there any events or signs along the way that could have tipped off Chicagoans that something was fundamentally awry?
I believe there was.
Years back I remember reading an article talking about a Taubman mall that was going to open without a Gap in it. Google pulled up this one from 2001, so this may be it. At the time, Gap was a juggernaut. They could basically dictate terms to mall owners, so important was a Gap to any mall’s success. Here’s what the linked article has to say:
The two largest mall developers–Simon Property Group Inc. and General Growth Properties Inc.–have already capitulated to some of the retailer’s [Gap’s] demands…Taubman could have more to lose by not having Gap stores in its malls than Gap would lose by not being there, said Steven Greenberg, head of Greenberg Group, a real estate consultant to retailers. “It is extremely difficult to have a successful retail center today without a Gap,” he said.
The article is illuminating and I recommend reading the whole thing. Because as it turns out, this event was really signalling that the end was nigh for Gap. The retailer ended up going into a tailspin from which it never recovered its position. Had a shrewd investor seeing how this lease dispute played out shorted Gap, he would have made a mint.
I believe a similar signalling event occurred in Chicago on the night of March 30, 2003. That was the night that Mayor Daley sent in the bulldozers to dig big X’s into the runway at Meig’s Field airport, to make happen its closure via fait accompli when he could not get it through the political process.
While some were outraged at the time, few appreciated the significance of the event. It was a big signal that something had gone seriously wrong with Daley and Chicago. While some dubious tactics such as using long term bonds to pay for litigation settlements began a bit earlier, 2003 is where the wheels started to come off the city. It just took another 5-7 years before people realized it.
Kristi Culpepper recently posted an eye-opening look at Chicago’s disturbing finances. (Don’t let the fact that this is on Tumblr deceive you – she’s legit). She notes that: “There has been a structural gap in Chicago’s Corporate Fund budget since at least 2003.”
For pensions, Chicago had underfunding by 2003 but wasn’t in a terrible position in terms of making its annual required contribution. But the contribution gap soared after that year 2003, creating a crisis. Here’s a chart out of a Nuveen report showing this.
In retrospect, Daley’s bulldozing of Meig’s Field was telling us (in line with the Cockroach Theory) that something was up. Had the media and public started connecting the dots back then, things might have been different. Unfortunately, Daley had just been re-elected to his fourth term, so the city would have had to wait another four years to change course. But if residents had done so in 2007, some of the terrible decisions like the parking meter lease could have potentially been avoided and maybe things would have been different.
It can be hard to tell which events are signal and which are noise, but when disaster strikes, it can be useful to go back and take a look at what might have been missed. In retrospect, Meig’s Field was a sign that Daley had lost his mojo and there were troubled waters ahead for the city.
Thursday, April 9th, 2015
As you know by now, Rahm Emanuel won his re-election bid. I’ve got an article up with some thoughts over at City Journal called “Rahm’s Reprieve” that looks beyond the importance of the mayor to Chicago’s condition and future, and suggests the community’s broader leadership, not just Rahm, need to change their ways. Here’s an excerpt:
And yet, the focus on Emanuel, in keeping with Chicago’s “great man” political tradition, obscures the role of other players in the current mess. Chicago’s vaunted business community has fallen in line with Emanuel, rarely if ever challenging him. It was equally supine before Daley, even as he signed bad union deals, foolishly pursued the Olympics, and racked up huge debts. What were the Commercial Club and the rest of the city’s business elite doing while this was going on? Feting Daley, the same way they now sing Emanuel’s praises.
Click through to read the whole thing.
Wednesday, April 8th, 2015
Resiliency is a hot topic in urban circles, but hasn’t gotten a lot of traction on the right. After reading The Resilience Dividend by Judith Rodin, president of the Rockefeller Foundation, and a recent book on personal resilience by former Navy SEAL Eric Greitens, I decided to write a pitch to conservatives to consider engaging in the resiliency discussion. The resulting piece is posted over at City Journal and is called “Strong People, Strong Cities: The conservative case for resilience.” Here’s an excerpt:
Disasters do strike cities, and disaster preparedness is a core function of government. New York mayor Rudy Giuliani, a Republican, ably led the city through the aftermath of 9/11, for example. Giuliani believed in less government, but he also believed that Republicans should govern effectively. Republicans, particularly at the state and local level, should take heed. Risk management and resilience planning are not betrayals of conservative principles, and ignoring them cedes the good-government high ground to the Left.
Rodin’s book also makes some conservative points about resilience. She devotes a section to underinsurance, pointing to a SwissRe study finding that only about 30 percent of global economic losses from disasters have been insured. If government picks up much of the shortfall—which, in the U.S., it invariably does—serious moral hazard results. Requiring that communities insure themselves more robustly will boost resilience and motivate developers to avoid building in environmentally sensitive areas.
Click through to read the whole thing.
Monday, April 6th, 2015
My latest is in today’s New York Daily News. It’s called “In NYC, throwing good infrastructure money after bad” and it’s about the grotesque costs of transport projects in the NYC area, compounded by terrible decision making. Here’s an excerpt:
Ten billion dollars — for a bus station. And if other projects are any guide, this price tag for a Port Authority Bus Terminal replacement is only going up from there.
That’s after we’ve committed: $4.2 billion at the PATH World Trade Center station; $1.4 billion for the Fulton St. subway station; $11 billion for the East Side Access project; $4.5 billion for just two miles of the Second Ave. Subway, and $2.3 billion for a single station extension of the 7-train.
Having grown numb to multi-billion price tags for building almost anything, New Yorkers might not know just how messed up all this is. In any other American city, even just one of these fiascoes might well have sunk the entire town.
For example, former Chicago Mayor Richard M. Daley attempted to construct an underground “superstation” in the middle of downtown for an express train he hoped to build to O’Hare Airport. Mothballed when the shell was complete after blowing the budget, this was one of his biggest boondoggles. But it still only cost his city $200 million — lemonade-stand money by New York standards.
Click through to read the whole thing.
Friday, March 27th, 2015
Update: Apparently you can browse the report online for free, you just can’t down load the PDF. So check it out.
The Organization for Economic Cooperation and Development (OECD), an organization of developed world countries, recently released a report called “The Metropolitan Century.” I read it while researching an article, but it’s full of interesting information. In fact, I think it even makes a good introductory primer to trends in urbanism.
First, they noted that productivity increases 2-5% when you double the size of a city. This is basically Geoffrey West’s finding, or something close to it. But what they also say is that if the population (weighted by distance) within 300km of a city (~185mi) doubles, productivity grows by 1-2%. So the population of the extended hinterland also plays a role in urban productivity. A city surrounded by a hinterland that is shriveling up might thus have some modest drag on its economy.
In the US, the OECD says that San Francisco and Washington, DC outperform economically relative to their size. Los Angeles and Chicago underperform. Among the top global cities, London outperformed relative to its size whereas New York was right at its expected value.
They also put some meat on the bones of real estate prices. They estimate that building regulations increase prices by two to eight times in central London and New York. Even in smaller city centers they estimate a 50% increase in prices. (This wasn’t specifically housing cost related, but overall real estate prices it would appear). They say:
Land-use regulation that limits new construction benefits home owners at the expense of renters and prospective residents. Home owners tend to benefit in several ways. First, they can enjoy the amenity value of attractive protected neighbourhoods. Second, they benefit from the house price increases that regulation causes. Land-use regulation can also be used to prevent people with lower social status from moving into a neighbourhood (for example by prohibiting multiple dwelling units). In contrast, renters will suffer because they have to pay higher prices. Similarly, prospective residents lose out because they have to pay more to move to the city. It also limits labour force mobility and can have detrimental effects on the entire economy of a country.
As home owners are often the most vocal group of the three, local governments might be tempted to pay particular attention to their wishes and restrict construction strongly. This might have positive effects on the current residents of a city, but will have negative effects on the rest of the country. If every local government pursues such a policy, it leads to a situation in which the negative effects outweigh the positive effects and most residents will be worse off.
There’s also some interesting info on whether it’s better to have one big city that dominates, or a collection of smaller cities. Here’s what they say on that:
It is not only the size of cities, but their spatial distribution as well that matters. Countries with more polycentric systems, i.e. systems of large cities instead of a small number of megacities, are found to have higher per capita GDP. The reason for this could be that, with a larger number of metropolitan areas, a bigger part of the territory benefits from being close to at least one of these metropolitan areas compared to, for example, a situation where one megacity combines the population of all those metropolitan areas.
In contrast, within a region of a given country, a more dispersed structure of cities appears to be associated with lower per capita GDP than if one larger city were to combine the population of those cities. In this case, with spillovers from small cities being fairly minor – both geographically and in size – having one large city in a region rather than a network of small cities may be economically more beneficial. This may also apply to small countries.
These are just a couple small samples. The full report is very readable, full of interesting insights. I believe it would even make a good introductory textbook on urbanism. Grab a copy if you can.