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Sunday, April 20th, 2008

Indiana University School of Music on an Upswing

I’ve always considered the School of Music to be Indiana University’s flagship program. It is a truly world class institution, spoken of in the same breath as Julliard and other top training programs for the world’s musical elite.

So in that sense, the trouble in the music school was something I saw as particularly emblematic of the challenges facing IU. It wasn’t that the program per se was in trouble, but it had basically been coasting academically and there had been notable financial struggles.

A major article in the Indianapolis Star today shows how the music school as been making major strides [dead link]. This includes over $100 million in new money flowing in the door, and the signing of key young faculty members such as alumnus Joshua Bell. This article appears to be part of a PR campaign by the music school as the Bloomington Herald-Times carried an article on the economic impact of the music school.

It is certainly welcome to see good news out of this critical institution. I’ve always had a soft spot for the music school since my student days working at WFIU. I wasn’t a music person, but worked with many of them, who exhibited an astonishing range of talents and interests ranging from vocal performance to jazz to early music to ultra modern music. This is truly an amazing program. Securing the future of the music school is critical to securing the reputation and success of IU as a whole – which is to say it is important to the entire state. I consider this a very positive sign. Clearly the financial and artistic competition is more fierce than ever – I believe Yale picked up $100 million in one gift alone, for example – but it looks like IU is headed in the right direction.

As I’ve written before, I think improving the linkages between Bloomington and Indianapolis, and the rest of the greater Central Indiana area, is critical to the economic future of the state. Traditionally Indianapolis ignored Bloomington apart from IU basketball, and Bloomington viewed the capital with hostility. Those barriers need to be broken down.

I think the music school can serve as a bridge. Again, my example is opera. I love opera, but Indy has only a small regional company that produces only three operas per year. IU has a first class student opera that puts on five productions a year. This is a great reason for Indy opera lovers to make the trip south. Indeed, the astonishing range of high quality music on offer in Bloomington is incredible. Any night of the week you can see the stars of tomorrow – for free – at Recital Hall. So there are lots of reasons Indy residents might want to take advantage of what IU has to offer. In the other direction, why can’t more IU students be given opportunities to perform with say the ISO? I’m sure there are already a lot of linkages, but figuring out how to really combine the cultural forces of Indy and Bloomington is something where the code hasn’t yet been cracked. I think both places have a lot to benefit from it.

Friday, April 18th, 2008

Indiana Transportation Updates

INDOT has let a $10 million project to widen SR 32 [dead link] between US 31 and Spring Mill Road in Westfield. This project is a great example of state-local cooperation. INDOT originally wanted to build a simple five lane road with a TWLTL. Westfield wanted something better. So INDOT agreed to build a road with a raised median and sidewalks. Westfield will supply and maintain the landscaping. I think this is a great example of INDOT listening to local concerns. What’s more, I’m pleased to see local government participating financially. It is easy to demand more when it’s other people’s money you’re spending. By committing some of their own, Westfield showed they were serious. The only down side I see to the project is the two year construction timeline, which doesn’t pass the smell test for segment of road that is only a mile and a half long.

I was also finally able to read that US 31 itizens advisory committee report I mentioned before. The file blasts my Acrobat reader for some reason. But it was GNU to the rescue, since my free software PDF reader could handle it. (All the more reason to use free software).

People wonder how I am able to understand and comment on transportation projects when I am not a civil engineer. It’s actually not that difficult. In fact, most of us make independent judgments about technical subjects all the time: economics, medicine, etc. I can’t design a bridge, but I can apply common sense critiques to a lot of things. For example, an examination of project goals requires nothing but one’s own values to assess. As for other things, here are a few things I like to do. If you are willing to read rather dry documents on INDOT’s web sites, you can do it too.

• Are the statements being made consistent and make intuitive sense?
• Is the data presented consistent with other sources and historical trends? If not, is there is a good reason why not? (For example, is the projected future population growth materially different from the last five years’ trend?)
• Is there a clear and compelling rationale given for a decision, or is it based on a “handwave”? The classic example of a handwave is saying “Standards require….”. There is an exception process for almost every standard, so simply saying it is a standard is simply a cop-out.

These minutes provide an opportunity to apply these in a couple of examples.

The first is the SR 38 interchange. This document says that will probably be the first one constructed, in “2011-ish”, because of ease of construction and a high fatality rate. Two things jump out here. One, the start of construction appears to be 2011, which is slightly later than prior published accounts. Two, just a few months ago, INDOT was saying they didn’t need to build an interchange here at all because traffic volumes didn’t warrant it. The town of Sheridan wasn’t happy about INDOT’s plans to exclude an SR 38 interchange.

So in September 2007, an interchange isn’t justified because of low traffic volumes. Six months later not only is one justified, it is number one on the list because of high fatalities. What gives? I’d like to know the answer myself.

The other item of interest is that the consultant say the roadway can’t be lowered below the water table. Carmel had wanted to depress the roadway through the city to avoid the visual impact of overpasses. Actually, the consultant’s recommendation is spot on here. The expense of pumping, etc. to deal with putting the road below the water table is clearly not worth it. I was impressed with the large amount of real information that was presented as to why this was a bad idea even if the money were available.

But one thing jumped out at me. That is, the state brought someone from the Federal Highway Administration to tell the crowd that the feds wouldn’t let a road on the National Highway System be built below the water table. If this sounds like a handwave to you, you’re right. It doesn’t take much searching to find projects where NHS roads were lowered below the water table. For example, much of the notorious Big Dig project in Boston is literally under water. Part of the Ohio River Bridges Project in Louisville, a tunnel underneath a historic estate near the riverfront, is almost certainly below the water table. How did they get permission from the feds for these projects? Inquiring minds want to know.

Again, I think it is the right idea not to do this, and it was amply supported by the facts presented. I just found it interesting that the consultant found it necessary to trot out an FHWA official to say it wasn’t allowed.

Again, it is strongly implied that there will only be sidewalks on one side of the road. This would be an incredibly bad idea. $500 million and you only have sidewalks on one side of the road? That’s not good.

Whatever the case, this project continues to move right along.

Tuesday, April 15th, 2008

Bureaucracy-2, Democracy and the Rule of Law-0

Democracy continued to take a beating in Indiana this week. Close on the heels of vetoing a school building project in Greenwood, the Department of Local Government Finance decided to deny a Westfield-Washington Library bond issue to build a new library. As in the previous case, there had been a publicly contested petition drive between the for and against sides, which the for side won handily, 55% to 45%. In a presidential election, that would have been a landslide. Nevertheless, the DLGF decided that they knew better than the residents of the city what to do.

There are four distinct problems with this trend in DLGF activism, which I’ll restate and highlight here:

1. It is anti-democratic
2. It subverts the rule of law
3. It confuses two separate questions about a project under one measure of tax efficiency
4. It damages Indiana’s ability to compete in the new globalized knowledge economy.

The first is very straightforward. I always thought the dueling petitions approach to publicly contesting a bond issue was hokey. A proper referendum, for certain types of capital projects at least, would be more desirable. Nevertheless, it is a reasonable proxy for the will of the people. Both sides had ample time to state their case and sign up voters. The No side lost, fair and square, plain and simple. For bureaucrats to overrule a democratically determined outcome like this absent a clear and compelling violation of some rule or law seems like overstretch to me. On matters of spending particularly, I think a high degree of deference should be paid to what the voters want. Clearly that was not the case here.

The second involves the rule of law. This is a more subtle but but in many ways more important point. I’ll quote from my previous “Why I Hate Historic Districts” posting.

What I consider perhaps the most important part of our political system, moreso than free speech or even democracy, is the idea of the rule of law. Now because of legal positivism and many other theories, this has become a rather meaningless term. So let me explain what it means to me. Fundamentally, the rule of law means that the power of government is executed only in accordance with general rules, that are published in advance, provide a sure guide to compliance, and apply to everyone equally. Contrast this with the rule of the commissar, where a government official has the arbitrary right to apply the standards he sees fit to a situation, leading to a situation where you don’t know if you are in compliance with the law or not until the commissar makes his ruling.

A great example of the rule of law is zoning. Whether you agree with zoning or not is another matter entirely, but at least it meets the test. If you own a parcel of land, it is easy to look up the zoning, where a set of clear rules exist which specify what uses are allowed on the land, what types of buildings, setbacks, etc. For uses that are compliant with the zoning of the parcel, going through the approval process is a purely administrative matter. The city can’t stop you from building something just because they don’t like it, and if they do, you can go to court and get an order to allow you to proceed. It is only when you want to do something outside of the zoning of the parcel, that is, when you are seeking a rezoning or a variance, that acceptance or denial becomes a more arbitrary matter, and that’s ok because what we are talking about is changing the law to accommodate the new use.

I strikes me that the DLGF is acting very much like a commissariat in this instance. The Star article doesn’t cite any rule that the bond issue broke, merely that the DLGF decided it was too expensive. That’s a completely arbitrary judgment. No citizen, corporation, or local government entity should be subject to that type of arbitrary second guessing by a bureaucracy. The DLGF should restrict itself very much to ensuring that the law is followed, not acting as a “daddy knows best” review board.

Beyond that, it is not clear to me that the DLGF’s rationale holds water. They cite the fact that cost of the bond was 148% above the average for a library construction project. Ok, maybe it is. But again, clearly the people supported this. What’s more, it isn’t clear that the increased cost is even indicative of inefficiency. There are two completely unrelated questions that need to be asked when determining the appropriateness of a public service. Namely, what service level is desired? and how can that service level be delivered most efficiently? If a city or town elects to freely decide they want a high caliber of services, such a nice library instead of a bare bones one, then it is likely to cost more, even though from an efficiency standpoint it might be one of the cheapest nice libraries around. There’s no indication from the article that the DLGF took this into account whatsoever.

Lastly, it shows what I highlighted in the Greenwood case as a dangerous case of the state imposing a least common denominator, el-cheapo, race to the bottom, one size fits all model on the state’s communities, hobbling their ability to compete in the new global knowledge economy. Again, I’ll quote myself, this time from my “The Importance of Aesthetic Design in Transportation Projects” posting.

Previously, Midwestern states could rely on participating in a sort of commodity market for manufacturing jobs. That is, the most important determinants of factory location were access to labor and the cost of doing business. This leads to a strategy of focusing purely on functional efficiency and minimizing cost. The problem is, in a commodity market, the low cost producer wins, and in a global economy with third world labor at pennies per hour, the Midwest will never be a low cost producer again, no matter how much cost cutting they do on highway design. This means a more differentiated strategy needs to be pursued.
…
The Midwest also has a particular problem: attracting talent. That is, its young and educated citizens are all too frequently electing to move elsewhere, and there isn’t enough inflow from elsewhere to make up the difference. This is a result of yet another trend: the mobility of people in our modern society. And while there is a circular effect, in today’s world it is more true that jobs follow people, people don’t follow jobs. One reason you see comparatively few life sciences and high technology jobs in the Midwest is the lack of a skilled labor force. The answer is not just to try to lure jobs, but also to try to lure the people.
…
Midwestern cities need to make people want to live in them. As I’ve argued before, no one who is bright, ambitious, and has big plans for themselves will want to live in a place where good enough is good enough. The new economy labor force is going to migrate to places where the civic ambition matches their personal ambition.

Indiana says it wants to have a strong life sciences sector for the future. But to have that you’ve got to have life scientists. Given that practically every city and state has said they likewise want to focus on life science, the competition is fierce. Is a top scientist or marketer or technologist or or other employee of these types of company going to want to live in a state where their kids have to attend school in a trailer and the community only has a bare bones library?

Skimping on these types of things is penny wise, pound foolish. In the sort term residential taxpayers might have lower bills. In the longer term, there won’t be a strong business tax base, and the residential taxpayers will suffer. Particularly when their kids skip town as soon as they can.

A Westfield official was quoted in the paper last year as saying, “We want nice stuff.” Westfield knows it has to elevate its game while it still on the leading edge of the growth wave. It knows it in a fierce national and international competition to lure talent and businesses, and has to supply the amenities they want. The state is unfortunately taking a more narrow view, one that ultimately compromises Indiana’s ability to be competitive.

Sunday, April 13th, 2008

Review: Caught in the Middle by Richard C. Longworth

Caught in the Middle by Richard C. Longworth, formerly a foreign correspondent for the Chicago Tribune, paints a picture of a Midwest ravaged by globalization and unable to adapt to the future. As he puts it, “The first task is to tell the truth, that the Midwest’s golden era is gone forever. Much of the Midwest is in denial. It will take courageous leadership to speak the truth.” (255).

Longworth’s view is sort of a cross between “The World is Flat” and “What’s the Matter with Kansas?” His thesis: globalization has permanently destroyed the ability of the Midwest’s key industries, agriculture and manufacturing, to provide a middle class lifestyle to the majority of Midwest residents. However, Midwesterners are not rising to challenge because they have a low understanding and awareness of the reality of their situation, are too lazy, are completely unwilling to change, have lost the will to innovate, and don’t value education among a host of social values, principally conservative, that Longworth views as pathological. In addition to explaining this, he also dedicates his time to examining outlier communities such as Chicago, Peoria, Warsaw, and others that have been relatively successful. And a significant amount of time is dedicated to the impact of Latino immigrants.

His prescription includes amnesty for illegal aliens along with a ramping up of further immigration, universal government health care, a return to valuing education, and a regional focus on solving problems rather than state by state solutions, which he views as unworkable. Examples of regional collaboration would include better cooperation between Big Ten institutions such as enabling in-state tuition across the Midwest, creating a Midwest regional think tank, and a Midwest regional newspaper. Perhaps his most radical suggestion is that, in a city-based global economic future, rural areas, small towns, and small industrial cities should be left to wither on the vine.

Longworth is at his best when discussing the plight of the rural Midwest, small manufacturing towns, and the metro/non-metro divide. He is also right on in the value of education and the need for change. However, his work suffers from a linear trend extrapolation, failure to examine in the internal contradictions of his globalization thesis, overlooking other urban success stories in his fixation on Chicago’s “world city” status while minimizing that city’s problems, and the gratuitous insertion of politics. What’s more, while he tries to be sympathetic towards the plight of globalization’s losers, he ultimately comes off as patronizing towards them.

Being a journalist, Longworth has an engaging writing style and a good eye for strong anecdotes and quotations. Rather than overwhelming with dry data, he more commonly selects archetypal places such as his hometown of Boone, Iowa and extrapolates their experiences to other locales, using data more sparingly. This is good in that you can take in this entire 300 pager in one session. On the other hand, it suffers from all the weaknesses of journalistic accounts in that it appears a bit superficial and episodal.

Among the strongest and best points he makes in his book is that globalization has changed the rules of the game forever, but the Midwest has, with some notable exceptions, failed to come to terms with this. One of the things he points out that really resonated with me was how in so many places Midwesterners still continue to rail against NAFTA, as if that were the source of their problems. Indeed, we’ve seen NAFTA play a role in the present presidential election. But NAFTA is clearly a sideshow. The problem isn’t plants moving to Mexico from the US, it is the completely dominance of manufacturing by China, the rise of offshore IT in India, nationalization of natural resources, the global mobility of capital and people, etc. All of these are vastly more important than NAFTA, but that’s what Midwesterners fixate on. There’s an old saying, “Without awareness, there is no choice”. If you don’t even know what’s happening to you, you can’t make choices about the best way to move into the future.

Longworth is also right when he says, that, like or not, it is cities that are the economic engines of the 21^st century. The small town and the family farm may be the spiritual anchors of the Midwest, its locus of identity, but they are no longer its material future. As Longworth notes, “The rural Midwest, in truth, existed for one era, and that era has passed. It responded to the economic demands of a single century, from 1850 to 1950, and has been withering ever since. Globalization only finishes the work of earlier decades. There is no place in a globalized world for the small town and the family farm.” (98) Painful words, but true. It is easy to see why people who spent their lives in those environments would not easily come to terms with their loss. Giving up on that way of life means to give up on many of the values one holds most dear. Sitting in a big city, it’s easy to lecture about this, but it’s always easier to dispense tough advice to others than to take it yourself. If someone said that the modern, upscale urban lifestyle was toast and it was time to move on, my guess is the latte sipping crowd wouldn’t let it go without a fight and a long period of denial. It is the same for everyone. The first step is admitting you have a problem, and that’s so often the toughest one to take. And nobody can be easily expected to give up the things that are most precious to them.

Of course, many of the Midwest’s cities have problems too, with Longworth also notes. Consider the case of Cleveland. “When I went to Cleveland, I found not alarm but complacency. In a city that is being destroyed by global forces – its industry and young people are fleeing and are not being replaced – I found almost nobody willing to actually talk about globalization or global challenges. In a city crying for answers, no one even asks the questions.” (159)

Because cities are the economic engines of the 21^st century, any economic development strategy should be extended metro based. Again, quoting, “In a global era, cities must carry entire economies by themselves. As small towns and cities lose their industry, they’ll become part of a metro region, bedroom suburbs for people who drive into the big city to work. Once, places like Newton and Anderson supported themselves; now they’re part of the Des Moines and Indianapolis region. If these regions are to survive, the big cities must provide enough lifeblood to do it.” (167)

Exactly. I’ve made this argument myself, when I suggested that the path forward for Indiana’s struggling small industrial cities is to bind themselves into a greater Indianapolis economy. But no one seems interested in doing this. Anderson, a frequent example in Longworth’s book, is ideally placed for this. It is only about 25 miles from the I-465 beltway, and located along the principal growth corridor in Indy, I-69 to the northeast. Yet not only does Anderson not seem interested in building a more tightly integrated economy with Indianapolis, it takes active steps to try to keep Indy at bay. For example, Madison County petitioned to be removed from the Indianapolis MSA so they could keep a standalone Anderson one, notwithstanding that Anderson has zero brand recognition outside the state. Recently the newly elected mayor of Anderson scotched building a joint airport with the booming Hamilton County suburb of Fishers, which was an incredible opportunity to link the two regions.

This highlights another key theme of the book – an unwillingness to change. Midwesterners are famously conservative and unwilling to change. Witness the decades of struggle it took just to get Indiana to adopt daylight saving time. Nevertheless, I don’t think this is a particularly Midwestern trait. In his article and book “Change or Die”, Alan Deutschman notes that 90% of people, when faced with the alternative of changing their lifestyle or literally dying, don’t make the change. Astonishing.

There’s a lot of good in this book, and I really haven’t started to talk about it all. But I want to be able to devote space to the downsides as well. One of them is Longworth’s conventional wisdom view of globalization. The world is flat, creative class, bioscience, world cities, etc. etc. But this is merely the trend of the moment, overblown even now, and not likely to endure indefinitely.

For example, why focus on bioscience? Sure, it’s an emerging industry. But why can’t the Chinese do bioscience just as well and less expensively? Is this an industry with staying power in the new global world? Maybe, maybe not.

The whole notion of the creative class is also vastly inflated. Sure, creativity is good, but it is only one value among many. Enron was very creative after all, and look what happened to them. Here’s typical a piece self-flagellation out of Indiana. “’[Richard] Florida says you need a culture of creativity to be successful, and Indiana doesn’t have that culture,’ a morose civic leader in Indianapolis told me, ‘He says you have to have a culture of embracing difference. Not a toleration of difference, but rather prizing people because they are different. Tolerance is one thing, but it’s pretty minimalist. It’s better than intolerance. But Florida’s basis is that you’re excited by the way that people are different from you. You’re glad that some are gay or belong to other races. Indiana isn’t glad.” (162)

Ah, yes, gays. Richard Florida may have invented the idea of turning gaydar into part of the index of leading economic indicators. But as Stuff White People Like – a hilarious send-up of the urban intelligentsia and yuppies – noted, having gay friends is something people love precisely because of the lack of diversity. “Older white people prefer to be friends with gay parents because it enables their children to experience much needed diversity with people who are, for all intents and purposes, exactly the same as them.” What globalism means from a practical point of view in big cities has been the creation of a sort of transnational upper class, who might be of difference races or sexual orientation or nationality, but share the same values and are otherwise exactly the same in all the ways that matter. There’s a bigger gulf between the urban elite of Chicago and someone from downstate than there is between the urban elite of Chicago and the urban elite of Buenos Aires or Paris or Singapore. Gay or straight’s got nothing to do with it.

Longworth also doesn’t pursue his thesis to its logical conclusion in all areas. The two states that figure most pessimistically in his equation are Indiana and Ohio. But if it’s true that cities are the economic future, those state’s actually seem to have some of the more optimistic geography. Virtually all of Indiana, for example, is conceivably inside the metropolitan economic zone of a city over 100,000 people. This doesn’t figure into his evaluation.

In another example, he says one problem with luring bioscience companies to the Midwest is a lack of venture capital. “The problem is money. Any biosciences boom in the Midwest will have to be a financial and scientific collaboration between universities and companies. Bioscience backers assume that the industry will grow much as the computer and information industries did, with companies funding university research or with university researchers taking their ideas and setting up their own companies. But this takes money, and as we shall see, the Midwest so far is short of the kind of red-blooded venture capitalists who finance new ideas and new corporations.” (209)

But is this really the problem. How is it that everything can be globalized, but venture capital is local? Money is the most easily transportable commodity around. As we’ve seen from the growth of the carry trade and “hot money” flows, gigantic amounts of capital move internationally every day. The idea that some venture fund, whose entire existence is about making profitable investments, is going to pass up a good deal because the managing director is too lazy to get on a plane to Ohio doesn’t make sense.

A local Indianapolis entrepreneur named Chris Baggott formed an angel group with some of his other successful buddies. They’ve got money to invest. There’s just one problem: no deals. Longworth is right that the Midwest has the research, but it right now is lacking in the most critical resource: people with an entrepreneurial mindset. There’s no money flow problem, there’s a people flow problem.

Longworth also says repeatedly that creative industries, and things like finance, law, and accounting, require face to face interaction, leading to world cities. But do they? I don’t know why any of these professions aren’t equally as amenable to offshoring as IT or manufacturing. Perhaps we just haven’t gotten around to it yet. I sure hope no cities betting their future on this stuff are sitting on their laurels thinking it can’t happen to them, because you had better believe it can.

This brings me to another beef, his continued praising of Chicago as the paradigm of the new world economy. Of course, Chicago has had a gigantic skyscraper building boom, perhaps the largest city condo building boom of any city in America, is a huge magnet for international immigrants, has the best international connections of any Midwest city, the best universities, etc. However, there are huge problems as well. Longworth notes some of them, but only in passing.

I’ve repeatedly in this blog noted how despite all this development, Chicago is losing population. The creative class is flocking, everyone else is leaving, priced out by soaring real estate prices and crushing taxation. Longworth talks about Chicago (and Minneapolis) attracting immigrants, but fails to note that the Chicago MSA last year had domestic out-migration to the tune of 57,000 people. That’s like losing an entire Anderson, Indiana every year. Even Detroit only had 58,000 people leave. Minneapolis had net domestic out-migration too. Chicago’s overall MSA population growth badly trails the US average at only 0.6% per year.

There are other successful Midwest cities besides Chicago and Minneapolis. Ones that I think provide a better model for the future. These are the ones lying along the I-70 corridor: Columbus, Indianapolis, and Kansas City. All of these are growing faster than the national average in population. All are experiencing domestic in-migration as well as international in-migration. All are extremely affordable and can actually offer a middle class lifestyle to someone who has less than a six figure income. But these cities are barely mentioned in his book apart from some throwaway lines about how boring they are. There’s no prospect of creating another Chicago in the Midwest. But there is ample reason to believe that you could turn some struggling cities into a more Columbus like model.

Longworth’s Chicago bias seeps through in his recommendations as well. Where, for example, do you imagine a Midwest think tank might be located? Or the headquarters of a Midwest regional newspaper? It doesn’t take a rocket scientist to figure out that this is just another way for an already prosperous Chicago to extract tribute from other Midwestern places. It’s also why no such ideas are likely to be embraced outside Chicago.

Lastly, my strongest critique is of Longworth’s attitude towards Midwestern people and values. There are a lot of quotes I could give, but I’ll select just this one. “Perhaps rural life wouldn’t mesh with IT, even if it was more available. The Internet exists for people who compete in a 24×7 world. Most rural people are accustomed to an 8-5 world. They aren’t lazy, just more tuned to the slower pace and long weekends. Global people want to do deals. Rural people want to go hunting.” (94)

I dunno, that sounds like he’s calling them lazy to me. And I think it is totally wrong. Every union guy I’ve ever known has grabbed every extra hour of OT he could lay his hands on. The rural and small town people I know have an incredible work ethic. The problem isn’t that. And I’d dare say that, given the number of Starbucks, day spas, gyms, and swanky restaurants dotting the urban landscape, that there’s more than ample leisure time for the creative class. I guarantee you I put in fewer hours at the office than my father puts in at the stone quarry he works at.

This patronizing attitude towards the non-elite turns into condescension at times. “In a world of the Next New Thing, devotion to biblical inerrancy and traditional values doesn’t cut it.” (98) Why mention the Bible? Religion is totally not needed to make any of his points. It only gratuitously offends those who hold strong religious beliefs. Some of the cultural problems Longworth talks about are real, but religion isn’t amongst them. Longworth would have been well-served to check his blue state politics before he sat down at the typewriter. (Was it really necessary to say, “Midwesterners … get their news, so-called, from Fox News” (261)?). He’s only going to turn off red staters, when I think the best parts of the book should transcend traditional left-right politics. If there’s one thing Longworth is right about when it comes to globalization, it is that it is a remorseless force, and no respecter of places, people, or even political parties.

On the whole, despite some weaknesses, Caught in the Middle is a welcome addition to the literature on the affects of globalization, and a notable entry in what has been too light a canon of books on the Midwest as a whole.

Saturday, April 12th, 2008

Unintended Consequences of Consolidation Legislation

Some time back, the Indiana General Assembly passed a law that gave localities great flexibility in designing and implementing governmental consolidations. This was meant to make things easier than what happened with the Indianapolis Unigov model, where it took special legislation to push through the merger. The new rules let two or more governmental units design a merger, then put it to their communities for a ballot for approval. This keeps things flexible and easy, ensures public support, and gets around a recent Indiana Supreme Court ruling that severely curtailed the ability of the legislature to enact special purpose laws for a given municipality.

This law was likely intended to facilitate city-county consolidation. However, as it has worked out, it is basically being used as an anti-annexation tool by rural areas. An example out of the Fort Wayne area provides a perfect example. Eleven townships and the municipalities therein have proposed a merger to form something called East Allen Communities. The vast majority of this territory is rural. However, the consolidation is structured such that the entire area will be considered incorporated. This means none of the territory can be annexed by Fort Wayne. Keeping Fort Wayne out and making sure the area cannot be subject to a city-county merger, is no doubt the sole intent of the merger. (Interestingly, the merger charter would appear to be unconstitutional, since there is one council member per township. Unless all townships have equal population and stay that way forever, it violates the one man, one vote principle).

A similar situation is playing out in Zionsville. Previously, residents of the unincorporated township areas had fought tooth and nail against annexation by Zionsville. However, after Whitestown made a gigantic annexation that included a portion of Eagle Township, the residents decided that Zionsville was the lesser of two evils. So now there is a proposal to merge Zionsville with Eagle and Union Townships. The backers struggle to show benefits to the taxpayers because there aren’t any. The sole purpose of this is to make sure Whitestown can’t annex any more territory. It is a merger in name only. In fact, there is a even a two-tier system where old Zionsville residents continue to get city services at a higher tax rate, while areas outside get county services at a lower one. (This is a troubling arrangement in its own right. Will the district boundary line be fixed by the terms of the merger? If so, it will put residents of the old city at a permanent tax disadvantage as the urbanized area expands. Can it be changed by the city council? If so, that would be nothing more than a functional equivalent of annexation. Is change automatic as urbanization thresholds would be reached? One would hope so.)

Arrangements such as these should not be allowed by the state. Flexible merger powers are a good thing, but they should not enable to rural areas to incorporate themselves in a way that would never be allowed under the current incorporation statute. Any territory which is not urbanized and will not be urbanized within a reasonable timeframe should not be allowed to be included inside a municipal boundary.

While I’m on the topic, I’ll bring up another dubious local government practice that seems to have become prevalent of late: fire territories. A fire territory allows two or more entities, normally a town and a township, to establish a joint fire service district, with proportional funding from each. Now this doesn’t sound like such a bad idea, but for any municipal taxpayer it is. Here’s why. Extending core municipal services like fire protection outside of the city limits on an a la carte basis creates two tiers of citizens: those who live in the town, receiving and paying for all city services whether they want them or not; and township residents, who get the menu plan, being able pick and choose just what services they feel like paying for, and enjoying a quality and cost level of services they would never be able to get except by being next to the town. It shouldn’t come as any surprise to discover that one township residents get the critical services they want like fire protection, their desire to be annexed will plummet.

Municipalities should jealously guard their services. Extending services is the only real lever that a city has to get people to agree to voluntary annexation. Give away your most precious services on a contract basis, and you’re done for. Plainfield and Brownsburg may discover this to their chagrin.

There’s a better way. If a town and township want to combine forces, the township could simply contract with the town for the service, with costs shared equitably, for a limited term only. Because this is a contract that would need to be reviewed periodically, there are opportunities to reconsider the appropriateness. One of the huge levers that Fishers has over Geist is that there is no Fall Creek Township fire department, and there is no way that the rump of unincorporated territory in the township could create its own fire department on a cost-effective basis. In this way, township residents in unincorporated areas are able to enjoy the benefits of high quality municipal fire service, but then have less ability to object if the town subsequently wants to annex them, which is only fair.

Thursday, April 10th, 2008

Tax Reform Trouble

As I sit here contemplating the impending arrival of the date when I have to send the IRS a check for several thousand dollars, it is crystal clear to me why we should want to have efficient, lean government. I’m not a fan of high taxes by any means. On the other hand, sometimes cost cutting can be counter-productive.

One of the side-effects of Indiana’s property tax fiasco last year was that the state Department of Local Government Finance, an agency chartered with reviewing and approving local spending plans, has stopped being a rubber stamp agency. However, I believe there is a huge danger that they will turn 180 the other direction with significant negative ramifications for the state, namely the undermining of democracy and hurting Indiana’s long term competitiveness.

A case out of Johnson County shows the trend. The Clark-Pleasant school district, which covers the rapidly growing city of Greenwood and which is the state’s fourth fastest growing distrct, put forward a $60 million building plan to keep up with growth. A group of citizen opponents initiated a remonstrance by obtaining sufficient signatures to challenge the building plan. This led to a petition drive where for and against camps collected signatures from voters in the area on competing positions, with the pro side winning 2-1. Notwithstanding this victory, a DLGF bureaucrat rejected the proposal, saying that even though remonstrators lost their petition drive, the district should have reduced the project scope anyway.

This is bureaucratic arrogance to say the least. Now a petition drive isn’t an election, but it’s a fair approximation of the democratic will of the people, particularly when the winning side had had such a lopsided margin of victory. The state supreme court even recognized a similar type of vote as a valid expression of the will of the people when it ruled that an informal ballot by an unincorporated citizens group called NOAX was enough to be valid to settle a remonstrance suit against an annexation. Had this been some stealth project, or the remonstrance extremely close, then perhaps some action would have been justified. But if a project handily survives a remonstrance in a petition drive competition, this should be taken as a strong evidence that the people support it and at a minimum state bureaucrats should show some respect to the will of the people. That does not appear to be the case here.

What’s more, this sends a chilling message to the rest of the state about trying to provide high quality governmental services. (Expect another message to be sent shortly, as another similar case is ruled on. Westfield is planning to build a new library, and again beat a remonstrance through a petition drive, but some bureaucrat is recommending that the DLGF reject it). This endangers Indiana’s future economic competitiveness.

As I noted in a previous posting, Indiana can no longer compete in the world by trying to be a purely low cost player. Not only will it never have the lowest taxes or the lowest costs in the US, it will never be cost competitive with the likes of China. That’s a loser’s game. Instead, Indiana has to be selling a product that people actually want to buy on its own merits. If the state forces every community into the same least-common-denominator, el-cheapo, one-size-fits-all model, even where the voters feel differently, it will be killing the ability of places like Greenwood to continue attracting residents and jobs to the state. Who wants to live in a town where the kids don’t even have a real classroom to sit in?

And of all the things to cut costs on, education has to be the worst choice. As Richard Longworth noted in his recent book, “Caught in the Middle” – to be the subject of a forthcoming long review here, btw – the traditional twin engines of the Midwest economy, agriculture and industry, are being squeezed by globalization. The jobs of tomorrow require high education levels, and Midwesterners have traditionally not valued education. This action by the DLGF appears to be an example that backs Longworth up in that regard.

Now I don’t think we ought to continue pumping unlimited sums of money into failing districts. I think we need serious education reform in Indiana and around the country. Clearly there is a lot of bloat and fat in the education budget just as in many government programs. But Clark-Pleasant appears to be an at least decent district, one with an 86.8% graduation rate according to the state. This is a capital program designed to keep up with growth. Might there be some fat in it? No doubt. But it seems largely needed to prepare for future growth, and to avoid having students huddled in trailers instead of attending to lessons in actual classrooms.

The project isn’t dead. The district can appeal to the State Tax Court and/or schedule a full referendum. Whichever route it chooses, you can believe that the appeal itself will cost money and the delays, assuming the project is eventually approved, will raise the total price tag. At a minimum, if the state loses, it should be forced to pick up both of these costs.

The remonstrance process as it exists today is not ideal. But it is reasonably democratic. I believe the new tax bill provides for a proper referendum on major school capital programs. I think that’s a good idea and I do think that school boards should be forced to justify their programs to the community at large. With a process like that, there should be no place whatsoever for bureaucratic second-guessing.

To sum up my beliefs on the issue:

• Bureaucrats should show a high degree of deference to democratically arrived at results when it comes to government spending.
• Indiana must build communities that people want to be a part of, to attract talent needed for the 21st century economy.
• Better education is absolutely vital to the long term economic future of the state in a globalized economy.

Of course leaving school funding levels up to local areas brings its own set of problems. Places that value education will vote for high quality schools. Those that don’t will end up with second rate schools. That’s not fair to the children, as it isn’t hard to see that it is likely to be already educated and affluent districts that will vote to provide lots of funding. This is where the state needs to ensure not that the affluent districts don’t spend too much, but that other districts don’t spend too little. I believe in local control, but there’s a definitely a state role to play, which could include income based funding assistance even for capital projects, to make sure that every child gets a good education. Because today an education isn’t a nice to have, it is an absolute necessity to compete in the global economy.

Update: One commenter in a thoughtful posting said the following, “Also, school districts compete with each other currently to build the most wow-inducing schools in the city for reasons of pride instead of what substance it brings to the students. Allowing the school districts to play like a real business with real customers, they will have to meet their real needs.” Believe me, I’m sympathetic to the idea of school choice.

However, this effectively implies that the competition is between local districts when the real competition isn’t between say Greenwood and Carmel, it’s between the whole Central Indiana region and places like Columbus, Ohio. Consider this thought experiment. Indianapolis has been trying to raise its cultural diversity and international profile, something that was again highlighted in Mayor Ballard’s State of the City speech. Well, Greenwood has become home to a sizable Sikh community. I believe many of them are truck drivers who moved from California to take advantage of Indiana’s lower costs and high quality of life. The value that Indian people put on education is well-known. Will Greenwood continue to attract more Sikh families if the kids have to go to school in a trailer? Or will those families looking to relocate from California decide to take advantage of the similar low costs and good quality of life in Columbus, Ohio, where their kids can actually sit in a real classroom? Let’s assume some do. Now a distribution business comes knocking looking for a place to set up shop. They ask, “do you have qualified truck drivers in the local labor force so we can staff up?” To which is the answer is, “Actually, we’ve got a terrible shortage, since all the truck drivers started moving to Columbus, Ohio.” Wonder where that company will locate? What’s more, the city’s ethic diversity is less than it otherwise would be.

The key resource is people. Businesses want to set up shop where there is a qualified labor force. If you can’t attract that labor force, you won’t attract businesses. This applies equally to truck drivers and biochemistry Ph.D’s. The real competition to attract them isn’t between various towns in the same region, but between regions and states. Indiana has to be able to build an environment where the labor force of the future wants to live. And it isn’t likely to be a place that is chopping education funds.

Wednesday, April 9th, 2008

Simon Company Enters High Rise Residential Market

In an announcement that spurred quite a bit of discussion over on Property Lines, the Simon company announced a proposal for a 47-story residential tower in Boston called Copley Place. This tower, which would be that city’s tallest residential building, would sit atop a Neiman-Marcus anchored retail development. Here’s a rendering:

This development prompted the natural question, if Simon can do something like this in Boston, why not in their hometown of Indianapolis?

I think that’s a legitimate question to ask. Clearly Indy is not Boston. However, it is intriguing to think about Simon being part of a high rise package at, for example, the old MSA site, especially if a retail center were incorporated. We’ll just have to see.

One thing it is not reasonable to expect is that Simon would undertake such a project if it didn’t make financial sense. While I think one would expect a company to try to do right by their hometown, investing in money losing projects that harm the long term viability of the company is the wrong move. The best way to make sure valued hometown companies stay valued hometown companies is to make sure they are well-managed and very profitable. Still, one would hope that a company like Simon would at least give the MSA site a look. Particularly if they could control a significant retail component, participating could make some sense.

As for the notion that Simon could bring a Neiman’s to town, I’d say forget it. Indianapolis has money. What it lacks is a culture of high end consumption and connoisseurship. That’s not necessarily a bad thing, but it limits high end retail possibilities. Admittedly, most fashion is women’s oriented, and Yours Truly is a dude, but I must say that the Saks men’s assortment at the Keystone store is sorely lacking in comparison with larger market stores. Until you start seeing a store like Saks carrying higher end lines (think Kiton and Oxxford suits, not Canali and Armani), I don’t see much of a prospect for higher end retail.

Sunday, April 6th, 2008

City Benchmarking Report

A group called the Columbus Partnership published a lengthy peer city benchmarking report comparing that city against 15 other metros around the country. While nominally a Columbus specific report, the same level of data granularity is available for all cities, making it just as useful to Nashville, et. al. as to the people who commissioned it. We should really thank Columbus for funding this research.

I haven’t even really begun to digest these numbers yet, but it looks like there is a wealth of data, mostly sliced by MSA, coming from all the standard sources such as Census surveys. You should see where your city stacks up. One nice thing: this isn’t just other Midwest metros, it also includes places like Charlotte, Raleigh, Portland, and San Diego. This gives good in-region and out-of-region comparators.

Here is coverage from the Columbus Dispatch. How’s this for the lede? “Central Ohioans tend to be poor, uncultured and overweight, according to the statistics.” Ouch.

In other Columbus news, Ohio State keeps increasing the scope, and extending the schedule, of its medical center expansion. It is now up to $1.3 billion and won’t be complete until 2016.

Franklin County enacted an anti-discrimination policy covering gays.

Also, Skybus Airlines went bust, ceasing operations.

Lastly on the Columbus front, I saw this great commentary on the travails of the Columbus Symphony Orchestra. It’s very applicable to any city and how it views the arts, namely as a token of sophistication or as a real, genuine arts group. Here are some great quotes:

Story after story about the orchestra’s potential demise has stressed the reduced prestige that Columbus would suffer as a result: We will see our status diminished. We will suffer a blow to our pride. We will look bad to however much of the outside world knows we exist. Can you imagine a less-impassioned plea for keeping the music going? … The best argument we can make for saving it is ‘What will the neighbors think?’ If keeping up appearances is the best reason we can muster for maintaining the orchestra, no wonder it’s in trouble. Surely we haven’t kept the Columbus Symphony around all these years solely because we value it as a civic decoration. Are we talking about an orchestra or a lawn ornament?

And

Can I suggest a change in language? If I could excise three words from the vocabulary of every cultural-arts institution in town, it would be these: cultural, arts and institution. When I hear those words, I don’t think enjoyment; I think endowment. I think stiff evenings in tuxedos and evening gowns. Describing the symphony as a cultural-arts institution is like describing the Columbus Zoo as a department of biology.

Read the rest for yourself.

Meanwhile over in Louisville, a similar group to the Columbus Partnership called the Greater Louisville Project put out their own study. I wasn’t overly impressed with their 2007 version, and this one is even worse. I can’t even parse the charts and data well enough to be able to properly critique it. Somebody needs to send these guys a copy of Tufte pronto.

Sunday, April 6th, 2008

The Europeanization of American Cities

The FT ran a great analysis column this week talking about how American cities are now starting to more resemble European cities in one important way. Whereas in the past the inner city was decayed and the suburbs were nice, this trend is starting to invert as central cities gentrify and it is inner ring suburbs that now find themselves in decay.

I think the trend they note is a bit overdone, largely affecting only the largest cities – their big example is Washington, DC – and select other places such as Atlanta. But it is telling nevertheless. A similar but different dynamic has been underway in smaller cities that haven’t had the same level of central city gentrification, such as Indianapolis. Here older suburban areas are nearly at the end of their “useful life”, and residents are fleeing to new, more remote suburbs. This depresses prices and opens opportunities for central city residents to move out. I call this the pull model versus the push.

Forty years ago today, Washington DC witnessed riots that carved a path of destruction through the city, at one point coming within blocks of the White House.
…
Yet walk along the U Street corridor in Washington today, past new condominiums, restaurants and coffee shops, and it is hard to imagine the scene 40 years ago. The turnaround of formerly depressed areas is not limited to the District of Columbia. Since the mid-1990s, educated young people and baby-boomers have been returning to the cities, in search of amenities and cultural stimulation. Serious urban poverty has as a result declined by more than 40 per cent across the US, according to research by the Brookings Institution, a think-tank.

But the rejuvenation of inner cities is shadowed by another dramatic shift in the location of poverty in America. For as city centers fill with wealthy whites, the suburbs are increasingly seeing growing numbers of low income residents and more impoverished immigrants.

This is simply stating what has been known for some time: gentrification only affects buildings. The people still have to live somewhere, and increasingly that somewhere is the fringes of cities and inner ring suburbs. This is exactly the model of European cities, where we see a favored historic quarter inside a ring road, surrounded by miles of banlieus and the like that American tourists rarely see apart from cab rides to and from the airport.

Indeed, poverty in the suburbs now exceeds that in cities, according to Alan Berube, author of a Brookings report on the suburban poor. Among recipients of the earned income tax credit in the 100 largest metropolitan areas, 59 per cent – or 8m people – live in inner suburbs, compared with 41 per cent in the centers.

Wow. Why have inner ring suburbs been experiencing these problems?

One reason is that suburban housing stock is aging and losing its appeal, and is therefore more affordable. ‘The housing is not built to last 60 years,’ says Myron Orfield, a former Minnesota state senator. ‘They don’t age well and don’t gentrify – they are not beautiful old homes.’

Ok, that may be true some places, but it isn’t true in some of the examples they cite. For example, inner ring suburbs in Chicago such as Evanston, Cicero, Berwyn, and Oak Park are for all practical purposes built the same as the city neighborhoods they abut, but were never annexed. The claim of inferior housing stock is more true in the south suburbs. Some inner burbs have prospered, while others have declined.

The trend is troubling, according to experts, because suburbs often do not have sufficient tax bases to deal with poverty. Some inner suburban areas are struggling to come to terms with rising crime, strained public school systems and increased demand for social services. ‘A number of suburban communities are beginning to look like a caricature of inner cities,’ says Bruce Katz, founder of the metropolitan policy programme at Brookings.

The problem has been particularly marked around Chicago, where the demolition of large public housing projects beginning in the late 1990s led rising numbers of poor residents to move further out.

Whatever the cause, the continuing decline of the suburbs, whether inner ring in Detroit or DC, or brand new subdivisions in Charlotte, is an emerging trend to watch.

Wednesday, April 2nd, 2008

What Makes a City Desirable?

One of my favorite weekly sites to visit is Peter De Lorenzo’s Autoextremist, self-described as the “bare-knuckled, unvarnished, high octane truth”. Interestingly, I had that motto in mind when starting this blog, though I hope I’m a bit less bare knuckled than Mr. Autoextremist.

A recent rant of the week was about what it takes to make people love cars. I thought virtually all of this was true of cities as well. He notes first that what people tell you in focus groups or surveys isn’t at all what they really base buying decisions on.

Get a group of people in a room and ask what’s important to them when they consider the purchase of a new car or truck, and the answers are as predictable as the sun coming up in the East. The words that will be regurgitated back to the moderator are inevitably ’safety,’ ‘fuel economy,’ ‘reliability’ and of course, ‘quality.’

And manufacturers that actually take those responses as gospel do so at their peril, because everyone will recite those words when asked, but no one will actually go to a showroom or an auto show and abide by their own list of ‘must haves’ when picking out a new car or truck.

Why? It’s simple, really. Words alone don’t motivate people to buy cars or trucks. There has to be an emotional connection on some level, no matter if you’re spending used car money or picking up a new Rolls-Royce Phantom Coupe.

Exactly. If you want to inspire people to want to live in your town, whether that be to stay there or to move there, you need to be selling a product that creates that emotional connection. There’s no magic formula for this. You see both big cities and small towns that do it, and those that don’t.

How do you create that emotional connection? Branding and marketing is part of it, but that’s only the icing on the cake. Continues De Lorenzo:

Great advertising can create an aura for a car or truck, there’s no doubt (e.g., Hal Riney’s original Saturn campaign), but that won’t matter if the vehicle in question has the emotional appeal of a rake.

Like they say, “lipstick on a pig” isn’t going to cut it. So what does? For automobiles, it is great design.

This is where great design comes in. Some people in this business still need to be reminded of the real impact of great design, which is shocking to me. You only have to look as far as the new Malibu to be reminded of the power of great design. Do you remember the previous model? Didn’t think so. It was swiftly relegated to Rental Car Land because it had all the presence of a fax machine.

GM did a superb job on the 2008 Malibu in every respect, and they even spent proper, big-time money on a comprehensive launch – for the first time in its history – in order to get the car into the public’s consciousness. But if the new Malibu didn’t have great design language inside and out, it wouldn’t be having near the impact on the market – or on the company’s bottom line – that it is today (transaction prices are up anywhere from $4,000 – $5,000 over the previous Malibu).

I’ve been an advocate for great urban design for quite sometime. I think it can be a key ingredient in the overall package. But for a city, that’s not enough. I’ve said before, you’ve got to identify a target market, and a vision that appeals to that target market. This comes from a rich understanding of what you are as a city and what you want to be. Vegas figured it out. Austin figured it out. Portland figured it out. As I recently noted, even Houston figured it out. There’s nothing stopping other cities from doing the same. It takes finding that vision, then a relentless focus on execution over the long term.

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Aaron M. Renn is an opinion-leading urban analyst, consultant, speaker, and writer on a mission to help America’s cities thrive and find sustainable success in the 21st century.

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