Saturday, October 31st, 2009
Lewis Mumford’s The City in History is one of the all time great books on cities. Published in 1961, it is contemporary with Jane Jacob’s “The Death and Life of Great American Cities”. Both of these are landmark works, and are also rhetorically magnificent. It makes me think back to the early 1600’s when the formative works of English literature, Shakespeare and the King James Bible, were created about the same time. (Another parallel: getting through The City in History is not unlike reading the complete works of Shakespeare or the entire King James Version – it ain’t short).
Mumford devotes a bit of prose to the Burnham plan, which he views as an extension of Baroque planning, something I’m sure Burnham would not disagree with. Here is the passage:
Right on into the twentieth century urban planning itself, at least in the great metropolises, meant chiefly baroque planning: from Tokyo to New Dehli to San Francisco. The most grandiose of these projects was Burnham’s and Bennett’s plan for Chicago, with its parks and its parkways, its diagonal avenues, its elimination of industry and railroads from the riverfront. But here as elsewhere one must note the typically baroque failing: no concern for the neighborhood as an integral unit, no regard for family housing, no sufficient conception of the ordering of business and industry themselves as a necessary part of any larger achievement of urban order. In the same fashion, the San Francisco civic center was conceived, like those at Cleveland and Springfield, without any further control over the townscape that enveloped it – and that openly defied its esthetic pretensions.
Some of the best and worst examples of baroque planning did not come forth until they had ceased, flagrantly, to be either symbolically or practically appropriate to the age that had constructed them. Without princely powers, stringent control of the surrounding area, heavy capital investments, baroque plans could not cope with the disorderly competitive enterprises of the expanding and towering city. For in baroque schemes half a loaf is actually worse than none: what remains undone or unaffected by the plan is itself a confession of its weakness.
The Windy Citizen
One new feature along with the new blog design is the “Share on Windy Citizen” social media button you’ll see on Chicago related posts if you read via the web. This lets you add a story to WindyCitizen.com, the same as through Facebook and Twitter. Windy Citizen is a social networking site similar to Digg focused on Chicago. It lets people nominate great stories about Chicago and vote them up or down to see what’s hot on the web about Chicago right now. It’s worth checking out.
If there are similar sites that are truly “go to” in your city the way Windy Citizen is, feel free to shoot me a note and I’m happy to consider adding a sharing icon for that site if one is available.
More Burnham Plan
Thursday, October 29th, 2009
Continuing with my series on privatization of government services, today I look at the question of how privatization creates value. You can also read part one on the types of transactions.
While a few people just don’t like the government doing things on principle, most of the time privatization – again, undertaken by both Democrats and Republicans – is touted has having benefits to the tax payer. There are three basic ways this can happen: new revenues, reduced cost, or improved service.
Many governments are attracted to privatization to raise funds. When Indiana and Chicago leased their toll roads for 75 years, they received billions in return. That’s a pretty powerful incentive for cash strapped governments. But we shouldn’t just assume a cash payment represents net revenues. We need to ask ourselves why someone would be willing to pay a bunch of money to take over a government asset or service. According to newspaper reports, Citzens Gas made an offer of $1.8 billion to buy the Indianapolis Water Company. Sounds like a great deal. But why would a company pay $1.8 billion for a utility that doesn’t make any money today? They some how need to raise new revenues themselves or reduce costs to justify that payment. Where is the real financial value being generated in the transaction?
On the revenue side, the way you boost revenue is to either raise prices or sell more units. It should come as no surprise that most privatization transactions that result in large cash payments to the government involve significant price increases. In our toll road example, tolls were raised considerably. Rates quadrupled in the Chicago parking meter lease. Part of the logic here is that prices had been set artificially low because of political demand. The lure of the big upfront payday helps politicians justify raising prices to the public.
In terms of selling more units, I haven’t seen that play a major role in most cases. Indeed, with things like water usage, we actually want to encourage people to conserve and consume less.
In some cases, straight-up asset sales – such as shares in a nationalized company or surplus property – simply convert value from one form to another, turning hard assets into cash that can be spent on other things.
In many cases we are told that a private company can provide a service more cheaply than the government. In theory, this would be straightforward to determine. You simply compare the cost of private bids for a service to the cost of doing it yourself.
The challenge is that it can be surprisingly difficult to calculate the internal cost of producing something. In fact, there’s an entire diabolical field of accounting called cost accounting that deals with this.
One of the big problems is that in addition to the direct costs of providing a service – the crews who are assigned to road maintenance, for example, along with their equipment and supplies – there’s a large amount of “overhead” services that go into it. Examples include legal services, shared facilities and office space, payroll processing, etc. Often these are provided on a “shared services” basis where they are pooled across departments so determining what amount should be charged back to a particular service can be difficult. In fact, some places might not even try, so a lot of the cost of a service is unknown. Many of the costs, likewise, are fixed in some regard. If the government owns an office building, the cost of office space might not be removed from the books even if a service that uses it is outsourced. And there are all sorts of contingent, deferred, and unknown costs. Most notably, the salaries collected by government employees don’t include all of the real costs because public sector pensions are generally so radically under-funded, so labor costs are probably understated.
On the other side, what someone else can charge to provide a service isn’t the whole cost either. The government still needs an oversight function and has to be accountable to the public for the results in most cases. So retained costs can’t be ignored.
I worked in the outsourcing business in the private sector (on both sides of the house). So in terms of one company outsourcing to another, I can tell you how we created value through costs savings:
- Labor Arbitrage. Yes, that means replacing employees here with cheaper employees in an offshore location. I hate it too.
- Centralization. Rather than having people scattered all over doing, for example, technology support, most functions are centralized in service centers to enable the benefits of pooling resources, standardized processes, and specialization through increased division of labor instead of generalists. You can also achieve purchasing power benefits this way.
- Economies of Scale. This is fundamentally about substituting fixed costs for variable costs and using large volumes to deliver superior unit cost performance. For example, someone in the invoice processing business can invest in high capacity scanners and automated workflow systems if volume from multiple clients is high enough.
- Arms Length Relationship. If you outsource a service there is a contract with agreed on payment terms and service levels. The person managing that contract for the vendor is on the hook for delivering financial results. That makes him very motivated to stick to the letter of the contract and not provide higher service levels and un-contracted for services. Also, he’s very motivated to push through any cost cutting or restructuring ideas he can come up with. Contrast this with an internally provided service. It can be very difficult to say No to service requests that originate inside your own organization, particularly when they come from highly placed people. Everyone understands the vagaries of organizational politics. Plus, since everything comes out of corporate “funny money” budgets, there’s no reason not to demand unlimited services unless you are in some sort of hard chargeback model. But if you’ve got an external vendor and have to pay for the things you want in green money, it is amazing how the definition of “need” can change. A third party can provide needed discipline to an organization in many cases. Call it outsourcing resolve, or in the public sector, outsourcing political will.
- Best Practices. Specialty providers in a given service area who do it as their core business can be expected to do it better than someone to whom it is merely an ancillary concern.
In the public sector there may be one more source of cost savings: taxes. Since governments don’t pay taxes, they get no tax benefit from depreciation, whereas a private company can. I mentioned this before in terms of sale/leaseback transactions. But a private company also has to earn a profit and pay taxes on profits, which would certainly affect its ability to pass on savings to the customer.
So when looking at a privatization transaction, let’s ask if any of these apply. For example, let’s consider the water utility privatizations that are being evaluated by Chicago and Indianapolis. Clearly, no jobs are going offshore. How many could be simply eliminated? Probably some, but probably not big numbers either. You can’t centralize core functions. For example, you couldn’t have a big, giant water company build one use plant in the center of the country and pipe water to customers from there. On the surface there isn’t much opportunity for variable to fixed cost conversion in the core either. Clearly, some functions like billing could potentially benefit, however. There are probably some best practices that could be brought to bear, but given that utilities, unlike say invoice processing at most companies, is actually a core function of most governments, Indy and Chicago already likely have plenty of expertise. There is likely some value in having an arms length relationship, though government contractors are likely to always be cozier with officials than a vendor would be in the private sector.
So while I can envision lots of ways that efficiencies could be gained and costs conceivably reduced, I am not seeing the opportunity for game changing reductions. Certainly not $1.8 billion worth.
So where would the value in the gigantic payoff come from? I would like to suggest as a rule of thumb that if it is not intuitively obvious where the value in a lump sum privatization is coming from, then there either a) is no value, and the transaction is primarily about capitalizing a future revenue stream or b) is a major price embedded in the deal.
Remember, capitalization is like that lottery payoff. You can take X per year for 20 years or get a big lump sum now that is lower than the total of the payments in the other option. There’s nothing wrong with taking the money now, but remember, if you do, all of those future cash payments disappear. If you were counting on those to balance your budget, you now have a big hole to fill. That is why, for example, when leasing the parking meters in Chicago, the city put a portion of the money into an investment account whose proceeds will replace the normal money the city would have collected from meters.
My gut tells me that when it comes to water utilities, to justify numbers like $1.8 billion, rates are going to be headed up – a lot.
In fairness, I should note that numbers like $1.8 billion are probably the gross, not net amount. Meaning a lot if it is just an assumption of debt by the buyer. For example, when a Citigroup led consortium was going to lease Midway Airport in Chicago, they were paying $2 billion, but there was only $1 billion in net proceeds since the other $1 billion was going to repay the city’s airport debt. (This deal was never closed).
Again, I should note that in the private sector, outsourcing is often about reducing service levels, or at least making sure that the targeted service levels aren’t exceeded. This can leave a lot of the rank and file unhappy but make the CFO very happy. In the public sector, where the top executives are elected officials who have to face voters regularly, this is obviously not something they want to do.
Still, you can get better service if you outsource at times. Gmail is far better than any email system I could host for myself, for example. For things like toll roads, if people don’t drive them, the concessionaire doesn’t make any money. So they’ve got a big incentive to keep it as motorist friendly as possible.
At the end of the day, this would have to be looked at on a case by case basis and we would need to have some reason to believe service would improve. Sometimes you don’t know until you try.
How the Indiana Toll Road Lease Created Value
So let’s put it all together and look at how the Indiana Toll Road and Chicago Skyway leases generated almost $6 billion in value. It’s a combination of several factors:
- Tolls went up. That is, prices were raised significantly
- The hedge paid off – big time. I mentioned in the previous installment that by paying a fixed price up front for 75 years, the toll road concessionaire took on a huge amount of risk about future revenues and costs that the government used to have. In turned out that they are getting far less traffic than predicted and they are taking a bath on the deal. In short, they vastly over paid. You can’t hang your hat on this happening every time, but it is nice when it does.
- Some cost savings, but probably not a major amount
- Some customer improvements such as electronic toll collection
Principally, it was about raising prices and then getting lucky when the vendors radically overpaid. Indiana had one additional lever. Chicago had already leased the Skyway. The only way to get to the Skyway is via the Indiana Toll Road. Indiana could have jacked tolls through the roof and cut off the supply to traffic to the Skyway whenever it wanted. As a result, the same consortium that leased the Skyway almost had to pay whatever it took to win the Indiana Toll Road. Mitch Daniels had them over a barrel.
Both Indiana and Chicago were able to realize further benefits through the way they spent the proceeds. They were able to put a lot of the money to use on capital improvements that otherwise would not have happened for a long time if ever. So they avoided years of construction cost inflation and pulled forward the benefits of those projects. However, that type of logic would not have justified doing the leases on its own if they weren’t otherwise such good deals.
Evaluating the Deal
So, as cities and public look at these potential deals, they need to understand the type of transaction or transaction bundle being considered, and examine how that deal is generating value. If it is not intuitively clear where the value is coming from, red flags should be raised. Next, I’ll look at the uses to which the funds can and should be put.
More in This Series
Tuesday, October 27th, 2009
[ Welcome to my new readers finding me via the Daily Dish and many, many other sites. I hope you enjoy and thanks for checking me out. I was going to publish the second installment of my series on privatization today, but thought instead I would ease you into it rather than plunging into the full metal Urbanophile experience. Since I referenced this piece in my last post, I thought I'd share it with you in full today.
I wonder if Andrew Sullivan realizes that the same person wrote both "White City" and "Detroit as Urban Laboratory and New American Frontier"?
This piece originally ran on November 1, 2008 ]
“The word of the Cross is to those who are perishing foolishness” – I Corinthians 1:18
Christian apologists have sought to find various digestible moral meanings in the harsh story of the Parable of the Talents, but what if the intent was merely observational? Rather than instructing on how we should live our lives, maybe the parable just relays an unpleasant truth about the world, namely that, to put it in a modern idiom, the rich get richer and the poor get poorer.
Columbus, Indiana was recently named the most historic destination in the United States by National Geographic magazine. Not only does it have a traditional 19th century downtown, but also a world-renowned collection of modernist masterpieces from the last 50 years – one of the best anywhere. A local businessman agreed to pay the architectural fees for any local civic structure if the town picked an architect on his list. The result is an architectural treasure trove. Today Columbus is the strongest traditional small manufacturing city in Indiana by a country mile. It’s reasonable to speculate that there might be a link between the enlightened architecture and the economic outcomes.
But have other places in Indiana or the Midwest followed this example and utilized quality of space and architecture to try to retain relevance in the modern era? With extremely limited exceptions, No. Why is this?
Often cities fail to learn from their own good examples. Monument Circle in Indianapolis is one of America’s great urban spaces, but it has not inspired that city to even attempt creating similar spaces elsewhere. Why not?
I used to believe that what we needed to transform our cities were good examples, something to show people the possibility of what could be. It’s not that our Midwestern cities are willfully doing the wrong things, it’s just that they don’t know any better. But is that true? I’m increasingly skeptical. There seem to be examples aplenty, they just aren’t emulated.
It seems that only a certain type of city is able to learn by example, and it is disproportionately those places that are already successful to begin with. Thus we see successful cities going from strength to strength while the weaker sit paralyzed. So much of the Midwest falls into that latter category, its cities “sour and crumbling”, unable to muster the will to fight against the physical, environmental, demographic, and economic ruin into which they are falling.
Cities like Chicago, Minneapolis, and Madison are successful. Yet they do not inspire emulators. Conversely, those places themselves are early adopters of good ideas from elsewhere. Every other day there is an article in the news about the success of places like Austin, Charlotte, or Dallas. About the striking urban renaissances in places like Boston or Seattle. Or the life sciences boom in San Diego. But no one learns the lessons. Even the most successful Midwest cities like Columbus, Ohio do not, and while they can take solace in out pacing their Midwestern peers, they still continue to be passed by up and comers like Charlotte and Nashville, relative non-entities twenty years ago. The dying small industrial cities of the Midwest cling to traditional approaches despite the hollowing out that has taken place.
It’s not like we haven’t figured some things out. While the disasters created by previous grand urban planning visions should certainly inspire a great deal of humility, we know much more of what works and what doesn’t. Successful examples teach us what actually worked in the real world, how they work, what it took to get them done, and a great measure of why they worked. They are actual templates for action – not just mindless copying, but really thinking about how they can be applied to the location conditions – not grand unproven theories. But they are seldom emulated by people who desperately need change.
Why do so many places seem unable to learn even from their own successes, much less others?
I think there are two principal reasons.
One reason is that good examples are often seen as extraordinary one-offs. Paradoxically, to the extent that a policy, a design, or an outcome achieves truly exceptional results, it will be increasingly likely to be seen as sui generis. Monument Circle is such a unique place that it is difficult to imagine its values informing the design of the average city street. Columbus is so amazing that its collection of modernist buildings can be viewed as a sort of artifact of nature like the Grand Canyon, as something that simply is but was not created. Tiger Woods and Michael Jordan aren’t role models, they are demigods.
That is why it is so important not just to focus on examples, but the right examples. I’ve said it before and I’ll say it again:
Every small town in America bricks up its Main St. And while that might help create the sense of the sacred essential to the city, it doesn’t inspire us to see ourselves or our everyday city in a different way. It often doesn’t move us to overall civic betterment. The design of the average street is so much more important than the design of the main street. The design of the local elementary school more important than that of the war memorial. It is critical to create examples that permeate the city in a way that can instruct. Crucial details like a street sign, well maintained sidewalks, a freshly painted fence around a park. These are what shape our view of what a city is and should be.
When everything about the environment we live in tells us one thing, it’s very difficult for something with a different message to break through and be seen as something that could be applied broadly to ourselves.
The second challenge is more fundamental. Like Machiavelli said, “It takes a wise prince to profit from good advice.” Research suggests that those who score poorly on a test are less likely than those who score well to be able to predict their own performance. In short, the worse we are, the less aware we are of it, and without awareness of our own deficiencies, we’re unlikely to be able to understand what it is we need to do to improve.
This is a key stumbling block. Until we are able to see the linkages between what our city is and does and our own civic performance, we’ll never be able to recognize good examples and use them to improve. That’s the tragedy of the Parable of the Talents. In the Midwest we are too often like the servant who got one talent, and unable to conceive of how we might profitably invest, fearfully cling to what we have, desperate not to lose it. We watch other places use their windfalls to build still greater success while burying what we do have in a hole in the ground.
That’s what we’ve got to overcome. The Midwestern city needs to be inspired to see itself like the cities with ten and five talents. Chicago did that. It looked at New York and London and said, “No, we can’t vie to be the world’s premier city like those two can, but we can sure as heck learn from them and figure how to be sure we’re at least playing the major leagues.” Minneapolis said, “No, we can’t be Chicago, but look at what other mid-tier cities in Europe have been able to achieve – we can certainly play in the game.” Indianapolis looked at what other much bigger cities had done to host the Super Bowl and said, “Why not us?” Columbus, Indiana said, “We can’t be all things to all people, but we can place a bet on architecture.”
But the further one gets from success, the harder it is to will ourselves to change and copy success, much less to innovate. That’s the fundamental challenge facing the Midwest. The challenge is vast and it will take enlightened and courageous leadership to face up to it. But I’ve seen the successful examples like Columbus. That shows me that there is a path forward and a potential bright future for the Midwest if we can figure out how to break through the torpor and get people to start seeing the examples that are right before our eyes for what they really are.
Sunday, October 25th, 2009
I previously wrote about how the Parable of the Talents can be viewed as purely descriptive, not normative. It does seem that the people who are already at the top of the heap are able to keep getting more good stuff. While in a dynamic society fortunes rise and fall, it can be surprisingly difficult to displace an entrenched incumbent absent a major market disruption. Perhaps that helps explain why New York City isn’t just on top, it continues to do things that distinguish it.
Given that New York is more or less fully developed, I wouldn’t have expected it to be a hotbed of transportation innovation. But surprisingly, New York has displayed a lot of leadership in the area of transportation design of late when it comes to its streets. I won’t claim it is better than anyone else in the world, but there are definitely good things happening there, so let’s take a look.
The High Line
The High Line was an old elevated rail line in Manhattan that was slated to be torn down. A group of people decided instead to lobby to have it turned into an elevated linear park. This became a very chic cause and as a result a lot of private money was raised to make it happen. Given the number of abandoned rail lines like this in our cities, I’m surprised it hasn’t happened more often. I don’t know if the High Line was the first of its kind, but it has certainly changed the public perception and the idea is now being copied in places like Chicago with its proposed Bloomingdale Trail (coming circa 2016).
The design of the High Line is also first rate. It was done in a contemporary style, preserving the rails and replanting native grasses to give the feel that you are still walking down an overgrown rail bed. Very nice. Here are a couple of pictures:
As you can see, the park features some great furniture designs as well.
Various cities have done art bike rack projects, but few of them are as interesting the one New York did with David Byrne. Here is one of his marvelous designs:
You can see more of the designs on David Byrne’s web site.
But in keeping with my adage that “the mark of a great city is in how it treats its ordinary spaces, not its special ones”, New York went further and held a design competition for a bespoke bike rack that would be installed as the new city standard for wide deployment. Here’s a look at the winner:
I’m not sure what I think of this, honestly. And it looks like it would be pretty easy to rip out of the concrete. But it is a unique design that, once widely deployed, could easily become yet another iconic image of the city, much the way the phone booths, black cabs, red double-decker buses, and bobby’s caps are for London.
I have strongly advocated that cities look to do something like this. When I’ve touted these types of designs of various people, I’m invariably told that it would cost too much money. But cities are often thinking of one-off type designs they do for “special” districts without considering that unit cost plummets with volume. Most larger cities should have minimum scale necessary to get an attractive price. And you can make a target fabrication price part of the design, and designers could partner with fabricators to submit joint bids.
Just to give one example, Columbus, Indiana recently had some custom bike racks created in the shape of their “C” logo at a fabrication cost of $200 each – less than the cost of a regular U-rack. There is simply no excuse.
Bicycle Tracks and Lanes
You wouldn’t think of New York as a place you’d want to ride a bike that much, but the city is making a big effort to be more bicycle friendly. This includes bike lanes, of course. But those are becoming ubiquitous in America. New York has gone beyond that and has actually installed so called “bicycle tracks”, or bike lanes that employ some type of full separation or buffering of bicycles from traffic. Here’s one on 9th Avenue (via BeyondDC):
These are starting to pop up around the country, but New York is a leader here.
Bicycle Access to Buildings Law
New York also passed a law that requires commercial building owners with at least one freight elevator to allow people to transport bicycles in them. I never thought about buildings not wanting bikes in them, but I guess some do. The law takes effect in December of this year.
Again, New York launched an international design competition for a new street lamp design. There were over 200 entries submitted from 23 countries. The winner was from architects Thomas Phifer and Partners and lighting consultant Office for Visual Interaction, Inc. These LED lamps will be green friendly – LED’s consume less energy than traditional bulbs – and also have a modular design to allow various components to be upgraded over time as new technology comes on line.
Oh, and the design is modern, sleek, and attractive as well:
I love the little wire looking things on the edges. They are like a throwback to the gas lamp era when you could use those to raise and lower old school lights. If you are going to incorporate historical references, that’s the way to do it.
It is still early days. The lights have to be tested and such, but the city is potentially looking to install these as the new standard. Looks like another winner.
Traffic Closures on Broadway
New York has also launched an experiment with closing sections of Broadway to traffic and turning the space over to people. The first sections are in Times Square and Herald Square. This one has been controversial. Some businesses don’t like it. Also, the lawn chairs and such I’ve seen photographed are quite tacky:
[ A commenter tells me these have been replaced with real tables and chairs - obviously I haven't been back to NYC since this happened. ]
Still, it’s probably worthwhile as an experiment at least. The street was not ripped out and cars can always be let back later if it is judged not to be working.
However, New York’s DOT has a broader public plaza program designed to convert underutilized streets into public plazas. Looks like a winner.
Street Design Manual
A lot of this is put together in the new New York Street Design Manual. New York is one of the first cities to issue a comprehensive design guide updated for the 21st century.
I haven’t had the leisure to read the entire thing yet, but the cover is a supreme work of graphic design in itself:
The green is an obvious choice, but I love how it is used sparingly. The design is crisp and modern, but what I really love is the use of green/yellow/tan shades and shapes that are equally as rural as urban. This could easily be the cover of a Pioneer seed brochure or John Deere spare parts catalog. Oh, and note the bike rack design on there.
A lot of the credit for this goes to Janette Sadik-Khan, New York City Transportation Commissioner. She has been one of those rare figures that combines the ability to get things done with the wisdom to know what it is we should do. Or, as a lengthy profile in New York Magazine put it, she’s equal parts Robert Moses and Jane Jacobs.
She’s not been without controversy, and let’s face it, anytime you try this many new things you are going to get a few things wrong, but on the whole I think you’d have to say New York has made a major turn in the right direction. It’s not just that any one of these projects is so great or innovative, it is the sheer quantity of quality in a place as challenging as New York City. Again, one would have thought that New York City was largely “done” from a street infrastructure perspective. It turns out that’s not the case – and in a very good way.
I have tried to give a feel for the breadth and depth of what New York is bringing to bear to make its streets better places. But I won’t claim this is a comprehensive survey. There is just too much going on. I didn’t even touch on transit, for example.
If you want to know more, the source of record for keeping up with these developments in New York is the inestimable Streetsblog. Some might find its NYC focus not of interest, and they do post a few times a day so possibly too high volume for others, but I consider it one the top sites in my reader.
Saturday, October 24th, 2009
It’s a brand new day here at The Urbanophile. A new site design, a new URL, a new technical platform, and a new hosting provider – but still the same mission, helping America’s cities find ways to thrive and find sustainable success in the 21st century.
For those reading through subscriptions, I’d encourage you to check out the new site at www.urbanophile.com. It should work fine with any browser, but it will look different on Internet Explorer.
Please, please, anyone who links to me update your links to the new location.
Feedback is welcomed. Please post it as comments here – good and bad. As a tough design critic myself, I’m not really in a position to avoid hearing about areas you think I could improve on.
A word on my new “Passionate About Cities” tag line. I’ll be the first to admit that I adapted that from Pret A Manager, where I ate lunch almost every day when I was working in London. (I absolutely love London – anybody there want to hire me?)
You might be wondering if this means I’m no longer focusing on the Midwest region. The answer is No. I intend to continue making the Midwest my core focus but am going to be diversifying a bit, such as with my recent California post.
This web site should work like any other, but if you are interested, here is some more information.
Since I don’t post every day or on a regular schedule, the easiest way to keep up is to subscribe. You can subscribe by email, and have the blog show up in your inbox shortly after it rolls off the presses. The system will send you an email with a link in it you have to use to confirm your address and activate the subscription, so please look for it. If you don’t see it, check your spam folder.
Or, you can subscribe via RSS, for use in programs like Google Reader. The feeds are the same as the old blog, so no need to do anything to keep getting it if you already subscribe.
New with this blog is that I’m publishing a comments RSS feed for those who want to subscribe to comments as well.
You can also follow me on Twitter. You might notice on the right side of the screen a box that shows my most recent Tweets, so you can get a current view every time you visit.
As I said, you can subscribe to comments now. Also, by reader request, I added a box on the left sidebar that displays the most recent comments on the blog.
I am now using WordPress as my platform, not Blogger. What that means is that you can no longer use your Google id to post comments. If you fill in your information in the comments form once, it should remember who you are.
Also, there is a new checkbox enabled function that has the system email you when new comments arrive on a post. So if you are only interested in comments on a particular post, you can subscribe just to that one by email.
Lastly, comments are disabled on posts older than 30 days.
After I ease into the new platform for a while, I’ll look to roll out some enhancements as they make sense. I’d like to add threaded comments and improved search, for example. But my plan is to stay squarely focused on producing the most compelling content, not web “frosting”.
Also, I’ve got a ton of work to do in the archives in terms of updating internal links to point to the new blog, cleaning up categories, etc.
The old site will stay up indefinitely so that links don’t get broken.
If you’ve got suggestions of things you would like to see, please post them here or shoot me a note.
My Old Personal Homepage
For those who have visited my old personal home page, that content is no longer available and that site has been merged with this one. The content was extremely dated. I have retained the software download pages for the free software I support.
I’d like to mention the folks that made this new site possible:
- Renee Wilmeth (Indianapolis) – along with Katie “Urban design your blog, Dude” Buitrago (Chicago) – gave me the kick in the pants I needed to take this on.
- Mike Doyle (Chicago) of CHICAGO CARLESS drove the site strategy and content development.
- Polina Osherov (Indianapolis) supplied the photography.
- Matt Hale (Indianapolis) supplied the graphic design of the blog and logo. Matt is part of the team at Vision 3 Creative.
- Lisa Gishoff (Chicago) of Gizmo Design created my initial Word Press template and was my “training wheels” on this new platform.
I was the project manager and also did a lot of hacking on the template myself. It’s been a while since I got to be hands on, and it was a fun – though a bit more fun than I wanted in some cases since I don’t know any of the programming languages this system is written in. Relax – I’ve never let that stop me before. I’m also doing my own conversion, which is an adventure in progress since I’ve never done this either. I made the executive decision to abandon cross-browser consistency as a goal.
Thanks to all the beta testers who helped out as well.
I’m sure there will be some bumps in the road. I’ve already got a list of approximately one million pixels that aren’t properly aligned, according to Matt, among many other enhancements that need to be implemented. As it always should be for the person at the top, I take 100% of the blame for any problems with the site.
Thursday, October 22nd, 2009
This post kicks off a multi-part series on the principles of privatization. Cities and states across America have been looking at various types of privatization programs to save money or raise money in a tough economy. This has been surprisingly non-partisan, with proponents and opponents scattered across both parties. Democrat Mayor Richard Daley is a huge fan, as is Republican Gov. Mitch Daniels in Indiana. Democrat Gov. Ed Rendell pushed a toll road privatization. The Republican administration in the city of Indianapolis is looking at several privatizations, including airport parking garages, the water utility, and convention center operations.
Done right, privatization can yield big benefits. But done wrong, it can be bad thing. My own view is non-ideological in that while I see the virtues of privatization in many cases, I think we have to look at the actual transactions in question to see if they are any good from a practical perspective. Often they are not.
Part of the challenge is that there are so many different types of privatizations. The word “privatization” is often used to describe radically different types of things. Also, many other things which are de facto privatizations are implemented without using the term. And even within a given deal, many different types of transactions are, in practice, bundled together.
In this post, I wanted to try to sort these out, and talk about various types of transactions and what they are. It is important for anyone considering a privatization transaction to keep what it is we are actually proposing to do in mind. Otherwise we might draw false analogies with other transactions and end up making a mistake as to what we are actually doing. I think there are three broad categories of things to consider: basic transactions, policy changes, and financial engineering.
Throughout this series I will return to the lease of the Indiana Toll Road and Chicago Skyway as examples of good privatization transactions.
Defining what a privatization transaction is can be difficult. I’ll define it roughly as a transfer of government funds or assets to a private organization in return for a payment and/or the execution of a government function. Some of the major types of things that might fall under this or some expanded view of it are:
- Contracting. This is simple and well understood. The government hires a private company to provide a transactional service, for example, to build a road. This might not seem like privatization per se, but in theory governments could do everything in house. Indeed, they typically do perform routine maintenance and repairs with their own staff, such as pothole filling.
- Outsourcing. This is also a type of contracting, but involves delivering a service over a particular and often extended contract term rather than for a particular transaction. For example, companies often outsource their IT or routine business processes like invoice processing. There can be big value in this if done right, which I talk about in a future post.
- Asset Sales. A government could simply sell off assets. This is done both at the large scale, such as by selling off state owned industries, or the small, such a routine surplus property auctions. The federal government has acquired quite a large number of assets recently in the form of failed banks and stock in bailed out companies. The intent is that this be temporary and that these be sold at some point when conditions change.
- Operating Lease. This is where an asset is transferred to a private company for a period of time in return for periodic payments, and where the private company takes over responsibility for operations as in an outsourcing contract. The Indiana Toll Road lease falls into this category. You might also think of a concession, such as a lodge at a state park, as falling into this category.
- Sale-Leaseback. This is where the government sells an asset to a private party, then leases it back. Generally at the end of the lease, the government buys it back for a pre-negotiated price as well. You might be asking why anyone would do this. In the public sector, it is a manipulation of the tax code. Governments don’t pay income taxes, private companies do. So governments don’t get any value from depreciating an asset on the books. But if they sell it to a private company, that company can deduct the depreciation on its books. In effect, that’s the sole reason for doing this deal. The company and the government split the tax gains. This used to be more common. The Chicago Transit Authority did a sale-leaseback on its Green Line L this way, for example. However, the feds were understandably peeved by this practice and I believe have largely shut it down. In the private sector, sale-leaseback transactions are typically a form of financial engineering.
- Public-Private Partnerships – For Profit. “Public-private partnership” is another nebulous term, but in this case I am referring to publicly subsidized real estate projects. In effect, rather than contracting with a private company for a government service, the government dabbles in traditionally private sector areas like real estate. Generally in this case the government will do things like assemble land and put in extensive infrastructure, often using tax increment financing, and private developers put in money as well and also operate the project. Sometimes there is just a pure subsidy to the development, but not infrequently the government actually has an equity stake. I recently talked about how Kansas City just got a $1.8 million check for its interest in arena profits, for example. Government usually do this in order to promote development in areas where the market isn’t investing, such as downtowns or impoverished areas.
- Public-Private Partnerships – Non Profit. There’s a less well known side to public-private partnerships, one that flies under the radar and isn’t typically thought of this way, but is actually one of the oldest and most important privatization transactions. That is when the government gives grants to non-profit organizations to implement projects or run programs. These are often social service or arts related. And often the public money is pooled with privately raised funds. This one is interesting. Privatization is usually associated with the political right and criticized by the political left. This type of transaction, rarely considered “privatization” but which clearly is, is generally associated with the political left and criticized by the political right. The rationale for these programs is generally that the government can help multiply the effect of private donations, and also that these non-profit groups – such as public arts programs or community development corporations – are closer to the needs of particular communities and bring unique expertise to the table.
In addition to these basic transaction, privatization can also involve other public policy changes. There are three that I typically see:
- Elimination of Services. One way to look at privatization in its most pure form is if the government simply stopped providing a particular service and left it to the marketplace to provide, similar to how most products and services work. This rarely happens, but one example where you see wide variability is municipal garbage collection. In some cities and towns, the government provides residential garbage collection. In others it is does not. In those places, people have to contract with a private trash hauler for a fee. Large cities tend to provide residential garbage collection as a service, and with large numbers of very poor people often living there, abandoned properties, etc. stopping this might not be such a good idea. Smaller places with more uniform incomes can more easily pull it of.
- Addition of Services. The government could add a service such a building a new toll road or transit line.
- Pricing Changes. A price change could be involved. For example, most lump sum privatization deals like the toll road leases involve significant price increases. Sometimes cities implement fees for services like trash pickup to raise additional funds.
Lastly, there can be various types of financial engineering involved. By that I simply mean transactions that involve buying or selling financial instruments at market rates. Similar to buying or shorting a stock, the value in these can be positive or negative and is only revealed over time.
- Capitalization. This is where you take a stream of future revenues and convert it into a lump sum. It’s just like lottery winnings where you have the choice of a large amount of money paid in annual installments, or a smaller total amount of money all given to you at once. (In reverse, you borrow a lump sum now, such as your house price, and pay it back in installments over time in your mortgage payments). Is this a good deal? Well, a dollar today is worth more than a dollar tomorrow, something known as the “time value of money”. In order to get someone to exchange a dollar today for a dollar tomorrow, you have to pay them interest to compensate for this. Whether there is any value in this is a complex topic I won’t go into completely now. But one area where I would say Yes is if you are able to invest the lump sum proceeds into something that earns a greater return than the interest you paid on the transaction. For example, construction costs for highway and transit systems had until recently been increasing at a rate greater than inflation. Due to regulatory creep, this would appear to be the case for some time. If that construction inflation rate exceeds, for example, the discount rate on the projected revenue stream in a toll road lease (or the rate you would pay on bonds to borrow the money to build now), it can make a lot of sense. That’s one reason I think the Indiana Toll Road deal was very good. But taking a lump sum and investing it in new construction quickly, Indiana was able to avoid a large amount of project inflation over the decades it would have taken to build those projects using traditional means. Realistically, the state would never have been able to afford many of them.
- Hedging. A hedge is a type of financial transaction you enter into in order to reduce your exposure to risk. For a fee, some other party takes on that risk. This could be through various formal or implicit mechanisms, but it fundamentally a derivative transaction. If when you think derivatives, you think financial meltdown, you are right. Derivatives are often very risky investments, though for traditional purposes they can be very useful because they provide predictability. For example, airlines know that they need jet fuel every year in the future. Rather than simply pulling up to the pump and paying the cash rate of the day, they can buy futures that allow them to lock in future prices. That way they know exactly how much they will be paying next year and can plan accordingly. Of course, if you lock in now and the price goes down, you lose money on the deal. Or if you need less than you thought, that’s also bad news. Investing hedges is often pure speculation. Because of the risk of losses if things go bad, governments tends to avoid hedging because of the associated political risk. However, hedges are often an implicit part of privatization transactions and can be a source of value because of the so-called “Winner’s Curse“, where bidders often overpay in an auction.
Keeping in mind all of the different things above, when looking at a transaction it is very important to understand what is part of the deal. Often multiple of these transactions are combined.
Let’s examine the Indiana Toll Road lease transaction. This involved a bundle of many different types of transactions:
- A price increase via a significant increase in tolls
- An operating lease where the asset is turned over to a consortium for 75 years and the consortium is responsible for operations and maintenance
- Capitalization of the lease payments/tolls into a $3.9 billion lump sum
- A contract of $400 million to the consortium for capital investments in the Toll Road
- A hedge against future fluctuations in toll revenues, operations, maintenance, and expansion costs.
- Addition of services (electronic toll collection)
As you can see, this was in fact a very complicated transaction. The fact that it largely took place with a single bidder and a single contract can obscure this complexity. Indeed, behind the scenes I am sure that the consortium that signed the lease actually parceled out many of the transactions elsewhere – to banks, construction companies, etc.
Why package these together? Some have asked the question, at lease implicitly. One variation goes, “Why can’t the state just raise tolls itself?” The question almost answers itself. There is enormous pressure to set the price of user fees for government services very low. Raising fees, like raising taxes, is often very unpopular. That’s the reason the Indiana Toll Road was a money losing asset to the state. However, by packaging these together, that toll increase is magically transformed into $3.9 billion in the here and now. That provides a powerful incentive and political justification for the tax increase. Lawmakers can go home and explain all the projects that are going to get done with the money.
As I said, I think that the Indiana Toll Road lease was a great deal. Similarly the Skyway transaction. The city of Chicago converted a financial albatross into gold. However, other transactions that might seem superficially similar – such as other asset leases that involve lump sum payments, may not be nearly as good because they don’t contain the same mix of elements. We need to carefully examine the various components of the transaction and where the value is coming from. That’s the topic of the next installment.
More in This Series
Tuesday, October 20th, 2009
My latest post is up over at New Geography. It’s called “The White City“. I take a look at the cities which are often touted as progressive urban role models, places like Portland, Denver, Minneapolis, Seattle, and Austin, and find that one thing that unites these cities is their lack of African Americans. This is in marked contrast to most cities of the Midwest and South. The following chart illustrates:
You might be interested in contrasting my piece with this one in the American Prospect.
When I say “progressive”, I don’t mean it in a left-politics sense – Midwest cities like Cleveland are very blue, for example – but rather that places like Portland and Denver are held up as exemplars that other cities should be imitating in terms of urban policies. I actually happen to be a big fan of a lot of what they are doing and think a lot of it worthy of adapting to other places. I’ll even go so far as to say that changing land use and transportation policies in our urban cores is an absolute imperative if we expect that Midwest cities are ever going to regenerate themselves.
But I am troubled that cities who share a lack of African Americans as a core feature in common are considered the model. Far better would be truly diverse cities like NYC, San Francisco, Chicago, and Miami – but those Tier One cities simply can’t be imitated by much smaller places.
Perhaps those cities can’t be blamed for their history and resulting demographics. And I don’t think all American cities should have the exact same demographic mix. But it isn’t realistic to expect that the models that work there will work in other places.
That’s the piece of the puzzle that is missing in places like the Rust Belt and the South. Cities try to “lift and drop” the policies and sales plan of Portland without considering the local context in terms of how things like transit should be targeted to benefit the entire community and promote social justice, as well as how to sell forward looking urban policies in this environment.
Dynamics like this are largely missing from too much of the urbanist agenda. Perhaps it is not surprising, since the “R&D labs” for urban policy are the Tier One cities and also these Portland-like smaller cities. What’s needed in places like the Rust Belt are a mixture of indigenous solutions and imported ideas that are tailored to the local community. It can’t just be trying to buy urban widgets from elsewhere like some sort of “public transit in a box” solution. The Midwest would do well to consider developing an indigenous urban R&D program to mitigate this.
I can also say this, with most large Midwest urban areas having core county African American populations of around 25%, any civic strategy that doesn’t involve African Americans is a loser.
As Smart City Memphis put it, “There’s the myth our African-American majority is an economic drag. Because distinctiveness is the basis for competitive advantage, Memphis needs to be a hub of black talent. If that isn’t at the top of our economic development agenda, we’re not really in the economic development business.” Cities need to create strategies based around their unique competitive advantages, and for the Midwest, one of those unique attributes are those cities’ African American populations. It’s too bad virtually none of them act like it.
What’s it worth to have a robust and engaged black community in your city? Well, what’s it worth to have the President of the United States be from your city? Absent the rich black cultural and political infrastructure of Chicago, there wouldn’t be a President from that city, or even the entire region, of any race.
I didn’t write that piece to bash Portland – well, not just to bash Portland – but also as a call to arms for Midwestern cities to figure out how to make their African American communities a key plank in their civic growth strategy. It’s a weapon those other cities simply can’t copy or match.
This was the topic of one of my very first blog posts ever, “Towards a New Vision for Black Indianapolis“. I happen to think that Indianapolis is very well placed to be a city that could really execute this strategy. Not only does it have many strong black cultural institutions, it also has, in my view, better race relations that many regional cities such as Cincinnati. And I experience degrees of social integration there to a degree greater than that of other regional cities I’ve been to. For example, pop into even a working class neighborhood bar on the near South Side and don’t be surprised to see a few black faces in the room. There are a number of racially mixed neighborhoods as well. I truly believe that one of the ways Indianapolis could truly take its civic success to the next level would be to set a goal of becoming the next great American city for African Americans and really making a push behind it.
As you might expect for such a topic, that post generated a bit of polarized reactions. Some of the critics suggested that “not black” doesn’t mean “white”. True enough. But that’s also why in the article I note how urbanist discussion in recent times has increasingly emphasized immigration as the prime metric of diversity. It helps divert people from an inconvenient truth.
Lastly, I’ll include this comment from Tommy Ates, whom I hope doesn’t mind my reproducing it here. It is very thoughtful and relevant.
Being black from Cincinnati and now living in Austin, reading the “The White City” article is both a validation of demographic observations and sobering testimony of how 21st Century cities are becoming a lifestyle choice where race is just an unintentional adjective, perhaps leading to ‘intentional’ acts of racial balkanism.
Being raised in Cincinnati, in the ’70s my parents moved there because there were an abundance of middle-class blacks that were “doing well”. In fact, Cincinnati does have safe “blurbs” (black suburbs). However, my deep criticism of Greater Cincinnati is that the suburban wealthy and middle-class blacks shun the black lower-class in Cincinnati.
In the 2000s, now the black “boom towns” are Atlanta and Houston. Living in Austin, instead of lapping it up in progressive Texan shangli-la, I get the creeping sense of being “left behind”. Nearly all of my cousins in my young age (20s-30s) have moved to Houston after high school because there is “culture”. When I’ve told my white friends, they look at me with incredulity. They don’t understand. But, “old South” may have ended for white Austin, but, after the 60s, it never did elsewhere for black and hispanics, except with a ’90s high tech bang with massive white incoming and rising home prices (far beyond average minority incomes).
As a result, Black and hispanic east Austin is dying. The people know it. The city of Austin and its downtown plan expect it. And, cynically, both the young and old minorities suspect, they won’t be missed. After all, their positioning in east Austin was a consequence for “old South” segregation. Well, nothing lasts forever, and what the real estate market gave, the market now takes away..and for some young minorities, time to go to a new “promiseland”.
For me, I love Austin for the art, “atmosphere” of diversity, progressivism, and civic will to build a denser, more impact urban core. Even though sometimes being only black face in restaurants and stores is a little uncomfortable -and jarring. I want to be a part of that effort against the encroaching suburban “donut hole” ravaging so many of our fine American cities.
Sadly, in some black quarters, the article’s mindset simply reveals what many people have thought all along. That, perhaps unconscious – or conscious, race or the lack of race has become a lifestyle choice.
In Texas, Austin for ‘liberal’ whites. Houston for blacks. Dallas for ‘conservative’ whites. San Antonio for hispanics. All the while, not dealing, but “dealing”, with the issue of race – in its absence.
If it’s not done with malicious intent, but it is the result, is it racist? Is it racism at all to go where one feels ‘comfortable’, even if the faces and viewpoints are all the ‘same’?
In a Changing World, Portland Remains Overwhelmingly White (The Oregonian)
Refugees of Diversity (The American Prospect)
Sunday, October 18th, 2009
If any of you are headed to Rail~Volution 2009 in Boston, please be sure to check out the panel discussion I’m part of called “The Rail~Volution Will Not Be Televised”. Others participating will be Pantograph Trolleypole of The Overhead Wire and economist Ryan Avent. We’re discussing the use of social media technology for transit advocacy. You won’t want to miss it! If any of my readers are attending or are in the Boston area, shoot me a note and maybe we can connect while I’m there.
Also, I mentioned that I am upgrading the blog, replacing the design and going to a new domain. I have tentatively scheduled the cutover for this Friday, so be ready for it and stay tuned for further instructions.
African Americans as Economic Development Platform
Smart City Memphis is a great blog for the reader, even if it is pretty locally focused on that city. A recent post suggests the city needs to blow up old myths and start acting on facts. This part caught my eye.
There’s the myth our African-American majority is an economic drag. Because distinctiveness is the basis for competitive advantage, Memphis needs to be a hub of black talent. If that isn’t at the top of our economic development agenda, we’re not really in the economic development business.
Amen. I’ve made that same plea to Midwest cities. As you’ll see in a future post from me, self-styled progressive paragons like Portland have virtually no African Americans. Don’t try to beat other cities at their game, try to make them beat you at yours. Their African American populations are among the key assets of Midwest metros in figuring out how to compete and be relevant in the marketplace today. It’s a shame so few places act like it.
Selling the Suburbs
@PD_Smith points us at an absolutely must watch BBC audio slide show on selling the suburbs. It’s about an exhibit of posters and marketing materials for suburbs in early 20th century London. Key to this era of suburbs of course was the extension of transit lines, since we had yet to enter the auto era, but the description of their marketing program holds extremely valuable lessons for people today trying to sell people on city living. And the graphic design of the pieces is gorgeous.
Again, so often today we are preached at about the need to live in the city and told how great it is for us, but seldom are we actually sold on it. I’ve yet to see any city with a marketing campaign to lure people to their downtown that compares with the brief few minutes of suburban sales slides from the BBC. Even the graphic design alone blows most cities out of the water.
Here are a couple of relevant samples. These were how public transit was marketed not just as a way for people to move out of the city to the suburbs, but to come back into it to for entertainment. That’s still relevant today.
Apparently these people did not subscribe to the position that people won’t ride buses:
Rail is good too of course:
Touting proximity to entertainment:
Midwest Bike to Work
The Census American Community Survey data is a treasure trove of good stuff. Bike Pittsburgh took a look at the bike to work figures for various cities. They’ve even got an embedded Google spreadsheet with the data for every mode of commuting, so check it out. Portland was #1 in America with 6% biking to work. Here’s how the Midwest central cities stacked up vs. a top 60 city average of 0.98% and median of 0.6%:
- Minneapolis – 4.3% (#2 in the nation)
- Milwaukee – 1.1%
- Chicago – 1.0%
- Columbus – 0.9%
- Pittsburgh – 0.8%
- Cleveland – 0.7%
- St. Louis – 0.7%
- Cincinnati – 0.5%
- Louisville – 0.4%
- Detroit – 0.3%
- Indianapolis – 0.3%
- Kansas City -0.2%
The Detroit Frontier in the News
My post on Detroit as the new American frontier continues to generate a surprisingly large number of hits as people keep discovering it and passing it along to others. Here are a few articles illustrating the theme.
Here’s a great piece on making a difference in Detroit.
The bad stories are easy to find in Detroit. More than a quarter are unemployed. The school district’s graduation rate is dismal. Violent crime is among the highest in the nation. But the good stories are there, and a common thread among many is persistence, pluck and patience in navigating the city’s sometimes cumbersome bureaucracy.
“If you want something done, you often have to do it yourself here,” explained Kate Devlin, who, although she doesn’t own it,boarded up a vacant building herself in North Corktown and is waiting to buy it at the tax foreclosure auction rather than waiting for the city to bring wrecking crews.
It isn’t easy. Sometimes, residents have to get creative.
Here’s another one on a North End activist.
Delores Bennett is known as the Grandmother of the North End for a good reason.
When she sees a problem, she fixes it. And for four decades, that’s meant helping children stay out of trouble….. “I don’t want any money from the city because when you do it on our own there aren’t any limitations,” said Bennett, 76, whose North End Youth Improvement Council provides scholarships and serves as an umbrella group for her other efforts.
And here’s one about a mother trying to run drug dealers out of her neighborhood.
One house remained a drug haven whose users craved privacy, keeping blinds drawn during all hours. “If we could get in there, we could tear those blinds down and that would be that,” Hoerauf said. The duo persuaded an officer to check to make sure the house was empty before they entered and took down the blinds. The drug use stopped.
The common thread a see in all of these is a sort of frontier ethic of self-reliance. In Detroit, everyone knows the city is not going to take care of these problems. If you want something done, you’ve got to do it yourself. Life isn’t always pleasant on the frontier – it sure wasn’t in the early days of the American Midwest and West. But often that formative experience builds the foundation, and especially the character and ethos that enables good things to emerge even decades down the line. In Detroit, everyone from Afrocentric educators to artists and urban farmers are staking their claim. If Detroit really does revive, my money is on the solution coming out of this rich grass roots ferment.
Ohio Migration Data
Jim Russell pointed me at this interesting report from Community Research Partners in Columbus, Ohio. They used IRS tax return data, a standard source, to measure migration in Ohio. Here are some graphics I found particularly telling. These show intra-state migration for Ohio’s largest three cities. You can see strong suburban outmigration everywhere. But the telling thing is how Columbus is sucking in people from all over the state, but Cleveland and Cincinnati are not. Both Cleveland and Cincy have virtually no in-migration from the rest of the state and are losing people to Columbus. Their balance of trade with each other appears to be minimal.
Kansas City Transit
Kansas City has had an odd history with efforts to build a rail transit system. They voted for a system that couldn’t legally be constructed. Then they voted down a couple of other efforts. I never followed it that closely, but was always puzzled as to what was going on. A video out of KC this week explains a lot as far as I’m concerned. You’ll have to click the link to watch since it is on a newspaper web site and isn’t embeddable. I strongly encourage you to do so. The video is only two minutes long, and it’s priceless.
Meanwhile, the Jackson County executive unveiled a plan for a regional commuter rail system. This could get interesting.
Louisville Tourism and Relocation Ads
Louisville rolled out some tourism and relocation ads that generated a bit of controversy. They mimic the interminable TV ads out there for erectile dysfunction and depression medications. While I don’t think these ads really showcase the best value proposition or brand promise for Louisville, I thought they were pretty funny.
Taking a swipe at Ohio:
Cool Philly Transit Benches
Keeping with my theme of the importance of design in public transit infrastructure, the Architect’s Newspaper points us at a cool rail station bench in Philadelphia.
This was designed and built by the one stop design and fabrication shop Veyko.
National and International Roundup
The United Nations just issued a Global Report on Human Settlements for 2009. According to their research, 200,000 people around the world move to cities every day. Pretty impressive.
Luring artists to lend life to empty storefronts (NYC) – Hey there, Indy has been doing this for a long time.
San Francisco’s ground breaking parking meter study (Streetsblog)
Site Selection magazine has a great interview on the Midwest with Richard Longworth. (h/t Jim Russell)
Youngstown, Ohio: A young town again (The Economist) – Nice coverage in the international press.
Eyes on the Art Prize (NYT) – Dittos for Grand Rapids, where the Art Prize generated a ton of press.
Dead Reckoning – Chicago Magazine looks at the cemetery relocation at the heart of a dispute over the O’Hare Modernization Program.
Chicago planners pinpoint scaled back locally preferred alternative for Circle Line (Transport Politic)
Block 37 superstation, unfinished and unused (Transport Politic)
CTA fare increases through the years (WBEZ)
High speed rail? (Michigan City News-Dispatch)
Seniors ride free policy nearing its end – good (Greg Hinz @ Crain’s Chicago Business)
Mayor Bing unveils turnaround plan for Detroit (Detroit News)
Detroit’s crisis is nothing new (Laura Berman @ Detroit News)
Chamber wants to make region a logistic hub (Crain’s Detroit Business)
How to lose federal transit funding – again (Free Press)
From the credit where credit is due department, I should note that I drove up Illinois St. the other day where sidewalks are being replaced, and only one of the sewer inlets I saw appeared to be raised above the sidewalk grade.
Stimulus stirs work on Eads bridge (Post-Dispatch)
Southwest light rail line moves ahead (Star Tribune)
Friday, October 16th, 2009
I mentioned in a previous post that the Chicago Transit Authority is facing a $300 million deficit next year. This prompted another in a recent series of “doomsdays”. As of now, the gap would be closed by raising L fares to $3, bus fares to $2.50, transferring money from capital to operating, eliminating express routes, reducing hours of service, and reducing bus headways to as long as 30 minutes on some routes. Internal expenses are also being reduced.
The CTA’s tax revenues come largely from sales and real estate transfer taxes, which have been getting clobbered in this economy. The CTA only really has the power to do two things once efficiencies are captured: raise fares or cut service. This budget isn’t good, but compared to other scenarios, certainly could be a lot worse. From the CTA perspective there is simply no way to address the problem without pain.
To be sure, this is only the opening act of the play. We’ve seen this movie before. Not just in Chicago or even only for transit, we see draconian service cuts prophesied only to be rescinded by a last minute reprieve (see, for example, New York, St. Louis, and Philadelphia libraries). I’m sure the CTA will be visiting Springfield for help. The Mayor and others have already questioned the free rides for seniors program that was recently added under disgraced Gov. Blagojevich. The CTA and the unions will be doing a dance. So there is no guarantee this will happen. (My own suggestion: make sure you don’t eliminate service where marginal revenues exceed true marginal costs – a difficult calculation to be sure).
Still, this budget, even if it doesn’t come to pass, has done a great service by showing the city the inevitable future. Service has been trending downward for decades. On very rare occasions there has been some new service, such as the Orange Line to Midwest, but the remorseless trend line is down. If the city doesn’t get to this doomsday scenario today in one swoop, just give it time and it will likely get there gradually soon enough.
The CTA is well on its way to being a social safety net service with a commuter rail operation on the side.
When headways are reduced to 30 minutes per route, CTA bus service is functionally indistinguishable from the IndyGo network in Indianapolis – America’s 99th largest transit system. You can only have true urban transit with headways of 15 minutes or less – ideally 10 minutes or better. At even 20 minute headways your average wait time for a bus is 10 minutes. What this means is that you are no longer able to just go to the bus stop and wait for the next one. Rather, you have to consult a schedule. This means you lose most of your discretionary traffic other than commuters. While I won’t suggest it was rolled out on this basis, Bus Tracker effectively positions the CTA to start operating this way.
And taking from capital to fund operating will work for a while, but as we know the CTA system has billions of dollars in deferred maintenance already. This is only going to add to it, and end up making the system less reliable.
If you look for reasons why Chicago Loop is thriving, why Chicago almost alone among Midwest cities preserved its urban core, there are many, but among them its transit system must be near the top. While most other cities dismantled their legacy transit system, until now, Chicago preserved its own as a unique asset. Ironically, just as other cities are rediscovering the virtues of public transit and the role it plays in preserving the urban core, Chicago is heading the other direction. While city after city in America is investing to build and expand systems – sometimes even dubiously, in my opinion – Chicago is letting its system rust away into dust.
This raises fundamental questions about the city and its future. Can you have a major global city without a real urban transit system? One where transit exists only for those who commute downtown or have no choice, but where otherwise transit isn’t woven into the fabric of the city? Chicago might find out sooner than it would like.
As with many wounds to the urban system, the short term effects are often invisible. Cities, especially cities like Chicago, have a complex web of forces that sustain them. As the strands of the web are broken, others might still hold the urban fabric in place – for a time. But over time, person by person, bit by bit, the system changes and evolves to reflect the new reality. One family buys a car. Another gets a second car. A third simply stops thinking about transit for anything other than commuting to work. Businesses respond by building more auto oriented malls. Traffic, which is already at alarming levels, gets even more gridlocked. People who don’t like this start moving – to New York or San Francisco or London. Those who are left take a skeptical eye towards transit funding since they don’t even use it. Chicagoland becomes a less attractive place to do business because of the extreme congestion and bottlenecks. Where does it lead? The future will tell.
I can share this one anecdote that can show you not the future, but the present. During the day at my Chicago Lakeview apartment building, there is only one car in the 10 car parking garage in the basement – mine. Everyone else drives to work. That’s not 2019, it’s 2009.
The RTA, CTA, Metra, and Pace can’t change this on their own. It will take strong leadership from the business and political communities, as well as demand from the citizens and neighborhood groups. I laid out a plan to get there in my recent five part series on transforming transit in Chicagoland, which I’ll link again below.
Changing the trendline for transit in Chicago means changing the game, not more of the same. It means the city needs to stop playing defense and start playing offense. The question is whether it has the will to do so.
A Roadmap for Transforming Transit in Chicago
Thursday, October 15th, 2009
I don’t have any personal connection to Cincinnati, so perhaps it’s not appropriate to take a position on a ballot initiative there. But I think the matter is relevant to a broader geography, and people can judge for themselves if they find my position compelling or not.
Issue 9 is the so called “streetcar initiative”. It is a proposed amendment to the city charter of Cincinnati that would require voter approval prior to spending any funds on any rail project of any type. It is being pushed by a coalition that is trying to stop a streetcar plan, though the initiative is more broad than just that. It would require a vote for any funding of any rail transit of any type. Also, it should be noted that Cincinnati previously did put a regional transit levy up for a vote to build a light rail system, and it was defeated.
The pro-Issue 9 camp is making the simple argument of “let the people vote”. It’s intuitively compelling. COAST, an anti-tax group that is one of the principal backers of the ballot initiative, has a pretty good track record of getting these sorts of things passed. So it does seem pretty clear that voters have been at odds with elected officials and leaders on many of these issues. And, I’ve said myself that the pro-streetcar marketing has not measured up to that on the anti-streetcar side.
Still, I don’t think this initiative is the right way to go. That’s for a few reasons:
- Direct democracy, though appealing in principle, has generally proven otherwise outside of relatively small, homogeneous communities. Athens was Exhibit A in this. Direct democracy was a disaster there, which is why our Founding Fathers chose a very different system. California is proving today that government by voter initiative is a recipe for ruin. Elected officials eventually find themselves so hamstrung by an accumulation of these initiatives that effective governance becomes impossible. The Chief Justice of the California Supreme Court recently criticized this very thing, saying that the ease of ballot initiatives in California has “rendered our state government dysfunctional”. While politicians are perhaps too easily co-opted by interest groups, the same has proven true of voter initiatives in California, which are often backed by huge special interest money. No doubt originally the initiative process was used for ostensibly good government purposes, but it has gone in directions its proponents could not have imagined. COAST may yet regret the Pandora’s Box it is opening with this.
- Constitutional documents such as city charters should deal with structural matters of government and general powers and duties, not micro-managing policy. Transportation is a clear and legitimate power of local government everywhere. Even COAST implicitly recognizes this. It certainly does not, for example, demand a voter referendum before any money is spent to fix potholes. It’s trying to use a bazooka to kill a gnat.
- The city of Cincinnati has to start building a differentiated product offering for its urban core in order to attract business and residents. I’m all in favor of low costs and low taxes, but that’s the only program COAST offers. In the case of the city of Cincinnati, with large legacy costs and other associated elements of being the core city, such as higher crime and worse schools than suburban jurisdictions, Cincinnati is structurally a high cost producer. It will never be able to compete in the market solely on costs. Costs are important, but they aren’t the only factor. Perhaps COAST has an alternative strategy to streetcars, but if so, I haven’t heard one. Organizations that exist simply to oppose things without any positive vision of what they want to achieve deserve a skeptical eye.
My view: Vote “No” on Issue 9.
I noted the pro-streetcar people had not gotten the job done on the marketing front. That is starting to change. I’ve seen some better materials of late. I’m not sure if the message is getting out, but the collateral is MUCH better. I’ll put a few videos below to give a sample. Some of these could prove very useful for other cities.
Here’s a brief 30 second spot with reasons to vote against Issue 9:
Here is just a really, really impressive video of various facts about the streetcar proposal. Any city looking to market transit should do something like this:
I’m not sure how effective this one will be, but it is kind of funny:
For those of you who would like to explore the streetcar matter in more detail, here are a couple of additional longer form videos. Note that I do not endorse the entire contents of these videos.