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Tuesday, July 22nd, 2014

Incrementally Transforming Kokomo Without Debt by Eric McAfee

[ Kokomo, Indiana is a small industrial city about an hour north of Indianapolis. It is one of the rare ones whose industry remains largely intact, with two large auto-related plants. This makes them different from the type of community that really has deindustrialized. Yet they fret that those who earn decent incomes in their town too often decide to live in the Indianapolis suburbs. Hence a program to upgrade quality of life in the city. It should be noted that while they've managed to do this without incurring debt, Kokomo arguably benefited more than any city in America outside Detroit from the massive federal auto bailout. Their civic improvements have in a sense been financed by a unique external windfall unavailable to others. Nevertheless, lots of places have received windfalls and spent them poorly. Cities may not be able to control our circumstances, good and bad, but they at least have some control over how they respond to them. This piece from American Dirt takes a look at Kokomo's response. Keep in mind it ran in 2012 and there are likely some anachronisms by now - Aaron. ]

Across the country—but particularly in the heavily industrialized Northeast and Midwest—smaller cities have confronted the grim realities of the unflattering “Rust Belt” moniker, and all of its associated characteristics, with varying degrees of success. With an aging work force, difficulty in retaining college graduates, and a frequently decaying building stock, the challenges they face are formidable. Cites from between 30,000 and 80,000 inhabitants typically boomed due to the exponential growth of a single industry, and, in many cases, the bulwark of that industry left the municipality nearly a half century ago, for a location (possibly international) where the cost of doing business is much cheaper. Essentially, everything the smaller Rust Belt cities had to offer is completely tradable in a globalized market; the resources that provided the town’s life blood are either depleted or are simply to expensive to cultivate further.

Reinvention is the only condition likely to save many of these cities from persistent economic contraction, but, with an overabundance of retirees and older workers, these towns lack the collective civic will that could be expected in larger communities with more diversified economies. An absence of young people intensifies (and, to a certain extent, justifies) the low level of civic investment in one’s own community; after all, if a resident is six months from retirement, how likely is it that he or she would support public investments intended to improve quality of life for twenty or thirty years into the future? For that matter, how likely will a population of retirees remain engaged to encourage or challenge major private sector investments as well?

By no means am I intending to denigrate needs and ambitions of the senior population; I’m merely observing that a stagnant Rust Belt city with this demographic profile will demonstrate vastly different priorities from a city rife with young families. While every Rust Belt city large and small must avoid obsolescence that results from the spoils of globalization, the smaller cities—which have tended to be dominated in the past by a single thriving industry—are less likely to claim alternative sectors and labor pools if their primary manufacturing lifeblood fails. A dying city of 80,000 may not exert the same impact within a region (particularly in the densely populated Midwest and Northeast) that a city of 500,000 would, but it is far more of black eye for the state than a town of 2,000 that has lost its raison d’être. This conclusion is obvious.  Many of these small cities must reordering of their economies comprehensively; while the state, the county, or private foundations may offer some outside help, the constituents of these cities themselves are typically the best equipped to understand how their city should evolve. Unfortunately, many of these communities aren’t yet even aware of the need for this reinvention, let alone which avenue to pursue in order to achieve it.

It is with no small amount of reassurance that I can assert that Kokomo, Indiana is not one of these latter cities.

No Rust Belt complacency on display here in the City of Firsts. Though as recently as 2008 it was on Forbes’ list of America’s Fastest Dying Towns, a recent visit shows much more evidence than I’ve seen of some comparably sized cities in the region that the civic culture is neither resting on its laurels nor wringing its hands about how much better things used to be. In fact, one of the Indianapolis Star’s leading editorialists, Erika Smith, recently visited the city, and, after receiving a tour from the Mayor, was pleasantly surprised by how proactive it has been in implementing precisely the type of quality-of-life initiatives largely perceived as necessary to help a historically blue-collar city stave off a brain drain or descend into irrelevancy.

I, too, recently received the Kokomo tour, followed by a meeting with Mayor Greg Goodnight, and I can also recognize some of the city’s most impressive achievements at shaking off the post-industrial malaise that saddled the city with double-digit unemployment rates as recently as a few years ago. Since then, the city has introduced a trolley system at no charge to users; prior to this initiative, the city had had no mass transit for decades. The Mayor pushed successfully to annex 11 square miles in the town’s periphery, therefore elevating the population by about 10,000 people. The Mayor’s team worked to convert all one-way streets in Kokomo’s downtown to two-ways, recognizing that accommodating high-speed automobile traffic in a pedestrian-oriented environment only detracts from the appeal. The team has restriped several miles of urban streets to incorporate bike lanes, and it has converted a segment of an abandoned rail line into a rail-with-trail path, branding it by linking it to the city’s industrial heritage. They have deflected graffiti from several bridges and buildings through an expansive and growing mural project. They have upgraded the riverfront park with an amphitheatre and recreational path. They have introduced several sculptural installations, the most prominent of which is the KokoMantis, a giant praying mantis made entirely of repurposed metal and funded privately. And my personal favorite: with the support of the City, the school superintendent has integrated a prestigious International Baccalaureate (IB) program to the public school system, including an international exchange program for young men from several foreign countries (a girls’ program should arrive in the next year or two) who live in a recently restored historic structure in Kokomo’s walkable downtown, attending demanding courses that bolster their chances of admittance in a coveted American university. Most impressively, the City of Kokomo has achieved all of this without incurring any public debt in the past year.

Obviously the individuals offering me this tour are going to make sure their Cinderella is fully dressed for the ball, and I recognize that not a small amount of the securing of certain infrastructural projects and transportation enhancement grants requires a political savvy that the current civic leadership has in abundance. And I don’t want to rehash Ms. Smith’s article, which more than effectively chronicles this approach at a macro level. In addition, Erika Smith recognizes, as do I, that very few of these initiatives (the IB foreign exchange program notwithstanding) are really particularly earth-shattering. But when most other similarly sized cities in the Midwest seem to be engaged in a race to the bottom, luring new industry through generous tax breaks (often initiated at the state level), Kokomo seems to recognize that a town lacking any amenities outside of low cost of living has to compete with dozens of other cities in Ohio and Michigan and Pennsylvania, and elsewhere in Indiana, that offer the exact same brand. Whether this investment yields a long-term return remains to be seen, but it certainly demonstrates the right gestures necessary to instill civic stewardship in a place whose decades of job loss have seriously scratched its mirror of self-examination.

What ultimately struck me about Kokomo—which Erika Smith only touched upon—was the level of design sophistication evident in some of these civic projects. I need only focus on a single location in the city, in which two particularly laudatory techniques are on display. At the intersection of Markland Avenue and Main Street, just south of downtown, the Industrial Heritage Trail begins its journey southward. Here’s a view as the trail terminates at its junction with those two streets, looking northwestward:

Here is a view in the other direction:

Continuing a bit further in this direction, one encounters this painted wall:

And, pivoting slightly to the left, another mural that is still in progress:

This photo series identifies two amenities that stand out for the astute decision-making that apparently took place during the implementation. The Industrial Heritage Trail clearly operates in a railway corridor, but it is not a rail-trail. Unlike the more common rail-trail conversion, this Kokomo trail did not incorporate the removal of the original rail infrastructure. The Rails to Trails Conservancy would label this approach a rail-with-trail, indicating that the trail shares the railway easement, typically separated by fencing. Rail-trails such as the Monon Trail in metro Indianapolis are still the more common practice. However, a growing number of communities are embracing rail-with-trails, not only because they obviate the need for costly removal of rails, ties, and ballast, but they reserve the rail infrastructure for the possibility that a railroad company may reactivate the line in the future. If the sponsors of Kokomo’s Industrial Heritage Trail had removed the infrastructure, the possibility of ever reintroducing rail along the corridor would be virtually nil. As it stands, the only conceivable disadvantage to rail-with-trails is that, in the event a rail company reintroduces train service, its close proximity to the path may prove hazardous to bicyclists or pedestrians. Otherwise, the decision to retain the railway not only helped to diversify options, it most likely saved a considerable amount of money.

The other smart decision was the site selection for those murals. The ones featured in the photos above are part of a growing mural campaign that the City of Kokomo introduced, and every one that I recall shows real foresight in the locational decisions. What makes them so good? The murals in the photos above front a public right-of-way, minimizing if not completely precluding the chance that later development will conceal them. I blogged a few years ago about an excellent mural in Indianapolis that showed wonderful care and craft in the entire implementation process…except where the conceivers chose to locate it. Not only did they paint on a cheap, cinder-block building that will likely tumble down if market pressures encourage new development in the neighborhood, but the mural also faces a vacant lot which is large enough to host a new structure that would block it completely, no doubt frustrating the community and pitting them against a developer.

Compare this to Kokomo’s murals. Here’s one a little further south on the Industrial Heritage Trail:

Again, it fronts the trail itself—not a chance that a developer will try to block it. And here’s another along a bridge underpass for the recently completed trail along the Wildcat Creek:

The original intention of the mural was to repel vandals at spot that previously suffered from it frequently; this approach has proven successful in locations across the country.  But it also sits in a park along a new greenway, so it should remain in perpetuity. Granted, Indianapolis has plenty of murals along retaining walls and buildings that front the aforementioned Monon Trail. Those, too, should survive far into the future. But in recent years, the City of Indianapolis has encouraged countless murals on the side walls of commercial buildings—sites where a blank wall faces a parking lot, where a building once stood. While these bare walls often scream for some ornamentation to help distract from what used to be there (another adjoining building), in many instances the parking lots will likely fall under increasing development pressure in upcoming years. Will the locals thwart development in order to save the mural? This remains to be seen, and I don’t want to base too much of an analysis on speculation. But it’s hard to deny that these public art investments seem less astute than the once I witnessed in Kokomo.

One could argue that Kokomo is merely taking advantage of the fact that it is jumping into the game relatively late; it benefits by learning from the mistakes of others. But decisions that stand the test of time also contribute their fair share to foster civic goodwill. Taxpayers are rarely too forgiving of poorly conceived projects, and several successive blunders, no matter how small they may be, demonstrate poor accountability. Only time will determine the return on investment, but Kokomo certainly has a leg up on many of its competing small cities. My suspicion is, if these projects stimulate the discussion and enthusiasm for proactive leadership that they suggest (Mayor Goodnight was re-elected last year by a landslide), the citizens of Kokomo are only beginning to stoke the fire.

This post originally ran in American Dirt on November 16, 2012.

Thursday, June 12th, 2014

Will the World’s Emerging Megacities Turn the Corner?

My latest post is online over at New Geography and is called “Will the World’s Emerging Megacities Turn the Corner?” There’s an explosion of megacities happening around the world, often in developing countries. These cities face huge infrastructure issues, social issues, poverty and slums, etc. The question is whether they will ever achieve escape velocity from that. I don’t think so. Here’s an excerpt:

Most emerging megacities likely will never turn the corner to developed status and achieve a decent standard of living and quality of life for their residents. They may be important national centers of aspiration, but most of them will never become influential global cities. Their huge size and vast problems will leave them with perpetual entrenched poverty, poor infrastructure and public services, and low quality of life by global standards.

The general rule seems to be that a megacity can only escape pervasive dysfunction if they are a major city in a country that is the world’s current rising economic (or historically imperial) power.
….
In the second edition of Peter Hall’s landmark book The World Cities, he describes a 1970s Tokyo in which the night soil pickup industry was alive and well. Only in an era of national economic hyper growth – culminating in the 1980s – was Japan able to fully modernize its urban infrastructure and clean up the massive environmental problems resulting from its rapid industrialization and urbanization. This was the time when Japan seemed destined to become the world’s leading economic power, and America was fretting as Japanese investors bought trophy assets ranging from Columbia Pictures to Rockefeller Center.

We are witnessing the same today in China. It’s no accident that cities like Beijing and Shanghai are becoming fully modernized at the same time that China is the world’s rising economic power. Even there, serious problems with social integration, pollution, and low quality development remain. China had best hope its economic growth continues until such time as it’s rich enough to solve those problems too.

Sunday, January 19th, 2014

Replay: Is College Worth It?

This post originally appeared on October 22, 2012 at New Geography.

Is college worth it? The question almost seems ludicrous on its face. The unemployment rate for people with a college degree is only 4.2% versus 9.1% for people without a college degree and 13.0% for people with less than a high school education. In this economy, that should be an open and shut case.

Yet in an uncertain world, many are questioning the value of college. There’s significant talk of a “higher education bubble.” Skyrocketing tuition rates and the correspondingly high levels of student debt has driven a lot of this. Tuition has been rising at a much faster rate than inflation overall. Total student loan debt is now at $1 trillion. And unlike other forms of debt, student loans can’t be easily discharged in bankruptcy.

In many ways college finance does mirror the housing bubble. You’ve got an asset everyone believes will only go up in value, a multi-party transaction, a situation where the seller of the product (the college) gets their money up front and so is indifferent to the student’s ability to repay, third parties insured against loss by the federal government, a non-transparent market where each student is in effect charged a unique price, young and unsophisticated consumers who are told they “have to get” a college degree, financial products without any income requirements, and even worse the asset (a degree) doesn’t have a secondary market.

All of these factors create a situation ripe for exploitation and abuse. Indeed, it isn’t hard to see that the massive increases in tuition cost are heavily driven by the ability of students to get huge loans with few questions asked. And as with the housing crisis, outright fraud by educational institutions is likely more widespread than commonly believed. The University of Illinois law school falsified its admissions data, for example, by inflating its students LSAT scores. The “cockroach theory” (if you see one, there’s probably a lot more you don’t see) suggests that this type of behavior is probably rampant.

Students and their parents are starting to wise up to the game, and the amount of student loan debt they think appropriate is plummeting. For example, in 2011 only 21% of people felt $20,000 in college debt was too much. Just a year later that percentage increased to 42%. In 2008, 81% of adults thought a college degree was a good investment. In 2012 that had dropped to 57%. That’s a stunning decline in the number of people who think college is worthwhile, though it might suggest that the problem is less with the value of a degree itself than in how much is paid for it. But there are anecdotes to suggest that some feel college (especially graduate school) isn’t worth what it used to be.

Why is that? In part it is surely the economy. Though degreed adults as a whole have lower unemployment, youth unemployment and probably more important underemployment remains high for college grads. A shocking 53% of recent graduates are jobless or underemployed. This has fed through into popular culture, with student loan debt relief being part of the grab bag of demands made by the various “Occupy” movements. When you graduate from college with huge, non-dischargeable debts, and you can’t find a job, particularly in your chosen field, you no doubt complain loudly about this to your friends.

But there’s also good reason to believe college is worth less today in many cases. Back in the 1980s and 90s the value of college was clear. Manufacturing was in decline. If you didn’t have a degree, you would probably struggle. In contrast, a college degree was like a golden ticket to success.

Today, in the age of globalization, it’s not so simple. Those without degrees are still hurting, but so are plenty of people with degrees. The emerging new separation is not between those with degrees and without, but those in jobs that are subject to international competition (tradeable) vs. those that aren’t (non-tradeable). High skill, white collar workers like computer programmers suddenly found themselves in competition with much lower paid people in places like India. This upended that entire job market. Today you might be better off as an ironworker or welder whose job has to be done on site than as an accounting manager whose entire department can be sent to the Philippines. A college degree is no longer a guaranteed passport to prosperity.

Also, today’s technology driven world is changing so rapidly that skills learned in college can prove obsolete by graduation. At the same time, open source frameworks and cloud computing have dropped the cost of starting a tech business to almost literally zero. In the dot com era, it took millions of dollars to buy servers and database licenses if you wanted to start a company. Today anybody can start a technology business in his bedroom.

So if you’ve got a good idea, why wait around for graduation to get started? The role models here are Bill Gates and Mark Zuckerberg, who dropped out of Harvard but both got rich starting companies. This dropping out of college to start companies is actively being encouraged by some folks like Peter Thiel, who is actually paying people to do it.

What these modern day Timothy Learys overlook is what Bill Gates and Mark Zuckerberg already had in common. Namely, they had already gotten in to Harvard. If you make it to Harvard, you already probably come from a privileged background. Thus you’ve got a family safety net in place if things go south. Those from working class backgrounds aren’t so lucky. Indeed, I’m struck that many suggesting that college isn’t the answer are presently in upper-middle class or better situations.

For a limited number of people, dropping out of or skipping school to start a business might make sense. But trend setters may manage to convince a significant numbers of kids from marginal backgrounds to forgo the college education —perhaps in a needed skill — that would provide necessary credentials and culturally acclimate them to the new economy world. Many of those kids don’t have a family cushion to fall back on. For them, turn on, tune in, drop out is not the answer.

The real answer isn’t to skip education, but to be more judicious about the decisions being made. Racking up large amounts of debt probably isn’t the right answer. The marketing promises of especially for-profit colleges should be heavily discounted. For some, getting education through going into a skilled trade may be a good choice. College majors that don’t deliver skills in demand in the marketplace or that aren’t considered valuable credentials by employers ought to be scrutinized. But getting an education remains one of the single best decisions any person can make.

Tuesday, November 26th, 2013

Chicago: Gentrification Comes to the Neighborhood School by Daniel Hertz

[ You may remember Daniel Hertz from his mind-blowing analysis of growing public safety inequality in Chicago. He's back with another one, this time a look at how gentrification is affecting the performance of Chicago's neighborhood schools. It's probably relevant to any city that's experiencing gentrification. This one comes from a newish web site called Chicago Bureau, which focuses on youth issues - Aaron. ]

To be on track for college, an elementary student needs to “exceed standards” on the ISAT, according to the University of Chicago Consortium on School Research. In 2001, there were only three neighborhood elementary schools in the entire city with a quarter or more students doing that well.

As a result, for a certain kind of parent, there were only two options for educating a child: getting him into one of the city’s flagship magnets, or moving to the suburbs. That put a lot of pressure on magnets and other test-in schools: like the Daley Sr.-era condo towers that still line North Lake Shore Drive, they had to rise above the rest of the city and offer the people who could afford to move to Evanston or DuPage County some reason not to.

But just like there’s only so much lakefront, there were only so many seats in those magnet schools. And over the last 10 years, as downtown and North Side neighborhoods gentrified, the number of parents trying to seat their children in one of those schools has turned what was always a competitive process into a frenzy. Last year, about half the freshmen admitted to Whitney Young, Northside College Prep and Walter Payton had near-perfect test scores and straight-A report cards. And the crunch is too big to be solved by expansions like the one Mayor Rahm Emanuel recently announced for Payton and Coonley Elementary.

Just as the magnet system began to overcrowd, though, neighborhood elementary schools suddenly began making a turnaround. Some of them, anyway. By 2013, those three “high-achieving” schools had become 15. That’s a 400 percent increase over 12 years — and lots of other neighborhood elementary schools were on track to get there soon.

Gentrification ISAT 2001 2013

Unsurprisingly, though, CPS’s new high-scoring schools weren’t distributed all over the city. Instead, progress was contained to the same neighborhoods that had seen the greatest gentrification over the previous 10 or 20 years, or which were already solidly middle-class. As a result, the average high-performing school’s student body in 2013 was only 20 percent low-income, compared to 85 percent for CPS as a whole.

In some cases, the new high-achieving schools had had large middle-class populations from the start and their scores just gradually ticked up. But about half of them saw dramatic demographic transformations. Lakeview’s Blaine Elementary, for example, saw its low-income population fall by 29 percent since 2010. At the same time, the proportion of its students exceeding ISAT standards has jumped by 25 percent. At Audubon Elementary, less than a mile to the west, the number of low-income students dropped 28 percent while ISAT exceed scores have jumped 53 percent over the same four years.

Another eight schools that don’t yet meet the “high-achieving” threshold are also rapidly gentrifying, losing an average of 20 percent of their low-income population over the last four years and doubling their exceed scores.

At the elementary level, then, professional-class families in some parts of Chicago have solved the magnet problem. They don’t have to decamp to the suburbs: they can bring suburban demographics to the city just by sending their kids to their neighborhood CPS school.

Gentrification ISAT grades change

And despite all the fuss over teacher accountability, charter schools and innovative curricula, the fact remains that in America, economic background is the single best predictor of a child’s academic success.

Which leaves the city…where? After decades of losing thousands upon thousands of middle-class families thanks to a struggling educational system, it must be good news for that process to be finally reversing itself. A city without a middle class isn’t going anywhere good; the tax receipts alone are cause for celebration, given the state of Chicago’s budget.

A school system without a middle class is also in big trouble, of course. So it’s heartening to see the beginnings, perhaps, of a decline in the kind of economic segregation that led to 87% of CPS students being low-income in the first place.

But if the number of low-income kids in our newly high-achieving schools keeps plummeting, not many of them will be in a position to benefit from the very transformation that’s pushing them out. After all, how many low-income families can afford a decent place to live within the attendance boundaries of neighborhood schools in Lincoln Park or Lakeview?

For a long time, the egalitarian promise of public education was frustrated by families with wealth fleeing the city for suburban school districts, leaving CPS with a heavy burden of poverty in all but a few elite test-in schools.

Gentrification ISAT - low-income

That dynamic seems to be changing, so that now a greater and greater number of middle-class families are choosing to send their kids to local elementary schools. But if we’re just moving the lines that divide the children who receive a good education from those who don’t—from district boundaries to CPS attendance boundaries—it would be hard to call that significant progress.

There is, though, a difference. The city of Chicago, and the leadership at CPS, have absolutely no power over any of the wealthier districts that surround them. But they can try to shape what happens entirely within their borders. The question of how to mitigate economic segregation in the city’s schools, so that all children have a chance at a decent education—without scaring the middle class back to the suburbs and starting again at square one—will be, I think, one of the greatest challenges our school system will face for the next generation.

Gentrification ISAT - High-Achieving Schools

Gentrification ISAT - Gentrifying Schools Pull Away

This post originally appeared at Chicago Bureau on November 5, 2013.

Sunday, July 7th, 2013

Replay: The End of the Road for Eds and Meds

This post originally appeared in New Geography on September 12, 2012.

In the last few decades, as suburbanization and deindustrialization devastated so many cities, they turned to two sectors that seemed not only immune to decline, but were actually growing: universities and hospitals. The so-called “eds and meds” sectors, often related through university affiliated hospitals, became a great stabilizer for many places. For example, the fabled Cleveland Clinic cushioned the blow of manufacturing decline in that city. Après steel, a city like Pittsburgh practically saw itself as defined by an eds and meds economy, with the new economic pillars being the University of Pittsburgh Medical Center and Carnegie-Mellon University.

Perhaps unsurprisingly, these sectors have come to dominate so many cites’ economic development strategies. It’s harder to find a major city that isn’t touting some variation of a life sciences “cluster” as a strategic industry than one who is, and local medical schools and hospital complexes feature prominently in this. Similarly, technology transfer from schools is supposed to power startups, while in many cities growth in the number of students itself is supposed to be an engine of growth. For example, there are 65,000 students in the so-called “Loop U” collection of colleges in downtown Chicago, and education growth has been a bulwark of the Loop economy.

Yet in reality, overreliance on eds and meds is problematic. Firstly, these tend to be non-profit, and thus reduce the tax base in cities that are dependent on them. In danger of bankruptcy, Providence, Rhode Island was forced to ask for special contributions from Brown University and RISD, for example. Also, as quasi-public sector type entities, eds and meds are seldom a source to dynamism in communities in and of themselves. Indeed, universities are among the most conservative of institutions in many respects. Witness the firing and re-hiring of University of Virginia president Teresa Sullivan, for example, or faculty protests against the appointment of Indiana Governor Mitch Daniels as Purdue University’s next president due to his lack of an academic background.

But for cities hanging their hat on eds and meds growth, a more fundamental problem now looms: these industries are at the end of their growth cycle. Spending on healthcare and college tuition costs has been skyrocketing at rates greater than inflation for years. Here’s a chart, via Atlantic Cities, showing job creation by sector since 1939:

 

If eds and meds employment has been going up continuously since 1939, what’s the problem? None, so long as it started from a low base at a time when other productive sectors of the economy were likewise growing strongly. But as sectors like manufacturing went into decline or stagnated, eds and meds has continued to increase relentlessly, accounting for an ever larger portion of total growth. For example, between 1990 and 2008, eds, meds, and government accounted for about 50% of all national job growth.

Unsurprisingly, with growth in jobs exploding, costs have followed. Medical costs and tuition have been growing at twice the rate of inflation, and at an increasingly divergent rate, as this chart from Carpe Diem shows:

Clearly, such a trend cannot go on indefinitely. As the US starts to groan under the weight of spending on health care and higher education, it’s clear that, as a society, we need to be spend less, not more on these items as a share of national output. Some cities with unique strengths, like Boston, with its many specialized biotech firms, or Houston, with the world’s largest medical center, may thrive in this environment, but the vast majority of cities are likely to be very disappointed in where eds and meds growth will take them.

The problem with health care is most obvious. Aggregate spending on health care has been exceeding the inflation rate for many years. According to a report by McKinsey, spending on health care has consistently grown faster than GDP:

 

The net result is a sector that has been consuming an increasing portion of the national economy. Health care spending is projected to consume fully 20% of the entire US economy by 2021.

The health care reform act will do little to nothing to rein in this cost. It’s difficult to see how in fact the trend will slow. But with the federal government (especially through Medicare) accounting for more and more total health care coverage, $16 trillion in national debt, and large deficits and unfunded entitlements, one can safely assume that whatever can’t go on forever, won’t. Eventually the government will be forced to take action to stabilize health care spending.

If the health care cost crisis has long been known, the public is just waking up to the crisis in higher education costs. Skyrocketing tuition has driven the cost of many colleges through the roof. This traditionally didn’t bother students, who were assured that a college education the key to a good job that would easily allow loans to be repaid. In a global age where even knowledge economy jobs are subject to offshore competition, and a recession that’s kept many young people — including many now deeply in debt — unemployed or underemployed. There is now about $1 trillion of it outstanding, much of it non-dischargeable in bankruptcy:


This student loan spike was created by many of the same dubious forces that led to the housing crisis. Indeed, some have said that student loans are the next subprime crisis, and commentators like Glenn Reynolds talk of a higher education “bubble”.

The overall economy will come back at some point, but it’s clear that America is reaching the point at which it can no longer pile more debt onto the backs of students. This by itself will serve to moderate tuition increases at most institutions. There is also a significant amount of reform the current system obviously needs that, if implemented, would also tend to moderate tuition increases. For example, it doesn’t seem unreasonable to suggest that colleges ought to have some skin in the game for these loans being repaid. Or that cheaper online education might substitute for physical classrooms in some cases.

Regardless of how it plays out, when you look at spending in aggregate in America, it’s clear increases in health care and higher education spending cannot keep increasing at current rates. This means that it just isn’t possible for all the cities out there dreaming of eds and meds glory to realize their dream. America simply can’t afford it.

Whether the end of the great growth phase in eds and meds comes 1, 5, or 10 years from now can’t be predicted. But come in the reasonably near future it will, and that’s when the bulk of the cities that put all their chips in those baskets will receive a very rude awakening.

Thursday, May 2nd, 2013

The Gilded City

Politically left magazine The Nation just published a special issue devoted to New York City called “The Gilded City – Bloomberg’s New York.” As you can guess from the title, they aren’t necessarily great fans. There are a ton of articles and perspectives in there that are worth reading no matter what your take on Bloomberg or New York (or left wing politics for that matter). Here are some samples.

What Happened to Working Class New York? “But scratch a little and things do not look so good. During the recession, the city had big job losses in relatively well-paid sectors, including government, construction, manufacturing, finance and insurance, and wholesale trade. The biggest gains since then have been in low-paid industries: restaurants, retail trade and home healthcare. Between July 2008 and July 2012, New York City had a net loss of nearly 60,000 jobs paying $45,000 a year or more, while gaining more than 130,000 jobs paying less than $45,000 [see chart, page 18]. The changing mix contributed to a nearly 8 percent drop in real median wage earnings between 2008 and 2011. An analysis by Hofstra University economists Gregory DeFreitas and Bhaswati Sengupta suggests that many newly created jobs have gone to commuters, exacerbating the difficulty city dwellers face in getting good jobs. For residents of the five boroughs, the official unemployment rate in February was 9.1 percent, well over the national level of 7.7 percent. Though New York is festooned with displays of luxury, its median household income is below the national median and falling. In 2011, 21 percent of New Yorkers lived in poverty, compared with 16 percent nationally.”

The Legacy of the 1970′s Fiscal Crisis. “Today, the fiscal crisis in New York may seem a distant memory, like the graffiti-covered subway cars of the era or the fires that once blazed through Bushwick, a neighborhood now dotted with artisanal chocolate shops and pizza places that win raves from The New York Times. But the diminished expectations we have for the public sector and the increasing difficulty of living a middle-class life in the city suggest the legacy of the fiscal crisis even now. City governments today—including New York’s—seem primarily to be vehicles to attract and maintain private investment. Business improvement districts and public-private partnerships involve companies directly in paying for the services they receive, while the city sweeps away community challenges to business-oriented development. This is supposed to lead to improved services for all; yet over the same years that have seen the rise of this business culture in city government, New York has become the most unequal city in the country—the gulf between rich and poor widening in ways that would have been hard to imagine even in the early ’70s.”

The Education of Michael Bloomberg. “The notion that there had been a great improvement in the public schools, leading to sharp increases in achievement among minority children—the majority of the city’s public school students—was echoed in the mainstream media. It helped Bloomberg retain mayoral control of the public schools, which the state legislature had granted him shortly after his election in 2002, and to win a third term in 2009 (a campaign in which he spent a record $108 million). Unfortunately, his claims of closing the achievement gap proved misleading. On the reliable national assessment known as the NAEP, there had been no significant increase in scores or narrowing of the gap since 2003, when the mayor’s policies were first imposed. In 2010, the state Education Department finally admitted what observers had long suspected: that the state exams had become overly predictable and that scoring well had grown easier over time.”

Dreams Built and Broken: On Ada Louise Huxtable. “The role of the critic is to tangle with reality—its politics, players, construction, destruction—to remain skeptical but not cynical, to have strong opinions but be open to being wrong. The reason Huxtable’s criticism continues to resonate is that she never let her opinions grow stale. One can disagree with her conclusions, but rarely with her identification of the central question. As history brought highlights (Lever House) and lowlights (Lincoln Center) back around, she gave them, as with the Barnes, more than a second glance. Huxtable ended her Beaux-Arts essay looking out her window across 42nd Street: ‘I raise my eyes for an architecture-break in a city that is as heartbreaking in its beauty as it is in its poverty and decay. It is still a city of dreams—promised, built, and broken.’”

Sunday, April 14th, 2013

NYU’s Marron Center and the School of the City

Camus said that the ultimate question of philosophy is: Why not kill yourself? For urban studies, that question might be: Why start yet another urban studies institute? This is certainly top of mind as New York University trumpeted a $40 million gift from Donald Marron to form and endow the Marron Institute on Cities in the Urban Environment.

In part, as Marron Institute Director Revesz notes, it is to bring order to the large number of other urban oriented or related institutes already at NYU, saying, “The Marron Institute isn’t just another center to add to the mix—it isn’t a competitor, it is a convener for these centers. What we have found is that the University’s scholars and centers often work in disciplinary silos and haven’t always taken advantage of important synergies we know are there. The Marron Institute is a unique effort to solve that problem. Our University-wide vantage point allows us to connect and support existing research from the Medical School to the Law School, the social sciences to the data sciences and everything in between.”

While the research agenda of the Marron Institute isn’t yet finalized, one idea that has been put forward comes from Paul Romer, NYU Professor of Economics, Director of the Urbanization Project at the NYU Stern Business School, an affiliated scholar at the Marron Institute. It’s called the “city as unit of analysis.” The idea is that as the factory as unit of analysis birthed chemical engineering and the firm as unit of analysis birthed the business school, examining the city as unit of analysis potentially opens to the door to the birth of an entirely new academic discipline spawning out of work in a variety of current ones.

As we sweep into a time of increasing urbanization globally, he believes the time is ripe for this field of study to emerge into its own. “It’s no surprise chemical engineering developed when it did,” notes Romer. “It was when we were building a lot of chemical plants.” Similarly, as we are building, rapidly expanding, and radically transforming the cities of the world, there’s potentially demand for a new discipline of the city.

In 1910 only 10% of the world’s population was urban. By 2050 nearly 75% of the world’s population will be urban. We are undergoing perhaps the most profound demographic shift in the history of mankind, going from, as Romer puts it, “living like packs of wolves to living more like ants or termites.” This is a shift that will be largely completed during the next century.

Supposing this new discipline did emerge, what would that mean practically? It’s too early to say, but Romer offers a couple of potential examples rooted in how abstractions could be applied to the city from other disciplines. For example, startups are important to the overall health of an industry. So could “startup” cities play a similar role in the urban landscape? A recent, though failed, proposal for so called “charter cities” (in the manner of charter schools) in Honduras shows how this might possibly play out in real life. The failure of this proposal isn’t even necessarily a knock against it, as there is a high expected failure rate for startups.

Another application is potentially applying business bankruptcy concepts to city. Corporate bankruptcies not only restructure debts, they ensure assets are allocated productively. But municipal bankruptcy today is almost entirely about paying what is owed. “How can we make sure that civic assets end up used more efficiently in municipal bankruptcy?” Romer asks.

Romer would like to see the study of cities develop into a recognized academic discipline, a “School of the City” perhaps, analogous to the “School of Business.” He thinks there’s potential for the Marron Institute to evolve into such a degree granting institution.

Director Revesz is carefully non-committal on this point, saying only, “We know that the study of cities will be central to the planet’s future, and NYU is poised to be a global leader in the field. We are working with faculty from across the University to think through a range of new approaches to teaching about cities. I’m not sure yet what shape that will take. But I do know that it will not follow the path of traditional urban studies program, which typically study one facet of the urban ecosystem while failing to understand the whole urban environment.”

Given the formation of a new institute and announcement of a $40 million grant to back it, it’s somewhat odd that they don’t yet have a more firmly developed concept of what is they actually want to accomplish.

However, with its prime location in Manhattan making it possibly the world’s ultimate urban university, NYU would seem to be in a nearly ideal place geographically to study the city. This is particularly true since the Marron Institute plans to integrate NYU’s global network universities in places like Shanghai and Abu Dhabi to ensure a global perspective. There is also already a ton of urban oriented work being done at NYU through the various institutes that are already up and running there.

So while ultimately the jury is still out on whether or not they can answer the ultimate question of urban studies compellingly, the field is certainly wide open enough for the Marron Institute to stake their claim.

Tuesday, April 9th, 2013

How to Reinvent a City in a Way That Is Embraced by a City by Rod Stevens

Two recent columns on the Urbanophile, one by Angie Schmitt called “A Culture of Corruption” and another by Aaron called “Do Cities Really Want Economic Development?” discuss how the forces of the status quo fight change. But sometimes you can create a new strategy for a place, based on its values, that will better embrace those values than what is happening now. This takes visionary leadership, as well as a “small is beautiful” approach to change as something that happens in the moment.

The Politics of Identity

In Detroit, the main problem is that local people are now being told that they are no longer Motown. This is a hard thing after being the center of the universe for cars for the last 100 years. How humiliating that Chrysler is now owned by Fiat, by old stereotypes an Italian maker of small under-powered cars. That’s why the Chevy Volt was so important when the feds took over GM take-over story: the government might be running things, but at least this new vehicle offered hope of a future in the limelight again.

In Port Townsend, WA, on the northwest corner of Puget Sound, there’s another identity play going on, this one to provide place-based education around maritime themes. Port Townsend is a small town of less than 10,000 people, but it is the wooden boat building capital of the United States. This is where people truck their old yachts to be restored, or refit work boats that go up to the fishery at Bristol Bay . The new schools superintendent talks of “making the city the classroom”, with the community, its surroundings and all things maritime as the subject of study. There is already a program there now, in operation for about ten years, in which seventh graders go down to the waterfront to learn rowing, and into shops at the maritime center where they learn geometry and measurement while building boats.

Now the superintendent wants to expand this program, pushing maritime subjects into every grade and class. Imagine biology students putting on rubber boots and going out on the tide flats to measure how the pH of the water is affecting oyster production, or third graders hiking up over the headlands of the old fort to look out at the lighthouse where the wind, waves and currents of Puget Sound collide. The key word here is “relevance”, of studying things that kids are already familiar with day to day, the beaches and boats they play on, the work stories they hear from their parents and grandparents at the dinner table. This isn’t learning in the abstract, some subject or formula they may or may not use later, but learning up close and personal, with things they can see, hear, touch and know. Imagine a town in western Pennsylvania saying that it wanted to make the study of steel, coal, rock, geology and making things part of its curriculum. If this had been done 25 or 30 years ago, with modern hands-on teaching, perhaps more of those towns would still have core industries in those fields, no longer giant, but perhaps re-oriented to niche markets, with highly trained workers who spoke “steel” or “glass” in their business conversations. In Port Townsend, they still speak “boat” there.

Visionary Leadership

I haven’t met many charismatic leaders in my career, maybe two or three, but this new superintendent is one of them. He speaks in a low-key way that is the exact opposite of the bellicose corporate leaders who sound like high school coaches yelling at the football team. This guy is a former art teacher who still keeps colored pencils in a box in the center of his conference table, but he has a track record of success, both starting up a high school maritime academy in Seattle, and a Chinese language program in northern Nebraska.

More importantly, when he speaks, people listen. He uses techniques outlined by Stephen Denning in “The Leader’s Guide to Storytelling”, techniques like keeping the future stories simple so listeners put themselves in the hero’s role, and think about what they can do to make things happen.

Every hero story involves some kind of Joseph Campbell challenge, and in Port Townsend that challenge is keeping the kids from moving away, the same kind of Pied Piper challenge that so many Rust Belt cities face. Forty years ago this was a counter-culture place young people fled to, a back-water place with cheap housing, a strong sense of community, and a boatyard where they could buy and fix up old boats. Today retirees who have “discovered” Port Townsend have driving up housing prices, and there are not enough good jobs for young people.

That’s where the school superintendent’s vision comes in. For some years the community has had a vision of converting nearby Fort Worden as a “learning center” for adults, and now this new vision extends this down to their own children, putting the city on the map internationally as a place that does K-12 education differently, mixing and matching local institutions together to create “seamless” learning across ages. Part of the goal here is not just to make traditional topics more interesting and relevant, but to create a different world view about how kids can educate themselves and involve themselves in the world. The traditional, conveyor-belt model has kids taking STEM and AP classes in high school, getting an engineering or science or business major in college and then going out into the world, sometime in their early to mid 20s, to interview for a job. The vision in Port Townsend is not only to give kids and adults skills that they can use now, in their own community, but to get them to look around that community for unmet needs and, by age 15, to be thinking about how they can use their own skills to meet these and create a livelihood for themselves. There’s a fundamental shift in this educational outlook, one that kids are not simply charges to be brought up to state standards, but assets to the community, to be prepared for membership in it and contributions to it.

Small is Beautiful

In Washington State, there is no more powerful political group than the teachers’ unions, which fought the idea of charter schools tooth and nail. This may be home to Boeing, Microsoft and Amazon, but most of the young engineers here come from places like Michigan, not the state’s own schools.

That’s why it will take all of the new superintendent’s leadership skills to really make this vision a reality. The first changes have to be non-threatening, incremental programs that do not directly threaten the status quo. How do you do this? With programs that create small and immediate successes. One of these is expanding the partnership with the maritime center to include youth use of its pilot house simulator. That simulator also caused one of the country’s oldest training schools for professional mariners to open a branch operation here. That company was drawn in no small part by the vision of this place as a learning center for all things maritime, and shared use of that facility with youth.

In putting this new strategy forth to the community, both for K-12 education and as a broader economic development strategy, it is important to embrace the values of the community. Some, especially older workers in “heritage trades” like wooden boat building, might say that the community should only encourage the growth of jobs that involve hand crafts, Williamsburg-like preservation trades. In fact, though, the real heritage here is the tradition of craftsmanship and veneration for things well-made, especially those that relate to salt water. The value, then becomes quality, not how or what tools are involved in making something, but of what standard it is made to, and to what use it is put. In Port Townsend’s case, this opens the way to a whole new generation of craft manufacturing, of making things for maritime use out of new materials and with new methods like computer-aided design and manufacturing. We are already seeing a boom in this in places like West Berkeley, South San Francisco, East Cambridge and Brooklyn. It is ironic that these old counter-culture places, the places that people fled to find themselves, have become centers of business change. Why? Maybe it’s because their people now know what they love and value (including their children and grandchildren!), and are not willing to let the status quo get in the way of holding on to them.

Rod Stevens is a business development consultant on Bainbridge Island WA, specializing in urban ventures.

Tuesday, February 5th, 2013

Hail Columbia! Welcome to America’s New Second City

My latest article from the Winter edition of City Journal is now available online. Called “Hail, Columbia!,” it makes the argument that Washington, DC is not just an economic boomtown, but is emerging as nothing less than America’s new Second City. This is for three key reasons:

1. Washington has developed a unique prosperity in the modern economy that goes well beyond its traditional recession-proof nature. Cities like Dallas boast “horizontal” success in adding people and jobs. Places like San Francisco boast of “vertical” success in raising per capita GDP and income. But Washington alone among big cities combines the stunning wealth and productivity of a New York with the volumetric growth of a Houston. It is a city simply without peer in America.

2. The scale of Washington now enables it to play with the big boys. In 2000, Chicago’s economy was about 50% bigger than Washington’s. Now it is only 25% bigger. Washington has more people with graduate degrees than Chicago and is on the verge of passing Los Angeles. At current growth rates, the combined Washington-Baltimore region will pass the 10 million population threshold in about 15 years to join the ranks of the world’s megacities.

3. Washington’s wealth extraction model has evolved from simply profiting from federal spending to a form of economic hegemony based on the regulatory superstate. The region may actually take a blow in the near term from fiscal retrenchment at the federal level, but the increasingly intrusive, fine grained control of the federal government over every aspect of American life ensures that the country will continue to pay tribute to Washington no matter what, and means you basically have to play in Washington to make it as an industry in America today.

There’s a lot more in there too, including the stunning transformation of the District of Columbia itself and the totally unexpected emergence of Washington as a global city. Please read the whole thing for yourself. It’s exciting or depressing depending on your point of view.

Wednesday, January 30th, 2013

Reinventing Metro Providence

I was very pleased this week to be a guest on Ted Nesi’s “Executive Suite” talk show on WPRI-TV in Providence. We spent about half an hour talking about the challenges and opportunities facing the region. Here’s the show, without commercial interruption even. We cover a lot of ground, and I think much of the thinking is relevant to many other cities. If the video doesn’t display for you, click here.

A big point I made was the need to think metro, not Rhode Island. But gosh darnit didn’t I go and talk Rhode Island myself for most of the rest of the piece? I think it just goes to show how difficult it is even for the diligent newcomer to maintain a perspective that’s different from the one that’s basically in the air he breathes.

The Urban State of Mind: Meditations on the City is the first Urbanophile e-book, featuring provocative essays on the key issues facing our cities, including innovation, talent attraction and brain drain, global soft power, sustainability, economic development, and localism. Included are 28 carefully curated essays out of nearly 1,200 posts in the first seven years of the Urbanophile, plus 9 original pieces. It's great for anyone who cares about our cities.

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