Wednesday, July 16th, 2014
NYU Economist Paul Romer gave a great talk at last month’s New Cities conference in Dallas. Called “Urbanization as Opportunity,” it’s now online and I’ll embed below. The first 2-3 minutes are warm up then it really gets going. Great stuff around crime, public space, etc. If the embed doesn’t display for you, watch on You Tube.
There are large number of additional New Cities videos online should you wish to browse them.
Sunday, July 13th, 2014
Justin Katz, writing at a web site called the Ocean State Current that appears to be published by a libertarian think tank in the state, is unhappy with my proposals. In fact, he’s giving a point by point rebuttal to my six part toolkit, which you can read here, here, here, here, here and here. I think it’s fair to say he thinks Rhode Island needs much more radical change than I prescribe, and can’t rely on a gradual approach among many other complaints.
Right or wrong, here is my thesis. A free market agenda along the lines of a Tennessee or Texas is dead on a arrival in Rhode Island. It’s simply not possible to pass. Among other reasons, this is because the people of Rhode Island by and large have some degree of progressive orientation. That’s very different from say Indiana, where every other person you meet on the street has Tea Party sympathies, and it takes a lot of police possibilities off the table. I also believe that most progressives in Rhode Island genuinely want to see a better economy in the state. Hence my pitch is aimed at providing analysis and policy recommendations that might have a chance at appealing to the Rhode Island electorate, and thus have some hope of getting implemented or affecting how people think about the issues. If Katz & Co. prefer a different approach, I’m all in favor of the marketplace of ideas.
By the way, even if you go on Atkins or some other rapid change program of weight loss and are successful, the weight seldom stays off as we know. Slow and steady changes in lifestyle are the best way for sustainable change.
Today I want to give a starter set of policy ideas for changing the trajectory in Rhode Island. I won’t claim these are a panacea or represent a comprehensive to do list, but you have to start somewhere. This is an expanded list from my City Journal piece.
Taxes and Fees
1. Seek a “grand bargain” on revenue neutral tax reform. Here the idea is not necessarily to reduce tax revenue overall, but to adjust the levers to make the system less onerous on entrepreneurship and small business. One conceptual idea – and I stress this is a hypothetical – might be to raise the income tax on top earners making over say $500K/yr (a shibboleth of the left) to eliminate the 7% sales tax businesses pay on utility bills. I’ll be returning to the matter of utilities again as it’s an important issue.
2. Repeal the $500 minimum corporation tax. Rhode Island shouldn’t add insult to injury by making a business that loses money pay a tax on top of it just for the privilege of existing. I know at least one person who killed off a side business just for this reason. To be sure it was a hobby, but hobbies sometimes germinate into actual full time businesses.
3. Waive permit and other fees for the first year for new businesses. So many startup businesses don’t even last a year. Why not wait until we see until there’s at least baseline viability before socking them with a bunch of fees? You could easily implement this by charging in arrears. Obviously you’d have to be careful to avoid burdening the system with people getting “just in case” permits such as creating tons of shell companies, but I think this can be managed.
4. Reform unemployment insurance. Benefits are too high and ideally Rhode Island should be closer to the national median. But this would be hard to achieve and a start at reform can be achieved without it. The focus here would be eliminating market-distorting cross-subsidies that favor frequent users of the system, and revisiting business successor rules that punish people for buying and saving failing or bankrupt businesses.
Regulations and Mandates
5. Reform temporary disability insurance (TDI). This is one that wasn’t on my radar until I heard Republican gubernatorial candidate Ken Block call for reform. But when I looked into it this appears to be an even bigger problem than he suggests. Rhode Island is one of only five states with mandatory TDI. The others are California, New York, New Jersey, and Hawaii, all states with fortress industries and such that make them most definitely not Rhode Island’s peer group. It has the second highest benefit levels. It has a state run monopoly system. It allows employees to double dip. And I believe Rhode Island’s program is one of only two along with California that has a temporary caregiver leave component. I’d completely repeal mandatory TDI. But again, reform of some sort should be possible without triggering political nuclear war. Eliminate the state run system and tell businesses to buy coverage from the marketplace. Eliminate double-dipping. Make temporary caregiver leave a one time only or one per decade type benefit instead of annual recurring one. Put a lifetime cap on weeks of benefits and beyond that claimants should utilize long term disability coverage. Again, whatever we think about the idea of this system, Rhode Island is a huge outlier here and has little leverage to lead the way on this.
6. Perform a post-Obamamcare health insurance mandate review. Rhode Island has more items of mandated insurance coverage than any other state. Coming from Illinois – a blue state mind you – I was stunned at how much individual health insurance costs in Rhode Island. Obamacare seems to have largely standardized coverage and I would suggest defaulting to its coverage guidelines. If Rhode Island has items that go beyond this, it should eliminate any where at least ten other states (including at least MA and CT) don’t already mandate it.
7. Pass a clean semi-monthly payroll act. Until last year, Rhode Island was the only state in America that required companies to pay their employees weekly. That was changed to enable bi-weekly/semi-monthly payroll, but only for businesses whose average pay is twice the minimum wage and can post a surety bond, get the written permission of any unions affected, and recertify with the state every four years. You know what I call that? Progress. That’s good news. But in keeping with the continuous improvement theme, the legislature should follow-up with a clean semi-monthly payroll bill.
8. Create a “most favored nation” regulatory policy with regards to Massachusetts and Connecticut. It’s hard to argue that neighboring states have different core values. So their regulatory systems should be considered prima facie adequate for Rhode Island. Unlike California, a big and rich state, businesses are not going to jump through hoops for the privilege of serving small and economically challenged Rhode Island. So to make it easy, I suggest harmonizing regulations with Massachusetts (and if possible Connecticut) to create a mini type of EU style common market effect. This could be implemented via a most favored nation policy saying that “If it’s legal in MA or CT, it’s legal in Rhode Island. If you’re licensed to do it in MA or CT, you’re licensed to do it in Rhode Island.” Rhode Island is really subscale to be running its own regulatory system anyway, so outsource it.
This doesn’t even scratch the surface of what’s needed on the regulatory front. Many of you probably saw the recent Thumbtack survey that ranked Rhode Island the worst state in the country for its small business climate, as rated by small businesses themselves. Metro Providence was ranked the second worst metro. Fixing this is actually much more critical than taxes in my view, but also harder as many of the worst regulations around land use and such are at the local level. So this is where local reformers should focus.
When I spoke to the Rhode Island House of Representative earlier this year, the other speaker was a representative from CVS sharing his perspectives on what that company looks for in places to invest. One item he mentioned as important is utility costs. Hence my thought about utility taxes above. But beyond that, Rhode Island’s electric bills are among the highest in the country and gas prices are high too. There needs to be a focus on bringing those down. Lowering electric rates doesn’t deprive the treasury of much and actually saves money on government electricity purchases. Unfortunately, as someone pointed out to me, in Rhode Island it works just the opposite; because it doesn’t appear to be a tax, the legislature feels free to pass laws that send rates through the roof.
9. Kill Deepwater Wind by any means necessary. Deepwater Wind is a crony capitalism fiasco of epic proportions involving an offshore wind farm. Billed by some as the “next 38 Studios”, it’s actually even worse as the price tag will be hundreds of millions of dollars. IIRC, the increased cost to governments alone from purchasing inflated electricity will be $1.5 million a year. The environmentalists I know don’t even like the project. The only plus side to anybody other than cronies appears to be reduced electric rates on Block Island. Well, I may have cheaper electricity, but I don’t get to live on an amazing island. Nevertheless, if it’s important to bring those rates down, then direct subsidies would be cheaper.
10. Partner with other New England states on increasing gas pipeline capacity into New England. A while back City Lab ran a story talking about a new gas pipeline under the Hudson River into New York City. As you probably know, gas is dirt cheap right now because of plentiful supplies from fracking in places like Pennsylvania. But that doesn’t help if the gas can’t get there. The Northeast has been under-pipelined. But as you can see, New York City is seeing the infrastructure investment to bring this online. New England isn’t. Here’s the money chart showing the price spikes this produces:
I’m not sure why no new pipelines have come into New England, but I’d certainly make it my business to find out. By the way, some residents do heat their homes with natural gas. I did when I lived in the state. So beyond industrial customers, think about what that chart means to struggling Rhode Islanders’ winter heating bills.
Sadly, the state seems to be moving in the opposite direction as the legislature passed more laws this year that will at first glance raise rates still higher.
11. Cut to Invest With a Major Infrastructure Bond. Bruce Katz at the Brookings Institution likes to talk about a principle called “cut to invest.” That means making cuts in current spending in order to invest in critical items like infrastructure. Rhode Island’s infrastructure is in rough shape so that approach is needed here. Interest rates are rock bottom right now so there’s no better time to borrow. As the Fed dials back on quantitative easing, the window may start closing on this. Rhode Island needs to identify cuts in ongoing spending sufficient to finance payment on a major infrastructure bond targeting roads, bridges, and schools. I’m not talking about adding any new road capacity here, just doing things like rehabbing or replacing the existing crumbling bridges and obsolete school buildings.
As the Sakonnet River Bridge debacle shows, this money is going to be spent one way or another. Better to do it now on the state’s terms instead of later when it will cost a whole lot more to, for example, fully replace decayed structures that could have been saved if they’d only been properly maintained.
Under no circumstances should Rhode Island issue a bond without the full necessary funding stream for repayment allocated up front.
12. Investigate shared startup/co-working facilities. Instead of paying companies to set up shop in Rhode Island, invest the sales effort into luring operators like TechShop to create locations in Rhode Island. These types of co-working facilities can reduce the cost of capital and risk of entrepreneurship. I’m not a big fan of government building these directly, but they are a key part of the startup infrastructure of a community these days.
13. Build more Quonsets. NYU economist Paul Romer has advocated for a “charter city” concept in developing countries along the lines of a charter school as a way to bypass dysfunction. Rhode Island already basically applied that concept at the former Quonset naval base. Quonset is everything Rhode Island is not. They’ve invested in first class infrastructure. They have a single zoning classification, business friendly performance-based development standards, pre-permitted sites, a single point of contact for approvals, and a 90 days to groundbreaking pledge. Port users even have a tax advantage in that they are exempt from the Army Corps of Engineers import duty because the state instead of the feds paid for the port improvements. The result: 9,000 jobs, including 3,500 created in just the last few years.
Why not replace this model elsewhere by partnering with towns to create more Quonsets? When I pitched this idea at a RIPEC event, an economist with Beacon Hill Institute in Boston wasn’t a big fan. He critiqued it on two basic points. One is that the businesses who located there probably would have been elsewhere in Rhode Island. The other was that the $10,000 a job in infrastructure investment was too high.
I think the first criticism is fair and must be true to some extent. Additionally, some of the jobs are directly port related and there isn’t another deepwater port handy that I’m aware of. However, there’s no hard data on this and my assumption would be that at least some of the non-port jobs must represent a net gain to the state. In any case, Quonset is the best thing going in the state right now, so why not give the model another chance? Also, keep in mind that a state like Tennessee paid $250,000+ per job for a VW plant. $10K/job – not in subsidies, but infrastructure – is small potatoes as these things go, particularly in state where the infrastructure is decrepit. I’m pretty sure if I told the legislature they could create middle class jobs at $10K a pop in infrastructure, they’d sign checks all day long.
At Quonset, the state is the developer. For new sites, I’d look to partner with a private developer, with a state authority as infrastructure partner and approval provider a la Quonset.
I won’t suggest this list is anywhere near where the state needs to be. It doesn’t address key issues as the local level like regulations that hobble building, or the corruption/cronyism issues. But hopefully this provides at least some tangible first steps that could get the state pointing in the direction it needs to go.
As with my guiding principles list, some of these items were originally suggested by other people.
Wednesday, July 2nd, 2014
You’ve no doubt seen many posts already about the 80,000 vintage newsreel type videos uploaded to You Tube by British Pathé. The biggest challenge with these is that no human being can possible process that quantity of material. But it’s fascinating and you could probably spend many a day watching these things.
I’ll share a few highlights today focused on Chicago. First, one I found via Ben Schulman. It’s a 1963 video called “The Changing Face of Chicago” and can be viewed on You Tube if the embed doesn’t display.
Listening to the narrator brag about the “27 urban renewal projects under construction” can inspire perhaps horror or laughter. But what it should spark is humility. I’ve little doubt that 50 years from now, the many earnest urbanist videos and policies put forth with equally as much dogmatic fervor and certainty will be the subject of future generations’ puzzlement. My own blog may perhaps be an exhibit.
We need to have a sense of meta-narrative about progress. By that, I mean that we not only need to understand the ways in which we’ve changed or grown vs. the past, but also keep an awareness that we’re not done yet and that in the future we will have gone beyond where we are now. We should never commit the fallacy of believing we’ve reached the apex of our understanding in the present.
Whet Moser also put together a collection of Chicago entries over at Chicago Magazine.
Here’s a fun one of his from 1939 called “Chicago Cycles.”
Here’s one from 1922 (silent) of riots in Chicago with police arresting “anarchists.”
And from the some things never change file, video of a 1938 snowstorm.
There’s plenty more so search and enjoy.
Tuesday, June 24th, 2014
[ I had lunch a few weeks back with Donald Cassell, who works on the Africa program at the Sagamore Institute. He's Liberian and his focus is Liberia. He sent me some very interesting material on the country, including this piece on an alternative energy project there written by his colleague Andrew Falk. Please look at the original version for footnotes - Aaron. ]
President Ellen Johnson Sirleaf recently wrote an article in Foreign Policy in which she lamented that Liberia’s twenty-three year civil war left the country’s energy infrastructure “in shambles.” She observed that of Liberia’s 4.1 million citizens, only about one percent of urbanites – and almost no one living in rural settings has access to electricity.
President Sirleaf is not making up excuses when she cites the impact of the country’s civil war: in 1980, when the war began, Liberia was producing 852 million kilowatts of electricity, and using 792 million kilowatts. By 1991, production and consumption had fallen by about sixty-eight percent to 273 million kilowatts and 253 million kilowatts, respectively. By 2010, the most recent year for which data is available, production and consumption had only risen to 335 million kilowatts and 311 million kilowatts, respectively.
A startling analogy employed by President Sirleaf in the same article puts Liberia’s electrical woes into perspective: AT&T Stadium, the home of the Dallas Cowboys, uses more electricity than the total installed capacity of Liberia. While this analogy could be misleading as the Wall Street Journal noted, AT&T Stadium only consumes that amount of power for several hours a day on eight regular-season NFL games it is staggering to consider that AT&T Stadium’s ten megawatt electrical usage is more than three times the amount that Liberia can put into its national grid.
President Barack Obama visited Africa during the summer of 2013 and announced a new initiative, Power Africa, which is designed to work with six African countries, including Liberia, to increase electrical production and provide electrical access to twenty million new households and businesses.
In contrast to the large-scale programs proposed by President Obama and being planned by multinational corporations, several individuals and small organizations are already on the ground making a difference in Liberia. One such organization is the Liberian Energy Network (LEN), a nonprofit organization started by Richard Fahey, a retired environmental attorney from the United States. LEN imported two hundred solar lights in May 2013, and two more shipments are anticipated before the end of the year. LEN sells the lights through retail shops in Monrovia and through partner organizations such as Ganta Methodist Mission Hospital, Advanced Youth Project, and the Christ Network for Good. It charges only enough to cover its costs of manufacturing, shipment, and operating expenses. Several types of lights are available, from a small reading light to a much larger unit capable of lighting a hospital ward. A third model also has the ability to charge a cell phone.
Meanwhile, a Liberian construction company is seeking to address the country’s electrical shortage by building sustainable, off-the-grid homes. MenKaR Construction Company is in discussions with John Waters and Donald Cassell, Sagamore Institute Senior Fellows, to design and build housing units powered by lithium batteries that are recharged by solar power. The proposed units will be close to the University of Liberia in one of Monrovia’s suburbs.
Waters is an expert in alternative energy with a long history in battery design and development. He was one of the General Motors engineers who helped develop the EV1, one of the earliest successful electric vehicles. Since then, Waters has worked on battery research for Delphi, Segway, and Bright Automotive.
Waters has developed a battery that he calls a Universal Battery Module (UBM). The UBM has a ten-year life in the worst-case scenario where it would be completely drained of power every day, 300 days a year, and completely recharged. The battery is designed to provide 3,000 one hundred percent discharge cycles. If, for example, the battery were only drained halfway every day, its life could extend to twenty years.
The UBM can be used to power lights and cooking appliances in the home; to run water pumps for drinking, bathing, and washing; and to recharge cell phones. The UBMs are also designed to be compact and light enough that they may be removed from the home to power electric scooters, motorcycles, four-wheel devices, and small tractors. For example, one application in the active planning stages is powering motorized water carts in Nigeria, where Waters is working with an international company to provide battery-powered carts to replace those presently pushed by eighteen to twenty-two year old young men.
Waters has also integrated his UBMs into a design for off-the grid homes. In designing a concept called Light Village, Waters envisions an off-grid family using ten compact florescent lights (CFLs) in their house (to replace kerosene or candles). Each CFL requires ten watts for ten hours, which is one kilowatt hour (kWh) for 10 lights used on a daily basis, and throughout the week. The family may use five hundred watts for cooking for three hours a day (for three meals) for a cumulative total of 1.5 kWh. The same family could use five hundred watts for an hour to pump water (0.5 kWh). And they move one battery to their scooter, which they ride for at least twenty-five miles for transportation to work or the market, which would use another 2 kWh. All together, the family has used 5 kWh.
To meet this need, the family mounts a 1 kW solar panel on the roof of their home. With six hours of sun, they generate 6 kWh, which they can store in three 2kW batteries. The 6 kWh is more than the 5 kWh the family needs daily, but it could be either shared, saved, or used for other electrical needs. The solar energy used to meet the family’s needs is abundant, “free,” quiet, and produces no emissions.
One of the unique aspects of Waters’ model is the mobility of the battery. The battery’s mobility makes it possible to also have a battery station in the village where a station owner invests in solar panels. The residents of the village could come in every two days and swap batteries for a fee. This option would relieve most people from having to invest in and install solar panels for their homes. Expanding the model further, Waters is in discussions with large capital companies that would purchase the UBMs and lease electrons back to customers at lower cost than they spend daily on firewood, charcoal, kerosene, and candles.
In addition to the solar power and battery packs, Waters has worked with Architects and Sagamore Institute Senior Fellows, Scott Truex and Donald Cassell, to design the Light Village homes to collect rainwater on the roof, which is then used in the kitchen and in the toilet. The resulting brown water could be then flushed outside the house where it is filtered and could even provide natural fertilizer for the family’s micro garden. Waters hopes the western idea of complex, expensive, and centralized energy and sewage infrastructures will be a thing of the past.
While it will probably be many years before Liberia begins to generate and consume electricity at rates similar to cities in the West, thanks to organizations such as LEN and projects such as Waters’ Light Village, many Liberians could be enjoying the benefits of sustainable electricity much sooner.
Andrew Falk is a senior fellow with the Sagamore Institute. His research focuses primarily on environmental and energy issues.
Sunday, June 15th, 2014
Not long ago, Brazil was riding high. It was feted as one of the “BRIC” nations destined to be the next world economic powers. The commodities boom had its natural resources and agricultural sectors humming. The press – for example, Monocle magazine’s swooning over Brazil’s push to boost its diplomatic presence – was adoring. And Rio was awarded the 2014 World Cup and the 2016 Olympics, two events that were intended to both serve as a catalyst for further development, and also as a coming out party of sorts for the country.
The World Cup is underway, but otherwise things haven’t quite worked out as Brazil thought they would. The average citizen of the country is upset at the vast sums being spent on international events that don’t benefit them. The last two years have featured riots, strikes, and various other expressions of unrest. Economic growth in the country has collapsed. In a special section last September, the Economist asked, “Has Brazil Blown It?”
Late last month the McKinsey Global Institute issued a major report on the country called “Connecting Brazil to the World: A Path to Inclusive Growth.” At 104 pages, it’s massive, but a must read for anybody interested in South America’s giant.
And it’s a somewhat depressing read as well. Though there are immense strengths and opportunities for the future, Brazil has big problems too, most of them longstanding, and which hobble its aspirations.
Brazil is the 7th largest economy in the world and the 7th leading destination for foreign direct investment. But it’s 95th in per capita GDP, 114th in the quality of its infrastructure, and 124th in its level of ease in trading across borders. Its export sector is also heavily commodity dependent, particularly oil. Ranked only 43rd in global connectedness on McKinsey’s index, they estimate a potential boost of 1.25% (presumably percentage points) to annual GDP growth from improvements on that measure alone.
Three particular items jumped out at me from the study. One is the “custo Brasil” – the Brazil cost, so notorious it gets its own Wikipedia entry. A variety of factors from bureaucracy to the tax regime to an uncertain legal climate, poor infrastructure, crime, and corruption make the cost of doing business in Brazil very pricey indeed.
The second is the very low rate of investment in the economy. Brazil’s gross investment rate as a percentage of GDP is 18%, compared with 26% in Chile, 29% in Mexico, 40% in India, and 49% in China. Conversely, government consumption is at 22% in Brazil vs. 12% in Chile and Mexico, 13% in India, and 14% in China. Private consumption is similar in the countries except for China, which is notably lower. This probably helps explain the poor state of the infrastructure in the country.
The third is something I have personal experience with, namely protectionist trade barriers designed to create and sustain domestic industries in sectors like autos and computers. I suspect these rules were modeled on Japan, and more lately China, which used rules and business practices to build successful local champions. But in Brazil this has rendered its industry sclerotic. In effect, cars sold in Brazil have to be made in Brazil, ditto for computers, etc. This is where my personal experience comes in. When we were doing global PC procurement, Brazil was always a special case and our vendors had to have special Brazil made PCs for domestic use. This may not be an actual rule, but tariffs produce a de facto barrier. While this technique may have worked in Japan, it’s clear that it failed in Brazil. As the exception that proves the rule, McKinsey uses the example of regional jet manufacturer Embraer as a counterfactual. That company was privatized and opened to global competition. The result is that its got tough itself and is now an industrial champion for Brazil.
There are tons of statistics in the study that are worth scanning just to see. Brazil is consistently benchmarked against Chile and Mexico in Latin America, as well as fellow BRICs India and China. The comparisons aren’t pretty.
Reading a lot about the country in the last year, I put its problems into three categories: poor governance, geographic disadvantage, and scale disadvantage.
1. Poor Governance
Most of the issues pointed out by McKinsey fall squarely under the heading of poor governance. The contrast with nearby Chile could not be more plain across every dimension: corruption, the rule of law, investment, public sector debt, tax burden, infrastructure, regulation, etc.
Latin America seems to prefer two sorts of governments these days. One is a right wing nationalist heir to the military juntas of the past, best exemplified by the Kirchner regime in Argentina. The other are left wing populist-nationalist movements like Venezuela that tend to feature a streak of anti-Americanism. Both of these have produced pitiful results.
Brazil is a sort of lite version of the latter. Lula da Silva was a charismatic labor activist who led strikes and was jailed by the previous military dictatorship in his youth. Post-democratization, he went into politics. After moderating some of his more radical views, he was elected president on a reform agenda. While he had some success and was arguably and improvement on his predecessors, he ultimately failed to deliver on material changes in governance. His hand picked successor Dilma Rousseff has not been as effective and is in an electoral struggle for another term.
In line with the nationalist streak of this governing type, one of Da Silva’s primary concerns was Brazil’s amour-propre. As one of the world’s largest countries, he found it self-evident that Brazil should be treated as a great power. He lobbied for Brazil to have a permanent seat on the UN Security Council. He and others responded in kind to any affront to the nation’s pride, such as requiring American and only American visitors to be finger printed after the US imposed a fingerprinting requirement on foreign visitors. He sought out diplomatic coups where ever he could find them, which included cozying up to unsavory characters like Mahmoud Ahmadinejad who thinks Israel should be destroyed and that Iran has no gays (presumably because he has them executed when he can find them).
Da Silva forgot that there’s more to being a great power than being a big country – you’ve got to earn it. And as a very popular politician he did not seize his moment of opportunity to truly grasp the nettle of reform.
Meanwhile nearby Chile is one of the Latin American governments that’s followed a different model. It’s been run by center-left governments more or less the entire time since the restoration of democracy, and they’ve delivered on a good governance model that has taken them to effectively developed country status. Chile is now even a member of the OECD. Chile is basically the Minnesota of Latin America, and the results demonstrate it. This should show Brazil the size of the prize if the get their act together.
2. Geographic Disadvantage
Brazil is simply a long way from major developed markets. This puts it at a geographic disadvantage versus many other countries. Current airplanes cannot make a non-stop flight from Brazil to East Asia, arguably the most important emerging part of the world. It’s even a long haul from the United States, with relatively few gateway cities vs. say major European capitals. Brazil is time-zone advantaged with the US, however. It also speaks Portuguese instead of Spanish, which imposes a linguistic handicap.
3. Scale Disadvantage
Brazil is a big country, geographically and in population. Size can be an advantage, but it also makes reform difficult as it’s hard to turn a battleship. Brazil’s population of 200 million is more than ten times that of Chile.
Brazil’s two principal cities, São Paulo and Rio de Janeiro, are also megacities. São Paulo in particular is huge, and at north of 20 million people (more than the entire country of Chile) is the 10th largest city in the world. I recently wrote that it’s unlikely the world’s emerging megacities will turn the corner in eliminating dysfunction. Their problems are just too huge and their national growth rate too low. Though I’d consider this more hypothesis than conclusion at this point, my rule of thumb is that a megacity can only achieve escape velocity from pervasive dysfunction if they are a major city in a country that is the world’s current rising economic (or historically imperial) power.
Brazil is not that country, and two mega cities will be a drag on growth. Although São Paulo is an important emerging global city – 23rd in the world in a forthcoming report I helped create – I’m told that both São Paulo and Rio are growing more slowly than secondary cities in the country. A previous McKinsey study threw cold water on the idea that megacities are an advantage, noting their under performance by saying:
It is a common misperception that megacities have been driving global growth for the past 15 years. In fact, most have not grown faster than their host economies, and MGI expects this trend to continue. Today’s 23 megacities—with populations of 10 million or more—will contribute about 10 percent of global growth to 2025, below their 14 percent share of global GDP.
In contrast, 577 middleweights—cities with populations of between 150,000 and 10 million, are seen contributing more than half of global growth to 2025, gaining share from today’s megacities.
So I’m not surprised that it’s Curitiba, not one of the megacities, that’s where the innovative BRT revolution was begun. If I were looking to invest in Brazil, I’d be looking at this next tier of cities. Nor is it surprising that Santiago, Chile (population 5.4 million) has had great success in modernizing given its more moderate size.
Plain and simple the degree of difficulty is higher in Brazil because of the size.
Brazil is also a very racially diverse country with a number of challenges resulting from its history of oppression. Brazil had more slaves than any other country in the world and was the last New World colony/nation to abolish it. If slave reparations are on the agenda in the United States, how much more so similar issues in Brazil? Again, contrast with Chile, which never had very many slaves and abolished slavery in 1818. With the exception of a relatively few indigenous peoples on reservations, Chileans largely perceive themselves as ethnically homogenous, though with some skin tone based status (moderately sized…historically racially homogenous…Minnesota?)
Which is to say that it’s tough to entirely fault Brazil for not living up to the example of Chile. Its degree of difficulty is much higher. And its geography hamstrings its global interaction.
Nevertheless, solving the governance challenges to address the real issues Brazil faces remains the top agenda item. McKinsey has laid out a number of good suggestions, the real question is whether or not Brazil’s socio-political system can produce the ability to implement them.
Thursday, June 12th, 2014
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.
Friday, June 6th, 2014
If you don’t already read it, Cate Long’s Muniland blog at Reuters is a fantastic resource for keeping up with the municipal finance market, and keeping abreast of the latest developments in distressed entities like Puerto Rico and Detroit.
The interesting part is that it’s not because interest rates are high (they’re low) or that investor demand is weak (it’s strong). Rather, it’s because of other factors.
The first is austerity. Local government revenues have collapsed well below the historic trend while at the same time there are huge liabilities from pensions and such that municipal issuers are struggling with. Here’s the revenue chart:
It’s easy to see why bond issuance is down. The cash flows aren’t supporting increased debt levels. What’s more, this isn’t easy to address as, apart from the uber-rich, the taxpayer’s incomes likely show a similar chart. Outside of a handful of high leverage locales where billionaires love to congregate there’s not much prospect of municipal issuers being able to tap into the uber-rich people revenue stream.
But there’s more that gets at what guest poster Robert Munson has written about many times and which Rod Stevens wrote about earlier this week. Namely that the public is rebelling against spending and investment because of poor governance and management. As Rod put it:
Here in Washington State, legislators want to pass an omnibus transportation bill that will straighten freeways and pay for new ferries, but problems with current projects have undermined public confidence in government’s ability to manage these. This last year the newspaper has been filled with headlines about a new ferry that lists, bridge pontoons for a new floating bridge that leaks (eek!), and a tunnel boring machine stuck under Seattle. In the Bay Area, a replacement for the Bay Bridge originally estimated to cost $750 million came in at more than $6 billion. We need new ways to manage not just the construction but make the strategic decisions about how best to meet our needs and then structure the contract.
Cate Long hits the same theme, noting:
Most of Kozlik’s theory has already been dissected, but he brings in a sociopolitical angle that is not often discussed. The lack of broad public policy support for infrastructure spending is a significant issue. Reuters reported a poll in which California voters said they prefer paying down debt to broadening the social safety net…Taxpayers seem to be adjusting their willingness to pay for social infrastructure. This has implications for municipal bond issuance.
She also quotes a Moody’s report which says:
‘The continued slowdown in the growth of net tax-supported debt primarily reflects a new conservative attitude toward debt among the states,’ says Kimberly Lyons, a Moody’s Assistant Vice President and Analyst. ‘Growing spending pressures coupled with inconsistent revenue growth and uncertainty over future revenue trends have forced states to take a cautious approach when considering the addition of new debt service costs to their budgets.’
As Robert Munson has noted, the public needs a new deal before it will be willing to invest again. The cities that are able to make good strategic investment decisions, and put in place accountability reforms that ensure the public’s money isn’t wasted, are the ones where the public will be willing to open their wallets. Rod suggests some criteria for where we can look for the places this new deal will emerge.
Some will no doubt be quick to blame the Koch Brothers and ALEC instead. But the Koch Brothers didn’t make that tunnel boring machine get stuck under Seattle, nor did they create the East Side Access or 7 train or PATH station financial debacles in New York, nor are they responsible for Chicago’s pension mess, nor the Bay Bridge fiasco.
We urbanists need to take responsibility for our share of the blame when initiatives fail or voters reject some project we like. The best thing we can to make sure the public is willing to spend on things that make sense is to be good stewards of what it already entrusted government with. We have to do that before we’ll be entrusted with more. If we can focus on making that happen and delivering value for money, I’m confident the public will be ready to spend in the future on projects that make sense.
Tuesday, June 3rd, 2014
Where can we expect real urban change in the way cities and regions manage themselves? So far, in this recession, we’ve seen the emergence of “tactical urbanism”, a kind of low-cost, grass-roots redevelopment of small urban spaces borne out of a lack of money and more formal urban plans. That’s not to put down the good this has created, but where and how can we expect to see cities, many if not most now stopped dead in their tracks in real revitalization, begin to move forward ahead again? Where will we see new management approaches that make better use of the money, enjoy widespread public support, and get large projects done?
This obviously isn’t happening yet, at least in a widespread way, but I offer here a framework for looking for this change, a kind of “triocular” of three lens or factors to spot where the conditions are ripe for change. I’ll describe those here, and then speculate on which regions and cities are most likely to change first and how long it will take for this change to become more widespread.
These three factors are: 1) the need for infrastructure; 2) high pension and other forms of debt, and; 3) local equity issues. When all two or three of these are strongly present, cities will need to find a different way of doing things, and necessity will be the mother of invention. Here’s why these three factors are important:
1. Infrastructure Needs
Infrastructure is the one thing most people can’t find a public substitute for. If the public pool closes, people can walk for exercise or join a private club. If a critical stoplight backs up every morning, they have to get up earlier, and try that as a quality of life to try the patience of voters!
Infrastructure issues become more critical the faster a region is growing. Traffic in Buffalo just isn’t the same as it is in Silicon Valley. And new infrastructure dwarfs salary expense. A typical municipal employee costs $90,000 a year all-in. A typical freeway interchange costs $25 to $150 million. With state and federal financing getting scarcer, cities are going to have to find a new way to pay for this.
A second aspect to infrastructure is a city or region’s credibility in developing it. Here in Washington State, legislators want to pass an omnibus transportation bill that will straighten freeways and pay for new ferries, but problems with current projects have undermined public confidence in government’s ability to manage these. This last year the newspaper has been filled with headlines about a new ferry that lists, bridge pontoons for a new floating bridge that leaks (eek!), and a tunnel boring machine stuck under Seattle. In the Bay Area, a replacement for the Bay Bridge originally estimated to cost $750 million came in at more than $6 billion. We need new ways to manage not just the construction but make the strategic decisions about how best to meet our needs and then structure the contract. Expect to see more independent, “blue ribbon”, need-specific commissions appointed to do this.
2. Pension Debt
These infrastructure problems would be a lot easier to solve if governments had the debt capacity, but they don’t. Stockton’s bankruptcy came from a combination of high spending on redevelopment projects, including a new waterfront promenade, an arena, and a new marina, and overly generous compensation for employees. The recession didn’t so much cause the bankruptcy as tip over a teetering set of dominoes. California redevelopment debt meant to go for capital projects was used to pay part of the salaries of mayors. Now, thanks to money problems at the state level, that form of financing is cut off, even as cities find their other forms of credit maxed out.
Debt alone won’t cause cities to change. We may get a set of “walking dead” cities like Detroit and Stockton that emerge from bankruptcy but never move forward because they have no prospects and deep management problems. But in dynamic places where industry is growing, the combination of infrastructure needs and debt limits will likely lead to new financing. San Diego has a history of troubled government, but with all of its prospects for bio tech growth, and world class institutions like UC San Diego and Scripps, can you imagine a place like this not finding a solution?
3. Equity Issues
These, too, are coming to the fore where the tech growth is the greatest. When everyone is poor, as in Appalachia, there are no perceived differences. When, as in San Francisco or Silicon Valley, this means losing the lease on your apartment, people come out to city council meetings.
The challenge here is that local governments cannot do much about differences in income, and yet they need to provide public services in a way that seems fair to all. The Google bus controversy, for example, is about more than just white buses using the curb in the morning. Those sleek, tall tour buses provide a clean, quiet, free, WiFi-enabled way for tech workers to commute long distances. All this while local service workers commute across town paying full fares for buses that frequently run late and sometimes have homeless people shouting in the back. Try building public consensus with that kind of split!
A Recipe for Change
Where are we most likely to see innovative change? Where these three factors come together. Probably not in Portland, Denver or Dallas, which have built out comprehensive light rail networks that give them the capacity for growth. The Bay Area is almost a certainty, as are Phoenix and Atlanta, which choke on growth, especially now that Millennials want to live and work in urban centers. Other possibilities include New York and Chicago, but politics and entrenched bureaucracies in those places may keep them from moving forward. (Can you say “Chris Christie”?) Other possibilities include the smaller cities—the Boulders, Austins, Madisons and Burlingtons of the world—but because of their scale, they can probably make their urban systems work along traditional lines, with a healthy helping of bicycling thrown in. Not on the list? Cities with few or no prospects for growth, such as Cleveland and St. Louis, where the infrastructure may be getting old but there is plenty of capacity and the commute times are relatively short.
The pace of change is another story. It took 30 to 40 years to make urban living fashionable again, and it will probably take 20 to 30 years to cook up new recipes for urban management. That assumes that some city is out there right now grappling with a problem is heading towards a new solution, that it will take several years to put the solution in place, and another three to five years after that to get noticed. Then another ten to 20 years after that for widespread copying. Thirty years ago we did see the electronic chip manufacturers in Silicon Valley come together, when their employees were late for work, to get a new transportation plan, the South Bay Master Plan, financed and under construction in a matter of just several short years. Maybe lightning will strike twice.
Rod Stevens is a management consultant on Bainbridge Island, WA. He can be contacted at email@example.com.
Tuesday, April 29th, 2014
[ This week Robert Munson returns to his look at North America's central train stations with a look at New York's infamous "beast" - Pennsylvania Station. He picks up after his look at the "beauty" that is Grand Central Terminal - Aaron. ]
This post is part of a series by Robert Munson called North America’s Train Stations: What Makes Them Sustainable – or Not?
Showing the grandeur of the original Penn Station (destroyed 1963), this main waiting room approximated the volume of St. Peter’s Cathedral in Rome. Photo via Wikimedia Commons.
Solving New York’s Perennial “Penn Problem” Starts Now
Surpassing the great stations of Europe, Penn Station showed how America would lead the 20th Century. Epoch-making innovation and entrepreneurial risk built tunnels under the Hudson River and directly connected America’s main metropolis to the other commercial centers of a vast, resourceful economy that emerged via the advantages of a great rail network. Penn Station celebrated that achievement by evoking Rome’s style from that previous great Republic.
But, America’s metaphor soured. In comparing the 1910 Penn Station to the 1964 version, eminent architectural historian Vincent Scully famously wrote: “One used to enter the city like a god; one scuttles in now like a rat.”
Penn Station’s road back to greatness will be long. This article provides this early step: analyze the Penn Problem frankly and suggest why current agencies cannot develop solutions. We start that step and put Penn in the context of this series by comparing its scorecard to New York’s success story.
Score: 60 (see full scorecard, with side by side comparison to GCT) – compare to Grand Central Terminal’s score of of 81.
Category: The Inexcusables
Photo by the author as he scuttles in at 11PM to Amtrak’s concourse… feeling Penn’s pain.
Grand Central shows us what happens when good stations are preserved. But if they are lost and replaced by a bad design, then updates won’t work either. Instead of the original, elegant Penn Station, commuters today get a transit rat-hole because government failed to protect a pivotal public asset. Updates to Penn’s commuter concourses and platforms since have been too little, too late, too costly and would never work well anyway. Given Penn’s inflexible design, updates could never accommodate growing commuter demand. Twice as many riders pass through Penn today than was the intended capacity of its 1964 design. Penn’s “curse” is that good money gets wasted because its updates cannot solve the core problem of poor design and poor governance.
Why such a mismatch persists in America’s largest transit metropolis is a lesson for many cities. While Penn’s scale is larger, its root cause is similar: failed transportation policy. Transit’s failed governance gets complicated by insular train operators. This historical concoction traps many central stations, particularly Manhattan’s Penn and Chicago’s Union Station. Un-trapping both using today’s tangled agencies will take decades of dedicated civic effort to change how transportation is organized and invested in. Have we got decades?
Penn’s problems are a New York legend perpetuated by escalating irritability. Instead of recounting those stories, this article focuses on defending its key suggestion: if a new strategy for ownership is not clarified within a few years, then a new authority must be created to resolve the Penn Problem.
The Big Picture In-Brief: Ownership Is The Core Problem
Compare this photo:
Penn’s Amtrak reception area decked-out for the holidays, photo via Flickr Photo Sharing.
with this one:
New Jersey Transit concourse at Penn Station, photo via Wikimedia Commons.
It is self-evident who owns Penn Station. Amtrak customers have a reception area, a coach-class waiting room with chairs and escalators down to platforms having a decent width. Almost one-third of passengers on the Northeast Corridor trains also qualify for the very comfortable LoungeAcela to wait, work or sleep in. While this Corridor by far is Amtrak’s most important, Amtrak still only has less than 10% of Penn’s non-subway passengers on an average weekday.
Photo taken by the author while waiting for his Long Island train. To the left are a row of perhaps two dozen fast-food stands. To the right are minimally responsive ticket agents. Trapped in the middle waiting for a mid-day track announcement, I see why New Yorkers have so much practice complaining.
For the other 90%, Penn Station treats commuter rail passengers as if there were a cattle class. NJ Transit and LIRR commuters get packed into stand-up concourses (no chairs) and anxiously await their track to be announced. Not unlike a prod, the board flashes which track and there is crush down into a narrow platform to get a seat next to someone who is not an obvious complainer.
To pile on the insults, the people whose fares and taxes will pay for the new station are the ones who suffer this daily saga. In this weird realm of disservice, why should passengers trust New York and New Jersey? Advocates for better transit must ask: what kind of “deal” are governments giving citizens to reward their doing the right thing and minimizing car usage?
To answer those questions, let us return to the point at which Penn became destined for transit hell. But, let’s make it easier to stomach by using the best analogy. Like Penn, Chicago’s Union Station primarily served inter-city travel in the first half of the 20th Century. Similar to the original Penn, Union Station’s air rights were sold hastily in the 1960s to appease Penn Central’s creditors.
Since then, both stations have had buildings above that abused the intent of air rights by scrunching the growing number of rail commuters for decades. Amtrak owns both suburban commuter stations. But because Amtrak has a national purpose, suburban systems get short shrift. Both stations, theoretically, have state agencies with power to solve these problems. Historically, no agency has proven itself.
Chicago’s often-proposed central station is the nearby West Loop Transportation Center. (Amtrak would keep its home in Union Station.) This Center could help convert outdated commuter systems to 21st Century standards that include through-routing. As with Penn, Chicago’s Center is no closer to reality… and largely for the same reason: existing governments cannot produce progress.
Consider The Proposed Penn Station Redesign
The Alliance for a New Penn Station, a joint project of NYC’s Municipal Arts Society and the Regional Plan Association, recently proposed solutions that can resolve the core problem. Entitled “Penn 2023”, the Alliance analyzes the problem well, then seeks to solve the ownership problem by proposing that Amtrak have a separate building called Penn Station South (below).
In critiquing this proposal, I count about a dozen quibbles. Most boil down to an impossible situation: Penn has too many passengers coming into too small a site and no current authority can sort out the resulting chaos of tracks and concourses. But as a positive step, the Alliance is to be commended for implicitly addressing the core problem of ownership by drawing three separate terminals and spreading the congestion.
As an outsider, I can be more explicit: Amtrak, New Jersey Transit and LIRR (MTA) should all have their own station. Furthermore, the tracks should be managed by an uber-authority responsible for through-routing.
It is all that simple.
But of course, simplicity’s virtue can often be its vice. Understand the owner’s dilemma. While Amtrak’s weight is great, it can’t solve a mistake it inherited in the 1970s. At various times and planning stages, Amtrak has been in-and-out of the proposal to convert the Farley Post Office into Moynihan Station (building 3 in the drawing above). Some $267 million was spent in planning and preliminary construction, about 85% paid by Uncle Sam. With no future funding source, the Moynihan proposal, again, appears stalled.
Amtrak’s solution to a nearly impossible situation also is simple: admit that its small customer share does not warrant suffering Penn’s huge headaches and, instead, should develop a station to its specifications nearby.
Amtrak should be happy. It has Uncle Sam to give it the easy way out.
Quite a separate matter is the New Jersey/New York nexus. It is all mixed up in Penn’s air rights. Madison Square Garden owns them. The Alliance sent a message last year when it convinced the City Council to limit MSG’s permit to ten more years, hence “2023” in the study’s title. Yet, MSG has a major investment and many expect MSG to fight to protect its rights. Lengthy lawsuits employing brigades of the profession’s finest……and the Penn Problem persists.
So, let’s be practical and leave aside for now any further speculation in this article of building 4 above, “A Reconstructed Penn Station.”
Next, let’s see the scope of the problems so how we, finally, can honor Senator Moynihan properly.
The above photo was taken on Labor Day 2013 during my annual trek to the U.S. Open. I compared this to the sign in 2009. Little changed of substance. Of the nine politicians, who fights for commuters? Of the seven agencies listed, who has a credible plan to fund the station?
Mayor Bloomberg, the biggest advocate for rezoning the station’s surrounds, also spent five years trying to make real estate deals pay for the station. He has been replaced by a new mayor with an agenda of redistributing wealth – and not to suburban rail commuters. Andrew Cuomo has had over three years as Governor to make this a priority fix. But, he has done little more than his predecessors who had much less power.
Three months prior to my photo, the Governor put the Port Authority in charge to restart the Moynihan conversion. Since the sign does not even acknowledge the PA as ‘de facto’ developer, it helps confirm the PA has no believable plan for this complicated real estate deal. What’s more, the PA increasingly is seen as a patronage dump that cannot fulfill its original mission of building infrastructure. This leads some observers to start calling for its breakup. Today, Penn appears to this outsider as a hot potato passed between creaky agencies, each unable to advocate a future vision.
Another clue of Penn’s ‘ad hoc’ rule comes from the green ARRA sign. Federal money paid for 85% of Phase 1; yet no agency used this free money to produce leverage for Phase 2 funding. As is true nationwide, metropolitan New York’s dependency on Uncle Sam has no future as a strategy for transit capital.
Beware The Wooden Nickel
Into this vacuum comes a new concept called “value capture” that, so far, seems to be funding part of the nearby Hudson Yards subway extension. This is at the heart of the MAS Penn proposal and offers a sign of fiscal hope. The scheme’s short explanation is transit raises the value of real estate (more true in Manhattan than elsewhere). In turn, increased building values will generate higher property taxes that the transit agency can borrow against to build now.
I am a skeptic of depending on this funding source for several reasons. First, this is the largest station in the western world and requires lots more money than a subway station. Worse for the City, it already was a struggle to get nearby landowners to agree to the value capture for a subway. It is a fair guess they will view a scheme for Penn’s rebuild as a double tax.
There also is an ominous Big Picture: value capture needs a decade-long track record of paying bondholders on-time. But, municipal bond markets are nervous about ominous clouds of pensions and insolvency nationwide.
Furthermore, squishy funding hurts the private landowners’ equation. Knowing there is not enough money to finish the suburban stations, landowners around Penn won’t invest enough either; further reducing value capture’s contribution.
Not Easy: Find A Way Out Of No Way
A credible plan must solve these big picture problems around governance and funding. Simultaneous with those changes, the transit agency cannot just put a pretty hat on top of 100 year-old platforms. Three new stations should have a complete update to 21st century transit standards that include through-routing, easy transfers, and tightly integrated mobility systems. This requires big-time money and an authority that can break transit’s old ways.
20th Century authorities cannot implement 21st Century standards. The metropolis’ polyglot of outdated authorities took over failed railroads and, now, have failed even to maintain the old system in good repair. Without money to first fix the systems New Yorkers already got, it is highly unlikely new stations will get built.
Transit also must solve its cost-overruns. New York area transit investments have been off-the-charts expensive compared to what global centers in Asia and Europe buy. For example, MTA’s East Side Access project at Grand Central was to cost $2.2 billion in the 1999 federal budget. Today, estimates cost upwards of $11 billion and will be finished as late as 2024. Worse, this exorbitant price tag does not even buy a through-route, suburbia’s track of the future.
These budget and timeline busters are multiple-decade affairs. The subway part of this same tunnel was started in the late 1960s that finally connected to its system in 2001. This spooks the public about future major projects.
Back at the Port Authority, it has made headlines with astounding cost-overruns at its post-9/11 station… along with newsy scandals such as Bridgegate. Solutions will require deeper and broader political discussion than now seen. Who leads that? Both Governors are looking for their path to the White House, while eyeing the other as a possible rival. Today has no leadership nor lasting momentum for replacing Penn.
Finding a responsible owner and funding source for the commuting stations will not get settled finally until the taxpayer agrees. Chances improve when there is a credible agency that serves riders and taxpayers alike with a whole new discipline of managing finances and timelines. That requires a new regional authority, independent of state politics.
Giving taxpayers a better deal — while necessary to get capital for transit — is not the topic of this series on defining performance standards for central stations in the sustainable era. But in future years, hopefully 2015, I will explore how regional politics is a prerequisite for sustainable transit. Manhattan’s Penn and Chicago’s Union Station will be case studies.
Only unprecedented collaboration of government agencies can make possible the fable’s happy day in which the Beauty (Grand Central) marries (through-routes) the former Beast (Penn transformed into her Prince.) But, a new agency will have to groom the Beast for this story to have a happy ending.
Thursday, April 10th, 2014
This post originally appeared in the Cincinnati Enquirer on April 8, 2014.
Cincinnati arguably has the greatest collection of assets of any city its size in America. So why has the region been stagnant to slow-growing for so many decades?
When you look at the stunning collection of advantages and assets of Cincinnati – its geography; the amazing dense, historic architecture (great contemporary architecture, too); top-notch cultural institutions; a large corporate presence; and so many pieces of local culture and flavor of a type that has been homogenized away in most places – it’s an embarrassment of riches.
Yet since 1970, while the U.S. has grown by nearly 52 percent in population, the Cincinnati region grew by 26 percent, only half as fast. Other than Dayton, the other surrounding metro areas have also grown about twice as fast or more than Cincinnati. Cincinnati has lagged on jobs, too.
How is this? How can Cincinnati have the best stuff, but be a growth laggard?
Part of it is that all the assets in the world don’t help you if you don’t take advantage of them. Most of these are located in Cincinnati’s delightful urban core. But Cincinnati has to some extent abandoned that core in favor of low-grade sprawl.
The city of Cincinnati has lost a big chunk of population, and its regional share dropped from about 40 percent in 1950 to only 14 percent today. By contrast, New York City is still at 45 percent regional population share today. And while it’s a slow-growing region, too, the city of New York is at an all-time high in population and is booming in many ways, such as its tech and real estate industries.
Even Hamilton County has lost population as a whole, dropping by about 120,000 since 1970. By comparison, Indianapolis’s almost identically sized Marion County gained 135,000 during the same period – this in a place with far fewer obvious assets.
What’s more, unlike its fabulous core, Cincinnati’s sprawl isn’t even that good for the most part. So Cincinnati has chosen to fight its battle where it has few marketplace advantages instead of leveraging its unique and compelling assets.
This has proven a demographically, economically and financially unimpressive strategy. Instead, urban Cincinnati and Hamilton County should align available financial resources to make the most out of the amazing urban environment and assets that exist there.
Meanwhile, the suburbs aren’t going anywhere and will continue to grow, so they should seek to do so on a higher-quality pattern that will be financially sustainable long-term. The problem with sprawl is often less about the environmental impacts than the fact that as they age, older suburbs that weren’t very high-income to begin with become financial albatrosses as they fill up with dead malls, aging and less market-attractive homes, legacy costs and similar issues. And unlike the high-quality classic architecture of the core, they’ve as yet proven less adaptable over the long term.
The wonderful collection of assets Cincinnati has may also have bred complacency. Another name for an asset is “the stuff we did yesterday.” But what are we building for tomorrow? What is our generation’s contribution to the pot?
Cities like Columbus that started out with much less understood in their gut that they needed to go out and create some things. They were hungrier. Cincinnati needs to recover some of that hunger and fire in the belly that motivates other places that are keenly aware of what they lack and are fighting every day to improve.
Cincinnati has also been plagued with deep and counterproductive community divisions. This includes the East Side-West Side split, city vs. suburb, three states, tea partiers vs. liberals, racial divisions, etc. This makes it harder to get things done than it should be because there’s no civic consensus. The streetcar debate makes that very clear.
Cincinnati needs to find a way to heal these wounds and build a durable consensus while leaving room for appropriate debate.
A strategy that works with, not against, the unique qualities and competitive advantages of Cincinnati; a more aggressive, hungry civic attitude; and a way to bridge community divides are three of the things that will help Cincinnati to realize the sustainable growth and prosperity it should have in light of the fantastic place that it is and the incredible assets it has.