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Sunday, May 20th, 2012

New York Considers Parking Meter Privatization

According to the Wall Street Journal, New York City is on the verge of soliciting interest in some form of parking meter privatization.

In considering this, it is important to understand the nature of parking meters. Parking meters aren’t a capital asset like a bridge or highway. Nor are they a real government service like garbage collection or parks. Rather, parking meters are an urban planning tool that cities use to manage access to precious on street real estate for the benefit of the city and neighborhoods. Because neighborhood business conditions are dynamic, and because the best rate to charge and even the best use of that real estate (which may not be parking) change over time, this makes parking meters an extremely bad fit for privatization in the style of Chicago.

Fortunately New York says that they are “not looking to sell the system” and that they will not relinquish control over setting rates. Those are both positives. While Chicago got it wrong, I think there is certainly plenty of scope for involving the private sector in the management of parking. For example, who cares who takes the quarters out of a meter? I sure don’t.

Also, the private sector could potentially implement new technology better and faster. We are on the cusp of a sea change in parking management. One of the key rationales for parking privatization has been the political difficulty of raising rates. But a new system being piloted in San Francisco, embedding ideas from UCLA professor Donald Shoup, points a better way forward. The idea is to bring congestion pricing to parking, by letting the market decide the value of the spot. The computerized meters there dynamically vary parking prices to maintain 80% meter occupancy. People who want and need a spot can then always find one, but spaces don’t go to waste. It gets the city council out of the business of setting parking rates, and depoliticizes them. There could conceivably be many other ways to both more efficiently manage parking and better deploy technology.

However, the devil is in the details. Private companies aren’t in the business of making investments unless they get a return. So what do you promise them to invest in new technology? The WSJ quotes a NYC official as saying, “Our process has been to consider locking in the current performance, and, if it makes sense, transferring the risk to a third party.” This sounds nice in theory, but to get someone to take on risk requires compensating them to do so. I always saw risk transfer as a key benefit of privatization, but through compensation clauses in contracts, it is clear very little risk is often transferred in these deals.

Thus beyond the concept of doing privatization right, there’s the enormous focus that must be brought to bear on contracting. As I’ve come to discover, too many of these agreements are copy/paste jobs with clauses that really disadvantage the public. New York needs to do better. A key is to make sure the term is limited. I’d say anything longer than around seven years is inappropriate.

In that regard I’m sorry that former Deputy Mayor Steve Goldsmith is no longer around. He’s someone who did many privatizations in Indianapolis nearly 20 years ago. While he’s perhaps more favorable to parking meter privatization than I am, I think he appreciated the need to get the details right.

In any case, New York City is probably right to give this a look, but they should realize that they are playing with fire. More than anything else, the most important thing is to make sure the public of New York doesn’t end up getting burned.

Thursday, May 10th, 2012

Will Yet Another Fiasco Finally Convince Rahm Emanuel to Cancel Chicago’s Parking Meter Lease?

Chicago’s parking meter lease is the gift that keeps on giving. Put aside for the moment the fact the parking meters are a bad type of asset for a long term lease in the first place. Even ignoring this, this deal continues to be Exhibit A in What Not to Do for privatization.

Recently the parking meter lessee claimed $13.5 million dollars in compensation for just one year’s worth of allowances for free handicapped parking. Over the course of the lease and with inflation at 3%, that would be over $3.3 billion paid to the vendor just for this!!! Figure in a discount rate of 12%* and that’s a net present value of $173 million. Rahm Emanuel is strongly disputing the payment, but the fact that he’s quietly pushed legislation in Springfield that would end free parking except for the most disabled is almost an implicit admission that the compensation claim is valid.

Now the Sun-Times reports that the vendor is demanding an additional $14 million in compensation for meter closures – and that just for the first nine months of 2011. Just as a refresher, whenever the city closes meters temporarily for construction, a street festival, or a NATO conference, it has to compensate the vendor for lost revenue if the duration exceeds the contractually agreed to closure allowance. Obviously the allowance wasn’t sufficient as this compensation on an annualized basis would be $18.6 million. With 3% inflation over the 72 years left on the contract, that would be $4.6 billion!!! Again, with a 12% discount rate that’s $238 million.

So if these compensation claims hold up, here’s the math for Chicago. The city took an asset that generated $23.8 million in revenue for the city and converted it into one where the city has to pay $32.1 million annual in compensation to the vendor. This is on top of the meter money the vendor gets to collect for the next 72 years.

In return for this, the city got $1.1 billion, which it promptly spent to paper over budget deficits. But even so, given the net present value of $411 million in compensation payments alone to the vendor, the city really only got about $740 million for the meters!

Now the compensation may be adjusted by legislation, arbitration, or negotiation. And these are back of the envelope calculations to be sure. You might prefer different assumptions around inflation and discount rates. But whatever the case, clearly this is a whole huge steaming pile of Bad News for the city.

The Sun-Times also reports that Rahm is talking tough on parking meters and plans to strongly dispute these payments. But they fail to ask the simple and obvious question: Why doesn’t Rahm unwind this disaster of a deal?

Yes, the parking meter deal can’t be cancelled under the terms of the contract. But I’m talking about a negotiated solution, which I’ve written about elsewhere. Whether my plan could work or not, I find it difficult to believe a guy like Rahm, a guy who doesn’t believe in the Can’t Do mindset, who actually is tackling structural problems like the deficit and pensions, couldn’t find a way to get out of this deal if he wanted to.

Why he doesn’t is a complete mystery to me. I’m assuming he must have at least looked at it. But I for one would like to know why he isn’t pursuing it. Especially since the alternative is dealing with the fallout from a disastrous deal for the next 72 years running. Hopefully this latest thorn in his side will convince Rahm to bite the bullet and do the right thing for Chicago by cancelling this lease.

Related:
Can Chicago Get Out of Its Parking Meter Lease?
Yet Another Privatization Debacle in Chicago
Three Years Down, 72 More Years to Go on Chicago’s Parking Meter Lease
Parking Meters and the Perils of Privatization

There is also lots of good parking meter coverage from the Parking Ticket Geek over at The Expired Meter.

* 12% is the mid-point of the range of discount rates suggested by William Blair, the city’s advisor on the parking meter lease, to be applied to meter revenues in valuing the system. So this is a very fair rate to use, though some have argued for a lower discount rate.

Thursday, April 26th, 2012

Common Driver Behaviors

Steve Vance, who co-runs the Chicago transport blog Grid Chicago, is a huge bicycle advocate. He put together the following short video from clips he shot cycling around the city showing how drivers commonly behave on the streets of the city. If the video doesn’t display, click here.

Sunday, April 22nd, 2012

What Exactly Does an Infrastructure Bank Do For Us Anyway?

Infrastructure banks are back in the news thanks to Chicago Mayor Rahm Emanuel’s plan for his billion plus dollar Chicago Infrastructure Trust. This trust would leverage private funds to finance infrastructure improvements in his city. I’m not taking a position on whether or not it is a good idea or a bad one. Partially that’s because I can’t figure out exactly what it is or what its actual value delivered is. This has nothing to do with Rahm’s proposal per se. I was equally confused back when President Obama proposed his National Infrastructure Bank.

The concept, as I understand it, is that an infrastructure bank is some type of investment fund. It collects money from private and in some cases (e.g. Obama’s proposal) public sources. These funds are then invested via some criteria into infrastructure projects that generate some type of financial return such that the original investment can be repaid over time.

So far so good I guess. The question I have though is what does this actually do for us that we can’t already do? Let’s examine some potential sources of value and what infrastructure banks might deliver on them:

1. They might raise funds in a debt constrained environment. In the Chicago proposal, we hear that the city is staggering under a huge debt load such that it can’t borrow any more money without negatively affecting its credit rating. Ok. So explain me this, if private investors put money into a project and expect to be paid back by some revenue stream over time, how is that not debt? This strikes me as very similar to some privatization transactions, which should be basically seen as a type of off balance sheet borrowing. For example, in the case of the Chicago parking meter lease, the city really just borrowed $1.1 billion from Morgan Stanley and is paying it back to them over 75 years in the form of quarters.

I’m not saying these types of financing activities are all bad. But we’ve seen enough of what happens when companies load up with special purpose vehicles and off balance sheet transactions to know that it dramatically reduces transparency. This will make it difficult to assess just how much debt the city has taken on. If the ratings agencies haven’t caught on to this, you can believe they will at some point if more cities shift to these types of financing structures.

Unfortunately, infrastructure banks are often presented as if they are “free money” to the public. I believe this greatly misrepresents the reality. Any money invested by the bank has to be paid back. An infrastructure bank seems to be just another fancy name for borrowing money. We should probably evaluate it just like we do debt.

2. They might be a vehicle for pools of private funds to be invested in infrastructure. There are two items here: private funds and pooling. We already have many ways in which private funds can be invested in infrastructure. The first is called the bond market, which is a well established mechanism. The second is through more traditional public-private partnerships such as privatization transactions, development projects, etc. It’s hard to see how an infrastructure bank uniquely contributes here. There are already ample means for private funds to be channeled to infrastructure.

An infrastructure bank also pools funds from various investors, which has value. But so to bank banks. And so do various purely private infrastructure funds of the type that already invest in toll roads, water systems, etc. It’s hard for me to see any unique value infrastructure banks bring here.

3. They might limit public risk. Potentially the repayment of the investors could be ring fenced to only the revenue streams of the project. For example, any tolls collected on a new toll road. This would be unlike general obligation bonds, which are backed by all the taxpayers of the city.

There’s clearly value here, but there are also other traditional vehicles like revenue bonds that accomplish the same purpose. Revenue bonds may not be the easiest mechanism however, since they typically require a separate contracting entity like a utility or special purpose authority, and investors want to know that there are stable revenue streams to repay them, like sewer fees.

An infrastructure bank might be good where some of these are not available. For example, the project Chicago has highlighted as an example of where to use its infrastructure bank is to retrofit buildings to make them more energy efficient. There may not be an easy way to use revenue bonds for this. Also, the exact energy savings might not be predictable.

In these cases, the investment might look more like equity than debt, since the ability to get repaid is uncertain. I’ve often seen privatizing contracts in this light. They include a hedge against future risk. For example, when Indiana privatized the toll road, they hedged their risk against traffic declines, which in fact happened during the Great Recession.

Of course, to get someone to take on your risk, you are going to have to compensate them. Thus the rates on this type of financing should be higher.

This raises two fundamental risks. The first is whether or not the city overpays a private entity to take on that project risk. The second is that the city might write a terrible contract such that it really doesn’t outsource much risk at all.

I used to crow about how privatization transferred risk to investors. After reading some of these contracts and seeing how they operate in practice, I’m much more skeptical. In practice, most of these contracts ensure that the public retains almost all of the risk associated with the deal. For example, pretty much the only risk the parking meter lessee took on in Chicago was whether or not people continued to put quarters in the slot. Anything else – like hosting a NATO summit that requires meter closures – is the city’s responsibility.

As I noted in my piece “The Privatization Industrial Complex,” cities are pretty much at the mercy of sophisticated investors who do transactions like this day in and day out for a living. Even in a sophisticated financial town like Chicago, multiple contracts have blown up in the city’s face. The idea that somehow governments will do a better job of negotiating deals with an infrastructure bank than they’ve done with other private investors seems dubious.

However, if you can develop a good framework for this, it does show what I think is one clear advantage of an infrastructure bank construct: it sets up a replicable structure through which these types of investments can be made such that you don’t have to make it up from scratch every time.

4. They might promote rational prioritization of investments. This was something Obama touted for his infrastructure bank. The idea is to somehow depoliticize investment decisions and channel money to the highest priority projects. I would agree this might be a valuable thing at the federal level. And we’ve seen some examples of how it can work, such as the BRAC process for military base closures. But Republicans clearly saw the risk that this would become in effect a slush fund for the President to use to reward supporters. The TIGER process I thought showed that there could be a pretty fair allocation of transport funds on a discretionary basis however, though clearly its decisions favored the President’s view of transport priorities.

In any case, given the lack of a clear and easy to understand rationale for why, if these projects will generate funds to repay the initial investment, any government involvement is need to lure in private funds, it’s easy to see why this wasn’t going anywhere, particularly when there is a fundamental disagreement on the vision for transport infrastructure in America (e.g., high speed rail) and on infrastructure spending and the federal role in it generally.

At the local level this seems less valuable. For example, Rahm can already pretty much channel investment anywhere he wants. If we wants a rational allocation of funding to high priority projects, there’s nothing stopping him from soliciting input on what those projects are from various advisors, then making it happen.

5. They might circumvent costly public contracting rules. Privatizing advocates sometimes suggest that for items with large capital expenditures such as highway or airports, private companies can implement these much more cost effectively because they aren’t subject to burdensome public contracting rules. Unlike public officials, who have an incentive to award contracts to their pals, these private companies have an incentive to make money, so they don’t need the legal framework around public procurement.

From an infrastructure bank perspective, I’m not sure how this would work. Is this just a financing activity that otherwise channels money through the normal bidding process? Or is it an entire separate contracting structure. Given that in Chicago the mayor has promised to abide by minority set-aside requirements and such, it seems like the latter.

It’s hard to see how this would be anything new compared to traditional privatization. Also, the public is likely to want many of its key policy goals such as supplier diversity or open records to be followed in any case. And for major construction, I think people are delusional if they think non-union labor is going to be used.

Again, I’m not saying an infrastructure bank is bad, but I’ve yet to see any clear and compelling explanation of the value proposition. It strikes me as just yet another alternative borrowing structure. I’m happy to be shown wrong on this. But if I’m confused, it’s easy to see why lots of other people are too and why there is so much skepticism around the concept. Feedback welcome.

Tuesday, April 17th, 2012

Yet Another Privatization Debacle in Chicago

I have been and remain a staunch defender of privatization done right, but done poorly it can be a disaster. It looks like we are seeing yet another example of this unfold in Chicago.

You are probably familiar with the now infamous Chicago parking meter lease. But prior to that the city had similarly leased parking garages downtown east of Michigan Ave. This transaction hadn’t done anything to raise concerns with me so far. I’m not sure why most city governments would be in the parking garage business in the first place. Put ‘em up on eBay I say.

But as it turned out, the city, in order to goose its returns, had promised the vendor who leased the garages a monopoly on parking. Lots of privatization contracts have no-compete clauses in them that prevent the government from operating a competitive facility for the duration of the lease. I’m not sure that’s good public policy, but it’s not a slam dunk decision either way. But the Chicago garage lease goes far beyond that and promised that the city would not allow anyone to build a garage that was open to the public in the area where the leased garages are. Wow! In effect, the city rezoned the area by contract without telling anybody. (A legit rezoning would have required notifying property owners, etc. as well as getting aldermanic signoff) It looks like the previous administration once again sold off the right to set public policy to a third party – this time for 99 years.

Naturally this has come back to haunt the city. Morgan Stanley, which controls both the meters and the garages, has filed a $200 million arbitration claim against the city. They claim that the city allowed the developer of the Aqua skyscraper to open a parking garage to the public in a restricted area, and this has harmed the value of their lease. If true, this looks like a very straightforward breach of contract.

This new claim comes on top of a $13.5 million claim over the parking meters related to allowances for handicapped parking. That’s a particularly dangerous claim because it could be recurring and if annualized and adjusted for inflation would mean that Chicago would end up owing over one billion dollars over the lifetime of that contract!

Rahm must be going crazy over these deals he inherited. This is what happens when you sign deals that don’t get subjected to proper public scrutiny. The timing is also less than ideal for Rahm as he tries to get his infrastructure bank proposal approved by a skeptical city council.

The Chicago experience should definitely cause other cities to think hard about privatization. Privatization should be about competition, not contractually enforced monopolies. It should not unduly restrict the ability to change public policy to meet future needs. The term should be strictly limited (50, 75, or 99 years is ridiculous). Deals featuring large up front payments should be avoided where possible, and subjected to strict controls on spending the windfall if not. And the contractual terms need a thorough vetting.

More on Privatization
Parking Meters and the Perils of Privatization
Can Chicago Get Out of Its Parking Meter Lease?

Principles of Privatization:
Part 1: Taxonomy of Transactions
Part 2: Value Levers
Part 3: Use of Funds
Part 4: Guidelines for Action

Wednesday, April 11th, 2012

The Moscow Metro

Here’s a cute little time lapse of the subway system in Moscow by Sasha Aleksandrov. I hope you enjoy it. If the video doesn’t display for you, click here.

h/t Atlantic Cities

Bars, Bookstores, Bowling Alleys, and Adult Entertainment

The cool blog Floating Sheep is out with another infographic, this one showing regions of the country by which of four search terms shows up the most: bars, bookstores, bowling alleys, or adult entertainment establishments. What’s the hot ticket in your town?

Thursday, April 5th, 2012

Hoosiers to Pay 80% of Local Tolls for Ohio River Bridges Project

Update 4/6: The organization behind the polls has put up a web site with raw data and more findings from their scientific survey.

Update 4/6: Later reports with more specific data from this poll show that the actual ratio is 74% of the local traffic is Hoosiers, not 80% – still a stunning ratio. The pollster estimates a slightly lower ratio of toll revenue to Indiana – 70%, though it’s not clear how they did this math. And finally it looks like Southern Indiana officials are waking up to the fact that they are going to get pimped on this deal. Remember folks, you heard it here first.

Indiana and Kentucky transportation officials have tried mightily to avoid talking about the breakdown of cross-river traffic in Louisville, a crucial piece of data to have in determining who will actually pay for $2.6 billion in two new bridges if it is done largely through tolling. But a new scientific, independent poll released today exposes that Hoosiers will pay four times as many tolls as Kentuckians because that’s how many more trips back and forth across the river they make compared to Kentuckians. In Clark and Floyd Counties, residents actually make five times as many trips as Kentuckians. This means that of all the local bridge tolls being collected, Hoosiers are going to pay 80% of them. This explodes the idea that Indiana and Kentucky are splitting the cost 50/50, which is already ridiculous as it stands.

Only about half of area residents supports tolling to pay for the bridges, which is surprising considering that most of the people are in Kentucky and they are paying next to nothing comparatively. Hoosiers seem wise to this game however, as only 36% of residents of Clark and Floyd Counties approve of tolls.

To recap: The two states were able to reduce the cost of the overall project by $1.5 billion, but Indiana gave away $1.7 billion to Kentucky, meaning its share of the costs actually went up by $200 million. Indiana also agreed to built a 1.4 mile approach road and tunnel in Kentucky for $795 million – a staggering $100,000 per foot – that is now the most expensive highway project on Indiana’s books.

I always knew tolling would be bad for Indiana, but now we know how bad. I wouldn’t mind if Hoosiers were paying for the East End bridge that makes sense (minus the gold plated, fraudulent tunnel on the Kentucky side of the river), but to pay for nearly the entire project is ludicrous.

I’m on record as being a Mitch Daniels fan, but he’s clearly screwed up badly on this one. He seems desperate to put another feather in the cap of his legacy by getting yet another highway project that had been stalled for years actually built on his watch. But the cost to Hoosiers here is just too high. He’s throwing his own southern Indiana constituents under the bus with this one by cramming a horrible business deal and tolls they don’t want down their throats. It’s time to change course big time before a terrible mistake gets made.

Indiana’s Bridge Deal Boondoggle
Part 1: A Financial Fiasco
Part 2: Hoosiers to Pay Even More With Tolling
Part 3: Indiana’s Mini-Big Dig
Part 4: A Better Way

Monday, April 2nd, 2012

If You Don’t Like Privatization, You’ll Have to Do Better Than This

The Washington Post has an interesting piece from Brad Plumer called “More states privatizing their infrastructure, are they making a mistake?” that has been passed around a lot by privatization skeptics. But judging from the contents of the piece, the only answer you can reach to the headline’s question is No. Though those forwarding it around suggest it is skeptical towards privatization, the author actually seems to like it and even his negative takes actually make the case for it.

A few of the legitimate risks of privatization were highlighted, but no actual examples of where privatization didn’t work out. Surprisingly, the one clear bona fide case of a privatization disaster, the Chicago parking meter lease, didn’t rate a mention. Instead, Plumer foolishly focused on the Indiana Toll Road lease.

The piece cites critics who suggest Indiana in effect just bonded out a future revenue stream in order to spend cash now. Of course this is true in a sense. But it misses the bigger point. The Indiana Toll Road had been a breakeven proposition at best for 50 years. It hadn’t even paid to maintain itself, much less to do anything else. The notion that somehow the state could have raised tolls itself and diverted the money elsewhere is purest fantasy. It would never have been possible politically. So the lease turned a break even asset into $3.9 billion for the state – that’s called a good deal.

Also, it’s worth noting that the private consortium who leased the Toll Road radically overpaid – by more than billion dollars. That’s not according to just Yours Truly, but also independent business press like Barron’s, which described the purchase as “one of the most illogical prices paid for any major piece of transportation infrastructure.” This is “free money” to Hoosier motorists and taxpayers they would never have been able to realize elsewhere. (See “Foreign Investors Hurting, Hoosier Taxpayers Smiling” and “Major Moves Is Majorly Great” for more details).

Plumer also notes “gotchas” in the contract, such as Indiana having to reimburse the vendor for temporarily removing tolls when a nearby freeway was out of service. Possibly Indiana could have done a better job negotiating here, though this was clearly an extraordinary event. But what’s more important here is that Indiana put $500 million of its windfall into a long term reserve, the earnings of which should more than cover any occasional compensation events. The types of claims Plumer cited are already pre-funded. It’s probably better to use a reserve for unexpected items rather than to try to imagine every conceivable problem that might go wrong in the next 75 years. This reserve also will generate funds for ongoing road projects for many years to come.

So while I agree states should proceed with caution on privatization, using a deal that was a grand slam home run as your only example of what can go wrong only shows exactly what a great deal privatization can be for the public.

More on Privatization
Parking Meters and the Perils of Privatization
Can Chicago Get Out of Its Parking Meter Lease?

Principles of Privatization:
Part 1: Taxonomy of Transactions
Part 2: Value Levers
Part 3: Use of Funds
Part 4: Guidelines for Action

Wednesday, March 28th, 2012

Manhatta

That great site How to Be a Retronaut pointed me at this great 1921 silent film of New York City by Paul Strand. It’s called “Manhatta” and provides a unique look at NYC at the early part of the 20th century. If the video doesn’t display, click here.

Also on the Retronaut recently was this 1925 “infographic” from Popular Science Monthly about how we may live and travel in 1950, and how this new world might solve congestion problems…..

Tuesday, March 27th, 2012

Applying Jane Jacobs Tenets of Vibrant Neighborhoods to Car-Based Cities by Tory Gattis

[ Tory Gattis is a former McKinsey consultant who writes about urbanism for the Houston Chronicle, in his blog Houston Strategies, and elsewhere. He's an unabashed and articulate proponent of the "Houston model" of urbanism. In this post, he applies Jane Jacobs' views of the virtues of density to a car-based city like Houston. While I realize many won't appreciate this point of view, I want to continue to present a variety of well-argued positions that challenge the thinking of all of my readers at some point along the way. Next week, Tory applies the insights of this piece to Houston vs. Manhattan - Aaron. ]

Jane Jacobs four tenets of vibrant neighborhoods are, in short form:

1. Mixed primary uses that create traffic/vibrancy throughout the day
2. Short blocks to make neighborhoods more walkable
3. Mixed age and overhead buildings to enable a diversity of businesses
4. Population density

To put them in context, it’s important to understand that Ms. Jacobs formed these tenets while observing her Greenwich Village NYC neighborhood (and similar ones) during the 1950s (the book came out in 1961). It was an urban world in the midst of a major transitional upheaval, as the car moved from a luxury to a standard household item for the middle classes. Cities at the time had been built around walking and mass transit, and accommodating the car was traumatic: too narrow streets, not enough parking, and freeways plowing through neighborhoods. Today, the vast majority of us live in an urban/suburban landscape built around the car – with accommodations for parking and major arterials and freeways – which makes the tenets seem almost quaint and disconnected from our modern world.

The problem as I see it is that these four principles have hardened into dogma in the urban planning community without really understanding the meaning and philosophy behind them. To some extent, I even think Jane Jacobs herself suffered from this too-narrow understanding of her own insight. Let’s see if we can get to the true essence of these principles, and then talk about how they might apply to modern car-based cities.

The goal is a very subjective concept called “vibrancy.” What is vibrancy? To put it simply, vibrancy means a buzz of people interacting and transacting in win-win exchanges – both economic and social. Vibrancy was very visible in Jane’s world: people on the street and sidewalks, jostling and bumping as they went about their daily businesses, often in street-level retail establishments just off the sidewalk. In the car-based world, that vibrancy is more hidden. Sure, you can see the cars (sometimes way, way too many cars in congested traffic), but you don’t really see the people or the interactions as they hide inside the cars, strip centers, and office buildings. They’re there, but we don’t “feel” them as much as we do in a classic Jane Jacobs walkable neighborhood.

Vibrancy starts with a very simple decision: is there some interesting or necessary activity that draws me out of my home? Work? Shopping? Socializing? Whether I’m in a walk-up apartment in New York or a house in the suburbs, the question is the same. More options increases the likelihood of drawing me out. And I have to weigh-up those interesting options against the barriers to going out, particularly mobility: how much time, effort, and money is required to go do this activity? A good, cheap restaurant is an easy choice when it’s right down the street, but a harder one in heavy traffic with unpredictable parking or with some long walks and subway rides in possibly unpleasant weather. There’s always leftovers in the fridge and something on TV, the mortal enemies of “vibrancy”.

The flip-side perspective is that of the business owner: what kind of reasonable customer base will I be able to draw on? The more barriers between me and them, the less likely they are to patronize my business. What is my “draw zone”? The more people – and the more money – in that draw zone, the better my prospects. That means a larger diversity of businesses can be supported.

Looked at through these lenses, Ms. Jacobs’ four tenets make instant sense. If you assume walking as the primary mobility mode, distance becomes a major barrier to vibrancy. Taxis are expensive – not to mention a major pain to flag down, even in NYC – and transit is generally a hassle, slow, and loses time in waiting and transfers. Thus we need as many interesting activities and options as possible within as short a distance as possible to get vibrancy. Mixed-use and mixed-cost buildings increase the variety of options within that short distance – and more options increases the likelihood that one or more of them will be attractive enough to draw you out on a given day, evening, or weekend. Short blocks make walking routes more direct, and put more options within the same travel-time range. And density provides the raw fuel of consumers to keep all those interesting street shops economically viable. The more eclectic a business, the larger the draw zone – in size and population – it needs to stay viable: convenience stores and dry cleaners are easy – offbeat bookstores and sushi restaurants are harder to support. The mobility zones are so limited in this world, that the only way a neighborhood reaches critical mass for vibrancy is to stack as many people as possible right on top of the businesses: mixed-use and density.

In the car-based world, distance becomes far less of an impediment. Speed determines the “mobility/draw zone” – fast arterials and freeways with minimal congestion. Short blocks and mixed-use become somewhat irrelevant because the pertinent geography now spreads over miles instead of blocks. Mixed age/cost buildings are still important, but over a much larger area. Harsh zoning and permitting can limit commercial space availability, increasing scarcity and prices and driving out lower value uses, thus limiting commercial diversity (see yesterday’s post on Opportunity City vs. Pleasantville). Density still matters somewhat, but far less than before. Generally speaking, in Jane’s world, mobility is relatively fixed and slow (walking, transit), but density is variable – therefore the key to vibrancy is to pump up density. In the car-based city, density tends to stay in a reasonably narrow and low range because of the need to accommodate cars and parking – plus consumer preferences for stand-alone homes – but mobility is variable: average trip speed is very dependent on the availability of high-capacity, smoothly-running arterials and freeways. I would go so far as to call the freeway the “short block” of the car-based city because of its similar relative improvement to the size of the mobility/draw zone.

So the four tenets of vibrancy transformed for the car-based city get reduced to two:

1. Loose zoning/permitting constraints to enable both a wide diversity of businesses as well as population density where there is consumer demand (apartments, condos, townhomes)
2. Maximized mobility with a well-designed, high-capacity arterial and freeway network

These two principles maximize the population within the largest possible mobility/draw zone, which gives vibrancy its best chance of reaching critical mass and flourishing.

All of this is not to say that car-based cities like Houston don’t need mixed-use, walkable neighborhoods – but they’re not required for us to be a vibrant city/metro. A “nice-to-have” amenity, if you will. What’s going on in downtown, uptown, midtown, and The Village (among others) are good, healthy developments – and I think Jane would approve – but they’re not the end-all/be-all of vibrancy.

Next week, we’ll go into more depth on density vs. mobility by comparing Manhattan and Houston trip scenarios, and what that means for vibrancy, “suburban monotony”, frontage/feeder roads, and Jane Jacobs’ “dead zones”.

This post originally appeared in Houston Strategies on May 3, 2006.

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Telestrian Data Terminal

A production of the Urbanophile, Telestrian is the fastest, easiest, and best way to access public data about cities and regions, with totally unique features like the ability to create thematic maps with no technical knowledge and easy to use place to place migration data. It's a great way to support the Urbanophile, but more importantly it can save you tons of time and deliver huge value and capabilities to you and your organization.

Try It For 30 Days Free!

About the Urbanophile

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

Full Bio

Contact

• arenn@urbanophile.com
• twitter.com/urbanophile
• linkedin.com/in/aaronmrenn

Please email before connecting with me on LinkedIn if we don't already know each other.