Wednesday, November 20th, 2013
This week it’s back to time lapses, with “Nightvision”, a sort of greatest hits our of famous buildings in various European cities, shot at night of course. As always, full screen recommended. If the video doesn’t display for you, click here.
Tuesday, November 19th, 2013
[ This week's guest post is from Sam Hersh. I'll hopefully have more of my own perspectives on the de Blasio phenomenon in the future. In the meantime, here's his take - Aaron. ]
When Bill De Blasio won New York’s mayoral election a few weeks ago, it came as no surprise to anyone. His impassioned analogies to New York’s “Tale of Two Cities” and his call for a city that provided not just for the wealthiest one or two percent, but for all, appealed to the growing sense that New York is an increasingly unfair and unequal place.
The angst felt by New Yorkers is not contained only to that city. In Chicago, real estate companies have poured investment into the Loop and a handful of adjacent residential and mixed-use neighborhoods. Yet, whole swaths of the city’s south and southwest side have remained in a state that would rival war-zones and have earned the city a reputation as America’s murder and gang capital du jour. San Francisco’s recent transit strikes, and the ensuing scandal that followed a Silicon Valley tycoon’s less than empathetic statements on Facebook have highlighted that city’s class tensions.
Saskia Sassen pointed out in her 1991 book The Global City that globalization and modern technologies should push wealth and geopolitical power to a small number of globally connected and powerful metropolises. And in many ways, this thesis has born itself out as financial centers in New York and, to a lesser extent, Chicago and Boston as well as technology in San Francisco and “Eds and Meds” in Philadelphia, Pittsburgh and Boston have all “revitalized” these legacy cities that only thirty years ago would have been widely assumed to be dead. Meanwhile, smaller, less connected legacy cities have shrunk in global importance.
Left out of many people’s analysis of Sassen’s writings – an analysis that equates geopolitical power with urban success – is the simple fact that a geopolitically powerful city does not always mean a city of evenly distributed wealth or equality. The urban poor in New York, Chicago, or Philadelphia are not necessarily better off than those in Buffalo, St. Louis, or Detroit. In some ways, the low cost of living in “unsuccessful” legacy cities means that quality of life is in many cases better than in those cities widely regarded as a success.
Given our assumptions about urban success – that it should involve a thriving private sector, a critical mass of wealthy taxpayers, and a sustainable level of investment (as an aside, I know few people who would describe investment in New York as “sustainable” at this point) – it should come as no surprise that the method most commonly employed to realize these goals, economic development, would fail so spectacularly to deliver positive changes in the lives of the urban poor.
While a thriving private sector, a critical mass of wealthy taxpayers, and a sustainable level of investment certainly register among the necessary descriptions of a successful city, urban economic development too often equates better cities with attracting better people at the cost of dealing with the populations already residing within a city. While the last few decades have seen the resurgence of once decrepit metropolises through TIFs and BIDs and tax breaks aimed at capturing employers of what Richard Florida would describe as “the creative class” – engineers, lawyers, artists, and bankers – De Blasio’s win, along with political movements like Occupy Wall Street augur a shift in focus from the technocratic priorities of Giuliani or Daley to a De Blasio-style redistributive view of urban justice.
So far I have ignored a bit of nuance between Bloomberg’s market-oriented (some might say neoliberal) focus on growth in “creative class” (high skill and high pay) sectors, and his classically progressive restraints in other initiatives (smoking, trans fat) and the degree to which other mayors have followed New York’s lead in this type of leadership. While I tend to hope that a market-oriented solution to urban problems can be found, the vehicle for urban revitalization seems almost irrelevant when we consider the degree to which it has benefitted the urban wealthy at the exclusion, and occasionally cost, of the urban poor.
Obviously, inequities in quality of life have been most pronounced in New York where wealth is profligate and new construction has been tightly regulated, pushing cost of living ever upward. Yet, the De Blasio election means less for New York’s poor than it does for the country as a whole. Whether the Rahm Emanuels and Michael Nutters of America’s cities are replaced by De Blasio democrats in the next election will mean a lot for the priorities of development in our cities.
It’s easy to dismiss the De Blasio win as an event isolated to the confines of New York as the logical end to both Bloomberg’s overreaching policies and “quality of life” initiatives which arguably placed a premium on attracting and retaining the wealthy. But, we should not ignore the very real possibility that De Blasio’s win, and the disdain growing for economic development-focused politicians, may lead to a spiral of urban disinvestment wherein wealthier taxpayers leave cities, making cities ever less attractive places to live, thereby further escalating the effects repelling the middle and upper classes from urban cores. The reason we should not ignore this possibility, though it may seem inflammatory at first consideration, is simple: we are still recovering from its effects throughout the last half of the previous century.
Yet, De Blasio is probably not as leftist as right-leaning pundits have bombastically proclaimed in the wake of his election. Hopefully, De Blasio and the growing urban left can pull off a type of development that prioritizes development for all, not just for the wealthiest residents, without falling into the traps of the union-entrenched Democrat machines that oversaw the urban perdition of the last half century. The death of urban economic development may well be upon us, but hopefully if it is, something that provides for the development of the whole city will emerge.
Sam Hersh is currently a student of urban studies at Haverford College in Pennsylvania hoping to use the worlds’ cities to more effectively catalyze human opportunity when he graduates. He can be reached at firstname.lastname@example.org.
Sunday, November 17th, 2013
Not long ago there were pretty clear boundaries between the personal sphere and the commercial one, as well as more clear boundaries between public and private space. What’s more, most things, both personal and commercial, were heavily based on a model of exclusive use. Today these lines are increasingly dissolving in ways that upset current business models and lifestyles. It portends a present and a future in which property is increasingly shared, not exclusive, and where there are a mixture of public, private, personal, and commercial entities intersecting in the same spaces. The key driver of this is technology, which has reduced barriers and transaction costs in a way that enables things like car sharing that would have been impossible not long ago. However, our legal frameworks have often not kept up with this. Some people who benefit from the current models would like to keep it that way. But if we let the marketplace evolve, then institute good rules to fit this new reality, it promises to hold huge benefits to the public.
First an example that’s by now old hat. In an age before cell phones and personal computers, there was a more rigorous separation of work and personal life. People need to be physically co-located in a office. They commuted there every day, worked in a dedicated personal office or cubicle, then went home where work as a rule did not intrude. Today’s workers are checking email every waking hour (and even being interrupted during the night), while also spending much more time on personal things (online banking, fantasy football, or random web surfing) while in the office. The internet has enabled distributed work environments, in which teams collaborate from offices, airports, and homes around the world. Companies increasingly have turned to “hoteling” or other shared space concepts in the office on the assumption employees no longer need dedicated space. Many people have flexible work arrangements or otherwise telecommute. In the latter case, home and office have literally merged.
This has had huge benefits across the board. Companies love it because they can access cheap labor pools overseas, effectively recruit people with a need for workplace flexibility, and reduce their office space needs. Joel Kotkin has said the latter trend may mean America has hit “peak office.” Workers get the flexibility they like, can save on commuting costs, access geographically remote clients, etc. The environment benefits from reduced commuting. The ultimate green commute is one you don’t have to make. I would say that the balance of the benefits here has accrued to business, while workers have sometimes had arrangements they don’t like forced on them. Still, on the whole this shows great promise of being a win, win, win.
The “hoteling” concept and “just in time” delivery aren’t limited to corporate uses. Things like car share are bringing them to the household market. The average personal car is supposedly idle 90% of the time. When you factor in all the additional infrastructure costs needed to support a one person, one car model (e.g., parking), the deadweight loss from all that idle capacity is stunning. Imagine factories that sat idle 90% of the time doing nothing. If a corporate manager had this low a rate of asset utilization, he’d be in deep trouble.
When you sign up for Zipcar or another service, you avoid some of this deadweight loss. By effectively sharing a fleet of vehicles with others, a relatively small number of cars can serve a large number of people, greatly improving asset utilization rates and delivering big value to consumers, even when they are paying a business to manage the fleet for them. It’s a huge form of productivity gain. This also has the effect of converting transportation from a largely fixed cost to a mostly variable one, with signficiant impacts on the decision making process for everything that involves transportation (mostly positive, I believe).
Though having a limited addressable market at present, obviously car sharing in the Zipcar style poses a threat to the entire US car industry, arguably one of the most important employers in the country and one President Obama himself personally intervened to save during the meltdown. Clearly the highest levels of politics in America will defend the car industry, though to date there’s been very little complaint from them about car sharing.
Things have been different when it’s transport service providers who are threatened. Public transit agencies have long been unrelentingly hostile to jitney services. Today car service booking tool Uber and ride sharing company Lyft have experienced an all out regulatory assault from entrenched interests. Lyft is a particularly interesting case. It’s a peer to peer ride sharing platform. Just as 90% of the time a private car is unused, when it is used, 80% of the available seat capacity goes vacant. Again, this is a massive deadweight loss. (The amount of theoretically wasted capacity in the world of private cars is stunning). Imagine an airline trying to make a business out of 20% load factors. It just doesn’t work, yet we as individuals run a “business” like that every time we drive our cars solo. Lyft helps fill up those empty seats, and even get some money – “donations” – in the process.
In other words, Lyft is a business that effectively turns your personal vehicle into a pseudo-livery vehicle. I’ve long argued that we should have “every car a jitney” by legalizing it and having personal auto polices cover ancillary commercial use as a matter of course. Lyft is trying to solve that problem and make it happen. Obviously the traditional “commercial” sector (e.g., taxis), which is highly regulated and subject to many taxes and fees hates this. They feel, rightly to some extent, that there’s a double standard. This is the type of conflict and legal uncertainty are spurred when the boundaries between personal and business, and between exclusive and shared use, start breaking down.
The big kahuna in provoking outrage of late has been AirBnB, an application that lets people rent out rooms in their homes as de facto hotel spaces. Again, the same principle applies. An empty bedroom is deadweight loss just like an empty office or an idle factory. It makes sense to put those spaces to work where feasible. This had been done previously in the form of house swaps and couch surfing. But the rise of commercially oriented AirBnB has raised hackles, especially in governments that have strict rules and high taxes on hotels. There have been a number of media articles of late taking note of or weighing in on the controversy. For example, in the New York Times piece, “The Airbnb Economy in New York: Lucrative but Often Illegal.”
Again, the benefits are clear in the improved utilization of space which is a pure efficiency gain. What’s more, AirBnB was even used by the government during Hurricane Sandy to find temporary free housing for those displaced by the storm. Peter Hirshberg noted that this type of distributed app might be the real killer app for smart cities, and will play an increasingly important role in urban resiliency. But it legitimately does create a set of parallel environments and rule sets, and exposes a world in which ancillary commercial activity at a residence is something that doesn’t really fit into our existing categories.
The list of situations like this are endless. Many zoning laws don’t appropriately allow home based businesses. Fund raising bake sales have been banned because it’s not legal to sell products prepared at home. In some places there have been issues with selling vegetables from home gardens.
Then there’s the disputes arising from the increasing use of public space for commercial purposes, whether that be curb side intercity bus service or food trucks. Pushcart style food vendors, often ethnic, are also often technically illegal (e.g., rogue elotes stands).
In short, traditional barriers are falling and boundaries are dissolving, especially when it comes to those key dimensions of personal-commercial, exclusive-shared, and public-private.
I don’t want to suggest all of the complaints about these are unfounded, though many of them are pure rent seeking. From the standpoint of someone running a fully commercial operation, who complies with massive amounts of costly red tape, it certainly seems unfair that others are allowed to operate what are basically businesses under a lighter tough regulatory scheme. The status quo isn’t necessarily where we need to be.
But let’s take a step back and look at the big picture. Our economy is in huge need of a massive injection of dynamism and new value creation. Many observers have said we need a completely new economic model. Walter Russell Mead has called this “beyond blue”. Richard Florida styles it the “great reset”. But clearly the old ways of doing things aren’t working and we need change.
This new style “shareable” economy based on peer to peer production in a distributed, small scale form is one that promises to provide at least part of the answer. It also renders addressable a huge amount of previously trapped value. Companies reaped huge amounts of gains by eschewing vertical integration in favor of more networked relationships. That’s corporate-speak for peer to peer sourcing. Similarly, things like hoteling, just in time delivery, etc. have let to much greater and more effective asset utilization. The amount of under-utilized assets in the household sector is stunning. This is about bringing to that household sector the same types of efficiency boosting and value creating techniques previously employed only by traditional businesses.
But beyond the sheer efficiency gains, I think it’s under appreciated in developed countries how economic informality can create economic dynamism. Peruvian economist Hernando de Soto noted that lack of property titles and difficulties of the formal economy perpetuated poverty because people in developing countries couldn’t access the system for credit to fuel business, etc. In the developed world we’ve got a similar problem brewing. Our economy has been largely entirely formalized to the point where we are choking in red tape that has produced an economic system that has failed too many of its residents and leading to the creation of these informal economies as a safety valve. And our societies are very ill equipped to deal with that as we’ve become excessively formalized.
We don’t need to establish property titles as we already have them, but we do need regulatory systems that enable entrepreneurship and new business models like peer to peer to thrive. What’s more, I think enabling some level of an informal sector to flourish is actually a good thing, as it’s a de facto “incubator” for new ideas that can later be developed into a more officialized system. Without a toleration of informality, these would never get off the ground. I’ve highlighted how this worked with regards to uncertain property titles on abandoned buildings in Berlin that helped launch the creative scene there. I also highlighted similar trends in Detroit. Those again were born of desperation, but we’re starting to get there in our economy more broadly.
It seems hypocritical to me for businesses to suggest that consumers be prohibited from doing exactly what business does every single day to improve productivity and generate more value. (It would hardly be the first time though. Business love globalization – for themselves. They can buy raw materials in Brazil, manufacture in China, do their IT in India, etc. But you try applying “consumer direct globalization” by purchasing your drugs from Canada or buying an out of region DVD and see how far you get. It’s a completely two tier system designed to free corporations while trapping the consumer in hyper-segregated markets).
This would seem to be one area where the left and right could agree. Free marketers should love light-touch regulation and lower taxes in the new peer to peer economy. The left should like the way it frees consumers from dependency on big business/neoliberalism, sustainability, etc.
Adjusting our rules to make this happen is an imperative. A non-profit called Shareable and the Sustainable Economies Law Center recently issued a report called “Policies for Shareable Cities” that talk about what a lot of places have been doing to make this happen. For example, they explained how Portland updated its zoning code to allow “food distribution” an accessory use in all zones in order to facilitate the development of the Community Supported Agriculture Model. Similarly, Marcus Westbury has talked about the need to update the software of cities in order to help redevelopment, as he helped with in the Renew Newcastle project.
But beyond new rules, maybe we should just go along with no rules for a while, and let this sector develop. After all, that’s what we did with tech. The government took a hands off approach and the feds even prohibited levying taxes. This helped the United States build a massive industry off internet technology, one that has continued to thrive even with the rise of offshoring. We should do the same here to see if we can replicate that success with peer to peer shared production in the household/personal sector.
Thursday, November 14th, 2013
My latest column is in the November issue of Governing Magazine. It’s called “Stopping the Civic Decline Cycle.” In it I urge cities to get a real grip on their problems and restructure for new realities rather than simply managing an endless, painful decline cycle year after year. Sadly, facing fiscal challenges right in the face rather than kicking the can down the road and trying to survive another year has proven to be quite rare. I don’t want to claim this is some preferred solution. But cities are where they are and have to respond to reality.
Here’s an excerpt.
The cycle of municipal decline looks the same in a lot of places. People and businesses leave, which causes tax revenues and quality of place to degrade. That, in turn, leads to tax increases and service cuts, which makes more people and businesses leave. This repeats in an endless cycle as a city slowly dies.
Rather than an endless stream of crisis management, cities should instead take a realistic forward look at their civic trajectory—medium-term revenue forecasting, demographic and economic forecasting, capital asset replacement cycles, and so on—and restructure the services delivered and revenues raised in order to create a sustainable baseline that can be defended over at least the medium term. This would enable cities to provide some degree of predictability to current and prospective residents and businesses about what their tax bills and services received will be. That right there will improve the business climate by reducing uncertainty and the, often correct, belief that most cities just don’t have a handle on their problems.
Wednesday, November 13th, 2013
This week a trio of short films about Johannesburg, South Africa.
The first is a 1971 film by Alan Michael Levy called “Up the City.” It was uploaded by his son, who gave it a new contemporary soundtrack. I’m not sure entirely what to make of this, but it’s a peek behind the veil of apartheid South Africa (though not an overtly political one). Thanks to Urbanophile reader Stéphane Dumas for this. If the video doesn’t display for you, click here.
The second comes from a recent post by Kaid Benfield. It gives us a bit of the feel of the changes in South Africa through the lens of a building called Ponte Tower. Benfield’s article on it is also worth checking out. If the video doesn’t display for you, click here.
Lastly, another look at contemporary Johannesburg. This one is another in the series of Resident Advisor documentaries on electronic music scenes in various cities, in this case, the Johannesburg house scene. If the video doesn’t display for you, click here. (You’ll have to click over to the Vimeo site for high def).
Tuesday, November 12th, 2013
[ Ramsin Canon is one of the most keen left political observers I know in Chicago. Among other things he's been the politics editor at Gapers Blocks, a union organizer, and is now a law student I believe. Needless to say, he's no fan of "neoliberalism", even when practiced by those on the left. Here he provides his frame and critique of the current reigning governance model in our various levels of government re:cities. I may revisit this topic with my own thoughts in the future, but I'd like to make a couple of observations here. 1) Canon sees the locus of the problems facing cities as being at the federal level or otherwise beyond their control such that the response he decries is at least somewhat rational (if not the right one in his view). I take this as similar to my view that "gentry liberalism" has a certain sort of logic to it. 2) His articulation of the background is one that even many with diametrically opposite policy views could endorse. They just might take different lessons away (e.g., that federal intervention in cities actually caused many of the problems, see:urban renewal, downtown freeways, war on poverty, etc). This provides potential touchpoints for debate. In any case, this definitely makes you think about where we are, how we got here, and what to do about it. - Aaron. ]
Jamelle Bouie, a moderate liberal writer for The American Prospect, tweeted this:
There’s nothing good for workers in places where cities scramble to give benefits to companies for a handful of shitty jobs.
— Jamelle Bouie (@jbouie) December 12, 2012
around the same time that Mick Dumke, a left-leaning Chicago Reader reporter, wrote this:
Desperate for money, state and local governments around the country have explored all sorts of privatization deals, or public-private partnerships, as advocates prefer to call them. Florida, Arizona, and other states have sent inmates to private prisons. Detroit has considered outsourcing management of its street lighting system…Chicago isn’t just part of the trend. For more than two decades, it’s been one of the privatization leaders. “You could say they’re at the head of the pack,” says Leonard Gilroy, director of government reform at the libertarian Reason Foundation. “Chicago is reflective of the outsourcing that’s been going on for years.”
Not long after, we read about this:
Beginning January 1, Chicago’s parking meters will be the most expensive in North America. It’ll cost drivers $6.50 per hour to park in the Loop. Near downtown the rate will be $4 per hour. Other metered areas throughout the city will be $2 per hour.
For Skyway drivers, tolls are going up from $3.50 to $4.
Mayor Rahm Emanuel’s administration will explore the possibility of privatizing Midway Airport but will take a shorter-term, more tightly controlled approach than was employed by former Mayor Richard Daley’s team on the city’s first go-round.
All the while, Mayor Rahm Emanuel continues to be lauded by left-neoliberals and fellow travelers for his aggressively pro-business economic development policies, including mass privatization. Meanwhile labor unions and community organizations scrambled to find a critique of these policies that will resonate with a public increasingly incensed with a policy atmosphere that regressively taxes them while slashing jobs and services.
With the election over and no longer sucking all the air out of the room, and with President Obama comfortable ensconced in his second term but before the 2016 jockeying starts in earnest, now may be the time to step back and think about the big picture. What is this amorphous policy regime to which Mayor Emanuel, and mayors across the country hew? A policy regime that is comfortable enough for the wealthiest and most powerful Americans that they can comfortably donate both to Mayor Emanuel and Mitt Romney?
What we’re feeling viscerally, but seeing from too close to appreciate, is the logical end of decades of neoliberalization of government, which has transformed a managerial state into an entrepreneurial one. Our Mayors are now “entrepreneurs-in-chief,” and the result is that governance has been transformed from a participatory process of pooling resources and regulating behavior for the public good into one of government by private negotiation and enticement of capital through competition between states, cities, and even neighborhoods.
The neoliberalization process, broadly speaking, began in the 1970s. Neoliberalization impacted local governments in various ways, but the most directly relevant are, first, the shift in federal policy from direct spending to “pro-growth” policies and, second, the liberalization of trade and regulatory regimes that introduced international competitive pressures on localities, particularly cities. The abandonment of federal and state commitments to infrastructure and social welfare programs required localities to resort to debt (in the form of bonds) and the active pursuit of capital investment to make up attendant budgetary shortfalls. The introduction of international competitive pressures made this need more acute.
In the pre-neoliberal Keynesian context, cities behaved more managerially, responsible for administering programs like public housing and developing regimes like Euclidean zoning, as well as encouraging business development and protecting labor interests. When cities were “disciplined” by a loss of federal and state funds, they were expected to either shrink in size or find private sources for revenue–the antithesis of the Keynesian principles of recession response. Both to avoid capital flight and to attract new capital, therefore, cities must act entrepreneurially, engaging businesses and enticing them to develop new projects.
Enticing investment can take many forms, of course. Among these are tax incentives like tax-increment financing (“TIF”) overlay districts or sales tax rebates, direct subsidies, and “particularized” regulations that permit the government to be more flexible to the needs of development parties. Particularized regulations (for example, development agreements with developers that exempt them from the controls in a zoning statute) counter the unpredictability and vicissitudes of the administrative and legislative process and thus have inherent value to businesses; it reduces risk by vesting contractual rights, and thus ensuring predictability. The parking meter “lease” deal is a perfect example.
The story of the parking meter lease deal is the perfect neoliberal story. Throughout the late 90s and early 2000s, Chicago’s budget survived in large part on a particular tax, the real estate transfer tax. In the housing bubble years, there was no problem relying on this revenue to fund transportation, mental health clinics, and living wage city jobs. But as with the neoliberal bubbles of the past, it couldn’t last; between 2006 and 2009, revenues from the transfer tax cratered, from $242 million to $63 million. Between 2007 and 2008, the drop was over $80 million–representing nearly 40% of the budget deficit in the year the parking meter lease deal was made. It’s no secret now that Mayor Daley entered the deal to make up for a huge deficit without raising taxes.
Bubble that made some people very rich bursts. Revenues disappear. Working class families pay the price (see above, “most expensive parking.”) Only two options are available to the government of the New Model Entrepreneurial City: race to the bottom in terms of taxes and regulations to encourage “growth,” and thus boost revenues, and start selling off assets.
Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts?
See above; Chicago is no longer a political community, it is an economic entity that is in competition with other cities in the region, in the state, across the world. In that mental framework, tax is cost, or price. You raise prices, you drive away your clients. In the case of the neoliberal city, the client is the developer, the investor, the employer. The federal government and the state are not going to give the city any real money; they are not investing in infrastructure, or education, or social welfare in any real way, the way they did up through the late 1970s and 1980s. The name of the game is “growth” through enticement of capital.
And capital plays the game perfectly. They condition “jobs” they’re supposedly creating on tax rebates, regulatory relief (i.e., from zoning codes), and more and more say in how the city is run–World Business Chicago being an example of that. Big business can always periodically threaten to leave the city, setting off the competition between cities and states that drive down standards, that abrogates regulations, that eliminates taxes.
This is our challenge in the coming era. Breaking this backward idea that the purpose of the city is to prostrate itself in pursuit of investment that is never really satisfied. Part of this will be a political solution: we need a Mayor unsatisfied with his pathetic role as an entrepreneur begging for investment, and willing to work politically to change the status quo. The other answer is a social one: alternative models to big business investment. Whether that means large-scale cooperatives, developing local sources of investment that can be pooled to provide employment, or some other method doesn’t matter. What matters is that cities begin to show that they can remove themselves from the uneven geographic development of capitalism that forces cities to regressively tax working class families and immiserate workers through wage depression and service elimination.
This post originally appeared in Same Subject, Continued on January 4, 2013.
Monday, November 11th, 2013
Ok, the great local autonomy debate is underway at Public Sector, Inc. Please check it out: Do Cities Need More Autonomy?
I’d greatly appreciate serious commentary on this topic. How do we empower cities without empowering the worst abuses? To encourage you to post your comments on the debate itself, I’m disabling them here. Definitely check it out. Rebuttals are tomorrow, as well as further questions and concluding thoughts later in the week. Again, here’s the background:
Cities have become an indirect beneficiary of the federal governments’ ever-growing reputation for dysfunction. This year, the Brookings Institution, Benjamin Barber, Thomas Friedman and David Brooks have all argued that city governments are now setting the standard for effective policymaking across the nation. Some believe that cities’ recent record justifies devolving more responsibilities to the local level, or at least reining in burdensome state and federal mandates. Already free from the incompetence and partisanship that continues to paralyze the federal government, perhaps cities deserve more autonomy to do more, and if we grant it to them, the nation as a whole would benefit.
But before asking them to do more, we should carefully assess how well cities are meeting their current obligations. The results are not, in every respect, encouraging. A recent Wall Street Journal series highlighted city governments’ fiscal woes, which still persist over four years after the recession ended, and have sometimes resulted in insolvency. Weak leadership and management are far-too common, especially among the nation’s many small and mid-sized cities. Some cities, in some areas, may be achieving great things. But it could just as easily be argued that, generally speaking, local governments’ problems and need for reform merit more attention than their achievements. And it’s far from clear that liberation is the most promising path to reform. More oversight, by state governments or federal bankruptcy judges, has certainly proved to be unavoidable in the case of Detroit and other fiscally-distressed cities.
So do cities need more autonomy?
Sunday, November 10th, 2013
I was surprised to see that last Wednesday’s post on Cincinnati’s culture of self-sabotage received such a huge response. In light of that, I want to circle back and more fully address the idea of cancelling projects.
What I do not want you to take away from that is that once started, projects should never be stopped on account of the money spent. That’s called the sunk cost fallacy. Money that’s been spent has been spent. One needs to look forward to the future expected benefits and costs. There are certainly many cases in which pulling the plug can be a good idea. For example, Indiana Gov. Mitch Daniels reversed the privatization of certain social services functions after he determined it was unlikely the contract would ever work out like originally envisioned. This an example of someone taking a risk, trying to make it work, then acknowledging it didn’t rather than continuing to double down on a mistake.
On the other hand, I do not see the majority of these rail cancellations as having anything to do with benefit/cost analysis. You may notice, it’s only transit projects that ever seem to get the ax. Since the era of the freeway revolts, it’s tough to name any governor or mayor that has ever sent back earmarks on a highway project, or ever cancelled any road project they could actually get money to build on the grounds that it’s a boondoggle. (My hypothesis continues to be that there’s no highway boondoggle big enough that even the most fiscally conservative governor is willing to kill it). Clearly, the cancellations in these cases is based on an ideological animus to transit specifically.
That is, unless it is baser motivations at play. Chris Christie’s cancellation of the ARC tunnel project enabled him to use the funds New Jersey had pledged to the project to bailout the state’s bankrupt highway fund. He’s not demonstrated any hesitancy to push even questionable and expensive transit projects when they involve Somebody Else’s Money. For example, he wants the Port Authority to spend a billion dollars on an extension of PATH service to Newark Airport, which many consider an inappropriate use of funds. Christie’s motivation appears to be bribing United Airlines to add flights to Atlantic City, whose gambling market is imploding. (Read up on the Revel Casino deal if you want to know more about this sordid story).
Meanwhile, many of these cancellations are proving to be costly in their own right. I noted before how Cincinnati had already let $95 million in contracts out the total $133 million cost of the streetcar, how it will have to repay federal grants that were going to pay for a big slug of the project, and likely end up with at best a minor financial win and potentially a loss.
It’s the same in Wisconsin. Gov. Scott Walker trumpeted that he was returning an $810 million stimulus grant for rail upgrades between Madison and Milwaukee. Apparently although the federal government was going to pay 100% of the construction costs through the stimulus bill, he didn’t want the state to have to pick up the estimated $7.5 million in annual operating costs. (How much the state actually would have had to pay incrementally is a an open point. The existing Hiawatha operating costs were being 90% paid for by federal funds. It’s by no means clear that the state would have been on the hook for the full amount anyway). The feds were actually generous enough to reimburse Wisconsin for money it had spent on the rail line it decided not to build. However, that did not prove to be the end of the matter. Train maker Talgo is planning to sue the state of Wisconsin for $66 million for breach of contract. Given that it actually built trainsets for the state, this seems like a strong case. Also, if the state does lose, it might also be forced to immediately repay an additional $70 million in loans. The state could have paid operating costs for a long time for that kind of money – and it would actually having something to show for it other than a hole in its bank account.
So from a financial perspective, it’s not even clear cancelling these projects was a good move – even if you look solely at costs and ignore benefits.
But beyond the financials, these types of things also show communities that have deep internal divides, and which as a result require businesses and residents to apply an additional uncertainty premium into investment business cases there to account for the likelihood that a) promised actions by the government may not actually occur, even if they are in flight and b) that the community may not be able to muster the staying power to make the kind of long term investments that are necessary for any community to retain marketplace relevance. Though hardly immune to infrastructure drama, New York City just put water tunnel #3 into service for Manhattan. This is a project that was started in the 1970s. That’s the type of long term thinking that has kept a place like New York on top. In short, credibility counts for something, and places like Cincinnati and Wisconsin have damaged theirs.
I want to contrast this with one of the legendary stories of Indianapolis. In the late 1980s it embarked on construction of a downtown mall. Maybe that wasn’t the best idea in the world. The city definitely didn’t have its act fully together. Two entire city blocks had been excavated and were literally holes in the ground. No anchor stores had been signed and it wasn’t clear if the project would or even could be finished. A lot of the public suggested scrapping the project. Some suggested turning the empty blocks into ice rinks. Others trying to bring in a Wal-Mart. Instead, city leaders across the board came together to commit to the project, including many of the downtown corporations investing in the project. It got built. While generally successful, the mall has certainly had its share of troubles over the years and may not even survive over the long term given the disfavor of the mall format. However, one thing that project demonstrated is that Indianapolis finishes what it starts. In short, they have credibility and an ability to execute that’s simply better than most places. I suspect that’s one of the reasons metro Indy has so outperformed Cincinnati in population, job, and reputational growth, despite having far, far fewer natural assets to start with. They aren’t constantly shooting themselves in the foot.
This is also why even though there are road projects out there I did not think were a wise use of funds – say I-69 in Indiana, to pick one I’ve criticized – once they are being built I’m all in favor of getting them done as quickly and cheaply as possible. And then letting the communities in question live with the consequences of making that choice, for good or ill. Again, that doesn’t mean no project should ever be cancelled, but you need to pick your battles. Communities are not well served when project debates turn into endless years of scorched earth politics, litigation, etc. in which neither side will ever given an inch on anything.
Friday, November 8th, 2013
Clark Williams-Derry, a blogger with the Sightline Institute, has been running a blog series called “Dude, Where Are My Cars?” which examines the increasing disconnect between traffic projections and traffic reality. The Sightline Institute is into sustainability advocacy, so would naturally have an anti-car POV, but there’s some interesting stuff in there. I was particularly struck by this graphic that’s been making the rounds:
In other words, the Washington DOT continues to use basically the same upward slope for future traffic predictions despite the fact that traffic has been on a steady downward slope since 1996. They just slide the origin point down the actual curve. Williams-Derry straightforwardly calls this “B.S.” He then proceeds to give a point by point rebuttal of the DOT’s claims regarding their projection.
He has strong words and in my experience they are somewhat justified. I try to give people the benefit of the doubt, but that’s becoming harder and harder to do in these cases. However, lest we be too harsh, keep in mind that transport is highly politicized, and staff bureaucrats, many of whom are no doubt not particularly well-paid, are under enormous pressure to toe the party line set by the political overlords. It’s not realistic to expect most of them to stick their necks out, particularly when there’s so little chance it would actually affect the outcome in any case. Like with Jay Carney, the job of a spokesman is to aggressively promote and defend the boss and his policies, not to go on some Socratic quest for the truth.
This also shows how incredibly difficult it can be refute DOT claims. Their traffic models are basically black boxes. As we all know, garbage in, garbage out. It’s very easy to tweak parameters in any model to get the results you want. Also, it’s not always obvious what the parameters in fact are. While some items like population and job growth can be fairly easily analyzed and critiqued, it’s usually hard to get a grip on much of the model. If they say the number in 2040 is X, how do you know if it’s too high or too low? Most of the time you don’t.
Thus the person who wants to try to understand if these are legitimate versus manufactured numbers has to read through reams of dry, technical material to accomplish one or both of two things (assuming there’s a problem): show inconsistency between numbers, or draw an easy to understand picture for the public of what the numbers actually imply if you believe them. One the latter point, much like some companies that disclose troubling information right in the prospectus on the assumption no one who happens to read it will notice or care, sometimes the dirt is right there for anyone who wants to read through some material. I’d put the recent Louisville bridge study into that category.
Unfortunately, few people have the time or inclination to do this. And with the state of newspapers as they are, there are very few transport reporters who are able to do a real analysis. This means that when you read the average article about transportation in the newspaper, it’s usually little more than a re-written DOT press release. Given that the papers will print whatever the DOT spokesman tells them uncritically, why not take advantage of that to the max? No surprise, that’s exactly what they do.
Thursday, November 7th, 2013
My latest post is online over at New Geography and is called “To Rebuild, the Midwest Must Face Its Real and Severe Problems.” Lou Mazzucchelli said the other week that when you have systemic problems, you need systemic solutions, not just point solutions to point problems. Clearly, incremental or point improvements can be a good thing, but unless they snowball into a comprehensive solution, they’ll be limited in what they can achieve. In the Rust Belt, most of the strategies for turnaround have been of the point solution variety. They generally attempt to rebuild on the idea of creating “success bubbles” outside the existing broken system in the hopes that they eventually expand to create a new dynamic.
Not a bad theory, and I’d even endorse these in many cases as they’ve shown some positive results, but by failing to address systemic problems, they leave cancers eating away at these communities. In this piece I review some of these core issues, ones that defy easy solutions and that people do not like to talk about in most cases. These include racism, corruption, closed societies, paralysis from two-tier societies, infrastructure, obsolete regulatory systems, and fiscal trauma in many cases. Fortunately, the region does have many strengths, and these could provide a basis for a more broad based rebuilding if the core problems are mitigated.
Here’s an excerpt (click through for the full story):
Despite the plethora of high end companies, educated workers, and top quality universities, the Midwest economy was traditionally based on moderately skilled labor in agriculture and industry. This forged a work force that places too low value on education and which can even be suspicious of people with too much of it. Today’s agricultural and manufacturing concerns, at least the ones with jobs that pay more than subsistence wages, require much higher levels of skills and education than in the past. What’s more, with the global macro-economy favorable to larger cities and talent based industries, larger metros have comparatively done well while most smaller towns have struggled. As a result, their quality of life and services have so badly degraded they are no longer attractive to “discretionary residents” (those with the means and opportunity to leave), which perpetuates a downward spiral as the educated flock to bigger cities. That’s why manufacturers complain they can’t find workers with skills, even if those skills are just passing a drug test and showing up to work everyday. This produces massive inequities, resentment, and policy confusion.
Pete Saunders followed up, suggesting that the South had to over come similar problems. His take is at “Can the Rust Belt Learn From Dixie?“