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Tuesday
Aug062013

Shifting $7,000 from a Car to a Community

This week's select content from the Strong Towns Network comes from Meika Weiss, a full-contact parent who is just beginning to advocate for alternative transportation and smart, livable communities along West Michigan's lakeshore. She has a bachelor's degree in political science and a master's degree in theology and blogs at the site Traversing Tulip Lane. You can connect with her on Facebook, email her good thoughts at meika.weiss@gmail.com or follow her on twitter @MeikaSue.

If you have great content you'd like to share in this space, join us over at the Strong Towns Network. Once a week we take the best of the Network blog posts and share them here. The Strong Towns Network is a great place to share ideas, get feedback and talk about ways to make your place a strong town. Thank you, Meika, for this week's top contribution.

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A while back, I wrote an article on my personal blog about how much money would find its way back into your pocket if you went from being a two-car to one-car family here). It came to $7,000 per year, or $583 per month. At the end of that article, I alluded to the the financial gains that our communities would also see as a result of this shift.

So we're starting today with this premise - you have an extra $580 per month in your pocket as a result of dropping one of your cars. It's great for you - what does it do for your community?

CEOs for Cities says this about the effect of low car-ownership rates in New York City:

It’s no secret that New York City’s high density, extensive transit and excellent walkability are fundamental contributors to the lifestyle enjoyed by its citizens. However, as this study shows, these factors are also major contributors to their economic well-being. Because New Yorkers drive substantially less than the average American, they realize a staggering $19 billion in savings each year — money that their counterparts in other metro areas spend on auto-related expenses. And because they spend so much less on cars and gasoline—money that quickly leaves the local economy—New Yorkers have much more purchasing power to spend locally, stimulating the city’s economy.


(The whole article is well worth a read, by the way. The link again HERE.)

It's tempting to think that this is unique to New York City, but the economic principles are the same everywhere - and we DON'T have to operate at NYC densities in order to make it work. We'll start by looking at why keeping money in the local economy is desirable, and then circle back around to how that relates to car ownership.

When it comes to the local economy, the basic principle at work is called the local multiplier effect. Here's how it works: You have $10 in your pocket. You go to your favorite coffee shop, Lemonjello's, and get something for yourself and your kids. That $10 pays a staff member, who goes down to New Holland Brewing Company and tries a Black Tulip Tripel Ale (which is great, by the way). The chef takes the $10 spent there to the Holland Farmer's Market to buy tomatoes for the salads. The farmer then takes the $10... you get the idea? This $10 has already functioned as $40 in our community, and it continues to be recycled through our local economy.

Obviously, it's not quite that simple. Lemonjello's uses a local roaster, but the coffee beans themselves are certainly not grown in Michigan. New Holland probably gets some of their restaurant supplies from a national retailer. There's an attrition of dollars to national or international interests; in other words, the money slowly escapes to circulate beyond our local community. There are benefits to this as well, but it stops that multiplier effect in its tracks.

Here's the rub: Local businesses recycle many, many more dollars through the local economy than chain businesses do. Chain stores are able to be price-competitive because they take advantage of economies of scale, which they do by purchasing in large quantities from centralized suppliers. As a rule, they also don't pay very well. Because of this the vast majority of the dollars that we spend there leave the local economy, as the chart below shows.



Here's where this ties in to our car discussion: Automotive spending functions in the same way as spending at a chain retailer does. About 73% of the money we spend on gas purchases and 86% of the money we spend on car purchases immediately leaves the local economy (here). It's a similar story for insurance. In other words, when you spend less on your car, you spend more in your community.

Now, if you dropped a car and then spent every penny you saved in that transaction at Walmart and Applebee's and Lowe's, there would be essentially no impact on your community. You still win, but it's a wash for your community. The dollars still leave.

You aren't likely to do that, though. Instead, your car spending will probably shift to a mix of local and national businesses, and more of your dollars will stay in your community than did before you made this leap. You'll probably shop at more local businesses than you did before because they're more accessible and neighborhood-based than their big-box competitors - it's just plain easier to run into a neighborhood business than it is to traverse the Walmart parking lot (do they make those things nightmares on purpose?) if you're on foot or on a bike.

My back-of-the-envelope calculation indicates that the Holland-Zeeland area (where I live) would see as much as $300 million returned to the local economy EACH YEAR if every two-car household became a one-car household. (Check out the notes at the end if you'd like to see how I came up with those numbers.)

To put that in perspective, the City of Holland is currently trying to raise $2.1 million to repair the DeZwaan windmill. Cleaning up Lake Macatawa is expected to cost $12 million. We could do both of those projects in January, then build the equivalent of the entire lauded Portland bicycle system by June with that kind of savings.

(According to Elly Blue's Dinner and Bikes presentation, this system cost $65 million to implement - and that over the course of over 20 years. In Grand Rapids, bike infrastructure has been costing about $10,000 per mile.)

I'm simplifying this intentionally; it's not quite so simple a cash transfer as I've portrayed here. But it serves to illustrate just what an insane amount money we're talking about here, even with necessarily imprecise numbers. And it doesn't take into account savings due to:

  • decreased health care costs as a result improved health due to more active transportation
  • decreased health care costs as a result of fewer motor vehicle collisions
  • decreased infrastructure costs as a result of needing fewer traffic lanes

There would also be costs to owning and maintaining fewer cars. Oil change shops, car dealerships, and repair shops would suffer; some would go out of business. And because some sort of transportation would still be required - bus, bike, or feet - some of the savings would be offset by these costs. But given how much it costs to run a car - remember, we're talking about $583 a month on average, most of which leaves our communities - we would still see a massive net gain.

If we want to create Strong Towns, it seems to me that this is the type of hypothesis that we want to test in as many ways and small places as we can. Are you persuaded? What first steps would you take to test this in your own community, and what can we learn from communities that may be doing this already?

Notes:
The average household size in Michigan is 2.51 people. The population of the Holland metropolitan area (the cities of Holland and Zeeland, Holland Charter Township, Park Township, Laketown Township, and Zeeland Township) is around 108,000. This means there are 42,835 households in our area. As of 2007, a statistically average household owns 1.9 vehicles, so for the sake of ease I rounded up to two. At two cars per household, that's about 85,670 vehicles at $7,000 each.

After I finished writing this, I asked that the good folks over at the Strong Towns Network check my numbers, and they steered to a series that Elly Blue (yes, of Dinner and Bikes!) wrote on the very same topic. You can find the first installment HERE - I recommend it highly. And last month, Copenhagenize did a similar breakdown for the city of Seattle.

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Reader Comments (3)

Great post. The cost of owning cars is definitely Strong Towns thinking. Encouraging individuals to see if they can live without the second car seems to me to be a far more effective conversation than telling people they should try to stop driving altogether, or not be reliant on driving in one form or another.

However, I do think there is an important gap between encouraging behavior change first/allowing development patterns to shift second and allowing development patterns to shift first/encouraging behavior change second (or is it concurrently?). An interesting way to approach this problem would be to ask community leaders to find the smallest changes possible that could reduce the need to have two cars.

For example, is the difficulty of going to the grocery store from single-use neighborhoods the biggest challenge to having one-car families in your community? Then maybe allowing a produce stand to set up set up shop within neighborhoods would be an effective (and inexpensive) solution to aid residents by making living as single-car families more feasible.

August 6, 2013 | Unregistered CommenterSkyler Yost

That's a great idea, Skyler. Produce stands is a good start. Walkscore.com shows which areas are less walkable and what is needed in those areas. Perhaps cities could provide incentives for other needed businesses to move into lacking areas.

Another example is takkyubin in Japan. If you could have your luggage delivered from the nearest convenience store to the airport, you might not need to drive or pay for an expensive taxi.

There needs to be a way to calculate the economic benefits of these to the city so that cities are properly incentivized to attract these businesses and can calculate a return on their investment. And someone on the city payroll needs to constantly ask him or herself, how else can we prevent money from leaving the city? (Is there a job title for this role?)

August 6, 2013 | Unregistered CommenterDerek

Here's an article & infographic from the National Building Museum's Susan Piedmont-Palladino, based on the fact that here in Washington, D.C., auto registrations actually are declining, and as a result the local economy benefits by over $100M a year:
http://www.nbm.org/intelligentcities/topics/city/city-essay.html

Given the immense social costs of cars, reorienting the economy away from them would probably result in a large marginal gain in productivity. And besides, the auto industry may be large, but it's not particularly labor-intensive. Bicycle manufacture, OTOH, is incredibly labor intensive.

August 6, 2013 | Unregistered CommenterPayton
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