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Monday
Feb272012

Projections

We routinely rely on projections when we plan for the future. The "best" plans theoretically anticipate where growth will happen, in what amounts and in what form it will take. Local officials then proceed to make huge bets on the future based on those projections. If we look back at the track of record of success or if we look ahead at the myriad of complexities and unknowns that face us, we clearly see the folly of this approach. In 2012, building resilience must happen in the absence of projections.

For those of you in California, we have two opportunities still available during our April trip to your state. First, on April 14 we are giving a planner's tour of Disneyland for up to six people (only five slots remain). This is a fundraiser for Strong Towns and the cost is $200, which includes ticket and a meal. If you are there for APA or live near the park, please consider joining us for a fun and informative tour. The second opportunity is that we have an open speaking date on Monday, April 16. Every other day of the trip is booked solid, but if you are a community located near Los Angeles or between L.A. and San Diego and are interested in hosting a Curbside Chat, get a hold of Justin Burslie to schedule.

While my plan was to finish up the "from the mayor's office" series, I must admit that my mind has been distracted over one issue since my testimony last week at the legislature. During the Q&A, we got into a discussion on growth projections and I made the remark that, if the legislators wanted to take a first step, they should start to ponder a state where we have no real growth for a prolonged period of time.

Of course, the implications of that are something we've thought about in this space a lot (although not for a few months). Our system of finance is dependent on growth. We've literally set it up that way. All U.S. dollars are loaned into existence and thus, to service the interest on that debt, the economy must continually expand. For governments -- particularly local governments -- costs increase and obligations grow each year. Unless there is sufficient growth, things start to go bad really quickly.

I can crystallize this all down to one question that I would like to see asked of Ben Bernanke, Barack Obama or any of the Republicans that are in the running for president:

How confident are you in your economic forecast?

This is, in a sense, an unfair question from a Strong Towns standpoint as the two logical answers are both incorrect. The most likely answer is going to be some derivation of, "Yes, I'm confident," to which my response is, "why?".

Why are you confident when your post 2008 projections have all been wrong to the optimistic side? What about your experience or the results you have seen give you the confidence of your predictions? What about the post-2008, fiat-currency economy is similar enough to the 1930's, gold-standard economy to give you confidence in the applicability of the lessons of the Great Depression? What gives you the confidence to believe that you understand the infinite complexities of the economy to even make a prediction?

I personally find the confidence we display in our current approach puzzling. At the federal level, we have little problem expanding the debt annually by 9%+ while the economy grows at just a fraction of that. At the local level, I routinely see cities evaluate their borrowing capacity as they prepare to tap into the debt markets to fund routine maintenance. They consider themselves good stewards if they keep borrowing below levels the market currently considers less risky (ignoring the trajectory of their debt, their obligations and the bond market in general).

In an economy where are literally in uncharted territory, we should not be this confident. Consider how seriously we are in a place we've never been: 

  • We are 40 years into a fiat, digital currency; a monetary system backed by nothing but faith and trust. We've never been here before, and neither has anyone else.
  • Our federal debt exceeds our GDP and is at levels that Rogoff and Reinhart, in their widely respected work This Time is Different; Eight Centuries of Financial Folly, indicate has historically been unstable. What makes this time different?
  • We have a financial system that just "surprised" us a few years ago with instruments nobody in the regulatory fields apparently knew about and few people investing in them even understood. Are we sure there are no more surprises?
  • We know that the level of interconnectivity in our financial system has never before been pondered. Indeed, the complexity of this international system is absolutely baffling. AS a small example, we still don't know what caused the 2010 Flash Crash. What makes us confident we understand this system?
  • We have been at zero interest rates for a long time, and very low interest rates for long stretches of time prior. Why do we remain confident that monetary policy -- the adjustment of interest rates -- has a solution to our problem?
  • It is self evident that our economy is dependent on cheap energy. It is also self evident that, with China and India attempting to provide their citizens with growth sufficient to give them a fraction of the U.S. standard of living, that the world energy markets are going to highly competitive indefinitely. What makes us think we can sustain even a 3% level of growth with energy price volatility?

Any confidence I might have had in our system disappeared the day Henry Paulson told us all that he needed nearly $1 trillion within 48 hours or the entire financial system would melt down. Any system where that is a possibility is not stable enough for me.

So what if the question were answered the other way; "No, I'm not confident." Then the immediate follow up is, "How can we be betting so much of our future on continued growth -- with no Plan B whatsoever -- when you have no confidence in the projections?"

The reality is that nobody who is in a position where they need to predict the future of the economy can say that they lack confidence in their predictions. If they did acknowledge that, we would find them to be incompetent and replace them with someone who pretended to know more. That is true even though we can clearly see, if we pause to look, that there is no basis for confidence and no record of success in making predictions. 

Many of you reading this are likely thinking, "But Chuck, we need forecasts to be able to plan. We need to make them on the best available information. Nobody could have foreseen the housing crisis, or 9/11, or a war between Israel and Iran, or...."

At the local level, this is precisely the logic that needs to change. We need to build a society that does not need projections, where we don't need a snake oil salesman masquerading as an expert (who may even have convinced themselves they are right) to tell us what the future holds. If you listen closely, that expert is only saying, "...based on the information available to me...." What good is that in such a hyper-connected, complex society?

To build resiliency in a local economy, the best available information is not enough. We actually need a growth pattern that is resilient. If you are wondering what that looks like, let me give you two simple examples:

  • Spending $40 million on a new industrial park on the edge of town so as to attract new businesses and new jobs under the mantra of, "If you're not growing, you're dying." Not resilient.
  • Taking a routine street maintenance project and tweaking it so that the street supports and attracts higher levels of investment on the same framework. Building resilience.

At the local level, we intuitively know more than we think we do. Or to say that a better way, the "experts" we routinely rely on -- from the Ben Bernankes of the world to the snake oil salesmen pimping us projects that will ostensibly solve our problems -- know a lot less than they pretend. Once your eyes are opened to that reality, they can't be closed.

So open them up. Take back control of the future of your community. Start building a strong town.

 

Strong Towns is a 501(c)3 non-profit organization. We depend on donations from individuals and organizations to support our effort. If you have the means, please consider making a donation in support of the Strong Towns movement.

Thursday
Feb232012

Friday News Digest

I had an amazing night last night with some very cool New Urbanists from Dallas, Forth Worth and the nearby areas. Our Curbside Chat was in the Texas Theater, the location where Lee Harvey Oswald was arrested hours after the assassination of JFK. (I even sat in the seat he was sitting in, just 'cause it was there.) Not only was the Chat well received but participants had some great local stories and interpretations to add to the mix. And to top it off, they are starting a local NextGen chapter. Thank you, CNU-NTX for making me feel so at home.

Next stop: Austin, where I am informed they have already maxed out their capacity with people who have RSVP'd. I'm really excited to head down there and see what I've been told is a gorgeous town.

Until then, enjoy the week's news: 

  • This past Wednesday I testified at the Minnesota State Capitol giving legislators from the House Property and Local Tax Division a modified Curbside Chat presentation. I had fairly low expectations going in, largely because I've been to the Capitol before and seen how legislators suffer through hours of testimony by frequently zoning it out ("multitasking" would be the positive spin you would put on reading the newspaper, replying to emails and playing solitaire, all while someone is providing testimony). It was really fantastic to not only hold their attention for nearly two hours but to see the bipartisan interest in the Strong Towns message. If you can suffer through some bad audio, this week on the podcast we've uploaded my testimony and then also the fascinating Q&A that followed. I left feeling optimistic.

Thank you to Sally Wakefield of Envision Minnesota for passing on this photo. 

  • Then on Thursday, I had five separate people forward me an article by the League of Minnesota Cities that called the Curbside Chat report "controversial". I must admit that made me really angry. Provocative? Sure. Thought-provoking? No doubt. Pushing boundaries? I can accept that. So explain to me what is "controversial" about a dozen legislators from both parties staying after a long hearing to talk and ask questions? I've delivered the Curbside Chat presentation to well over a thousand people, it has been downloaded by well over 10,000, I've had dozens of radio, television and print interviews and through it all the only ones I've ever seen use the label "controversial" is the League of MN Cities. What makes the report controversial? Is it because we reveal what is actually going on or is it simply because we don't call for an increase in Local Government Aid? This all makes me really upset because cities need to hear this message. If the largest group representing them is going to cavalierly tell their members the Curbside Chat is "controversial", they are dong a massive disservice to the entire state. This needs to be corrected.
  • Thank you to Colin Broderick with the DT106ers for passing on my TEDx talk to your neighbors in Ireland. I'm really honored that you would be reading our stuff from overseas. You analysis of the local example of the square in Dublin was right on. Thanks so much.
  • There have been quite a few people that passed along this article from an executive in Oakland County, MI, who extolled his love for "sprawl". My friends, we have no need to suffer fools. We understand how the Growth Ponzi Scheme creates the illusion of wealth as near term cash advantages are exchanged for long term financial obligations. Let's not waste our time with such ill-informed drivel; there's too much to do in our own communities to get bogged down. Reality will come to bear too soon for all of us, and then we'll actually need some pity for this guy instead of outrage. Stay focused.

"Sprawl" is the  unfortunate pejorative title government planners give to economic development that takes place in areas they can't control. In reality, "sprawl" is new houses, new school buildings, new plants, and new office and retail facilities.  "Sprawl" is new jobs, new hope and the fulfillment of lifelong dreams. It's the American Dream unfolding before your eyes.

  • Jefferson County, AL, is often thought of as an outlier -- an extreme example of corruption and malfeasance -- and that is used to dismiss their current financial problems. The more I learn about their situation, the less I'm comfortable with that explanation. The story here is really just how financially ridiculous our pattern of growth is and how fragile it makes our local governments in time. The only thing that makes Jefferson County an outlier is that the corruption and malfeasance allowed them to drive the car off the cliff that much quicker. I could quote multiple parts of this article in the NY Times, so read the entire thing with Strong Towns eyes and see for yourself how there really is not that much difference between them and other communities across the country.

Jefferson County began to borrow vast sums of money, but that money, it turned out, was a perfect medium for graft and contract-padding. Rather than replacing more than 2,000 miles of decrepit sewer pipes, the county dispensed contracts to build water treatment plants, pumping stations and administrative buildings, some on slag heaps left behind by closed steel mills.

All this debt was supposed to be paid off with revenue from the new sewer system — in other words, by fees the county would charge residents whose homes were hooked up to the system. As the debt grew, so did those fees — and the public outcry. By 2002, the average sewer bill in the county had doubled, to $18 a month.

One thing led to another. In an attempt to expand the system and add new ratepayers, the county tried to bore a giant tunnel beneath the Cahaba River, Birmingham’s main source of drinking water. But the tunnel was so unstable that the endeavor was abandoned. The county spent millions just to extract the boring machine, which had become entombed underground.

“That cost $19 million,” Mr. Young told the bond analysts. “Now it’s called ‘the Tunnel to Nowhere.’ ”

  • Over at our Facebook page this week, we were asked by Max Seigel to report what kind of printer we have. I thought that was an odd question, until he followed up with his analogy, which was fantastic. I pass it along here:

When I bought my computer, it came with a printer costing me no more than $20. At the time I thought “Sweet, free printer!” But since using the printer, I’ve had to frequently purchase ink costing $60 a pop. Over the life-cycle of the printer, I’ve realized I’ve spent more in the printer and ink combined than had I purchased a laser printer costing $250. The upfront costs of a more expensive printer are significant, as is the toner, but I would end up paying less than the subsidized printer in the long run. In other words, I was seduced by the free machine that ended up costing me a lot of money.

Here is the connection to Strong Towns. Federal and State subsidized projects are like the $20 printer. Initially communities think “Sweet, free bridge.” But, once you figure the cost of keeping the bridge in working order, it turns out to be a major expense for communities. This is an expense that if a community couldn’t fund the bridge to begin with, likely wouldn’t have the wherewithal to maintain.

Solution: Purchase the bridge (printer) at full cost, without a subsidy. If you can do that, then you can likely afford the cost of maintenance (ink).

  • If you've felt that spring in your step lately it is likely because this week is National Engineers Week. I really would like one of these shirts so I can "tell the world" that "engineers can save the environment". Too bad I don't have the shirt here in Texas so I could tell that to the world as I drive over the High Five. I'll just have to wait until I get back to Minnesota, where someday I can drive over the federally-"protected" St. Croix river on a new, $700 million bridge. Engineers can save the environment, sure. You'll just have to pay them more (and they won't actually save it, but you'll feel better about yourself).

  • I read this article in my local newspaper and was alarmed when I got to the last paragraph where it suggested that the Coalition of Greater Minnesota Cities was calling for economic development spending in the form of $35 million for building highway interchanges in rural Minnesota. I knew that had to be wrong, so I went to the Coalition's website. Nope, they were quoted correctly. They want the legislature to borrow $35 million to spend building interchanges in rural areas. I wonder if the League of Minnesota Cities finds that proposal controversial? I think the bill should be called the "Walmart/Quik Stop/Mc Donalds Subsidy Act of 2012". It is this antiquated, 1950's mentality that is bankrupting small towns all over this country.
Approximately $35 million in trunk highway bonding for interchange projects in greater
Minnesota where the interchange will promote economic development, increase employment
and improve public safety.  No project specifically earmarked.  Repeal of Motor Vehicle Sales Tax exemption for collector cars will provide the revenue needed to pay for debt service on the
trunk highway bonds.
  • This week at the legislature, I did make the case for a land tax to replace the property tax, specifically in areas where we have made large public investments in sewer and water infrastructure. When I got back to the office, my colleague Justin Burslie asked for more explanation and we decided to shoot my response as some bonus video for the Strong Towns Network. I say "bonus" because right now the curriculum is focusing on infrastructure, not taxation. We'll be switching to zoning next month and transportation after that. If you want to get this type of stuff everyday, as well as interact with lots of people working to implement a Strong Towns approach, come over and join us.

  • The most amazing thing about elevated highway removal is how it costs far, far less money than replacement while simultaneously creating all kinds of value for adjacent neighborhoods. You spend less to get more -- it is an amazingly high-return investment. This article touches on a few examples, including one here in Dallas. In fact, if you are in the Dallas area next month (which I won't be -- too bad), Patrick Kennedy of Walkable DFW will be presenting facts and figures about a potential highway teardown in Fort Worth. The numbers will "blow your mind," he said, and I totally believe him.

For example: Since 1959, San Franciscans had to deal with the elevated Embarcadero Freeway cutting then off from the city’s eastern waterfront (and ruining their view of the Ferry Building). Nonetheless, voters kept rejecting plans to tear it down—until 1989, when an earthquake damaged it beyond repair and forced the city to consider alternatives.

Now instead of an elevated highway, the Embarcadero is a six-lane boulevard flanked by pedestrian walkways 25 feet wide. There are street lights, palm trees and waterfront plazas. Thousands of residential units have gone up, increasing the housing stock by over 50 percent, and jobs in the area have grown by nearly a quarter. The Ferry Building now contains a farmer’s market and retail shops. Neighborhoods in the immediate vicinity have seen a revival, whether they the freeway used to isolate them directly (Rincon Hill) or simply held back the entire area from flourishing (South Beach).

  • While I'm really excited to get Minnesota Twins baseball back into my life (although Twins fans need to be more than concerned about Justin Morneau), I'm enjoying watching the Timberwolves play some feisty basketball as of late. While I was packing for this trip to Texas, I was able to catch the big comeback and last second win against the Jazz this past Wednesday. If you haven't checked them out this year, you should. They are a lot of fun.

Take care, everyone. See you back here on Monday for (I think) the last chapter of our "from the mayor's office" post.

 

Strong Towns is a 501(c)3 non-profit organization. We depend on donations from individuals and organizations to support our effort. If you have the means, please consider making a donation in support of the Strong Towns movement.

Wednesday
Feb222012

It should be about people

The author of this post, Nathaniel Hood, is a Strong Towns partner. In addition to contributing to this site, you can read Nate's work at his blog, Thoughts on the Urban Environment, and at the new Minnesota-based transportation site Streets.MN. You can also follow him on Twitter.

For a place to be successful, it needs people. All types of people. This is why the idea of creating “entertainment districts” might not be such a great idea.

Proposals for entertainment districts occasionally sprout up in City Councils meetings as the next big thing. While it certainly is tempting in its efforts to capitalize on people’s passion for retail, sports, food and drink; it is a development prospect that should be viewed with skepticism.

This is a rendering of one proposed Vikings stadium; one that was slated to be part of a “sports entertainment district” in downtown Minneapolis. Sports entertainment is a large element in selling these districts, and fair enough, sports are something we value in our culture and it makes subsidizing these projects somewhat more tolerable to the general public. But is it worth it for the urban spaces they create?

In Minnesota, “the best stadium site got snubbed,” at least according to Steve Berg in the Star Tribune:

Perhaps we’ve just witnessed the ultimate NIMBY encounter: America’s two most powerful religions squaring off against each other, with Christianity telling the National Football League: Not in my back yard! Build a Vikings stadium if you must, but not next door to the Basilica of St. Mary. [Star Tribune, January 26, 2012]

In the article, Berg’s arguments refuting Basilica of St. Mary’s Rev. John Bauer’s aren’t necessarily wrong. In fact, he points out holes in Rev. Bauer’s objections to the Linden Avenue site. Yet, none of this matters because Berg’s vision is, ironically, antithetical to his greater aspiration for Minneapolis urbanism.

Berg wants to create a sports entertainment district centered around Target Field, a new Vikings stadium and the renovated Target Center. This is a misguided effort to create a place not worth being in. In my opinion, instead of asking how we could fund an entertainment district, we should be asking ourselves: do we even want an entertainment district?

Why? Because they lack the most crucial element of creating great places: people.

While entertainment districts certainly have people during the odd event, they are otherwise deserts of large infrastructure investments. Don’t believe me? Check out examples of entertainment districts across the county in Cincinnati, Phoenix, Des Moines, Philadelphia, Pittsburgh, and even the so-called successes of Denver (here & here) and Los Angeles.

Entertainment districts, even the best ones,  fail at creating a lively mix of retail, residential, commercial and civic space. In fact, most all mega projects have failed in this regard. They are isolating locations, usually not worthy of the public affection beyond the handful of large sporting events, conventions or Friday night bar excursions. In fact, show me an existing or proposed entertainment district and I’ll show you a struggling city.

Large and mid-size towns have started to classify downtown’s as entertainment districts. This is a dangerous precedent to set and often times contradictory to Strong Towns place making principles. Kansas City’s Power and Light District comes to mind. It’s hard not to argue that the area is charming, fun, exciting and a few other hedonistic adjectives. It’s all of these things … if you’re 25. But, unfortunately, these types of environments don’t help in attracting other sorts into the urban settings; baby boomers and families with young children aren’t going to be attracted to these places.

That’s not to say that the activities that take place in the Power and Light District should be regulated or banned. Nor do I want to imply that sports stadiums don’t have a place in our urban environment. But, what I’m attempting to say is that downtowns need to be a place for everyone. Entertainment districts don’t do a good job that, and they certainly don’t offer good urban outcomes – often times they replicate the same symptoms of urban malls.

Paris and Florence don’t have entertainment district. Neither does San Francisco. Melbourne doesn’t either. What these cities have are spaces for people. They also have sports stadiums and bars – just not as the focal points of their city centers.

When a large building fails at creating a lively mix of retail, residential, commercial and civic space – it creates an isolating space not worthy of the public affection. It doesn’t help that these places aren’t cheap – taxpayers usually end up taking on the initial bill, and all the risk. Entertainment districts are the new “Bilbao anomaly” are the new urban mall, are the downtown casino, the list goes on. Regardless, at the end of the day, strong towns don’t create “entertainment districts”, they should create places.

 

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