New Geography

Author: Steve Lafleur

  • Raise the Gas Tax!

    Driving just got a lot cheaper in America. The timing is great not only for American consumers, but also for America’s infrastructure. The Highway Trust Fund simply can’t keep up current spending levels without more revenue. Significant declines in pump prices have presented an excellent opportunity to raise the federal gas tax, while keeping pump prices lower than initially anticipated. Though a gas tax hike may not be the ideal approach, it is infinitely preferable to bailing out the Trust Fund with general revenue, or to putting the brakes on much needed infrastructure spending. This is a rare opportunity to improve America’s infrastructure without putting an additional burden on American taxpayers. It would be a shame to miss it.

    No one enjoys paying taxes, though they are much easier to swallow when the revenue produces visible results. Since the gas tax is deposited into the Highway Trust Fund, it is somewhat like a user fee, albeit, an imperfect one. From the standpoint of fairness, it makes sense that drivers should pay for using the roads. Aside from fairness, the virtue of the ‘user pays’ principle is that it helps to ration roadway use. If movie theatres were paid for through tax revenue and tickets were free at the point of consumption, everyone would be stuck waiting in line. The same principle generally applies to roadways, although tolls have a more direct impact on traffic congestion than gas taxes. There is some legitimate debate over the optimal mix of revenue tools to fund roads, but if it comes down to raising the gas tax or using general government revenue, raising the gas tax is the obvious choice.

    Congress has allowed the Highway Trust Fund to gradually lurch towards insolvency. Expenditures have risen while gas tax rates haven’t. America’s aging infrastructure is in desperate need of repair, so holding out for the ideal solution no longer seems tenable. The Congressional Budget Office estimates that spending is poised to exceed revenue by $167 billion over the 2015-2024 period. The Trust Fund has already received $54 billion in transfers from the treasury since 2008.

    One of the proposed solutions to the shortfall is to restore the Highway Trust Fund’s original mandate: use gas taxes exclusively to pay for highways. In other words, get rid of what’s known as the Transit Account. That would go some way towards alleviating pressure on the Trust Fund, but it still wouldn’t bring the fund into balance. Regardless of whether or not the Trust Fund continues to pay for mass transit expansions, Congress will need to find more revenue.

    There has never been a better time to increase the gas tax. Consumers and firms have budgeted for much higher gas prices than they’re paying at the pumps. The bi-partisan proposal to increase the gas tax by 12 cents per gallon would leave gas prices below $3 per gallon, which is still a substantial overall decline. Indexing the gas tax to inflation would help to ensure that the Trust Fund doesn’t end up in this bind every few years.

    Given the state of the American economy, now is a particularly bad time to defer highway construction and maintenance. Public spending can’t be expected to fix all that ails it, but this is a good time to support the construction industry.

    While 30 cents per gallon might seem high, American drivers would still pay among the lowest gas taxes on earth, and less than Canadians pay. That America has managed thus far to maintain an enviable national highway system for a fraction of Canadian federal fuel taxes is a testament to the efficiency of the Highway Trust Fund model.

    Given the enormous windfall that drivers will receive from lower gas prices, clawing back some of it to ensure that American still have roads fit for driving is a reasonable proposition. Just because the federal government owns the national highway system doesn’t mean that it’s free. Someone has to pay to maintain the system. Drivers should be first in line to do so.

    Steve Lafleur is the Assistant Director of Research for the Frontier Centre for Public Policy– www.fcpp.org — a Canadian think tank based in Winnipeg, Manitoba.

    Flickr photo by Curtis Perry: Another perfect day for highway drivers in LA.

  • Canada’s Prairie Cities Step Up

    Traditionally, the discussion of Canadian urban issues focussed almost exclusively on the Big Three cities: Toronto, Vancouver, and Montreal, with the occasional nod to Ottawa. Calgary, Winnipeg, and Regina were generally only mentioned as punchlines, and, until recently, no one in urban Canada really knew what was going on in Edmonton other than that they had a winning hockey team in the ’80s and a really big mall. Saskatoon, which Joni Mitchell famously escaped as soon as she could, hasn’t historically been on anyone’s radar, and Regina is scarcely mentioned outside the context of football. It’s not surprising that many Prairie residents are defensive or bashful about their cities, given the PR they’ve gotten over the years. But from an outsider perspective, now is a very good time to live on the Prairies.

    With Calgary, Edmonton, Regina, and Saskatoon perennially vying for the title of fastest growing Canadian city, and with Winnipeg in the early stages of an urban renaissance, it’s getting harder to ignore Canada’s Prairie cities. The narrative is shifting. The election of young, urbane, and pragmatic mayors in Calgary, Edmonton, and Winnipeg has put the spotlight on these once ignored cities.

    Naheed Nenshi, a Harvard-educated McKinsey consultant turned university instructor, was improbably elected Mayor of Calgary in a 2010 landslide victory. His quick wit and social media savvy have made him a darling of Canadian urbanists. He was recently short-listed for the World Mayor Prize. Regardless of what one thinks of his policy agenda, he is a good ambassador for the city.

    Not to be outdone, Edmonton elected 34-year-old city councillor and self-proclaimed nerd Don Iveson as mayor in 2013. Iveson recently made headlines for showing up at a comic expo in full Star Trek attire. His nerd-chic appeal has resonated with a cohort of young Edmontonians who feel that the city’s creative community gets short shrift. He, like Nenshi, is thought of as a smart, moderate mayor, an image that flies in the face of the redneck Albertan stereotype that hasn’t been an accurate representation of either of these Alberta cities for quite some time.

    Winnipeg has followed suit, electing privacy lawyer Brian Bowman as mayor. The 43-year-old has chaired both the Winnipeg Art Gallery and the Winnipeg Chamber of Commerce. Like Nenshi and Iveson, Bowman was elected with a diverse support base, including the business and arts communities. Being of Metis descent, he is also considered to be in a strong position to address some of the challenges facing the city’s large, indigenous population.

    The three mayors have more in common than belonging to roughly the same age cohort. All three are seen as moderates, and all have had some minor political experience but aren’t identified strongly with any political party. Each grew up in his respective city. Their biographies underscore an often overlooked advantage of Prairie cities: opportunities for economic mobility.

    As Canada’s Big Three cities get more expensive, Prairie cities are becoming increasingly attractive to recent graduates and early career professionals. Relatively affordable rents and tighter labour markets make them bargains, relative to Toronto or Vancouver. Tighter labour markets combined with the general default instinct among young professionals and graduates to move to Toronto or Vancouver mean that Prairie cities are a good place to get from the bottom to the middle in one’s industry. While there is a ceiling – the best paid financial sector employees will be in Toronto for the foreseeable future – there is less competition. Being able to live in the most attractive urban neighbourhoods for less than the cost of living in generally undesirable Toronto neighbourhoods, or being able to buy a house for a fraction of the sale price in Vancouver, sweetens the deal.

    Prairie cities are also a great place to take a chance. Lower rents mean that someone who wants to open a business needs to accumulate less capital and borrow less money than he or she would in a bigger city. That makes opening a restaurant or founding a start-up a less risky proposition. The same goes for aspiring artists. Relatively cheap gallery space makes it much easier to display one’s work. Whereas it might take family connections or years of networking to get on the board of a non-profit in Toronto or Vancouver, opportunities abound on the Prairies.

    In the world of politics, contrast Nenshi, Iveson, and Bowman, all from fairly ordinary families, with the winner of the last Toronto election.

    Toronto’s new mayor, John Tory, was born to the founder of the prestigious law firm Torys LLP. Tory was given his start in business at telecom giant Rogers by family friend Ted Rogers, the son of Rogers founder Edward Rogers, and went on to later run Rogers. His career also included running the Canadian Football League, making partner at the family firm, serving as principle secretary to former Premier of Ontario Bill Davis, chairing the campaign of former Prime Minister Brian Mulroney, and leading the official opposition in the Ontario legislature. In short, John Tory is the epitome of the Canadian establishment. His chief opponents weren’t exactly political novices either.

    Could Nenshi, Iveson, or Bowman have plausibly become the Mayor of Toronto? The answer is likely no. While some might argue that the level of political competition is necessarily higher in Toronto, the bigger reason is that the entrenched political and business elites in the three major cities have more clout than their Prairie counterparts.

    Calgary, Edmonton, Regina, and Saskatoon are dominated by new money. While Winnipeg has some influential legacy families, the political barriers to entry are generally much lower than they are in Toronto. A person of Bowman’s upbringing would have had an exceedingly difficult time becoming chair of the Chamber of Commerce in Toronto. An academic City Hall gadfly like Nenshi wouldn’t have a chance, even if he considered making a run for Mayor of Toronto. And someone as young as Iveson would have a hard time getting elected as a city councillor in Toronto, let alone as mayor. That isn’t meant to take away from them in the least. It is merely a recognition that the political system in Toronto is much more elite-driven.

    The combination of affordability, opportunity, and economic mobility presents a major opportunity for Canadian Prairies cities. Lower political barriers to entry can facilitate more responsive local governments. Relative isolation can help to spawn innovation of necessity. And upward mobility can help lure young talent from across the county.

    Cynically – or optimistically, depending on one’s view – none of these young mayors has a great deal of power to bend the trajectory of their cities. Mayors are merely single votes on councils, and even city councils are only one of many actors that shape these respective cities. Arguably the most important thing that mayors can do is serve as good ambassadors for their cities. The first step is to convince residents of the reality that things are going pretty well, and even better times lay ahead. The rest of the world won’t believe in Prairie cities until their own residents do. Civic pride is contagious.

    So far Nenshi has been an exceptional civic booster, and Iveson appears to be on that trajectory, too. Bowman seems keen on following in their footsteps. Hopefully, mayors and councillors in the rest of the Prairie cities can do the same. Prairie cities are having a moment, and that moment could potentially be a very long and a very good one.

    Steve Lafleur is the Assistant Director of Research for the Frontier Centre for Public Policy. He currently lives in Winnipeg, Manitoba, and has lived in every major Prairie city with the exception of Saskatoon.

    Flickr Photo by Elsie, Calgary Reviews: A chai latte at Caffe Rosso, Calgary

  • The Death of Nassau Coliseum: A Harbinger of Suburban Decline?

    Nassau Veterans Memorial Coliseum is one of the last remaining old time hockey rinks. But this will be the last year that the New York Islanders play there. The old barn has long been slated for replacement. It is an old building that requires expensive repairs. Many attempts were made to reach an agreement for a new arena with Nassau County. Sadly, the team’s new location will be at the Barclay’s Center in Brooklyn; on Long Island physically, but not a part of the island’s suburban tradition. The team will retain the name, but Long Island effectively is losing its team.

    Suburban Decline, Urban Ascent?

    Some observers, like Mark Byrnes in CityLab, see this shift as further evidence of suburban life and the elevation of the urban core.1 But instead it is another frustrating case of a small, highly visible not in my backyard (NIMBY) movement in suburbia on one hand, and, on the other, an unwanted development foisted upon urban residents without due process through eminent domain.

    Two Arenas

    The New York Islanders haven’t been very newsworthy for the last decade – save for their volatile ownership situation, but their transition from one of the National Hockey League’s oldest buildings in Long Island to a new building in Brooklyn has been a very public ordeal. It’s a story that involves local politicians thwarting construction of a new arena that would have cost taxpayers nothing, a failed referendum to finance an alternative proposal that would have required public funding, and ends with the Islanders moving out of Long Island into the controversial Barclay Centre. Even if the Barclay Centre proves to be a viable and enjoyable venue for the Islanders, it will forever remain one of the most disastrous developments in the history of professional sports.

    The Old Barn

    Nassau Coliseum is the second oldest active building in the National Hockey League. The arena was built on the site of decommissioned Army/Air force base Mitchell Field.2 Nassau County acquired the land in 1960, a year after closure. Nassau Coliseum officially opened on February 11, 1972.3 The cost of the project was $32 million ($179 million, adjusted for inflation).4 The Coliseum sits on 5 acres of a 77-acre plot in Uniondale, the rest of which is mainly surface parking.5

    The site is intersected by two major roadways, and is across the street from Hofstra University and a golf course. It is right down the street from Levittown, the prototypical post-war American suburb. It is the type of place where one might assume that building large scale projects should be relatively simple.

    The Lighthouse Project

    In 2000, software billionaire Charles Wang bought the Islanders for $190 million.6  High end estimates suggest that Wang might have lost as much as $208 million between 2000 and 2009 on the team in large part due to   having one of the least favourable lease agreements in professional sports.7.8 “The need to refurbish the ageing building provided a perfect opportunity to put the team on a solid financial footing.

    Wang proposed a plan to develop the area surrounding the arena. The Lighthouse Project was expected to take 8-10 years to complete at a cost of roughly $3.74 billion.9 The plan included a renovation of the Coliseum, a 60-story tower designed to look like a lighthouse, housing, athletic facilities, a new minor league baseball stadium, restaurants, and a new hotel.10 The transformation of the Coliseum would have entailed lowering the floor of the ice rink to accommodate additional seats, increasing capacity from 16,300 to 17,500 during hockey games, 18,500 for basketball games and 20,000 for concerts, while adding 50 luxury boxes.11

    The proposal would also have brought a 125,000-square-foot athletic complex including two ice rinks (a practice rink for the Islanders, and another for the public), a basketball court, and a fitness club where the Islanders and the Arena Football League’s New York Dragons (also owned by Wang) would have trained.12

    The project would also have included moderately priced housing, which is lacking in Long Island. Long Island County was also exploring enhanced public transportation to the future development, including bus rapid transit.13

    Phase two of the project would have included a conference center, a sports technology building, residences, and the 60-story lighthouse (including a 500 room luxury hotel).14

    Building a new arena on such a large parcel of land surrounded by sparse, low density development should have theoretically faced few obstacles, given that the owner was willing to finance the entire project. Unfortunately, the project drew the ire of some local residents. Robert Zafonte, president of the 3500 member East Meadow Civic and Community Association, had this to say:

    ”The high-rise disturbs me,” he said. ”It seems to be totally out of character with the nature of the suburban area here. It is not consistent with what Long Island is all about – residential, small homes. I don’t think it belongs here.15”

    The Lighthouse Project was approved by the county in 2006, but stalled when Wang was unable to secure zoning approvals from the Town of Hempstead.16 Republican Town of Hempstead Supervisor Kate Murray, lobbied intensely by a small group of local residents, decided that the project would result in too much traffic.

    Not in My Backyard

    In an attempt to salvage the project, Charles Wang and the Lighthouse Development Group partnered with Rexcorp to create a scaled down version of the project. The most notable change was that the Lighthouse would now be 30 stories, rather than 60.17

    But as Pearl M. Kamer, chief economist of the Long Island Association pointed out, “When you cut density on any project, you cut revenue.” He argued that under the proposal, scaled back to meet Murray’s demands, it would be difficult if not impossible to generate enough revenue to finance the project.18 This meant that the new proposal would likely require public funding, in contrast to the original proposal which would have been entirely privately funded.

    Wang eventually reached an agreement with Nassau County to build a scaled down version of the Lighthouse Project, pending an August 2011 referendum. Since the stripped down project would have yielded less revenue than the original proposal, the project would only have been viable with $400 million in public financing.19 The funding would have necessitated a 4 percent property tax increase. Voters rejected the proposal by a 57-43 margin.20

    The End of the Lighthouse Project

    With the end of the Lighthouse Project, Wang entered into a 25 year lease with the Barclay Centre soon after. The Islanders will begin playing at the building in 201521, though they already played their first exhibition game at the arena on September 21st, 2013.

    Losing the Islanders will result in significant economic losses to the county. Nassau County’s comptroller estimated that had last year’s NHL lockout lasted a full season, the county would have lost $62.2 million in economic activity, and the Nassau County treasury would have lost $1.1 million in  of ticket taxes, as well as a share of concessions and parking fees.22  Those are substantial loses for a county of less than 1.4 million residents.

    While Charles Wang has frequently been blamed for the relocation, NHL Commissioner Gary Bettman lays the blame squarely at the feet of local politicians.

    "This is a situation that is not of the Islanders’ making,” he said. “The responsibility for what’s happened really lies with Nassau County and the Town of Hempstead. For the fans in Nassau, not just of the Islanders, but of circuses and rock concerts and the like, it’s a shame.23”

    The Uncertain Future of the Coliseum

    Though this seems like the end of the Nassau Coliseum saga, the future of the arena is still up for debate. Barclay Centre part-owner Bruce Ratner has proposed a $229 redevelopment plan for the arena. The project would include renovating the Coliseum, building restaurants, an ice rink, bowling alley, movie theater and other facilities.24  

    The Ratner proposal faces many hurdles, including luring an American Hockey League (NHL farm team) club to replace the Islanders. The Islanders AHL affiliate, the Bridgeport Sound Tigers (also owned by Wang), could potentially move from Connecticut to fill that void. Additionally, the Islanders are still slated to play 6 home games (out of 41) per year at the Coliseum.25 One columnist at Forbes has speculated that Ratner, who would own both the Nassau Coliseum and part of the Barclay Centre, might well decide to keep the Islanders in Long Island after all if he can secure approval for the new project.26  

    Imposing an Arena on Brooklyn

    The Barclay Centre differs dramatically from the failed Lighthouse Project. The Barclay Centre was part of the $4.9 billion Atlantic Yards project built in run down commercial area of Brooklyn, despite local opposition. Mayor Bloomberg used eminent domain to seize the “blighted” land to allow for construction.

    Brooklyn had been without a sports franchise since 1957, when the Brooklyn Dodgers moved to Los Angeles.  

    The Barclay Centre was initially proposed in 2004 when real estate developer Bruce Ratner purchased the New Jersey Nets for $300 million. Ratner planned to move the franchise out of New Jersey and into the lucrative Brooklyn market. The project was initially projected to open in 2006.

    The attempt to use eminent domain to seize the land was brought before the New York Supreme Court, delaying the process. The court eventually ruled in Ratner’s favour.

    Ratner’s years of frustration with the project lead him to sell a majority share of the Nets to Russian businessman Mikhail Prokhorov for $200 million.

    Due to construction delays, the Nets signed a deal to play in Newark at the Prudential Centre until the Barclay’s Centre was complete.

    Construction of the $1 billion arena began in January of 2010. The Barclay’s Centre was open to the public on September 21, 2012. Just over a month later, the Islanders announced their agreement to play at the Barclay’s Centre.

    The Barclay Compromise

    The Barclay’s Centre wasn’t a bad solution to the stalemate in Nassau County. The arena is new, and Brooklyn is a lucrative sports market. The Long Island Railroad provides direct service to Atlantic Terminal, meaning it will be more convenient for many Long Island residents to access the Barclay’s Centre than Nassau Coliseum. However, the 15,813 seating capacity is far short of most modern NHL arenas, and many seats have partially obstructed views.

    At the same time, the failed Lighthouse Project was a missed opportunity for Nassau County. The community still hasn’t rebounded to its 1970 population, which fell by 100,000 during the 1970s. Estimates suggest that the $4.4 billion of private investment into the Lighthouse project would have created 75,000 construction jobs and 19,000 permanent jobs thereafter.27 Moreover, it would have resulted in expanded public transit options on Long Island. Lawrence Levy, executive director of the National Centre for Suburban Studies at Hofstra University in a 2009 interview described the project as “potentially a game-changer.”

    Even ignoring the direct economic losses, the failure of the Lighthouse Project sent a clear message to businesses that Long Island will only accept investment on its own terms. The fallout is impossible to measure.

    Wither Suburbia?

    There is an ongoing dialogue between observers over whether suburbia is a “market outcome”, or whether it is an artificial creation of government policy. The truth is likely in the middle. Suburban communities are regulated, subsidized, and taxed in many different ways. Zoning restricts the ability to build corner stores and cafes in residential neighbourhoods. Wasteful road projects connect many uneconomic housing developments to cities. Land-use regulations drive up land prices, which are passed on to homebuyers. Suburbia is certainly a market outcome in the sense that decreased transportation costs, dispersed entertainment and communications options, and preferences for larger backyards mean that many people would happily pay the market cost of suburban housing. But its particular shape is not a market outcome. Neither, for that matter, is the shape of any geographical area.  

    There are good reasons for regulating land-use. Separating factories that emit noxious odours from residential communities makes sense. The trouble is that land-use planning has gone from a health and safety measure to an economic tool. In Uniondale it was used to ensure that additional traffic didn’t impose costs on drivers, who would prefer not to bear the costs of congestion. In Brooklyn, it was used to ensure that developers and the municipal government could extract value from property that wasn’t on the market. The market outcome would have been allowing the Lighthouse Project to proceed, and the New Jersey Nets to remain in New Jersey (or perhaps to move to Uniondale). The Barclay’s Centre doesn’t represent a triumph of the city. It is the net result of contrasting political meddling in two different jurisdictions.

    Perhaps There Are No Real Lessons Here

    While we shouldn’t read too much into isolated incidents, there does seem to be an increasing propensity for suburban communities to prevent dense development – from the Bay Area to suburban Toronto –  and for cities to use eminent domain to ram through those same types of developments.  

    This is a story about politics, not economics. And sometimes politics leads to some really bad outcomes. That may well be all there is to it. Either way, the Islanders will be moving to Brooklyn next year. Fans should enjoy the old barn while it lasts. It is the last of a dying breed.

    Steve Lafleur is a public policy analyst with the Frontier Centre for Public Policy, an independent think tank based in Winnipeg, Manitoba. His primary research interests are housing and land use policies, transportation and infrastructure, criminal justice policy, immigration, inter-governmental fiscal relations, and municipal finances. His work has been featured in most Canadian newspapers including the Toronto Star and the National Post.

    1 http://www.citylab.com/politics/2012/11/islanders-move-harbinger-suburban-decline/3826/

    2 http://nysea.bizland.com/nysea/publications/proceed/2012/Proceed_2012_p221.pdf

    3 http://nysea.bizland.com/nysea/publications/proceed/2012/Proceed_2012_p221.pdf

    4 http://nysea.bizland.com/nysea/publications/proceed/2012/Proceed_2012_p221.pdf

    5 http://query.nytimes.com/gst/fullpage.html?res=9D01E5DD1538F930A35753C1A9629C8B63

    6 http://nysea.bizland.com/nysea/publications/proceed/2012/Proceed_2012_p221.pdf

    7 http://nysea.bizland.com/nysea/publications/proceed/2012/Proceed_2012_p221.pdf

    8 http://sports.espn.go.com/nhl/news/story?id=4129484

    9 http://en.wikipedia.org/wiki/The_Lighthouse_Project

    10 http://en.wikipedia.org/wiki/The_Lighthouse_Project

    11 http://query.nytimes.com/gst/fullpage.html?res=9D01E5DD1538F930A35753C1A9629C8B63

    12 http://query.nytimes.com/gst/fullpage.html?res=9D01E5DD1538F930A35753C1A9629C8B63&pagewanted=2

    13 http://query.nytimes.com/gst/fullpage.html?res=9D01E5DD1538F930A35753C1A9629C8B63&pagewanted=2

    14 http://query.nytimes.com/gst/fullpage.html?res=9D01E5DD1538F930A35753C1A9629C8B63&pagewanted=2

    15 http://query.nytimes.com/gst/fullpage.html?res=9D01E5DD1538F930A35753C1A9629C8B63

    16 http://www.newsday.com/long-island/nassau/inside-the-deal-to-remake-nassau-coliseum-1.6115950?utm_medium=twitter&utm_source=twitterfeed

    17 http://en.wikipedia.org/wiki/The_Lighthouse_Project

    18 http://www.nytimes.com/2010/07/25/realestate/25lizo.html?adxnnl=1&adxnnlx=1379883639-wcQ7dfnu7u1PMJZCGW8k9g

    19 http://www.nytimes.com/2011/08/02/nyregion/nassau-voters-reject-proposal-to-overhaul-coliseum.html?_r=0

    20 http://www.nytimes.com/2011/08/02/nyregion/nassau-voters-reject-proposal-to-overhaul-coliseum.html?_r=0

    21 http://www.nydailynews.com/sports/hockey/ice-job-brooklyn-nhl-islanders-leave-15-article-1.1191783

    22 http://nysea.bizland.com/nysea/publications/proceed/2012/Proceed_2012_p221.pdf

    23 http://www.newsday.com/sports/hockey/islanders/gary-bettman-says-he-likes-future-islanders-owners-1.9230790

    24 http://www.newsday.com/long-island/nassau/inside-the-deal-to-remake-nassau-coliseum-1.6115950?utm_medium=twitter&utm_source=twitterfeed

    25 http://www.lighthousehockey.com/2013/5/2/4293850/ratner-brooklyn-islanders-games-nassau-coliseum

    26 http://www.forbes.com/sites/tomvanriper/2013/08/16/brooklyn-islanders-not-so-fast/

    27 http://www.nytimes.com/2009/06/18/nyregion/18towns.html?_r=0

  • Time for Real Solutions to Vancouver’s Housing Affordability Crisis

    Vancouver is in desperate need of new solutions to ease its worsening housing affordability crisis. The 8th annual Demographia housing affordability survey released by the Frontier Centre found that Vancouver has the second least affordable housing market next to Hong Kong. On average, and assuming zero interest, a house in Vancouver would cost the median family more than ten years income. Three years is the threshold after which a market is considered unaffordable.

    Mayor Robertson recently announced the launch of a new task force to tackle the housing affordability crisis. The only way to tackle this problem is to focus on getting more housing units on to the market.

    Much of the debate around housing affordability descends into discussions about manipulating housing prices by freezing out market mechanisms. Rent control used to be a popular remedy, until cities realized that the side effects of the cure were worse than the disease. Two common methods of attempting to tackle housing today are social housing and inclusionary zoning. Social housing has been responsible for creating some of the most crime ridden neighbourhoods in the Western world. There is a reason "the projects" have such a bad name. Yet politicians of all stripes tend to promise more "affordable housing" as they call it, knowing that it will at best benefit a narrow group of people who qualify. Inclusionary zoning—requiring developers to build a specific number of below market rate units in new developments—has been one of the methods that municipal governments have attempted to compensate for this shortcoming. It also misses the point. It fails to bring broad price levels down, since it increases prices substantially for market rate units in the same development. One study from San Jose State University economists found that inclusionary zoning increases the price of market of new homes by $22,000-$44,000 in the median city. That is simply how developers pass off the cost of losing money on affordable units.

    The policies mentioned above ignore the fundamental issue: houses are priced by supply and demand. In a desirable city like Vancouver, prices are bound to be higher than in Omaha, Nebraska, or Saskatoon. But the dramatic price escalation that started in the 90s isn’t beyond the city’s control. There are many ways to get more supply on the market. One of the commendable policies undertaken by the city has been the introduction of laneway houses. These are small units that are hived off from existing houses. They are essentially small secondary suites that back in to laneways. But it won’t be anywhere near enough on its own. Vancouver needs to develop more land. The land is there, but it is off limits to development because of the agricultural land reserve (ALR). That needs to change.

    The ALR serves two purposes. The first is to preserve agricultural land. The benefit from it is contingent on whether the benefits from local agriculture outweigh the costs of taking land off of the market. From a nutritional and an economic perspective that simply isn’t the case. Flash frozen foods are often more nutritious than "fresh" local food, and intensive farming is more economical and sustainable than small scale farming. We would not be able to accommodate anywhere near our current population without industrial agriculture. This justification simply fails.

    The second justification for the ALR is to prevent urban sprawl. In a sense this works, since there is no sprawl development in the ALR. On the other hand, this approach is conducive to "leap frog" development which takes place beyond the growth boundary. It happens anywhere that a growth boundary exists. People commute further for cheaper housing. This is as true in the smart growth Mecca of Portland as it is in Toronto or Ottawa. From an economic perspective, there are reasons to worry about sprawl. People who move out into cheaper housing on the urban fringe typically pay less property taxes, and often cost municipalities more per capita. But the ALR hasn’t solved this problem. Metro Vancouver outside of the city proper accounted for 87% of the metropolitan area’s growth between 2006-2001. Simply put, the ALR simply hasn’t prevented sprawl.

    In order to balance the concerns of housing affordability and urban sprawl, the city of Vancouver should strike a compromise: open portions of the ALR, but only to high density development. This may not be the optimum solution for families that would prefer to purchase single dwelling homes, but a significant influx of new units would be a countervailing force against runaway home prices. This would also put downwards pressure on housing in the rest of Greater Vancouver. Though opening up broad swaths of the ALR may be the ideal, this seems like a reasonable compromise.

    This type of solution would rile people on both sides of the political spectrum, but it would be a dramatic improvement over the status quo. High home prices can only be solved from the supply side. The choice between maintaining the ALR as constituted or opening up portions should be obvious. Infill development can only go so far towards solving Vancouver’s housing crisis.

    Steve Lafleur is a Policy Analyst with the Frontier Centre for Public Policy.

    Downtown Vancouver photo by runningclouds

  • Mass Transit: Could Raising Fares Increase Ridership?

    Conventional wisdom dictates that keeping transit fares as low as possible will promote high ridership levels. That isn’t entirely incorrect. Holding all else constant, raising fares would have a negative impact on ridership. But allowing the market to set transit fares, when coupled with a number of key reforms could actually increase transit ridership, even if prices increase. In order to implement these reforms, we would need to purge from our minds the idea that public transit is a welfare service that ought to be virtually free in order to accommodate the poor. Concern about poverty should drive welfare policy, not transit policy. Persistent efforts to keep public transit fares as low as possible are a big part of the reason that public transit ridership in North America has hit record lows. To increase ridership, transit agencies have to convince people who can afford to drive that transit is a better option. Convenience, and not lower prices, is the key.

    There are three basic reasons that private automobiles have virtually crowded out transit. First, private automobiles are inherently more convenient for a large segment of the population. Transit routes are naturally limited to well-traveled corridors, which are often slower because of wait and stop times. On the other hand, you can get into your car and immediately take the most efficient route to your destination.

    The second factor is free roads. While people do pay for roads, they don’t pay for using specific roads at specific times. Gas taxes go into general revenues, and road construction and repair isn’t directly connected to usage. As a result, a large percentage of roads are subsidized by travelers who use a small percentage of highly traveled routes. Similarly, drivers don’t pay more during peak times than non-peak times. They instead pay with their time, by waiting in traffic.

    The third factor is that the market dictates private automobile sales. This is important because automobile companies and dealerships have an incentive to keep prices competitive while selling a high quality product. It also ensures that there are a multitude of different types of automobiles, and differing finance schemes and secondary markets tailored to a range of needs. The private sector is great at marketing things to people; government isn’t.

    While public transit can never be as flexible as private automobiles, some of the automobile’s advantages can be reduced. Road tolls and congestion pricing ought to be implemented where practical. Ironically, offsetting these new fees by reducing the gas tax would actually also be beneficial for transit services. After all, the only reason many impractical roads are built is that they are financed out of general revenue. If roads were primarily financed by those who used them, more funding would go to highly traveled urban roads, and less would go toward subsidizing sprawl.

    Here’s the controversial aspect of the solution: Transit should operate on a for profit basis and its prices should closely reflect market forces — even if it means that transit fares increase.

    Mass transit has one major advantage: where there is sufficient demand, transit is inherently cheaper than private automobile usage because the costs are spread over many people, making the per person cost lower. That’s why most people fly with commercial airlines instead of chartering private jets, for example. But keeping the price too low reduces the ability of transit service to provide more routes. And this is important. While there is a segment of the population who are stuck with public transit no matter how inconvenient it is, most people won’t ditch their cars unless they can get to their destinations relatively quickly. And it may not be economical for a transit system to get them to many of those places for $2.25.

    A flat price structure subsidizes inefficient routes with efficient ones. But what if transit services charged the full cost for less efficient routes? While charging more for less popular routes may seem like it would reduce ridership, it wouldn’t. If people knew that there were many additional routes going to out-of-the-way locations that they don’t ordinarily frequent, they would still positively factor it into their calculation of whether or not they need a car. After all, paying $5 to get to an out of the way destination occasionally is still cheaper than getting a cab, and can often be cheaper than the cost of driving. Transit systems have higher ridership in major centres than in small centres, even when the fares are high. Transit is not only cheaper than driving in dense cities, it’s also equally or more convenient.

    But just allowing prices to fluctuate isn’t enough. For a price system to function properly there needs to be an incentive to keep prices as low as possible. Public monopolies don’t have this incentive. Furthermore, there needs to be competition to ensure high levels of service. The reason that air travel service is so high quality and cheap is because it is private, not public.

    The thought of privately delivered public transit will no doubt turn some people off, especially public sector employees. And simply removing government from the transit business isn’t necessarily the best solution. Instead, municipal transit services should be turned into transit commissions that coordinate and contract for transit from competing companies. Transit companies would bid on routes, and pay the city a fixed cost for the right to service each route based on a competitive auction.

    For less cost efficient routes, a city could even offer a small subsidy per rider, should no transit company enter a bid. Whichever company would be willing to service that route at the lowest subsidy level would win. This would maintain downward pressure on costs. But it would be important that the transit commission use this as a last resort. Otherwise it could undermine the competitive market process by creating the incentive for companies not to bid on many marginal routes until a subsidy was offered.

    Collecting variable rates for trains is simple, but it would be more difficult for buses. One method would be to have buses classified as local, express, or commuter, for instance. Each would charge a different rate. An automated payment system could be installed where riders swiped their cards on the way in and out, as they do on the Washington DC Metro, to calculate the rate.

    Changing the operating and pricing structure wouldn’t alter the way that people use transit services. Transit vehicles would still work on a coordinated schedule, and collect fees from riders as they always have. What would change is that the competing companies would have an incentive to keep operating costs lower, and to provide more routes. They also would have to meet performance guidelines monitored by the city, or face fines. What would change is the philosophy of transit companies. They would be out to make a profit.

    This may seem like a radical departure, but consider that London, England, contracts out its bus service. If one of the world’s busiest cities can co-ordinate a public-private partnership of this magnitude, there is no reason smaller cities couldn’t do the same. The key is to create the right incentives and institutions. The current model of treating transit as a welfare service has failed. It is time to make transit the first choice for commuters, not the last.

    Steve Lafleur is a Policy Analyst with the Frontier Centre for Public Policy.

    Image from BigStockPhoto.com: A metro bus in Madison, Wisconsin.

  • Dulles Metrorail Silver Line Vs Bus Rapid Transit

    Long overdue rapid transit service from Washington DC to Dulles airport is now under construction. The Dulles Corridor Metrorail Project, known as the Silver Line, may seem like it was an obvious choice as a way to improve the region’s public transportation. Construction began in March 2009, and service is expected to begin by 2013. As those who have used bus service from the DC area to the airport can attest, the current system — a regular city bus equipped with luggage racks — is inadequate. The buses are low capacity, and are not designed for highway driving.

    While rail might seem like the most obvious solution, it is also by far the most expensive and slowest option. The price tag is staggering, and the rail extension will take years to construct. The better option would have been to make use of the existing roadways, and implement an expansive bus rapid transit system (BRT).

    The 23 mile extension of the Washington Metro rapid transit system is forecast to cost $6.8 billion dollars; roughly $296 million per mile. The constant scramble to finance the over-budget project has resulted in more than one construction setback.

    In contrast, consider how a BRT system could have worked, and what it would have cost. One lane in each direction on the Dulles Toll Road could have been designated as a high occupancy vehicle (HOV) lane, to ensure that buses could move relatively quickly. The average cost of implementing a BRT system running on an HOV lane is $8.97 million per mile (in 1999 dollars), which would have brought the cost to roughly $230 million. It should be noted that this average is heavily skewed by one costly project; two million to five million dollars per mile is more typical, which would make the final cost in DC between $52 million and $130 million.

    The buses themselves would have had to be fully articulating — the kind that bend in the middle, also known as accordion buses — with overhead luggage compartments, and a capacity of roughly 87 passengers. They would likely cost somewhere between $750,000 and $1.68 million.

    The overwhelming likelihood is that busses to Dulles would cost near the low end of the price range. The high end is based on the cost of buses used in Boston for their Silver Line BRT system to Logan Airport, where dual fuel electric/natural gas buses are used; these buses run underground, where they cannot burn gas, as well as on surface streets where there aren’t any overhead electric lines.

    The cost per passenger trip is likely to be lower for rail than for BRT, because of rail’s higher capacity per vehicle; the train will transport about 175 passengers per car. Despite this, the lower per passenger operating cost doesn’t come anywhere near making up for the massive capital cost. The interest alone on the $6.8 million dollar loan would equal $1,067,317 per day (amortized over 30 years at a 4% interest rate). This doesn’t factor in the cost of the principle, or the operating cost.

    Even after spending $6.8 billion, only about 10% of travelers to Dulles are likely to arrive by public transportation, according to projections by the Airport Authority. Compare that to 16% for Reagan , which is right in the city (Dulles is more than 25 miles outside of DC’s central business district. This highlights another advantage of BRT: modularity. Instead of all or nothing, BRT can be gradually introduced, and levels of service can be adjusted to meet demand.

    While access to Dulles isn’t the full justification for the Silver Line, it’s hard to imagine the rail extension ever paying for itself. At the end of the day, cost is the number one issue, and BRT wins hands down.

    Steve Lafleur is a Policy Analyst with the Frontier Centre for Public Policy.

    Photo: Metrorail Construction; truss erecting span at I-459 and Rte 123

  • Cities Have Outgrown Their Role as Mere Creatures of the Provinces

    The Martin Prosperity Institute recently released the map below, which compares the GDP of several US metropolitan areas to the size of national economies. For instance, the Boston-Cambridge-Quincy metropolitan statistical area (MSA) has a GDP of $311.3 billion dollars. If it were a country, it would be the 40th biggest national economy on earth, ahead of countries such as Denmark ($310.1) and Greece ($303.4). The Houston-Sugar Land-Baytown MSA has a GDP of $378.9 billion, which would make it the 31st biggest national economy, bigger than Austria ($375.5) and Argentina ($368.9). New York-Long Island-Northern New Jersey ($1.28 trillion) isn’t all that far behind Canada ($1.57 trillion).


    While trotting out such comparisons is an interesting exercise, the comparison also gives us some important perspective.  Despite the fact that these cities, as well as many others, produce as much as large countries, they have nowhere near the same fiscal levers at their disposal. Further, they are subservient to higher levels of government. The same problem exists in Canada. The Greater Toronto Area’s economic output ($233.9) is nearly equivalent to Finland’s total GDP ($270.6). Note that this definition is far less expansive than the US metro areas listed above. If the definition were expanded to include the entire Golden Horseshoe, it would be closer to the Size of Norway ($414.3 billion).  Yet the City of Toronto can’t finance a public transit expansion without the two senior levels of government. Calgary ($62.5 billion), roughly the size of Lithuania, couldn’t decide to create a municipal sales tax. Vancouver ($85.5 billion), slightly bigger than Serbia, can’t even decide how to allocate gas tax dollars without a special deal with the federal government.

    The problem isn’t that we have too little government spending, but that revenue collection and spending decisions often happen at the wrong level. Revenue generation and spending should take place as close as possible to the point of delivery. There is no reason why someone in Moose Jaw should pay federal income taxes so that the Federal Government could partner with the province of New Brunswick to build a highway near Moncton. Similarly, there’s no reason why someone in Edmonton should send property tax dollars to the province so that it can pay for a transit expansion in Calgary. Not only is filtering money through multiple layers of bureaucracy inefficient, but it leads to bad decision making. Decisions both on the revenue, and expenditure side need to be made at the lowest level of government possible.

    In order to ensure that cities can meet their infrastructure requirements, provincial governments should gradually devolve spending responsibilities and revenue generating capacities to the municipalities, and the federal government should end the practice of intervening in infrastructure issues altogether. Some municipalities may choose to raise property taxes, others may increase user fees, and still others may experiment with municipal sales taxes. But regardless of how municipalities decide to raise revenue, they are better placed to determine how much revenue is required, and which projects are really essential. More importantly, devolution gives more direct control over decision making to the people that are actually impacted by the decisions. Devolution means more accountability, and more local input. And if tiny Iceland can fund it’s own infrastructure, there’s no reason why Winnipeg or Edmonton couldn’t do the same.

    This piece originally appeared at the Frontier Centre for Public Policy Blog.

    Steve Lafleur is a public policy analyst with the Frontier Center for Public Policy.

  • Learning the right lessons from LA’s “Carmageddon”

    Carmageddon has come and gone, and the world didn’t end. The catalyst for the predicted disaster was the closure of Interstate 405 in Los Angeles for construction for the weekend of the 16th and 17th of July. Freeway closures aren’t all that unusual, but the 405 is not a regular freeway. It is both the busiest, and most congested road in America. The 405 carries an estimated half million vehicles per weekday. Had traffic been even close to normal volumes—even weekend volumes—the event would have earned the nickname. However, less people drove. Way less people. In fact, the roads were unusually empty.

    There are two lessons that one might be tempted to take home from this:

    1. Persuasion can cause people to drive less.
    2. America could do with less freeways.

    These are the wrong lessons to take away. Using moral suasion or fear to alter people’s behavior can work under certain circumstances, but it hasn’t helped alter people’s day to day commuting patterns. People drive more now than ever, even though the glamorization of automobiles has diminished, and the appeal of urban living has increased. There are plenty of people who choose urban, auto-free living, but that’s a choice that isn’t made by public interest campaigns. It may be the case that there are compelling arguments for stalling the growth of urban freeways, but using Carmageddon to make that point would be disingenuous.

    The two real lessons of Carmageddon are:

    1. Persuasion can convince people to drive less under unusual circumstances–temporarily.
    2. When faced with the right incentives, people will drive less.

    The fear stirred up about the closure for months obviously worked. Billboards went up; the media counted down; celebrities Tweeted warnings at the behest of the city; Mayor Villaraigosa advised people to “go on vacation,” and councilor Paul Koretz told people to “stay the Hell away.” But this only works in acute situations, where there is a credible threat. The fact that the apocalyptic term Carmageddon caught on certainly helped permeate the public consciousness. But everyone knows LA traffic is usually incredibly bad, yet they endure it on a daily basis. People in LA are grudgingly willing to tolerate the country’s worst traffic, but they’re not willing to venture into the city with Interstate 405 closed unless they have to. Since it was on a weekend, most of them didn’t. Many radio shows even pre-taped segments to keep their guests from getting stuck in traffic. Several film and television productions were shut down for the weekend. These types of deferrals can be arranged, but rarely, and with sufficient notice. Citing Carmageddon as an example of how we can do with less automobile traffic is like pointing to a blackout as an example of how we can reduce electricity consumption.

    The most important lesson, though, is that people respond to incentives. Since the city obviously doesn’t want people to “stay the Hell away” forever, they’re going to have to come up with another way to use incentives if they want to tackle gridlock. LA drivers spend over half a billion hours per year stuck in excess traffic delays, which costs the economy roughly $12 billion dollars. Adding more freeway lanes seems like an obvious solution, except for the fact that it doesn’t work. Studies have shown that every percentage increase in roads leads to an equal percentage increase in driving. In other words, more roads mean more driving. There are certainly exceptions to this, since the optimal level of roads isn’t zero, but it does illustrate the fact that we can’t just build our way out of traffic congestion. Instead, we need to introduce strong incentives other than fear to reduce congestion. That incentive is congestion pricing.

    While road tolls aren’t the most appealing thing to drivers, electronic tolls can reduce the amount of discretionary driving, and convince some number of people to take transit rather than driving. Some would describe this approach as a “War on Drivers,” but the reality is that the intention is precisely the opposite. It is an attempt to make sure that drivers can actually get where they need without soul crushing traffic. If that means they’ll have to pay $2 to drive to the store to get bread, maybe they’ll walk to the corner store instead. Incentives are important, and even small incentives can radically shift people’s behavior. Goading people into changing their behavior rarely works. Otherwise no one would drink cola, or eat trans-fats.  On ordinary days, people need to get places, and for most people, driving is more convenient. The number of people for which driving is the most convenient choice will decline if the urban renaissance being predicted does materialize, but we can’t count on the majority of existing drivers to abandon their cars and move to city cores. Acknowledging that cars will be the dominant mode of transportation for the foreseeable future, and that people drive more than they need to when it is free are key to addressing traffic congestion. Otherwise, everybody will continue to sit in traffic.

    This piece originally appeared at the Frontier Centre for Public Policy Blog.

    Steve Lafleur is a public policy analyst with the Frontier Center for Public Policy.

  • Can the Winnipeg Model Save Detroit?

    Detroit, not only in the US but across the globe, has become the poster child for urban decay.  The city lost 25% of its population between 2000-2010, and over half its population since 1950.  Over 90,000 houses stand empty, and many neighborhoods have been completely abandoned. 

    The burden of maintaining infrastructure and law enforcement in a city with an eroding tax base and sparse population has lead to attempts to “shrink” the city.  This means bulldozing several areas of the city, and relocating existing residents.  Current Mayor Dave Bing realizes this, and has pledged to knock down a staggering 10,000 structures during his first term.  In the past such slum clearances lead to vigorous opposition from urbanists like Jane Jacobs, who argued that top down approaches to urban redevelopment would cause a great deal of pain, for little to no benefit.  Yet despite the fact that Jacobs is widely admired by planners, the plan to shrink the city has met with little opposition in Detroit.  Frankly, unless Detroit sees a major population surge, shrinking the city may sadly be necessary.  

    Last week, New York Mayor Michael Bloomberg appeared on NBC’s Meet the Press, and at one point mused about using immigration policy to repopulate the city.   Bloomberg didn’t offer a substantive policy proposal, but the premise makes perfect sense.  Most of Detroit’s problems stem from the fact that fewer and fewer people are working and paying taxes in the city.  There is more infrastructure than people need or the city can afford. 

    Ultimately the issue then is getting people to live in Detroit. But the biggest problem, even with a mild resurgence in the auto sector, is that Americans, and even most Michiganders, don’t want to live in Detroit, even with jobs.

    But for many immigrants, Detroit would seem like a major upgrade over their current living situation. This is not as far-fetched a notion as some may believe. Here’s a proposal for Detroit based on an unlikely Canadian immigration success story: Winnipeg.

    Learning from Winnipeg

    When Americans think of Winnipeg, they think of white guys wearing earmuffs in July, speaking with the kind of Canadian accents typically ridiculed on American sitcoms.  When Canadians from outside of Manitoba think of Winnipeg, they think of a former industrial city that is hardly a draw to the much sought after “creative class” even though  the city has the nation’s lowest housing cost.  What no one from outside the city associates with Winnipeg is immigration.

    Winnipeg’s immigration success is not well known outside of the province, but it is hard to dispute the facts.  Smart immigration policies have helped Winnipeg stabilize its population and reverse the city’s decline.

    Between 1971-1996, the city of Winnipeg grew by just under 16%, or roughly 0.6% per year.  Like many North American cities, all of the growth was taking place in the suburbs.  In fact, the population of Downtown Winnipeg shrunk by 23.25% during that period.  Though the rate of decline is nowhere near that of Detroit, the causes and effects are similar.  Manufacturing declined; people moved to the suburbs, aided by highway expansions and low cost automobiles; residents moved to more entrepreneurial cities, such as Calgary; ensuing job and population decline lead to a decline in safety.  The most notable difference is that racial tensions in Detroit exacerbated suburban flight.  But the similarities are sufficient to use Winnipeg as a model.

    Using immigration to reverse population decline in Manitoba

    In 1998, the Province of Manitoba introduced the Provincial Nominee Program, which gave the province the ability to recruit immigrants over and above federal immigration quotas.  Since Manitoba was not seen as the most attractive place for new immigrants to settle, only 1.8% of immigrants to Canada settled in the province between 1996-2000 (Note 1).  Since the introduction of the nominee program, immigration to the province has increased by 250%.  The increase in the City of Winnipeg has been staggering.  In the years 1996-2000, the city saw 15,809 new immigrants.  In just one year, 2007-2008, the city attracted 16,585 immigrants.  Equally as important, 78% of Manitoba immigrants stay in the province, which is a significant improvement over the 1980s, when they had a retention rate of less than 50%.  Increased immigration ended Manitoba’s population stagnation, and the province now enjoys consistently positive net migration.

    Economic outcomes of Manitoba immigrants

    A survey of immigrants who migrated to Manitoba through the provincial nominee program shows promising results.  Three quarters of participants surveyed have never experienced involuntary unemployment.  Of those surveyed, 85% were employed, and 7% were in school.  While the average annual household income of $49,066 for participants is lower than the provincial average of $60,242, they are generally making enough money to live reasonably well, contributing to the provincial and municipal tax bases. 

    Reasons for the program’s success

    Of course, mass immigration often creates challenges for recipient regions.  Aside from the need for immigrants to find jobs, they also often require language training, and educational upgrading to meet certification levels for their professions. However, the success of the program shows that participants were by and large able to overcome these difficulties.  Some of this can likely be attributed to the fact that immigrants of similar backgrounds tended to cluster together, some integrating into communities with existing settlers of similar backgrounds.  The primary examples of these two patterns are the concentration of Filipino immigrants in Winnipeg, and the large number of Mennonites from Germany, Mexico, and South America who integrated into existing Mennonite communities.  This can be important, since it allows for them to develop, or take advantage of informal support networks.  Living in a community with speakers of the same language makes it easier for immigrants whose first language is not English to integrate into the community, and can help with finding employment. 

    Benefits of targeted immigration to Detroit

    Immigration is often a source of innovation and entrepreneurship.  Recent studies have shown that immigrant entrepreneurs in America have created more jobs for existing Americans than  for other    immigrants.  More people moving to Detroit would also mean more customers for the service industry in the city.  And by paying property taxes, they would help to keep the city government afloat.  Perhaps the most important benefit would be that more people generally would make the city safer.  Criminals, after all, hate witnesses. 

    Hopeful signs from recent immigration to Detroit

    Recently, Detroit has experienced an influx of Latino and Muslim immigration.  Despite the stigma attached to these groups by many Americans, anecdotal evidence suggests that these newcomers have been a boon to the city.  According to the Immigration Policy Center, Arab American employment now contributes $7.7 billion to the Detroit metro economy, and provides $544 million in tax revenue to the state.  They now support over 140,000 jobs in the city.  Latino immigrants are being credited with helping to revitalize Southwest Detroit, which saw $200 million of investments between 1993-2008, and the area’s population grew by nearly 7% between 1990-2000 even as most of the city declined.  The City is now home to nearly 50,000 Latinos, up from under 20,000 in 1990.    

    And for those who claim immigrants take American jobs, the evidence suggests the opposite.  Despite the fact that immigrants have lower average wages than non-immigrants, they manage to have a disproportionate economic impact in many cities, Detroit being one of the best examples.  According to the Fiscal Policy Institute, immigrants contribute 1.3 times as much to the economy per capita as non-immigrants in Detroit.  This means, among other things, they disproportionately create jobs and contribute to the tax base.    

    Policy recommendations

    Creating a targeted immigration program would require co-operation between municipal, state and federal governments.  The policies recommended here are one set of options among many.

    • The federal government should create an ”urban revitalization” visa category to allow for municipalities with severe demographic declines to accept immigrants without counting them towards immigration quotas.
    • The state of Michigan, or other similarly challenged states, should create a specific program modeled on Manitoba’s provincial nominee program.
    • Immigrants should be required to prove that they have the financial means to support themselves for a specified amount of time in the absence of income.  This would ensure that they didn’t burden the existing welfare system.
    • Participants in the program could be required to undertake language training at their own expense, or to prove a basic competence in English. 
    • The City of Detroit should move more aggressively towards allocating abandoned buildings to provide housing or places for businesses of immigrants, or anyone else who wants to occupy them for that matter.  Filling buildings means more property taxes.
    • The City should concentrate on settling new immigrants of similar ethno-linguistic backgrounds into specific underpopulated areas.  Rather than simply allowing a certain number of immigrants into the city, they could create zones with high vacancy levels, and allow immigrants who apply to the program to move into these zones initially.  The aim should be to populate one neighborhood every two years to fill current vacancies.
    • Instead of punitive measures to force immigrants to stay in Detroit, the city should provide incentives to stay.  This could include requiring immigrants under this program to sign long term leases with large deposits, or to purchase property.  This is preferable to attempting to monitor the movement of immigrants. 
    • The city and state should attempt to partner with businesses, who may be interested in opening operations in the city due to the influx of immigrant labor.  This could help to give further incentives for new immigrants to stay, and create jobs for existing unemployed residents.

    Many of these recommendations require more micromanagement than I’d personally prefer, but address political and economic realities.  Simply allowing anyone and everyone to immigrate to Detroit or anywhere else in America is a political non-starter.  Also, the dire budgetary situation facing the City of Detroit and the state of Michigan means that neither can afford to allow new immigrants to become economic liabilities.  After all, the justification for this program is to replace the tax base and reduce crime, not to create a new underclass.  Though there would certainly be some hiccups, evidence in Winnipeg and Manitoba could help to revitalize both Detroit and much of the state of Michigan.  Failure to undertake an aggressive revitalization strategy will make an aggressive shrinking strategy inevitable.  Given the two choices, revitalization seems vastly preferable.

    —

    Note 1: Unless otherwise noted, data on the Manitoba Provincial Nominees Program is based on http://www2.immigratemanitoba.com/asset_library/en/resources/pdf/pnp-manitoba-provincial-nominee-program-tom-carter-report-2009.pdf

     

    Steve Lafleur is a public policy analyst and political consultant based out of Calgary, Alberta. For more detail, see his blog.

    Photo by Arlo Bates

  • The 30th Anniversary of the C-Train in Calgary

    I’ve spent a good chunk of the last few months working on a study of Calgary’s light rail transit (C-Train) system, which was released today by the Frontier Centre for Public Policy.  I’ve had a long standing interest in LRT systems, and spent the summer of 2009 working for the Cascade Policy Institute in Oregon, where we compiled massive amounts of data on their world renowned LRT system as part of an ongoing project.  The data (including actual field research, which proponents of the system haven’t done–they rely on survey data), indicates that ridership is lower, and costs are far higher than proponents believe.

    That firsthand experience (which included riding the train every day), coupled with the empirical literature from light rail systems across North America, shattered my previous conviction that light rail transit can be an economical method of transit.  For the record, I do believe that subways can be profitable in dense urban cores (even the badly managed TTC nearly breaks even), and buses already are profitable in many cases (especially inter-urban bus services, such as Greyhound and Megabus).  Many proponents of LRT believe that it is a happy medium between subways and buses.  If that were the case, it would be profitable.  However, LRT combines the disadvantages of the two: it is slow, inflexible, and expensive.  Numerous studies, in particular an authoritative study by the non-partisan United States Government Accountability Office, have demonstrated that on average, buses are a cheaper, faster, and more flexible than LRT for providing mass transit.

    While I use many different metrics to demonstrate that the costs and benefits of LRT are wildly exaggerated, my favorite is that Calgary spends both the most on transit and the most on roads per-capita.  Given that Calgary’s entire land use and transportation framework for the past several decades has been built around the C-Train, it is hard to call it anything but a failure. The City has cracked down on parking so aggressively to encourage people to ride the train that there are only 0.07 parking spaces per employee in the central business district.  Because of this, Calgary is tied with New York for the highest parking prices on the continent.  But many of those people who would otherwise have parked downtown instead park in the free parking spots provided at C-Train stations.  Not only is free parking horribly inefficient, but this also emphasizes one of the major contradictions of the C-Train: it isn’t getting people out of their cars, and it isn’t helping to curb urban sprawl–two of its primary goals.

    Unsurprisingly, those last two findings proved controversial, though not as controversial as my assertion that the C-Train fails to help the urban poor.  A columnist for the Calgary Herald wrote an angry response to my Herald article that accompanied the story (though doesn’t seem to have read the study).  She attempts to refute my arguments about urban sprawl, and the impact of the C-Train on the poor, while dismissing the study as “a cost-benefit analysis guaranteed to resonate with other right wingers who share the mantra of lower taxes above all else, including over the reality of everyday experience.” I’m not clear on when cost-benefit analysis became a right wing concept, but I’ll let that one go.  I will, however, address her two criticisms in short order.

    The idea that urban transit could worsen sprawl seems odd.  The reason why it does so in Calgary is because the C-Train network is built on a hub and spoke model.  What this means is that transit is concentrated on going from the outskirts, into the city center.  Since LRT is so expensive, and since people need to be ‘collected’ by buses to get to LRT stations, the city has less resources to provide transit circling the core, or travelling east-west.  And if you can’t provide good transit for people who aren’t living along LRT lines, and don’t work along one of the lines, people are just going to keep moving further out (hence the highest road costs in the nation).  Here’s what Calgary Transit’s current planning manager has to say about the C-Train’s impact on sprawl:

    “In one respect, it should allow Calgary to be a more compact city, but what it’s done is it’s actually allowed Calgary to continue to develop outward because it was so easy to get to the LRT and then get other places,” says Neil McKendrick, Calgary Transit’s current planning manager.”

    While that comment is true for those who can afford to live by LRT stations (or to drive to them), it doesn’t apply to the city’s poorest.  As it happens, LRT lines raise the cost of adjacent housing (though for proximate high end housing it lowers the value–hardly a concern for the poor)–by $1045 for every 100 feet closer to a rail station.  This isn’t a terribly complicated concept.  If you spend a massive amount of money on a form of transit that is considered to luxurious, the price of housing goes up. This is exacerbated by the fact that diverting transit resources to those areas makes transit there comparatively better, making it that much more desirable comparatively for people who intend to use transit at all–even as just an occasional amenity, say for going downtown on weekends.  LRT is great for people who can afford to live by the stations, but not so much for anyone else.

    Unfortunately, for many, light rail transit has become a sacred cow.  But if Calgary is ever going to have adequate rapid transit, the City will need to explore more cost effective options.  Buses may not be trendy, but expanding BRT in Calgary would dramatically improve people’s mobility at a reasonable cost. Fortunately, the current Mayor has acknowledged that BRT will have to be part of the solution for making Calgary a transit friendly city.  He also made the wise decision of de-prioritizing the southeast LRT extension (expected to cost $1.2-$1.8 billion). If the Mayor follows up on his promise to make BRT an integral part of Calgary Transit in the short term, the City will not only have far better transit, but it will have a chance to watch the LRT and BRT operating side by side so that the people can decide for themselves whether the billion plus required to build the Southeast LRT is worthwhile.  My bet is on BRT.

    This piece originally appeared at stevelafleur.com