New Geography

Category: Policy

  • General Motors’ IPO: Deal Or No Deal?

    Those who are looking for a feel-good stimulus story, notably members of the Obama administration, cite the recent initial public offering (IPO) in which the federal government sold off 28 percent of its General Motors shares for about $15 billion.

    When the government-owned shares went public, President Obama said: “American taxpayers are now positioned to recover more than my administration invested in GM.” From the headlines and sound bites, you might think that the government was in the money on the $49 billion that the Troubled Asset Relief Program invested in GM during the dark days of the Great Recession.

    To believe that the U.S. government made money on its GM investment is to imagine that former republics of Yugoslavia will get back together so that they can restart the production lines of the Yugo.

    In the GM story, there have been many winners and losers on the road from bankruptcy to IPO. For the most part, the losers include investors, bondholders, taxpayers, and the 65,000 workers laid off so that, in the showroom of American politics, the bailout money could look like a rebate.

    The winner was the United Auto Workers union, which delivered Ohio and Michigan to the Obama campaign in the 2008 election. Without the union’s support in 2012, the president’s handling and maneuvering ability in the electoral college might resemble the torque on a Chevy Vega.

    The GM that went bankrupt in 2008 was not just a car company; it was also an unfunded pension plan, a bad bank (partial ownership of General Motors Acceptance Corporation or GMAC), and a health maintenance organization notable for padded bills.

    As it hit the crash wall, GM had negative equity, $88 billion in losses since 2004, 92,000 workers, 500,000 retirees, and 22% of a domestic car market that had shrunk to 13 million cars a year.

    What sleight of an accountant’s hand turned the originator of the Chevy Nova into an emerging juggernaut (maybe one with “soft Corinthian leather?”) that the market now values at $51 billion?

    Instead of letting GM go through Chapter 11 liquidation, and winding up the company according to bankruptcy laws, the U.S. government stepped in and allocated the spoils according to political rather than legal precedents. In theory, the move was designed to “protect American jobs.” What did these jobs cost?

    The immediate losers were GM shareholders (largely wiped out), and the holders of $95 billion in corporate bonds, now worth about $0.30 on the dollar.

    If you check the price of GM shares today, you will see them trading at around $34 a share. “Not bad,” I can hear you saying, recalling GM at $22 or even $8. But these are the new Government Motors shares; the old ones, which your grandfather owned, are trading for less than $1 on penny stock exchanges. Maybe the certificates are selling at flea markets?

    In the restructuring, the new owners of GM became the U.S. (61%) and Canadian (12%) governments, and the United Auto Workers (17.5 %), whose generous health and retirement packages would have been watered down or lost in a commercial liquidation.

    In the bankruptcy, the UAW retirees were moved ahead of the bondholders to the front of the disassembly line, no doubt because their rust-belt votes count more in presidential elections than those of bi-coastal hedge funders.

    Stakes in the new GM were granted to the union in lieu of cash due on health care and other benefits, which survived the reorganization. In the recent IPO, the unions netted $3.4 billion for a third of their stake.

    Other options thrown into the car deal included the $17 billion given to GMAC, whose losses became a ward of the state, and whose profits go to the hedge fund, Cerberus. It’s been renamed Ally Bank, just so you won’t associate its bad debts with the GM bailout. (“Test drive the new Ally… from zero to $17 billion in six point four seconds.”)

    GM was also allowed to carry forward $45 billion in Net Operating Losses through bankruptcy, a deduction rarely, if ever, granted to other scrapped companies. Clunkers for cash? The company also got a $6.7 billion loan, at below market rates.

    And finally, to promote Chevy Volts, buyers of the new hybrid electric car are given $7500 in federal tax credits. Maybe Ford dealers can match the subsidy on their hybrids by throwing in a set of snow tires?

    The new GM is allowed to operate with an unfunded pension liability, which remains on the books to the tune of about $30 billion. Mark that claim to market (those accounting rules that did so much to collapse the likes of Merrill Lynch), and GM’s IPO stake is hardly worth $15 billion.

    The contrived GM liquidation also kept the auto maker from dumping about $14 billion in promises onto the Pension Benefit Guaranty Corporation, a nominally private company — the board, however, consists of the secretaries of Labor, Commerce, and Treasury — that, with government benedictions, backs up politically correct pension payments.

    There is almost no way to know the total losses that can be attributed to the government’s GM restructuring. But, clearly, the government played Three-card Monte with the company’s bad assets, and kept the good ones for themselves. On Wall Street — the object of so much government venom — this is called “asset stripping.”

    Little wonder that everyone, including its government shareholders, are now upbeat about GM’s prospects. Morningstar writes: “GM can break even at near-depression-like sales volume, and it is selling more units in the U.S. with four brands than old GM did with eight brands in 2009.”

    At the time of GM’s IPO, President Obama sounded like Mr. Goodwrench: “Just two years ago, this seemed impossible. In fact, there were plenty of doubters and naysayers who said it couldn’t be done, who were prepared to throw in the towel and read the American auto industry last rites.”

    What he might have said is this: “We hosed the shareholders and suckered the bondholders down to $0.30 on the dollar. We propped up GMAC with $17.5 billion and then buried the losses in bad bank accounting. We leaned on the accountants to keep $45 billion in Net Operating Losses. We learned something from Bernie Madoff and are letting GM continue to carry $30 billion in unfunded pension liabilities. We dumped GM’s health care obligations, for shares, into a union trust. The rest we moved off the lot. Home run.”

    The government originally threw $49 billion at GM’s cash guzzling problems and then forced another $100 billion on the market in losses. In exchange thus far, it has recouped $15 billion, for about half of it stake in the new GM.

    In Washington, that might pass for a good deal. It might also seem fair in a remake of The Godfather (“The Corleone Family wants to buy me out? No, I buy you out, you don’t buy me out.”) Elsewhere, it sounds like a lemon.

    Photo of Classic Cadillac 2 by Shiny Things: “For-sale Cadillac parked in Morro Bay. How tempting is that?”

    Matthew Stevenson is the author of Remembering the Twentieth Century Limited, a collection of historical essays. He is also editor of Rules of the Game: The Best Sports Writing from Harper’s Magazine. He lives in Switzerland.

  • Demography vs. Geography: Understanding the Political Future

    Demography favors Democrats, as the influence of Latinos and millennials grows. Geography favors the GOP, as the fastest-growing states are solid red. A look at America’s political horizon.

    In the crushing wave that flattened much of the Democratic Party last month, two left-leaning states survived not only intact but in some ways bluer than before. New York and California, long-time rivals for supremacy, may both have seen better days; but for Democrats, at least, the prospects there seem better than ever.

    That these two states became such outliers from the rest of the United States reflects both changing economics and demographics. Over the past decade, New York and California underperformed in terms of job creation across a broad array of industries. Although still great repositories of wealth, their dominant metropolitan areas increasingly bifurcated between the affluent and poor. The middle class continues to ebb away for more opportune climes.

    Each state has also developed a large and politically effective public sector. In both states, no candidate opposed to its demands won statewide office in 2010. At the same time, the traditional, broad-based business interest has become increasingly ineffective; instead, some powerful groups such as big developers, Wall Street, Silicon Valley, and Hollywood, became part of the “progressive” coalition, willing and able to cut their own deals with the ruling Democratic elite.

    In New York, Republicans did capture a handful of seats in rural areas that have historically been friendly to the GOP, but in California the Republicans made no headway at all, even in rural areas. The difference here can be explained by demographics. In New York, the rural population is overwhelmingly Anglo; in California, much of it is Hispanic, a group that is both growing and, for the most part, tilting increasingly to the left.

    Can the New York and California models be replicated in other states and yield political gold for Democrats? The answer depends on how these two economies perform over the coming decades.

    Another state model competes for supremacy. It can be found in Texas, the Southeast, and parts of the intermountain West. The hallmarks are fiscal restraint and an emphasis on private-sector growth. If these free market-oriented states can produce better results than the coastal megastates, with their emphasis on government they could own the political future.

    Demographics: The Democrats’ Best Hope

    Right now, demography is the best friend Democrats have. Over the next four decades, the two groups that will increasingly dominate the political landscape are Hispanics and millennials (the generation born between 1983 and the millennium). Both groups tilted leftwards in recent elections. This trend should concern even the most jaded conservatives.

    The Latinization of America, even if immigration slows, is now inevitable. Only 12 percent of the U.S. population in 2000, Hispanics will become almost 25 percent by 2050. As more Latinos integrate into society and become citizens, they are gradually forming a political force. Since 1990, the number of registered Latino voters swelled from 4.4 million to nearly 10 million today.

    Anglos—60 percent of whom supported Republican congressional candidates in 2010—are beginning to experience an inexorable decline. In 1960, whites accounted for more than 90 percent of the electorate; today, that number is down to 75 percent. It will drop even more rapidly in the coming decades, with white non-Hispanics expected to account for barely half the nation’s population by 2050.

    California and New York are laboratories of the new ethnic politics. In New York, Latinos represent roughly 12 percent of the voters, while the overall “minority” vote has risen to well over 30 percent. California has, by far, the nation’s largest Hispanic population and Latinos are now roughly 24 percent of eligible voters. Overall, non-whites constitute well over a third of the electorate.

    The growth of the Latino vote works to Democrats’ advantage. Until the GOP-sponsored passage in 1994 of the anti-illegal alien Proposition 187, Latinos in California routinely voted upwards of 40 percent Republican (and even did so for Governor Arnold Schwarzenegger in 2006). This year, barely one-third of California Latinos supported Republican candidates Meg Whitman and Carly Fiorina.

    The Republican embrace of what is perceived by Hispanics as nativism has clearly alienated Latinos. This applies not only to California but also in Arizona, where Latino voters are now 18 percent of the total; in Nevada, they represent 14 percent and played a critical role in re-electing Majority Leader Harry Reid.

    This shift is all the more remarkable given the fact that many Democratic policies, on both social issues and regulations squashing economic opportunity, are at odds with Latino social conservatism and aspirational instincts.

    Of course, Latino voters are not the same in every corner of the country, and Republicans can do well with Hispanic voters if conditions are right. For example, Latinos in Florida and New Mexico support Republican candidates far more than in California or New York. Texas Republicans picked up two predominately Latino house districts along the Mexican border this year. And several recently elected high-profile Latinos—Florida Senator Marco Rubio and Governors Brian Sandoval in Nevada and Susan Martinez in New Mexico—earned strong Hispanic support (Rubio won more than 45 percent of Latino voters in a three-way race). Latino Republican candidates also won in Washington State and, of all places, Wyoming.

    The elevation of such emerging leaders could eventually turn the Latinos into a successfully contested group. But there is also a distinct possibility that emboldened nativist-oriented Republicans (backed largely by their older, Anglo base) could embrace policies, such as abolishing birthright citizenship, that seem almost calculated to alienate Latino and other immigrant voters.

    Millennials: Growing Up, Staying Left?

    Latinos and minorities are not even the GOP’s biggest demographic challenge. Millennials, the so called “echo boomers,” constitute a growing percentage of the electorate. They also tilted heavily Democrat. In 2008, millennials accounted for 17 percent of the nation’s voting-age population; by 2012, that share will grow to 24 percent. By 2020, they will account for more than one-third of the total population eligible to vote. Their power will wax while the seniors’, who broke decisively for the GOP this year, will inevitably fade.

    Millennials and generation X, their older brothers and sisters, constitute the majority of self-professed Democrats, note Mike Hais and Morley Winograd, authors of the forthcoming Millennial Momentum: America in the 21st Century. Last November, they supported Democratic candidates 55 percent to 42 percent, although their turnout flagged compared to what it was in 2008. They can be expected to turn out in bigger numbers in the 2012 presidential election.

    A connection exists between the Latinization trend and millennial voters. Boomers were 80 percent white; among millennials, at least the younger cohorts, the majority are from minority households.

    More critically, on a host of issues—from the environment to gay rights and economic re-distribution—this generation appears well to the left of older ones. One hopeful note for libertarian-minded Republicans: almost half believe that government is too involved in Americans’ lives (in this sense, their views are similar to those of older generations).

    Can millennials and generation X-ers be turned toward the center? History suggests this is at least possible. Boomers started off relatively left of the mainstream, notes political scientist Larry Sabato (although as Hais and Winograd suggest, Boomers were never as “left” as their louder, and often better-educated, generation “spokespeople”). In 1972, their first appearance at the ballot box, they split between Richard Nixon and George McGovern while older voters went overwhelmingly with President Nixon. In 1976, they helped put Jimmy Carter in office.

    But, over time, Boomers clearly shifted to the center-right, and eventually tracked close to the national averages. They supported Ronald Reagan in 1984, Democratic Leadership Council standard-bearer Bill Clinton, and George W. Bush. Politically, Sabato notes, “the boomers have become their parents.”

    Will today’s younger voters follow a similar arc? The key lies with how Republicans deal with critical issues, such as gay rights and the environment. It should be sobering for Republicans that a popular conservative like Senator Jim DeMint—the putative godfather of the Tea Party—lost overwhelmingly among South Carolina millennials by 54 to 46 percent against a marginal Democratic candidate.

    “This doesn’t say that the millennials will necessarily be Democrats forever and could never vote for Republicans,” notes Hais, who surveyed generational dynamics for Frank N. Magid Associates, an Iowa- and Los Angeles-based market research firm. “Obviously, the Democrats will have to produce, especially in the economy. But, I think that for millennials to begin to vote for Republicans, it is the Republicans and not millennials who will have to do most of the changing. The Republicans will have to come up with a way to appeal to an ethnically diverse, tolerant, civic generation—something they haven’t done very well to date.”

    Geography: The Great Republican Advantage

    Demographics may seem a long-term boon for Democrats, but geographic trends tilt in the opposite direction. Actually, Republicans did exceptionally well in the country’s fastest-growing places, both within metropolitan areas and by state. Democrats won the urban core, winning it by almost two-to-one in an otherwise disastrous year for them. But this is not where population growth is concentrated. Out of the 48 metropolitan areas, notes demographer Wendell Cox, suburban counties gained more migrants than core counties in 42 cases over the past decade. Overall suburbs and exurbs accounted for roughly 80 percent or more of all metropolitan growth.

    Suburbs and exurbs, where a clear majority of the country lives, are where American elections are determined. Dominated by the automobile single family houses, these areas shifted heavily to the Republicans this year, voting 54 to 43 percent for the GOP. Unless there is a startling economic development or the unlikely imposition of density-promoting national planning policy, the periphery is likely to remain the ultimate “decider” in American politics for the foreseeable future. The next generation of homebuyers, the millennials, note Hais and Winograd, also identify suburbs as their “ideal” place to live—even more than their boomer parents.

    Immigrants also are demonstrating a strong preference for the suburbs. Since 1980, the percentage of immigrants who live in the suburbs has grown from roughly 40 percent to above 52 percent. They also remained the preferred home for most boomers as they age.

    Republicans also dominate the fastest-growing states: Virginia, Utah, Florida, North Carolina, and, most importantly, Texas. Over the past decade, more than 800,000 more people moved to Texas than left the Lone Star State. In contrast, New York suffered a net migration loss of over 1.6 million, while California, once the nation’s leading destination, lost almost as many. Texas, Florida, and Virginia will gain congressional seats while New York will lose seats and California, for the first time in its history, will add none.

    More important still are the reasons driving this migration: job growth, cost structure, taxes, and regulation. While the highest earners in Hollywood, Silicon Valley, or Wall Street may still flourish in the two big blue states, jobs are evaporating for many middle- and working-class residents.

    For the vast majority of middle- and working-class people, the growth states are increasingly attractive places for relocation. Over the past decade, states like Texas, Virginia, North Carolina, and Utah, according to a Praxis Strategy Group analysis, enjoyed faster growth in middle-income jobs than in the deep blue strongholds. Texas, for instance, has increased middle-income jobs at seven times the rate of California over the past decade.

    This job growth extends beyond low-wage jobs at places like Walmart. Over the past decade, Texas has increased its number of so-called STEM jobs (science, technology, engineering, and mathematics related jobs) by 14 percent, well over twice the national average. Virginia and Utah performed even better. In contrast, New York and Massachusetts grew high-tech jobs by a paltry 2.4 percent, while California lagged with a tiny 1.7 percent increase.

    Jockeying for the Future

    In its first two years, the Obama administration tried to reverse these geographic trends by steering funds into universities, mainly those located in big cities and along the Northeast and California coasts. This tilt was natural for an administration which one Democratic mayor from central California described as “Moveon.org run by the Chicago machine.”

    The Obama administration’s “green” policies are also designed to favor major dense urban areas, with large increases in transit funding, high-speed rail projects, and grants for pro-density “smart growth” policies. But with the resounding defeat in November, the drive to force the population into dense and normally democratically inclined cities seems certain to ebb. The demise of the fiscal stimulus will put increased pressure on states like New York and California to cut down their public-sector growth, further threatening their weak recoveries.

    In the coming years, budget-constrained states will have to focus on private-sector jobs and growth. Given the likely tight job market over the next decade, particularly for minorities and millennials, Republicans could do well to demonstrate the superiority of their pro-enterprise model.

    Currently, red-leaning states top the list of states with the “best” business climates. Texas, North Carolina, Tennessee, and Virginia topped a recent survey by Chief Executive Officer magazine. In contrast, the bottom rungs are dominated by New York and California, as well as by longstanding Democratic bastions Michigan, New Jersey, and Massachusetts.

    To succeed, Democrats will need to prove capable of something other than a reverse Midas touch. They will need to develop a pro-growth, job-oriented program, something that they have not done well since the Clinton era. The decline in the numbers of pragmatic, business-oriented Democrats at the state and federal levels could make that job tougher than ever.

    It is still possible that, as millennials and Latinos flock to the suburbs, blue state demographics could overwhelm red state geography. In a decade, for example, Texas will likely be more far Latino than Asian; by 2040, according to demographer Steven Murdoch, the overall minority population, could be three times that of Anglos. At the same time, surging high-end employment will bring more educated, socially liberal people to the state. If these groups continue to favor the Democrats, Texas and other deeply red states could turn purple if not blue.

    In the long run, each party has strong cards to play. Demographic shifts favor Democrats, while geography tilts to the Republicans. Ultimately, the winner will be the party that offers a successful strategy for economic growth—but without culturally alienating the demographic groups destined to hold the balance in the political future.

    This article originally appeared at The American.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by Eric Langhorst

  • Holiday Greetings from New Geography

    Here’s to the end of our 31st month publishing NewGeography.com. It’s been another good year of steady growth. Thanks for reading, for the good natured arguments, and your submissions. We hope your holiday season is relaxing and safe (for me it’s a 350 mile drive across the frozen tundra.)

    Here’s a look at of some of our most popular pieces over the past year.

    January
    The War Against Suburbia
    Reducing Travel Congestion and Improving Travel Options in Los Angeles
    Housing Affordability as Public Policy: The New Demographia International Housing Affordability Survey
    Beyond Neo-Victorianism: A Call for Design Diversity

    February
    America on the Rise
    A Race of Races

    March
    What American Demographics Will Look Like in 2050
    Midwest Success Stories
    New Traffic Scorecard Reinforces Density-Traffic Congestion Nexus
    Let’s Not Fool Ourselves On Urban Growth

    April
    Best Cities Rankings
    Finding Good in this Bad Time

    May
    Is it Game Over for Atlanta?
    Bungled Parliament: The Price of Pursuing Safe Society Over Growth and Opportunity
    Shanghai: The Rise of the Global City

    June
    The Future of America’s Working Class
    Time to Dismantle the American Dream?
    The Suburban Exodous, Are We There Yet?

    July
    How Texas Avoided the Great Recession
    ”James Drain” Hits Cleveland
    Civic Choices: The Quality Vs. Quantity Dilemma

    August
    The Golden State’s War on Itself
    The Beginning of the Great Deconstruction
    Urban Legends, Why Suburbs Not Dense Cities are the Future
    City Thinking is Stuck in the 90s
    Can the Suburban Fringe be Downtown-Adjacent?

    September
    The New World Order
    City Size Does Not Matter Much Anymore

    October
    The Smackdown of the Creative Class
    Greetings from Recoveryland, Ten Places to Watch Coming out of the Great Recession
    The World’s Fastest Growing Cities
    The Privitization-Industrial Complex

    November
    I Opt Out of California
    The Rise of the Efficient City
    The Other Chambers of Commerce

    December
    Hasta La Vista, Failure
    If California is so Great, Why are So Many Leaving?
    Cities that Prosper, Cool or Not

    Photo by Fusionpanda

  • The California Cheerleaders Are at it Again

    State Treasurer Bill Lockyer and economist Stephen Levy published a piece in the Los Angeles Times that argues that California doesn’t really have any fundamental problems. In their piece, Lockyer and Levy don their rose-colored glasses and give us the same tired old excuses, twisted logic, and factual inaccuracies.

    I’ll begin with the factual inaccuracies:

    Lockyer and Levy claim that California is the state with the youngest population. That is just incorrect. The U.S. Census website has a map. California is not even the same color as that used to identify the lowest-aged states.

    The authors’ claim that California’s high unemployment rate is due to the loss of 600,000 construction jobs is also wrong. Since November 2007, the month before the recession started, California’s construction industry has lost 334.7 thousand jobs. This represents less than 25 percent of California’s 1.36 million job losses since the recession’s inception. The story is still wrong if we choose the starting date for calculating job losses as the date that most supports L&L’s argument. California’s construction jobs peaked at 948.3 thousand in February 2006. It appears to have bottomed out at 529.2 thousand in September 2010. This is a huge number of job losses, over 400,000, but it is only two-thirds of the 600,000 claimed, and it certainly does not explain all of California’s high unemployment or California’s million plus non-construction recession job losses.

    Lockyer and Levy claim that California’s budget crisis stems strictly due to revenue shortfalls, saying,

    “Our critics say we are addicted to spending. But the numbers show that isn’t true….California’s current budget woes have been caused by the devastation visited on our revenue base by the recession, not a failure to curb spending. In the three fiscal years preceding this one, general fund expenditures fell by $16 billion.”

    This is just disingenuous. Lockyer knows as well as anyone that the general fund comprises less than half of California’s spending, and while the general fund expenditures have indeed reflected a decline in taxes, total State spending has increased from $194.3 billion in fiscal year 2007/08 to $216 billion in the 2010/11 year. Furthermore, when the composition of State spending is evaluated, we see that virtually all of the cuts in the general fund have been in local assistance. State operations have been almost completely spared.

    Besides, California’s budget problems didn’t begin with the recession. Do Lockyer and Levy think that our memories are so short that we forgot that Gray Davis was thrown from office because of budget problems, and that Arnold came in office pledging to fix California’s persistent budget deficits?

    We are also again treated to Lockyer’s mantra that California has a constitutional requirement that it not default on bonds, adding,

    “During the current fiscal year, general fund revenues are expected to total $89.4 billion. Education spending under Proposition 98 will total $36 billion. That leaves $53.4 billion available to pay debt service on bonds — more than eight times the $6.6 billion the state will need.”

    That’s wonderful, but constitutional requirements and revenues don’t pay debt. Cash pays debt, and California does run out of cash. When California runs out of cash it issues vouchers. Already some banks have refused to accept California vouchers. What will the State do if all banks refuse to honor vouchers?

    I’m sure the Treasury sets aside funds for debt repayment before they issue vouchers. Whatever they set aside will probably not be enough if California finds itself in a situation where vouchers are not accepted. Do we think the unions will let their people work if they are not being paid? Would the workers want to work if they are not being paid? Would contractors work? Will there be anybody around to write a check, even if the reserves are there?

    The fact is that if vouchers are not accepted, California will be plunged into a very serious crisis, a crisis in which case California’s constitutional requirement to pay would have no more meaning than its constitutional requirement that it have a balanced budget by June.

    Lockyer and Levy ludicrously claim that California’s business environment is good. But disinterested groups that issue reports that consistently rank California as among the least attractive states are wrong, groups like the Tax Foundation and Chief Executive Magazine. Lockyer and Levy cite Public Policy Institute of California (PPIC) research that business relocations cause smaller percentage job losses in California, but the PPIC can’t measure jobs that aren’t created when businesses that could reasonably be expected to expand in or move to California don’t.

    Lockyer and Levy also repeat Brett Arends’s claim that California’s share of the World’s venture capital has increased to 50 percent, but they neglect to note that the amount is declining, a lot, as Tim Cavanaugh showed here. California is getting a larger share of a rapidly declining pie. The net result is a huge decrease in California’s venture capital.

    Finally, I’ll conclude with my favorite Lockyer and Levy quote:

    “California no doubt faces serious challenges. But our obstacles are not insurmountable.”

    That’s exactly right, but the problems are not insurmountable until you confront California’s real, fundamental, problems.

    Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

    Photo by Kevin Cole

  • Smart Growth and the Quality of Life

    The idea of “smart growth” should be like mom and apple pie. But take a closer look and you find, for the most part, that smart growth policies often have unintended consequences that are anything but smart.

    If housing is unaffordable, the cost of living is high and people are leaving, it probably means that a state rates higher in smart growth policies. That’s the story from an analysis of the new Smart Growth America state ratings on transportation policies the organization believes would reduce greenhouse gas emissions. The new ratings are based upon strategies recommended in Moving Cooler, a smart growth oriented report authored by Cambridge Systematics in 2009 (Note 1).

    The new Smart Growth America ratings and the Moving Cooler strategies relied, in large measure, on strategies that would force higher population densities, virtually stop development on and beyond the urban fringe, and seek to, in the immortal words of Transportation Secretary Ray Lahood, “coerce” people out of cars.

    Yet when the new ratings are arrayed alongside measures of the quality of life, such as housing affordability and the cost of living, smart growth shows its less attractive side. You can see this, for example, in patterns of domestic migration states with the highest Smart Growth America scores also suffer the highest net domestic out-migration. .

    Quality of Life Indicators: The following analysis compares the Smart Growth America ratings of the states with quality of life indicators, which include lower house prices, a lower cost of living and a greater net domestic migration (Note 2).

    • Housing Affordability: Housing affordability is measured using a median value multiple (Note 3), which is the median house value by the median household income (from the 2009 American Community Survey). Economic research generally indicates that smart growth land use policies lead to higher house prices and lower levels of housing affordability. A lower housing affordability score means that housing is more affordable, and is an indication of a better quality of life. Generally, the median value multiple was 3.0 or below until the housing bubble and remains at that level in some states.
    • Cost of Living: The overall cost of living was examined using regional price parities developed by the Bureau of Economic Analysis (US Department of Commerce) in the form of “regional price parities.” Regional price parities are the domestic equivalent of “purchasing power parities,” which are used to adjust personal income and gross domestic product data between nations. A lower score means that the cost of living is lower and is an indication of a better quality of life.
    • Net Domestic Migration: Net domestic migration rates are for the period of 2000 to 2009 and based upon Bureau of the Census data and is calculated as a percentage of the 2000 population. A higher score means that more people are moving in than moving out. A state with a higher score is more attractive to movers than states with lower scores, which is also an indication of a better quality of life.

    The Top (Mostly Bottom) Ten

    Generally, the states with the highest Smart Growth America ratings perform the worst by these quality of life indicators.

    California is first in Smart Growth America score, at 82 (out of a possible 100). Yet, California ranks 49th in housing affordability, 48th in cost of living and 45th in net domestic migration, having lost 4.4 percent of its population (1.5 million) to other states since 2009. California’s average rank among the quality of life indicators is 47, essentially a mirror image of its Smart Growth America rating. Only New York has a worse average ranking (49th).

    Maryland is second in Smart Growth America score, at 77. However, Maryland ranks 42nd in housing affordability, 41st in the cost of living and 36th in net domestic migration, having lost 1.8 percent of its residents (nearly 100,000) to other states since 2000. Maryland’s average rank is 40th on the quality of life indicators.

    New Jersey ranks third, with a Smart Growth America score of 75. New Jersey ranks 45th in housing affordability, 47th in the cost of living and 47th in domestic migration, having lost 4.5 percent of its population (450,000) to other states during the decade. Among the top ten, only California has a worse average ranking than New Jersey’s, at 46th on the quality of life indicators.

    Connecticut ranks fourth, with a Smart Growth America score of 70. Connecticut ranks 40th in housing affordability, 46th in cost of living and 40th in domestic migration, having lost 2.8 percent (nearly 100,000) of its population. Connecticut’s average rank is 42th in the quality of life indicators.

    Washington is fifth in Smart Growth America score, at 68. Washington ranks 44th in housing affordability and 40th in cost of living. Washington ranked much higher, however, in domestic migration at 14th, with a gain of 4.0 percent (240,000). Washington, like other western states, has been the recipient of strong migration from even more expensive coastal California. Washington’s average rank is 33rd in the quality of life indicators.

    Oregon ranks sixth, with a Smart Growth America score of 65. The state ranks 47th in housing affordability (trailing Hawaii, California and New York), but has a higher average cost of living ranking (31st) and in domestic migration, principally because it, like Washington is a favored destination by people fleeing California.

    Seventh ranked Massachusetts (64) scores much more consistently in the quality of life indicators, at 46th in housing affordability, 45th in the cost of living, 44th in net domestic migration and 45th overall.

    Neighboring Rhode Island (61) ranks eighth and is also a consistent performer, ranking 43rd in housing affordability and net domestic migration, 44th in the cost of living and 43rd overall.

    Delaware and Minnesota share 9th place with a Smart Growth America score of 59. Delaware’s average ranking is 28th, and Minnesota’s average ranking is 29th. Delaware’s ranking, near the top of the bottom 25 is driven by a high net domestic migration rate. Minnesota scores similarly in all quality of life indicators.

    Two states scoring the worst in the quality of life indicators were notably absent in the Top (Mostly Bottom) Ten. New York’s average rank was 49, compared to its Smart Growth America rank of 21. Hawaii’s average quality of life indicator rank was 46 and its Smart Growth America rank was 15. Some of the worst housing affordability and highest costs of living drove their low quality of life scores.

    States with Higher Quality of life Indicators

    The five states with the lowest Smart Growth America scores are Nebraska, North Dakota, West Virginia, Mississippi and Arkansas. These states surely qualify as “flyover” country, being well removed from the more elite coasts. Yet, each of these states scores considerably better than Smart Growth America’s top ten states, with some of the nation’s best housing affordability and lowest costs of living. Slightly more people moved out of these states than moved in. However, bottom ranked Arkansas (Smart Growth America score of 2) attracted 75,000 net domestic residents, almost 1.6 million more than Smart Growth America’s top ranked California and 170,000 more than second ranked Maryland.

    Texas (15th), North Carolina (16th) and Georgia (17th) were among the higher scoring large states in the quality of life indicators. The high Texas ranking resulted from higher rankings in housing affordability and net domestic migration. Georgia and North Carolina had among the highest rankings in net domestic migration.

    Statistical Analyses

    For fun, I did a quick statistical analysis, which indicated that inferior housing affordability and a higher cost of living are associated with a higher Smart Growth America score, at a 99 percent level of confidence (Note 4).

    This relationship is evident in Table 1, which is a summary by Smart Growth America scores. Housing affordability and the cost of living all improve as the Smart Growth America score declines. At this level, a similar relationship is evident in the net domestic migration rate, with the exception of states with a Smart Growth America score of under 20. The states with the highest Smart Growth America ratings (60 and over) lost 2.5 million domestic migrants, while the states with scores from 40 to 60 lost 500,000. States with Smart Growth America ratings under 40 gained 2.5 million domestic migrants, more people than live in all of the nation’s municipalities except for New York, Los Angeles and Chicago. Table 2 provides detailed data for all states.

    Table 1
    Quality of Life Indicator Summary by Smart Growth Score
    Smart Growth America Score
    Housing Affordability
    Cost of Living
    Net Domestic Migration Rate
    Net Domestic Migration
    60 & Over             

    5.1
    		      

    114.5
    -1.7%
    		      

    (2,035,132)
    40 to 60             

    4.3
    		      

    102.2
    1.8%
    		         

    (501,121)
    20 to 40             

    3.3
    		        

    87.7
    2.2%
    		       

    2,576,584
    Under 20             

    2.6
    		        

    79.2
    -0.5%
    		               

    (517)
    Table 2
    Smart Growth America Transportation Ratings & Quality of Life Indicator Summary by State
    Smart Growth America Rating
    Quality of Life Indicators
    State
    Housing Affordability
    Cost of Living
    Net Domestic Migration Rate
    Average Rank
    Value
    Rank
    Value
    Rank
    Value
    Rank
    Value
    Rank
    California
    82
    1
    		      

    6.5
    49
    129.1
    48
    -4.4%
    45
    47
    Maryland
    77
    2
    		      

    4.6
    42
    106.5
    41
    -1.8%
    36
    40
    New Jersey
    75
    3
    		      

    5.1
    45
    125.6
    47
    -5.4%
    47
    46
    Connecticut
    70
    4
    		      

    4.3
    40
    121.6
    46
    -2.8%
    40
    42
    Washington
    68
    5
    		      

    5.1
    44
    102.9
    40
    4.0%
    14
    33
    Oregon
    65
    6
    		      

    5.3
    47
    95.4
    31
    5.2%
    9
    29
    Massachusetts
    64
    7
    		      

    5.3
    46
    120.8
    45
    -4.3%
    44
    45
    Rhode Island
    61
    8
    		      

    4.9
    43
    113.7
    44
    -4.3%
    43
    43
    Delaware
    59
    9
    		      

    4.4
    41
    97.7
    34
    5.8%
    8
    28
    Minnesota
    59
    9
    		      

    3.6
    26
    92.6
    28
    -0.9%
    32
    29
    Vermont
    57
    11
    		      

    4.2
    37
    99.5
    36
    -0.2%
    29
    34
    Illinois
    53
    12
    		      

    3.7
    28
    99.2
    35
    -4.9%
    46
    36
    Virginia
    51
    13
    		      

    4.3
    38
    102.1
    39
    2.3%
    19
    32
    Wisconsin
    51
    13
    		      

    3.4
    21
    91.5
    24
    -0.2%
    28
    24
    Hawaii
    50
    15
    		      

    8.1
    50
    133.4
    50
    -2.4%
    38
    46
    Pennsylvania
    50
    15
    		      

    3.3
    20
    94.2
    29
    -0.3%
    30
    26
    Arizona
    45
    17
    		      

    3.9
    30
    94.4
    30
    13.5%
    2
    21
    Florida
    45
    17
    		      

    4.1
    34
    99.9
    37
    7.2%
    6
    26
    Michigan
    45
    17
    		      

    2.9
    12
    92.5
    27
    -5.4%
    48
    29
    Nevada
    42
    20
    		      

    3.9
    32
    100.4
    38
    17.9%
    1
    24
    New York
    41
    21
    		      

    5.6
    48
    131.8
    49
    -8.7%
    50
    49
    New Mexico
    37
    22
    		      

    3.7
    27
    83.5
    14
    1.4%
    23
    21
    Colorado
    36
    23
    		      

    4.3
    39
    97.1
    32
    4.7%
    10
    27
    Utah
    36
    23
    		      

    4.1
    33
    86.5
    19
    2.4%
    18
    23
    Kentucky
    35
    25
    		      

    2.9
    13
    80.8
    4
    2.0%
    21
    13
    Tennessee
    35
    25
    		      

    3.3
    19
    84.7
    18
    4.6%
    12
    16
    Alaska
    34
    27
    		      

    3.5
    23
    106.7
    42
    -1.2%
    33
    33
    Maine
    33
    28
    		      

    3.9
    31
    92.2
    26
    2.3%
    20
    26
    South Carolina
    33
    28
    		      

    3.2
    18
    83.2
    13
    7.6%
    5
    12
    New Hampshire
    32
    30
    		      

    4.1
    35
    113
    43
    2.6%
    17
    32
    Georgia
    31
    31
    		      

    3.4
    22
    87.9
    23
    6.7%
    7
    17
    Kansas
    31
    31
    		      

    2.6
    7
    83.6
    16
    -2.5%
    39
    21
    Idaho
    30
    33
    		      

    3.8
    29
    82.7
    10
    8.5%
    3
    14
    Iowa
    28
    34
    		      

    2.5
    3
    82.9
    11
    -1.7%
    35
    16
    Ohio
    28
    34
    		      

    3.0
    15
    87.2
    21
    -3.2%
    42
    26
    Texas
    27
    36
    		      

    2.6
    6
    91.7
    25
    4.0%
    15
    15
    North Carolina
    26
    37
    		      

    3.6
    25
    86.9
    20
    8.2%
    4
    16
    Missouri
    25
    38
    		      

    3.1
    16
    81.3
    7
    0.7%
    27
    17
    Oklahoma
    24
    39
    		      

    2.6
    4
    81.6
    8
    1.2%
    24
    12
    Alabama
    23
    40
    		      

    3.0
    14
    80.8
    4
    2.0%
    22
    13
    Louisiana
    23
    40
    		      

    3.2
    17
    83.6
    16
    -7.0%
    49
    27
    Montana
    23
    40
    		      

    4.2
    36
    83.1
    12
    4.4%
    13
    20
    South Dakota
    23
    40
    		      

    2.8
    11
    82.3
    9
    1.0%
    26
    15
    Wyoming
    21
    44
    		      

    3.5
    24
    97.4
    33
    4.6%
    11
    23
    Indiana
    20
    45
    		      

    2.7
    9
    83.5
    14
    -0.4%
    31
    18
    Nebraska
    18
    46
    		      

    2.6
    5
    87.3
    22
    -2.3%
    37
    21
    North Dakota
    18
    46
    		      

    2.4
    1
    79.5
    3
    -2.8%
    41
    15
    West Virginia
    13
    48
    		      

    2.5
    2
    70.3
    1
    1.0%
    25
    9
    Mississippi
    12
    49
    		      

    2.7
    8
    80.8
    4
    -1.3%
    34
    15
    Arkansas
    2
    50
    		      

    2.7
    10
    78.2
    2
    2.8%
    16
    9
    Housing Affordability: Median House Value/Median Household Income, 2009
    Cost of Living: Regional Price Parities, 2006
    Net Domestic Migration: 2000-2009 Migration/2000 Population

    ——————-
    Note 1: Moving Cooler has been criticized by Alan Pisarksi (ULI Moving Cooler Report: Exaggerations and Misconceptions) and this author (Reducing Vehicle Miles Traveled Produces Meager Greenhouse Gas Emissions Returns) in previous newgeography.com articles.

    Note 2: There are additional quality of life indicators, such as shorter work trip travel times, less intense traffic congestion, less intense air pollution, more living space, etc.

    Note 3: This measure is based upon median house value, which is the only data available at the state level. The median value multiple is different from the Median Multiple (median house price divided by median household income), which is widely used in metropolitan area analysis (such as in the Demographia International Housing Affordability Survey).

    Note 4: Details of the regression analysis: The dependent variable was the Smart Growth America score. The independent variables were the cost of living indicator and the domestic migration rate. The coefficient of determination (R2) was 0.55. (The positive relationship to the cost of living was strong, with a probability of only 1 in 10,000 that the result could have occurred by chance. The indicated association with the net migration rate was weak; the chance association cannot be ruled out).

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

  • Toward a Continental Growth Strategy

    North America remains easily the most favored continent both by demography and resources. The political party that harnesses this reality will own the political future.

    America cannot afford a prolonged period of slow economic growth. But neither Democrats nor Republicans are prepared to offer a robust growth agenda. Regardless of what happened in the November midterm elections, the party that can outline an economic expansion strategy suitable to this enormous continental nation will own the political future.

    Economic expansion that barely exceeds the current 2 percent or less is woefully insufficient for the United States. Such meager growth could perhaps work in countries with very low birthrates and limited immigration, such as in much of Europe and Japan, but not in the demographically vibrant United States.

    In the years between 2000 and 2050, Europe’s workforce will decline by 25 percent; Japan’s by 44 percent; China’s by 10 percent. In contrast, America’s workforce is expected to expand by more than 40 percent, adding millions of new entrants from an increasingly diverse population.

    Given the growth in workforce, it is impossible to see how the country succeeds without rapid expansion not only of employment but also a broad-based wealth creation. Despite conservative attempts to dress up the numbers, the vast bulk of all the gains in wealth since 2000 have been achieved by the relatively small number of Americans with incomes significantly above the poverty level. Meantime many middle-tier educated and skilled workers have lost ground while the rate of upward mobility has stagnated.

    The collapse of the housing bubble has eliminated the one way that middle class families took advantage of economic growth during the Bush years. Under Obama, virtually all the gains have been to the stock market (up 30 percent) and corporate profits (42 percent). Meanwhile, weekly earnings, jobs, and home sales price all stagnated or declined. But the biggest price may be paid by young people; even those with degrees have lagged behind in wage growth as they crowd into a labor market potentially far tougher than the one their boomer parents faced.

    All this suggests an emerging “aspiration gap” that could define our politics for much of the next few decades. Today, belief in the achievability of the “American dream,” according to a recent survey by Strategy One, has dropped to the low 40s. Americans may still overwhelmingly believe in the ideal of upward mobility but, as individuals, now only a minority feel they can achieve it themselves.

    The “aspiration gap” fundamentally does not advantage either party at the moment. Democrats are set for large losses in the 2010 election. But party identification and approval for the GOP remain low, particularly among the rising minority and millennial constituencies. Even in suburbia, amid rapidly rising middle class angst, the Republicans, according to a recent Hofstra University poll, have lost more support than the Democrats since 2008. Independents have been the big winner and constitute the largest faction of suburbanites—more than 36 percent, compared to just 30 percent two years ago.

    Our Failing Parties: The Democrats

    Let’s start with the Obamacized Democratic Party. Up through the 1990s, the Democrats still maintained strong links to small businesses, private sector unions, and the old Midwest industrial economy. This gave them reasons to favor growth-inducing policies that could close the “aspiration gap.”

    But today the party has become captured largely by the coastally oriented alliance of public employees, their charges, greens, and the professiorate—what Fred Siegel calls an alliance of the “overeducated and the undereducated.” For the most part, these constituencies are largely detached from the private sector, and thus only tangentially interested in economic growth. Even high unemployment, unsurprisingly, was not the primary concern for an administration dominated by longtime public servants and tenured professors—people who rarely lose their jobs.

    This indifference stems not so much from a traditional socialist agenda, as imagined by some conservatives, but by the nature of the party’s constituencies. It is more a dictatorship of the professoriate than that of the proletariat.

    Further obscuring the growth agenda is the fact that some key advisors consider growth itself inherently evil. Take for instance the president’s science advisor John Holdren. A protégé of the Malthusian Paul Ehrlich, Holdren long has favored the planned “de-development” of Western economies in order to reduce consumption.

    The “de-development” agenda has been bolstered by the growth of the climate change industry. Proposals for “cap and trade” rules or Environmental Protection Agency regulations on greenhouse gases represent profound threats to basic industries like manufacturing, housing, and agriculture. In contrast, they have proven boffo for university research grant-seekers and Silicon Valley venture capitalists, who increasingly focus on “clean” technologies subsidized by government grants and edicts favoring their technologies.

    The climate change agenda also distorts the administration’s approach to infrastructure. Instead of focusing on transportation bottlenecks effecting companies and commuters on a daily basis, the administration has favored massive boondoggles such as high-speed rail or sometimes poorly conceived light-rail systems. These are often too expensive compared to alternatives, and not well-suited to the needs of most American communities or companies.

    Our Failing Parties: The Republicans

    Today, with as many as 25 million Americans unemployed or underemployed, the Democratic Party still seems to be missing a coherent program to put them back to work. Sadly, much the same can be said of the Republicans, who benefit from populist outrage about the stimulus, but also lack an answer to the deepening aspirational gap.

    The fundamental problem is obvious at the level of the Tea Party, the grassroots driving force behind today’s GOP. Tea partiers know what they are against—higher taxes and government spending—but have not developed much in the way of approaches to spur growth.

    This is epitomized by the career of the movement’s patron saint, Sarah Palin. Celebrated by many in the “lower 48,” Palin is widely seen among Alaska’s predominately Republican business community as indifferent to economic growth. As governor, they maintain, she proved more interested in redistribution to the middle class—through larger checks from the state’s energy fund—than in investing in things like new infrastructure.

    “She epitomizes the whole idea of we get a piece and no sense of planning for the future, about thinking about what we need to do,” notes Jim Egan executive director of Commonwealth North, a local think tank.

    Long-term growth, in Alaska and elsewhere, Egan suggests, needs government to play a critical supporting role. The fact that the Obama administration missed its opportunity to focus on basic infrastructure in its bungled, politically driven stimulus does not mean that investing in the future is an inherently bad idea.

    The Republican embrace of austerity represents good policy when it comes to reducing wasteful spending, notably on public employee pensions. But knee-jerk resistance to any government spending could prove detrimental in an increasingly competitive world.

    Needed: A Continental Strategy

    To promote economic growth, the country needs to develop a new national consensus around which I call “a continental strategy.” This would focus on taking advantage of the unique demographic and resource assets of this country as well as its North American neighbors, Mexico and Canada.

    Today the United States faces formidable competitors, notably from China, India, and Brazil. These are proud, vast countries with considerable resources and an expanding middle class population. At least in the short run, they suffer neither the ruinous demography of Japan nor the elaborate welfare burdens of Western Europe.

    Already these countries are investing in their basic infrastructure so that they can tie their vast landmass together and profit from it.

    Hard as it is to imagine amid the wreckage of the stimulus, American history is replete with examples of how government can actually do good things. The public support for canals, railway lines, the New Deal engineering and construction projects, the Interstate Highway, and space programs all greatly benefited the country’s economy. They underpinned first American leadership in the industrial age, and then in the information economy. In recent decades, public investment in basic infrastructure construction and maintenance has declined, even in the face of considerable population growth.

    “One looks back at that map ‘Landscape by Moses,’” writes the sociologist Nathan Glazer, about the legacy of New York City’s “master builder” Robert Moses, “and if one asks what has been added in the 50 years since Moses lost power, one has to say astonishingly: almost nothing.”

    Restoring our priority towards binding together and improving our continental infrastructure remains critical to achieving greater economic growth. Rather than a policy of retrenchment, it would represent a return to an approach that sparked our original ascendency and could gain broad bipartisan support.

    Even today, what makes a continental strategy so compelling lies with this often overlooked reality: North America remains easily the most favored continent both by demography and resources. It possesses the world’s second-largest oil reserves and massive, still largely untapped natural gas supplies.

    North America also constitutes by far the world’s richest agricultural area, with the most arable land. This is a huge advantage as global food demands grow over the next few decades. Critically, the continent also boasts more than four times as much water per capita as either Asia or Europe.

    Most important still, North America retains a unique demographic vitality among all advanced countries. It continues to lure upwardly mobile people from around the world: roughly half of the world’s educated migrants come to America, and a considerable number also head for Canada.

    Ultimately a continental strategy meets the needs of large segments of the country—ranging from immigrants and their children to millennials—who will dominate our emerging job market. These same groups in the coming decades will also shape our political future.

    The party that offers these new voters the greatest opportunities for work, raising a family, and buying a house will be the one that dominates the political future. As generational chroniclers Mike Hais and Morley Winograd, both committed Democrats, have pointed out, millennials are essentially nonideological; they will be attracted to those policies that work, both for society and for their young families.

    Although this year’s political results may please conservative ideologues, they should recognize that this represents only the defeat of poorly executed Obamian statism. The future belongs to whichever party emerges as the true party of growth.

    This article originally appeared at The American.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by IronRodArt – Royce Bair

  • Dallas: Building America’s Largest Urban Park on the Trinity Riverside

    A flood protection site in Dallas is being transformed into America’s largest urban park. The economic and ecological benefits of conserving this slice of North Texas are destined to reverberate well beyond the city limits. Blackland Prairie is the most endangered large ecosystem in North America. The development that is underway —thankfully — to preserve this remnant of our past will also shore up our natural assets for the future.

    The Trinity River Corridor Project aims to restore or develop a total of 10,000 acres, including 6,000 acres of forest, 2,000 acres along the river’s Elm Fork, and a 2,000-acre floodway extension, which alone will be three times the size of Central Park. Over eighty percent of it will comprise natural landscape, much of it Blackland Prairie ecology. In 1998, a $246 million bond was passed to establish the ambitious public works project, which will also preserve the Great Trinity Forest, the largest urban bottomland hardwood forest in North America.

    What It Means For Dallas
    After plans to turn the 715-mile Trinity River into a shipping channel were scrapped, the value of the Trinity River and its surrounding environs was re-evaluated. At the 21st Century City conference, Ignacio Bunster-Ossa, a principal with Philadelphia-based Wallace, Roberts & Todd, calculated benefits that included 19,000 new trees to absorb approximately 380 tons of CO2 – the equivalent of 750,000 miles traveled by automobile; 300 acres of wetlands to sequester 3,000-4,000 tons of CO2; and $8.8 billon in development value to boost the local economy.

    Estimated at around $2.2 billion, the Trinity River Corridor Project also allocates a portion of the land use for recreational amenities including an equestrian center, sports fields, trails, and a “nature interpretative center.” International regattas, fireworks, concerts…these are promises for the future, although at present, the nature interpretive center is the only part of the plan that has been completed.

    Trinity River Audubon Center: A Glimpse
    Trinity River Audubon Center is a 21,000 square foot LEED-certified nature education facility . The view from the window of TRAC Executive Director Chris Culak’s office is vintage Old West: fertile soil, coneflowers, Lemon Beebalm, Black-bellied Whistling Ducks, and a vast many other flora and fauna that have sprung up in this nexus of Cross Timbers, grasslands, and wetlands.

    “The property started out as a quarry in the 1940s,” explains Chris. “Since the mid-60s it has been a dump. The guy who ran it was fined repeatedly. The dump caught fire twice— in 1988 at 1997— and the second time it burned for two months, primarily due to the construction debris. Bulldozers had to roll in to make room for the fire trucks.” Ultimately, stakeholders organized and sued the City.

    The City of Dallas estimated it would cost $107-110 million to clean it up, and would take at least 10 years. In 2000, it resolved the matter by doing a $25 million landfill instead, which was completed in record time. Its partnership with the National Audubon Society to develop a nature center within this property demonstrates how a municipal liability can be transformed into a major asset.

    Today, the Trinity River Audubon Center is the gateway to remarkable biodiversity that blossoms across 120 acres, including four miles of meandering trails. Since opening in October 2008, more than 85,000 people have come through the Center, 30,000 of whom are students. Reflecting the National Audubon Society’s mission to connect people to the outdoors, TRAC is fostering a conservation ethos in children who may not get it elsewhere.

    Getting Down to Brass Tax
    The Trinity River Audubon Center presents a great example of the economic development potential in public-private partnerships. The $15 million TRAC building was jointly paid for by the City of Dallas, which contributed $13.5 million and the National Audubon Society, which covered the rest. Additional funds are appropriations from the federal government for flood control, and from state, county, city, and private funds.

    The City’s return on its initial investment is a restoration project that totals $37 million in capital improvements. As with other public-private partnerships for cultural centers such as the Dallas Museum of Art and the Nasher Sculpture Garden, the City maintains ownership, but only pays a small stipend. Beyond that, these entities must raise their own money.

    “People sometimes say that if it’s worth so much, then private interests will develop it,” says TRAC’s Culak, “but without the vision for implementation and municipal support, you can’t get that kind of development in here.” He added, “The economic benefit will be tenfold, but we’re going to have to put something into it to get as much out of it.”

    Fortunately, Dallas has tremendous resources within its philanthropic community. A core group of visionaries have been keepers of the dream, including Gail Thomas, Ph.D., the president of The Trinity Trust. “The average citizen in Dallas doesn’t have a clue about the marvelous, dramatic changes that will take place in their lives,” says Gail.

    Renewal Takes Awhile
    “In the 20th century we created our cities to move as quickly as we could from one place to another,” explains Gail. “We built these cities in the fast lane, for connectivity. In the midst of building airports, railroads, and highways we forgot the importance of walking, of having our human senses activated by our environment. Consequently, our 20th century cities have been rather cruel to human sensibilities. We seek a more humane city, one that allows for the complexities of diverse lifestyles while offering serene and quiet places that feed the soul.”

    To get to this vision will require a significant amount of development, over the next decade and beyond. Says Culak, “This is on the same order as building DFW Airport was over 50 years ago. Any resistance we have to it is just like it was then.” He continues, “People want things instantly. They are still asking, ‘What’s in it for me?’ Unless you go on vacation to Indianapolis, Pittsburgh or Vancouver, you don’t necessarily know what other cities are doing. For Dallas, this is it. It’s a city built on a prairie next to a river. The Trinity River is the only natural resource we have. You’ve got to use what you have.”

    Dallasites are in for a surprise when they discover that what we do have is a river made for kayaking. The standing wave, a practice whitewater feature, will open this spring, the horse park will open its first barns this coming year, and the first of two Calatrava bridges will open in October 2011.

    Such events represent a great thrust forward for a project that is still a mystery to many in this community. “There have been a lot of naysayers,” says Gail, “but we think we’ll have the last laugh.”

    Photo of Trinity River near Dallas by gurdonark — Robert Nunnally

    Anna Clark is the author of Green, American Style and the president of EarthPeople. She lives in one of Dallas’ first residences to earn a Platinum-LEED certification from the U.S. Green Building Council.

  • Education Wars: The New Battle For Brains

    The end of stimulus — as well as the power shift in Congress — will have a profound effect on which regions and states can position themselves for the longer-term recovery. Nowhere will this be more critical than in the battle for brains.

    In the past, and the present, places have competed for smart, high-skilled newcomers by building impressive physical infrastructure and offering incentives and inducements for companies or individuals. But the battle for the brains — and for long-term growth — is increasingly tied to whether a state can maintain or expand its state-supported higher education. This is particularly critical given the growing student debt crisis, which may make public institutions even more attractive to top students.

    The great role model for higher-education-driven growth has been California. The Golden State’s master plan for education — developed under Pat Brown in 1960 — created an elaborate multi-tiered public system that offered students a low-cost and generally high-quality alternative education. Over the next half century, California became, in historian Kevin Starr’s phrase, a “utopia for higher education,” as well as a model for other states and much of the world.

    Today many of the states that copied California’s model — notably North Carolina, Texas and Virginia- — threaten to upend the Golden State’s dominance of public higher education. These states now all spend far more than traditional leader California when you look at percentage of state expenditures; Virginia, for example, spends twice as much of its state budget on higher ed than California does. New York and Illinois spend an even a smaller percentage.

    The combination of fiscal woes and misplaced priorities has engendered spending cuts in California. Tuitions for higher public education have soared: In 2009 they were raised 30%, and they have been raised over 100% over the past decade.

    To be sure, the University of California (disclaimer: I attended the Berkeley campus) retains a huge reservoir of talent, with courses taught by 111 Nobel Laureates. It still dominates lists of top public universities;  six of the top 14 schools in the US News and World Report 2010 rankings are UC schools.  But the signs of relative decline are clear. In 2004, for example, the London-based Times Higher Education ranked UC Berkeley the second leading research university in the world, just behind Harvard; in 2009, that ranking, due largely to an expanding student-to-faculty ratio, had tumbled to 39th place.

    Other states are now looking to knock California further off its perch. In 2009 alone the University of Texas lured three senior faculty members from UC. As departments shrink at places like Berkeley, those in schools such as the University of Texas at Austin, Texas A&M and Texas Tech have expanded rapidly, adding students and buildings.

    Of course, these schools also have budget problems, and they have increased tuition too–albeit at a significantly lower rate. But for the most part, these up-and-coming state systems are more focused on expansion than on retrenching and survival. While some in California question the viability of some of the newer UC campuses, Texas is busily expanding its roster of tier-one, public research universities, seeking to add the University of Houston as well as UT campuses in north Texas, Arlington, Dallas, El Paso and San Antonio to the ranks of UT Austin, Texas A&M and Rice, a private school in Houston.

    Texas Tech,  best known for its engineering and agriculture-oriented programs, for example, is thriving. Located on the windy Great Plains on the western side of the state, it is far from the state’s major metropolitan areas, and its home town of Lubbock (population: 225,000) is likely not high on anyone’s list of hip and cool college towns. Yet the school, which enjoys strong alumni and business support, is in the midst of a major building boom and a $1 billion capital campaign. When I visited there earlier this month, the campus was full of construction crews; Texas Tech has added over 3000 students in the past two years and now has over 31,000 students.

    Other unlikely upstarts include the University of North Dakota, which has boosted spending by 18.5% in 2009, a luxury afforded by the state’s booming energy, agriculture and increasingly high-tech economy. North Dakota, which historically has suffered significant loss of young talent, has set a goal to rank No. 1 in the average education of its population. Today it already ranks No. 3 in terms of college-educated residents between the ages of 25 and 34.

    These shifts could presage — and to some degree enhance — what is already a powerful trend toward states that, in the past, have been educational also-rans. Although Texas also faces budgetary constraints, its annualized $9 billion deficit is dwarfed by those of California, Illinois and New York. And those bluish states already have much higher tax rates, which leave less room for revenue increases. Texas also has the luxury of an $8.2 billion “rainy day” fund, as well as a more vibrant economy.

    More important still, states like North Carolina, Virginia and Texas continue to grow more rapidly than the older brain-center states. This is particularly true in terms of the high-tech jobs many graduates would likely seek.  Indeed since 2002 these states have all enjoyed far greater growth rates in high-tech employment than California, Illinois, Michigan or New York. They also have added more new tech jobs in actual numbers than California–despite their significantly smaller size.

    Migration patterns are also changing among college-educated workers. Between 2005 and 2007, Texas, Virginia and North Carolina already enjoy higher rates per capita of net migration of educated workers between the ages of 22 and 39 than California, New York or Massachusetts.

    This advantage could expand as the upcoming states increase their educational offerings along with employment opportunities. Students may end up tempted to attend schools closer to where there is job growth. Unlike Austin and Raleigh-Durham, which have rapidly expanded tech employment, Silicon Valley has produced virtually no new net tech jobs for the past decade.

    The second impact may  be more subtle, as declining revenues from businesses and individuals reduces the opportunity to boost education spending. As the country stumbles into this recovery, the greatest advantage will fall not only to states with the most natural resources, but those with the best-educated human resources. For a half century this is a game that states like California have played to perfection, but it is one in which other places are likely to catch up, and perhaps even pass. The long-term implications for the nation’s economic geography could prove profound.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by Luca Zappa

  • Retro Rail Alert

    The New Zealand Government recently decided to follow the example of Montreal and Toronto by amalgamating the six City councils and the single Regional Council of the Auckland Region to create a united “Super City” of 1.4 million people.

    Like similar amalgamated bodies, the new Auckland Council, which came into being on the 1st November, 2010, has fallen for the notion of regionally determined smart growth built around a huge investment in heavy rail.

    Backed by a Regional Council totally committed to Smart Growth, every decision was driven by the need to “get people out of their cars” rather than to improve mobility. Since the 1990s they have fought for densification as a means of enabling more public transport. The bus lanes linking the north shore to the CBD are for buses only. HOVs are not allowed on and nor are shuttle buses. The planners openly argue that the near empty lane is to encourage people to get out of their cars on the congested motor way lanes and take the bus. Also they are inserting bus only lanes into our already narrow urban streets. Cars are just being crowded off the streets.

    Consequently, congestion has grown progressively worse, but this was seen as only further evidence of the need to invest in rail.

    Many of us thought that the election which replaced the Labour Government with a coalition of National and Act, two conservative-leaning m parties of the Right, would put an end to this “trip backwards to the future”.

    But, as has happened elsewhere, the Right adopted the policy while the Chambers of Commerce and similar groups championed the mega-amalgamation on the grounds of efficiency. They saw huge savings to be made in having only one Mayor and one council, and one plan, and one rate, and indeed, ideally only “one of everything”.

    Yet instead of searching for a new, modern way to develop this region, Len Brown, the left of center first Mayor of the Auckland Council has backed a “Vision for Auckland” built around an extensive rail network – including a rail link to the Airport, a CBD rail loop, light rail on the surface streets, and a rail tunnel under the Waitemata harbour.

    Residents of surrounding areas may not share this Vision – especially if they have to share the costs. This is the kind of division that led to Montreal’s recent de-amalgamation.

    The Mayor supports his Vision with claims that professional analysis and expert advice will show that these projects are viable and necessary and that Government must fund them.

    One has to wonder where he gets his advice from.

    No investment in rail in New World cities since the 1980s has resulted in a reduction in congestion. In most cases congestion has increased and public transport market share has diminished because the investment into rail has diminished funds for roads, buses and High Occupancy Toll lanes, measures that actually work to increase mobility

    The Government should also be aware that the international engineering firms at come in behind these proposals for rail investment (and similar major project works) have a proven expertise in getting a foot in the door with low bids then cranking up the costs afterwards. These projects routinely come in over budget.

    Furthermore, some research reveals that Heavy Rail (as is proposed for the Auckland network) has a worse record for cost overuns than Light Rail projects. Early projects have a worse record than more recent projects, possibly because the tendering firms have gained experience over time in how to fool the public, and the population with low ball estimates of cost and exaggerated estimates of ridership.

    “Megaprojects and Risks: and anatomy of ambition.” (Click on the link to read the Public Purpose review.)

    This has become a clearer pattern, as seen in projects as diverse as the English Channel Tunnel, the Great Belt rail-road bridge between Zealand and the Jutland Peninsula, and the Oresund road-rail bridge between Copenhagen and Malmo, Sweden.

    So this is not just an American problem.

    The “Chunnel” trains, for example, were projected to carry 15.9 million passengers in the first year of operation (1995) but by the sixth year (2001) ridership was 57% lower at 6.9 million. The cost overrun was 79%.

    The Flyvbjerg data set of international studies, including rail and road schemes, contained 258 projects.

    • 90% had significant overrun of costs.
    • Rail projects had the highest cost escalation (45% over)
    • Road projects had the lowest escalation (20% over)
    • The average ridership was 61% of forecast and the average cost overrun was 28%.

    The figures for rail alone were worse.

    An even more pessimistic summary of performance is contained in a power-point presentation by Lewis Workman of the Asia Development Bank, Predicted vs. Actual costs and Ridership – Urban Transport Projects, May 2010.

    This presentation notes that the problem is actually worse in developing countries. The Bangkok metro “actual ridership” fell short of the projections by 55%. The authors ask the question “Lies or Incompetence?” and their answer is “Probably Both.”

    New Zealand’s Minister of Transport, Stephen Joyce is well prepared to shout louder than the “one voice” of the new Auckland Council. In September 2009 he warned that the Government is committed to spending NZ$500m on the city’s rail electrification projects – but funding cost over-runs is not an option.

    His officials have identified up to $200m of potential cost over-runs in the NZ$1.6bn project, which is still on the drawing board.

    One of the first rail upgrade contracts demonstrates his concerns are justified.

    The Manukau Rail Link was initially estimated to cost NZ$40 million [2006] which subsequently rose to NZ$72 million [2008] and the latest figure is NZ$98 million. This is for a 1.8k link and station southwest of Manukau CBD.

    The Minister should hold fast to this position. But maybe he should also hold fast to the position that Auckland Council will not be compensated for any revenue shortfalls on account of lower than projected ridership.

    Maybe the Auckland Council would then take on board the remedies for these “foot in the door” feasibility studies, or get those who make the studies to stand behind them with some form of guarantees backed up by insurance.

    The recent experience with BART suggests that US politicians should learn to play equal hard-ball.

    Similarly the 5 km BART connection to the Oakland Airport (on the East Bay) was originally projected to cost $130 million and cater to more than 13,000 passengers daily. However, after a decade of delays, those forecasts have been changed to $484 million – a cost increase of say 250%, and 4,350 passengers a day – a ridership shortfall of say 60%.

    The crystal balls are not getting any clearer.

    Consequently, according to a study by transport planners Kittelson and Associates, each new passenger who uses the system during its estimated 35-year lifespan will be supported by a subsidy of $102 – on top of the fares they pay. This is more than 10 times the original projected subsidy of $9 per new passenger. This combination of cost overrun and ridership shortfall has had a catastrophic effect on the viability of such projects.

    But the boosters are not deterred. They say it should be built because “the community wants it”, which sounds familiar.

    The table below shows this the Oakland Airport rail link is clearly a project that should never be started. Even the “rapid transit” speed will not be delivered.

    Politicians’ Visions reward the citizens with nightmares.

    These large multi-national engineering consulting firms have become accustomed to treating Governments – both Central and Local – as giant ATM machines.

    It’s time to take away their plastic.

    Owen McShane is Director of the Centre for Resource Management Studies, New Zealand.

    Photo by bcran

  • Florida Goes Underground

    By Richard Reep

    Last year’s report that Florida had lost people marked a new low in our state’s boom-and-bust history. But this autumn’s news seems to surpass even that sorry milestone with a combination of sluggish tourism, empty state coffers, and a reputation as one of the top real estate foreclosure states. Florida just can’t seem to get out of its own way, and with the fourth highest population in the country, it could have competed with Texas to replace California as one of the best business climates in the nation. Instead, Florida, which boasts one of the lowest tax rates in the nation, continues to see businesses and citizens depart, with newly elected governor Rick Scott recommending even lower taxes as the best solution. Instead, it is high time that Florida fix its real problems of economic monoculturalism and anti-education policies that drive it further and further away from America’s future potential.

    It is no secret by now that a diverse income source is the only way to survive the Millenial Depression. States that have more than one income source, like Texas, were able to adapt policies to favor resilient businesses and industries. In Florida, despite loud and clear input to the state legislature, no change in state policies have been effected this year, once again making tourism and construction growth the focus of job creation.

    The tourism industry knows well its position as “first in, last out” when a recession hits, diversifying its products and geography, enabling at least something to run while everything else stands idle. Thus Marriott International, in the late nineteen eighties, invested in senior living facilities, which bore well through the 1990-93 recession. Regulatory burdens on this market segment eventually caused Marriott to focus on other, less regulated markets, and today its global diversity has caused the company to remain economically sustainable. Florida, with so much sunk cost in tourism, seems unaware that its former tourism dominance has been quietly replaced by such glittering destinations as Brazil, Dubai, and China.

    Agriculture is, of course, Florida’s economic mainstay: even in a recession, people must eat. This industry, however, employs a whopping 44,000 farmers, about a month’s worth of laid-off Florida workers. Clearly, the state should be looking elsewhere to create jobs.

    Governor-elect Scott’s vague promise to increase state venture capital spending while cutting taxes is amusing, in light of similar promises from past politicians. While the state’s Capital Formation Act has attracted investment in biomedical clusters, it takes a great deal of spending to sustain this fund. Similar promises created tax incentives for the film industry, which built studios in the nineteen nineties. Then, when the going got rough, these subsidies evaporated, and the studios promptly moved to New Mexico.

    The money for such schemes comes from the same place that Florida politicians seem to always find money: the education system. Florida, after struggling to get up to 27th in spending per pupil, seems about to find out what it is like to be 50th. And this is a last place finish the state should avoid.

    An educated population can adapt more easily to the changing times, can more competently choose its leaders, and can create wealth for itself. None of these qualities have been demonstrated by Floridians in recent years (think of the 2000 election) and, if the newly elected leadership has its way, none are likely to spring forth in the near future either.

    Florida’s two best hopes are to invest more in its public education system, not less, and to diversify its economy. Recent immigrants from states like Wisconsin and New Jersey, where schools are well funded and taken seriously, express shock and dismay at the public schools in Florida. While states like New York debate the worth of comprehensive assessment tests, Florida has been busy distilling its education system down to a teaching-the-test model, producing little else but test results. Regaining an educated, aware citizenry is critical if the state is to see a future as a contributor to the nation’s recovery.

    The potential to diversify its economy remains strong in Florida. Instead of lowering taxes, however, the new state leadership would do well to consider a more guided regulatory approach that favors a diverse economy. Come and gone are many industries which could return with the right incentives: aviation training, movies and television, solar energy research, and the space program. Research, manufacturing, and commercial jobs in all of these industries could contribute to a rebirth of Florida and spark investment that would produce lasting results.

    Florida’s tax climate favors business, but is oddly mismatched by its regulatory climate. The dodged a bullet with the failure of Amendment 4 – a proposal that all new development would have to face a public vote – and the state’s development industry congratulated itself heartily on this success. This proposal made the ballot because of the cumbersome development process regulated by the state’s Department of Community Affairs, which has widely been perceived to fail at its task, protecting neither nature nor the quality of life for its citizens. Whether or not the new governor gets his wish to eliminate this bloated state bureaucracy remains to be seen, but regulatory reform in the state’s development codes needs to be in the works.

    And tourism, which has been a great economic engine, has a chance to come back. Florida will always be a destination, and while other world places have leapfrogged ahead, tourism is highly competitive, as destinations age rapidly. The enduring romance with Florida will continue, but its famous beaches and theme parks will need to reinvent themselves bigger and better than ever. With a new Legoland in the design phase, and redevelopment at some of the world’s most hallowed ground in the Magic Kingdom, tourism’s long-term future bodes well.

    The smoke has cleared from the election battles. Now, more than ever, Florida’s leadership should be nurturing a more educated citizenry and reforming its regulatory system, rather than keep its tax system at ultra-low levels, to pull itself out of this nosedive. Florida’s natural advantages in climate and accessibility make it ideal for such a wide variety of businesses that very little should stand in its way to diversify the economy and create a productive, vibrant, educated workforce.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

    Photo by Captain Kimo