New Geography

Category: Urban Issues

  • Las Vegas: The World’s Convening City?

    Conventional wisdom, and in many cases wishful thinking, among many urbanists holds that America’s sunbelt cities are done. Yet in reality, as they rise from the current deep recession, their re-ascendance will shock some, but will testify to the remarkable resiliency of this emerging urban form.

    Origins: Bright Light City

    The epicenter of the sunbelt rebound will be Las Vegas. The desert city has taken a unique road to a world city status. Most places get there by being financial, trade or manufacturing hubs, or can have a concentration of all three in the case of the biggest and most connected world cities. In contrast Las Vegas has achieved world city status via one key sector: entertainment.

    Just about no one saw Las Vegas coming as a world city. Even in the late 20th century few would predict that the region could ever get to 1 million residents, let alone reach two million. In 1970 Jerome Pickard, a demographer working at the ULI—the Urban Land Institute in Washington, DC, projected U.S. metropolitan area populations to the year 2000. These estimates were nearly perfect, but for one major exception—he missed Las Vegas.

    Las Vegas at the time seemed like, to make a bad pun, a one trick town. Its main industry, gambling (or “gaming” in local parlance), was pretty much unique to Nevada. Sure, the city already had landmark hotels and the famous “Strip” was by then iconic enough to influence American architectural theory, but the idea of an overgrown honky-tonk town as a true world city seemed a stretch.

    A generation later, what changed? To start, gambling began to spread throughout the U.S. and indeed the world. First, Atlantic City, NJ, allowed gaming in the late 1970s and soon the floodgates opened. Soon people could gamble on riverboats in the Mississippi and off the Gulf Coast. Then a Supreme Court ruling allowed Native Americans to build and operate casinos—and they did just about everywhere.

    Every time gaming expanded, analysts predicted the demise of Las Vegas. Yet history has shown that the widespread diffusion of gambling only induced a bigger appetite. In this socio-cultural-legal-lifestyle transition, Las Vegas became the epicenter of gaming. Many people who gambled in a nearby Indian reservation were really just warming up for Las Vegas.

    The gaming industry in Las Vegas also matured in two key ways, offering a host of complimentary activities to go along with gambling. The first was the Las Vegas tie into Hollywood and live entertainment. By the 1980s, Las Vegas became one of the world’s largest venues for entertainment, surpassing even Broadway in New York. The city then began to add function after function related to tourism—food, shopping, and perhaps most importantly of all: conventions.

    Las Vegas’s rise also was directly tied to infrastructure. Completed in the 1930s, Hoover dam provided Las Vegas with ample power and water. The other major improvement was a new highway to Los Angeles, which led to Vegas’s discovery by Hollywood figures.

    At the same time, a series of complimentary economic drivers transformed the city over several decades. The casino and entertainment complex constructed in Las Vegas by 1970 soon engendered a proliferation of airline connections and convention business. The city had enough business to warrant non-stop links to just about every other major city in the U.S. The scale of tourism worked to keep landing fees among the lowest of any major American city. In 2008, McCarran Airport ranked 15th in the world for passenger traffic, with 44,074,707 passengers passing through the terminal, and 6th in airplane “movements,” which includes take offs and landings.

    The other advantage Las Vegas possesses is lots of hotel rooms. In fact, nine of the top ten largest hotels in the world can be found on the Las Vegas Strip (which technically lies outside the city proper in unincorporated Clark County, NV). The presence of so many hotel rooms facilitated the emergence of the nation’s largest convention business.

    The city is also a leading center of producer services specific to gaming. Las Vegas is to gaming what Houston is to energy, the command and control center in a booming global business. Like Houston, whose initial energy business growth came from nearby oil wells, Las Vegas’s initial advantage derived from being home to the first large-scale gaming industry. Many overlook the fact that the U.S. is a service exporting powerhouse, with almost a half trillion dollars in overseas sales last year. In fact the U.S. captures over 14 percent of total world service trade, which performed much better in the current recession than did goods trade. Las Vegas is now grabbing a bigger share of these exports.

    As gaming spread, Las Vegas firms that specialize in building and managing mega-resort and entertainment complexes often built, designed, or consulted on new gambling centers from Atlantic City in New Jersey to Macau in China (which recently passed Las Vegas in total gambling revenue). In the current recession, as gaming revenue plummeted in Las Vegas, properties in much of the rest of the world kept performing, especially China. This geographic diversification strengthened the bottom line for such Las Vegas-based companies as MGM-Mirage and Wynn and sustained the local firms that export gaming services.

    To consolidate its gaming and entertainment gains, Southern Nevada must still diversify its industrial mix to reach a multi-dimensional world city status as say Los Angeles. Fortunately Las Vegas has the capacity to further leverage its core industry. At the same time some other key sectors look promising, especially data storage and transmission, and alternative energy technology such as solar and geothermal.

    Finally, Las Vegas is working to improve its transportation links to nearby Southern California and the Sun Corridor complex of Phoenix and Tucson. These regions are increasingly integrated with one another. Las Vegas’s inclusion in the larger Southwestern U.S megaregion should further connect it to the global economy and lift its status as a world city in full.

    The Convening City

    Ultimately, the Las Vegas case for world city status lies in its role as the globe’s leading convening space. There are more face-to-face exchanges in Las Vegas during a major convention than key financial exchanges in New York or London. Las Vegas, on any given week, may comprise the world’s most expert cluster in a particular industry.

    The convening role that Las Vegas plays in the world economy comprises perhaps the biggest opportunity for additional diversification, especially given the way business is evolving in sectors such as business services. These gatherings provide a means of overcoming coordination and incentive problems in uncertain environments. It becomes an environment to create a critical “buzz” around a company, product or industry.

    Most Las Vegas conventions are really about deal making. Conventions also are used for industry education, vendor networking, competitor insights, networking with prospects, hosting an exhibit, and seeing customers. Another dimension to building trust in Las Vegas lies in the fact that it is very much an adult place. It is a wide open, non-moralizing, libertarian place where grownups get to have fun. Las Vegas is a place where you can, and maybe even should, mix business with pleasure.

    To move forward, Las Vegas needs to tweak its branding in a way that signals its dual personalities as a play hard and work hard city. This shift is already under way. The Las Vegas Convention and Visitors Authority now use the tagline “Only Vegas” and an omnibus identity for the city. Their website has two links: one aimed at business community: VegasMeansBusiness.com with the tagline: “Close the deal and make new opportunities.” and one for tourists: VisitLasVegas.com which uses the tagline: “What happens in Vegas, Stays in Vegas.”

    So far Las Vegas has not leveraged its role as convening place to create something on par with the New York Stock Exchange or the Chicago Board of Trade. However, the convention business can be used as the basis of what may become a permanent trade show.

    A harbinger of this future potential for Las Vegas can be seen in its new giant furniture mart, the World Market Center. This grew out of the city’s role in hosting the largest furniture/home wear convention every year. Las Vegas has developed a year round trade show capacity in furnishing with big annual events. This city is now poised to be a leading design center. Architectural and industrial design firms will follow. In this way, Las Vegas could emerge as the Milan of the U.S., where design leads to industrial spin offs.

    Las Vegas can expand this model to host permanent trade shows in a multiple fields from home entertainment and biotechnology to alternative energy. Rather than become a new ghost town, as some urbanists imagine, the city in fact has a bright future, one that will continue to befuddle its many critics while enriching the opportunities of its citizens.

    Robert E. Lang, Ph.D. is one of America’s most respect urban analysts. He is director of both Brooking Mountain West and the Lincy Institute and is a professor of Sociology at the University of Nevada, Las Vegas.

    Photo: by Roadsidepictures

  • The New Look of the American Suburb

    If you want an easy demonstration of the unsustainability of the classic American suburb, just take a drive around the inner ring suburbs of almost any city, starting with the ones that have a classic branching, winding streets, not traditional grids or those that grew up along transit lines. It is easy to find untold miles of decay, of “dead malls”, “grayboxes”, and subdivisions that have seen better days. If most of today’s new suburbs think they’ll fare any better, they are going to be in for a rude shock in 30 years or so.

    Some have argued that what we need are “suburban retrofits,” where older areas are redeveloped along new urbanist lines. While this is certainly an attractive option in some places, particularly in town center areas, the sheer quantity of decaying older suburbs means this isn’t a viable option across the board at the moment. Retrofits are hard to pull off and expensive to boot. There simply isn’t enough planner/political bandwidth or TIF dollars to make it happen on a wholesale basis. So we have to find some method to renew most of these areas in place.

    Enter immigrants. In older cities, immigrants were historically crammed into near downtown ghettos like the various “Chinatowns” and the like we see. Today, in cities that have them, those districts might still have a cultural role, but they are no longer the demographic core of their communities. Also, for cities without longstanding histories of immigration, these ghettos never developed. Instead, today immigrants disperse throughout metro areas. You find them everywhere from inner city neighborhoods to the most posh suburbs. One of the places along that spectrum you can find them are these inner ring suburbs.

    I want to share some pictures of immigrant driven revitalization of inner ring suburbs through some facts and photos from Indianapolis. But I think you’d find similar things in many cities across the nation.

    Indianapolis was traditionally one of America’s least diverse cities, featuring only the classic black-white split. But it has seen a large influx of immigrants in the last decade. Its metro foreign born population is only 5.19%, which is small, but the Indianapolis Star reported last year that this represented a 70% population increase since 2000. Unlike some towns which have seen immigration driven almost entirely from Mexico, Indianapolis has seen a very diverse set of immigrants, that come from all over the globe, including 26,000 Asians and 10,500 Africans. The Indian population has doubled to 6,000, the Pakistani and Nigerian populations have tripled to 1,000 each. There are 5,600 Chinese and 1,500 Burmese. These aren’t huge numbers today, but given the network effects of international immigration and the lead time to build a large community (remember the example of the large community from Tala, Mexico, which has its roots in the 1970’s), this represents a potential future tsunami of immigration, provided the economy stays strong, the local climate welcoming, and a bit of pro-active marketing takes place. Again, I’m sure we’d see similar diversity of immigrants in other cities, ranging from Detroit’s Arab community to Bosnians in St. Louis to Somalis in Columbus, Ohio.

    The most diverse area in Indianapolis is Pike Township on the northwest side. Though technically part of the city today, it is originally an inner ring suburban area. Its schools have children from 63 different countries speaking 74 different languages. The Lafayette Square area on the southeast boundary of Pike Township is a classic struggling inner ring commercial zone, complete with a dying mall.

    Yet the presence of all of those immigrants has led to a spontaneous renewal of parts of this struggling area in the form of businesses catering to local ethnic populations.

    One of them is a 62,000 square feet international supermarket called Saraga:


    Saraga is run by Korean brothers Jong Sung and Bong Jae Sung and features hundreds of spices and 40,000 products from around the world, ranging from house made kimchi to a halal meat department. Lest I stir up too much suspicion I didn’t take many photos inside the store, but wanted to share one shot of some of the contents from a Middle Eastern aisle:


    The owners are planning to open a second location on the South Side. They are facing a lot of competition from an array of new specialty markets in their current location, and also want to be positioned closer to the burgeoning immigrant community on the South Side and south suburbs. Not long ago the South Side of Indianapolis was stereotyped as the “redneck” side of town, but as American Dirt chronicled, this has changed a lot. While not part of the favored quarter, the South Side has increasing diversity both ethnically and in terms of incomes. Notably the South Side has become epicenter of the Indianapolis Sikh community.


    Saraga should be careful. There are already two Indian groceries and a Mexican grocery in Greenwood. Here is part of the competition in Lafayette Square:


    This, and many of the other establishments, might not look like much. But imagine what it would look like if they weren’t there.

    Here’s one of my favorite signs from a nearby strip center, showing the diversity of establishments rubbing elbows:


    The facade of Cairo Cafe shows a typical Indianapolis pattern, where an ethnic restaurant does double duty as a small scale specialty grocery.


    It’s the same thing at the Vietnamese restaurant Saigon and Guatelinda. Saigon is beloved of hipsters, but I’ve got to confess I don’t think it is very good.


    Another nearby strip mall always blows my mind for the diversity of restaurants and stores it contains. You might need to enlarge this one to see, but it’s a Peruvian restaurant next to a Mexican restaurant next to an Ethiopian restaurant:


    A pastry shop next to another oriental market:


    Some type of Latino shop:


    A Cuban sandwich shop:


    Hopefully this gives you a flavor for how immigrants can be a force of renewal for older, struggling suburban area. I’ll admit I focused on food establishments, since that’s what’s most interesting to me, but there are plenty of others. This also shows the increasingly multi-cultural face of America, even in an interior city in the middle of Midwest corn country. If I were a city with lots of these struggling areas – and let’s face it, that’s most cities – I’d sure want to get me a lot more immigrants pronto.

    In the interest of completeness, I should also note that the Lafayette Square area has also become home to large number of independent black-owned businesses. In addition to being Indy’s immigrant heart, Pike Township has also emerged as a key hub for the region’s black middle class. That will have to be the topic of a future post, alas.

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile.

    This article is re-posted from The Urbanophile.

  • The Muddled CNT Housing and Transportation Index

    The Center for Neighborhood Technology (CNT) has produced a housing and transportation index (the “H&T Index”), something that has been advocated by Secretary of Housing and Urban Development (HUD) Shaun Donovan and Secretary of Transportation Ray LaHood. The concept is certainly worth support. Affordable housing and mobility are crucial to the well-being of everyone, which translates into a better quality of life, more jobs and economic growth. Surely, much of the internationally comparatively high standard of living enjoyed by so many middle and lower income households in the United States has resulted from inexpensive housing (often on the urban fringe) and the ability to access virtually all of the urban area by quick and affordable personal transportation.

    CNT has developed an impressive website, with “tons” of data and maps that are both impressive and attractive. Maps can be adjusted to look at approximately 40 demographic indictors for “block groups” in the nation’s metropolitan areas. Block groups are neighborhoods (smaller than census tracts) defined by the Bureau of the Census and have an average population of approximately 1,500.

    CNT uses the HUD “housing burden” at 30% of household income as a maximum for affordability and further says that housing and transportation should not exceed 45%. The maps show neighborhoods that CNT finds to be affordable and not affordable by these criteria.

    But for all of its superficial impressiveness, the H&T Index is subject to serious misinterpretation and suffers from methodological flaws that neutralize the usefulness of its affordability indices.

    The H&T Index: Potential for Misinterpretation

    The H&T Index: Not a Neighborhood Index: The H&T Index is particularly susceptible to misinterpretation by ideological interests contemptuous of America’s suburban lifestyle, who would use public policy to force people to live in higher densities. While the H&T Index reports data at the neighborhood level, it is not a neighborhood index. However, the H&T Index does not compare neighborhood housing and transportation costs with neighborhood incomes. Rather, the H&T Index uses the metropolitan median household income.

    As a result, low income neighborhoods appear to be affordable, because their less costly housing is compared to the higher metropolitan area median income. Higher income neighborhoods appear unaffordable, because their higher housing costs are compared to the lower metropolitan area median income.

    Press reports, such as in the Washington Post have failed to clearly describe this issue. Without clear reporting, the H&T Index is could play into the popular fiction that suburbs are filled with households unable to cannot afford their housing and transportation. In fact, the vast majority of suburban homeowners can afford their transportation and housing and an appropriate portrayal of neighborhood data (with the corrections noted below) would illustrate this. The high level of recent foreclosures that have occurred in some suburbs are simply a reflection of the fact that “easy money” enticed some people to take on obligations that were beyond their means (just as central city developers built condominium towers that have been foreclosed upon or offered as rentals, with unit prices discounted 50% and more).

    The potential for misinterpretation is illustrated by examining three neighborhoods in Dallas County (Table 1), one low income, one middle income and one high income (2000 data).

    • The H&T Index indicates that housing costs are 8% of incomes in the low-income West Dallas neighborhood when compared to median metropolitan income. However, when the neighborhood income is used, the share of income required for housing is 57%, nearly twice the HUD maximum standard.

    It might be thought that people should move to West Dallas from the suburbs to take advantage of the low housing prices. However, any such migration would quickly escalate land prices up to eliminate any advantage (and to force the low income residents to move, as happens in “gentrifying” neighborhoods).

    • In the middle income (Garland) neighborhood, housing costs as a share of income are 24%, whether measured by the metropolitan or neighborhood income, both within the HUD 30% maximum
    • In the high income (University Park) neighborhood, CNT finds housing costs to be 102% of median metropolitan incomes. When neighborhood income is used instead, housing costs drop to 25% of incomes, well within the HUD 30% maximum.
    Metropolitan & Neighborhood Housing & Transportation Indices: 2000
    Factor Low Income Neighborhood: West Dallas Middle Income Neighborhood: Garland High Income Neighborhood: University Park
    Median Household Income: Metropolitan (PMSA) $48,364 $48,364 $48,364
    Housing Cost Share 8% 24% 102%
    Median Household Income: Neighborhood $6,989 $48,594 $200,001
    Housing Cost Share 57% 24% 25%
    Base data from H&T Index

    The H&T Index: Criticisms of the Methodology

    (1) Missing the Housing Bubble? CNT places more emphasis on transportation costs than on housing costs. This is evident in the H&T Index attention to rising transportation costs from 2000 to 2008. The housing bubble and its impact on household costs appears nowhere among the 40 indicators (Note).

    Yet, there is every indication that housing costs have risen substantially more than transportation costs since 2000. For example, in Kansas City’s core Jackson County, the Census Bureau’s American Community Survey data indicates that the increase in average housing costs was nearly 60% greater than CNT’s transportation cost increase. In Portland’s core Multnomah County, the increase in average housing costs was more 125% greater than CNT’s estimated increase in transportation costs (Figure).

    (2) Exaggerating by Mixing Averages and Medians: The H&T Index compares average housing and transportation costs with the median household income. Averages and means are not the same things. Median income data is “middle” score, with one half of households having incomes above the median and one-half having incomes below the median. On the other hand, “average” housing costs and transportation costs are the total housing and transportation costs divided by the total number of households. High incomes and high priced housing skews averages up. Mixing medians and averages is inherently invalid. For example, in 2008, average housing costs were 19% higher than median housing costs. This means that, on average, where the H&T Index reports a 30% housing affordability figure, it is really substantially lower, at 25% (30% reduced by 19%).

    Thus, the net effect of comparing average housing costs to median incomes makes the housing element of the H&T Index worse than it really is.

    (3) Exaggerating by Leaving Some Households Out: The H&T Index excludes home owning households without a mortgage. The average housing expenditures of households without mortgages are smaller than those of households with mortgages. However, this is a material omission, since housing costs include utility payments. In Multnomah County, excluding households without mortgages raises average housing expenditures by nearly 10% (in 2008). Households without mortgages are households too. The net effect of excluding households without mortgages is to increase housing costs, making the housing portion of the index higher than it would otherwise be.

    (4) Exaggerating by Mixing Data from Different Years: The H&T Index provides 2008 estimates for neighborhood transportation costs, using modeled data. Transportation costs have surely increased since 2000, reaching their peak in 2008 due to the highest ever gasoline prices. CNT again compares these average costs to median household income, but not for 2008. CNT uses 2000 income data. In Jackson County and Multnomah counties, the use of 2000 instead of 2008 data exaggerates transportation’s share of household income between 20% and 25%.

    Each of the above methodological issues is sufficient to render H&T Index outputs to be unreliable.

    Housing’s Role in Housing & Transportation Affordability

    While both transportation and housing costs are important, housing costs have dented household budgets far more than the increase in transportation costs. Even after the house price declines of the last few years, house prices remain well above their historic ratio to household incomes. This will only get worse, if, as many expect, mortgage interest rates rise from their present lows and as rents rise to follow higher house prices.

    In contrast, transportation costs are more susceptible to reduction than housing costs. Once the mortgage is signed, the cost of the house will not be reduced. Once the lease is signed, there is little chance that the rent will be lowered. But transportation costs will be reduced in the future by the far more fuel efficient vehicles being required by Washington. Some people can work at home part of the time. People also change cars more frequently than they change houses. If costs become an issue, perhaps the next car is a compact rather than an SUV.

    CNT’s focus on trends in transportation costs rather than housing costs is consistent with its related study, Penny Wise Pound Fuelish, which advocates expansion of prescriptive land use (smart growth) policies to encourage core urban development and make much suburban development illegal. Yet, these very policies played a dominant role in driving house prices up three times as fast relative to incomes as in metropolitan areas that did not adopt them.

    Genuine advocacy for affordability requires addressing both transportation and housing costs. It also requires recognition of the significant damage done to affordability by prescriptive land use policies. An extra dollar that a household must pay for housing is just as valuable as one spent on transportation.

    All of which leaves us where we started. The nation could still use a reliable housing and transportation index.

    Note: CNT provides no 2008 data for housing costs. Such costs will not be available at the neighborhood level from the American Community Survey until 2012 or 2013. However, it would likely have been no more difficult for CNT to model updated housing data by neighborhood than it was to model 2008 data for transportation costs at the neighborhood level.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

    Photograph: Hartford Suburbs

  • Leading a Los Angeles Renaissance

    Surprisingly, despite the real challenges Los Angeles faces today, the city is out in front of many of its urban competitors in transforming its capacity to provide a safe place to raise and properly educate children, exactly the criteria Millennials use in deciding where to settle down and start a family. It is the kind of challenge that cities around the country must meet if they wish to thrive in the coming decade.

    LA’s biggest win in this respect derives from the political courage of former Mayor James Hahn. It was Hahn who appointed Bill Bratton as police chief, who then deployed his COMPSTAT process for continuously reducing crime. During his tenure as the city’s Police Commissioner under both Mayor Hahn and his successor, Antonio Villaraigosa, Bratton achieved the same improvement in LA as he did previously in New York,– in a city with many of the same societal problems but about one-fourth the police resources and a much larger area to patrol. Even as unemployment soared in 2009 during the Great Recession to 12.3 percent in Los Angeles County, the city saw a 17 percent drop in homicides, an 8 percent reduction in property crime and a 10 percent drop in violent crime. This is a first great step in restoring Los Angeles, once the destination for families, back to its historic promise. Today, Angelinos feel safer than they have in decades.

    COMPSTAT is above all a vehicle for changing bureaucratic cultures. In his initial dialogue with the brass of the New York Police Department (NYPD) Bratton told his management team that he planned on holding them accountable for the crime reductions he had promised Mayor Rudy Giuliani.

    Citing the FBI’s national crime reports, they responded by telling Bratton that since crime “is largely a societal problem which is beyond the control of the police,” it was completely unfair to hold them accountable for reducing it. Since the police department was not responsible for the city’s economic vitality, its housing stock, its school system, and certainly not its racial and ethnic tensions, all of which were the root causes of crime, the managers felt it was unreasonable to expect them to actually reduce crime.

    When Bratton asked them what they could be held accountable for, the leadership replied that they were prepared to accept responsibility for the “perception of crime in New York City” and that their existing tactics of high profile drug busts, neighborhood sweeps, and the like were effective ways to manage that perception. Bratton adamantly refused to accept this definition of accountability from his team and went about creating a system that placed accountability for crime reduction on the NYPD’s leadership, something that also worked its way down through the ranks of every precinct in the city and into the fabric of the department’s culture.

    This fully captures the type of cultural change that every part of any city’s bureaucracy must undergo to become a Millennial city.

    During Mayor Hahn’s tenure in Los Angeles, for example, he expanded the COMPSTAT process to all departments in order to hold General Managers accountable for their performance under a program called “CITISTATS.” Some departments, such as Street Services, Sanitation, and Street Lighting, are still using the lessons learned in that experience to continuously improve the cost and quality of their services.

    But Los Angeles’s recovery has often been blocked by the City Council which has proven reluctant to cede its traditional right to intervene in department operations and to direct resources to specific projects or programs in their Councilmanic districts regardless of the overall city’s needs. When Villaraigosa ascended to the Mayor’s office he removed the potential irritant to his relationship with the Council by disbanding CITISTATS. That decision has deprived Los Angeles of key insights that could have been used to help deal with its current budget challenges.

    It also removed one of the more promising vehicles for Neighborhood Councils to hold city bureaucrats accountable for the services they deliver. The Councils, although far from perfect, remain one of the city’s best hopes for fulfilling Millennials’ desire for direct, locally-oriented involvement.

    In contrast, Mayor Villaraigosa’s determination to hold the Los Angeles Unified School District (LAUSD) accountable for the performance of its students has begun to pay dividends. Recently the board voted 6-1 to adopt a policy mandating competitive bids eventually be issued for the management of all 250 “demonstrably failing schools” as defined by federal education law. The parent revolution that spurred this new approach would not have been successful without the support of LAUSD board members that the Mayor had helped to elect.

    Including parents armed with new information on student performance in the process of reforming LAUSD’s schools promises to produce schools that deliver superior results at lower costs and to create a new, decentralized, parent-controlled, educational decision-making system that will be especially attractive to Millennials and their parents.

    Now that the Great Recession has brought single family housing back to affordable levels in many parts of Los Angeles, the building blocks of safer streets and better schools give the metropolitan area an opportunity to establish an environment that can attract large numbers of Millennials just as they enter young adulthood. To take advantage of this opportunity, however, all members of the city’s leadership will need to learn one more Millennial lesson.

    Unlike the Baby Boomers running the Los Angeles City Hall today, Millennials aren’t interested in confrontation and debilitating debates focused on making sure one side wins and the other loses. They want what business people term “win-win” solutions that take into account everyone’s needs and produce outcomes that benefit the group or community as a whole. Los Angeles, a city built on the expectations of the last civic GI Generation that came to LA in the 1940s, must realign itself to the tastes of the emerging next civic generation, the Millennials.

    Finding such solutions, given the many challenges LA faces, will not be easy. LA continues to be run by Boomer politicians, like those in Congress, who know how to play up divisive issues, but haven’t demonstrated an ability to get results.

    But if today’s leaders in cities like Los Angeles aren’t up to the task, it won’t be long before a new generation of leaders who have grown up believing in such an approach will emerge to take their place. As Ryan Munoz, a politically active high school senior put it, “With all the technology at our disposal, our approach is different. We can be less partisan, less confrontational and work better together.”

    Rachel Lester, who at 15 years old just won election as the youngest member of any Los Angeles Neighborhood Council by campaigning with her Facebook friends, captured the potential power of the generation. “When a few teenagers do something, a lot of teenagers do something.” When cities develop leaders as great as America’s newest civic generation, the Millennials, those cities will once again take their rightful place in the pantheon of America’s most desired places to live. Los Angeles would be an ideal place to start that movement.

    Morley Winograd and Michael D. Hais are fellows of the New Democrat Network and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008), named one of the 10 favorite books by the New York Times in 2008. Morley Winograd served as a consultant to Mayor Hahn on the implementation of the CITISTAT process.

    Photo by Lucas Janin

  • The Best Cities For Jobs

    This year’s “best places for jobs” list is easily the most depressing since we began compiling our annual rankings almost a decade ago. In the past–even in bad years–there were always stalwart areas creating lots of new jobs. In 2007’s survey 283 out of 393 metros areas showed job growth, and those at the top were often growing employment by at least 5% to 6%. Last year the number dropped to 63. This year’s survey, measuring growth from January 2009 to January 2010, found only 13 metros with any growth.

    Mike Shires at the Pepperdine School of Public Policy, who develops the survey, calls it “an awful year.” Making it even worse, the source of new jobs in almost all areas were either government employment or highly tax payer-funded sectors like education and health. This year’s best-performing regions were those that suffered the smallest losses in the private economy while bulking up on government steroids.

    So far the recovery has favored the government-dominated apparat and those places where public workers congregate.After all, besides Wall Street, public-financed workers have been the big beneficiaries of the stimulus, with state and local governments receiving more than one-third of all funds. Public employment grew by nearly 2% over the past three years, while private employment has dropped by 7%.

    Read how we pick the best cities.

    Private sector workers have also seen their wages decline, while those working for the various levels of government have held their own. Federal workers now enjoy an average salary roughly 10% higher than their private sector counterparts, while their health, pension and other benefits are as much as four times higher.

    Not surprisingly government workers, according to a recent survey, are more likely to see the economy improving than those engaged in the private sector. It’s not so pretty a picture on Main Street; personal bankruptcy filings rose 23% in the year ending in March.

    Small Is Still Beautiful

    Despite these differences, some patterns from previous years still persist. The most prominent is the almost total domination of the top overall rankings by smaller communities. With the exception of Austin, Texas, all the top 10 growers–and all the net gainers–were small communities. Americans have been moving to smaller towns and cities for much of the past decade, as well as jobs, and this recession may end up accelerating the trend.

    At the top of the list stands No. 1 Jacksonville, N.C., whose economy grew 1.4%, paced by 3.3% growth in government jobs. Fast growth, however, is not a stranger to this Southern community, whose employment base has grown 22.8% since 1998. The area includes the massive Marine Base at Camp Lejeune, a beehive of activity since the U.S. started waging two wars in Afghanistan and Iraq. Fort Hood-Temple-Fort Hood in Texas came in fourth place overall with Fayetteville, N.C., home to the Army’s Fort Bragg, placing sixth and Lawton, Okla., home of Fort Sill, close behind at No. 7. Similar explanations can apply to war economy hot spots Fort Stewart (No. 20 overall) and Warner Robbins (No. 26), both in Georgia.

    But perhaps nothing captures the current zeitgeist more than the presence, at No. 23, of Hanford-Corcoran, Calif. A large Air Force base and a state prison have bolstered Hanford-Corcoran’s economy, which shows that even in the Golden State–an economic basket case whose unemployment keeps rising–a large concentration of government jobs still guarantees some degree of growth.

    Not all our top-ranked small stars got their stimulus from Uncle Sam. Energy-related growth explains strong performances from Bismarck and ag-rich Fargo, N.D., at Nos. 2 and 8, respectively. You can also credit some energy-related growth to the high standing of Morgantown, W.Va., (No. 17) and Anchorage, Alaska, (No. 18), which have benefited from consistently high prices of oil and other sources of energy.

    Texas at the Top of Big Cities

    Our list of best places among big cities is dominated this year, as last, by Texas, with the Lone Star State producing fully half of our top 10. This year, like last, the No. 1 big city (those with a more than 450,000 non-farm jobs) was Austin, Texas, which enjoys the benefits of being both the state capital and the home to the University of Texas, as well as a large, and growing, tech sector.

    But the Texas story also includes places that do not enjoy Austin’s often overwrought “hip and cool” image. Broad-based economies, partly in energy, have paced the growth of No. 2 San Antonio, No. 3 Houston, No. 5 Dallas and No. 7 Fort Worth. Other consistent big-city Southern performers include No. 8 big metro Raleigh-Cary, N.C., as well as two ascendant Great Plains metropolises, No. 9 Omaha and No. 11 Oklahoma City. None of these places were too hard-hit by the mortgage meltdown, and they all have retained reputations as business-friendly areas.

    The other big winner among the large areas is an obvious one: No. 6 ranked greater Washington, D.C. While most American communities suffer, our putative Moscow on the Potomac has emerged as the big winner under Barack Obama and the congressional centralizers. Remarkably, federal employment in the area has grown at a smart pace throughout the recession. One partial result: Washington office space is now–for the first time ever–more expensive than that in Manhattan. Northern Virginia, home to many beltway bandit companies, ranks No. 4 on our list.

    The Eds and Meds Economy

    With the productive economy outside energy only now getting its footing, the biggest relative winners have been what could be called the “eds and meds” economies. This includes de-industrialized places such as Pittsburgh (ranked a surprising No. 13), Rochester, N.Y., (ranked No. 17) and Buffalo, N.Y. (No. 20). If you have few more factory jobs to lose, little in-migration and a huge collection of institutions relatively immune to the economic turndown, you have a better chance to look good in bad times. The stimulus tilted more toward education and health than to construction and infrastructure, something that has worked to the favor of these cities.

    We can see this in New York City, whose huge and growing concentration of colleges and hospitals helped propel it to No. 10 among the big regions, its best ranking ever, despite losing almost 130,000 jobs. This is all the more remarkable since the Big Apple was the epicenter of the financial collapse, although that also made it the prime beneficiary of the federal bailout and Wall Street’s boom. Soaring salaries for hedge fund managers and new hires at financial firms could be pacing new growth in the city’s elaborate service industry, from toenail painters, restaurateurs and psychologists to dog walkers and yoga instructors.

    The health of the eds and meds economy, however, has even been enough to lift some traditional bottom-dwelling sad sacks, such as No. 14’s Philadelphia, to unfamiliar, if rather relative, heights. With private-sector growth weak everywhere, cities with lots of big hospitals, universities and nonprofit foundations look better for the time being than they have in a generation.

    The Road Ahead

    We expect our list to change next year, but how it will do so will depend as much on politics as economics. The current policy approaches–with healthy increases in government employment and strong support for education–have worked relatively well for taxpayer-financed economies including those with a strong “eds and meds” sectors. State universities, now confronted with the real pain of the recession felt by state taxpayers, are already crying for heavy increases in federal support.

    But if Congress takes a turn to the center, or even right, after November, the advantageous position of the favored government-supported sectors may erode. Particularly vulnerable will be state workers, whose current federally sanctioned reprieve could be terminated if voters force legislators to start addressing concerns over the huge governmental deficits both locally and nationally. Given D.C.’s unique ability to print money, Washington and its environs will likely continue to expand, as they did under the spendthrift Bush regime, but many state and local governments may be forced onto a stringent diet.

    On the other hand, a welcome return to basic growth in overall economy would further boost those relatively low-cost areas–notably in Texas, the Great Plains and the Intermountain West–that have in recent years enjoyed the strongest trajectory in the non-government related sectors, including natural resource-based industries . These places have pro-business regulatory and tax regimes, lots of available land and affordable housing, which will attract new businesses and workers to their areas.

    This change could also benefit some places, such as Silicon Valley, parts of Southern California and the Pacific Northwest, which despite high costs still retain globally competitive, tech-related sectors. A resurgent job market in these areas would erase the current apparent advantage enjoyed by “eds and meds” based economies in favor of those places that will serve as the real incubators for a revived private sector economy. With the resumption growth, hopefully, our economy next year will begin resembling the more capitalist, competitive one we have enjoyed in the past.

    This article originally appeared at Forbes.com.

    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 Febuary, 2010.

    Photo: kiril106

    April 20, 2010

  • 2010 How We Pick the Best Cities For Job Growth


    By Michael Shires

    The methodology for the 2010 rankings largely corresponds to that used last year, which emphasizes the robustness of a region’s growth both recently and over time. It allows the rankings to include all of the metropolitan statistical areas (MSAs) for which the Bureau of Labor Statistics reports monthly employment data. They are derived from three-month rolling averages of U.S. Bureau of Labor Statistics “state and area” unadjusted employment data reported from November 1999 to January 2010.

    The data reflect the North American Industry Classification System categories, including total nonfarm employment, manufacturing, financial services, business and professional services, educational and health services, information, retail and wholesale trade, transportation and utilities, leisure and hospitality, and government.

    “Large” areas include those with a current nonfarm employment base of at least 450,000 jobs. “Midsize” areas range from 150,000 to 450,000 jobs. “Small” areas have as many as 150,000 jobs. Because of the significant declines in employment across the nation which caused some MSAs to drop below the 450,000 and 150,000 job thresholds, the size category for each MSA in the 2010 ranking is kept the same as it was in 2009 to maximize comparability between the rankings.

    This year’s rankings use four measures of growth to rank all areas for which full data sets were available from the past 10 years. Because of the expanded availability of data since last year, we were able to include another 61 small MSAs in this year’s rankings for a total of 397 regions. As a result, this year’s rankings can be directly compared to the 2009 rankings for MSAs for the large and midsize categories, but there are some adjustments needed for year-to-year comparisons in small MSA category. In instances where the analysis refers to changes in ranking order, these adjustments are made accordingly.

    The index is calculated from a normalized, weighted summary of: 1) recent growth trend: the current and prior year’s employment growth rates, with the current year emphasized (two points); 2) mid-term growth: the average annual 2004-2009 growth rate (two points); 3) long-term trend and momentum: the sum of the 2004-2009 and 1999-2003 employment growth rates multiplied by the ratio of the 1999-2003 growth rate over the 2004-2009 growth rate (two points); and 4) current year growth (one point).

  • The Millennial Metropolis

    Back in the 1950s and 60s when Baby Boomers were young, places like Los Angeles led the nation’s explosive growth in suburban living that has defined the American Dream ever since. As Kevin Roderick observed, the San Fernando Valley became, by extension, “America’s suburb” – a model which would be repeated in virtually every community across the country.

    These suburbs – perfectly suited to the sun-washed car culture of Southern California – have remained the ideal for most Americans. And they remain so for the children of Boomer and Generation X parents, Millennials,(born 1982-2003), who express the same strong interest in raising their families in suburban settings.

    According to the most recent generational survey research, done for Washington-based think tank, NDN, by Frank N. Magid Associates, 43 percent of Millennials describe suburbs as their “ideal place to live,” compared to just 31 percent of older generations. In the same survey, a majority of older generations (56%) expressed a preference for either small town or rural living. This may reflect the roots of many older Americans, who are more likely to have grown up outside of a major metropolis, or it may indicate a desire of older people for a presumably simpler lifestyle.

    By contrast, these locations were cited by only 34 percent of Millennials as their
    preferred place to live. A majority (54%) of Millennials live in suburban America and most of those who do express a preference for raising their own families in similar settings. Even though big cities are often thought of as the place where young people prefer to live and work, only 17 percent of Millennials say they want to live in one, less than a third of those expressing a preference for suburban living. Nor are they particularly anxious to spend their lives as renters in dense, urban locations. A full 64 percent of Millennials surveyed, said it was “very important” to have an opportunity to own their own home. Twenty percent of adult Millennials named owning a home as one of their most important priorities in life, right behind being a good parent and having a successful marriage.

    This suggests that some of the greatest opportunities in housing will be in those metropolitan areas that can provide the same amenities of suburban life that Los Angeles did sixty years ago. In this Millennials are just like their parents who moved to the suburbs in order to buy their own home, with a front and back yard, however small, in a safe neighborhood with good schools.

    Given the fact that nearly four in five Millennials express a desire to have children, cities that wish to attract Millennials for the long-term will have to offer these same benefits. These Millennial metropolises also will need to be built with the active participation of their citizens, using the most modern communication technologies, to create a community that reflects this generation’s community-oriented values and beliefs. Metropolises that wish to attract Millennials, will also need to include them in their governing institutions. Such cities will have a leg up on those run by closed, good old boy networks that don’t reflect the tolerance and transparency Millennials believe in.

    The passion of Millennials for social networking and smart phones reflects their need to stay in touch with their wide circle of friends every moment of the day and night. In fact, 83 percent of this generation say that they go to sleep with their cell phone. This group-oriented behavior is reflected in the efforts of Millennials to find win-win solutions to any problem and their strong desire to strengthen civic institutions. Seventy percent of college age Millennials have performed some sort of community service and virtually every member of the generation (94%) considers volunteer service as an effective way to deal with challenges in their local community.

    The other key characteristic of the Millenial metropolis will be how it carves out a safe place for children. The Boomer parents of Millennials took intense interest in every aspect of their children’s lives, earning them the sobriquet “helicopter parents” because of their constant hovering. Now the Generation X “stealth fighter parents” of younger Millennials are turning the Boomer desire to hover and talk into a push for action and better bottom line results.

    This can already be seen in cities like Los Angeles where a parent revolution is successfully challenging the entrenched interests in the Los Angeles Unified School District (LAUSD).

    The idea began with a website, www.parentrevolution.org, that offered a bargain to parents willing to participate in a grass roots effort to improve individual schools. The organizers, led by Ben Austin, a long time advocate on behalf of Los Angeles’s kids, promised that if half of the parents in a school attendance district signed an online petition indicating their willingness to participate in improving their local school, they would “give you a great school for your child to attend.”

    This process has worked both in working class areas like East Los Angeles’ Garfield High School and the Mark Twain Middle School in affluent West LA. With the backing of the parents, Austin went to the Los Angeles school district and demanded that they either put the management of the school “out to bid,” or his organization would be forced to respond to the parent’s demands by starting a charter school in competition with the LAUSD school. Since each child has seven thousand dollars of potential state funding in their back pack, a newly enlightened LAUSD agreed to these demands. When 3000 parents showed up to demonstrate their support of the concept, the school district voted 6-1 to adopt a policy mandating competitive bids eventually be issued for the management of all 250 “demonstrably failing schools” as defined by federal education law.

    The key to building the Millenial metropolis will be to accommodate such changes. Places like Dallas, Houston, Austin, or Raleigh-Durham that have survived the Great Recession reasonably well now are focusing on producing open, accessible communities with good schools and safe streets. These communities appear best positioned to take advantage of the next bloom of urban growth. Of course the ability to provide America’s next great generation with good jobs and a growing economy will also be required if any metropolis wants to attract Millennials. But with the right leadership and a sustained effort to focus on the basics of family living, almost any city has the opportunity to become a leader in the rebirth of America’s Millennial Era metropolises.

    Morley Winograd and Michael D. Hais are fellows of the New Democrat Network and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008), named one of the 10 favorite books by the New York Times in 2008.

    Photo: Papalars

  • Beyond the Census: America’s Demographic Advantage

    As the nonstop TV commercials have made clear, the U.S. Census Bureau really hopes you’ve sent back your questionnaire by now. But in reality, we don’t have to wait for the census results to get a basic picture of America’s demographic future. The operative word is “more”: by 2050, about 100 million more people will inhabit this vast country, bringing the total U.S. population to more than 400 million.

    With a fertility rate 50 percent higher than Russia, Germany, or Japan, and well above that of China, Italy, Singapore, South Korea, and virtually all of Eastern Europe, the United States has become an outlier among its traditional competitors, all of whose populations are stagnant and seem destined to eventually decline. Thirty years ago, Russia constituted the core of a vast Soviet empire that was considerably more populous than the United States. Today, Russia’s low birthrate and high mortality rate suggest that its population will drop by 30 percent by 2050, to less than one third that of the United States. Even Prime Minister Vladimir Putin has spoken of “the serious threat of turning into a decaying nation.”

    Perhaps an even more important demographic gap is emerging between the United States and East Asia. Over the past few decades a rapid expansion of their workforce fueled the rise of the East Asian tigers, the great economic success story of our epoch. Yet within the next four decades, a third or more of their populations will be older than 65, compared with only a fifth in America. By 2050, according to the United Nations, roughly 30 percent of China’s population will be more than 60 years old. Lacking a developed social-security system, China’s rapid aging will start cutting deep into the country’s savings and per capita income rates. A slowdown of population growth in poor countries can offer a short-term economic and environmental benefit. But in advanced countries, a rapidly aging or decreasing population does not bode well for societal or economic health.

    Between 2000 and 2050 the U.S. population aged 15 to 64—the key working and school-age group—will grow 42 percent, while the same group will decline by 10 percent in China, nearly 25 percent in Europe, and 44 percent in Japan. Unlike its rivals, America’s economic imperative will lie not in meeting the needs of the aging, but in providing job and income growth for our expanding workforce. What the United States does with its “demographic dividend”—that is, its relatively young working-age population—will depend largely on whether the private sector can generate jobs, an issue that’s particularly critical now, with more than 15 million unemployed.

    Immigrants may be one force that will lead the way: between 1990 and 2005 immigrants started one quarter of all venture-backed public companies. This enterprising spirit is crucial, because U.S. employment has been shifting not to mega corporations but to individuals; between 1980 and 2000, the number of self-employed people expanded tenfold to make up 16 percent of the workforce.

    To create jobs, America needs to pay attention not only to high-tech industries but also the basic ones—construction, manufacturing, agriculture, energy—that will employ our expanding blue-collar workforce. Expanding our basic industries, and focusing on the necessary skills training for those laboring in them, will provide new opportunities for the majority of workers who do not possess college degrees. It also will be critical to addressing the outflow of capital to other countries, and provide the basis for innovations that will create new exports.

    With the mobilization of our entrepreneurs and supportive government policies, the United States should be able to exploit its vibrant demography to assure its preeminence over the next four decades. If we fail to start taking these steps now, our current leaders will have earned the opprobrium that future generations will heap upon them.

    This article originally appeared at the Newsweek.

    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 Febuary, 2010.

    Photo by Seema K K

  • The War For Jobs, Part II: Teamwork On The Frontlines

    So if we are in a new war — this one for business and job growth — what role does local government play?

    It would be a mistake to over-emphasize the role of government, especially at the local level. Despite the claims of politicians from both parties about how many jobs their policies “created,” governments don’t create jobs, at least not in the private sector. Ventura, for example, is estimated to generate about seven to eight billion dollars in annual economic activity. The sales and profitability of thousands of individual businesses are only marginally impacted by what goes on at City Hall, no matter what cheerleaders or critics might claim.

    Still, local government can obviously contribute to a healthier economic climate — and it can certainly get in the way of one.

    There are four broad areas where our impact (good and bad) is greatest: services and infrastructure; taxation; regulation; and encouragement.

    When local Chambers of Commerce advocate for “business-friendly” policies, they usually underplay the most important function of local government: providing vital services (from policing to clean water) and key infrastructure (from roads to sewer pipes). That’s the core function of government, and the more cost-effectively local government does that, the better it is for local business.

    Yet it’s taxation, regulation and “encouragement” that advocates and critics focus on, and argue over endlessly. Important questions. But there is a catalytic spark when encouraging business starts with two simple words: teamwork and focus.

    That’s where we in Ventura are putting our energy to grow business and high value, high wage jobs.

    We’ve put together a team to focus on the business sectors that will drive economic recovery. Alex Schneider directs our successful Ventura Ventures Technology Center. With thirteen start-up high tech businesses, it’s the tangible outcome of our intense focus on new economy business development. On the first of May, Joey Briglio returns to work on green business development. We are transferring Eric Wallner from the Community Services Department to capitalize on his expertise in growing our visitor and creative business sector.

    These new assignments complete the team that also includes Economic Development Manager Sid White and Ventura Business Ombudsman Alex Herrera. White concentrates on Downtown Redevelopment, real estate, Auto Center redevelopment, general business assistance/loan programs, and ongoing work with County Economic Development organizations. Herrera provides personal access and follow-through for local businesses of all sizes. All are assigned to the Community Development Department under Director Jeff Lambert. As City Manager, I’m taking a hands-on approach to working directly with all of them on our new business strategy.

    This is our team. This is our focus.

    Past battles over land use gave Ventura a reputation for being “anti-business.” We can argue ‘til the cows come home whether this was fair or not. But why re-fight those battles? We’re in a new war and our goal is to change our reputation by winning the battles ahead.

    Almost nobody in Ventura wants to pave the city with oversized real estate overdevelopment. Almost everybody wants robust business growth to generate local jobs, enhance the range of private goods and services available to local residents, and to augment revenue to support public services. When 200 Ventura business and community leaders assembled last May for our Economic Summit, what emerged was a community consensus that is as wide as it is deep: focus on growing our own businesses, especially green ones — and increasingly, every business is turning greener.

    In all the buzz about ‘green jobs’ in the energy sector, it’s important to focus on ‘clean tech’ innovation in every field. Our own Patagonia is a blue-chip model for the green future. In recent years, top executives from Walmart, GE and other global giants have visited Patagonia’s downtown Ventura headquarters to study their rigorous focus on reducing waste and shifting to more sustainable supply chains. Is Patagonia a pioneer in renewable forms of energy? No, they make outdoor clothes. Their local workforce exemplifies the opportunity America – and even high-cost coastal California – still has to lead the world in producing globally-competitive quality products and services.

    It was a theme hammered home by Mayor Bill Fulton in his State of the City speech this year:

    “We are fortunate to be located close to two major economic engines… that constantly spin off startup businesses in the high-tech and biotech centers: UC Santa Barbara to our north and Amgen to our south.

    In the past two years, Ventura has made a major effort — unlike any other city in this region — to connect with these institutions, with startup entrepreneurs, and with venture capitalists, to encourage spin-off businesses to locate and grow here in Ventura. And it’s working. Today — for the first time — we are part of the high-tech/biotech business ecosystem.

    “This is a time of great change and uncertainty in our society. Old ways of doing things are falling by the wayside quickly, and new ways are emerging rapidly. Such times can be frightening, but they are also pregnant with great possibilities. We in Ventura are very determined and well positioned to take advantage of those opportunities in order to reinforce Ventura as a great place to live and work.”

    For a city committed to living within our means, we are focusing our team on earning a reputation that Ventura is serious about winning the new war for jobs. We hope to be a pioneer in forging strategy and tactics that will set the standard for other cities in California tackling the urgent task of reinventing the California dream. Reinvigorating the seventh largest economy on the planet will be based on victory in the war on jobs.

    This article is part two of a two-part series by Rick Cole on the war for jobs.

    Flckr photo of Ventura at night by Wink

    Rick Cole is city manager of Ventura, California, and 2009 recipient of the Municipal Management Association of Southern California’s Excellence in Government Award. He can be reached at RCole@ci.ventura.ca.us

  • The War For Jobs Trumps The War For Sales Tax Dollars: Part I

    At the beginning of every war, generals always try to fight the last one. Experienced professionals are often the last to realize the times and terrain have changed.

    Since the passage of Proposition 13 — the 1978 ‘taxpayer revolt’ against California property taxes — most California cities have focused on generating sales tax. Property tax, which had been the traditional backbone of local revenue, was slashed by 60%, sparking an intense Darwinian struggle between cities for sales tax market share. During the nineties, the cities along the 101 Corridor in Ventura County competed intensely in the “mall wars” over which cities would get auto dealers and major retailers. The City of Ventura won some and lost some, but during the last consumer boom we were still number two in the County in sales tax per capita, after Thousand Oaks.

    This intercity competition spawned redevelopment megadeals, tax sharing agreements and fawning over chain stores and “big boxes.” “Public-private partnerships” was the name given to deals cut with favored developers and retailers. Some cities won the lottery (Camarillo declared its strawberry fields next to the freeway “blighted” in order to grab redevelopment funding to build its successful outlet center), and some lost (Oxnard’s planned 600,000 square foot “Riverpark Collection” sits vacant and forlorn, and the city’s downtown theater and restaurant development scrapes along with continuing city subsidies).

    With the steep drop in sales tax revenue across California, cities are tempted to try that much harder to grab a bigger slice of a shrinking pie. That’s why a major retailer that pays low wages to mainly part-time employees stills gets more attention and help from cities than a similar size manufacturer or company headquarters paying top salaries. That’s why cities review detailed reports on their top 100 retailers every quarter and don’t even keep lists of their top 100 employers.

    But that is fighting the last war. In the debt-fueled boom that crashed in 2007, 70% of every dollar was going to consumer spending, as consumers tapped their credit cards and home equity loans. To cash in on that spending spree, developers could continue to build new shopping centers and auto malls.

    Now all that has changed. Consumers not only have less income and credit, they are saddled with more debt. Even a recovery in consumer buying power might not translate into needing more stores, as the Internet changes the way people live, shop and entertain themselves. Retail square footage will be slashed as inventory is digitized (think e-books) or as consumers take advantage of an electronic market that offers infinitely more variety than any store (think Zappos Shoes and More.)

    Today’s sharp drop in sales tax is an economic Pearl Harbor. The next war has already begun. Cities will need to fight, not for more stores, but for high wage private sector jobs that can directly compete in the brutal global economy. There are two basic ways to do that: provide value through local advantage, or provide world-class quality.

    Local advantage is not easy. Local retailers and service businesses still compete with corporate giants by adapting to serve a local clientele. Our downtown is primarily made up of these niche companies, serving local customers and clients. But economies of scale continue to favor bigger players.

    World-class quality is even harder. “Buy American” is a nice slogan, but most Americans pay no attention to labels on their underwear or their autos. To sustain high wage jobs, companies located here must overcome the cost disadvantage of operating in coastal California by providing products or services that are worth the premium.

    Patagonia, the outdoor specialty clothing powerhouse, is a high profile success story for competing in the world economy. Although they do nearly $400 million in annual sales, most of the company’s actual work (manufacturing, shipping, back office functions and retailing) takes place elsewhere. But its highest-value headquarters function remains in Ventura, providing 200 high quality, high wage jobs. Their unique passion for a green supply chain landed them on the cover of Fortune as “The Coolest Company on the Planet.”

    Can cities be as effective at growing these kinds of companies as they have been at luring Walmarts and Lexus dealers?

    Ventura is a test case. Our Ventura Ventures Technology Center and quest for Google Fiber are innovative experiments. We are “incubating” thirteen tiny start-ups – and fostering what Lottay CEO Harry Lin, an experienced high tech entrepreneur, calls a “technology ecosystem” of connected players in the new company game.

    If we succeed in our efforts to promote new and expanded “world class quality” companies and the high wage, high value jobs they produce, will that help pay the bills for city services? Isn’t a new Walmart still a better bet?

    The answer is not clear-cut. A new Walmart will provide some tangible real revenue, particularly if it diverts Ventura residents from driving to Oxnard to shop at their Walmart. But if Walmart primarily takes customers away from our two Targets and our other retail outlets, there’s little actual gain in revenue. And the point is, in a shrinking retail market (lower incomes, lower spending, more diversion to the Internet), there isn’t much opportunity to keep adding new stores, especially in a competitive market where Oxnard is trying to fill up the brand new center they have sitting vacant. To refill our recent sales tax declines, we’d need the net sales tax of about ten new Walmarts, or their equivalent. For obvious reasons, that can’t happen and won’t. It still makes sense to “buy local” where a penny on every dollar stays home to fund city services. But we can’t build enough stores to restore a prosperous economy or the community services we’ve had to slash.

    So while Ventura’s entrepreneurial emphasis on high wage jobs may be experimental, at least we are fighting the right war. It will be a while before we know whether we are winning. But fighting the last war is a sure loser. Even if the economy “recovers,” it will be years before the region’s retail space is filled — if ever. The best thing we can do to create a healthy retail environment is to generate new wealth in our region through robust business and job growth.

    In the early years following Proposition 13, some cities led the way toward retail development in the war for sales tax dollars. Today, Ventura is adopting new tactics and weapons in the war for jobs. That may seem like a new and untested strategy. It is. Yet in a changing world, there is great opportunity to rebuild local prosperity on a new and stronger foundation.

    This article is part one of a two-part series by Rick Cole on the new war for jobs.

    Flckr photo of Ventura by ah zut

    Rick Cole is city manager of Ventura, California, and 2009 recipient of the Municipal Management Association of Southern California’s Excellence in Government Award. He can be reached at RCole@ci.ventura.ca.us