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  • What Detroit’s Bankruptcy Teaches America

    As has long been expected, the city of Detroit has officially filed for bankruptcy.  While many will point to the sui generis nature of the city as a one-industry town with extreme racial polarization and other unique problems, Detroit’s bankruptcy in fact offers several lessons for other states and municipalities across America.

    The Day of Reckoning Can Take Much Longer Than We Think to Come

    What’s most surprising about Detroit’s bankruptcy is not that it happened, but how long it took to get there. In authorizing the bankruptcy filing Gov. Rick Snyder talked about “60 years of decline.” He’s not joking. It’s been widely known that Detroit has been in trouble for a very long time.

    Time Magazine ran a 1961 story called “Decline in Detroit.”  Jane Jacobs described its lack of vitality in her 1961 classic “The Death and Life of Great American Cities”:

    Researchers hunting the secrets of the social structure in a dull-gray district of Detroit came to the unexpected conclusion there was no social structure….Virtually all of Detroit is as weak on vitality and diversity as the Bronx. It is ring superimposed upon ring of gray belts. Even Detroit’s downtown itself cannot produce a respectable amount of diversity. It is dispirited and dull, and almost deserted by seven o’clock of an evening….Detroit today is composed of seemingly endless miles of low density failure.

    Moving from urban planning to economics. She wrote in 1969’s “The Economy of Cities”:

    This was the prosperous and diversifying economy from which the automobile industry emerged two decades later to produce the last of the important Detroit exports and, as it turned out, to bring the city’s economic development to a dead end.

    These are both well known, but the record of troubles in Detroit even predates this, going back at least to Life Magazine’s 1942 article “Detroit Is Dynamite” which gave a prescient warning to the city just a year before 1943’s race riot.

    For a city as uniquely troubled as Detroit to remain in serious decline for such an extended period of time before going bankrupt is a testament to the sheer resilience of cities. It also suggests that those predicting eminent doom for their own city unless it changes its ways are likely to end up as false prophets.

    Indeed, Detroit’s day of reckoning may not even yet be fully given that various challenges to the bankruptcy filing are expected. The fact that Detroit has limped along for so long suggests that cities may be able to survive nearly definitely as “zombie municipalities” similar to zombie banks. Though this may possibly end a Greek style crisis at some point, a very lengthy existence as the undead would seem to be possible.

    Decline Poisons Civic Culture and Sunders the Commonwealth

    Detroit also illustrates that once decline starts it sets in motion a toxic civic dynamic that makes the tough choices needed to turn things around nearly impossible. Just as growth begets growth, decline begets decline, and part of the reason is social dynamics.

    This comes about because in a city in decline – such as in late imperial Rome –people start thinking only about themselves and no longer come to see themselves as part of a greater enterprise or commonwealth. The city and suburbs, blacks and whites, taxpayers and unions no longer see their fortunes as linked. Rather than rising and falling together, it’s every man for himself.

    When the pie is growing, it’s easy to come to an agreement over how to divide it because everybody can get a bigger slice at the same time. But when the pie is stagnant or shrinking, zero-sum thinking takes over. To make a sacrifice is seen to in effect allow someone else to profit at your expense. Perhaps these dynamics were present latently before, but tough times bring out the real civic character.

    In Detroit’s case everyone from public employee unions who refuse to give up any of their benefits (and will no doubt fight to deny the bankruptcy filing) to suburban towns that would rather pretend the city does not exist have played a role in setting the disaster. With nobody willing to sacrifice for the greater good, prisoner’s dilemma logic results happen. You can see this playing out in nearly any troubled American city. By contrast, it seems to be healthier places like Denver that have managed to build stronger regional civic consensus. It’s simply easier in those places.

    Instead, Detroit chased conventional wisdom approaches and fad of the month type endeavors ranging from constructing the fortress-like Renaissance Center to the People Mover to former Gov. Jennifer Granholm’s “Cool Cities” program, none of which did anything but generate hype. What they all had in common is a transfusion of subsidies to the city (and taking on debt) rather than building a consensus around addressing the real issues.

    America Doesn’t Learn Lessons From the Past

    The last thing Detroit teaches us is that America too often doesn’t learn from its mistakes. Detroit’s troubles have been evident for quite some time, yet it’s hard to see that many other post industrial cities have managed to carve out a different path. Rather, they pretended that Detroit’s civic was somehow unique due to its auto industry dependence – and managed to ignore other failed cities as well – while embarking on the same turnaround strategy via conventional wisdom and silver bullets.

    They have even managed to ignore failures much closer to home. Booming new suburbs can look just 5-10 miles down the road to see yesterday’s hot spot now turned into a festering mess of dead and dying malls, declining schools, increasing poverty, and falling home prices. Yet most of them are simply replicating the same pattern that is destined to fail financially over the long term in any region without either severe building restrictions or very high population growth.

    Sadly, none of these augur favorably for change. Detroit may continue to garner special international attention as a train wreck people can’t stop watching, but less spectacular slow motion civic failures seem likely to remain commonplace unless somebody finds a way to overcome these forces.

    Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile.

    Photo by Kate Sumbler.

  • XpressWest Las Vegas Train: Where are the Venture Capitalists?

    Recently, the US Department of Transportation indefinitely suspended a federal loan application for the XpressWest high-speed rail train from Victorville California to Las Vegas. The only public rationale for the decision was contained in a letter from former Secretary of Transportation Ray LaHood, who cited “buy-America provisions.” Important contents of the letter were not made public (presumably to protect confidential commercial information), but Secretary LaHood indicated that “serious issues” and “significant uncertainties” surrounding the project forced him to suspend “further consideration” of the loan request.

    US Senate Majority Leader Harry Reid of Nevada hopes to resurrect the loan application. However even he is reported to have noted that the White House is “worried about XpressWest obtaining the remaining $1.5-billion in private financing needed to get the train running.”

    That’s just the beginning of the private investment concern. Current reports indicate that the Victorville to Las Vegas line will cost $7 billion to construct, $5.5 billion of which would be provided through a low interest 35 year loan from federal taxpayers, the initial payment on which would be deferred for six years.

    Based upon the experience of high-speed rail programs around the world, it seems virtually inevitable that the Victorville to Las Vegas high-speed rail line would cost much more than $7 billion. All of those additional funds would be the responsibility of private investors, not federal taxpayers.

    International Record of Cost Escalation

    The problem is amply illustrated by   European research on world infrastructure costs.  Oxford professor Bent Flyvbjerg, along with Nils Bruzelius (a Swedish transport consultant) and Werner Rottenberg (University of Karlsruhe and former president of the prestigious World Conference on Transport Research) reviewed 80 years of infrastructure projects and found initial cost estimates to routinely be low (Megaprojects and Risk: An Anatomy of Ambition). They estimated that rail project costs escalation an average 40 percent and that 80 percent cost overruns are not unusual in passenger only rail (Note 1).

    If the Victorville to Los Angeles high-speed rail train would escalate in costs at the average indicated by the research, the cost would rise to $9.8 billion, increasing the private investment share required from $1.5 billion to $4.3 billion. If the cost escalation were to be at the 80% level, the Victorville to Los Angeles high-speed rail train would cost $12.6 billion to build, raising the private investment requirement to $7.1 billion.

    Britain’s Escalating Costs

    The British, who continue to debate building a high speed rail line from London to just north of Birmingham already seen costs rise by nearly 1/3, while experts are predicting the cost will eventually escalate 120 percent or more.

    Obviously, cost escalation at these levels would require additional private capital.

    Nearby California’s Unprecedented High Speed Rail Cost Escalation

    The actual experience of the nearby California high-speed rail line indicates that the results could be substantially worse than indicated in the academic research. Before the California High Speed Rail Authority abandoned plans to build a genuine high-speed rail line from Los Angeles to San Francisco, costs approximately tripled from the original estimates (Note 2).

    A similar tripling of cost escalation on the Victorville to Las Vegas line would take the cost to $21 billion. This would require private capital of $22.5 billion – 15 times as much money as the current $1.5 billion that is apparently difficult to raise.

    Serious Issues and Significant Uncertainties

    Meanwhile, editorialists are raising “serious issues” and “significant uncertainties” about the project.

    The Washington Post: The editorial board of the Washington Post said in a July 18 editorial (entitled “Good riddance to XpressWest, the high-speed boondoogle”) of the XpressWest project: “We’ve seen some bad policy ideas but not many more awful …” The Post continued “What XpressWest struggled to explain was why taxpayers should bet on a proposition that private investors apparently found too risky: hordes of travelers driving to Victorville, parking their cars and then boarding the train for an 80-minute ride to Vegas — as opposed to driving the whole way, flying or taking “My Party Ride,” a limo-like bus trip for up to 30 passengers at $99 each, including food and drinks.” The Post expressed relief that “common sense has prevailed,” though bemoaned the fact that “multiple federal and state agencies had given environmental and regulatory approvals.”

    Las Vegas Review-Journal: The hometown metropolitan daily expressed similar concerns. In a July 18 editorial, the Review-Journal said: “Like most recent rail projects, XpressWest ridership projections were overly optimistic. The train certainly appeared capable of meeting its operational costs, but the idea that it could make good on repaying $5.5 billion in debt on top of that was a stretch. Las Vegas Monorail, anyone?” (Note 3).

    The editorial continued: “The prospect of default on a train loan is too much to ask from a federal government already $17 trillion in debt,” adding, if the federal government “ is serious about “investing” those billions, spend them on improvements to the nation’s interstate system, which carries both passenger and commercial traffic and is in constant use, 24-7. Interstate 15, which runs between Los Angeles and Las Vegas and is heavily congested, could use the money. So could the planned Interstate 11 between Las Vegas and Phoenix.”

    In addition, echoing my, “taxpayer risk assessment,” published by the Reason Foundation, had shown that the cost of expanding Interstate 15 to six lanes between Victorville and the California border would have been a fraction of the high speed rail costs, and would have been largely paid by highway user fees paid by drivers and truckers, and would reduce both traffic congestion, greenhouse gas emissions and energy consumption.

    The editorial concluded: “Improved interstates would speed commerce, create permanent jobs and have billions upon billions of dollars in long-term economic impact across many states. That would be a return on investment. A tourist train on a high-speed trip to bankruptcy? No so much.”

    Where are the Venture Capitalists?

    There is no shortage of venture capital in the United States.The apparently difficulty being encountered in raising sufficient private capital for the project demonstrates that it is even more risky than the standard venture capital projects. The risks for private investors are huge at the $1.5 billion. The risks are even greater at double that number, which has to be considered among the more optimistic potential outcomes.

    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.

    ——

    Note 1: Flyvbjerg et al reviewed 80 years of infrastructure projects found consistent low-balling of cost estimates. They characterize the process as "strategic misrepresentation," which they shorten to "lying," in unusually frank language.

    Note 2: In response to the public outcry, the California High Speed Rail Authority substituted a somewhat less expensive plan that requires high-speed rail to mix with conventional commuter rail trains in San Francisco and Los Angeles operations.

    Note 3: The Las Vegas Monorail was similarly promoted as sufficiently viable to pay its operating and capital costs in the early 2000s. My 2000 analysis projected that ridership would be well below forecast and that the Las Vegas Monorail would eventually default on its debt. That occurred.

  • Suicide: Sprawl Not Guilty

    Atlantic Cities reports on research indicating an association between suicide and lower density, in an article entitled “The Unsettling Link Between Sprawl and Suicide.” Actually, there’s no reason to be unsettled, at least with respect to urban areas and their densities. The conclusions apply to rural areas, not urban areas.

    Above the 300 persons per square kilometer, or 780 persons per square mile, the authors found no association. The authors of the study note, “above this threshold … the suicide rate remains fairly constant."

    The US Census Bureau standard for urbanization is 1000 people per square mile or more, which is similar to the international standard of 400 persons per square kilometer. Even the suburbs of extremely low-density Atlanta and Charlotte have to reach the 1,000 persons per square mile threshold to be in the urban areas.

    This research, while interesting, has nothing whatever to do with the urban form.

  • Singapore Needs A New Sling

    Over the past half century, the tiny city-state of Singapore has developed arguably the most successful formula for growth and social uplift on the planet. Like the famous Singapore sling — a tropical cocktail blending gin, grenadine, sweet and sour mix, cherry brandy and club soda — the city’s mandarins created the perfect recipe for rapid economic growth by combining its strategic location and hard-driving, largely Chinese population, with first-class infrastructure, a relentlessly improved local workforce and an opportunistic immigration policy designed to fill gaps in the labor pool.

    These policies turned what could have become just another steamy, racially divided, corrupt and crime-ridden Third World metropolis into a modern-day Venice with a stunning skyline, a per capita GDP higher than the U.S. and EU, and one of the world’s best-educated and disciplined workforces. It is a burgeoning financial center that in a recent survey, ranked fourth on the planet ahead of such self-important  places as Tokyo, Chicago and Toronto. It stands fifth in the amount of assets managed by institutional investors, ahead of much larger countriessuch as Japan, Great Britain and Brazil.

    Yet as Singapore approaches its 50th year of independence in 2015, the strategy that worked so well, so long, may have reached its expiration date. In the place of a once swaggering self-assurance, many Singaporeans have turned decidedly negative. In a 2011 Gallup survey, the percentage of city residents who things would be worse in five years was among the highest in the world, along with such more understandable countries as Greece, Italy, Syria and Spain.

    Some ascribe these attitudes to traditional Chinese fatalism — particularly among those living in the diaspora — but China itself was not high on the pessimist list, and, for the most part, as Pew suggests, Asian immigrants to the United States, an increasingly Chinese-dominated group, are actually more optimistic about the future than most Americans.

    Economics may be part of the explanation behind this growing negativity. GDP growth continues to chug along at 5% per annum — something the U.S. and the EU would die for — but real wages for ordinary Singaporeans have stagnated.  From 1998 to 2008, the income of the bottom 20% of households dropped an average of 2.7% while the salaries of the richest 20% rose by more than half. Real median income for the middle class rose 11% from 2001 to 2010.

    By contrast, between the 1970s and 2000, incomes doubled or better every decade.

    The growing income equality is particularly troubling  in a country that under the brilliant leadership of legendary Prime Minister Lee Kuan Yew and his People’s Action Party, combined a meritocratic mentality with a powerful commitment to social democracy.

    To be sure, Singaporean living standards remain very high by Asian standards, even for those toward the bottom of the social order. Largely through the efforts of the state-owned Housing Development Board the vast majority of Singaporeans live in clean apartments, spacious by Asian urban standards, which they also own.

    Yet structural changes in the economy, notably the growth of financial services, could accelerate the growth of inequality. Financial centers tend to have vast disparities in wealth (see New York and London). This gap may be furthered by the rising importance of tourism, where the city ranks fifth in the world behind New York, London, Paris and Bangkok. Add to this gaming — the city is about to pass Las Vegas — and you see a rise of both high-rollers and lower paid hospitality jobs.

    Then there’s city-state’s paramount problem: its plunging fertility. Three decades ago Lee and his PAP were rightly concerned about the city’s overpopulation. Now the big problem is a rock-bottom low birthrate — with a fertility rate under 1.2 – barely  half that necessary to replace the current population, which threatens to turn this ultra-dynamic city state into a giant old-age home.

    The reasons for this plunge, according to demographer Gavin Jones at the National University of Singapore, lie largely in such things as long working hours and ever-rising housing costs, something that has been boosted by foreign purchases of private residences. With large apartments increasingly expensive, Singaporeans, particularly those with children, often think of emigrating to less expensive or at least roomier places such as the United States, Australia and New Zealand. One recent survey estimated that over half of Singaporeans want to migrate; the World Bank estimates upward of 300,000 Singaporeans have moved abroad, accounting for almost one in 10 citizens.

    This emigration is taking place just as Singapore has turned increasingly to foreign workers to keep the economy humming, ranging from the relatively unskilled from neighboring countries and South Asia to some of the world’s most talented academic, technical and financial experts. Since 1970 the percentage of Singaporean citizens among the residential population has dropped from 90% to barely 63% today.

    The growing immigrant presence has sparked some unease among Singaporeans. Some fear their city is evolving into what is sometimes called a “Hotel Singapore,” dominated by globalized culture, with its predictable glitzy panoply of shops, iconic structures and global restaurant brands. This reflects pressure in cities to conform to what the Dutch architect Rem Koolhass calls “a larger and seemingly universal style” whose impact on local culture he compares to “the disappearance of a spoken language.”

    Fears of untrammeled globalization have been stoked by a recent government report, “A Sustainable Population for a Dynamic Singapore,” that suggested, in the name of global competiveness, that Singapore’s population expand to 7 million from its current five by 2030. Many natives saw this proposal, which relies heavily on immigrants, as a direct threat to their quality of life and job prospects . With 5.3 million people crammed onto an island of only 714.3 square kilometers, occasional  flooding and train breakdowns, it is unsurprising that many feel the city-state is already crowded enough.

    These factors are sparking, for the first time in decades, something approaching political conflict. In 2011, the opposition won six seats in Parliament, the most since independence in 1965. The ruling party’s share of the vote dropped from 75% in 2001 to barely 60%.

    Most Singaporeans admire the accomplishments of the PAP, and the generally successful outcomes of its policies , but clearly there is a desire for a change of direction. How Singapore addresses these problems is important not just for the city-state, or even Asia, but the entire world. The Singaporean model remains an inspiration to city-builders , and how it meets its contemporary challenges could prove critical in an age where the majority of people live in urban areas.

    The first step for Singapore’s reinvention lies with recognizing the seriousness of its challenges. The policies of the past may have worked impressively, but may not be as appropriate in the future. As my old Japanese sensei Jiro Tokuyama once noted: the hardest thing to do is how to unlearn the secrets of your past success. The ingredients in the cocktail that is Singapore need to be tweaked for a new era.

    Fortunately, Singapore enjoys the social cohesion, the human capital, and capable leadership to make the necessary changes. One key element relates to focusing on how to nurture families once again, and to recapture that sense of Singaporean-ness that makes the place so special. It is not so much a matter of financial incentives — these have not worked — as in controlling housing costs, expanding space for families,  and most importantly, finding better ways to balance life and work.

    Already some initial steps to humanize the metropolis are taking place. These include a remarkable expansion and improvement of green space, and attempts to decentralize work around the newer state housing estates and commercial developments. Steps to increase the size of apartments, repurpose aging shopping and office structure for housing as well as encouraging more home-based work could also prove helpful. These changes will be critical if the world’s most successful city wants to remain so in the decades ahead.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.

    Singapore skyline photo by Bigstockphoto.com.

  • Moving from Travis County (Austin) to Williamson County

    In an article entitled, “The People Moving to Austin and ‘Ruining It’ are from Texas,” the Austinist notes that more people are moving to Austin from neighboring Williamson County than from Los Angeles County.

    The article has the potential to mislead in two ways.

    The lesser of the problems is that it confuses Austin with Travis County. The cited data is for Travis County, not the city of Austin. The source of the data, the American Community Survey does not report on municipal migration. (Austin is most of Travis County’s population, but itself has sections in Williamson and Hayes counties).

    The bigger problem is that the article tells only half the story. Yes, 10,500 people moved from Williamson to Travis over the 2006-2010 period, but 14,200 moved from Travis to Williamson. Thus, there was a net outflow of 3,700 people from Travis to Williamson. Meanwhile, there was a net gain of residents in Travis County from Los Angeles County of approximately 800.

    Thus, while there is net migration from Los Angeles County to Travis County, the net migration from Travis County to Williamson County is 4.5 times as large.

  • A Suburban Economic Future?

    The basic, often unappreciated, fact  about economic life in Australia’s  metropolitan regions are that most of the jobs are in suburban locations. Our central business districts (CBDs) – prominent though they are – account for only around 10% of all metro wide jobs. That rises to maybe 15% if you include inner city areas. But still, 85% of everyone else who calls Brisbane, Sydney, or Melbourne home works somewhere other than the CBD or inner city.

    Not only that, but the share of jobs in the suburbs versus the city has been rising, at least marginally. This doesn’t mean that CBD job markets are shrinking (in the main, they’re not) just that suburban employment markets are growing faster. So CBDs are becoming, perhaps inexorably, less dominant.

    The evidence also shows that suburban employment isn’t distributed evenly but in various concentrations. Some of these areas add to very large numbers – rivalling the totals found in CBDs – but they do so at much lower densities  of employment. Concentrations of 2,000 to 4,000 jobs per square kilometre are dense by suburban standards but still only a fraction of CBD concentrations, which can closer to 100,000 per square kilometre. For many suburban employment areas, concentrations are even lower at maybe 500 to 1000 jobs per square kilometre. While CBD office workers measure their space in square metres (roughly 15 to 20 per person) some suburban workers might measure theirs in acres.

    The income profiles of CBD and suburban workers vary. Across the three major centres of Brisbane, Sydney and Melbourne, the research shows that suburban workers, on average, earn considerably less than CBD workers. The top ten income areas city wide are nearly all inner city areas, and these workers earn more than double the average of the bottom 10 areas (which are invariably suburban). The average CBD worker, according to the census, pockets between A$80,000 and A$90,000 per annum. The average suburban worker pockets around $50,000 per annum. Given that suburban jobs account for around 85% of all jobs, the CBD is indeed a privileged centre of income earning ability.

    Having said that, there are still interesting pockets of suburban employment where above average incomes are to be found. The Brisbane airport and port region, for example, features in the top 10 income earning locations along with inner city locations, even though the majority of jobs (62% to 74% according to the Census) are blue collar.

    CBDs and suburbs vary widely as well in transit choice. For suburban workers, the private car is the overwhelming mode of transport (above 80% to 90%), not by choice or because of some “love affair” with the car, but of necessity. The very nature of dispersed suburban employment makes public transport uneconomic, which is why only around 5% of suburban workers use it. For CBD workers though, public transport is more widely used because it’s more available and convenient: more than 50% (and more than 60% in Sydney’s case) of CBD workers make use of it.

    The evidence also shows that the closer you live to the city, the more likely you are to use public transport to get to your CBD workplace. The proportion of people with CBD jobs falls the further you live from the CBD: meaning outer suburban residents are highly unlikely to have CBD jobs and hence only around 3% to 5% use public transport. Ironically, given CBD jobs earn the highest incomes and are also more likely to use public transport to get to work, we have a situation where those with the highest paying jobs are enjoying the biggest benefit of heavily subsidised public transport. You could argue on this evidence that those on lower suburban incomes are subsiding the train and bus fares of their higher paid CBD workforce cousins.

    Now for the future

    The evidence is one thing but where it all leads can provoke any number of alternative scenarios. Just for the sake of discussion, here’s one possibility: that cost and convenience factors will increasingly work against CBDs and inner cities and more and more businesses will establish, grow, or relocate to, suburban employment locations.

    It’s possible this shift is already underway. The evidence shows a slow diminution of CBD prominence. Technology is increasingly reducing the person to person immediacy and co-location advantages of a highly concentrated CBD environment. We communicate more and more through electronic means, which also means physical location is less and less essential to daily business contact.

    Costs are another factor. CBD offices and retail space are expensive relative to suburban locations. They are worth it in terms of prestige where this matters (leading legal or accounting firms for example), or where central location is important. But as costs via rents rise, the equation is constantly recalculated. Is it worth headquartering large numbers of staff in CBD offices when these staff have limited need for face to face business dealings outside the business? The cost/benefit analysis is an ongoing exercise and the business press contains plenty of evidence of companies who increasingly decide the suburban alternative is attractive. Rising car parking costs – for business visitors and clients along with staff – are just another factor in the falling competitive advantage for CBDs.

    Employee costs could also be a factor. Even basic administrative roles in CBD locations command higher pay packets than similar roles in suburban locations, for whatever reason. If it is possible for administrative functions to be located in a suburban location where total employee costs are less, will this become a factor in the trade-off between CBD and alternative suburban locations?

    Congestion may be another. As urban densities rise, especially around CBDs and inner city areas, congestion of all forms (private and public transport) will increase. Density is after all almost a synonym for congestion. Will businesses in increasingly congested CBD or inner city environments opt for suburban alternatives where congestion is less of an issue?  We can not yet say.

    On the other hand, because CBDs and inner cities feature such a concentration of social amenities through public infrastructure (entertainment, cultural and recreational facilities) they may continue to appeal as residential addresses. Is it possible that as CBDs and inner cities develop their residential stock, we may find significant numbers of people who live in CBD locations for the inner city amenity, but who work in suburban locations? Time will tell.

    Planning schemes would have to adapt to any of the above scenarios. Existing suburban economic areas may need their development density  under city plans increased to meet demand. TODs may become places where people travel to a suburban workplace centred on a train station or bus interchange, as opposed the current thinking which is that people will live near suburban transit nodes in order to work in inner city locations.

    Any number of other scenarios are possible. My research has attempted to present the statistical evidence on the suburban nature of employment in our metropolitan regions, and make some observations about the public policy and future development implications. Given the extent of commentary, research and public policy concentration around the CBDs and inner city, the research suggests that some equally intense efforts to improve our suburban economic environment would yield significant community wide results.

    Ross Elliott has more than 20 years experience in property and public policy. His past roles have included stints in urban economics, national and state roles with the Property Council, and in destination marketing. He has written extensively on a range of public policy issues centering around urban issues, and continues to maintain his recreational interest in public policy through ongoing contributions such as this or via his monthly blog The Pulse.

  • Metropolitan Dispersion: 1950-2012

    America has become much more metropolitan since 1950, when the Office of Management and Budget released the first modern criteria for determining the boundaries of metropolitan areas. Metropolitan areas are the economic or functional definition of the "city." They are otherwise known as labor markets and include the physical "urban area" (the area of continuous development) as well as economically connected rural territory from which people commute into the urban area. A previous article examined the development of the “physical” form of the city (urban areas) in the United States, from 1920 to 2010 (See Observations on Urbanization: 1920-2010).

    Major Metropolitan Areas in 1950

    In 1950, there were 14 major metropolitan areas in the United States (over 1,000,000 population). Their combined population was 44.5 million. By 2010, there were 52 major metropolitan areas, with a total population of 169.5 million. This increase, 124 million, is approximately equal to the population of France and the United Kingdom combined. While major metropolitan areas were increasing their population by 281 percent, the rest of the nation grew only 106 percent (Note 1).

    Dispersion to Smaller Metropolitan Areas

    As the nation was moving to major metropolitan areas, much of the growth was in the 38 smaller metropolitan areas that passed the 1,000,000 mark after 1950. These areas had 17.7 million residents in 1950. By 2010 they had added more than 70 million new residents, for a total population of 88.5 million. In contrast, the 14 metropolitan areas that had more than 1,000,000 population in 1950 grew only 36.5 million, to 81.1 million (Figure 1).

    Among the metropolitan areas that had reached 1,000,000 population by 2010, the fastest growing were all in the Sun Belt. Las Vegas, which was too small to be a metropolitan area in 1950, grew 39 times (3,941 percent) compared to the 1950 population for the area constituting the 2010 metropolitan definition (Clark County). Orlando grew 17.6 times (1,757 percent), while Riverside-San Bernardino grew 14 times (1,400 percent). Three other metropolitan areas grew 10 times or more, including Phoenix at 11.6 times (1,164 percent), Charlotte at 10.3 times (1,025 percent) and Miami at 10.2 times (1,017 percent).

    Los Angeles added the most to its population, at 8.7 million residents from 1950 to 2010. Perhaps surprisingly, however, New York also grew strongly, adding 6.9 million residents. Los Angeles, which grew quickly until recently, managed to reduce New York’s 8.5 million 1950 lead by only one-fifth by 2010. Dallas-Fort Worth added the third greatest number of new residents (6.1 million), partially by absorbing the former (and smaller) Fort Worth metropolitan area during the period. Houston added 5.4 million residents. Miami added 5.4 million residents, also incorporating smaller metropolitan areas, Fort Lauderdale and West Palm Beach. Chicago ranked surprisingly high, adding 4.0 million residents, the result of comparatively strong growth in the early decades (Figure 2). The strong population growth evident in New York and Chicago is largely attributable to much faster growth rates between 1950 and 1970 period.

    The ascendancy of Texas is illustrated by the fact that its two largest metropolitan areas, Dallas-Fort Worth and Houston added more residents (Note 2) than the two largest metropolitan areas in California, Los Angeles, and San Francisco (11.5 million compared to 10.9 million). However, stronger long term California growth was indicated by the 4.1 million addition to the Riverside-San Bernardino metropolitan area (the “Inland Empire”), which is adjacent to the Los Angeles metropolitan area and has emerged as the dominant growth center of the state in recent decades.

    Similar Regions, Big Differences

    There were substantial contrasts in growth between similarly sized metropolitan areas in 1950 over the period.

    Atlanta and nearby Birmingham were similar in population in 1950. Atlanta had a population of 672,000 (ranked 23) and Birmingham had 559,000 (ranked 27). By 2010, Atlanta had risen to a population of 5.3 million and a rank of 9th, compared to Birmingham’s 1.1 million and a rank of 49th.

    A somewhat smaller, but significant difference is evident between Seattle and nearby Portland, which were nearly the same size in 1950 (733,000 and 705,000 respectively) ranking 20th and 21st respectively. Over the next 60 years, Seattle grew 2.8 million (some of it from absorbing the former Tacoma metropolitan area). By 2010, Seattle was the 15th largest metropolitan area in the nation, while Portland had fallen to 23rd, adding a smaller 1.5 million residents. Portland and San Francisco were the only major metropolitan areas in the West to fall in the national rankings between 1950 and 2010.

    Slower Growth Major Metropolitan Areas

    The slowest growing major metropolitan areas were Buffalo (4 percent), Pittsburgh (6 percent), Cleveland (41.7 percent), Detroit 42.4 percent and New York (52 percent (Table 1).

    Table 1
    Major Metropolitan Areas: 2010, Change from 1950
    Population Rank
    Metropolitan Area 1950 2010 Change 2012 1950 2010
    Atlanta, GA         671,797     5,286,732 687%     5,457,831 23 9
    Austin, TX         160,980     1,716,286 966%     1,834,303 107 35
    Baltimore, MD     1,337,373     2,710,489 103%     2,753,149 12 20
    Birmingham, AL         558,928     1,128,050 102%     1,136,650 27 49
    Boston, MA-NH     2,389,986     4,552,402 90%     4,640,802 6 10
    Buffalo, NY     1,089,230     1,135,511 4%     1,134,210 14 47
    Charlotte, NC-SC         197,052     2,217,035 1025%     2,296,569 91 24
    Chicago, IL-IN-WI     5,495,364     9,461,105 72%     9,522,434 2 3
    Cincinnati, OH-KY-IN         904,402     2,114,580 134%     2,128,603 15 28
    Cleveland, OH     1,465,511     2,077,240 42%     2,063,535 10 29
    Columbus, OH         503,410     1,901,965 278%     1,944,002 32 32
    Dallas-Fort Worth, TX         614,799     6,426,210 945%     6,700,991 24 4
    Denver, CO         563,832     2,543,478 351%     2,645,209 26 21
    Detroit,  MI     3,016,197     4,296,247 42%     4,292,060 5 12
    Grand Rapids, MI         288,292         988,938 243%     1,005,648 60 52
    Hartford, CT         358,081     1,212,384 239%     1,214,400 47 44
    Houston, TX         806,701     5,920,456 634%     6,177,035 18 6
    Indianapolis. IN         551,777     1,887,877 242%     1,928,982 29 33
    Jacksonville, FL         304,029     1,345,596 343%     1,377,850 56 40
    Kansas City, MO-KS         814,357     2,009,338 147%     2,038,724 17 30
    Las Vegas, NV           48,289     1,951,269 3941%     2,000,759 NA 31
    Los Angeles, CA     4,367,911   12,828,842 194%   13,052,921 3 2
    Louisville, KY-IN         576,900     1,235,708 114%     1,251,351 25 43
    Memphis, TN-MS-AR         482,393     1,324,829 175%     1,341,690 36 41
    Miami, FL         498,084     5,564,657 1017%     5,762,717 34 8
    Milwaukee,WI         871,047     1,555,908 79%     1,566,981 16 39
    Minneapolis-St. Paul, MN-WI     1,116,509     3,348,859 200%     3,422,264 13 16
    Nashville, TN         321,758     1,670,890 419%     1,726,693 55 37
    New Orleans. LA         685,405     1,189,863 74%     1,227,096 22 46
    New York, NY-NJ-PA   12,911,944   19,567,407 52%   19,831,858 1 1
    Oklahoma City, OK         325,352     1,252,992 285%     1,296,565 53 42
    Orlando, FL         114,950     2,134,411 1757%     2,223,674 138 27
    Philadelphia, PA-NJ-DE-MD     3,671,048     5,965,341 62%     6,018,800 4 5
    Phoenix, AZ         331,770     4,192,887 1164%     4,329,534 51 14
    Pittsburgh, PA     2,213,236     2,356,285 6%     2,360,733 8 22
    Portland, OR-WA         704,829     2,226,009 216%     2,289,800 21 23
    Providence, RI-MA         737,203     1,600,852 117%     1,601,374 19 38
    Raleigh, NC         136,450     1,130,490 729%     1,188,564 125 48
    Richmond, VA         328,050     1,208,101 268%     1,231,980 52 45
    Riverside-San Bernardino, CA         281,642     4,224,851 1400%     4,350,096 63 13
    Rochester, NY         487,632     1,079,671 121%     1,082,284 35 51
    Sacramento, CA         277,140     2,149,127 675%     2,196,482 64 25
    Salt Lake City, UT         274,895     1,087,873 296%     1,123,712 68 50
    San Antonio, TX         500,450     2,142,508 328%     2,234,003 33 26
    San Diego, CA         556,808     3,095,308 456%     3,177,063 28 17
    San Francisco-Oakland, CA     2,240,767     4,335,391 93%     4,455,560 7 11
    San Jose, CA         290,457     1,836,911 532%     1,894,388 59 34
    Seattle, WA         732,992     3,439,809 369%     3,552,157 20 15
    St. Louis,, MO-IL     1,681,281     2,787,695 66%     2,795,794 9 18
    Tampa-St. Petersburg, FL         409,143     2,783,243 580%     2,842,878 41 19
    Virginia Beach-Norfolk, VA-NC         446,200     1,676,820 276%     1,699,925 38 36
    Washington, DC-VA-MD-WV     1,464,089     5,636,232 285%     5,860,342 11 7
    Notes on changes from 1950
    All first named municipalities were the central cites per OMB in 1950 except:
    Norfolk was the central city of Virginia Beach
    San Bernardino was the central city of Riverside-San Bernardino
    Jersey City and Newark were also central cities of New York
    Las Vegas 1950 is for Clark County (was not a metropolitan area)

     

    Meanwhile, 11 metropolitan areas fell from the top 50 in 1950. All were in the Northeast or Midwest, except for Knoxville, TN. Youngstown has been beset by economic difficulties throughout most of the period. In 1950, Youngstown was the nation’s 30th largest metropolitan area, larger than Atlanta, Phoenix and Las Vegas. However, Youngstown added only seven percent to its population over the 60 years, and fell to 93rd place. Wheeling-Steubenville (WV-OH) is one of the nation’s few genuine “shrinking cities,” that is a metropolitan area or an urban area that is losing population. Wheeling-Steubenville was ranked 48th in 1950. Since that time, the economic influence of Wheeling has deteriorated so much that OMB has split the metropolitan area into two parts, removing Weirton, WV (which includes Steubenville, OH). The Wheeling metropolitan area is approximately 60 percent smaller than in 1950 (Table 2).

    Table 2
    Metropolitan Areas No Longer in Top 50
    Population Rank
      1950 2010 Change 1950 2010
    Youngstown, OH-PA   528,498   565,773 7% 30 93
    Albany, NY   514,490   870,718 69% 31 60
    Dayton, OH   457,333   799,232 75% 37 70
    Allentown, PA   437,824   821,173 88% 39 67
    Akron, OH   410,022   703,205 72% 40 74
    Springfield, MA   407,255   621,570 53% 42 83
    Toledo, OH   395,551   610,001 54% 43 86
    Wilkes-Barre, PA   392,241   563,630 44% 44 95
    Omaha, NE-IA   368,395   868,116 136% 45 61
    Wheeling, WV-OH   354,092   147,950 -58% 48 273
    Syracuse, NY   341,719   662,578 94% 49 79
    Knoxville, TN   337,105   837,571 148% 50 64

     

    Cities: From Monocentric to Polycentric to Edgeless

    The changes that occurred in cities of the United States and elsewhere around the world have extended well beyond the population increases. The former monocentric model of the city, organized around a dense core has been recent placed by the polycentric city (with the new suburban employment centers documented by Joel Garreau as “edge cities”). In its revisions of the metropolitan area criteria for the 2000 census (Note 2), the Office of Management and Budget began defining core (as used in the encompassing metropolitan area term “Core Based Statistical Area”) as the urban area (urbanized area), rather than the former “central cities.” OMB has designated many suburban employment centers as "principal cities," and in consequence no longer has any suburban designation.

    Robert Lang of the University of Nevada Las Vegas has shown that the evolution of metropolitan areas has been extending beyond the “edge cities” and has heralded the “edgeless city.” The dispersion continues.

    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.

    —————-

    Note 1: Some of the metropolitan growth occurred as residents in counties that were not metropolitan in 1950 were added to metropolitan areas as their borders were defined outward. The current boundaries of the major metropolitan areas would have increased their 1950 population by 17 percent.

    Note 2: The OMB final notice for 2010 defines “core” as “A densely settled concentration of population, comprising either an urbanized area (of 50,000 or more population) or an urban cluster (of 10,000 to 49,999 population) delineated by the Census Bureau, around which a Core Based Statistical Area is delineated. According to the OMB definition, the core is now an entire urban area, not a central city. The “building blocks” of urban areas are census blocks (smaller than census tracts), rather than municipalities, as had been the case before 2000.

    Photo: Crystal City Employment Center: Virginia suburbs of Washington (by author)

  • Will Europe Hit a Demographic Tipping Point?

    The best hope for the youth of France, according to a recent New York Times op-ed, is, well, to get out of France.  Youth unemployment in France is running at 26%.  No wonder some might believe their best opportunity lies elsewhere, including their old colony of New France (Quebec). 

    But this punishing level of unemployment is only slightly worse than the EU-wide rate of 23%. Countries like Spain and Greece have astonishing youth unemployment rates of nearly 60%. What does the future of these countries’ youth look like? Or their adults for that matter? Maybe it’s a future on another continent, including former colonies.

    Young people in France are starting to test the economic waters in Quebec. Fairly recently Spain became a place immigrants came to for opportunity, becoming one of the primary draws for immigrants for both Africa and Latin America. But now Spain is again seeing people leave for greener pastures in Latin America. It’s a similar case in Portugal, where tens of thousands of Portuguese natives have moved to their former colony of Angola in recent years.  

    In 1968 Paul Ehrlich’s doomsday tome The Population Bomb predicted mass starvation and civilizational collapse in much of the world due to overpopulation. But the more serious problem – particularly in traditionally higher-income countries – today is actually too few, not too many new people. The pivot to seeing this as the problem has come through something very basic: pension math. Across the developed world, public pension systems built on the assumption of continued population growth are now facing an actuarial day of reckoning as the bills come due while birth rates have plummeted.

    A society needs a total fertility rate – that is, the average number of children born to each woman – of 2.1 just to maintain its population without immigration. Some European countries like France (2.03) and the UK (1.98) are in reasonably good shape, but they are the exception. The total fertility rate in Greece is 1.43, in Germany 1.36, in Spain 1.36, in Portugal 1.30, and in Poland 1.30.  Much of southern and central Europe hovers near the so-called “lowest-low” rate of 1.3 in which the population is naturally being cut in half every 45 years.

    Simple birth rates alone have caused some to posit a societal going out of business sale in Europe. However, just as extrapolation of high population growth rates in the past led to wildly alarmist claims that proved false, so today we must be careful about not proclaiming Europe is doomed. But with the population on tap to be halved every generation, the runway to turn things around is difficult to conjure. And while we’ve seen many countries make the shift from high to low birth rates, there isn’t a huge track record of success in the other direction.

    It’s against this backdrop that Europe’s youth unemployment crisis must be seen.  Not only are Europe’s young facing short term pain from economic crisis, they also face the long term prospect of being a small population cohort that has to spend their entire working lives (when they eventually find jobs) paying for previous generations’ lavish retirement benefits never properly funded. Along with this, they are the ones who will likely bear the brunt of reduced pension payouts for themselves while the current and nearly retired are fully protected from cuts. This is on top of the massive official public sector debts that have been accrued, along with many years of pain from IMF and EU mandated austerity in a number of countries. Contracting demographics is like a “force multiplier” for unfunded liabilities, and this generation may never achieve the affluence – and buying power – of their parents.

    Immigration has been heralded as a solution to demographic issues, but this seems unlikely to bail Europe out. Unlike the US or Canada, European nation-states are built primarily on ethnic identities that make integration difficult no matter how progressive the policies.  Sclerotic economies and regulations that reward incumbents and large “national champion” firms while punishing entrepreneurs – immigrants are disproportionately entrepreneurial – don’t help.  With Europe having a large percentage of unassimilated and unemployed immigrants along with high native born unemployment rates, there has been social unrest all around. Immigrants have rioted, even in unlikely locales like Stockholm, while there has been an alarming rise in far right extremist groups among the native born.  Unlike immigrant-friendly North America, immigration has been as much problem as solution in Europe.

    So what exactly is in it for a young person in Greece, Italy, Spain, or apparently even France to stay home? Increasingly not a lot other than avoiding the difficulty involved in moving to another country far from home where the culture, language, etc. are different. That’s a daunting challenge to be sure, especially in a continent where people are very rooted, not just in their country, but often their town, though this can be reduced if they move to a former colony. But it appears we are seeing early signs of migration out of some European countries.

    It’s way too early to say what this will turn into, but if an exodus of the youth does take hold, it isn’t hard to imagine how this could hit a catastrophic tipping point in some countries. Facing unemployment, unfunded pensions, massive debts, austerity, and social unrest – as well as the prospect of getting stuck as the bag holder for all this – it isn’t hard to imagine a flight for the exits among the young. This would be like a demographic Lehman Brothers. Once confidence is lost, there’s a run on the bank, or in this case, a run for the exit.

    This is far from assured, of course. But it’s not an inconceivable outcome if things stay on the present course. Solving the nexus of issues around growth-euro-debt is critical for Europe, as is cracking the code on immigration. It seems unlikely birth rates will improve until these items are solved first. In the meantime, the US and Canada should be revisiting their own immigration laws to make sure they are poised to respond to – and benefit from – another wave of European economic refugees heads their direction.

    Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile.

    Photo by funtik.cat (Dasha Bondareva).

  • Eastvale, CA: Suburban Charm Trumps Urban Convenience

    Eastvale, a new community just over the Riverside County line from Orange County, is a place that most urbanists would naturally detest. City Hall is no architectural masterpiece, occupying a small office inside the area’s largest shopping mall. The streets are wide, and the houses tend to be over 2,500 square feet. There’s nothing close to a walking district and little in the way of restaurants besides fast-food outlets and chain eateries.

    Yet Eastvale, which incorporated in 2010 , is also among the fastest-growing places within California. Located in an area once known as Dairy Valley, it was settled by Dutch farmers and for years was known as "Fly Valley" because of the insect infestations associated with herds of cattle. Houses began to go up in the early 2000s, as families leaving congested and high-cost coastal Southern California began to move into the area.

    Although hit by the housing bust, like much of Riverside County, Eastvale’s home sales have been on the upswing, and real estate agents suggest that the biggest problem is finding properties to sell. Land prices, $5 an acre in 1974, rose to $525,000 at the peak of the boom, then collapsed, but are now back to over $300,000. The median price of a single-family home, $433,000, is just around the state average. In contrast, prices in coastal Orange County average $556,000 and, along the coast, closer to $1 million for a comparatively newer home.

    With prices escalating again in Southern California, affordability is once again dropping, particularly for new buyers. Today, according to the California Board of Realtors, affordability of new housing in Orange County for first-time buyers has already dipped below 50 percent for the first time since 2008. It could be headed back to the 20 percent – or lower – rates experienced during the housing bubble.

    Los Angeles, San Diego and other coastal cities are experiencing similar upticks, but with no appreciable likelihood of new home construction, which statewide is now running at one-third of annual demand. This is particularly true for single-family detached homes, the housing preferred by most consumers but most detested by the state’s planning hierarchy.

    In the short run, this shortfall benefits what historian Bob Bruegmann calls "the incumbent’s club," current owners of single-family homes. But it also fundamentally functions as a tax on future generations. The costs of housing inflation are imposed on the offspring of the coastal cities, not to mention immigrants and new migrants, who still need someplace to live a basic middle-class lifestyle without draining all their financial resources.

    Although people on the coast tend to look down on the "909s", the fact remains that, to retain a large, growing and vibrant middle class, the coast needs an outlet, particularly for the workers to staff its industries. Roughly a third of the Inland Empire’s workforce labors in either Los Angeles or Orange County. Without the outlet represented by the area, companies in Orange and Los Angeles will increasingly be forced to relocate or expand further out of the region and the state.

    Rather than being dismissed as second-rate, the oft-maligned Inland Empire remains a critical component for the future of Southern California. The media obsesses over the disasters that accompanied the housing bust but, in places where schools and parks are strong, like Eastvale, things have improved as foreclosures have plummeted.

    In fact, after a long hiatus, local developers are beginning to put up more new houses to meet the demand. With over 50,000 residents, Eastvale already has more people than downtown Los Angeles, and the mayor, Ike Bootsma, seventh of nine children of a Dutch immigrant farming family, projects this population to swell to 76,000 by 2020.

    Eastvale largely attracts upwardly mobile (average household income is around $100,000) families, many of them minorities. These are people who, a decade or two ago, might have settled closer to the coast, but can no longer afford to do so.

    Kids are a big deal in Eastvale, at a time when coastal California, including both Orange and Los Angeles are becoming older, and dominated by childless households. One-third of Eastvale’s population is made up of children under 18, well above the one in four average for California. The number of persons per household is over four, compared to less than three for the state as a whole.

    The dream people are chasing is a traditional one, yet many of the new families are diverse. Located roughly an hour from downtown Los Angeles, almost half the city’s households speak a language other than English at home. Asians account for close to a quarter of the population, Latinos roughly 40 percent.

    "There’s no way you can live this life in Mumbai," notes Indian immigrant Nibha Kothari, who moved to Eastvale with her husband and young daughter earlier this year. "There’s a balance here between city and town here. In Mumbai, everything is so crowded and congested and there’s so much stress. It’s the little things, the quality of life for our family, that got us here."

    Residents like Kothari admit it’s not the aesthetics of the urban design that brings them to Eastvale. Instead, as in Irvine, it’s the things urban pundits barely address, like good schools, a well-developed park system , low crime rates and, perhaps most importantly, larger house footprints. After all, family is the main reason people move to Eastvale, and many locals talk about having relatives living in the same community.

    Andrea Hove, the wife of an Orange County sheriff’s deputy with whom she has four kids, has several relatives in the neighborhood and a network of friends who also have extended families. "I wanted to stay home with the kids," she explains. "In Orange County, we’d be stuck with 1,800 square feet and send the kids to private school. Here, I have great schools, 3,000 square feet for less, and my walk-in closet is bigger than most people’s bedrooms. It’s a great family community in terms of schools and parks. I can’t go anywhere without seeing someone I know."

    Finally, she says, there’s also an excitement from being in somewhere new that is still developing its sense of place and urban traditions. "This is a place where we can shape the community for our kids," she suggests. "We can make it the way we want it, not just live the way some politician says we should."

    These kind of aspirations are rarely discussed among planners, academics or even many developers but they constitute much of what people actually want and reflects their most cherished priorities. It may seem mundane to urban aesthetes, but crucial in the locational decisions of many people.

    "Everyday life," observed the great French historian Fernand Braudel, "consists of the little things one hardly notices in time and space."

    Most people live ordinary lives, start businesses, raise families, go to church, play in little leagues and local softball tournaments. Concert halls, hip restaurants and striking architecture may thrill our media and design communities, but perhaps more critical to the long-term future may be places, like Eastvale, where Southern California’s middle-class families still can comfortably thrive.

    Joel Kotkin is executive editor of NewGeography.com and R.C. Hobbs Professor of Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at The Orange County Register.

  • The Truce That Could Save American Cities

    Some states, such as New York and California, are loudly proclaiming that they have returned from the fiscal abyss. Maybe for now, but the future doesn’t look so good when long-term debt and pension obligations are factored in. Taken together, our 50 states owe $1 trillion in unfunded pension obligations.

    But right now the most severe and imminent fiscal crisis is in the nation’s cities. For one thing, some states are trying to improve their balance sheets by cutting aid to localities while imposing new mandates for everything from housing to green policies. Governors in states like Pennsylvania, New York and California have b been pushing obligations down to levels of government below them. California Gov. Jerry Brown’s ‘Realignment’ strategy put the responsibility of state justice programs on local governments (though this came with promises of increased state aid). Brown also oversaw the dissolution of over 400 Finance Redevelopment Agencies, some of which may now be forced into bankruptcy. So while state debt is expected to decline by $1.7 billion next year, local debt is set to increase by $600 million.

    Despite the mild recovery, many cities remain in dire fiscal straits. In April Moody’s Investors Service warned it could downgrade the ratings of Chicago, Cincinnati, Minneapolis, Portland and 25 other local governments and school districts as part of a change in how it factors public pensions into debt grades. In Chicago, teachers’ pensions alone cost $1 billion a year, while overall debt service accounts for close to a quarter of the city budget.

    Seven major municipalities have already filed for bankruptcy, the largest being San Bernardino, Calif. The main cause is not hard to find: unfunded pension obligations to employees. A recent Lincoln Institute paper estimated that the aggregate unfunded liabilities of locally administered pension plans top $574 billion and eat up nearly 20% of municipal budgets. But the worst is yet to come. According to the Lincoln Institute’s Anthony Flint,  “If trends continue, over half of every dollar in tax revenue would go to pensions, and by some estimates in some cases would suck up 75% of all tax revenue.”

    This dynamic will eventually be felt not only in long-term basket cases such as Detroit but also in America’s largest and most venerable cities such as Los Angeles, New York and Chicago. Part of the problem lies in legacy costs, similar to what we have seen in older industrial companies and airlines. The longer a municipality has been ladling out generous retirement benefits to public workers, the more they have to face the consequences, particularly as more retirees have the poor taste to live well into their eighties and beyond.

    In New York, notes the Manhattan Institute’s Steve Malanga, annual pension costs during Michael Bloomberg’s 12 years as mayor have grown from $1.8 billion to over $8 billion. According to the 2012 NYC budget, by 2015 these “legacy costs” will account for 25% of the city’s total budget, up from 16% in 2005. Overall these costs will have doubled over 10 years while other spending will have grown by barely 30%.

    A crisis is also brewing in Los Angeles, a once youthful city whose rent-seeking developer and union-dominated political structure has turned it into an economic and fiscal laggard. Former Mayor Richard Riordan has predicted that unless pensions and compensation are reformed dramatically, the city will slide toward bankruptcy. The nation’s second-largest city faces a projected $800 million deficit over the next four years and pensions that are underfunded by at least $15 billion.

    These  huge obligations increasingly constitute a tax on the future of urban residents. As cities are forced to cough up ever more money to meet their retirement promises to workers, they become ever more incapable of addressing the basic infrastructure needs critical to maintaining economic competitiveness against younger, often faster-growing cities in less union-dominated parts of the country, notably in the South and Southwest, as well as newer, often more affluent suburban areas.

    In the coming years count on the emergence of an increasingly dire conflict between urban boosters — who long for everything from improved schools to more bike lanes and better transit — and their traditional allies among the public-sector workforce. Essentially this will be not so much a war between conservatives and free-spending liberals, but what Walter Russell Mead has described as “blue on blue” conflict.

    Conservatives, of course, have their own answers to this conundrum: large-scale budget cuts, severing of union contracts, privatization of essential services even if  basic infrastructure   deteriorate. All but the last alternative have some place in forward-looking urban strategy, but face enormous political challenges given the essentially one-party, union-oriented politics in most major cities. If a media-savvy plutocrat like Michael Bloomberg could not slow the expansion of the cost structure of New York, it’s unlikely that the more run of the mill mayors around the country can much succeed.

    So is there a way out, short of the unlikely resurgence of conservative thinking in urban America? One possibility lies in restating urban priorities towards a  City Hall focus on boosting  the private sector as a means to meet at least some of its obligations. Rather than waging a war neither side can win, perhaps this new understanding could serve as the basis for a durable urban truce.

    This, of course, requires a short course in economics for most urban officials and unions. The impending bankruptcy of cities such as Detroit, where service cutbacks and contract rollbacks are now the order of the day, should be held up as a stark lesson of what can happen. Continued tax increases, the preferred solution among progressives, are a mistake since they tend to drive businesses and middle class workers to places with less onerous burdens.

    What needs to be drilled into the urban progressive mind is the basic reality that if the private economy fails, unions will find themselves confronted not by weak-kneed, weak-minded politicians they can own, but by bond holders, accountants, lawyers and judges who will press to either negate contracts or allow basic services to deteriorate to catastrophic levels.

    At the same time, the private sector needs to recognize its inherent interest in the maintenance of efficient and reliable city services. Rather than simply denounce government, per se, the business community needs to appreciate the fundamental importance of the public sector to long-term economic growth. For much of western history urban infrastructure and efficient services played a critical role in the creation of strong urban economies.

    This has been true as well in the United States, from the days of toll roads to late 19th century investments in water and sanitation systems. Modern Los Angeles would have been inconceivable without the aggressive, and often ruthless, building programs of the city-owned Department of Water and Power. And for all his many excesses, the resurgence of New York still rests on the road, bride and transit legacy created by the master builder Robert Moses.

    These public efforts provided a basis for economic growth, that can  generate revenues to pay city workers. Sadly this virtuous cycle has given way to a vicious one, with much of municipal spending wasted on economically questionable  “bread and circuses” — subsidized condo development, sports stadia, convention centers, arts programs, often marginal rail transit investments  — over more mundane investments in roads, bridges, buses, ports and the like. With rising interest rates imposing higher costs for infrastructure projects, the need to be judicious on spending priorities will become only greater.

    To assure the future of our cities, deals need to be struck between workers and cities to temporarily keep down costs as cities try to snap out of the post-recession doldrums and develop stronger growth-based economies. In economically distressed Rhode Island, State Treasurer Gina Raimondo, a former venture capitalist, led an effort to save that state’s cities and towns about $100 million this fiscal year and $1 billion over the next 20 years.

    Ultimately leaders in both the private and public sectors in cities need to recognize that the only way out of recurring crisis and inevitable decline lies in job-generating economic growth. Many of the cities with the best job growth are running budget surpluses , ranging from ultra-blue, union-dominated San Francisco to red state stalwarts such as Nashville, Fort Worth and Oklahoma City.

    This suggests that business and governments need not only to restrain spending, but spend public funds in ways that are most likely to stimulate economic growth. There should be a strong discussion about municipal priorities — they often differ somewhat by city – with the primary focus   on those things that promote job creation and upward mobility. The urban future can not be secured by providing lavish retirements for city workers or subsidies for rent-seekers. Cities can only truly prosper by promoting that foster  growth in ways that deliver  real benefits to the vast majority of their citizens.

    Joel Kotkin is executive editor of NewGeography.com and R.C. Hobbs Professor of Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.

    City Hall photo by Flickr user OZinOH.