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  • The Cost of Chicago Jobs

    In Chicago’s recent history, when you think of beers, Jesse Jackson and his sons Yusaf and Jonathan come to mind. Yusaf and Jonathan Jackson were fortunate enough to receive a coveted Anheuser-Busch distributorship on the north side of Chicago. Just the other day, MillerCoors announced it would move its corporate headquarters to downtown Chicago by the summer or fall of 2009. The cost was high. The City of Chicago and the State of Illinois will pay $20 million to help bring 300 to 400 jobs to Chicago.

    Chicago was in competition with Dallas for MillerCoors. Even though Dallas lost the MillerCoors battle to Chicago, Texas as of late has been the big winner in landing corporate headquarters. In April of 2008,Texas became the number one state for headquarters of the 500 largest corporate headquarters compiled by Fortune Magazine. As the Houston Chronicle reported, “Texas now boasts 58 headquarters, three more than New York, the previous No. 1, and California, with 52. The Houston area has 26 of the companies.”

    In the same week as the MillerCoors announcement, some rather grim news for Chicago and Illinois was released. The Illinois Department of Employment and Security reported that the “Illinois unemployment rate for June was 6.8 percent, climbing 0.4 percent points from May. The number of unemployed increased for the second month in a row, rising by 26,900 to 463,900 unemployed individuals, and reaching it highest level since June 1993.” To put things in perspective, last month, while the Illinois unemployment rate was 6.8 percent, the national unemployment rate was 5.5.

    While Illinois and Chicago give MillerCoors the $20 million welcome, America’s largest retailer is an object of derision in Chicago. Wal-Mart was allowed to open its first store in Chicago’s city limits after a protracted fight in the City Council. The pro-union Chicago Aldermen have prevented any more Wal-Marts in Chicago. The thousands of jobs Wal-Mart could have provided Chicago’s poor and working class will not happen.

    The taxpayers are allowed to subsidize MillerCoors with $20 million (for 400 jobs) in Chicago, but having several Wal-Marts employing thousands of job seekers is not to be in Chicago. Instead of challenging Chicago’s City Council to open up the city to an aggressive anti-union company, Mayor Daley wants organized labor peace. The organized labor calm is necessary to bring the Olympics to Chicago in 2016. Chicago didn’t have much domestic competition from other U.S. cities bidding on the Olympics because it’s a money loser for taxpayers. Mayor Daley, the unions, and businesses with heavy clout view the Olympics as a great heist with high tax tolerant Chicago taxpayers left with the tab.

    The last several decades, Illinois has been a sub-standard performer in jobs and population growth. In December 2007, Crain’s Chicago Business described the Illinois job situation:

    “Financial pressures on Illinois residents are deepening, as the state continues to lose economic ground compared to the nation and its own past.

    That’s the gloomy bottom line on a comprehensive study of the state’s economy being released this morning by the Chicago-based Center for Tax and Budget Accountability and the two research units of Northern Illinois University at DeKalb.

    The study finds that, though the rate of decline has somewhat slowed, Illinois continues to lose good-paying manufacturing jobs to service-industry posts that tend to pay less.

    As a result, most Illinois workers actually earned less in 2007 than they did in 2000, adjusted for inflation, with median household income dropping from $54,900 in 1999-2000 to $49,328 today.”

    An important part of the erosion of jobs-based earnings in the state is due to the loss of manufacturing jobs. Howard Wial and Alec Friedhoff did a study for the Brookings Institute in 2005 on manufacturing jobs lost in the Great Lakes Region from 1995-2005. The greater Chicago area was one of the leaders in manufacturing jobs lost. Wial and Friedhoff report:

    “Total employment in metropolitan Chicago grew moderately before the 2001 recession, declined from 2000 through 2003 and rose again in 2004 and 2005. The region gained 346,000 jobs (an 8.2 percent increase) from 1995 through 2000. Despite recent gains, total employment fell total employment fell by 109,900 (2.4 percent) from 2000 through 2005. Over the entire period 1995-2005,the region gained 236,100 jobs (5.6 percent), well below the national growth rate.

    Manufacturing employment declined almost continuously since 1995,with the largest annual losses occurring in 2001 and 2002. The region lost 35,700 manufacturing jobs (a decline of percent) from 1995 through 2000 and another 141,300 (22.2 percent) from 2000 through 2005. The result was a loss of 177,000 manufacturing jobs (a 26.3 percent decline) over the entire decade, the largest total loss of all regions in this analysis.”

    The Chicago Tribune had an interesting fact in their article about MillerCoors coming to Cook County. The Tribune reports that the county’s job growth for “management of companies” jobs is nowhere near that of adjacent counties. According to the Bureau of Labor Statistics, the Tribune reports: “between 2001 and 2006, they grew 7 percent in Cook County, 33 percent in DuPage County and 83 percent in Lake County.”

    In conclusion, Chicago needs all the jobs it can get. Cutting regulations and eliminating union mandates would be lot cheaper and more effective for attracting jobs then subsidizing a major corporation with $20 million dollars from taxpayers. The MillerCoors deal is indicative of the costs Chicago taxpayers endure. It’s ironic though, MillerCoors will be located in downtown Chicago (which is a special taxing district that has an 11.25 percent retail sales tax, the highest in America). The tax proceeds from the highest retail sales tax is meant to subsidize economic development in downtown Chicago. So, Chicago may lose retail jobs downtown.

    Steve Bartin is a resident of Cook County and native who blogs regularly about urban affairs at http://nalert.blogspot.com. He works in Internet sales.

  • The South Rises Again! (In Automobile Manufacturing, that is)

    Volkswagen’s announcement last week that it will build a new assembly plant in Chattanooga, TN is the latest sign of triumph for the South’s growing auto industry. The new plant will sit within close proximity to one Toyota is building north of Tupelo, MS (where the popular Prius will be manufactured), and another that Kia broke ground for last year in West Point, GA on the Alabama border. This joins existing plants such as those operated by Nissan in Nashville and Smyrna, GA, BMW’s plant in Spartanburg, SC and three assembly plants in Alabama.
    With the average cost of building these facilities at over $1 billion, and the high-paying manufacturing jobs they represent, these plants promise to give the area a substantial industrial base for years to come. On top of all this, BMW even announced a $750 million expansion of its Spartanburg plant in March.

    What’s interesting about these decisions is how foreign auto manufacturers are all choosing to forego building new facilities in the Upper Midwest where the labor market has many idle, qualified workers. Instead they are heading to locales south of the Mason-Dixon line, where such skilled employees in the past have been comparatively scarce.

    The impact has been devastating for the upper Midwest. Michigan, for example, has lost an astounding 34 percent of its auto jobs in the last five years leading to a glut of available and experienced workers. According to the U.S. Dept. of Labor, Michigan still leads the country in auto employment with 181,000 jobs followed by Indiana. But the next three states are something of a surprise: Kentucky, Tennessee, and Alabama.

    Why is this happening? Some it may have to do with the fact that recently laid-off workers in Michigan bring habits developed working in unionized environments – something which foreign automakers do not want, even though unions are very powerful in Germany, for example. The United Auto Workers (UAW) has found it hard to organize foreign automakers in general.

    In contrast, unions are comparatively weak in the South. Though Alabama has seen a huge jump in the number of its auto workers in recent years, according to its state department of labor, only 7,100 are unionized.Nationwide, according to the Bureau of Labor Statistics, around 12 percent of workers belong to unions compared to just over 10 percent in Alabama. However, the “Yellowhammer State” looks positively union-saturated compared to its neighbors: less than 5 percent of workers in Georgia, Texas, South Carolina, Virginia and North Carolina belong to them.

    But it’s not only a question of unions. The South is attractive to auto makers due to its network of rail and highway lines that make transport to key markets easy and affordable. Furthermore, many southern cities — notably Houston, Charleston and Charlotte — have made big infrastructure investments in recent years.

    Another plus for the South has been the growing role of universities in creating a research hub for the auto industry. The Clemson University International Automotive Research Center is the nation’s only school to offer a Ph.D. in automotive engineering and has secured $200 million in commitments. Additionally, the South Carolina center has created partnerships beyond auto manufacturers with other universities in the area: Auburn, Mississippi State, Alabama, Alabama-Birmingham, Kentucky and Tennessee.

    Alabama has seen the biggest net gain in auto-related jobs, having added more than 30,000 in the last ten years. The state has three plants: a Mercedes-Benz U.S. International in Tuscaloosa, a Honda plant in Lincoln and one for Hyundai-Kia in Montgomery. Additionally, many suppliers have set up shop to service the new Kia plant under construction just over the border in Georgia. A survey by the Alabama Automotive Manufacturer Association found that there are nearly 49,000 auto jobs in the state with another 86,000 jobs that depend on the purchases of these employees resulting in a combined payroll in 2007 of $5.2 billion.

    The overall impact of some of these plants may not be felt for a few years since three of them are just in the process of being constructed. But, with new behemoth facilities manufacturing some of the most fuel-efficient vehicles on the road, it appears that an industrial anchor for the region’s future has been secured. It also confirms a growing shift in the industrial geography of heavy industry in this country from the traditional Midwestern heartland to regions south of the Mason-Dixon line.

    Over time these changes will provide tests for regions both North and South. In the North, regions will have to learn how to compete in higher value-added, specialized industries, as we can see in places like Wisconsin. For the southern areas, the need to maintain and develop sophisticated industrial infrastructure — particularly in term of skills — will remain a major challenge in the years ahead.

    Andy Sywak is the articles editor for newgeography.com.

  • Demography of the Battleground States

    William Frey of the Milken Institute and Brookings Institution breaks down the race demographics of the presidential battleground states in this month’s Milken Institute Review. Frey groups the states into what he calls the Fast Growing Battlegrounds, Slow Growing Battlegrounds, and Fast-Growing South Longshots.

    His conclusion? The rapid growth in racial minorities in the fast growing battleground states make them prime targets for Obama. A similar trend in the longshot states, along with recent migration from blue states, give him a chance there as well. On the other hand, white dominated slow growth battleground states where Obama fared poorly in the primaries leave plenty of room for McCain to move in.

    Check out Frey’s analysis.

  • Guzzling BTUs: Problems with Public Transit in an Age of Expensive Gas

    As gas prices inch up toward $5 per gallon, many environmentalists and elected officials are looking to public transit as a solution to higher transportation costs and rising fuel consumption. A closer look at the numbers, however, warrants more than a little skepticism that public transit can fulfill the nation’s energy conservation goals.

    The US transportation sector is a voracious consumer of fuel, accounting for 28 percent of all energy use in 2006 according to the US Department of Transportation. Petroleum products account for 95 percent of this consumption. Naturally, those interested in conserving natural resources, fossil fuels in particular, would want to focus on reducing oil use. Moving people out of cars and onto public transit seems to make intuitive sense.

    It turns out, however, moving people to transit may not be the best strategy after all. According to the US Bureau of Transportation Statistics, a typical transit bus uses 4,235 btu per passenger mile, 20 percent more energy per passenger mile than a passenger car. More interestingly, the amount of energy used by cars has fallen to 3,512 per passenger mile in 2006, an 18 percent drop since 1980. In contrast, the amount of energy used by transit buses increased by 50 percent over the same period, rising to 4,235 btus per passenger mile. Light trucks were not quite so energy friendly as energy use fell by nearly one third to 6,904 btus per passenger mile (although their energy efficiency has remained stable since the mid-1990s).

    The long term trend toward more fuel efficient private vehicles is likely to continue as more and more energy-frugal cars such as gasoline-electric hybrids and electric plug-in vehicles become more popular. The Toyota Prius sold its one millionth vehicle in 2008 as it achieved mass production status. Sixty-five hybrid models are expected to be on the US market by the 2010 model year, nearly tripling the current number available. Moreover, all-electric vehicles such as the Tesla sports car are expected to become more popular as consumers become more accepting of personal vehicles fueled by non-traditional technologies. (Notably, Toyota is experimenting with solar panels on new generations of the Prius.)

    These trends, of course, don’t imply that fuel consumption has declined overall. On the contrary, US motorists are consuming 75.4 million gallons of fuel each year, up 7.8 percent from 1980. Yet, this is remarkably stable trend given the fact vehicle mile traveled have increased by 49 percent since then. Travel demand has more than doubled for light trucks and similar vehicles while fuel consumption by these vehicles increased by just 59 percent. Efficiency gains, then, have effectively compensated for large shares of the increase in travel demand, dramatically reducing the amount of energy used for each mile driven.

    Unfortunately, the same can’t be said for public transit. While transit ridership has increased significantly over the past year, climbing to 10.3 billion trips during the first quarter of 2008 according to the American Public Transit Association, the overall effect on the travel market has been modest. Long-term, transit’s market share for all travel fell from 1.5 percent in 1980 to 1 percent in 2005. Transit’s market share for work trips has fallen to 5 percent overall. Meanwhile, the public transit infrastructure – buses, route miles, etc. – has remained largely intact. That means more buses are transporting fewer people, significantly curtailing public transit’s energy efficiency. Not surprisingly, the energy intensity for public transit increased on average by 1.5 percent per year from 1970 to 2006.

    The story is a little different for passenger rail, which carries about half of the nation’s public transit riders (although national data are dominated by ridership in New York City). Transportation consultant Wendell Cox has calculated the energy intensity for other modes of transit in 2005 and found that commuter, heavy, and light rail transit used significantly less energy per passenger mile (about 40%) than public bus or passenger cars.

    Yet, the prospect for reducing energy use significantly by improving rail transit’s market share of overall travel is slim. Despite double-digit increases, light rail ridership accounts for just 3.4 percent of transit passenger miles nationally . In contrast, commuter and heavy rail ridership growth was just 5.7 percent and 4.4 percent respectfully. Moreover, increased ridership for rail services depend on the availability of other transit services, most notably feeder bus routes as well as urban densities that are difficult to sustain outside a few major cities such as New York, Chicago, or Boston.

    Thus, as a practical matter, public transit is unlikely to provide a meaningful solution to reduced energy use in transportation. This becomes clear after looking at travel behavior in the wake of the increase in gas prices over the past year. Overall, public transit ridership increased just 3.3 percent. If we convert ridership into passenger miles traveled – a distance-based rather than trip-based measure – a 3.3 percent increase translates into 1.6 billion passenger miles over the course of a year. That may seem like a big number, until it’s compared to overall US travel.

    As gas prices went up, US automobile travelers eliminated 112 billion passenger miles from our roadways as vehicle miles traveled fell by 2.3 percent. Even if we assume all the increased transit ridership was accounted for by the migration of automobile travelers to public transit, buses and trains captured fewer than 2 percent of the reduction in automobile-based travel demand.

    Thus, in the end, those seeking ways to promote energy conservation are still relying on market forces to affect behavior and resource use. Higher-income consumers value mobility, and automobiles provide the flexibility and adaptability they demand. As energy prices rise, incentives to provide resource stingy alternatives such as hybrid and electric only vehicles increases, stimulating even further innovation that bring down costs over the long run. Meanwhile, contrary to public perception, as fewer segments of the population rely on fixed route transit systems, the relative energy efficiency of public transit declines.

    Samuel R. Staley, Ph.D., is director of urban and land use policy at Reason Foundation and co-author of “The Road More Traveled: Why the Congestion Crisis Matters More Than You Think and What We Can Do About It” (Rowman & Littlefield, 2006). He can be contacted at sam.staley@reason.org.

  • Sprinting Blindfolded to a New Equilibrium

    Everyone except the fabulously wealthy and the truly disconnected knows energy has become much more expensive in recent years, but it’s worth taking a step back and examining just how much it has jumped and what we should (and should not) conclude about the impact on nearly all aspects of modern life.

    The raw data provides a startling enough starting place. Since 2004, the U.S. retail price for gasoline has leaped from $1.53 per gallon to $4.10, and oil has skyrocketed from $28 per barrel to over $140. The retail price of natural gas, largely ignored by U.S. consumers during the summer, has increased from $9.71 per thousand cubic feet to $14.30 (its highest price ever for the month of April), and even coal has risen from $19.93 per short ton to $25.40. Electricity, closely tied to the price of natural gas and coal, has increased from 7.61 cents per kilowatt hour to 9.14.

    Whether this rise in oil prices was triggered by the fundamentals of supply and demand, politics, collusion among oil producers or a lack of investment in developing oil fields around the world (I strongly favor fundamentals), or you think we’re headed toward a peak in world oil production very soon or decades from now (I’m firmly in the “very soon” camp), the bottom line is that the economy doesn’t care about causes or rationalizations, just prices.

    Economics, the study of the allocation of scarce resources, tells us that economies constantly adjust themselves in response to price changes. One company raises the price of the tennis rackets they manufacture, so some customers will buy a competitor’s product or forego buying a new racket this year or take up another sport. Many such events constantly send overlapping ripples throughout an economy, causing the quantities demanded and supplied of many goods and services to rise and fall slightly. In econo-speak, the entire system seeks a new equilibrium in response to a change in the price of one good or service relative to substitutes. Talking about minor price changes for non-critical items is the normal background noise of a healthy economy. But energy, especially oil, presents an entirely different scenario.

    Virtually everything we buy depends on the price of oil to some degree. Raw materials, finished goods, customers, and the people who perform services all need to be transported. Oil and natural gas are also critical components in making plastics and many chemicals and fertilizers, and fossil fuels provide 70 percent of the energy consumed to generate electricity in the U.S. In most applications, trying to find a substitute for fossil fuels on the scale and immediacy we’d prefer is impossible without paying a very high price. (As the old line goes, I can do a job for you quickly, cheaply, or well — pick any two.)

    When the price of such a significant and unique resource rises so much and so quickly we’ve pole vaulted over a mild jostle to the system and gone straight to a deep, pervasive, game-changing shock.

    The sheer magnitude of this shock explains why there is so much talk in the financial press lately about which of the Big Three car companies could file for bankruptcy within a year. Ford, GM, and Chrysler are in a desperate race against time. Can they radically overhaul their product lines to meet the rapidly shifting demands of their customers before they run out of cash?

    Given the high cost and long development time to create a new car model, this is a daunting task, to say the least. By comparison, the commercial airline industry is in far worse shape, as they don’t have the potential to save themselves via converting to electric vehicles or plug-in hybrids. Even using biofuels to run their jets is more wishful thinking than a real-world solution, and is at least a decade away from widespread application. Unless the price of jet fuel drops dramatically and fairly soon, the downsizing and bankruptcies we’ve already seen among airlines will be only the beginning of their “adjustment.”

    So, all is gloom and doom, right? Well, no, and this is the point that’s so easy to overlook. Even though energy prices have been rising for years, we’re still in the very early stages of the U.S. economy’s reaction; what we’ve seen to date is much more the initial impact than our individual and collective response.

    Still, it’s not hard to find media stories about the increased use of public transportation, people driving less overall, and more workers telecommuting or converting to a four-day workweek. Plus, we’re awash in reports of how 2010 will be a sea change in the car business, with several companies offering plug-in hybrid and full electric vehicles in the U.S. A further complication is the virtual certainty that soon the U.S. will overtly begin to rein in CO2 emissions, whether via a carbon tax or a cap-and-trade system.

    Beyond that we have the growing challenge of generating enough electricity to meet traditional demands plus the additional burden of recharging electric vehicles, all the while reducing CO2 emissions and finding enough water to cool thermoelectric plants (nuclear, coal, oil, and natural gas) in a world where climate change is creating drought in inconvenient places. With so many large and powerful forces suddenly in motion at once, trying to make firm predictions about the quantity demanded or the price of any fossil fuel is a revelation of one’s hubris or insanity.

    The last thing we should do is fall into the trap of making simplistic, linear extrapolations. You can barely Google any energy related topic without finding references to the impending “death of the suburbs,” a topic Joel Kotkin addressed recently and I commented on both here and on my own site. Similarly, you can find numerous other opinions that grossly underestimate the inherent flexibility (and therefore unpredictability) of entire economies. Many of them are based on a fallacy that roughly says: “We use a lot of oil to do X. Oil will get more expensive, so therefore we won’t be able to do X.” These comments almost never mention the possibility that we’ll find ways to do X with far less oil, or that we’ll fill the same need by doing Y, or that savings in oil consumption in other, less critical, parts of the economy will buy us time to change how we do X.

    In more concrete terms, how many people really think that more expensive oil will stop us from making medical supplies or fueling trucks that deliver food? Isn’t it more sensible to assume that we’ll cut back on far less critical uses, like pleasure boating or flying for vacations, and keep the increasingly scarce oil flowing to life-and-death applications?

    Humanity has just begun an unprecedented, expensive, painful, and, above all else, unpredictable journey. The end of the age of cheap energy will no doubt reshape almost everything we do, from decisions about personal consumption to our governments and public policies, to our institutions and businesses, to our cities. Our collective future will be a lot of things, but “dull” isn’t on the list.

    Lou Grinzo runs the web site The Cost of Energy , and is an economist by training, a programmer, technical editor, and writer by profession, and an energy geek by genetic predisposition.

  • Which Cities Will the High Cost of Energy Hurt (and Help) the Most?

    A high cost energy future will profoundly impact the cost of doing business and create new opportunities, but not necessarily in the way most people expect.

    By Joel Kotkin and Michael Shires

    The New York Times, the Atlantic Monthly and the rest of the establishment press have their answer: big cities like New York, Chicago, and San Francisco will win out. Our assessment is: not so fast. There’s a lot about the unfolding energy economy that is more complex than commonly believed, and could have consequences that are somewhat unanticipated.

    On the plus side there are some undoubted winners — those areas that produce energy and those with energy expertise. What’s working for Moscow, St. Petersburg, Calgary, Edmonton, and Dubai is also working for the U.S. energy regions as well. Not surprisingly, many are located deep in the heart of Texas. This includes not only big cities like energy mega-capital Houston but a host of smaller ones, like high-flyers Midland, Odessa and Longview.

    But it’s not just Texas cities that are winning. A host of other places have strong ties to energy production and exploration — Salt Lake City, Denver, and the North Dakota cities of Bismarck, Fargo, and Grand Forks. And it’s not just oil: The U.S. Great Plains have also been described as “the Saudi Arabia of wind.” If the right incentives are put in place, a wind-belt from west Texas to the Canadian border could be produce new jobs, both in building mills and also for the industries — manufacturers, computer-related companies — that will harness the relatively cheap energy.

    Alternative renewal energy producers in biofuels, thermal, and hydro-electric will also become big business. The Sierra Nevada cities like Reno could benefit from thermal; the Pacific Northwest’s hydro-power gives places like Portland, Seattle, and a host of smaller communities — Wenatchee, Bend, Olympia — a great competitive advantage in terms of dependable, low cost and low carbon energy.

    How about the big cities and metros that consume less energy? It seems logical that San Francisco, D.C., Los Angeles, Boston, Chicago, and New York should have an advantage over other cities and their suburban hinterlands; these cities, especially New York, have higher than average transit use. San Francisco and Los Angeles enjoy milder climates requiring less air conditioning and heating.

    But these advantages are somewhat mitigated by the fact that these same cities often pay far more for energy than their rivals. Electricity in New York, notes an upcoming study by the New York-based Center for an Urban Future, costs twice the national average. California cities also suffer much higher prices — almost 50 percent higher than their counterparts in the Midwest. So even if you use considerably less energy, you might end up paying more. Being a big, dense city clearly has advantages, but they too often are squandered by aging infrastructure, lack of new plants and high business costs.

    One other problem for big Northern cities: colder regions will feel the ripple in local economies as the impact of high heating bills is felt next winter. A cold winter will push northeastern city-dwellers to join the chorus of complaints now voiced by drivers in auto-heavy Sunbelt states like Florida and California.

    Nor is it certain suburban areas will do so much worse in tough energy times. Studies of commuting patterns in Chicago and Los Angeles show that many suburbs thirty miles or more from their downtowns — places like Naperville, Illinois and Thousand Oaks or Irvine, California — have shorter commutes than most inner-ring urbanites. This is a result of the movement of jobs to “nodes” on the periphery over the past 30 years.

    Another kind of area that will do well are those that have well-developed telecommuter economies. In Los Angeles, notes California State University at Los Angeles geographer Ali Modarres, telecommuters are concentrated not only in places like Santa Monica, but also in sections of the San Fernando Valley (which has most of the region’s entertainment workers) as well as further out inu highly educated communities like Thousand Oaks and Irvine. In the long run, the best and most energy efficient commute is none at all.

    So who are the losers? Certainly some of the distant outer suburbs, like the high desert communities far east of Los Angeles, which lack jobs for their residents, and suffer longer than average commutes. Also hurt will be poorer inner city areas where workers have to commute, by transit or car, over great distances. Sadly, it’s many of the communities that have already suffered the most. The changeover to lower mileage vehicles will be particularly tough on those communities that produce SUVs and trucks — places like Flint, Michigan; Ft. Wayne Indiana; and Janesville, Wisconsin.

    But there are also some auto centers that are likely to do better. Just follow where low-mileage vehicles, particularly those built by Toyota, Honda, Nissan, and the Korean makers, are either being built or planned. This is mostly a southern play — Tupelo, Mississippi; Nashville, Tennessee; and Georgetown, Kentucky, site of the largest Toyota plant outside Japan.

    Economic change has always impacted America’s communities. But with the current energy price surge, we may find that “creative destruction” may be sweeping through many communities even faster than we anticipated.

    Cities and Oil Prices: The Winners and The Losers

    For most places, it’s hard to tell what the long-term effect of the high cost of energy might be. But there are some fairly safe bets.

    Two kinds of areas tend to perform best in a harsh energy environment. One is the energy-producing cities, whose place at the top of this list should come as no surprise. Another, though it may take a bit longer to emerge, may be those cities that are sites for production of fuel-efficient vehicles. These tend to be located in parts of the country — Texas, the Southeast, and the Great Plains — that have lower energy costs and more favorable business climates.

    Winners:

    1. Houston: This is one town where $150 a barrel gasoline is viewed more as an opportunity than an atrocity. Not that Houstonians don’t drive — like other Texans, they tend toward the profligate in energy use. But prices are not terribly high by national standards and, more to the point, energy is producing lots of high wage jobs here for both blue- and white-collar workers. As headquarters to sixteen large energy firms — far more than New York, Dallas, and Los Angeles combined — Houston, which ranks No. 4 on our list of the best large cities to do business, provides an irresistible lure to hundreds of smaller firms specializing in everything from shipping and distribution of energy, to trading, exploration and geological modeling.
    2. Midland-Odessa, Texas: Houston is no longer the oil production center it once was, but the twin cities of Midland (No. 1 on our Best Cities list overall and among small cities) and Odessa (No. 4 on the list of small cities) certainly are. The two cities, only 20 miles apart in the energy rich Permian Basin, experienced hard times when energy prices dropped. Office buildings went empty, and people fled. But now the big problem is finding enough labor to keep the rigs going. Boomtimes are back — and only a dramatic change in the energy markets will slow them down.
    3. Bismarck, North Dakota: No. 30 on our Best Cities list of small cities, Bismarck may be in the early stages of a big time expansion. It’s the closest “big” city to the rapidly developing Bakken range — rich with oil and shale deposits — and already enjoys the advantages of being the capitol of a state that boasts a $1 billion surplus. North Dakota’s biofuels, wind, and coal industries also make the city a natural focal point for Great Plains energy. As in Midland-Odessa, the biggest constraint may well prove to be the availability of labor.
    4. The Mid-south Autobelt: The shift to smaller cars may seem dismal in Detroit, but it’s pure joy to much of the mid-South. Foreign companies specializing in energy efficient vehicles — Volkswagen, Kia, Honda, Nissan — are concentrated in a belt running from Nashville (No. 18 on the large metro list) and Chattanooga (No. 59 on midsize list) in Tennessee to Huntsville, Alabama (No. 5 on the midsize list). Local universities in the area are also getting into the act, with several cooperating in an automotive research alliance.

    Our list of losers is all too familiar. Basically, these are areas dominated by America’s weak automakers and are particularly wedded to the SUVs and trucks that are losing market share at an astonishing rate. Most fall in states that are strong union bastions, have relatively high energy prices, and get much of their energy from coal, a fuel that’s even less popular with environmentalists than oil is.

    Losers:

    1. Detroit: The center of the American auto industry ranks dead last, No. 66, on our big city list. The Motor City’s legacy as headquarters town for the former Big Three is now its biggest headache. It’s not just factory workers being hurt here; Detroit is where much of the technical, manufacturing, and design talent base of the U.S. auto industry resides. It’s also where ad agencies, law firms, and other high-end business service providers to the industry cluster. All have taken big hits over the last few years, which has led to increased out-migration, high rates of foreclosure and a deteriorating fiscal situation.
    2. Flint, Michigan: No. 171 on the small city list, just two from the bottom, Flint seems to make more and more of what Americans don’t want. In 2006, it made more than 170,000 pickup trucks; it’s doubtful it will see that level of production for a long time to come. And this is a place that was hurting even before gas prices went up. Over 40 percent of all manufacturing jobs disappeared between 2002 and 2007.
    3. Ft. Wayne, Indiana: Compared to Flint or Detroit, Ft. Wayne (No. 85 on the mid-sized list) is not doing too badly. Between 2002 and 2007 manufacturing employment dropped only 2.5 percent. The big problem is the future of the industrial sector. Ft. Wayne made 200,000 pickup trucks in 2006. It’s hard to see many of these jobs surviving if energy prices stay high.
    4. Janesville, Wisconsin: No. 92 on the small list, the Janesville plant manufactures GMC Yukon, the Yukon XL, the Chevy Tahoe, and the Suburban. Although more than 200,000 SUVs were produced at this plant in 2006, the plant will close by the end of 2010. The largest private employer in Janesville is Mercy Health Systems. Being in Wisconsin helps — the state is in better shape than Midwest neighbors such as Michigan and Ohio.

    Joel Kotkin is a presidential fellow at Chapman University and executive editor of Newgeography.com.

    Michael Shires, Ph.D. is a professor at Pepperdine University School of Public Policy.

  • Suburbs Will Adapt to High Gas Prices

    Will high gas prices doom the suburbs? The short answer is no. America’s investment in suburbia is too broad and deep and these will drive all kinds of technological and other adaptations. But the continued outward growth of new suburban housing tracts and power centers is unsustainable.

    It is, of course, risky to predict anything, particularly the future. No one can predict with certainty the direction of gas prices, let alone how they will reshape our landscape. While the long-term trend for oil and gas is almost certainly rising prices, volatility will continue to make short-run bets risky either way.

    But whether gas prices plateau, spike or even decline in the next five years, larger forces will reinforce the shift to greater reinvestment in older urban areas – and towards reinvention of existing suburban areas, particularly those with strong economies.

    There will still be some “greenfield” peripheral development, but unplanned “sprawl” will wither. New development will be look more like New Urbanist new towns. There will be a revival of the integrated planned community, like Reston in Virginia, the Woodlands near Houston or Valencia and Santa Margarita in Southern California.

    The forces converging to curb sprawl go beyond gas prices. There will be regulatory and market pressure to cut carbon emissions to address global warming, but the most serious threat to outward sprawl will be the private and public shortage of financing for new infrastructure, which is likely to be chronic. Given the deepening crisis in the housing and lending industries, in the long interval building resumes, new development will be very different from what we’ve seen in the past fifty years of most conventional suburbia.

    Of course, even if we adopted a universal program of “smart growth” across America tomorrow, it would be decades before we had repaired and reshaped our landscape and economy to a more sustainable model. In the meantime, there will be tremendous pressure to exploit existing and new energy sources to maintain the suburban model we live in. But we can’t ignore the pragmatic economist Herb Stein who first observed, “Things which can’t go on forever, don’t (known as Stein’s Law).”

    In part, because of legislation such as AB 32, the “Global Climate Solutions Act,” California may be one of the first test cases of this transition. Whether you think this is the greatest threat to our planet in human history or you think this is environmental hysteria, global warming legislation is now a political reality.

    We can’t meet reduce greenhouse gas emissions to 1990 levels by 2020 – the fundamental goal of the legislation – without reducing vehicle miles traveled. With transportation producing 40 percent of the problem, improved fuel efficiency will help – and so will switching to alternative fuels and increased telecommuting. But those gains will be essentially wiped out by the offsetting increases in population and mileage that people are traveling.

    While the costs of retooling new growth to be more sustainable will be significant, so are the opportunities. This year alone, according to the Economist, the oil importing nations will transfer two trillion dollars to the oil exporting nations. That’s money that will not be go to improve our infrastructure, protect our environment or educate our youth. It goes out our tailpipes.

    Here in California, the $20 billion transportation bond that voters approved in 2006 comes nowhere near to closing the $100 billion dollar gap in transportation infrastructure needed to address auto congestion and goods movement by truck. There is no way California’s government or economy can afford to continue to pay that cost. But it has taken gas at nearly $5 a gallon for people to wake up and smell the fumes.

    But halting sprawl is not the same as reversing it. Gas prices, AB 32 mandates, highway spending deficits and environmental concerns all conspire against more red-tiled roof subdivisions in Palmdale and Victorville. Yet growth pressures will fuel new demand down the road, so older suburbs and cities have to find ways to develop family-friendly housing and attract jobs that have been flowing to the suburban edge.

    These are two different, but related challenges. Older suburbs have to find a way to gracefully urbanize by strengthening or creating walkable centers and adding more population along commercial/transit corridors. They need to transition from auto-dependence to a wider range of real transportation alternatives. Above all, they face the challenge of persuading residents that reinvention of the suburbs can improve their quality of life and standard of living.

    Planners make a mistake if they try to tell suburban residents to give up what they like about suburbia in terms of space, privacy and safety. Acceptance of higher densities in existing suburban communities will only come if design of more urban housing improves and new development offers residents tangible improvements in amenities such as pedestrian-friendly districts, parks, bikeways and opportunities to work close to home.

    Older cities, on the other hand, already have much of the physical framework in place, but need to improve their parks, schools, libraries and neighborhoods. They must make themselves attractive to retain working and middle-class households, especially families with children. The key challenge will be to overcome the entrenched special interests that dominate urban politics to focus on the efforts that make a city hospitable to residents and businesses and be less dominated by the interests of developers and public employee unions.

    All across the state there are promising examples that suggest suburban and urban communities are getting the point. in the short run, the weak economy and awful financial market, both for public and private sectors, will slow change. But California has shown incredible resilience over the past 150 years. Our growing population and changing demographics will open up a huge market for reinvesting in our older communities.

    Now is the time to prepare for that time. Remember during the last deep real estate downturn, former Governor Pete Wilson abandoned his promise to tackle statewide growth management. His excuse was, “I wish I had some growth to manage.” The tragedy of that missed opportunity was that it wasn’t long before growth again overwhelmed our capacity.

    What if we’d not only put in place a coherent growth management strategy like Oregon, New Jersey or Maryland – but we’d established the collaborative regional structures in place like in metro Denver, Salt Lake City or Portland? Today, we’d be finishing the Subway to the Sea, the Gold Line extension to Ontario Airport and we’d have regular commuter rail between Ventura and Santa Barbara. Maybe then, $5 gas would be a little less painful.

    For too long, we’ve viewed cities and suburbia as natural antagonists. But the future may lie with greater convergence. Cities can become greener and more attractive to population growth. Suburbs can begin to urbanize in graceful and sustainable ways. Both are due for reinvention and reinvestment. The challenges we face will give us the opportunity – and the necessity – for doing just that.

    Rick Cole is the City Manager in Ventura, California, where he has championed smart growth strategies and revitalization of the historic downtown. He previously spent six years as the City Manager of Azusa, where he was credited by the San Gabriel Valley Tribune with helping make it “the most improved city in the San Gabriel Valley.” He earlier served as mayor of Pasadena and has been called “one of Southern California’s most visionary planning thinkers by the LA Times.” He was honored by Governing Magazine as one of their “2006 Public Officials of the Year.”

  • Industrial Architect

  • Jerry Brown’s War on California Suburbs

    In the 1960s, California Gov. Edmund Gerald “Pat” Brown laid the foundation for building modern, suburban California with massive new highway projects and one of the most significant public water projects in history. The resulting infrastructure gave us broad, low-density developments with room for millions of Californians to have a home with a backyard and two cars in the driveway.

    Those were the good old days. Today, Pat Brown’s son Jerry is waging war on the very communities his father helped make possible. Why? Global warming.

    Jerry Brown has been a fixture of the state’s politics for more than three decades. He was elected governor in 1974 and four years later earned the moniker “Governor Moonbeam” for his interest in creating a space program in California. In 1998, he was elected mayor of Oakland, a working-class city across the bay from San Francisco. And in 2006, he was elected attorney general. Today he is mulling a run for governor in 2010, when he will be 72.

    In the meantime, Mr. Brown is taking aim at the suburbs, concerned about the alleged environmental damage they cause. He sees suburban houses as inefficient users of energy. He sees suburban commuters clogging the roads as wasting precious fossil fuel. And, mostly, he sees wisdom in an intricately thought-out plan to compel residents to move to city centers or, at least, to high-density developments clustered near mass transit lines.

    Mr. Brown is not above using coercion to create the demographic patterns he wants. In recent months, he has threatened to file suit against municipalities that shun high-density housing in favor of building new suburban singe-family homes, on the grounds that they will pollute the environment. He is also backing controversial legislation — Senate bill 375 — moving through the state legislature that would restrict state highway funds to communities that refuse to adopt “smart growth” development plans. “We have to get the people from the suburbs to start coming back” to the cities, Mr. Brown told planning experts in March.

    The problem is, that’s not what Californians want. For two generations, residents have been moving to the suburbs. They are attracted to the prospect, although not always the reality, of good schools, low crime rates and the chance to buy a home. A 2002 Public Policy Institute of California poll found that 80% of Californians prefer single-family homes over apartment living. And, even as the state’s traffic jams are legendary, it is not always true that residents clog roads to commute to jobs in downtown Los Angeles or other cities.

    Ali Modarres, associate director of the Edmund G. “Pat” Brown Institute of Public Affairs at California State University Los Angeles, believes the density-first approach is ill-suited for areas like L.A. County, where most residents and jobs are dispersed among subregional “nodes.” Research by Mr. Modarres, co-author of the powerful book “City and Environment,” demonstrates that people living in nodes — Pasadena, Torrance, Burbank and Irvine — often enjoy considerably shorter average commutes than do a lot of inner-city residents. Many of these people commute through tangled traffic to get to jobs on the periphery.

    “I have no problem trying to find solutions on global warming,” Mr. Modarres told me, “but I doubt these kinds of solutions are going to do anything. The whole notion that through physical planning you can get a lot of people to abandon their cars is pretty iffy.”

    Mr. Modarres also points out that forcing developers to build near transit lines, a strategy favored by “smart-growth advocates,” does not mean residents will actually take the train or bus. A survey conducted last year by the Los Angeles Times of “transit oriented development” found that “only a small fraction of residents shunned their cars during rush hour.”

    There is also little punch behind the science used to justify the drive to resettling the cities — and plenty of power behind the argument that suburbs are better for Mother Earth. Several prominent scholars — including University of Maryland atmospheric scientist Konstanin Vinnikov, University of Georgia meterologist J. Marshall Shepard and Brookings Institution research analyst Andrea Sarzynski — have found there is little evidence linking suburbanization to global warming, pointing out that density itself can produce increased auto congestion and pollution.

    The antisuburbanites also ignore evidence that packing people together in cities produces “heat islands.” Temperatures in downtown Los Angeles sometimes reach as much as three degrees centigrade higher than outlying areas. Recent studies in Australia have shown that multistoried housing generates higher carbon emissions than either townhomes or single-family residences because of the energy consumed by common areas, elevators and parking structures, as well as the lack of tree cover.

    In the short run, while being “tough” on climate change appears popular, an assault on the preferred lifestyle of suburban voters may not. These voters aren’t likely to appreciate being castigated as ecological evildoers, especially by people who generally house themselves in spacious splendor.

    A report by the Los Angeles Weekly’s Dave Zahniser — entitled “Do as We Say, Not as We Do” — found that a lot of prominent “smart growth” advocates in Los Angeles live in large single-family homes, some of them long hikes from mass transit. Mr. Brown himself, not long ago, moved from a loft in crime-ridden downtown Oakland to a bucolic setting in the Oakland Hills.

    At a time when political trends favor Democrats, a hypocritical jihad against basic middle-class aspirations may not be the best strategy. Mr. Brown would be better off embracing telecommuting and other ideas to cut suburban commutes that accommodate the majority’s dreams and preferences. He might have learned that from his father. Instead he’s gone from wanting to launch people into space to opposing people who move to the suburbs.

    This article first appeared in the Wall Street Journal.