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  • Energy Makes a Super-city

    Superlatives can no longer describe Dubai – there are simply too many. It is now the fastest growing city in the world with $300 billion of construction underway. Once Dubai was a sleepy Arab port nestled between its larger and more famous oil rich neighbors: Iraq, Iran and Saudi Arabia. Now tiny Dubai is home to the “world’s tallest building,” and more construction cranes than China and its 1.4 billion people. What is more amazing is that Dubai has a population of just 200,000 native Emirates within a land area one-half the size of Orange County, California. If you count all the workers, the city has a population of 1.8 million.

    It all started with the Burj Al Arab, the “world’s first 7-star hotel,” rising more than 50 floors above the Persian Gulf. Its unique sail shape makes it instantly recognizable. The Burj Al Arab has grown into iconic stature, like the Eiffel Tower.

    The Burj Dubai, the “world’s tallest building,” has passed 165 floors and no one except the Absolute Ruler of Dubai knows the final height. The Burj Dubai is 100 percent sold out. It will contain the world’s first Armani Hotel, and the world’s most expensive offices. Its competitor, Al Burj, a few miles down the road at the Dubai Waterfront, is reported to be 200 floors but they will not commit until Burj Dubai stops its reach for the sky.

    Shoppers can choose from the Mall of the Emirates, the “world’s first shopping mall with an indoor ski slope,” or the Dubai Mall, the “world’s largest shopping mall” at 10 million square feet. It will not reign long as the world’s largest – the Mall of Arabia will be 12 million square feet. The Mall of Arabia will be located at Dubai Land in the “world’s largest amusement park” – three times the size of Disneyworld. These Dubai malls will later be dwarfed by the Bawadi District with 60,000 hotel rooms and 40 million square feet of retail in what will surely be the “world’s largest shopping mall.”

    The products displayed in these malls will pass through the Port of Jebel Ali, the “world’s largest man-made port,” and 8th busiest container part in the world. Jebel Ali is one of three man-made structures that can be seen from outer space – the Hoover Dam and the Great Wall of China being the others.

    Shoppers will arrive at DXB, Dubai’s brand new airport built to accommodate 120 million passengers annually. DXB will become the “world’s busiest airport,” easily surpassing Atlanta Hartsfield, which accommodated 72 million passengers last year.

    New residents of Dubai have already moved into Dubai Marina, the “world’s largest marina,” even larger than Marina Del Rey in Los Angeles. Dubai Marina will be home to 200 residential towers each more than 40 floors with six towers of more than 90 stories. The Princess Tower at 107 stories is the “world’s tallest residential tower,” but the Pentominium, at 120 floors, will become “the world’s tallest residential tower,” next year. Its neighbor, Infinity Tower, at just 80 floors, will be the “world’s tallest tower featuring a 90-degree twist.”

    Dubai has the “world’s largest man-made residential islands” with four of them. Palm Jumeirah, the first of the Palm-shaped trilogy is three-by-five miles. It sold 4,000 residences along 17 separate fronds in three days. Thirty-two hotels will line the trunk. At the crescent of Palm Jumeirah is Atlantis, a 2,000-room hotel. The 61-story Trump International Tower straddles the monorail that connects the Palm to the mainland. The penthouse recently sold for $30 million making it the “world’s most expensive penthouse.” The Queen Elizabeth 2 ocean liner was purchased by Sheikh Mohamed and will be docked at Palm Jumeirah.

    Palm Jebel Ali is 50 percent larger than Palm Jumeirah and part of the Dubai Waterfront project that will house 1.7 million people upon completion in 2020. Jebel Ali will be larger than Paris at seven-by-five miles. Besides 8,000 residences and fifty hotels, homes will be built on stilts with a boardwalk that circles the fronds and spells out a poem written by Sheikh Mohamed that reads:

    Take wisdom from the wise
    It takes a man of vision to write on water
    Not everyone who rides a horse is a jockey
    Great men rise to greater challenges

    Palm Deira, largest of the Palm trilogy, will become the “world’s largest man-made island,” larger than New York’s Manhattan, bigger than central Paris and almost as big as Greater London. Palm Deira will house one million residents. The 42 fronds will be twice as large as its sister Palm islands at nine-by-five miles. Palm Deira will be connected to the mainland by a Central Island that will become the commercial center of the community on the north end of Dubai.

    The fourth offshore mega-project is The World, a collection of 300 islands intended to look like the world from outer space. The project stretches five-by-three miles and is surrounded by an oval breakwater to protect the individual islands from Persian Gulf storms and waves. The ambitious 300-island project will cost $14 billion when completed. Individual islands will sell from $15 million to $250 million. To date, more than half have been sold but that may be deceiving as only half have been offered for sale.

    If these superlatives were not enough, Dubai is building a business center to rival New York City’s Manhattan, London’s City or Tokyo’s Ginza Strip . Business Bay will wrap around the Burj Dubai and contain 230 high-rise office towers, each 40 floors or more. All 230 office towers are sold. The Burl Al Alam will be the “world’s tallest commercial tower” at 108 floors of mixed-use apartments, office and hotel. When completed this business center will contain 64 million square feet of office space. Halliburton and Baker-Hughes have already announced that Dubai will become their world headquarters.

    Easily lost in the superlative is the size of Dubai. It is only one of seven emirates that make up the United Arab Emirates. It is not an oil rich nation like its neighbor. Abu Dhabi that owns 94 percent of the oil in the UAE. Dubai’s oil will run out in 2016. Sheikh Mohamed, Emir and Absolute Ruler of Dubai, steered Dubai onto a course of development predicting the rise in oil prices that would bring a gusher of oil money into the Persian Gulf. Each day the nations that surround the Persian Gulf pump 20 million barrels of oil to a thirsty world. At $140/barrel, they earn $2.8 billion per day, $19.6 billion per week, $84 billion per month and $1 trillion per year.

    Dubai correctly anticipated the staggering transfer of wealth to the Arab oil producing states and like a smart business man, geared up to provide plenty of product for his wealthy clientele. With $300 billion of projects under development and one-third of the world’s cranes, Dubai has become the “fastest growing city in the world,” – yet another superlative that hardly tells the story. It is a story of a city about to become a player on a global scale – and one that the established great urban regions will have to take seriously in the years to come.

    Robert J. Cristiano Ph.D. has more than 25 years experience in real estate development in Southern California. He obtained financing from the Middle East following the collapse of the savings & loan industry in the early 90s and has become an expert on that region. He is a resident of Newport Beach, CA.

  • The New Boom Towns

    The steep hike in gas and energy prices has created a national debate about the future of American metropolitan areas — mostly about the reputed decline of suburbs and edge cities dependent on cars. But with all this focus on the troubles of traditional suburbs, one big story is overlooked: the rapid rise of America’s energy-producing metropolitan areas.

    In many of the nation’s strongest regional economies, $5 a gallon gas is less a threat than a boon. From Houston and Midland in Texas, to a score of cities across the Great Plains, today’s energy crisis is creating new wealth and new jobs in a way not seen since, well, the energy crisis of the 1970s.

    This reflects a global trend that is turning once out-of-the-way places, like Dubai and Alma Alty, into glittering high-rise cities. Other energy- and commodity-rich places are undergoing a similar boom — from Moscow and St. Petersburg in Russia, to Calgary and Edmonton in Canada and Perth in Australia.

    What all these places have going for them is control of what Kent Briggs, former chief of staff for Utah’s late Gov. Scott Matheson, once called “the testicles of the universe.” These cities base their wealth not on clever financial technology, cultural attributes or university-honed skills but on their position as centers of the global commodities boom.

    In the process, there has been a shift in the balance of economic power away from financial and information centers like New York, Los Angeles, Boston, Chicago and San Francisco. These cities are deeply vulnerable to the national financial and mortage crises. New York, according to David Shulman, former Lehman Brothers managing director, faces upward of 30,000 to 40,000 layoffs in its financial sector. San Francisco in the last quarter gave away a Transamerica Pyramid’s worth of office space.

    In contrast, things have never looked better for cities now riding the energy and commodity boom. By far the biggest winner is Houston, whose breakneck growth has been fueled by its role as the world’s premier energy city. As with Dubai, this is less a function of the city’s proximity of actual deposits (though the Gulf of Mexico represents one of the most promising energy finds in North America), than to its premier role as the technical, trading and administrative center of the worldwide industry.

    This prominence is, in historic terms, relatively recent. As late as the 1980s “oil bust,” notes historian Joe Feagin, Houston’s energy sector remained “a colony of New York,” where many of key industry corporate and financial decision-makers still lived.

    Yet, today, Houston’s national, even global dominance, of the energy business is palpable. With the lure of low-cost office space and housing stock, as well as myriad personal ties among executives and leading engineers, Houston managed to consolidate its position as the predominant center of the oil and gas industry. In 1960, Houston had barely one of the nation’s large energy firms, ranking well behind New York, Los Angeles and even Tulsa; today it has 16, more than all those cities combined.

    High wages offered by energy firms — annual salaries for geologists average $132,000 or more; while blue-collar workers make roughly $60,000 — have attracted a new generation of skilled executives and technicians to the region, which also enjoys a far lower cost a living than many other major cities. Areas like River Oaks, Galleria and Energy Corridor are home to well-educated, upwardly mobile workers in their late 20s and 30s. The area is growing at a time when these workers are, according to recent census numbers, leaving places like San Francisco, New York, Los Angeles and Boston.

    “People from other areas say that you guys don’t make much down there,“ said Houston executive recruiter Chris Schoettelkotte. “[But] the guys from L.A. make the same amount of money in the same field here. We pull them from Wharton, the Ivy League and Stanford and they get paid through the nose… Houston can get the talent.”

    Houston’s status as energy capital is also propelling it into the ranks of first-tier cities. Today, Houston has the third largest representation of consular offices. It ranks behind only Los Angeles and New York, and has outstripped traditional commercial centers like San Francisco and Chicago.

    It’s energy, along with the port and growing airport, that makes the Texas city a world capital. “When I go overseas people put Houston with New York and L.A.,” said Houston salvage entrepreneur Charlie Wilson. “In many cases, Houston is considered to be at the top of the world class because of oil. If you’re in China, you’re looking at Houston because of the oil.”

    But Houston is not alone in benefiting from the rising price of energy and other commodities. According to the new Inc./Newgeography.com job growth rankings other energy cities include Dallas — home of Exxon Mobil –- as well as smaller Texas burgs like Midland, Odessa and Longview.

    This is a dramatic turnaround for places like Midland. Until recently, said Midland oilman Mike Bradford, wildcatters had held back from drilling, because they feared the high oil prices would not last. Now they are convinced that the energy market has broken free of OPEC control and prices will remain high. “We think high [oil and gas] prices are for real — and we’re going nuts,” said Bradford, who also sits on the Midland County Commission.

    But you don’t have to be in Texas to be part of an energy boomtown. Bakersfield, Calif., oil capital, is also thriving, despite the hard times throughout the Golden State because of the mortgage crisis. Alaskans, who now receive more than $1,600 per capita from the state’s Permanent Fund Dividend, twice what they received in 2005, are likely to see their wealth increase. If there’s an expansion of drilling there, look for Anchorage and other Alaskan cities to enjoy even flusher times.

    Another hot spot is in the Great Plains. Energy production and high commodity prices are pacing the economies of regional centers like Des Moines; Billings, Mont.; Cheyenne, Wy., and Sioux Falls, S.D. In Bismarck, Grand Forks and Fargo, N.D., where incomes are surging, there’s a sense that these are the best of times. One sure sign: The energy boom — coal, oil, wind as well as biofuels — has produced a a billion-dollar state surplus for North Dakota.

    The energy and commodity boom is changing the face of these small cities in key ways. Fargo, the butt of sophisticated jokes with the Coen Brothers’ movie, now boasts a first-class arena, fine restaurants, a luxurious boutique hotel and a thriving arts scene.

    Grand Forks has a growing condo market. Scores of smaller cities — like Bismarck and Dickinson – are also showing signs of a new quasi-urban sophistication. After decades of demographic stagnation, some of these towns are seeing healthy population gains.

    Rising unemployment is not a problem here; a looming labor shortage is. In some markets, there are signing bonuses and $12-an-hour wages at fast-food business.

    If energy prices hold firm, and particularly if the nation begins to ramp up energy production, we can see the boomtimes extend to energy-rich Utah, Colorado, New Mexico and Louisiana. These can mean more growth in already healthy economies like Albuquerque, Salt Lake City and Denver; but also for long hard-pressed New Orleans and other Gulf Coast cities.

    Finally there’s another group of potential winners: areas that have been selected to produce the energy-efficient vehicles of the future. Even as Detroit, Flint and Ft. Wayne, Ind.,– producers of SUVs and trucks — suffer, many cities in the mid-South, like Nashville, Huntsville and Chattanooga, Tenn., seem certain to gain as Nissan, Toyota, Volkswagen and other foreign producers ramp up production.

    Perhaps the ultimate example of “world turned upside down” by energy prices may end up being Mississippi, long a perennial loser in the economic sweepstakes. But this week, Toyota announced it would start building its popular hybrid Prius in Blue Springs, Miss., in late 2010. That’s just outside Tupelo, Elvis’ birthplace.

    We may not see a reappearance of the King — but for many people this resurgence is just as stunning.

    None of this, however, suggests that San Francisco, Los Angeles or New York are about to be eclipsed by Houston — much less Fargo or Tupelo. But if the history of cities tells us anything, places well-positioned for growth industries tend to emerge as ever more serious players.

    It worked for industrial cities like Chicago, which emerged from obscurity in the late 19th Century; or later for high-tech centers like San Jose, Austin and Boston. If energy and commodity prices stay high for another decade, we may have to get used to a shift in the power of places across the American landscape.

    Joel Kotkin is a presidential fellow in urban futures at Chapman University and the author of “The City: A Global History.” He is executive editor of the website newgeography.com. This article first appeared at The Washington Independent.

  • A look at the Information Sector

    The Information sector of the economy is has followed an interesting trajectory over the past 15 years. The info sector built up to a huge peak in the early part of this decade, and has seen general decline since that time.

    Growth in Information Subsectors:

    The big boom and bust was caused by employment inflation of the telecommunications sector. Publishing followed a similar, but less extreme path. Both industries have reverted to employment levels in the early 1990s.

    Motion picture and recording, data processing, broadcasting, and Internet publishing have all seen modest gains since the early 1990s.

    Information growth by percent:

    Here’s the fastest growing metro areas in the information sector through the recent period of decline. We’re seeing a decentralization effect here: smaller metros with historically manufacturing-centric otherwise specialized economies are building information industries.

    Information growth by number of jobs:

    Seattle is leading the charge and Madison is rapidly becoming and information center in the central states. I wouldn’t have guessed Springfield, MO or Orlando would show up here.

  • Information Sector Growth Nodes, by number of jobs, 2000 – 2007

  • Information Sector Growth Nodes, by percent, 2000 – 2007

  • Flushing in Florida?

    It’s all gloom and doom in the Miami Herald today after recent job numbers indicate the state is last in the nation in job creation.

    The top job-loss state in the nation. Shrinking wages. Collapsing population growth. Record home foreclosures.

    Florida’s economy is not just firmly and bleakly in the red —- it will likely stay that way until next June, according to the state government’s top economists who issued their most pessimistic financial forecast in years.

    With few exceptions, the economists’ Wednesday forecast shows that most economic indicators will do worse in this budget year when compared to a forecast they issued in February.

    A good sign that the recent growth in Florida was built on a house of cards, this is right in line with the findings of our Best Cities analysis.

    Link via Steve Bartin.

  • U.S. Information Sectors, 1991 – 2008

  • Houston, New York Has a Problem

    The Southern city welcomes the middle class; heavily regulated and expensive Gotham drives it away.

    New Yorkers are rightly proud of their city’s renaissance over the last two decades, but when it comes to growth, Gotham pales beside Houston. Between 2000 and 2007, the New York region grew by just 2.7%, while greater Houston — the country’s sixth-largest metropolitan area — grew by 19.4%, expanding to 5.6 million people from 4.7 million.

    To East Coast urbanites, Houston’s appeal must be mysterious: The city isn’t all that economically productive — earnings per employee in Manhattan are almost double those in Houston — and its climate is unpleasant, with stultifying humidity and more days with temperatures exceeding 90 degrees than any other large American city. Since these two major factors in urban growth don’t explain Houston’s success, what does?

    Houston’s great advantage, it turns out, is its ability to provide affordable living for middle-income Americans, something that is increasingly hard to achieve in the Big Apple. That Houston is a middle-class city is mirrored in the nature of its economy. Both greater Houston and Manhattan have about 2 million employees.

    In Manhattan, almost 600,000 of them work in the idea-intensive sectors of finance, insurance, and professional services; only 2% are in manufacturing, and fewer than that in construction. Finance increasingly drives New York City’s economy as a whole. By contrast, Houston is a manufacturing powerhouse that makes machinery, food products, and electronics, with a retail sector twice the size of Manhattan’s and lots of middle-class jobs.

    Housing prices are the most important part of Houston’s recipe for middle-class affordability. In Gotham, the extraordinarily high housing costs aren’t a problem for the hyper-rich. With enough money, you can live in a spacious aerie overlooking Central Park, shop at Barney’s, eat at Le Bernardin, and send your children to Brearley or Dalton.

    The abundance of poorer immigrant New Yorkers, in turn, tells us that for people simply seeking a lifestyle that beats rural Brazil, the city’s many entry level service-sector jobs, wide array of social services, and extensive public transportation can offset high apartment prices.

    But what if, like most Americans, you are neither a partner at Goldman Sachs nor a penniless immigrant? Consider an average American family with skills that put them in the middle of the U.S. income distribution — nurses, sales representatives, retail managers — and aspirations to a middle-class lifestyle. What kind of life will such people lead in Houston and New York City, respectively?

    For starters, they’ll probably earn less in Houston, though not as much less as you might think. In the 2000 U.S. Census, the typical registered nurse made $50,000 in New York and $40,000 in Houston. A retail manager earned $28,000 in New York and $27,800 in Houston. Let’s be generous to New York and assume that our middle-income family would earn $70,000 there but just $60,000 in Houston.

    If our Houston family’s income is lower, however, its housing costs are much lower. In 2006, residents of Harris County, the 4-million-person area that includes Houston, told the census that the average owner-occupied housing unit was worth $126,000. Residents valued about 80% of the homes in the county at less than $200,000. The National Association of Realtors gives $150,000 as the median price of recent Houston home sales; though NAR figures don’t always accurately reflect average home prices, they do capture the prices of newer, often higher-quality, housing.

    In Houston, you’ll find a lot of nice places listing for $175,000, and they’ll probably sell for about 10% less, or $160,000. These are relatively new houses, often with four or more bedrooms. Some have more than 3,000 square feet of living space, swimming pools, and plenty of mahogany and leaded glass. Almost all seem to be in pleasant neighborhoods — a few are even in gated communities. The lots tend to be modest, about one-fifth of an acre, but that still leaves plenty of room for the kids to play. For a family that has about $35,000 available for a down payment, basic housing costs — that is, mortgage payments — would be about $9,200 a year.

    The average home price in New York City is dramatically higher. In 2006, the census put it at $496,000, and $787,900 in Manhattan — way out of reach for a family earning $70,000 a year. There are cheaper options: a perfectly pleasant Staten Island home with three bedrooms and two baths for $340,000, for instance. These houses don’t have the amenities you would find in new Houston houses, but they offer 2,000 square feet of living space. Alternatively, the family might purchase a condominium, with two or three bedrooms, in Queens — say, in Howard Beach or Far Rockaway. Even for the Staten Island option, a family making the same $35,000 down payment would face basic housing costs of about $24,000 a year.

    You thus get much more house in Houston and pay a lot less for it. Small wonder Houston looks so good to middle-class Americans.

    It looks even better once you take taxes into account. Federal taxes are roughly equal for the two families: about $7,000 per year. But under the Texas constitution, to enact a state income tax requires approval by statewide referendum — and two-thirds of the revenues generated by such a tax, if passed, must go toward reducing other taxes. As a result, Texas doesn’t have any state income taxes. Nor, for that matter, does it have any city income taxes.

    Houston residents do have to pay property taxes, which come to about $4,800 for a $160,000 home. In New York City, not only would a middle-class family have to pay local property taxes, probably about $3,400; they would also have to pay state and city income taxes — adding another $4,000 or so to their tax burden, depending on deductions and other factors. State and local levies thus add about $2,600 to the cost of living in New York.

    Ah, but doesn’t it cost a lot more to get around sprawling Houston? The Houstonians must have two cars: the poor public-transit system leaves them no other choice. American families earning $60,000 typically spend about $8,500 a year on transportation — and sure enough, in Houston, that’s sufficient (barely) to cover gas, insurance, and payments on two relatively inexpensive cars.

    The New Yorkers could save a lot by giving up on cars altogether and relying solely on Gotham’s extensive network of buses and subways, but on Staten Island or in outer Queens, that would mean a significant lifestyle cost. Family members would have to walk to the grocery store and rely on taxis for other trips. A more reasonable approach would be to have one car for local trips and use public transit to get to work. With a public-transit bill of $80 per month, a fair guess is that the New York family will end up spending about $3,000 less per year than the Houstonians on getting around.

    Just as with housing, however, there’s a significant difference in the quality of transportation in Houston and New York. In Houston, the middle-class breadwinner likely will drive an air-conditioned car from an air-conditioned home to an air-conditioned workplace, and take 27.4 minutes to do it, on average. Commuting via New York public transit is more complicated. If you live in Queens, the average commute to midtown Manhattan (if that’s where you work) is 42 minutes, and longer if you’re coming from Far Rockaway.

    From Staten Island, the average commute is 44 minutes — and often something of a triathlon, with bus, ferry, and subway stages. Our middle-class New York commuter thus spends at least 120 more hours in transit per year than does his Houston counterpart. And except perhaps for the ones spent on the ferry, none of those hours is as agreeable as sitting in an air-conditioned car listening to the radio.

    Will rising oil prices eat away Houston’s cost advantages? While there’s no question that more expensive crude favors dense New York, the impact of paying more at the pump is likely to be modest. If the Houston residents buy 500 more gallons of gas per year than the New Yorkers, and if the price of gas jumps by $3 a gallon, then the price of Houston living will increase by $1,500. This is a real cost, but it doesn’t come close to evening the playing field.

    Further, the Houston family could always drive a 50-miles-to-the-gallon hybrid, which would let them buy only 400 gallons of gas to drive 20,000 miles. Big-city boosters may like to think that rising gas prices will end suburban sprawl, but a far more likely response to expensive oil is a large switch to more fuel-efficient cars.

    After housing, taxes, and transportation, the New Yorkers have $26,000 left. The Houston family has $30,500, and those dollars go a lot further than they would in New York. The American Chamber of Commerce produces local price indexes for various areas, including Houston and Queens (though not Staten Island). The overall price index for Queens is 150, which means that it costs 50% more to live there than it does in the average American locale. The price index for Houston is 88.

    If we exclude the areas that our two families have already paid for (housing and transportation) and average the remaining categories in the index (food, utilities, health, and miscellaneous), Queens is 24% more expensive than the average American area and Houston is 6% less expensive. Thus — again, after housing, taxes, and transportation — the Queens residents’ real remainder is a little less than $21,000; the Houston family’s is $32,200. The Houston family is effectively 53% richer and solidly in the middle class, with plenty of money for going out to dinner at Applebee’s or taking vacations to San Antonio. The family on Staten Island or in Queens is straining constantly to make ends meet.

    If the key factor making Houston a middle-class magnet is its plentiful and inexpensive housing, that raises the question: why is it so cheap? The low cost of homes reflects the low cost of supplying homes in Texas. Building an “economy” 2,000-square-foot house in Houston costs about $120,000, and a slightly larger “standard” one about $150,000.

    Why is it so much more expensive in New York? For one, supplying housing in New York City costs much, much more — for a 1,500-square-foot apartment, the construction cost alone is more than $500,000. Also, part of the reason is geographic: an old port on a narrow island can’t grow outward, as Houston has, and the costs of building up — New York’s fate, especially in Manhattan — will always be higher than those of building out. And the unavoidable fact is that New York makes it harder to build housing than Chicago does — and a lot harder than Houston does.

    The permitting process in Manhattan is an arduous, unpredictable, multiyear odyssey involving a dizzying array of regulations, environmental, and other hosts of agencies. A further obstacle: rent control. When other municipalities dropped rent control after World War II, New York clung to it, despite the fact that artificially reduced rents discourage people from building new housing.

    Houston, by contrast, has always been gung ho about development. Houston’s builders have managed — better than in any other American city — to make the case to the public that restrictions on development will make the city less affordable to the less successful.

    Of course, Houston’s development isn’t costless. Like most growing places, it must struggle with water issues, sanitation, and congestion. For environmentalists who worry about carbon dioxide emissions and global warming, Houston’s rapid growth is particularly worrisome, since Houstonians are among the biggest carbon emitters in the country — all those humid 90-degree days mean a lot of electricity to cool off, and all that driving gobbles plenty of gas.

    But Houston’s success shows that a relatively deregulated free-market city, with a powerful urban growth machine, can do a much better job of taking care of middle-income Americans than the more “progressive” big governments of the Northeast and the West Coast.

    The right response to Houston’s growth is not to stymie it through regulation that would make the city less affordable. It’s for other areas, New York included, to cut construction costs and start beating the Sunbelt at its own game.

    This article appeared first at the New York Sun.

    Mr. Glaeser, a professor of economics at Harvard University, is a senior fellow at the Manhattan Institute. This article is adapted from the forthcoming issue of City Journal.

  • Commuting Patterns in Chicago

    You may have read our recent commuting case study of the Los Angeles region written by Ali Modarres. Ali put together some detailed commuting pattern maps of the area.

    Here’s another similar commuting map of the Chicago area. It’s interesting to note the major difference in commute times of neighborhoods often in close proximity. Obviously, distance to jobs matters, but so does the occupational make-up of the neighborhood.

  • Suburbs Thriving, Cities Stagnating in Keystone State

    The headline in the Philadelphia Inquirer said it all, “Philadelphia’s population shrinking, though region’s is growing.” This in the midst of what is purported to be a condominium boom in its thriving center city.

    But facts are facts: Philadelphia’s population has dropped 4.5 percent. This ranks it first among the top-25 U.S. cities in population loss from 2000-2007. This data causes you to pause and rethink the real impact of major public investments in the city spurred on by a governor who is the city’s former two-term mayor.

    For one, gambling was supposed to bring good jobs to the city. The two winning bidders each created projects on the Delaware River, but these projects are stuck in a protracted political battle and their fate at these riverfront locations is uncertain along with the thousands of jobs they have promised.

    Part of the problem for the casinos is that a new vision has been created for the Delaware Riverfront. The Penn Praxis plan envisions recreation and greenways, not gambling for this area of the city. As a result, the gaming interests are being asked to consider building somewhere else within the city.

    There is also the Pennsylvania Convention Center. The first phase was built into the old Reading Railroad terminal on east Market Street. Supporters contend that it has spurred a hotel and restaurant boom in the city and there is validity to this position.

    But work rules issues have plagued the center since its inception. The result has been that most convention groups have chosen not to return because of arcane union rules that made it beyond difficult to do simple things like set up a booth or get electric power to a display. Negotiations have brought some relief, but problems remain to be solved.

    Despite these problems the convention center is now slated to expand about two blocks west of its current location. The costs have escalated dramatically and now exceed $800 million . This is an increase of nearly $100 million since the deal to move forward was approved and buildings were condemned and razed.

    On July 12, Governor Rendell hinted that he was having second thoughts about the viability of the expanded center when he said that the center is “getting to the point where the cost will outweigh the benefit.” These remarks were made while the governor was signing legislation that would increase the taxes on a hotel room in Philadelphia by more than 15 percent to pay for tourism promotion and the convention center.

    Stadium Economics
    Public dollars have also helped to fund a new football and baseball stadium in South Philadelphia. Citizens Bank Park is a real gem of a baseball stadium – a fun family entertainment venue where the Philadelphia Phillies play 82 games a year. Across the street is Lincoln Financial Field where the Philadelphia Eagles play their games as well as Temple University. There are only 20 – 25 games played there each year. The Phillies stadium cost $458 million and the Eagles complex $512 million, most of which came from public investment.

    What has been the economic impact of this investment? Has the neighborhood been revitalized by this investment? The short answer is no. They are basically commuter stadiums where fans come, see, and go.

    Rick Eckstein, who is a professor at a local university and author of Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums, has studied the economic impact of public investment in stadium projects. He concludes, “I have been studying and writing about publicly financed stadiums for more than 10 years and cannot name a single stadium project that has delivered on its original grandiose economic promises, although they do bring benefits to team owners, sports leagues and sometimes players.”

    Over the years billions of dollars has been invested in tourism and entertainment projects and the results are clear: the projects required more dollars than originally thought and the promises of profound economic benefits have never materialized as expected.

    Philadelphia is a lot more fun than it was 20 years ago, but its economy remains stagnant and its core population continues to leave to find opportunity elsewhere.

    There is also another trend resulting from this kind of pubic investment. The more public money that is poured into a region the more taxes and fees follow.

    In Pennsylvania, these kinds of investment go far beyond Philadelphia. Pittsburgh has two new stadiums costing a total of more than $1 billion and a new $375 million convention center that is touted as, “the cornerstone of western Pennsylvania’s hospitality industry.”

    Erie has the Bayfront Convention Center at $44 million and funded it with a new five percent hotel room tax. The Altoona region has Blair County Convention Center & Sports Facility Authority a $50 million project funded with $48 million in federal and state grants. The City of York invested economic and political capital in securing a $28 million revenue bond to fund a minor league baseball stadium. The City of Chester just was awarded a soccer franchise and is planning a new stadium to go along with the new casino as core projects to revitalize its economy.

    When we look back at the billions of dollars that has been spent on these projects and the results, you are left to wonder whether or not these dollars could have been spent more wisely in other areas to build an economy on sturdier foundation.

    The results have not been encouraging. Population growth in Pennsylvania between April 2000 and July 2006 was a mere 1.3 percent. Private non-farm employment decreased 0.1 percent according to the U.S. Census Bureau. Pennsylvania’s senior population continues to be among the highest in the nation at 15.2 percent in 2006.

    Philadelphia lagged behind the national average of the percent of the population with a bachelor’s degree by 4.5 percentage points in 2000; Pittsburgh’s mean household income was nearly $12,000 below the national average. None of the major cities in Pennsylvania gained population during the early years of this century.

    Suburban Growth
    Meanwhile there is a very different story in suburban and rural counties. Montgomery County’s population grew at a rate nearly three times that of the State of Pennsylvania and Bucks County grew by nearly four times. In Berks County, the next county beyond Philadelphia’s four suburban collar counties, population growth was a healthy 7.4 percent and household income exceeded the national average.

    In rural Monroe County, located outside of Wilkes-Barre, population spiked by nearly 20 percent over six years while in Pike County, northeast of Scranton, we saw staggering growth of 25.7 percent and household income exceeding the national average.

    The people of Pennsylvania want what every other American wants for their families: a nice home, good schools, quality government services and a safe community. They are abandoning cities because they cannot keep this promise to their middle-income wage earners.

    However, they are finding what they want in Pennsylvania’s first and second ring suburbs and in rural communities that don’t invest in stadiums, convention centers or entertainment to build their economies. Instead these communities provide a quality of life that attracts people and the jobs are following.

    An economy built on tourism and entertainment provides very few family wage jobs. These funds would likely be better invested in quality of life and infrastructure in order to create high wage, blue collar jobs in the global economy.

    If not, people will continue to vote with their feet as they look for opportunity beyond the casino, restaurant and tourism industries and a better quality of life outside of cities that are increasingly being viewed as opportunity-free zones.

    Dennis M. Powell is president and CEO of Massey Powell an issues management consulting company located in Plymouth Meeting, PA.