Reason Foundation

The Decade's Ten Most Expensive Transit Projects

Posted on March 10, 2010, 8:14pm | Samuel Staley

The Infrastructurist on-line magazine ("America under construction") has put together a revealing list of the decades 10 biggest transit projects in North America. It's worth browsing through the slide show, and includes debacles such as San Juan Puerto Rico's rapid transit line (and the Los Angeles Red Line subway) as well as successess such as Vancouver's Canada Line which was delivered through a public-private partnership. These are all "megaprojects" that cost more than $1 billion.

Video Interview: The U.S. Shouldn't Bailout Greece or California

Posted on March 10, 2010, 3:00pm | Anthony Randazzo

I was back on RussiaToday last night talking about the Greek debt crisis, where it stands, and whether the U.S. will bail them out. We also discuss Greece's claim that short sellers are causing the problems and whether Washignton D.C. should bailout California if they go bankrupt:

Philadelphia Needs Competition for Waste Collection

Posted on March 9, 2010, 4:36pm | Leonard Gilroy

Prior to a conversation with a local reporter yesterday, I was unaware of the extent to which Philadelphia remains stuck in the 20th century when it comes to residential waste collection services.

For example, even though many jurisdictions charge citizens a monthly user fee for waste collection—typically as part of billing for garbage, water and other services loosely defined as "utilities"—Philly funds its waste collection services from general tax revenues, which means trash services have to compete for dollars against hundreds of other spending items in the city budget.

Other jurisdictions have figured out that user fees are a much better approach than general appropriations funding for waste collection. As my colleague Adam Summers discusses in this study, user fees are most appropriate when services are clearly defined and can be directly connected to specific users/consumers. They also prevent the "free-rider" problem of some people using a service for free while others must pay for it whether they use it or not. User fees, furthermore, offer practical benefits including more flexible management and greater financial accountability.

By contrast, the two major downsides of Philly's general appropriations approach are that: (1) spend-happy politicians won't set aside enough to properly fund waste collection, and (2) you get almost no financial accountability as costs are obfuscated and smeared across columns in the city budget. We're seeing these downsides play out in Philly right now, as Philadelphia Daily News reporter Catherine Lucey writes (emphasis mine):

As the city gears up to charge you $300 a year for trash collection, questions linger about whether Philadelphia's trash operation is as efficient as possible.

"I don't want someone to tell me what I'll get for the $300; I want to know what [trash collection] costs," said Maurice Sampson II, who served as recycling coordinator under former Mayor W. Wilson Goode.

Mayor Nutter last week proposed the trash fee and a 2-cent per-ounce soda tax - moves he described as the best way to balance the city budget without service cuts or changes to the major city taxes. Some low-income families could qualify to pay a reduced $200 trash fee under the plan, which Nutter says is still a work in progress. The trash fee would bring in $107 million annually, covering the cost of the service, officials said. But experts questioned whether the city could be paying less for trash and recycling collection - either through more efficient management in-house, or by privatizing some or all of the system.

"If government is providing this service, it has an obligation to provide it in the most efficient way possible," said Leonard Gilroy, director of government reform for the Reason Foundation, a nonpartisan, nonprofit conservative policy group. Gilroy said cities that have privatized trash services saw savings of 20 to 40 percent. He also said a system where the public sector employees bid against private firms to collect trash in different parts of the city - such programs exist in Charlotte, N.C., and Phoenix, Ariz. - would provide cost savings.

Linda Morrison, who served as the director of competitive contracting under then-Mayor Ed Rendell, said that competitive bidding would reduce costs. "Just turning something over to a private company may or may not save you any money, but if you open it up to competition, that almost certainly would save you money," Morrison said.

Mayoral spokesman Doug Oliver yesterday said that the city wasn't in a position to consider privatization - which would require City Council approval - as it is in the midst of contract negotiations with the city's blue-collar workers. [...] The city unions have long opposed privatization, saying it would kill jobs and not necessarily provide better service.

Later on we find out that the city employs 840 sanitation workers and still uses three-man crews to collect waste (one driver with two workers that hand-toss the trash), even as other cities and private waste companies long abandoned the inefficient, labor-heavy, 1950s-era model in favor of automated, one-man trucks with mechanical arms.

With 840 jobs in sanitation, it's no wonder "the city unions have long opposed privatization"—why would they want to cut off a good thing (even if its not a good deal for taxpayers)? In its defense, the city claims that automated vehicles aren't feasible citywide given the constraints of narrow streets and on-street parking. And I won't discount the possibility that those are indeed challenges, but they don't seem to me to be insurmountable challenges to a more efficient operation.

At the very least, putting the city's trash service up for competitive bidding would be a way to quickly evaluate if there is a better and less costly mousetrap. Waste collection is probably the most-often-outsourced function in municipal government. A 2009 Reason Foundation study found that 29.0% of metropolitan core city governments, 57.3% of suburban governments and 39.3% of rural local governments used for-profit contracting as the delivery method for waste collection in 2007. The potential for economies of scale, new technology and vertical integration (from collection to disposal) make this a natural for for-profit service delivery.

Competition would keep the system honest in Philadelphia. And it seems to me that it might be feasible there, given two conditions:

• Managed competition: Since two mayors have tried to privatize waste collection in recent decades and failed to persuade the labor-friendly City Council, then perhaps the way out for Philadelphia is managed competition—allowing the public employees to pool together, create employee business units and bid against private sector waste services companies. Indianapolis, Phoenix and Charlotte pioneered this approach with great success (see here and here for more). This works because you allow the public employees to streamline themselves and innovate under the pressure of competition (which they don't have when they're the monopoly provider, as in Philly). By lifting civil service constraints and allowing public employees to cut their own middle management ranks (which they inevitably do when they actually have to compete), they can and do drive down costs. In Charlotte's case, over the course of their 15-year managed competition program, waste collection contracts have shifted back and forth over time between the "public option" and private sector providers, with the decision based on bottom-line costs. At the end of the day, taxpayers win when competition drives down costs, regardless of who wins the competition.
• Competition by zone: Philly city leaders may have a point in noting that some parts of the city will necessarily incur higher per-unit waste collection costs. But that's the case in practically any city, given variations in density, land use, topography, etc. across the geography of a city. Given that reality, Phoenix and Charlotte have been pioneers on competing waste collection services in specific city zones using the managed competition model. Policymakers can fine-tune the costs of waste collection along geographic lines through competition, which helps to minimize costs systemwide. And as discussed above, Charlotte's seen their contracts shift back and forth between public and private providers, depending on the specific zone being served and the specific bid costs achieved through regular competition (typically 5 year contract terms).

If you could put those two things together in Philly, then you'd really have something. It certainly makes sense to transition to a user fee model, as city leaders are discussing, but before doing that, taxpayers deserve to know that their leaders have done everything possible to contain the costs of the enterprise. Having a whopping 840 employees and using three-man trucks are signs that this probably hasn't happened yet.

There is no realistic way to find that minimum price point without competition. The city could go out and hire all the consultants they want, undertake all of the efficiency plans and exercises they want, etc., but at the end of the day a monopoly is a monopoly and won't feel true pressure until it's got some competition.

Greek Debt Crisis: Watch RT Tonight at 6pm

Posted on March 9, 2010, 3:01pm | Anthony Randazzo

I will be back on RussiaToday tonight at 6pm eastern to discuss the Greek debt crisis. Click here for a live feed. I'll be the first guest, probably on air at 6:10pm.

County Government Wants Authority to Invest in Private Businesses

Posted on March 9, 2010, 2:32pm | Samuel Staley

WTOP news reports on a bill in the Maryland state legislature that would allow Montgomery County, Maryland to invest tax dollars in private equity companies:

"Delegate Brian Feldman, who leads Montgomery's delegation to the House of Delegates, says the proposal would improve the county's ability to compete for new biotech companies. He notes the state already can make equity investments in businesses that have returned millions of dollars to state coffers."

Remarkably little analysis has been done on whether county governments (or state governments) are good venture capitalists, but it's hard to see how county officials are in a better position to weigh the prospects of start-up companies than private venture capitalists with their own money on the line. This is a bit like the tail wagging the dog. Unfortunately, I have no doubt we can expect to see a lot more of this as more reports of the federal government's occasional "success" in its equity "investments" in big banks and other businesses "too big to fail" show paper profits.

Of course, at least conceptually, a difference exists between the federal government's program that took equity stakes in banks and the proposed county program. The federal government took equity stakes in banks to provide capital and liquidity and to hedge against what they believed would be certain losses even though the businesses themselves were fundamentally sound. All the investments were in established financial institutions with a track record of effective management under normal economic conditions; they weren't start-up ventures in a highly uncertain and risky business like biotech. Also, no one really expects the federal government's investment in GM or Chrysler to pay off, so this was really a direct bone to an important political constituency, not a true venture capital investment.

Montgomery County's rationale for the program also seems odd because its economy is strong. It's benefiting from the goose in jobs resulting from expanded federal government employment. In fact, the problem facing the county is that low-income and middle-income households are being priced out of the market because supply can't keep up with demand (which is also due to the country's stringent planning laws). Where are all these new workers going to live if the county is successful?

Progressive Urban Dreams: Central Planning

Posted on March 9, 2010, 8:58am | Samuel Staley

The city of Detroit is thinking about downsizing, and in the process is revealing a progressive dream that would erase any meaningful housing or neighborhood choice for residents in the city. Detroit is literally planning to bulldoze certain neighborhoods and relocate residents to neighborhoods it considers "stronger" and worth further city investment.

According to the Associated Press (March 8, 2010):

"Though the will to downsize has arrived, the way to do it is unclear and fraught with problems.

"Politically explosive decisions must be made about which neighborhoods should be bulldozed and which improved. Hundreds of millions of federal dollars will be needed to buy land, raze buildings and relocate residents, since this financially desperate city does not have the means to do it on its own. It isn't known how many people in the mostly black, blue-collar city might be uprooted, but it could be thousands. Some won't go willingly."

This isn't conventional urban renewal, where the government uses eminent domain to remove blight and redevelop neighborhoods. This also isn't like more benign approaches that focus on razing abandoned buildings or land bank vacant land for future development. This plan involves the forced relocation of residents and businesses to areas the urban central planners believe are healthier and worth saving. The vacant land would be converted into farmland or other semirural uses. This is actually very conventional central planning on an urban scale.

The city of Detroit unquestionably faces major revitalization challenges:

"Now, a city of nearly 2 million in the 1950s has declined to less than half that number. On some blocks, only one or two occupied houses remain, surrounded by trash-strewn lots and vacant, burned-out homes. Scavengers have stripped anything of value from empty buildings. According to one recent estimate, Detroit has 33,500 empty houses and 91,000 vacant residential lots.

"Several other declining industrial cities, such as Youngstown, Ohio, have also accepted downsizing. Since 2005, Youngstown has been tearing down a few hundred houses a year. But Detroit's plans dwarf that effort. The approximately 40 square miles of vacant property in Detroit is larger than the entire city of Youngstown.

"Faced with a $300 million budget deficit and a dwindling tax base, Bing argues that the city can't continue to pay for police patrols, fire protection and other services for all areas."

And the federal government will be a key player. Detroit, one of the worst run cities in the nation, can't "afford" to fund the program, so it's looking to the Federal government for the funds to implement the plan:

"The current plan would demolish about 10,000 houses and empty buildings in three years and pump new investment into stronger neighborhoods. In the neighborhoods that would be cleared, the city would offer to relocate residents or buy them out. The city could use tax foreclosure to claim abandoned property and invoke eminent domain for those who refuse to leave, much as cities now do for freeway projects.

"The mayor has begun lobbying Washington for support, and last month Detroit was awarded $40.8 million for renewal work. The federally funded Detroit Housing Commission supports Bing's plan.

"It takes a true partnership, because we don't want to invest in a neighborhood that the city is not going to invest in," said Eugene E. Jones, executive director of the commission."

It's both sad and unfortunate when urban "leadership" is lionized for restricting freedom and choice rather than finding creative ways to tap into individual (and neighborhood level) freedom, creativity, and innovation. But, this doesn't fit the progressive idea that government solves problems instead of people working outside formal political channels.

Perhaps the solution is not more central planning, but more decentralized governance. The city could focus on using managed competition to de-bundle public services such as water, sewer, law enforcement, and even fire services so they can be scaled to the needs and willingness to pay for individual neighborhoods rather than attempting to provide services in a one-size fits all approach that can't be sustained.

Detroit's large geographic size could be an opportunity to experiment in decentralized urban governance that empowers neighborhoods rather than central planning that has historically shown little ability to reverse urban decline in Detroit or elsewhere.

March 15-19: Reason Saves Cleveland With Drew Carey

Posted on March 8, 2010, 3:04pm

Coming March 15-19: Reason Saves Cleveland With Drew Carey, an original Reason.tv series featuring The Mistake on The Lake's most famous native.

The six-part series comes just as Cleveland has been dubbed "the most miserable city" in America by Forbes magazine.

Michael McIntyre at the Cleveland Plain Dealer writes:

Carey took time off from his gig as host of TV's "The Price Is Right" to help produce and star in a series of Web reports detailing Cleveland's woes and a number of proposed fixes that will be launched next week on reason.tv, the Internet arm of the nonpartisan, libertarian-leaning Reason Foundation, on whose board Carey serves.

Carey established reason.tv three years ago and has developed a number of short Web documentaries to highlight government's heavy-handedness. Now, the lens turns to his hometown with a six-part series called "Reason Saves Cleveland."...

Bottom line? As the Web site's motto reads, "Free minds and free markets." In other words, move out of the way, government. In a town like Cleveland, with big government bureaucracies, cumbersome regulations and old-school unions, the series argues, it's no wonder times are so tough.

The series includes segments suggesting ways to fix Cleveland schools.

"Your choice is, you know, go to a Catholic school or get the hell out of town and raise your kids somewhere else. That's not much of a choice at all," says Carey. He is also fearless in taking on teachers unions, saying, "Maybe hiring teachers just based on seniority isn't a good idea because just hanging around doesn't make you good."

Other segments recommend privatizing government services; simplifying zoning laws; cutting red tape; and ending reliance on big-ticket development projects such as the new medical mart/convention center.

"I didn't know Cleveland was such a bustling convention city. Take that, Vegas!" says Carey.

A chief goal should be to bring people back to the city.

"My only experience in running a city is SimCity, the computer game," Carey says in one of the episodes. "I know that when you raise taxes, all the Sims leave the city."

Awful schools. Fleeing population. Rising taxes. Abandoned buildings. Chronic unemployment. Corrupt politicians. Can Cleveland make a comeback (something its NFL franchise seems incapable of)?

Of course it can, but only if its elected officials, leading businessmen, and remaining residents stop what they've been doing for decades and borrow the best practices of thriving cities when it comes to reforming schools, creating a pro-business environment, encouraging development, and trimming government waste and overreach.

Featuring sitcom legend, Price Is Right host, and proud Clevelander Drew Carey, each 10-minute episode of Reason Saves Cleveland explains exactly how the city that gave birth to Standard Oil hit the skids—and how it can roar back to life in the 21st century.

Reason.tv's Nick Gillespie narrates and talks with educators, elected officials, businesspeople, policy experts, and residents from all walks of life in a documentary series that maps a route back to prosperity and growth not just for Cleveland but for all the other once-great American cities on Forbes' Most Miserable list (are you listening, Stockton...and Memphis...and Detroit...and Miami...and Buffalo...and St. Louis...and ...?).

Reason Saves Cleveland with Drew Carey is written and produced by Paul Feine; camera and editing by Roger Richards and Alex Manning.

For a full episode guide and release schedule, go here.

Click below to listen to Drew Carey reminisce about the good old days in Cleveland, when the Cuyahoga River caught fire and Johnny Carson used the city as an all-purpose punchline. And why Drew would film Price Is Right there in a heartbeat.

Why We Can't End Fannie and Freddie Today, Though I Wish I could

Posted on March 8, 2010, 12:35pm | Anthony Randazzo

A reader wrote me this morning to ask why we can't just shut down Fannie Mae and Freddie Mac today. I share this frustration, but believe it would not be the best policy choice, as much as it would seem to be the more libertarian response.

As I wrote in my Washington Times piece last week, "The process of eliminating Fannie and Freddie is going to be complicated and hotly debated. They cannot be shut down right now because virtually the entire mortgage market is dependent on them as a wastebasket for toxic mortgage debt. But a long-term strategy for dissolving Fannie Mae and Freddie Mac can and should be created now."

The reason why is based in the fact that ending the GSEs tomorrow would put the market into quantifiable disarray. I do not think this is prudent. The government has promised to back Fannie and Freddie and responsible individuals, investors, and firms (as well as irresponsible ones) have made bets in the market based on that information—even though it is a bad policy response from the government. We would be doing these people and firms a disservice by unfairly reversing course on them instantly.

I should note, that this reasoning does not support bailing out firms. Prior to the Bear Stearns bailout there was no explicit guarantee from the government, rather investors bet on both a belief in market resilience and an implicit promise from the government to prop up market failure. Those investors were taking their risks with non-explicit information. This is a different scenario. Imagine if you had invested in a firm based on the fact that the government guarantee was allow them to become profitable. You would want fair warning that the guarantee was coming to an end.  

This is why I suggest in my artlce and previously on this blog, that they be wound down in an organized way over the next several years. I will be recommending in a forth coming policy paper, to be published by Reason Foundation, that the GSEs be banned from buying or guaranteeing any new mortgages by the end of 2010 (or 2011 if its more politically palatable). This would force the market to adjust its activities based on the change in government assistance. It would also allow for investors to alter their bets. Since the GSEs are already worth virtually nothing, there would be little to no shareholder loss.

Then, at the same time as the GSEs are ending their market operations, they will be put on track to have all assets and parts of their portfolio sold off over the next five years or so. The proceeds would go to pay Fannie and Freddie debt holders—aka the U.S. government. At the same time, the GSEs should be put on the U.S. budget since they are, for all practical purposes, nationalized. Designing such a plan would take a lot of time, and will require numerous, dragged out deal sessions as potential buyers do their proper due diligence and ensure they are not taking on debt that will drag them down.  

Obviously, this is not the most ideal for those who see the GSEs as failures of a market intervening government. They are the compromises of political realities and the reality of the market as it exists today.

Privatization Saving Puppies, Hungry D.C. Pols, and Libyan Camel Breeding

Posted on March 8, 2010, 12:15pm | Leonard Gilroy

Over at Governing, Harvard research fellow and former Reasoner John O'Leary takes a tongue-in-cheek look at a few privatization stories—including the privatization of Kansas City's animal shelter, the U.S. Senate's restaurants and Muammar Gaddafi's camel breeding operations—but makes a serious conclusion (emphasis mine):

Privatization won't always work. But when public-sector agencies are broken and stuck in a cycle of ineffectiveness, bringing in new management is a strategy that should be considered. Privatizing the dog pound, the Senate's soup kitchen and Libya's camel-breeding farms may sound humorous, but they represent real management headaches for public managers. They also were over-consuming taxpayer dollars.

Dysfunctional agencies don't work well for anyone and can be notoriously resistant to change. Sometimes a new operator is just the thing to breathe new life into a moribund operation. Just ask Fluffy.

Or, just ask the board of education in Los Angeles, which last August voted to privatize the operation of 200 chronically underperforming schools (and 50 new schools).

These weren't ideological decisions—these were pragmatic enterprise management decisions intended to produce better outcomes. The sooner that politicians drop the antiquated notion that privatization is an ideological tool to fear—and embrace it as proven management tool to drive better, faster and cheaper public service delivery—the better.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Free Market Land Use and Transportation Policy Conference Dates Set

Posted on March 8, 2010, 8:59am | Samuel Staley

One of the best places to learn about free-market approaches to land use, transportation, planning, and other urban policy issues is the annual conference organized by the American Dream Coalition. This is the only national conference that focuses on the nuts and bolts of addressing urban planning and transportation issues from a free market, pro-property rights perspective.

This year, the conference will be in Orland, Florida, from June 10-12.

From the ADC web site:

Mobility and homeownership are under attack. The Secretary of Transportation says the goal of the Obama administration is to “coerce people out of their cars.” The House Transportation Committee wants to require all rural areas to conduct land-use planning to prevent “sprawl” — and make single-family housing unaffordable to most people.

Now more than ever, it is time to come together to fight these threats to the American Dream. The 2010 Preserving the American Dream conference in Orlando on June 10-12 is your opportunity to meet dozens of experts and compare notes with activists from all over the world.

Speakers who have so far agreed to attend include:

• David Hartgen, author of The Performance of State Highway Systems
• Steven Polzin, Center for Urban Transportation Research
• Steven Greenhut, Pacific Research Institute
• Clyde Hart, American Bus Association
• Joel Schwartz, Blue Sky Consulting Group
• Doug Guetzloe, Ax the Tax
• George Siler, former executive director, Knoxville-Knox County Metropolitan Planning Commission
• Sam Staley, Reason Foundation
• Robert Poole, Reason Foundation
• Alan Pisarski, author of Commuting in America
• Wendell Cox, author of War on the Dream
• Randal O’Toole, author of Cato Institute
• Ron Utt, Heritage Foundation
• Ed Braddy, American Dream Coalition
• Tom Rubin, transit expert

Conference registration is just $259. We also offer a student and low-income rate of $175. The optional Thursday tour of Tampa and Orlando transportation and land-use projects is $49.

The conference will take place at the Orlando Doubletree Resort on International Drive, a beautiful hotel just minutes away from SeaWorld, Universal Resort, and Walt Disney World. To make reservations at the conference rate of $99, good for any time between June 6 and June 15, call 1-800-327-0363 and ask for the American Dream Coalition rate.

News Links on Mobility and Transportation Policy

Posted on March 7, 2010, 1:55pm | Samuel Staley

The American Dream Coalition newsletter has carved out a few useful recent newslinks for those following transportation policy issues:

Federal dollars for federal roads – Robert Poole, Washington Times
Highway policy: confliction and confusion – Fleet Owner
New Scorecard Reinforces Density-Traffic Congestion Nexus – Wendell Cox, New Geography
                Bonus: Sydney: Choking in its Own Density
LaHood Faces Off With GOP Senator Over High-Speed Rail, Livability – D.C. Streetsblog
Improving Virginia’s Transportation System – Ron Utt, Tertium Quids
Porsche unveils 'green' supercar for petrol-heads – The Local, Germany
Are Today's Cars Too Smart for Their Own Good? – AOL News
It’s the Traffic, Stupid – New York Times
City of Jacksonville to consider mobility fees – Daily Record, Florida
Austin reached 4th highest traffic congestion without high population density – C.O.S.T., Texas
Bellevue drops Mercer Slough light-rail route – Seattle Times
Thousands a month spent on security for light rail cars – WVEC.com, Virginia
Pandemonium at MTA Hearing in Brooklyn, 4 Arrests – Gothamist, New York
FTA delivers scathing report on safety of D.C. Metro – Washington Post
Latest attempt to reform San Francisco's Muni – San Francisco Chronicle
Man Rescued Along Light Rail Tracks – KPHO-5, Arizona
Pedestrian killed by VTA light rail vehicle – ABC-7, San Jose, California
Summary of MAX Rail Fatalities – PortlandFacts.com
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When Smart Growth Comes to a Small Town

Posted on March 6, 2010, 4:06pm | Samuel Staley

John Semmens over at Transportation Research Digest flagged this study of Smart Growth's potential transportation impacts in two small towns in Maine. The study is useful because it provides a glimpse into how Smart Growth--high density, mixed-use development--might be applied outside large urban areas like Washington, D.C., Chicago, San Francisco, etc.

The estimates were performed by the University of Vermont's Transportation Research Center for the towns of Lisbon (population 9,100) and Sanford (population 20,800). The study used transportation demand and land use modeling through the year 2030 based on two scenarios for each town: directing future development into one mixed use development or developing future development into two mixed used developments in Lisbon and three in Sanford. (Yes, these are small towns, so future growth in a state that isn't growing very much doesn't generate much of a change in actual land use.)

In the Lisbon case, about a quarter of projected future growth would be directed into Smart Growth areas under scenario one. In Sanford, about 20 percent of future growth would be directed into these areas. Under the second scenario, about 60 percent of the population and 41 percent of the jobs would be directed into the Smart Growth areas in Lisbon, and about half the population and one third the jobs in Sanford would go into these areas.

The results weren't too surprising: the effects of Smart Growth would be small. According to the executive summary:

"In Lisbon, VMT and GHG emissions estimated for the Targeted Smart Growth scenario were

0.43% and 0.42% lower, respectively, than estimates for the Status Quo scenario. The VMT

percent reduction corresponds to 656 fewer vehicle miles traveled daily in the Town of

Lisbon. Under the Multiple Smart Growth scenario, the reduction in network-wide VMT and

GHG emissions was approximately 0.68% and 0.57%, respectively, compared to Status Quo.

The VMT percent reduction corresponds to 1,038 fewer vehicle miles traveled daily.

Modeling the Transportation Impacts of Smart Growth Development in Maine

"In Sanford, VMT and GHG emissions estimated for the Targeted Smart Growth scenario

dropped by 0.24% and 0.27%, respectively, from the Status Quo scenario. The VMT percent

reduction corresponds to 985 fewer vehicle miles traveled daily in the Town of Sanford.

Under the Multiple Smart Growth scenario, the reduction in network-wide VMT and GHG

emissions was approximately 0.42% and 0.43%, respectively, compared to Status Quo. The

VMT percent reduction corresponds to 1,698 fewer vehicle miles traveled daily."

But, here's the kicker from my view. In order to get these small impacts, the towns had to impose an enforceable growth boundary so that land would, in effect, be rigged to develop at higher densities. Second, the modeling assumed that new growth would be directed into these mixed use, Smart Growth areas. The modelers redirect the development that would have gone outside the growth boundary into the the Smart Growth developments.

Here's the question: What mechanism would accomplish this? Presumably, zoning and land-use regulation would effectively limit the amount of housing that could be built outside the designated Smart Growth areas so vacant land inside the growth boundary couldn't be used to accomodate the new development.

Moreover, this implies a substantial housing preference mismatch: households that preferred the low-density development outside the growth boundary are now forced to choose higher-density housing designated by town planners.

The provocative part of the analysis is that it really justifies the worst fears of critics of Smart Growth: top down central planning is directing housing choice regardless of the preferences for households. Smart Growth advocates often claim their goal is only to provide choices in the market place. In high-growth, built up areas, this is a valid perspective, and we welcome ways to free up the housing market (Houston style) to allow real-estate markets to meet this demand.

In slower growth, small town areas, however, coercion is fundamental to meeting Smart Growth goals. Smart Growth isn't about choice any more than Portland's growth policies are about choice. Smart Growth policies are about scripting an urban landscape that is different from what households freely choose in the market place.

Amid Illinois' Fiscal Woes, Chicago Proves Tax Hikes and Service Cuts Aren't the Only Option

Posted on March 5, 2010, 6:30pm | Leonard Gilroy

A recent Chicago Sun-Times article painted an accurately bleak picture of the fiscal challenges facing Illinois and its local governments. Yet they only suggested two solutions—tax hikes and service cuts—discounting the proven role that private companies and capital can play in lowering service costs and delivering better infrastructure.

Chicago would be much worse off today without the $3.6 billion from the Skyway, garages and parking meter leases. The city was able to avoid major service cuts and tax increases that would have been an economic albatross in a recession. Further, being able to pay down debt and set aside reserves prompted a credit rating upgrade that's still saving city taxpayers millions in interest.

It's time for more. A Midway Airport lease would pay off debt, shore up public pensions, fund infrastructure and create jobs, all smart fiscal moves. Also, privatizing the management and operation of McCormick Place would make it less costly and more competitive to attract convention business back to Chicago.

Public officials across Illinois should take a page from Mayor Daley and embrace the private provision of public services to help downsize government and bridge the fiscal gap.

Bulldozing Fannie and Freddie

Posted on March 5, 2010, 2:47pm | Anthony Randazzo

Yesterday, I had an op-ed published in The Washington Times on the reasons why we need to get rid of Fannie Mae and Freddie Mac:

Taxpayers have already spent more than $111 billion bailing out mortgage giants Freddie Mac and Fannie Mae, and that's going to be just the tip of the iceberg. Instead of limiting Fannie's and Freddie's bailouts to $400 billion as first planned, the Treasury quietly announced (on Christmas Eve, no less) that it would offer the two firms unlimited bailouts. This puts taxpayers on the hook for any losses the two firms suffer. And there will be lots of losses.

Last week, Fannie announced it lost $15.3 billion in just the fourth quarter of 2009, bringing its 2009 losses to $74.4 billion. The Congressional Budget Office expects Fannie and Freddie to cost taxpayers a whopping $290 billion this year alone. Collectively, the two firms hold or guarantee more than $5 trillion in debt. In December, 3.8 percent of Freddie's mortgages were at least 90 days late and 5.2 percent of Fannie's mortgages were delinquent. Those numbers will continue to rise as the economy rights itself.[...]

The process of eliminating Fannie and Freddie is going to be complicated and hotly debated. They cannot be shut down right now because virtually the entire mortgage market is dependent on them as a wastebasket for toxic mortgage debt. But a long-term strategy for dissolving Fannie Mae and Freddie Mac can and should be created now. The ideal plan would break them up and sell their assets over five to 10 years, with any remaining government activities related to housing consolidated in another agency.

Read the whole piece here.

For more on this topic, see these previous blog posts:

• Fannie and Freddie Losses Are Mounting
• How We Could Break Up Fannie and Freddie

Renters Priced Out of Homes In Heavily Planned Montgomery County (MD)

Posted on March 5, 2010, 11:40am | Samuel Staley

The Washington Post reports on a new study by a tenant advocacy group in Montgomery County, Maryland arguing that renters are being priced out of homes. The problem is likely to get worse as the economy picks up, demand for housing increases, and the supply can't keep up with demand.

"It is a sentiment that Montgomery County tenants' advocates say is becoming more common in a costly housing market where rent increases often soar beyond growth in personal income, according to a report released Friday by the county's first "tenants work group," which held four public meetings and commissioned a survey of Montgomery renters conducted by Salisbury University. Montgomery Executive Isiah Leggett (D) appointed the group, made up of tenants and government officials, in 2008.

"The group's report concludes that Montgomery residents living in about 95,000 apartments, townhouses and rental houses are often priced out of their homes, lose security deposits with little explanation and face eviction for no reason."

the last comment, that tenants losing their housing "with little explanation and face eviction for no reason," is a clue to the group's recommendations. The county government created Tenant Work Group provides few inspired recommendations, even less understanding of how housing markets work, and relies on the conventional, ineffective, and economically disastrous policy proposals that have gutted affordable housing markets in cities for decades: rent controls, restrictions on evictions, and other tenant "rights" proposals.

The Montgomery group's recommendations include instituting a rent-control law, requiring landlords to have "just cause" before ending a lease and informing tenants about county services that could help them.

This is no mention of the role planning has played in Montgomery County that has the effect of increasing the costs of building new housing to meet rising demand. A far more cost-effective and equitable approach to addressing the affordable housing needs of Montgomery County residents would be to back off the regulatory process and allow "as of right" development of housing in built-up areas without the need for rezoning or zoning approvals.

This is an ideal case of Houston-style development regulation would be more effective than hamstringing the housing market with further regulation. In the long run, the solution is increasing supply, not reducing it.