Reason Foundation

Las Vegas City Neighborhoods Fare Worse Than Suburbs

Posted on April 25, 2012, 5:00pm | Baruch Feigenbaum

Much of the hype from the Great Recession has focused on how exurbs are losing population while closer in neighborhoods are gaining population. In reality the opposite is often true. At last week’s American Planning Association conference in Los Angeles, Alan Mallach of the Brookings Institution highlighted that in Las Vegas the suburbs and exurbs have survived the recession while the older parts of the city have not fared as well.

Mr. Mallach who researches urban revitalization and real estate divided sun-belt towns into four categories: bust high-cost, bust low-cost, small-decline and stable. Mallach found that although some cities particularly in California, Florida, and Nevada have high unemployment rates and depressed housing prices, any notion that the sunbelt is declining is a myth. Some sunbelt cities are outperforming the rest of the country. Texas metro areas have been some of the least affected places in the country by the recession. Mallach found that over the past fifty years, the only significant variable in predicting migration and growth is the average January temperature. This research supports the idea that the Sunbelt will begin growing again when the recession ends.

Typically the ghost towns in boom/bust cities such as Las Vegas are not distant suburbs but closer in neighborhoods. Home prices in the newer planned suburban communities decreased less than home prices in the older urban neighborhoods. The “less walkable” suburban developments saw smaller price depreciation than the “more walkable” urban developments. The vacancy rate in the new planned communities actually decreased during the recession. And during the recession, most home buyers continued to purchase a dream-house in a planned community with a 15-30 minute drive from their workplace. These homeowners do not consider a 15-30 minute one-way drive time an inconvenience. Other boom/bust cities across the country have housing characteristics similar to Las Vegas.

Mr. Mallach does not expect a radical change in the economy of demographic patterns. The most popular places in boom/bust cities like Las Vegas will most likely remain the suburbs. 

There are two takeaways from this research. First, while many have been quick to promote the death of the suburbs and the rebirth of central cities, in many metro areas this is not the reality. While revitalized cities have many positives, policymakers need to use facts not desires to create new policy. 

Second, many people still prefer to live in suburban areas. Yes many people, particularly the young prefer cities for their variety and excitement. Historically, younger people prefer cities. As these younger people age, have families, look for better schools and more affordable housing, they often move to the suburbs. People should be free to choose between the cities and the suburbs; both have advantages and disadvantages. The U.S. is a large country; promoting the same solution for every metro area is not the way to improve the neighborhood or the economy.

Romney's Transportation and Land Use Policies may be Little Different than Obama's

Posted on April 25, 2012, 1:54pm | Baruch Feigenbaum

Many people know that “Obamacare” was modeled on former governor Mitt Romney’s Massachusetts health-care law. However, few know that one of President Obama’s landmark “smart growth” initiatives known as the Partnership for Sustainable Communities was also based on a Romney program. 

When Romney was governor of Massachusetts he fought sprawl and encouraged density. According to The Grist, in 2002 he said, “Sprawl is the most important quality of life issue facing Massachusetts.” After winning Romney changed the state’s land-use laws in several ways. First, he created the Office for Commonwealth Development and appointed environmentalist Douglas Foy to lead it. According to Commonwealth Magazine, the business community was furious. The state office ensured that transportation, housing, energy, and environmental offices all worked together to promote smart growth. The Partnership for Sustainable Communities has accomplished the same goals on the federal level with the department of transportation, department of housing and urban development and the environmental protection agency.

Romney’s administration worked to concentrate development in town centers, construct housing near transit stations, and improve existing roads instead of expanding them. 

Further according to The Grist:

Romney was a vocal advocate for the cause. “I very much believe in the concept known as smart growth or sustainable development, which is the phrase I used in the campaign,” Romney told Commonwealth Magazine in 2003. “You do not want to deplete your green space and air and water [in order] to grow, and the only way that’s possible is if your growth is done in a thoughtful, coherent, strategic way.

As Romney put it in 2005, “By targeting development to areas where there is already infrastructure in place, not only can we revitalize our older communities, but we can also curb sprawl as well.” His administration actively pursued a “sustainable development agency” and promoted “transit-oriented development,” “multi-modal transportation,” “village-style zoning" “green building,” “mixed use” development, “mixed-income housing,” and other approaches that would delight any green-leaning city planner — and rile up any red-blooded Tea Partier.

Environmental activists still found plenty to criticize in Romney’s approach to land use and development, but many greens and smart-growth advocates were pleasantly surprised, at least in the first half of Romney’s term. In 2006, the U.S. EPA gave Massachusetts’ Office for Commonwealth Development its National Award for Smart Growth Achievement.

There are several parallels between Romney’s state program and the current federal program:

Just as Romney’s Office for Commonwealth Development incentivized local communities to embrace smart growth by offering grants, so does the Partnership for Sustainable Communities. Since its launch, the partnership has helped to allocate about $3.5 billion in grants and other assistance to more than 700 communities that want to better coordinate housing, transportation, and economic-development projects and make neighborhoods more walkable, transit-accessible, and sustainable.

In fact Romney’s policies were smart growth oriented until his last year as Governor when he decided to quit the Regional Greenhouse Gas Initiative (RGGI):

 [I]n mid-December (2005) Romney abruptly pulled the state out (of the RGGI)— despite the fact that several staffers in his administration had spent two and a half years and more than half a million dollars negotiating and shaping the deal.

Romney had until (December of 2005) been an advocate and architect of RGGI, which includes a market-based trading system that will let big fossil-fuel power plants buy and sell the right to emit carbon dioxide. As recently as November (2005), he was publicly talking up the agreement: “I’m convinced it is good business,” he told a clean-energy conference in Boston. “We can effectively create incentives to help stimulate a sector of the economy and at the same time not kill jobs.”

So why did then Governor Romney pull out? It was about this time he considered running for the Republican 2008 nomination for President. 

So where does Romney stand now? He recently told several donors that he might eliminate HUD, the department his father headed during the Nixon administration. He has said the EPA under President Obama is “out of control.” Would he approach smart growth in a similar manner to health-care and argue that promoting smart growth at the state level makes sense while promoting it at the federal level is unconstitutional? Since the President’s smart growth policies mostly apply at the local level, applying the health care reasoning to the smart growth arena is not the same. 

Still people who worked with Romney are not sure of his real views. I will try to hazard a guess. Romney is a moderate Republican; in a few states he might qualify as a Democrat. He believes in smart growth, providing universal healthcare, reforming immigration, and is pro-choice. However, to become President his views have “evolved” to become more in line with the base of the Republican party. While he is not the first politician to switch his views to become more electable, he is pressing the limits of believability. 

The question is what happens after he is elected. Will his true opinions on smart growth shine through or will he take a politically popular path. And what happens if he is elected to a second term?

Much of the current opposition to smart growth has arisen as a result of a United Nations document titled Agenda 21. The non-binding agenda that came out of the 1992 Rio Earth Summit contains many policies that could be harmful to the United States. However similar to most other bad United Nations policies it has been ignored by most of the world and will likely continue to be ignored. Some in the tea party are making a mountain out of this molehill of a document. Neither Obama’s nor Romney’s policies are based on Agenda 21. In reality, they are based on smart growth dogma that is emotionally charged and largely factually unsubstantiated. Programs such as the Partnership for Sustainable Communities, applied indiscriminately with no regard for the differences between different places, are potentially more damaging to the United States in the long-term than any United Nations document. 

From a land use and transportation viewpoint, Romney’s policies may be little different than Obama’s policies. In some ways Obama is more believable because he actually believes in what he preaches. Romney preaches just to be elected. In transportation matters, President Obama has been one of the least effective Presidents in the last fifty years. The fact that Governor Romney may be little different is a depressing thought indeed.

Livable Centers Initiative Grant Program Needs to be Refocused

Posted on April 6, 2012, 11:00am | Baruch Feigenbaum

The Livable Centers Initiative (LCI) by the Atlanta Regional Commission (ARC) is intended to promote urban regeneration in metro Atlanta communities. But the projects it has funded have had little success in creating any sustained new economic activity. Moreover, the program is supported by federal gas taxes that are supposed to be dedicated to national highways. Nonetheless, other cities around the country, from Albany to San Francisco are using it as a model.  If ARC wants to continue with the LCI program, and if other cities want to follow the model, two simple rules should be followed: first, it should be funded locally; second, it should focus on activities that have been shown to actually underpin economic development, such as the construction and maintenance of roads –especially if it is funded by gas taxes. 

When the LCI program helps cities build appropriate infrastructure, it has the potential to be a useful tool. Planning for future growth can create higher-quality developments at lower costs. Some of the grants have supported transportation improvements. The city of Marietta and Cobb County received a grant to study bus rapid transit (BRT) in the Delk Road area. The city of Alpharetta used an LCI grant to study transit possibilities in the Northpoint Activity Center. Typically LCI grants are modest, between $80,000 and $150,000. In some cases, part of the cost of studies has been funded by private businesses, thereby leveraging the public funds. 

However, there are numerous problems with the LCI program. 

First, LCIs use federal gas tax funds to support local projects. Funding for this program comes specifically from the L-230 funds in the highway section of the state’s transportation bill, not the transit section or the intermodal section. Highway funding is intended to support national highways that facilitate interstate commerce by moving goods and people along roads such as I-75 and GA 400. Yet LCI grants have been used to support non-highway-oriented projects such as the development of Cycle Atlanta on the premise that it would connect job centers and residential areas by bike lanes. Another LCI grant is slated to enhance the Marietta University District which focuses on land usage, and not highway infrastructure, along U.S. 41. 

More generally, non-motorized transport receives most of the resources from LCI grants. As of March 2011, $97,631,660 supported pedestrian facilities. Another $44,934,471 supported combined bicycling and pedestrian facilities. Only $15,438,929 supported roadway operations; $9,221,900 supported transit facilities, and $9,020,229 supported multi-use trails and other facilities. Sidewalks and bike paths do not facilitate much interstate commerce. Moreover, the transportation elements of these projects are regional at best.

The full commentary is available here. 

Miami Stadium Shows Complexity of Crony Capitalism

Posted on March 13, 2012, 10:20pm | Samuel Staley

When the city of Miami-Dade County, Florida decided it wanted to build a new home for the Miami Marlins (formerly the Florida Marlins), it sunk $347 million into the ball park (with a total cost for the complex, including financing, amounting to $2.4 billion). The Marlins fronted $155 million, which is nontrivial, but still well short of the full construction cost for a facility that was built almost exclusively for their benefit. The deal and sports complex has been controversial since the proposal was first floated by the city-county council in the early 2000s, and has even been mired in an investigation by the Securities and Exchange Commission.

What caught my eye recently, however, was an interesting wrinkle in the contract. Apparently, the county leases parking spaces to the Marlins on game days for $10 a spot, allowing the team to sell them to fans and patrons for a profit. It's a nice little deal for the Marlins, and a back door way to subsidize the team even further.

There was a catch. Apparently, Florida courts have decided that if public parking spaces are leased out to a private company they are no longer serving primarily a public purpose so they should be taxed. Sounds logical. But Miami-Dade didn't have the funds to pay the property tax bill (and the team refused to pay the property taxes since they weren't in their contract).

Not to worry. In the wee hours of the Florida legislative session, the Miami Herald reports (3/12/2012) that a bill was passed exempting Miami-Dade from having to pay property taxes on the garage.

Portland Area City Does Unthinkable: Adapt to Market

Posted on February 12, 2012, 9:16am | Samuel Staley

Events in Beaverton City near Portland, Oregon would be unremarkable in most cities in the U.S.: Faced with property that has been undeveloped for 15 years, the city has approved rezoning that will allow developers more flexibility. Local residents are up in arms.

The protests surround the designation of the Sunset Transit Center as a transit-oriented develoment in a devleopment called Peterkort Town Center. Peterkort is a 250 acre development, and the rezoning, which would allow for less commercial development in the short term, applies to 13 properties making up 138 acres of the total development. The city of Beaverton's planners argue the maximum development potential designated in the plan--11 millions square feet of commercial develoment and high densityhousing at the transit stop--is unrealistic. So, the rezoning allows the developers to start out with 2.7 million square feet of commercial and higher density development in places within the zone (but not at the transit stop) where they think it will be commercially viable.

As one city planner told OregonLive.com (Feb 8, 2012):

"The county generally agreed with the city's approach, said Stephen Roberts, a county planner, but there were points of concern.

"In a letter to the Beaverton Planning Commission, county staff asked the city to consider more housing density close to the transit center, permitting less retail north of Barnes Road, the significance of a park or civic space near the station, and when housing would be phased in.

"McIntyre said the problem with the leeway provided by the new zoning is that up to 80 percent of commercial development could occur before any of the mixed-use housing is built, a recipe for spread-out strip malls.

"For example, in theory, Beaverton's code allows for a maximum of 11 million square feet of commercial development, about eight times larger than Washington Square mall.

"Realistically, city officials said, that won't happen, because the layout of the land, residential densities and traffic would prevent such a plan.

"The likelihood of that happening is so remote that it's not a real possibility," [Beaverton city planner Steven] Sparks said. A more likely scale is 2.7 million square feet of mixed residential, office and retail development, he added."

In some ways, this is a classic problem of modern planning implementation: modern comprehensive plans are by definition static, prescribing outcomes that aren't supported by the market. Beaverton is simply trying to change the plan to conform to what the market is willing to support.

If Beverton followed the original plan, or Washington Counyt's harder line prescriptive approach, Peterkort Town Center could lay undeveloped for another 15 years.

Of course, this outcome wouldn't be new. The land that the City of Euclid, Ohio prevented from being developed in the precedent setting case that established zoning, Village of Euclid vs Ambler Realty, lay vacant for more than 20 years after zoning precluded its development. Even more infamously, the acres cleared by eminent domain in New London, Connecticut (Kelo vs. New Londdon) to make way for private development also never materialized.  

The Washington Post: D.C. Gov’t Loans Create “Million-Dollar Wasteland”

Posted on January 18, 2012, 12:00am | Harris Kenny

The Washington Post recently published an investigative report entitled “Million-Dollar Wasteland,” which finds Washington, D.C.’s Home Purchase Assistance Program (HPAP) for low-income residents is scourged with foreclosures, liens, and financial hardships. The following outline of HPAP’s operating procedures is distilled from the original investigative report, which is worth reading in full and is available online here.

The D.C. Department of Housing and Community Development has managed HPAP for over three decades. HPAP is funded primarily through grants from the U.S. Department of Housing and Urban Development and is intended to assist low-income families by making home ownership more affordable. First, applicants must apply and receive a first mortgage from a private bank. Eligible lenders meeting these first criteria then have their loan reviewed by the Greater Washington Urban League. Approved lenders then receive a second taxpayer subsidized no interest loan with payments deferred for five years. Some lenders receive further help in the form of equity from the D.C. Housing Authority.

In practice however, HPAP’s intentions belie its impact.

The Washington Post finds:

Nearly one in five buyers participating in the city’s 35-year-old loan program for first-time homeowners is behind on mortgage payments, city officials said — a default rate that’s at least three times higher than the overall rate in the region...

… The money can be a lifeline for working families in the District, which has wrestled with steep rent increases and an acute shortage of affordable housing.

But the program has put some families in financial distress.

The Post tracked more than 1,300 loans, about 80 percent of the loans awarded by the District between 2005 and 2009. The analysis found that about one in three were made on homes priced at $250,000 or more, with some houses topping $375,000.

The practice appears to run counter to a city guideline that suggests a buyer in a four-person household have the ability to purchase a $218,000 house. The price point has fluctuated somewhat in recent years: In 2006, it was $235,000.

No investigation into government loans would be complete without examples of waste, fraud, and abuse! The report continues:

Real estate records show that among those who have been involved in the loan program is Jack Spicer, a longtime developer involved in a sweeping 1980s real estate scheme where straw buyers would purchase properties in the District at inflated prices using fraudulent appraisals. HUD backed the loans and ultimately lost millions of dollars. Spicer cooperated with prosecutors during the investigation and served four months in a halfway house.

More recently, he was one of several developers who sold distressed apartment complexes in Southeast to a government-subsidized nonprofit group that later declared bankruptcy; the deal was detailed in a Post investigation in May about troubled HUD-funded construction projects.

Records show that Spicer and his companies sold six houses to city-subsidized buyers for far more than he had paid.

The full investigative report recants unfortunate stories of people who were drawn into mortgages to buy homes they simply cannot afford. At first glance I’d suggest that borrowers in over their heads peruse the Federal Trade Commission’s pointers for Americans “Knee Deep in Debt.” Then again, government loans incentivized borrowers’ problems in the first place. This ultimately begs the question: With government financial assistants like these, who needs loan sharks?

For more on failed government loans, see my recent op-ed in The Denver Post entitled, “Government Loans Bring Trouble.”

When It Rains It Pours (Denver Failed Gov't Loan Edition)

Posted on January 16, 2012, 7:42pm | Harris Kenny

I recently had an op-ed published in The Denver Post entitled, "Government Loans Bring Trouble" (also available on reason.org here) that explores failed urban renewal initiatives in Denver, Colorado. Last week The Denver Post's Jeremy P. Meyer wrote a piece entitled, "91 housing groups, businesses in arrears on loans from city of Denver" that sheds more light on the city's burgeoning failed loan portfolio. Meyer reports:

Nonprofit housing groups, restaurants, a tavern, a furniture store and a theater company are among 91 borrowers with delinquent city loans through Denver's Office of Economic Development.

The city is working on cleaning up its portfolio of 655 loans, of which roughly 14 percent, or $21.6 million worth of loans, are in arrears.

Past-due amounts on those delinquent loans total more than $8 million, according to documents the city supplied to The Denver Post in response to an open-records request.

Meyer continues:

Nine of the loans in collection with the city are in liquidation, meaning all efforts to get borrowers to pay back the amounts have been exhausted and the city is working on foreclosing on the business or property...

Foreclosure and liquidation is the last resort, say city officials who manage the portfolio of loans that use federal grants for small-business loans and to provide affordable housing...

Of the 91 distressed loans, 38 are in the process of being "worked out," meaning city officials are working with the borrowers to find solutions to get them to pay back the loans. That can include deferring payments, suspending the payments on the principal or refinancing. Those borrowers in the "workout category" owe more than $6 million in past-due payments.

Meyer's full piece is worth reading and is available online here. It's unlikely the city will be able to work through its loan portfolio without generating more controversy, which makes this an issue to watch in 2012.

[Op-Ed] Government Loans Bring Trouble (in Denver)

Posted on January 10, 2012, 5:44pm | Harris Kenny

On Friday January 6 I had an op-ed published in The Denver Post entitled "Government loans bring trouble," which explores a failed economic development project known as the Lowenstein Project in Denver, Colorado. The Lowenstein Project is enabled by special tax increment financing loans and demonstrates the folly of having bureaucrats take risks with taxpayer money that private banks aren't willing to.

This issue came to light last month when Jeremy P. Meyer of The Denver Post reported that, "About 15 percent of the loans in the Denver Office of Economic Development's $127 million portfolio are in arrears or default..." 

The piece continues:

One of these loans, known as the Lowenstein Project, illustrates how local officials have been gambling with taxpayer money on dubious urban renewal initiatives. The Lowenstein Theatre, located across from Denver's East High School on East Colfax, had been essentially vacant for 20 years. In 2006, former Office of Economic Development (OED) Director John Huggins proposed the Lowenstein Project, which would target the area for a $14 million redevelopment effort to build a movie theater, bookstore, music store and restaurants.

Denver officials loved the idea and helped private companies buy the Lowenstein property by handing out tax increment financing (TIF) loans of $475,000 each to Charles Wooley; Denver-based real estate firm St. Charles Town Co.; Twist & Shout; and Neighborhood Flix Cinema and Café.

By 2008, Neighborhood Flix Cinema and Café was bankrupt, taking taxpayer money that had been loaned to the company down with it. Then, in February 2011, the Lowenstein Project developers defaulted on their $2.4 million TIF loan.

Fast forward to now: On Dec. 19, the Denver City Council amended the $2.4 million TIF loan sitting in default so that a separate, more senior $1.5 million TIF loan can be paid off first.

The piece concludes:

Government-issued loans amount to taking money from productive taxpayers and wasting it on politically connected insiders. Politicians interested in urban renewal might instead look in the mirror and see if their own policies are stifling economic growth.

For more, read the full piece available online here.

Sports Subsidies, Crony Capitalism and the Fleecing of Taxpayers

Posted on September 16, 2011, 8:58am | Samuel Staley

Congratulations to elected officials in Columbus, Ohio! They finally figured out a creative way to do an end-run around the decisions of voters and do what they've wanted to do all along: have a government run and operated sports arena. Columbus officials announced this week that they have figured out a way to purchase the privately owned and funded arena that hosts the NHL Blue Jackets for $42.5 million dollars. They're using future tax revenues from voter approved casinos to finance the project.

I guees it didn't matter that voters in Columbus, Ohio went to the ballot box and turned down initiatives to publicly fund professional sports stadia and arenas in 1978, 1981, 1986, 1987, and 1997. Fed up with taxpayer's resistence to publicly fund something the business community felt was so vital to the local economy, Nationwide Insurancy Company and the Columbus Dispatch Publishing Company built the arena for $150 million, opening in 2000.

Now, officials say it's different because they aren't asking for a tax increase. Since the revenues are coming from taxes on the casinos, they seem to think that voters would be okay with it. Hardly. (I was there at the the time and part of the public debate while on staff at The Buckeye Institute.) The initiatives that failed at the ballot box were asking voters to approve tax money going to publicly fund professional sports facilities. They weren't just referenda on raising taxes. (Indeed, voters approved initiatives to fund public purchases of farmland as open space, sales taxes to fund roads, and money for brownfield redevelopment during the same era.)

This is just another version of crony capitalism. The Blue Jackets are threatening to leave Columbus because they claim they are losing $10 million to $12 million per year on the arena lease. What is interesting is that Nationwide (who owns the arena) is not renegotiating the contract. They're selling the stadium they spent $150 million to build a decade ago for 28 cents on the dollar to the local government. In addition, Nationwide is committing to spend another $50 mllion on the Blue Jackets and take an equity interest in the team.

It's the taxpayers who lose on this. They are getting a facility they voted down a decade ago, they're paying for a facility that can't hold its value, and their tax revenues are being redirected to underwrite a failing enterprise.

The Perils and Promise of Public Private Partnerships for Redevelopment

Posted on July 31, 2011, 7:58am | Samuel Staley

Quincy, Massachusetts has decided to make over it's tired and worn downtown. So, its embarked on a unique approach involving the private sector. This approach shows both promise and peril for property rights. I first became aware of this effort, which appears quite innovative, after reading a lead article in New Urban News (July/August 2011).

Quincy officials recognized that an integrated approach to redeveloping the downtown would likely have more success. As a town inside the Rte 128 beltway outside of Boston, land is scarce. High demand, under the right circumstances, can be harnessed to create an integrated approach to redevelopment. Virtually all the public infrastructure needs to be replaced (including 200 year old clay sewers) and the site encompasses 50 acres.

Quincy, however, didn't have the funds to underwrite the development plan itself. So, it's contracted with a private developer to underwrite most of development costs and shoulder most of the risks. As New Urban News explains (p. 6-7):

"One of the things that sets the Quincy project apart from old-style urban renewal is its financial structure. After nearly three years of negotiations, the city and Street-Works [a design and development company] agreed that the builk of the financial risks would be borne by the developers (and its lenders and investment partners) rather than the municipality.

"Street-Works will round up the money to pay for the infrastructure replacements as well as for private portions of the project. 'This mechanism-the 'purchase model'-'largely eliminates the public risk often associated with redevelopment projects,' Mayor Thomas P. Koch emhasized in a press statement. 'The city will purchase the public infrastructure-including parking garages-from Stree0Works only when new buildings are occupied and producing enough revenue to cover the City's debt costs.'"

The complete plan and development agreement can be found here. The entire project is expected to cost $1.8 billion, generate 1 million in commercial office space, support two hotels, and create 735 housing units. The private sector developer is Hancock Adams Associates (whose management partner is Stret-Works) out of Boston, and they are going to finance 78 percent of the project.

According to an article from the World Propety Channel (Jan 4, 2011):

"In a prepared statement, Quincy Mayor Thomas P. Koch and Street-Works believe New Quincy Center could become the new model for urban redevelopment projects across Massachusetts.

"At the heart of the master agreement is a financing mechanism that will require revenue from the new private development to pay for $227 million in public infrastructure costs.

"Koch says this is a wholesale reversal of traditional urban redevelopment by requiring the private investment to come first.

"The mechanism, called the "purchase model," largely eliminates the public risk often associated with redevelopment projects. It works this way:

"The City will purchase the public infrastructure - including parking garages -- from Street-Works only when new buildings are occupied and producing enough revenue to cover the City's debt costs."

The city is responsible for providing the infrastructure, including new roads and utilities to service the new development. Interestingly, one of the reasons the city decided to go the public-private partnership route was a belief that eminent domain was no longer possible for redevelopment in a post-Kelo political world. They figured they would let the private companies worry about acquiring the land for the non-public infrastructure and building components. According to the Quincy Patriot-Ledger (March 14, 2009):

Unfortunately, this isn't quite true. The City of Qunicy could still use, and did use, eminent domain to clear private property for the public infrastructure parts of the project. In order to provide access to the new development, for example, the privately owned Quincy Fair Mall was taken through eminent domain and the tenants evicted. Many of these businesses are small and neighborhood based, so at least they didn't have to underwrite these debilitating costs. 

Not everyone was happy with the move, as the experiences of the Asian restaurant Little Q Hot Pot illustrates. Fortunately, Massachussetts state law requires cities to provide relocation expenses to the business evicted. Little Q Hot Pot is indicative of the lengths cities will go to evict businesses to make way for their plans. One Quincy citizen sympathetic to Little Q's plight to fight city hall wrote (October 14, 2009):

After a "negotiated settlement," Little Q eventually relocated to Boston's Chinatown.

Nevertheless, this is an interesting case that might represent the next frontier of P3s. The private sector can often provide the experience and management expertise necessary to more efficient build, manage, and develop property. But that doesn't mean that property rights will be respected in the process.

For more on redevelopment without eminent domain, see Reason.tv's Drew Carey video "Redevelopment: A Tale of Two Cities" and our policy analysis on eminent domain abuse and reform.

Of Cheeseburgers and Publicly Funded Convention Centers

Posted on June 11, 2011, 8:52am | Samuel Staley

The Maryland Public Policy Institute's Marta Mossburg is beating a drum that simply can't be beat loud enough: Stop throwing public tax dollars down the convention center rabbit hole. Or maybe it's a political black hole because these white elephants just seem to suck up more and more money despite increasingly dismal performance. Once the conventional center (inevitably) fails to live up to the rosy forecasts of its promoters, elected officials dump millions of dollars into hotels through direct subsidies and tax incentives to prop up a failing industry. Still, the convention centers fail to generate the revenues the subsidizers had hoped, so politicians are sucked into piling more tax dolalrs into the economically doomed projects.

As Marta notes in a recent Baltimore Sun (June 7, 2011) commentary:

"Expecting a convention center to lead to job growth is like expecting a diet of double bacon cheeseburgers to lead to weight loss.

"Pretty much every person who lives in a city with a convention center and every economist knows it — except for people in organizations like the Greater Baltimore Committee (GBC) and Visit Baltimore. They are the ones pushing the nearly $1 billion public-private expansion of the Baltimore Convention Center, arena and Sheraton hotel.

"Take Baltimore, where 53,000 jobs exited the city over the past decade, along with 30,000 residents. Those figures are difficult to spin. So are the huge declines in attendance at many convention centers around the country and concomitant drop in hotel room nights.

"Consider Las Vegas, a top destination, where convention center attendance was 1.31 million in 1999 and 1.16 million in 2010 after a massive expansion earlier in the decade. Lest people think it was all due to the economy, peak attendance was 1.7 million in 2006 — or a 30 percent increase in attendees after a doubling in size of the center. The GBC proposal would more than double the current convention space in Baltimore."

Marta's column has a lot of good infor on how these projects have turned out to be misguided, off the charts dismal public investments. Here's another taste:

Is it déjà vu, or do convention pushers suffer from a collective medical problem? As the saying goes, the definition of insanity is doing the same thing over and over again and expecting different results.

Either way, expanding the city's convention center is "just wacky," said Heywood Sanders, an expert on convention economics and a professor at the University of Texas at San Antonio.

He said that economic developers in Baltimore originally argued for a convention center with Camden Yards. After a center was built, it became a reason to lobby for more hotel space and entertainment venues to attract tourists in a never-ending treadmill of "If we build it, they will come."

But don't city's need convention centers? Well, no they don't. Yes, they need space to hold meetings, but they don't need large convention centers, particularly ones that are empty most of the year. Private hotels have been providing convention space for decades, perhaps centuries, so they should be the primary providers of covention space now. The demand for large conventions, in fact, is fairly concentrated in a few key destinations: Las Vegas, Orlando, Chicago. Baltimore? Nope. Cincinnati? Nope. Note even Boston or Houston. So, let the private sector provide the space based on their ability to gauge demand and fund their facilities in private capital markets.

Reason has published lots of articles on these issues, and a lengthy magazne article by yours truly, "Ground Zero in Urban Decline," may be worth another perusal.  

The Sacramento Kings and the Bizzaro World of Professional Sports Tug of War

Posted on March 30, 2011, 8:55am | Samuel Staley

A truly bizarre set of circumstances is playing out in California, as the City of Anaheim vies to become the new home for the Sacramento Kings NBA franchise. Apparently, the owners of the Kings are not happy with the level of subsidy Saramento has invested in the franchise, so they are threatening to leave. Southern California entertainment mecca Anaheim is apparently interested in luring the Kings to their playland with $75 million in bonds issued by the city. (Reportedly, the bonds will be financed by a local private billionaire who already manages the Anaheim arena. I'm not sure of the details of the project, however.)

First, kudos to the City of Sacramento for finally deciding "enough is enough." Sports franchises are terrible economic development tools. The subsidies cities and taxpayers have poured into these for-profit enterprises, aided and abetted by legally protected professional sports oligopolies, is little short of scandalous.  See my previous blog posts here and here.

Still, the tactics employed by Sacramento are truly bizarre.  Sacramento's city manager sent a letter to Anaheim's city manager "respectfully" requesting that they break off negotiations with the Kings before the bond vote. The letter can be found here. Sacramento's reasoning appears to be that the Kings franchise still owes Sacramento money (upwards of $70 million). Sarcramento is afraid that if the Kings move to Anaheim, they won't pay off their debt to the city. In other words, Anaheim shouldn't negotiate with the Kings because Sacramento's deal didn't pay off, or is going under.

This is odd because Sacramento appears to be working under the operating assumption that the Kings won't pay off their debt simply because they are moving their operations to another city. I'm not familiar with the original debt agreement between the Kings and the city, but I've not heard of a case where a business can simply write off their debt by moving their business to another location. If they can, perhaps Sacramento (and their taxpayers) deserve what they get because they signed a lousy deal. This is sort of like Verizon telling AT&T to break off negotiations with T-Mobile because T-Mobile still has debt.

But, the real ringer is probably in the explicit threat by the City of Sacramento to challenge Anaheim's environmental review for the relocation of the sports franchise. California's environmental review procedures are notorious for their ability to inflict interminable and terminal delay on projects in large part because anyone has standing to object to the review. Sacramento is playing the environment card to stop the deal.

In addition to the run of the mill objection that the review simply isn't good enough, Sacramento is claming that one of the reaons Anaheim's environmental impact assessment is inadquate is because it fails to account for urban blight in Sacramento that might result from the relocation of the Kings!

This would be a stunningly dark precedent if this reasoning carried the day. In essence, any business could be blocked from moving its operations since, almost by definitition, the relocation would create blight through empty buildings, lower employment, or lower tax revenues. It would become incumbent upon relocating businesses to "make whole" the neighborhoods and cities they leave. Businesses would effectively become locked into their locations.

Leave it to California to find even newer and more innovative ways to throttle their already struggling cities and economy.

Dealing with the Incredible Shrinking City at the New York Times

Posted on March 29, 2011, 10:45am | Samuel Staley

The New York Times' opinion forum, Room for Debate, takes on the problem fo "shrinking cities." My contribution notes that while the issue has taken off as the problem de jour in urban policy circles the truth is the problem of urban decline has been around a long time. The solution is focusing on framework that gets these cities back to basics, a strategy I outlined last year for the City of Cleveland as part of the "Reason Saves Cleveland" initiative.

Of particular interest, and perhaps surprising to some, is the contribution by Richard Florida of The Creative Class and other books fame. Florida takes an organic, Jane Jacobsian approach to revitalizing these cities. in his essay "How Not to Save A City," Florida writes:

"The most successful efforts of renewing old urban neighborhoods don’t come from top-down reclamation schemes but from organic, bottom-up, community-based efforts to strengthen and build on neighborhood assets. Many of today’s great urban neighborhoods from New York’s Greenwich Village to Boston’s North End to Columbus’s German Village were those where residents successfully blocked top-down renewal schemes.

"Instead of handing over neighborhoods or even whole sections of cities to city hall or private developers, we’d be much better off enabling residents to take control of and build on community assets, engaging them in community-based organizations that can spearhead revitalization and build real quality of place.

"This is the kind of approach Jane Jacobs long ago laid out: It generates revitalization by empowering and harnessing the creativity of people who live and work in the neighborhood. It does not cost an arm and a leg, and it works.

"In the wake of the 9-11 attack on Lower Manhattan’s Financial District, I asked Jacobs how she would rebuild the area. “You’re asking the wrong question,” she replied. “It’s not what I would do or anyone else would do for that matter,” she told me. “The key is to engage the residents of the area, the business owners, the shopkeepers, the workers and the commuters. They’re the ones that can show the way to rebuild.”

Does Transit Spur Economic Development? Maybe "Yes," Maybe "No"

Posted on March 26, 2011, 8:44am | Samuel Staley

The Center for Transit-Oriented Development has published a report, Rails to Real Estate, on the potential economic development benefits of light rail. For a positive, pro-transit view of the study, take a look at the article in the New Urban Network. The study looks at land development along three relatively new light-rail transit lines in Minneapolis, Denver, and Charlotte. Both transit supporters and transit critics will find ammunition in this study.

I think the results are consistent with my own thoughts on transit-oriented development, namely:

• Transit investments alone don't drive economic development. Transit access is more of an amenity for new development projects, not a fundamental driver of investment decisions
• The land development effects are uneven. While some light-rail stations experience a burst in development, the effects are not uniform and downtowns seem to benefit more than other locations;
• Developoment around rail-transit stations appear to redistribute investment in an area, not necessarily generate new real-estate value on a citywide or regional scale;
• Urban planning that allows the market to capture the value from transit accessibility and infrastructure improvements (e.g., allowing for mixed uses) is essential for successful project development.

Ironically, the one variable missing from the analysis is transit ridership. At no point (that I could tell) did the authors try to directly link transit ridership (or thresholds) to station-area development. In fact, at one point, they note that the Charlotte Blue line is considerd a very succesful new rail project because ridership exceeded forecasts. The intial target was 9,100 riders per day and ridership had grown to 15,000 riders per day. That's great growth, except that these levels of ridership are amazingly low. I doubt they are sufficient in and of themselves to trigger new investment and, while more realistic, are far below targets set by rail transit forecasters in the 1980s and 1990s. I've discussed the forecast issue elsewhere on this blog along with the problems with TODs.

Also, it would have been useful to see the authors engage in more rigorous quantitative analysis to determine what factors or variables were the most important for influencing development around the stations or along the corridor. David Hartgen analyzed the LYNX line in Charlotte and found that the light rail line could at most get credit for less than 13 percent of the corridor's economic growth.

So, I'm still left looking for the study that answers the fundamental question: Where's the Transit in Transit-Oriented Development?

Time to Break Up Detroit (and Other Declining Cities)?

Posted on March 23, 2011, 8:01am | Samuel Staley

The City of Detroit has lost 25% of its population since 2000, the largest drop of any major city in the U.S. With just 713,777 residents, Detroit's population has fallen to a level not seen since 1910 and it is now smaller than Austin, Texas. Twenty percent of its land is vacant. Perhaps it's time to break up the city. Few people, however, should be suprised as my colleague Shikha Dalmia telegraphed these recent declines in 2009.

Conventional planning wisdom is that consolidation can solve the problems of urban decline by redistributing resources to those neighborhoods and places it's most needed. A nearly five decade experiment with Detroit--a "virtual consolidation" where resources have become more available on a per capita basis as its population has plummeted from over 1 million people--shows the poverty of this approach. Detroit has not been able to use its vast federal and local resources to stem its decline.

So, perhaps its time Detroit is broken up, or at least decisions over resources are devolved to the neighborhood level. An interesting explortation of approaches to "rightsizing" local government was sponsored by the James Irvine Foundation, the San Fernando Valley CIVIC Foundation, the Economic Alliance for the San Fernando Valley, and Reason Foundation back in 2001 and is worth dusting off and a hard look. I also talked about the importance of decentralization in testimony before the Ohio House of Representatives when it considered legislation supporting "Urban Homestead Zones" within Ohio's big cities.

And Detroit may not be the only city needing to experiment with this radical change to local governance. (See Wendell Cox's essay on urban cores versus the suburbs over a NewGeography.com.)

Why a Sports Stadium Can't Save Baltimore (or Other Cities)

Posted on March 22, 2011, 1:57pm | Samuel Staley

Okay, I admit I got caught by Marta Mossburg's satirical riff on Baltimore's economic development policies published in the Baltimore Sun on March 15th. I should have looked at the headline, which referenced the view from 2021, and the substance of the article.

But, alas, the truth is that Mossburg was keying into real-world sentiment and public policy. Many public officials actually do believe that simply spending more money on nifty projects will bring their cities back. They won't, and the academic research is pretty clear on that.

And Baltimore is a case in point. Despite projects such as the Inner Harbor and Camden Yards, both of which were well designed and implemented, Baltimore has continued to bleed population and jobs. By one estimate, 30,000 people have left since 2000 as the city's population has dipped to 620,000.

Mossburg, a fellow at the Maryland Public Policy Institute, opens up her fictional article by reporting that the U.S. Bureau of the Census released its population figures for Baltimore, and local leaders are baffled. The city lost 50,000 people and 10,000 jobs over the last decade, she writes:

"[Baltimore] Mayor Christian Johansson said he was "stung" by the figures. "We've invested $3 billion in the new convention center and arena and State Center complex. We lured the Indy 500 to Baltimore. We built a $1 billion incubator for high-tech jobs. I don't get it."

Unfortunately, the academic research is pretty clear that these kinds of programs don't (and won't) turn a city's economy around. They can't. Job creation in a market-based economy is bottom up and driven by entrepreneurship, not government programs and spending on white elephants. In fact, in some cases, investment in sports stadia have had negative impacts on the local economy as money has been shifted from other nonsubsidized uses to subsidized ones.

One recent article (spring 2004) in the Journal of the American Planning Association noted that these projects create "opportunities" for revitalization (what project doesn't?), but their success is not guaranteed. Camden Yards, in fact, is used as an example of a project that didn't. But even in the "successful" projects (e.g., Cleveland and San Diego), the effects were highly localized; they didn't catalyze citywide or regional development.

I've looked at these issues for more than 25 years, and the mistake elected officials make over and over again is they believe their own press releases. Ribbon cutting doesn't created jobs. Similarly, sports stadia, sporting events, and convention centers don't create an economy; a vibrant economy creates the environment that make these businesses flourish. Pushing money into programs that "create jobs" like state building projects don't improve the productivity or competitiveness of the city's economy, they reshuffle jobs.

Back in 1995, I wrote an article (with David Swindell) for The Buckeye Institute that concluded:

"Public investment in sports is not a good economic development policy for Ohio cities. While sports may have important psychological and political value, public officials should not sell the idea on economic grounds. If city officials, business leadersa nd local citizens believe ia sports stadium is needed and financially sound, private capital should be raised to finacne the project."

The same conclusion holds true for conventional centers and entertainment complexes in 2011 as well as other forms of public "pump priming." Hopefully, Baltimore officials will take note. 

Transit Won't Save Detroit. High Speed Trains Won't Save the US

Posted on February 10, 2010, 2:29pm | Adrian Moore

Monday night PBS aired a documentary Blueprint America: Beyond the Motor City which they say "examines how Detroit, a symbol of America’s diminishing status in the world, may come to represent the future of transportation and progress in America."

I say it is an incredibly one-sided view of how some people think that a bunch of already failed ideas will suddenly start working, and not just work, but perform miracles.  They argue that a few miles of a single light rail line is going to turn Detroit into a happening city, and the high speed trains will do the same for the whole US.  Interestingly, the piece is almost utterly devoid of facts, and is instead full of opinions and hope.

I teamed up with Shikha to do a pretty thorough dissection of their key assertions.

San Diego County Planning to Triple Size of Jail Facility in Downtown Santee, Should Consider Cheaper & Better Alternatives

Posted on July 10, 2009, 6:42pm | Adam Summers

The City of Santee, California, and San Diego County are currently embroiled in a big fight over the expansion and renovation of a women's detention facility located in Santee.  The problem is that when the facility was originally built several decades ago, it was a small, out-of-the way rural community, but now it is a thriving city of 57,000 residents and the jail facility sits right in the downtown area.  Santee is a lot different now than it was when the Las Colinas Detention Facility was initially constructed, and residents and business owners in the area are justifiably concerned about plans to triple the size of the jail, from its current 15 acres to 45 acres--complete with guard towers and barbed wire fencing around the perimeter--in the city’s urban core.  The expanded facility would comprise roughly 20% of the entire downtown area.

The County owns hundreds of other parcels of land, many of which would be much more suitable for a jail facility and could be built on less valuable land outside a city center, but has so far refused to seriously consider alternative sites.

The Las Colinas land is adjacent to the RiverView office and technology mixed-use campus, which is part of the 700-acre Santee Town Center and transit center.  The facility is also surrounded by homes, a church and a day-care center, and senior mobile home parks.

A study of the land for the proposed expanded jail site by The London Group Realty Advisors concluded that the land has a market value of $89 million.  In addition, the study estimated that the expansion of the jail would reduce the value of surrounding properties by $75 million.  This reduction in land value and the foregone revenue the County could receive from selling the land for more productive and appropriate uses would result in a total economic loss of approximately $165 million.
 
The consultants’ report also suggested several other potential sites for the jail among the hundreds of parcels of land that the County owns.  One promising site at or adjacent to the East Otay Mesa Detention Facility would allow the County to save on costs for food, warehouse services, and transportation of goods by sharing or consolidating services and infrastructure with the existing facility there.  Even if the East Otay Mesa site is deemed unsuitable for some reason, there are many other sites of County-owned land that should be considered.  In consideration of this, it would be prudent for the County undertake a comprehensive evaluation of its real estate portfolio to identify other sites for an expanded detention facility that would be better alternatives.

Given the value of the land Las Colinas sits on in the downtown Santee area, and the loss in property values and development opportunities that would result from its expansion at the current site, it makes financial sense for the County to sell the land and use the proceeds to develop an upgraded facility elsewhere.  The incompatibility of an expanded detention facility with the City of Santee’s current and future makeup and growth, and the resulting public opposition to the proposal, only reinforce this notion.

In deciding on the proper way and place to renovate and expand the Las Colinas Detention Facility, San Diego County supervisors should consider the impact of the jail expansion on taxpayers across the county, as well as the residents of Santee who are rightly concerned about the effects of the County's decision on their community and quality of life.  Unfortunately, County supervisors recently voted 4-1 to support the current expansion proposal at the present Santee location.  The lone dissenting vote was that of Chairwoman Dianne Jacob, whose district includes Santee.  The City of Santee has vowed to fight the County vigorously in the courts.