Metropolis on a Hill

Review: Laws of the Landscape

2010-05-13T15:31:00.000-07:00

Laws of the Landscape: How Politics Shape Cities in Europe and America by Pietro S. Nivola (1999)

I was initially suspicious because this book comes out of the Brookings Metro series, which tends to be dominated by "smart growth" anti-sprawlers, and I thought this might be a typical tome about how Europe's far-sighted planning laws should be implemented in the US. Thankfully, the book is balanced and informative, and it manages to cover its broad topic succinctly and cogently.

The author begins by pointing out the many non-political reasons that the US is more "sprawling" than Europe. One simple explanation is population growth: from 1950 to 1996 the US added 115 million people, which amounted to a 74% increase. European countries like the UK only grew by 15 or so percent over the same period. New households everywhere tended to be accommodated in the purlieus, the US just had a heck of a lot more of them, hence more sprawl. The United States' consistently higher birthrate means we also have significantly more families with young children (about 22% of families versus 15% in European countries, and those American families with children tend to be larger). These families tend to prefer larger suburban homes, and again more sprawl.

Nivola also mentions an important though understudied phenomena that helps explain American suburban growth. Although both sides of the Atlantic received many external immigrants (still, in 2000 the US had more immigrants than all of Western Europe and Japan combined), the US had a lot more internal migration inside the country than Europe as a while. In the 1980s 380,000 US citizens a year moved to the South, and 130,000 moved to West. Migration across the EU, with its social and language barriers, just can't compare. And just like new families in old cities, these migrant families tended to have their new houses built in greenfields, thus further amplifying population growth sprawl.

Perhaps most importantly, Americans have long had more cars than Europeans, and thus more suburbs, for the simple reason that they were much richer. Even back in the 1920s, 30 years before the Interstate Highway Act or other purported "government-subsidized" auto programs, 56% American families already owned a car. Many European countries wouldn't reach that level of auto ownership until the 1960s or even 70s.

There are also simple environmental explanations for our scattered metropolises. For most of the twentieth century we had cheaper, home-grown energy than Europe, which had to import most of its oil and gas (Nivola doesn't mention it but in the 1950s the United States produced 60% of the world's oil, over 5 times Saudi Arabia's proportionate production today). We also had much more land, and less concerns about crowding and concentration. Given all these facts, it would be shocking indeed if America wasn't much less dense than Europe (for example, our cities are about 1/4 the density of Germany's).

Still, Nivola examines the usual political bugaboos, like the highway trust fund and gas taxes, that purportedly make the US even less dense, but he is mainly agnostic as to whether or not these are a "bad" things. He seems to view sprawl itself as something of an inherent social bad, but he also seems to recognize that most of it comes out of free market choices, and that many European anti-sprawl regulations may do more harm than good. For instance, the European farm subsidy per hectacre is over 10x that of the US's (the Japanese level is 183x the US's!), and no economist defends that, but that subsidy certainly has a tangential effect of depressing residential housing growth. Another unfortunate reason for European compactness is their seriously anti-competitive retail regulations, which punish larger stores with bigger workforces by requiring them to have limited operating hours and more labor regulations. The result is small, local stores, but with shorter hours and higher prices.

The author's solutions for some of America's sprawl problems are eminently reasonable and would probably garner the consent of almost every economist, focusing as they do mainly on the problems that bedevil the inner city and drive out residents, rather than the qualities that attract families into the suburbs. He demands the real reform of the unfunded federal mandates that burden large local governments (the 1995 Unfunded Mandate Reform Act did no such thing), a program to improve schools in the inner city by limiting the power of teachers' unions, a reform to the US litigation bonanza that burdens smaller businesses that are less able to defend themselves, and better policing to fight inner city crime. One of his proposals, equalizing the tax deduction of employer-provided parking and transit (he cites a maximum of $170 a month for parking and $65 for transit) has actually been gradually implemented over the years until the 2008 Stimulus bill finally equalized them at $230 a month. Charter schools and Quality-of-Life policing are also helping to further some of his other reform proposals as we speak.

So overall this is a solid discussion of a topic that tends to engender more passionate screeds than empirical reflections. For that we should be grateful.

An Obama Settlement that Destroys Black Opportunity

2010-04-20T18:28:00.001-07:00

It was well-intentioned no doubt, but the recent consent order the Department of Justice entered against two mortgage lenders, AIG Federal Savings Bank and Wilmington Finance, will hurt poor and black homebuyers and help no one except a few government lawyers.

Under the settlement these two companies (both, importantly, subsidiaries of AIG) will have to pay $6.1 million to 2,500 African-American borrowers who the DOJ claims suffered from discriminatory high prices and fees for their mortgages (they will also have to pay $1 million towards general financial education. First lesson: don't piss off the government). The real rub here is that these companies did not originate these discriminatory mortgages, but only bought them from local brokers who themselves were putatively discriminating. The settlement is the first to argue that national mortgage lenders are liable for the policies of these entirely independent brokers. DOJ claims that the lenders should have monitored these brokers and used "statistical analyses" to make sure they were not unwittingly discriminating against minorities.

The whole case suffers from false and anachronistic reasoning.

Before branch banking deregulation (implemented gradually by states in the 1980s, and across state lines with the 1994 Riegle-Neal Interstate Banking Act) many areas did have only one or two small community banks. These banks had short hours, conservative lending policies, and almost no competition. State and national rules against establishing branch banks meant they had a kind of de facto monopoly for their target area, and the profit cushion that arose from that monopoly meant they could comfortably ignore loans in poor and minority areas and focus mainly on high-quality white mortgages. This was the era of what was called 3-6-3 banking. Namely, borrow at 3 percent, loan out at 6 percent, and be on the golf course by 3 o'clock. Today, as evidenced by these subsidiaries of an international conglomerate, mortgage brokering is a worldwide affair, and everybody must compete to originate mortgage loans. The open market means that if one bank tries to discriminate against blacks by offering too high prices, then another can jump in and make the profit on a lower-priced loan. If all lenders in a market are discriminating, someone else can start making loans to minority borrowers. This is a classic example of how, as Nobel Prize winner Gary Becker has shown, competition decreases racial discrimination, because it makes discriminating both more expensive and less enforceable.

So what about DOJ claims that blacks suffered higher mortgage rates and fees despite having similar incomes? Unfortunately, years of scholarship have shown that blacks tend to default at significantly higher rates than whites with similar incomes. A September 1999 study by Freddie Mac showed that blacks with approximately $70,000 a year in income have worse credit histories than whites with around $25,000 a year income. Gary Becker himself showed that if banks were discriminating in mortgage lending, one should see lower default rates and higher profitability among loans to blacks, because banks would pick only the most credit-worthy minority applicants. Instead you see the reverse, high default rates and lower or equal profitability among loans to blacks.

The reasons for high black default-rate are legion. Less saved wealth, more variable job histories, and the relative absence of two-earner (and two parent) families all contribute. And all of this is, in some way at least, certainly the end result of years of racial discrimination and segregation. But it definitely does not show that mortgage bankers today are actively discriminating against minorities. Interestingly, nobody in the DOJ or elsewhere seems to argue that these well-educated bankers and mortgage brokers bear a particular animus against blacks that somehow manifests itself through charging them slightly higher fees on loans. Most people today would rightly say that that is ridiculous (yet this kind of assumption lies behind the endless press reports on mortgage discrimination and the housing crisis). Instead, the contemporary enforcers of racial housing laws claim that "cultural affinity problems," or some other unstated mechanism, cause bankers to underestimate black credit-worthiness and therefore overcharge for loans. Of course this doesn't explain why Asians have lower default rates or why black-owned banks appear to practice similar "discrimination" against black borrowers as white-owned banks, but no government lawyer appears interested in explaining this, and of course they don't have to because these cases never make it in front of jury. It almost always makes sense for accused companies to just settle and make nice with the government which regulates them and can cause them even more trouble in the future if the want to get fiesty. In this case it makes particular sense because these two companies are directly owned by AIG, and are therefore directly owned by the government that is supposedly suing them. Settlement in this case was a foregone conclusion.

This brings to mind the arm-twisting that accompanied the auto bailout, where then TARP-controlled banks caved into Obama's demands that they write off billions of dollars in secured loans on the GM and Chrysler debt so that the Democratic-friendly unions could get a bigger cut of the pie that emerged from bankruptcy (UAW illegally got 17.5% of GM and 55% of Chrysler). It also brings to mind Obama's consent decree with Westchester county, where the administration explicitly used the threat of removing HUD funds to force them to sign a decree that now forces counties across the country to allocate affordable-housing funding based on race. The administration knows that its discretionary power over federal funds allows them to force new policies sub rosa without enacting new laws. Of course, this is exactly why untrammeled political discretion over the economy is dangerous: it forces citizens and companies to bow to demands which help political friends but hurt the broader public and the rule of law. Unfortunately in the mortgage discrimination case, the effect may be even more destructive in the long-run than any of these others, because this forced settlement (with a government-owned bank subsidiary) will allow the DOJ to browbeat the rest of the private-sector with a nice signed and certified consent order in its hands. All mortgage lenders using independent brokers now exist under the Sword of Damocles.

I of course agree with these DOJ lawyers that banks should not be allowed to explicitly use race as a factor in making loans, but the problem is today almost any metric that can somehow be correlated with race ends up being a potential liability for the companies that use it. If zip-codes or job histories or credit scores correlate with race, the racial discrimination squad can use a couple easy regressions and show how a mortgage lender is secretly out to destroy black homeowners. The end result is that almost any measurement used to calculate loan rates is subject to lawsuit, and now this is true even if an independent broker makes a non-discriminatory loan without any broader statistical background. Just the gathering of such loans together in a company is dangerous, trying to rate them by chance of default is even more so. In this way this settlement works much like the recent credit-card bill, which also operated under the assumption that most borrowers were equal and banks should use fewer measurements to determine credit risk. Of course, in both cases this will lead the banks to raise rates for everyone and cut off credit to the poor. This is also the exact same logic that caused our nation's housing crash. Despite all the platitudes about learning from history, the administration is now forcing more bad, under-priced loans on banks, telling them its all for the best in the long run. But intentionally making banks dumber about the loans they make is not a path to credit stability.

In my mind though, the greatest tragedy of this settlement will be inflicted on the black homeowners it was designed to help. The increasing dangers of liability will cause more and more lenders to retreat from making loans in minority areas, ironically causing exactly the sort of redlining these laws were originally designed to prevent.

It's the same old law of unintended consequences.

(PS For those few people following this blog, I apologize for the long absence. I should return to making more regular posts during the next few months).

The Dangers of the Commuter Tax

2010-01-27T17:39:00.000-08:00

Today, Washington Post editorial writer Colbert King offered an interesting eulogy to his former boss, Senator Charles McCurdy Mathias, a Republican from Maryland. Mathias was truly a non-partisan in the old mold, a Republican who helped pass both the 1971 Federal Election Campaign reform law and the 1973 War Powers Resolution. But King also mentions a little known political tactic Mathias employed along with former Washington DC mayor Walter Washington...

Washington and Mathias had a routine based on their mutual needs that they would employ from time to time. Both men told the story of how Washington would ask, "Now, Mac?" And Mathias would reply, "Not now, Walter, I'll tell you when."

When political troubles seem to be stirring in the Maryland suburbs, Washington would publicly call for a commuter tax (which would have been impossible to pass) - allowing Mathias to "defend" his constituents by denoucing the idea.

This would be followed by a call from the Senate: "What can I do for you up here on the Hill, Walter?" Mac would ask. And the city's budget would sail through.

Of course the commuter tax is like catnip to DC residents and kryptonite to DC suburbanites. Since only one of those two groups gets to elect members to Congress, a DC commuter tax will not happen as long as DC can't decide how to turn Eleanor Holmes Norton into a full-fledged representative. In fact, a commuter tax for DC has been explictly barred ever since the 1973 District of Columbia Home Rule Act (which Mathias also helped pass).

Even if the political situation were different, however, a commuter tax wouldn't make sense for DC. As I've discussed earlier, commuters actually pay more than their share of local taxes almost everywhere in the nation, mainly through the high property taxes paid by their employers. Most importantly, commuters don't use local schools or social services, which in major urban cities like New York constitute over 50% of all spending.

In fact, New York City was forced to drop its commuter tax back in 1999, and in the following eight years, despite the apocalyptic screeds of the tax's proponents, the city increased its population by 4.4% and its employment by over 10%. And this while the city almost doubled its revenue to over $50 billion dollars a year (although much of this went towards projects, and pensions, few today would consider wise). Clearly the end of the commuter tax didn't end revenue flexibility for the city government. Still, the New York Times never stops trying to get that old commuter tax magic back.

Those cities which have heeded the call of the Times and other downtown papers and maintained a commuter tax (such as Philadelphia, Newark, Detroit), continually number among the worst performing and most consistently bankrupt urban areas in the nation. Philadelphia was in fact the first city in the country to impose a commuter tax, back in 1939, and it has not been a notable success there. Haughwort (2000) estimates that the city lost over 127,000 jobs just since 1970, almost 1/4 of its entire employment base, simply from the rise in the wage tax rate during those years, which at one point constituted almost half of the city's revenue. The tax now takes almost 4% of non-residents income, and that on top of state and federal income taxes. No city in the nation even comes close to that burden, or manages to offer such poor urban services in return for the vast sums it receives. Still, according to advocates of the commuter tax, those tens of thousands of lost jobs should mean that tens of thousands of commuters are no longer a burden on the municipal fisc, and Philadelphia should be booming, but of course it continues to lose population while it lurches from one fiscal crisis to the next.

Mathias's and Washington's old routine dramatizes the sempiternal conflict between suburbs and cities, but both sides should now understand that when it comes to commuter taxes, they're all on the same side.

The FTA to America: Cost-Benefit Analysis is Dead

2010-01-14T14:39:00.000-08:00

Yesterday the Federal Transit Administration (FTA) announced what it called a "dramatic change" in the way it grants money to local mass transit systems. Dozens of multi-million dollar rail and bus projects across the country will be affected. Now the most wasteful of those projects will get a new leg-up when competing for grants.

To understand the change, however, you have to go back to June 2004, when Congress made clear in a report attached to its annual Transportation appropriations bill that FTA's New Starts grant program (from whence comes the vast majority of the $10 billion in gas taxes that goes to transit) needed to be reformed. Congress said that the criteria the FTA used to evaluate which projects got funded were abstruse and impenetrable, and that grants were obviously going to whatever eye-grabbing system politically pushed itself to the front of the line. The GAO also reported (more than once) that the FTA needed to refine the way it evaluated projects, and the Department of Transportation's Inspector General also chimed in with the growing chorus for reform. So, on March 9, 2005, the FTA released a "Dear Colleague" letter to mass transit systems across the country, stating that from then on out the administration would focus on the "cost effectiveness" of transit programs and that only projects rated "medium" or "high" in cost effectiveness would get funds. This meant that every project had to provide at least $24 of consumer benefit per hour of transit system riding.

The change may seem abstruse and inconsequential, a mere switch in the bureaucratic lexicon, but it fundamentally reshaped the way transit was funded in America. While before almost every major project that was submitted to the FTA was "recommended" for funding, after the 2005 "Dear Colleague" letter, the number recommended dropped by more than half (from an annual 27 recommended projects to 10). There was of course no change in funding, and both before and after about 5 or 6 major projects got grants every year, but now those projects that got grants had to actually show some benefits to commuters. They had to demonstrate with some real numbers how these projects would not just be "light rails to nowhere," but would carry real riders who could actually help pay the way. (Of course the riders wouldn't actually sustain the entire line themselves, otherwise they wouldn't need the grants. These lines would ultimately just be less un-cost effective than the other projects.) The 2005 Transportation Bill (SAFETEA-LU) further clarified that real specifics had to be used in evaluation.

The major effect of this was that light-rail projects got the shaft. Almost regardless of the planners or the politicians involved, no sensible report could mangle the numbers enough to make light-rail look cost-effective. While for years FTA had funded larger and larger rail-based projects (under the theory that they were more "transformational"), now the FTA looked towards Bus Rapid Transit (BRT) and small scale improvements. A 2003 transportation bill amendment that was created by Congressman Earl Blumanauer (D-OR), although originally intended to fund Portland streetcars, actually encouraged BRT by creating the "Small Starts" program for projects under $250 million dollars that allowed "non-fixed guideway" (i.e. bus projects) to be funded for the first time.

Of course the light-rail lobby has been pushing to destroy these changes, and especially cost-effectiveness accounting, ever since, arguing that vague, indefinable terms like "livability" needed to receive more weight in FTA evaluations.

With the Democrats in charge they began to see results. In 2009, the transportation bill encouraged (but did not require) more consideration of non-cost factors in FTA evaluations. And on January 13th, the Obama administration handed the light-rail lobby the final coup de grace they had been craving. The system will now drop cost effectiveness as a necessary criteria and go back to giving equal weight to the old inscrutable "six statutory project justification criteria."

It is worthwhile to note that all of these (environmental impacts, mobility improvements, "other factors," etc.) have continued to be considered since 2005, but since then those funded projects also had to be cost-effective as well. No longer. In the announcement Ray LaHood also promises to revise the criteria further to give even more emphasis to "livability." Such a change will insert even more discretion and politics into the grant-making process. Light-rail (as I've discussed before, one of the great boondoggles in modern government), unconstrained by proof of effectiveness, will further extend its march across the American landscape, drawing down not just more resources from the federal government, but also from those local governments foolish enough to build them without a thought for the long-term funding. More white elephants systems will drag down transportation budgets and snarl traffic in major American cities.

Which is a shame because Bus Rapid Transit has been showing real promise. As early as 2001 the GAO showed that BRT was much cheaper and just as effective as light-rail. And now, despite complaints that "no one ever built a building because of a bus stop," there is real evidence that BRT can spur development. Cleveland's Euclid Avenue line has surprisingly kick-started a real-estate boom along its corridor, against even the expectations of most of its planners. Also, while light-rail continuously over-estimates its ridership numbers (see the incredible Seattle Links numbers), a study of 21 BRT lines show that they consistently underestimated their ridership by 20 to 70%.

This consistent underestimation of buses and overestimation of light-rail ridership should reveal to any sensible reader that planners have a real systematic bias against buses and for rails. The underestimation of buses comes from the old saw that buses simply have a "bad image," and planners take this to mean that no matter the cost and the convenience, people simply won't ride them. Buses may indeed have a bad image, but most researchers have found that Americans have a shockingly rational relationship to transportation, and that a mere bad image won't deter them for long. Just look at the continual success of the inter-city Chinatown buses, which, against all the predictions of Amtrak, prove that millions of people prefer cheap, run-down buses to heavily subsidized rail service. The truth is that you provide anyone with a short and easy commute or trip, and they'll take it, no matter the mode. So despite all the talk of America's "addiction to the automobile" or their "romance with the rails," romance will not cause someone to cram into a subway car 2 hours a day for 260 days a year if its not a good way to get to work, and addiction will not cause someone to climb into a car if they have to pay $40 for parking for the day and they can't afford it. Americans travel a lot, and not surprisingly they are very particular about cost and convenience, and less particular about image, on their morning slog. The only place then where buses have a truly unassailable burden about "image" is in the planning community itself, which is why they manage to keep being surprised when people flock to cheap and efficient BRTs.

And if cost-effectiveness was used to evaluate these BRT projects, their benefits would continue to be obvious. The Obama administration, however, has decided to turn its back on the evidence and find new means for justifying its romance with the rails.

Blog Roll: Greater Greater Washington, of course, is totally loving this announcement, ditto The Transport Politic, ditto Streetsblog. Numerous local papers also report that this change could "help our local transit projects." See Dallas, Washington D.C.

There have to be some other cons out there, right?

The TSA and Airline Security

2010-01-07T21:14:00.001-08:00

While blame for the recent terrorism snafu on Northwest flight 253 to Detroit has been spread fairly broadly, one government agency has become a particular target of concern and complaint, the Transportation Security Administration (TSA).

And perhaps unfairly in this case. The bomber, Umar Farouk Abdulmutallab, boarded a flight first from Lagos to Amesterdam and from thence to Detroit. Of course in Amsterdam the TSA's eternally-wearied screeners never got a chance to ruffle through his bags looking for 6 ounces of shampoo or to question him regarding his choice of footwear, so they had no feasible chance to prevent him and his underwear incendiaries from boarding that plane. The TSA does have some control over the foreign airport screening procedures for flights entering the U.S., but understandable concerns about techniques like "full body imaging" have prevented more intrusive screening procedures until now.

And one of the most scrutinized aspects of the incident, the failure to put Abdulmutallab on the so-called "No Fly List," is also probably not the TSA's fault. Although under the suzerainty of the TSA, most of the info for the list comes from intelligence agencies who were not ready to recommend that Abdulmutallab was a serious flight risk.

Other agencies perhaps had a chance to stop this, but the TSA was simply out of the loop.

Still, the sempiternal government urge to do something, anything, in the face of crisis remains, so the TSA is using the attack to further expand its already ridiculously convoluted and often counterproductive screening regimen at domestic and foreign airports and to institute a bevy of useless rules on the behavior of airlines passengers themselves. Many commentators are right to call this mere "security theater."

As usual it is the government's response to crisis, as opposed to its handling of the crisis itself, that is most disturbing here. The TSA's responses to multiple crises over the last eight years, many self-inflicted, are almost all perfect examples of poor diagnosis and misdirected effort. Although the TSA should not bear the burden of fault in this particular case, the agency has become an ever larger and more unmanageable part of the national security bureaucracy that is making us all less, not more, safe.

The History of the TSA

The TSA was created on November 19, 2001, after George W. Bush signed the Aviation and Transportation Security Act, which passed with little debate barely two months after the September 11 attacks. Here again there was the desire to do something, anything, that appeared to be "proactive" against the terrorist threat. The act created the new agency and gave them the authority to hire federal airport screeners and to direct airport security procedures.

The problem was that individual airports already performed their own security and screening prior to 2001, so the TSA didn't create any new layer of security, it merely displaced the old security workers. Previously airports contracted out security to firms like ITS and Wackenhut, and in general they did a good job of it, because, for obvious reasons, airlines and airports have a serious incentive to prevent their planes from getting hijacked or exploded.

September 11th changed this impression of general competence, however, and some blamed private security screeners for missing the terrorists. It is important to note though that the 9/11 terrorists did not get through security because of lax enforcement, they got through because box-cutters weren't supposed to set off any security bells, and up until then almost no one claimed that they should.

Still, many argued that only government civil servants, famous everywhere for their dedication, resourcefulness, and efficiency, could correctly manage the complex task of airport security.

Surprisingly to some, numerous indications show that these civil servants have not lived up to expectations.

As required by the 2001 act, the TSA allows a few airports to opt-out of the federal screeners system through their Screening Partnership Program (SPP). Those seventeen airports that have chosen to opt-out, such as Kansas City and San Francisco International airports, have been shown to be significantly more effective at detecting bomb material coming onto airlines in TSA's own tests. These private screeners missed around 20% of hidden bomb materials surreptiously snuck on the plane by TSA agents, which sounds fairly damning until you compare it to the 60% missed at TSA-run airports like Chicago's O'Hara. Another recent study by the TSA seems to confirm the same pattern.

In earlier tests from the 1990s, before the TSA took over airport security, only about 40% of the hidden bomb material made it through. This means the TSA has somehow succeeded in making airport screeners worse at their jobs after spending over 40 billion dollars during a decade of almost paralyzing fear about terrorism on airlines. Truly astounding.

One might then expect all TSA airports to escape the agency's grasp and jump on the privatization bandwagon, but expansion of the private program has been hampered due to concern that both the airports and the companies they hire might be liable for any mishaps even while the TSA is shielded by sovereign immunity. Another problem is that the 2001 act, in a clear handout to federal employee unions, requires any private contractors hired to have at least the same pay and benefits package as the TSA's federal employees. And they aren't cheap.

So instead of leading to institutional reform, the continual horror stories about bomb material, guns, and terrorists slipping past TSA workers leads politicians to fall back on the default solution: throwing more money at the failing agency. Obama, desperate to show the world that he can be just as wasteful as Bush when it comes to national security, has increased the TSA's budget by another 11% just last year, mainly with the goal of purchasing expensive explosive detection devices from a few major companies such as L-3 and GE. These would further scrutinize checked and carry-on baggage with high-tech scanning equipment, even though no major terrorist has tried to sneak a bomb on a bag for years. The 9/11 hijackers didn't, Richard Reid didn't, and Umar Abdulmuttallab certainly didn't. Still, a big budget solution has the benefit of looking "proactive."

All told, the TSA now spends over seven billion dollars a year, and it has very little to show for it. It is perhaps worthwhile to chronicle some of their more egregious failings.

This December, the same month as the Christmas bomber, the TSA inadvertently releasedits screening manual to the general public, detailing all of its screening procedures to any potential terrorist who might be curious. It also recently lost a hard drive containing over 100,000 of its employees social security numbers and bank codes. Its agents have regularly (very regularly) been accused of stealing flyers' personal items, and some have already been convicted.

Although the TSA doesn't handle all aspects of the infamous "No Fly List," its management of the list has come in for a justified amount of ribbing over the years. The list has admittedly stopped several dangerous persons from boarding American airplanes, including several Senators and Congresspersons, some children under five, marines returning from war, my own mother (a Smithsonian employee on government travel), Nelson Mandela, and, perhaps most impressively, federal air marshals sent to protect flights. One of the main problem seems to be that the List only classifies people by their names, and a similar name is enough to elicit a "match" and to refuse someone the right to travel. Of course in the grand tradition of government programs this long list of names doesn't come cheap. Merely maintaining the names-only list in its current condition, meaning listing heads of state and missing known terrorists, has cost the government at least $500 million dollars over the last 8 years.

Of course the TSA has celebrated all of these much heralded accomplishments. As early as 2004 it threw a half a million dollar party where $81,000 in plaques were awarded to its employees for their success thus far.

Errol Southers and Collective Barganing

Any and all of these problems have been exacerbated recently because the TSA has been functioning without an appointed administrator since Obama took office, almost 12 long months ago.

Of course some will place the blame for the lack of an administrator on the Republicans, more specifically on Senator Jim DeMint (R-SC), who has placed a senatorial hold on the president's nominee to head the agency, Errol Southers.

DeMint is certainly the proximate cause of the empty position, but this is merely an unfortunate side effect of having a politicized agency. Lack of consensus among elected officials can easily lead to "policy paralysis," and this can prevent an agency from either evolving or acting at all. It is not just Republican obstructionism, it is the very nature of politics running an agency such as the TSA. There is no way to prevent it.

And Jim DeMint's fear about the president's nominee pushing for the unionization of the TSA workers is certainly legitimate. Erroll Southers has refused to say whether he will demand collective bargaining for TSA employees (as DeMint says, "It seems that the only person who pays any attention to TSA who hasn't formed an opinion is Erroll Southers, the man who wants to run the agency"), but since Obama has explicitly endorsed collective bargaining it seems likely his nominee will too, in which case holding up the nomination can only be good for national security. (There is also of course the little matter of Southersmisleading Congress about using a police database to spy on his ex-wife's boyfriend, but I'll leave that to others).

As James Sherk has shown, collective bargaining has already hampered other government security agencies and it would hamper the TSA too. For one, the Treasury Employees union recently brought the Customs and Border Protection Agency to an arbitration hearing for changing security procedures without first consulting the union. Any attempt by the TSA to change security procedures in the face of a threat would bring the same result.

And the TSA's labor contracts are restrictive enough. Already airports are complaining that the TSA's work rules require year round employees, which means there are hundreds of underemployed workers whiling away the slow winter months even though the summer-time travel rush is met with understaffed lines. Collective bargaining would exacerbate these labor issues.

And the CBO has already estimated that a proposed bill which would bring TSA employees into the federal pay schedule and require collective bargaining would cost the governmentabout $700 million over five years, and that is without factoring any potential pay or benefit increases from the bargaining itself. Merely hiring the labor specialists to conduct the bargaining negotiations would cost about $61 million.

In what is perhaps a foretaste of things to come, a screener labor union's dispute with a private security company at the Toronto airport in 2006 caused the union's workers to pass almost 250,000 passengers and their luggage through the security gates with little or no screening while thousands of other individuals and their bags were extensively checked, leading to delays. AFGE blandishments to the contrary, unionization and collective bargaining would bring the same contentious relationship to the TSA.

Solutions

Ultimately, America has to give up the resource-heavy, time-wasting TSA model and try other methods of security. There is an interesting case to be made for the "Israeli model" used at Ben Gurion airport, where screeners focus on personal inspection of flyers as opposed to their luggage, but I agree there is certainly a question of "scalability" in this United States of 300 million people.

Perhaps ultimately we have to acknowledge that some terrorists will get through, and some planes will be lost. Although that may be difficult for some politicians to admit, it is a simple and unimpeachable truth. Just like we cannot protect every transit rider, ever driver, or every pedestrian, we cannot protect every plane.

And even with the current terrorist threat flying remains safer than absolutely any mode of travel.

Of course everyone knows that flying is safer than driving, but I think few people know exactly how much safer. Flying today is astoundingly safe. If one uses the most common measure, deaths per passenger kilometer traveled, airplane travelers suffer only 0.05 deaths per billion passenger kilometers traveled. That number may be hard to conceptualize, but it means that only a single passenger fatality occurs for every 450,000 trips taken by a passenger around the entire globe. If somebody took a flight around the planet every day for a 1000 years on typical commercial airliner they would still be more likely to survive than not. And flying has continually and constantly gotten safer for the past 100 years, and safety will most likely continue to improve in the future. The continual underestimation of flying safety has dangerous consequences. One Michigan study showed that fear of flying in the three months after September 11th probably led to about 1,000 deaths in car crashes due to increased auto travel. Relative to an airplane traveler, an auto driver today is about 70 times more likely to die on a trip of a similar distance.

So perhaps the best thing we as a nation can do in the wake of this incident is to remain calm and remember, despite the endless hassles on the TSA's security line, that flying is still an incredibly safe and efficient way to travel.

Film of worldwide airline traffic over 24-hours

Thomas Hoving and New York City Parks

2009-12-15T05:00:00.000-08:00

Thomas Hoving died last Thursday, December 10th.

Most obituaries focused on his successful decade-long tenure as the director of the Metropolitan Museum of Art, where he enlivened the museum world by treating art exhibitions like movie extravaganzas. His 1969 "Harlem on my Mind" exhibit brought both multimedia pieces and political controversy to the Met unlike any previous exhibit in its history, while the 1975 King Tut tour he organized is still remembered today. How many museum exhibitors can say that 30 years later?

But the New York Times has also been heaping praise on his short reign as New York City park commissioner under Mayor John Lindsay. One Op-Ed even recommends a revival of his "Vest Pocket Park" program.

He was certainly an innovative commissioner. Replacing the dictatorial Robert Moses, Hoving claimed he wanted to take the "No" out of park signs. He created "Hoving Happenings" such as a massive game of capture the flag in Central Park, and a blank 105-foot canvas provided along with free paint for the open expression of children and adults. He lamented the then ubiquitous playgrounds, "the black-topped, link fenced asphalt prison, that standard architecture that has made the W.P.A style the longest art style of the 20th century," and demanded innovative design instead of the typical "swing, slide and sandbox stereotype."

Many of his innovations, however, have not stood the test of time.

Although the Times traced the vest pocket parks back to Jacob Riis, Hoving himself said the program was really an anti-riot and anti-crime measure, created to "keep their [black kids'] fucking minds off getting drugs and shooting each other." Instead of lowering crime, however, there is evidence the vest pocket parks exacerbated it.

It is widely acknowledged today that the money Hoving spent on vest pocket parks and Happenings redirected funds from basic upkeep and led to a rapid deteroration of New York's park system. The hundreds of vest pocket parks he created were too dispersed for supervision or regular maintenence, and within months they began to collect refuse and criminal activities. Alexander Garvin's book American City states that due to his sudden departure to the Met "Hoving never had to face the sad results of his program," which left the city with a dozens of scattered 20 by 100 sized parks that only collected garbage along with a dangerous maintenence backlog.

Yet Hoving's policies were continued and even amplified by his successor, a limousine liberal in the classic mold named August Heckscher. Heckscher actively celebrated the chaos in the park system created by Hoving's lax disciplinary policies and unconcern for upkeep. To the middle class complaining about deteriorating parks he said "If a citizen's priority goes to clean sidewalks, safe streets and polite salesclerks, he should move to a[nother] place that is content to be safe, clean, and polite." He celebrated New York City for having "the most flamboyant street gangs, the most brazen graffiti, and the most sophisticated pimps of any large city." He shockingly claimed that vandalism "was simply a way in which certain elements of my constituency used the parks. It was a form of recreation. Some people liked to sit on benches; other like to tear them up. As commissioner, I would have to accommodate myself to both types." He also said most vandals were merely attempting "to rectify an error in design or conception."

Not surprisingly, with a park commissioner who actively condoned graffiti, crime, filth, and destruction, New York's parks hit a new and terrifying nadir.

In 1971 a New York Times op-ed lamented the suddenly sordid condition of Central Park as it had evolved under Hoving and Heckscher: "In the last few years, vast areas of trodden earth havse spread like mange across the hills and hollows of listless grass...Litter overflows the baskets near the foodstands. Broken glass glints in the rocks where mica once glittered." One writer described the aftermath of a "Hoving Happening" as looking like the bathroom of a commuter train.

The vest pocket park program so celebrated under Hoving and Heckscher was suspended in 1979 after Mayor Koch came to power, and his administration sold many of the now weed-strewn lots to neighboring homeowners for mere pittances. Under Operation Green Thumb about 700 vest pocket parks were leased to become neighborhood gardens. Koch's administration also finally funded much-needed park maintenance and began to put some of those old-fashioned "Nos" back into park signs. Perhaps most importantly, Koch began the gradual transfer of Central Park's upkeep to the non-profit Central Park Conservancy, which now maintains and operates the entire park. It is today a widely admired model of privatization that has kept the park in near sterling condition for almost two decades.

Although Hoving did open up the parks to the public and accelerated some original design policies, it has taken over 20 years to undue most of the damage his short-sighted policies created. It is well to remember that along with all the eulogies.

Highways, Transit, and User Fees

2009-11-23T16:35:00.000-08:00

Perhaps the most contentious and long-lasting debate in the world of urban planning is the debate pitting highways against transit as an urban investment, and the related debate about whether highways and/or transit "pay for themselves."

Even after I began to look more towards free-market solutions to current problems, I was a fervid believer that highways were the grandest giveaway in the federal government, that they represented a hand-out to cars paid for by the general taxpayer, and that they would sooner or later bankrupt the nation. These truisms are repeated endlessly in books like Suburban Nation by Andres Duany and Elizabeth Plater-Zyberk, and The Geography of Nowhere by James Howard Kunstler, and a host of new media sites. I thought free-market principles should demand an end to the hand-out.

It was only gradually, after I saw the numbers and read the papers, that it became clear to me that highways more than paid for themselves through user fees (gas tax, diesel tax, sales tax on wheels and trucks). There really shouldn't be any debate anymore. The U.S. Department of Transportation simply keeps the numbers on this.

Their stats show that federal and state "user fees" pay for 72.5% of the 171 billion dollars spent annually on road work in the United States, including highway policing and safety and including local roads and cul-de-sacs. If you take out the locally administered roads that comprise 30% of all spending (and which are accessible by bikes and any other vehicle and which tend to be paid for through property taxes or impact fees on the builders) and just leave highways, they more than pay for themselves through user fees.

Transit on the other hand tends to pay less than 25% of its total costs through user fee s, mainly fares, but parking and ad revenue too. (See the 2008 Data Tables, sections on Operating and Capital expenses (Tables 1 and 7)).

Transit costs about 36 billion annually in operating expenses along with about 16 billion in capital expenses (but most transit agencies inexplicably include maintenance as a capital expense). Only about 13 billion of those dollars, though, are raised through fares.

A good chunk of the rest of transit's costs are born by federal and state gas taxes and highway user revenue redirected to transit. There is just no truth that transit is bled to subsidize roads. In fact it's the exact opposite. On a federal level 20% of all gas tax revenue goes to transit, and even if this didn't come directly from cars it is massively disproportionate to the 1% of total annual passenger miles that are traveled by transit users. The past 30 years have shown a continually larger percentage of total revenue directed at transit while transit has required ever larger subsidies per rider and has become an ever smaller percentage of total travel. All the trends are bad for transit and getting worse. From about 3% of all passenger miles traveled (PMT) in 1970, transit dropped to 1.5% in 1980 and to lower than 1% today. That's while the "fare-box recovery ratio" of transit has dropped, steadily, from almost par in 1970 to about 25%. And while cars have gotten significantly more environmentally friendly, expelling almost 95% less noxious fumes and using less gas per mile than 40 years ago, transit fuel use has increased on a PMT basis over those same 40 years, to the point where buses now use more fuel per PMT (measured by BTUs) than the average passenger car, and subways use almost as much. Even with the massively disproportionate subsidies these trends will undoubtedly continue.

After all the ballyhoo in the papers (which, as some have noted, are almost always based in the transit-dependent downtowns of old central cities) with the increase in transit ridership in 2008, they hardly mentioned the significant decrease in transit ridership in 2009. There was more than one paper that prematurely declared 2008 the end of the auto-era, and the next slight blip up in transit ridership will certainly occasion more of the same. The number of papers that only report the upswing (not the downswing) in transit ridership is so great that if you type in "decreased transit riders" in Google, you receive numerous article which explain how higher fares and lower subsidies decrease the number of riders, while typing "increased transit riders" gives you dozens of news reports on the 2008 increase, and none on the 2009 decrease.

Now some will say that transit is a public good and that therefore the government should subsidize it. But a highway is a public good too, and in fact a whole host of things can be considered "public goods" that need to be subsidized if one starts being creative. A restaurant can bring more retail traffic to an area and thus benefit other shops and the public, internet connections can increase the size of a network and thus increase returns, etc. etc.

And this is where the Public Choice approach is helpful. If a liberal is able to identify a "public good" or a "market failure" their assumption is simply "OK, just let the government do it and correct the market failure." But there is no reason to believe that publicly elected officials have the incentives to match benefits with costs or that they are able to magically "correct" failures through their exceptional foresight which alludes private actors. In fact, there is reams of evidence that their attempts to "fix" market failure lead to worse economic solutions because they are dominated by interest-group politics and political considerations, not, of course, cost-benefit analysis. In most cases there is no good way to measure the amorphous "public good" that arises from any subsidies, so the political debate revolves around which group can donate the most to which politician and which group can grab the most subsidies or the most headlines. It's just a horribly mis-placed way to direct resources. The result is all these terribly designed subways and light rail lines (see LA's purple line, or DC's Anacostia streetcar, or Charlotte light rail or just about any federally subsidized line) that go to the middle of nowhere because that's where landowners have the most clout and that's where construction companies wanted to build and that's where some politically connected community development corporation had offices, etc. etc.

But if one still thinks transit needs subsidies, and one still thinks politicians are somehow able to vote for the "correct" amount of transit subsidies, what is the correct amount of subsidies? Is 75% of the cost too high, or too low? Is it 35%, 50%, 90%? Once you start talking about vague public goods, there's no good way to decide. I've come to realize that most of these transportation issues are fundamentally boring accounting questions that politicians and politics simply aren't good at answering. Some liberals talk glibly about "market failure," but then always assume just throwing it into Congress or the state legislature will somehow correct the situation without realizing that political economy has its own rules too, and that no one seriously thinks they are conducive to good economic outcomes.

In the case of transit, almost any public good redounds to local landowners along the path. They receive an un-earned increase in land-value, and the only way therefore to see if transit may be a worthwhile investment in areas where it needs a subsidy is to allow landowners along the path to pay for it. If transit has positive externalities to local landowners, then they can create a Special Assessment District to fork over the costs. The closer a government is to the costs, as in SADs, the better it is able to evaluate the value of an investment and the less likely it is to be lobbyist-dominated.

A private business, of course, is the most sensitive to costs and benefits and the least susceptible to outside pressure, because they have their own money on the line. After all, highways that are privately built, operated, and funded tend to be more heavily used because the operator is looking at recovering costs, not pleasing different constituencies based on their political heft. Just look at SR 91 in Orange County. Privately run roads provide more innovations and more customer satisfaction than government-run ones. If transit was also privately operated, or at least unsubsidized (as it was not so long ago), I have no doubt there would be substantially less transit in this country, but those transit systems which were left would be more efficient and better designed to benefit the general welfare.

Transit advocates are fond of talking about the "unsustainability" of the American highway system, but after looking at the numbers, it is clear that it is the ever-growing subsidies towards transit which are unsustainable, returning as they do less and less bang for their government-funded buck, with ever more expensive and ever more empty subways, trains, and buses. It's time to start looking for different solutions.

Review: Democracy by Decree

2009-11-11T04:00:00.000-08:00

In 1982 ten prisoners in Philadelphia's Holmesburg prison filed a federal suit against the city's mayor, Wilson Goode, and charged him with violating their constitutional rights, specifically the 8th Amendment right against cruel and unusual punishment, due to the supposed squalid state of the city's jail. Mayor Goode began negotiations with the plaintiffs' attorneys to see if an agreement could be reached.

The Philadelphia District Attorney, Ronald Castille, however, was not named in the suit, and was therefore not involved in the negotiations. When he got word that Goode was considering making a deal that capped the number of prisoners in city jails he was understandably concerned. The DA was charged with overseeing public safety, but if Goode's agreement with the attorneys went into effect, hundreds or thousands of the people he helped convict would be released immediately onto the city streets. He asked the judge to allow him to intervene in the case, but to no avail. Goode's deal with the attorneys went into effect, and almost all new suspects who came before city courts were immediately released on bail.

The mayor of Philadelphia would not typically have the authority to release thousands of prisoners without the agreement of the city council or the state legislature, but when Goode signed a "consent decree" with the Plaintiff's attorneys, which was then ratified and codified by a federal judge, he became the sole representative of the state and local government and acquired the power to do anything he imagined feasible to remedy the supposed constitutional defects of the jail. Other elected officials, both at the time and after he left office, would have to pay the cost, but for now he alone handed control of the Philadelphia prison system into the hands of a federal judge and a group of crusading attorneys who were required to "supervise" the decree.

Within months the number of fugitives in the city leaped from 18,000 to 50,000. Almost 10,000 of these were re-arrested for new crimes only to be put back on the streets once again. While on the streets these released fugitives murdered 79 people, committed almost a 1000 robberies, and were involved in 1,113 assaults. One car thief, who had already been arrested twice and then released on bail both times, shot and killed a twenty-one year old rookie cop who was trying to prevent him from stealing yet another car.

For six long years the federal judge would hold the city to the consent decree requiring release of prisoners, even citing the city for contempt, even after a new mayor, Ed Rendell, came to power and argued that he was unconscionably burdened by the agreement of his predecessor. The federal judge who had released the prisoners and who now supervised the Philadelphia jails was convinced that he had done a good job, and sincerely believed that the agreement signed under his watch needed no modification.

This is a perfect example of the dangers of runaway consent decrees, as documented by Ross Sandler and David Schoenbrod in their fine book, Democracy by Decree: What Happens When Courts Run Government.

Sandler and Schoenbrod meticulously demonstrate how state and local governments in America today are hobbled by hundreds of consent decrees. Consent decrees run local jails in all fifty states and state prisons in 41. Almost all fifty states also have school districts, mental institutions, and foster care programs under a myriad of different consent decrees, many of them signed decades ago by politicians long out of office. These decrees are managed and supervised by a select group of judges, plaintiffs' attorneys, and bureaucrats, who, unknown to the general populace, work behind closed doors to run some of the most crucial functions of modern government.

In New York City, for instance, consent decrees twenty-years old or older decide how the city runs homeless shelters, public housing, special education, foster care, its Rikers Island jail, and other institutions. These are some of the city's most important duties, but at this point their management is almost completely out of the hands of any currently elected official. Any modifications to these abstruse and elaborate decrees, which have in the past been detailed enough, for instance, to mandate the number of nutritious snacks at schools, demands intensive background negotiations with the "public interest" plaintiffs' attorneys. These attorneys are understandably reluctant to relinquish their power given that they have become the unelected leaders of numerous city departments. More importantly, they are typically paid, by order of the judge, for every hour of these negotiations by the city itself, usually at their princely hourly attorney rates. Some attorney groups have brought home almost half a million dollars in a single year just for "supervising" a consent decree.

The authors trace the origins of the modern consent decree to the noble crusade to desegregate schools following the Brown decision in 1955. To insure an equitable balance of races, courts began managing school districts with tens of thousands of children based on early consent decrees between the NAACP and local school boards. Courts and public interest lawyers became involved in delicate issues about districting and application procedures that were entirely outside their previous experience. There were some marked successes and some notable failures in this endeavor. Yet after Congress began legislating "soft rights" (such as a vague though absolute right to "clean water" and "honest government") and inserting "citizen suit provisions" (beginning with the Clean Air Act of 1970) into federal laws, courts began expanding into more and more areas, defending what the new breed of public interest lawyers called the "new property."

This revolutionary concept meant a citizen's right to demand certain actions from the government was in some ways analogous to older conceptions of personal property that courts typically defended. By this concept an individual could file a lawsuit demanding that the government maintain the environment or distribute welfare checks or manage prisons in a more humane manner, and courts would rule on these suits and apply remedies just like they used to do for cases about trespassing and adverse possession. This "new property" concept, though, was much more complex and slippery than the old property, and while defending this concept courts sank deeper and deeper into the policy morass of a thousand different areas of government, areas in which they had no expertise and no democratic legitimacy. The results were lamentable.

For one, the decrees often expanded far beyond their original stated intent to remedy a specific failure to abide by federal law. Sandler and Schoenbrad extensively document the notable case of Jose P.

In 1979 lawyers for Jose P., a deaf elementary school student, brought suit against the New York City Board of Education for failing to place Jose in a special education program after three-months time. The federal Individuals with Disabilities Education Act of 1975 made broad, unquantifiable requirements about evaluation of children in need of special education (a typical "soft right") that Jose's lawyers claimed the city violated. After a short hearing Judge Eugene Nickerson granted a preliminary injunction against the Board of Education and required them to evaluate and place children who needed special education quickly. A simple enough remedy. He then, however, appointed a "special master" to supervise the schools, formulate precise guidelines for the order, and negotiate a detailed consent decree with the city. Soon, without so much as a hearing, Judge Nickerson placed another, much broader, special education suit under that master's supervision, and required him to rule on remedies for that case as well. This special master was basically given the power to reshape New York's entire special education system to his own will, although nobody had elected him or put him into a definiable office. Of course, the prospect of re-engineering the entire system sub rosa attracted other litigants to Judge Nickerson's door. Soon, a complaint by the Puerto Rican Defense Fund led to their inclusion in negotiations, followed quickly by the Public Education Association, and then, not to be left out, Advocates for Children of New York. Almost ten years later a group of lawyers filing under the new Americans with Disabilities Act was incorporated into the case without any new hearing.

These public interest lawyers were all authorized to appear in hearings before the special master, and together they all became a kind of parliament for New York's special education system, negotiating and deciding on policies for the entire city, all while earning literally millions in hourly fees for their burden. The original decree became just a starting point for decades of further negotiations. Their detailed plans for the city were never published, or scrutinized, but soon they were deciding exactly how long an evaluation for special education should take, how long it should take to place a child in a certain program, how much money should be spent on psychologists, teachers, and training, and how much taxes should be raised to pay for it all. After 30 years of effort, they still claim that the city needs their supervision due to its continuing "malfeasance," which, of course they don't assume any responsibility for. Under their supervision, special education jumped from a small percentage of total spending to 25% of the city's education budget, yet few today would uphold New York's sprawling special education program as a model. All of it though is under the judge's and the plaintiff's murky control, with no end in sight. This all emerged from the case of a single child who putatively suffered a delayed placement into special ed over 30 years ago.

There is almost no way to justify these actions as legal. It was and is nothing less than the usurpation of government by a select group of judges and lawyers. What is perhaps most surprising, though, as this book shows, is how incredibly common, almost mundane, this story has become.

Sandler and Schoenbrod skillfully analyze why consent decrees are so plentiful today and why they have become so entrenched. These decrees provide judges and lawyers with interesting and meaningful work distinct from the typical endless parade of petty cases. Some elected officials also get used to deflecting blame onto a non-elected body. They also allow executive branch bureaucrats to sign off on agreements that often end up increasing their own agency's budget (even when they are supposed to be opposing the lawsuit). These bureaucrats often understand that judicially supervised decrees can protect them and their department from the typical rounds of budget cuts by mandating spending levels. When New York City found that social workers added little to special education screening procedures under the Jose P. case (the city was already required to have psychologists and professional evaluators to decide if a child had special needs), Judge Nickerson inexplicably allowed social worker unions to intervene in the case to protect their jobs. They too became part of the tight clique of special education negotiators. Once they were included, the judge demanded that the city hire 90 more, and these, of course, became vigorous lobbyists for the continuance of the decree. There is here, as elsewhere, a new iron triangle of complicity in ending democratic government that should be disturbing to every citizen. These groups remain entrenched and powerful, and Sandler and Schoenbrad do not give much hope that they can be easily removed.

But maybe the times are a-changing. Just this year the Supreme Court, in Horne v. Flores, struck a blow against these endless and expanding consent decrees. Justice Samuel Alito wrote that to be released from a consent decree a government merely had to show that it was abiding by the original federal statute, and not every particular requirement that somehow made it into a consent decree over the years. Thanks to the Supreme Court's intervention, the state of Arizona will not have to raise taxes to fund a judicially-determined level of bi-lingual education. Perhaps other states and cities can now use the decision to escape the grasp of these arbitrary decrees. Perhaps the people can begin to decide again how to run their own schools, adoption systems, and housing programs.

Both Justice Alito, in his opinion, and Justice Stephen Breyer, in his dissent, explicitly cited Democracy by Decree as informing their opinion on the case. This means, though, that they both read the authors' list of previous Supreme Court cases that aimed to end or restrict these eternal decrees, and how they failed in that purpose. As the authors show, district court judges have relied on their relative obscurity to continue these decrees in the face of Supreme Court precedent. As I've discussed recently, Westchester County was just browbeat by the federal government into a historic housing consent decree that forces it to produce millions of dollars worth of affordable housing (see also this City Journal article for more background).

If history is any guide, we'll be dealing with these unelected leaders for some time to come.

(Another book review: here.)

Mayoral Election Rundown

2009-11-06T03:49:00.001-08:00

Election day is over, and despite the rotten economy an overwhelming number of mayoral incumbents held onto their seats.

Bloomberg squeaked by in New York City, 51 to 46. Apparently his aides knew how close this would be all along, but feared announcing it to the world would bring down the big guns. They did get Geoffery Canada to keep Obama out though. Dave Bing won again in Detroit, which means the city is actually being run by someone with business experience and without a criminal record. Luke Ravenstahl, the incumbent mayor of Pittsburgh, all of 29 years old, won handily against Acklin, the graybeard of the race at 31, and Harris, 30 years old. In Minneapolis Rybak, with the endorsement of all 13 city council members, took almost 75% of the votes in a 10 way race. St. Paul's incumbent, Chris Coleman, held on too. Ohio incumbents won in Cleveland and Cincinnati. In other news, Menino is officially crowned king of Boston. All except Bloomberg, who is nominally a Republican, and Coleman, who is nominally independent, are Democrats.

In the open races there were few surprises. In Miami Tomas Regaldo won solidly on a promise to stop development (he may be a little behind the curve on that one). Anthony Foxx did upset the polls, however, to become Charlotte's first Democratic mayor in 22 years. Seattle's non-partisan race is still too close to call, but McGinn, who flip-flopped on the only theme of his campaign (he originally promised to stop the Alaska Way Viaduct, now he says he won't), has a slight lead. Houston is going to a runoff, and so is Atlanta, which means that Houston may elect an openly gay mayor, and Atlanta may elect a white one. So there may be potential surprises in the future.

Also, check out this Wall Street Journal article on an odd mayoral race in Lewis Run, Pennsylvania, population 573.

For a complete rundown of the major races, see the U.S. Conference of Mayors' tally sheet.

Sundry Links

2009-11-05T19:00:00.000-08:00

1. The Washington Post has a fantastic series on the peculations of AIDS nonprofits in the city. I thought the shady dealings of Peaceoholics uncovered by The Washington City Paper would be the best D.C. outrage story of the year, but this tops it. D.C.'s AIDs coordinator Debra Rowe, who was formerly convicted of heroin possession and distribution, awards millions in AIDs housing grants to a group called Miracle Hands, founded by Cornell Jones, who spent 9 years behind bars for running one of America's largest cocaine markets. Not surprisingly, Jones's group blows the money and warehouses AIDs victims in homes without electricity and heat. They also managed to spend half a million on a job center that never opened, all while Jones put Rowe's father and uncle on security detail at the nightclub he operated next door to his non-profit group. He also employed her son directly for the non-profit she was awarding grants to. There's so much more.

2. In more DC-area news, the Post highlights the failures of Maryland's Smart Growth program (yeah, the original one), and Washington City Paper has yet another great piece, this one on recycling, or the lack of it, in the District.

3. Lawrence Halprin dies. He was one of America's truly great landscape architects. He designed everything from the pedestrian mall in Charlottesville (beautiful), to Ghiradelli Square in San Francisco (unbelievably lucrative), to Freeway Park in Seattle. New York Times architecture critic Ada Louise Huxtable described Freeway Park as the most important public space since the Renaissance. Halprin will be missed.

4. Houston's Light Rail disaster: I've done a few blogs on light-rail recently, and specifically Houston's light-rail, but here's a good look at the ridership numbers. After diverting billions of dollars from buses to rail, Houston was able to both increase its costs and lower its ridership. Good job Houston.

5. Also, the Houston Chronicle has been trying to push zoning on Houston's unwilling citizens for decades now. Here's an article that claims the city's citizens have finally caved into their blandishments. You'd think after 6 previous referendum rejections the zoning advocates would give up, but planners are persistent. This time they might actually win.

6. Buffet puts an unimaginable $44 billion dollars into the freight rail company Burlington Northern Santa Fe. He calls it a bet on America's future. It's also a bet on America's successful freight railroad system, which has actually been the most profitable sector of the economy this year. And, unlike much transportation in the US, they live entirely without government subsidies. This is perhaps why they carry almost 40% of the freight tonnage in America, while in Europe, which pushes and subsidies rail passenger lines, railroads barely carry ten percent of freight. All that European freight is lost just to increase passenger rail to 6% of total travel. And yet they're supposed to be the green ones.

7. I've never heard of this program before, but Neil Peirce at Citiwire documents the strange case of Barcelona@22. Barcelona, Spain apparently allows landowners in some downtown city blocks to vote on the possibility of rebuilding their block at higher densities. In exchange they have to give up a third of their land for parks, housing, and technology-based jobs centers. I'm skeptical about such programs, but it is an interesting arrangement.

8. After opening to such fanfare it looks like Paris's Velib bike-sharing program is destined for the scrap-heap. Vandals have stolen or destroyed around 80% of the bikes. What's most surprising is that the French commentators seem to agree that much of the destruction is political, done by second-generation immigrants who come into the city from the suburban banlieus and who resent the ecological-mindedness of trendy downtowners. So this is actually a cautionary tale about restrictive building codes which limit building heights in European cities and therefore turn downtown into an enclave of the elite. France managed to turn biking into an a snob activity.

LA's Rail Debacle

2009-11-02T03:27:00.000-08:00

The modern light-rail resurgence has been part of a wider trend towards more rail investment in American cities. But commuter and heavy rail can be just as dangerous and inefficient as light-rail, as Los Angeles's experience shows.

L.A.'s Metrolink is a commuter train, not a light-rail, but its on-grade crossings are almost as dangerous as any light-rail system, and for all of the same reasons. In the previous 15 years Metrolink has caused an astounding 244 deaths. The freight railroads which use the line, and which are not subsidized by the government, don't cause this sort of havoc, unless of course they come into contact with a Metrolink. It's another good reason to leave fixed rails to transporting heavy goods and instead keep people mobile through buses, cars, and bikes.

These hundreds of deaths have not been bought cheap either. Ever since LA's residents passed Proposition A in 1980, their far-flung city has tried to build a far-flung rail network, with a notable lack of success. LA's rail-riders garner subsidies 3 to 8 times those of bus-riders. Metrolink's capital and operations cost an astounding $18 dollars per passenger, while the Metropolitan Transit Authority (MTA) heavy-rail systems like the Blue and Green line cost anywhere from $6 to 13 dollars a ride. MTA buses cost only about $1.17 per passenger. So, how did the MTA deal with this obvious disparity? It cut efficient bus lines that "competed" with the the inefficient rail system, and instituted a cheaper "flat fare" for rail riders instead of the fare measured by distance for bus riders.

And it actually "taxed" bus riders to pay for these rail boondoggles. About 40% of the cost of construction of the original Blue Line (finished in 1990) was paid for by substantially raising bus fares, which caused a loss of about 96 million bus riders per year. The newly subsidized Blue Line now carries a grand total of 17 million passengers annually, about 1/5 those lost to buses. (Over the same period MTA paid over a million dollars to lobbyists in Washington to secure federal transit money for its new Red Line to North Hollywood. Congress, led by Harry Waxman, approved funding for the line.)

Perhaps the most inexcusable aspect of all these subsidies is the inequity. In the mid-1990s, while these fare increases were taking place, bus riders were 83% minority and more than half earned less than $15,000 per year, while 72% of the MTA's commuter rail line riders were white and earned over $60,000 a year. LA was giving by far the greatest subsidies to wealthy-white suburbanites, and they were taking them right from poor inner-city minority bus riders.

This led to the 1994 lawsuit against the MTA by the Bus Riders Union, which accused the MTA, with some merit, of violating Title VI of the Civil Rights Act against the discriminatory application of public services. The 1996 consent decree required the re-institution of the old monthly fare and held bus price increases to inflation. Still, the inequity and inefficiency remains.

This is not a story about how putatively low-density Los Angeles is an inappropriate setting for heavy-rail and transit. Actually, at over 7,000 people per square mile, LA is the densest metropolitan area in the nation, and it has the second-greatest number of total transit passengers, behind, of course, New York. It's buses today have the highest "load rate" (passengers to seats) in the nation.

Buses in LA can and do work. Rail doesn't. Or, as the recently departed urban economist John Meyer and his progeny succinctly put it, "Bus good, train bad."

On-Grade Rails and the Streetcar Conspiracy

2009-10-21T19:54:00.000-07:00

I've already blogged about the expense and dangers of light rail, but here's a great video showing the obvious difficulties Houston's light rail system is having while traveling on-the-grade of city streets (ht Paul).

Many, including, not surprisingly, the Houston Metro system, have blamed the drivers for these accidents. Admittedly, as you can see, most accidents involve drivers taking left turns without examining the next lane or just plain ignoring oncoming trains. But since trains arrive much less frequently than cars along a similar lane, there will always be less of an impetus to carefully check the lane when turning to the side. Drivers are also used to dealing with other cars which can brake suddenly and which can swerve out of the way of oncoming traffic. The light rail provides much slimmer reaction time for nearby motorists while turning. As the numbers show, fixed on-grade rail is an obvious safety hazard, no matter who's at fault.

These are just a few of the reasons the country at large abandoned streetcars for buses back in the 1950s and 60s. Everyone at the time understood that they were more costly, more dangerous, and less maneuverable. But by the 1970s a mythology about a golden era of streetcars emerged in their absence. Rabble-rousing attorney Bradford Snell perpetuated the myth, in books and in congressional committee hearings, that General Motors succeeded in a nefarious conspiracy to destroy the once-beloved streetcar industry. After the 1973 oil crisis, these claims gave the public a convenient scapegoat and a comforting story of lost innocence.

In fact, the General Motors subsidiary National City Lines did buy up some streetcar lines in a few cities, but, as Robert Bruegmann points out in Sprawl: A Compact History, cities gave up their streetcars whether or not General Motors bought any of their lines. In L.A., whose myth about the conspiracy was memorialized in Who Framed Roger Rabbit, there were actually two old streetcar lines, the Red and the Yellow. General Motors only bought up one, but both switched to buses in the post-war period. In the famous antitrust case of United States v. National City Lines (1948), much cited by Snell and other conspiracy theorists, GM was convicted of conspiracy and restraint of trade but was charged only $5,000 for their crime. What Snell and many others failed to point out, however, was that GM was not charged with monopolizing or destroying the streetcar industry, but with trying to monopolize the bus industry. It was charged with forcing its subsidiary to buy only GM buses, hardly an unprecedented act for a corporate parent. Also, as Jon Teaford points out in The Rough Road to Renaissance, many of the lines that replaced streetcars with buses were actually municipally owned. The New York City Board of Transportation spent millions in the 1940s to replace its old trolleys with efficient buses, while the Chicago Transit Authority and the Detroit Department of Street Railways removed the last trolleys from their city's streets in the late 1950s. The city of Chicago boasted that "Comfortable, easy-riding buses are being substituted for rattletrap streetcars that should have been derailed at the scrap heap years ago."

But just twenty years later, the combined power of amnesia and faddish planning theories succeeded in bringing the streetcar back, beginning with San Diego's system in 1981. We're all paying for it now.

"The police or the mayor, they don't tell us what to do. God tells us what to do."

2009-10-15T17:00:00.000-07:00

Those are the words of a man, Ronald Moten, whose unfortunately named non-profit "Peaceoholics" received over $10 million dollars in D.C. government grants. Moten also claims that "we don’t work for the government; the government works for us." At least we know the money hasn't bought him off. The problem is that is doesn't seem to have bought much of anything.

These great quotes and many others are brought to you courtesy of the always impressive Washington City Paper. Thanks to them we finally have an in-depth view of the intricately convoluted, back-scratching world of non-profit youth "rehabilitation." In D.C. government-land, three different city departments each award multi-million dollar grants to Peaceoholics with almost no documentation, no contracts, and no-check up, all while ex-convicts are inexplicably placed in charge of teenagers and at-risk youth. The D.C. government hoped that it could gain access to the gangs that Peaceoholics barters with while reforming those marginal ex-convicts and gang members who might think of returning to respectable life. Not surprisingly, things go awry, and one of the "mentors" is soon charged by numerous teenagers with sexual abuse. The peace-loving organization mocks the accusers in and outside of court.

The problem with the government trying to social engineer the ghetto by buying access to it is that the stodgy city politicians cannot possibly understand what they are trying to influence. Just like the Community Action Program in the 1960s, throwing millions of dollars into poor but complex inner-city hierarchies can only lead to chaotic disruption. When these government-funded non-profit groups begin trading on their "access" to dangerous criminals and gangs, everyone should be aware that those groups have to maintain their access through the same kind of power games the gangs themselves use. The gangs associate because they believe that they can get money, protection, and power. The same story always plays out. The line between the government, the non-profit, and the gangs quickly becomes blurry, and the government ends up embarrassed and temporarily chastened when it discovers that its been funding a criminal enterprise after all.

Just look at Jeff Fort in Chicago, whose Blackstone Rangers gang remade themselves as a voter registration organization and received a million dollars in federal grants before being investigated by a Senate Committee in 1970 for directing the funds towards drugs and gang activities. They eventually even tried to contract with the Libyan government to commit terrorist acts in the U.S for cash. Of course, originally, Fort "seemed like such a sincere young man." Or consider the case of the Chicago Conservative Vice Lords, whose leaders received hundreds of thousands of dollars from the Rockefeller Foundation for their "community organizing" group before it was discovered that they too were directing a criminal enterprise with the funds. One of their leaders was convicted of murder in 1970 (or, as the group's seemingly official webpage puts it, "Bobby Gore did not commit the murder, however, the jury thought he did and he was convicted"). More recently, an LA city councilman admitted to providing $5,000 for a gang intervention group whose leader, not surprisingly, was named as an associate of the MS-13 gang in a federal indictment. Everywhere and always it is the same misplaced hope in reform through cash payments.

Although Peaceoholics founder Ron Moten doesn't seem to be involved in these sort of blatantly illegal shenanigans, it is clear from the article that he used city money to lobby for lighter sentences for hardened gang members, doubtless to protect his cred among these groups. It is also clear that his ex-cons inexplicably became the lead investigators in some city crime scenes. When a police officer was asked who is in charge at the scene of a shooting, he replies, "Probably that dude from Peaceoholics; he's the big boss around here." He adds that that dude isn't telling his officers anything. Of course this isn't what the government originally intended; the abdication of police responsibilities to a shadowy non-profit, but once Peaceoholics had the access...

One Peaceoholics member admitted that the police were jealous because "We don’t necessarily tell them what we know. But we lookin’ out for public safety.” I'm sure they can be trusted.

Of course, in the grand tradition of urban giveaways, Moten's totally inexperienced group of ex-cons was also granted millions in cheap loans to develop "affordable housing," which it will doubtless pass on to a real developer so it can pocket the difference. Once the housing is built though, Peacoholics can then use it as a carrot to reward its own supporters and lobbyists with cheap apartments. (Yet another example, in case one was needed, of how affordable housing continues to be the greatest un-discussed boondoggle in urban government.)

It is clear that Moten was building a political power-base among the gangs using government money. The money and the surreptitious government support allowed him to reward friends, punish enemies, and create his own powerful business network, at least it did before it all fell apart with the sexual abuse case. No worry though. Moten promises to "pursue community activism, business ventures, and consulting opportunities in other cities." It's all of a piece.

The Power Law and City Growth

2009-10-13T16:35:00.000-07:00

A recent study claims that interconnections in human cities mimic the interconnections in the human brain.

The study doesn't claim that cities mirror the brain's geography or its layout, but they supposedly mimic the brain's rate of growth of interconnections. These interconnections are measured, somewhat surprisingly, in terms of highways and exit ramps for cities and pyramidal neurons and synapses for brains. The researchers say that the number of both highways in cities and neurons in the brain increases with surface area at a 3/4 power, while highway exit ramps and synapses increase at a 9/8 power. This supposedly shows the efficiency of large cities and large brains. The hardware or infrastructure becomes more efficient as cities and brains grow, and the interconnections become more dense. The larger it is, the more brains and cities can get out of less.

I've already addressed problems with using power law functions to describe cities. The main issue is that millions of things in both the natural and man-made world organize themselves into power law (or exponent) functions, from the use of English words to the organization of galaxies. The somewhat odd choice of variables for comparison (why are exit ramps like synapses? why not intersections in general?) also makes it look like the researchers cherry-picked their subjects to find a correlation. The fact that researchers could find a similar power law function in two disparate fields actually proves very little about either brains or cities.

The White Elephant Olympics

2009-09-28T14:36:00.000-07:00

After much hand-wringing on the part of Mayor Daley and Chicago city council-members, Obama has decided to throw his heft behind his home city's bid for the Olympics.

He should have stayed in DC.

As Steve Bartin at New Geography states, every recent Olympics except the 1984 Los Angeles games has been a money-loser for the host city, and has served mainly to highlight the pretensions of their elected officials. The complicated and conflicted loyalties of some of the Chicago officials overseeing the games means this one could be worse than most.

For a cautionary tale, one need only look at the ingenious yet deserted stadiums that recently held Beijing's $43 billion dollar Olympics extravaganza. Now the Bird's Nest's only scheduled event for 2009 is a single opera. Or one could look at the never-ending disaster that is Montreal's 1976 Olympic stadium, which was never completed yet left the city saddled with multi-billion dollar debts and millions of dollars in repairs that are still costing the city today. Barcelona remains littered with empty stadiums from its 1992 games. Sydney's "Superdome" from the 2000 games is now in receivership while the city still has to shell out $100 million a year to operate an empty rail line directed towards it. The entire country of Greece is still groaning under the burden of its 2004 games, which cost an estimated 5% of the country's GDP.

The prospect looks equally bleak for future Olympic cities. Vancouver's credit rating has already been downgraded due to the hefty financial burden of its coming 2010 Winter Olympic games. A London committee is already warning that their city's 2012 Olympic stadium could become a white elephant unless an anchor tenant is found soon.

Ryan at The Bellows claims that the Olympics are a boon to the cities that host them because it forces those cities to invest in the sort of long-term infrastructure that is crucial for a city's growth. But unless one considers empty stadiums and the off-ramps that lead to them (undoubtedly the main investments for any Olympic games) essential to a city's development, there is no possible justification for spending this sort of money. One of the most consistent findings in empirical urban economics research is that investment in sports stadiums is either inconsequential or a net drag on a city's growth. That finding is even more relevant for Olympic stadiums, which are built without prospective long-term tenants. An article in Industrial Geographer shows that even the slight increase in sales that occurs during the games mainly crowds out other spending (ht Yglesias). Former Salt Lake City Deputy Mayor Brian Hatch, who played a big part in bringing the Olympics to that city, now admits that "people tend to avoid Olympic cities the year of the event, thinking it will be too crowded."

Like all other urban mega-projects that strive for glory, the Olympics is based more on appearance than reality (see my post on the "politics of the visible"). Most elected officials know that they will be long gone by the time the bills come due, but the corona of achievement will often light their political careers. Mayor Daley, not surprisingly, is crossing his fingers.

Green Grocers in the Ghetto continued...

2009-09-23T17:21:00.000-07:00

The New York City Planning Commission unanimously approved a plan to offer subsidies for supermarkets in low-income areas. The proposal now goes to the City Council for almost certain adoption.

I've already voiced my concerns about this plan (here), and every one of those concerns is still relevant to the current proposal. I would add that labor's new attempts to require a "living wage" and health benefits for all supermarket employees almost ensures that no new supermarkets will be built under this program.

As I said before, if the city wants to encourage eating vegetables or fight obesity than it should subsidize fresh foods directly, say through fresh food stamps, and not give indirect handouts to supermarket developers in the hopes that some of those subsidies will then trickle down into the produce section. I will also note that the only significant study of supermarket availability and obesity (it is the only study, shockingly, that's tried to control for self-selection bias) shows that supermarkets reduce the Body Mass Index of nearby individuals a grand-total of one-half a BMI point. When considering all the other factors which are impossible to control (see my post on neighborhood effects), the effect of subsidizing a supermarket in a "food desert" will probably be about zero.

As usual, this government program is built on trendy, untested theories and interest group politics. Its a pretty thin reed on which to base a multi-million dollar policy, but, of course, that hasn't stopped the city before.

Light Rail Fables

2009-09-22T16:46:00.000-07:00

The press loves light rail. Every light rail opening and every new condo built near light rail is reported as part of a grand return to American community and another nail in the coffin of the automobile age.

The PBS program "Blueprint America" recently lavished praise on Charlotte, North Carolina's new light rail system, and featured the city's liberal Republican mayor Patrick McCory singing its praises. Many newspapers, such as Charleston's Post and Courier, echoed that claim and agreed that Charlotte found "light rail success" with its new line. Wired Magazine said that Portland, Oregon demonstrated "success in light rail transit." And yesterday the New York Times claimed that weekend users in Phoenix, Arizona "make light rail a success" there as well. The adulatory articles are endless.

They are also completely inexplicable. Every serious study shows that light rail is infinitely more expensive and less efficient than any other form of urban transportation, and is also more dangerous than any other form of public transit.

First, the expense. Richard Green easily debunks the New York Times inflated claims about Phoenix's light rail system. He calculates that even if fares covered operating costs (they don't, see below) the costs of capital alone would mean an average subsidy of $9 a ride. As he says, it would surely be cheaper to pay for free shuttle trips to local hot spots for the bar crawlers that apparently make up most of its ridership. Furthermore, two researchers at the Saint Louis Federal Reserve calculate that the annual subsidies given to light rail passengers in their city (Saint Louis light rail fares pay less than 30% of operating costs, which is actually on the high end for many light rail systems) could instead be used to lease and maintain a completely new Prius for every poor light-rail passenger, with enough money left-over to give $1,000 a year to every middle-class passenger. Wendell Cox has actually calculated that if one includes both capital and operating expenses, the average light rail fare in America pays only 11% of the system's total cost per-passenger-mile. That means many light rail passengers are being subsidized to the tune of almost $30 per ride, and in that case even a rather lavish taxi trip given to every rider would be cheaper than a light rail system. These numbers show that light rail is not even remotely close to paying for itself, and is in fact one of the greatest unreported boondoggles in government today.

But the New York Times does what most papers do, it measures "success" without calculating any of the costs, arguing only that the Phoenix system is exceeding its own meager passenger goals. This method would seem to make almost any project at which government money is thrown a success, if only such a project could meet its own arbitrary goals, but as Samuel Staley at the Reason Foundation shows, the vast majority of light rail systems aren't even successful on their own terms. Less than 20% of those studied reached or exceeded their predicted ridership numbers. Rachel DiCarlo at the Weekly Standard also chronicles a few representative major lines that failed to attract their predicted riders (despite many blandishments in the press) and lists the tens of millions of government funds thrown at them annually.

Light rail is also much more dangerous than any other form of transit, with around 7.5 crashes per million passenger miles as compared to 3.84 for buses and 0.33 for commuter rail. The "successful" Phoenix system had 13 collisions in just its first three months. This, of course, makes sense when one considers the obvious fact that light rail is on level with the street and yet cannot easily swerve out of the way of pedestrians or traffic. Common sense would seem to say this is a bad idea, and common sense would be right.

Also, as other studies have shown, about 60% of all light rail riders are former bus riders, so many of these systems only transfer people from a cheaper, safer form of transit to a more expensive and more dangerous one, at the cost of millions of dollars to local taxpayers. Some estimate that as few as 25% of light rail riders would be driving without the system, meaning that common claims about light rail significantly countering congestion are almost total bunk.

In the PBS program "Blueprint America," Charlotte's Mayor celebrates the new funds for mass transit contained in the recent stimulus bill and calls for even more. He said his only worry was that funds would be diverted from successful projects like his city's light rail to inefficient roads and highways due to "politics, not common sense." The fact that this could be reported with a straight face demonstrates exactly how blind the media continue to be on this subject.

Review: American Passage by Vincent J. Cannato

2009-09-17T18:37:00.000-07:00

Ellis Island only functioned as an immigration entrepot between 1892 and 1924, but in those 32 short years almost 12 million immigrants passed through its doors. Theodore Roosevelt pointed out that the United States absorbed more immigrants in one of those years, 1905, than did all of the American colonies from the founding of Jamestown to the Declaration of Independence. Of those who arrived, 80% passed through Ellis Island. It is no wonder that the island became a national symbol almost from the moment of its birth.

Yet Vincent Cannato's American Passage: The History of Ellis Island places the history of the island, and the politics surrounding it, in a new light. While most books focus on the sempiternal battle between restrictionists and open-door advocates, Cannato shows that most turn-of-the-century politicians shared a broad agreement on immigration policy. Both sides acknowledged the need for substantial immigration, and both sides agreed on the need for certain restrictions, such as a ban against those "likely to become a public charge," against those with communicable diseases like trachoma, and against criminals and tramps.

Much of the political battle, then, concerned with the administration of these simple rules.

Unlike today, however, such government rules and regulations were relatively sparse and ill-defined, and immigration agents were afforded an almost unimaginable amount of leeway in deciding who to reject and who to accept into the country. Therefore the battle over the presidential appointment of the Commissioner to Ellis Island, seemingly a mere government functionary, was fierce, and congressional investigations into their administrations endless. Many Commissioners were labor leaders (such as former Knights of Labor head Terence V. Powderly) who were assumed to have anti-immigrant sentiments, and who could thus paradoxically satisfy blue-blood groups such as the Immigration Restriction League. Others were mere political hacks. In any case these men had broad discretion to implement policy as they chose. Some years they pushed the rate of rejection for immigrants arriving at the Island as high as 8%, while in other years, to the horror of many Yankee Brahmins, they could push it as low as 0.5%. Some Commissioners required a flat minimum of cash on hand ($25 at one point) to allow admittance, while others allowed Jewish charity groups to post bonds to admit utterly indigent Jews fleeing Russian pogroms. Some inspected all passengers on the steamship; others inspected only those traveling in steerage class. It was basically all up to the Commissioner.

Yet, as Cannato points out, almost all immigrants, in any year, passed through the building in a matter of hours, and only about 2% of all those who arrived on the island during its entire history were rejected and forced the return to their country. This is a startlingly small number when considering the much more restrictive immigration policies in place in almost any nation today. Compared to these, even the most forceful attempts to restrict immigration at Ellis Island were relatively mild.

While Cannato's book often focuses on bureaucratic squabbles and individual Commissioners, perhaps his most important contribution is to place the history of immigration in the broader history of the battle between free markets and regulation in the Progressive Era. While few today would think that markets had anything to do with immigration, in the nineteenth century the battle over free versus regulated markets was a crucial and open part of the immigration debate.

For instance, in 1855 the State of New York turned Castle Garden, a former fort and theater on the southern tip of Manhattan, into a central immigration depot. The intention was not to enhance enforcement of the typical state rules against the immigration of paupers and criminals (there were almost no federal rules until after 1875), rather, the goal was to remove immigrants from the predations of "runners," who supposedly bilked the newly arrived poor out of their savings in a chaotic atmosphere of free-market hucksterism all along the East River. The fort would instead establish a central, organized point for debarking immigrants, collect a $1 head tax that funded hospitals and support networks, and contract out to a few respectable vendors who would provide immigrants with food and railroad tickets. (The old runners staged a large "indignation meeting" at the Castle's opening, protesting the "cholera" the new immigrants were supposedly bringing and claiming the fort would lower downtown property values.) The new commissioners, drawn mainly from charitable groups, believed that the state could handle the immigrants' earliest moments in America better than the free market, and that steady regulation was a panacea for immigration ills.

As in most history, however, there is little data to support either side of the issue, and it's hard to know today if state regulation did offer an improvement for these early immigrants. Many reporters did recognize some improvement in their situation, but by the 1870s the fort had certainly become a political patronage pit for New York State, with 90% of its employees Republicans in an overwhelmingly (even then) Democratic city. Most vendors, given a virtual monopoly by their political connections, became corrupt and exploitative. Hucksters soon returned to surround the fort. The battle between the free market and regulation that Castle Garden was supposed to end continued unabated.

In the 1880s and 1890s, Progressive reformers championed the move from state to national immigration regulation, mainly because they believed that states did not have the political will or resources to control the unending flow of immigrants coming to America's shores. They wanted to regulate both the total number arriving and the experience of immigrants upon arriving. Notable Progressive economists, such as Francis Walker, wrote about the need to regulate immigration just like modern corporations and markets were regulated. In fact, Ellis Island was chosen as an immigration depot because it was thought it would once again keep the free-market hucksters at bay.

But the entrepreneurial runners and hucksters were less of an issue to Progressives than they had been to earlier reformers. While Progressives interested in other fields raged against the oil companies or the railroads, Progressives interested in immigration railed against the supposed depredations of the large steamship companies, who became the new enemies. They claimed steamship companies enticed unwitting immigrants onto American shores only to leave them stranded without work or prospects, hurting both the immigrants and native workers who had to compete with them. Much of the debate about immigration to Ellis Island, in fact, centered on the putative influence of these steamship companies on politics (most of whom were German-owned and who ironically made common cause with the flood of Jews escaping Russia). Still, most politicians of the day thought steamship companies should do a better job of screening passengers for the ill and the indigent before they even embarked, to save the expense of both the immigrant and the government, and congressmen often investigated what were considered their lackluster efforts. These politicians believed industry self-regulation, albeit highly supervised self-regulation, was cheaper and easier for all involved. Many reformers, however, thought that only the strong hand of government inspectors could to stay the unending hordes. Since the steamship companies were required to pay the return fare of any immigrant rejected at Ellis Island, they did have an incentive to internalize regulation of passengers, but there were never-ending complaints that they were not doing enough, and that they were trying to slip too many indigent immigrants past Ellis Island agents. It was the same old battle about regulation and markets that one could hear in countless other areas, both then and now.

By putting the battle over immigration in the wider context of the battle between Progressive Era reformers and free-market promoters, Cannato enlarges the import of the immigration debate, and connects it to other debates in both its era and our own. Despite a few flaws, such as his excessive focus on bureaucratic infighting, he has written an important book that should survive as a reference for some years to come.

The Urban Policy Czar and More Place-Based Policy Nonsense

2009-09-10T18:52:00.001-07:00

Last month some of the top names in the Obama administration, including Urban Czar Adolofo Carrion, released a guidance memorandum encouraging more "place-based policies" in planning for the FY2011 budget (h.t. Discovering Urbanism). The memo cites some irrelevant statistics to support the necessity of such policies, not only Bruce Katz's old stat that metro areas make up 80% of the population and 90% of the GDP (a stat that I discussed, along with Carrion, here), but also, in an impressive act of legerdemain, a stat showing that 64% of all counties across the country are rural. Don't worry readers, everybody is important and everybody is in the majority! Why this means anything in terms of place-based policies I have no idea.

Even more inexplicably, while reams of economists, including Edward Glaeser, lambast such policies, the Obama administration seems intent on expanding them.

I know I've spent quite some time railing at these place-based policies (policies that target impoverished areas instead of impoverished people) (see, for instance, here and here). But, as this new memo shows, such policies are stubbornly resistant to the outrage of economists and policy analysts, and thus deserve as much unflattering light as they can receive.

I would like to provide two representative, though little known, examples of the type of policy Carrion wants to expand...

One is the HUBZone, which stands for Historically Underutilized Business Zone. The "HUBZone Empowerment Contracting Program" was created in the 1997 Small Business Reauthorization Act, and requires 3% of all government contracting to go to small businesses in these "underutilized" zones. This year that should mean about $15 billion dollars, not an insignificant chunk of change (of course the government has never reached its own goal, and in 2007 only about $2 billion dollars were given to HUBZone contractors, mostly through contract "set-asides").

Any economist will rightfully talk about the distortionary effects of such a policy (the forcing of company moves to inappropriate locations merely to procure government contracts, or the refusal of cheaper and superior contractors for expensive and inferior ones), or they will show, as Bartik did, that almost all employment gains go to new migrants into the region. But of course Congress loves the whole concept because it is another means to facilitate handouts to favored groups. Thanks to amendments in 2004 and 2005 HUBZones now include Indian lands and areas affected by the BRAC military base closings. The "qualified census tracts" that make up most of the rest of the zones are also subject to congressional tampering. Undoubtedly both zones and requirements will be extended in the future, and in turn a whole industry dependent on these set-asides will grow, and they will soon lobby for more federal concentration on HUBZone procurement. See, already, the Small Business Administration Office of Advocacy's (an amazing part of the federal government which is statutorily required to lobby for itself) 253 page report on the need to expand the program. The classic Washington life-cycle continues.

When congress can't use the tax code to social engineer the country sub-rosa, they use government procurement regulations, and this is the perfect example of that engineering. The surprising thing is that such regulations (requiring everything from small businesses preferment to race and disability affirmative action) are so often celebrated by liberals who understand they make the government they are putatively championing even more inefficient and paperwork-dependent. By larding all sorts of liberal social goals onto procurement policy, politicians make the everyday tasks that government performs more difficult, and thus increase the public perception of the government as out-moded and inferior to private enterprise. More important to most politicians, though, these policies hide the costs of government intrusion deep in procurement contracts.

Another amazing and little known place-based program is the Treasury Department's Bank Enterprise Award Program, created in 1994 to give grants to "community banks," which mainly invest in affordable housing in impoverished areas (again, one of the literally countless government policies that led to housing overproduction, as I discussed here). This year, amidst the greatest housing bubble in human history, they granted 55 banks about $22 million dollars to lend.

A recent GAO report said the program had poor internal controls, made little attempt to evaluate applications, and almost certainly had no appreciable impact on lending. Of course, that's just the beginning of its faults. Like all government grant programs, it encourages more deadweight time lost on grant-writing (one public housing official in North Carolina estimated that grant-writing cost his organization 25% of the income gained from the grants themselves, not to mention the cost to administer and evaluate the grants on the federal side). Since the general costs to the federal government of raising funds (the "costs of tax compliance") amount to at least 12% of revenue (some say as high as 30%), it is easy to see how this is an inordinately inefficient way to raise bank capital, especially when it is handed out by bureaucrats interested in politics instead of bank finance. Of course, the long and tortourous road the funds have to walk before they can even hypothetically end up in the hands of a poor or needy individual means almost nobody has bothered to trace it. As the GAO implies, its impact on the poor is probably nil.

Although the net effect of these programs may not sound like much, they are representative of the hundreds of official government policies which emphasize places over persons, and that, in the process, help landlords and politically-connected businesses instead of the truly needy.

Daniel, at Discovering Urbanism, thinks "comprehensive" place-based policies are a welcome counterweight to old "context-insensitive" place programs like urban renewal, and that today's place-based programs are a far cry from those of the past. He cites the "success" of the Kansas City Green Impact Zone (which would seem impossible since it is barely a few months old, and almost no money has been spent).

This may make since, since the one possible argument for place-based policies would be if a program is so "comprehensive" that it generates important spill-over benefits that raise the entirety of the community. I would still say that most of those benefits would go to landowners who can raise rents, but there may be some hope for such policies, as is demonstrated by the Harlem's Children's Zone (documented in Paul Tough's great book). Still, it is important to note that Harlem Children's Zone is a very exceptional case. It is a non-profit corporation with unbelievable, and impossible to replicate, philanthropic support. The idea that the federal government, with limited funds and thousands of statutory and regulatory requirements on spending them, can somehow create "comprehensive" programs through a few inter-agencies meetings and memos is far-fetched to say the least. In fact, the history of the Model Cities Program, which also tried explicitly to promote "comprehensive planning" in grant awards, shows that federal log-rolling tends to disperse funds to smaller and smaller areas. The program started with a few "demonstration cities," but political clamoring led to hundreds of small grants given to cities whose support Lyndon Johnson needed, which meant there was almost no concentrated effect. The cities themselves ended up dispersing grants and funds over large areas because of similar motivations. The same process is at work today in policies such as the Essential Air Service Program, which donates an average of $74 dollars a passenger to numerous small and isolated airports which have strong congressional support, instead of the large airports that emplane most of the nation's passengers. As I noted before, programs like HUBZone tend to expand their reach over time, not narrow their focus, and the proliferation of similiar new statutory programs shows that "comprehensive planning," although much celebrated, is receding further and further away every year (and merely throwing a bunch of distantly-related grants with the word "green" in them into one area, as in Kansas City, is not being "comprehensive"). History should teach us that the federal government is the last entity that can or should do focused, comprehensive planning.

I would also add that people-based policies are not context-insensitive, they merely allow the individuals who work within those policies to be sensitive to place in their own manner. It may be almost tautological to say that "place" is inherently "local," but it emphasizes the important fact that the benefits and deficits of particular places are known best to local actors and citizens. There is no realm where federal bureaucrats in Washington have less expertise and less experience than in drawing lines down individual streets in cities thousands of miles away to decide which zones should thrive and which should die. Such expertise only comes from years of experience on the ground, "tacit knowledge" acquired through regular interaction with a particular place. This is the sort of knowledge government bureaucrats can never acquire.

In short, keeping the federal government out of place-based policies should be a national goal, but, since the new Urban Czar now has to earn his keep, that goal may be more distant than ever.

PS I can't help but note one shining example of the innumerable ridiculous government grants out there, the Boating Safety Financial Assistance Grant. Why oh why?

The High Line Assessment District

2009-09-01T22:37:00.000-07:00

In an earlier post, I noted that New York's new High Line park was funded by the entire city but that most of the benefits went to local residents and landlords. I suggested that New York could create a special assessment district, such as was common for parks in the nineteenth century and is becoming increasingly common in New York today, to charge surrounding properties some of the cost of maintenance and construction.

I was excited to learn that the non-profit managers of the park, Friends of the High Line, suggested a "High Line Improvement District," with accompanying tax assessments, to help raise part of the estimated $3.5 million dollars in annual maintenance costs.

Unfortunately it appears that local residents were able to shoot down the idea.

Perhaps the inflated salary of the High Line's director, reported in this Times story, helped fan community opposition. But the main problem was that local residents already had their park, and they knew concentrated opposition always carries more political weight than a very slight tax increase spread across the whole city. Other successful improvement districts, like that around Bryant Park, were created before most of the actual improvements were done, so that payors knew that without their contribution they would not receive the public park or public good. Once the work on the High Line was substantially complete, however, most residents knew that the city would not close down, or let deteriorate, such a well-publicized project. Their opposition to the assessment district, like the construction of the park itself, carried no cost to them.

Government Travel and the Politics of Appearance

2009-08-25T15:34:00.000-07:00

The federal government is telling their employees to stay clear of any city that appears too fun (hat tip, New Geography).

For conventions and gatherings, the Department of Justice wrote in an email that it "decided conference[s] are not to be held in cities that are vacation destinations/spa/resort/gambling...Las Vegas and Orland[o] are the first 2 on the chopping block." DOJ is worried that conferences in these cities will look too much like taxpayer-funded junkets. Other departments now echo DOJ's position.

This new policy has several important implications.

First, the purely monetary. Government-funded travel totals over $14 billion dollars every year, and federal per diem payments are the life-blood of many major hotels and restaurants. Understandably, cities that are "on the chopping block" to lose their share of this substantial pie have raised their voices in protest. The Democratic Senator from Las Vegas, Harry Reid, has publicly complained, and bills have been introduced in Congress to officially overturn the policy.

These protesters undoubtedly understand that even the fourteen billion figure vastly understates the importance of this policy shift. The half a trillion dollar contracting sector, of which billions go to conferences and travel, doesn't have to listen to any of these federal restrictions, but you can bet that they see which way the political winds are blowing and will tack accordingly. With contractor spending increasing by 20% in just one year, despite Obama's calls for "in-sourcing," you can bet they will scramble even harder to live up to the federal ukases. And of course in the America of 2009, half the banking sector and the majority of the domestic auto producers are also under government control; they will have to listen attentively too. One visitor's bureau notes that even plain old private companies are avoiding resort destinations, because "political rhetoric has created an environment where corporate CEOs are canceling meetings due to the possibility they may be vilified by the media." Ultimately, they will all do anything to avoid another AIG debacle.

AIG's junket scandal could be considered the crucial turning point. While previously the term "junket" was reserved for the wasteful travel of public officials, it would now be liberally applied to a company that was at least nominally private. After AIG, every company that was entangled with the government had to understand the media ramifications of every one of their travel decisions. From then on, public opinion and politics would determine the shape of both public and private travel. Travel officials call it the "AIG effect." The present DOJ policy is only the most concrete manifestation of that effect.

What the policy ultimately demonstrates, however, is why the federal government is so ill-equipped to direct American cities and economies (despite Obama's attempts to create a new "urban policy"), and why entangling cities in national politics is dangerous and destructive.

As the U.S. Travel Association points out, the blacklisted resort cities are actually much cheaper than most other cities for travelers, precisely because they have such a concentration of hotels and amenities. They demonstrate classic "economies of agglomeration." But the government understands that most people don't read accounting charts, and they admit that the only problem is that these cities give "the appearance of being lavish." To a democratically-minded government, the appearance is more important than the reality. To preserve their appearance of economy, the government not only pays more, but it pays more for a city that provides significantly less satisfaction for their employees, making it more difficult in the long run to attract the sort of talent that private businesses can easily accommodate. (As I've discussed before, the government makes up for these negative amenities with abstruse though lavish benefit packages. Once again, appearance.) Anyone who's ever been in a government office sees the same process at work, with antiquated equipment and peeling paint exemplifying the clear message of "economy" to that government's constituents, while creating an unproductive and unappealing workplace for their employees. The actual costs and benefits of a fully functional building never enter into the equation.

In fact, one can see the same process at work in all of the government's "place-based policies." America currently has dozens of explicit anti-poverty policies that direct resources to areas and regions instead of people, and these are just as based on flimsy appearance as DOJ's junket policy. These policies are ultimately aimed at fixing the appearance of a blighted area, not fixing the underlying social pathologies. When Jimmy Carter stood up in a run-down section of the South Bronx in 1977 and promised to end the devastation that surrounded him, he was looking at the appearance instead of the reality. The problem wasn't necessarily the burned-out buildings, it was the poverty and suffering they hid. Yet Carter proposed a national development bank which would guarantee loans to businesses in "distressed areas," not to distressed people. In the 1980s, the Low Income Housing Tax Credit, the Historical Rehabilitation Tax Credit, and other programs worked to beautify inner cities without fixing the problems of the people who lived there. Clinton's Enterprise Zones targeted subsidies and tax breaks to the most depressed urban areas in the country, but for all the rhetoric about ameliorating poverty, it was certain patches of ground that were singled out for assistance, not individuals.

The theory is that developing these depressed areas will pull their residents out of poverty, but dozens of studies have shown that economic development in a region, especially subsidized economic development, does little to help the people who actually live there. Bartik's study (1991) showed that only 23 out of every 100 new jobs created in a region went to the people who lived in the area, the rest went to in-migrants who moved to acquire those jobs. Even this may vastly overstate the effects of most policies, since the study dealt with entire metropolitan regions and most place-based policies focus on individual neighborhoods, where even more workers will come from outside the designated area. Other studies have shown almost no local impact, or shown that any benefits actually accrues to local landowners, who get increased prices for their land, often driving poor renters out in the process. Yet this doesn't matter to place-based politicians, who can gleefully point to that most valuable of political commodities, visible change. Media reports can print before and after pictures and celebrate the foresight of elected officials who were able to divine the possibilities of a once blighted slum. Almost every city in America today often tells itself the same sorry story about one of its revivified neighborhoods.

Of course the same overwhelming political focus on the visible, on the "concrete," leads to publicly funded megaprojects and boondoggles. To the media and the politicians who feed off it, nothing is more concrete, though in reality less substantial, than ribbon-cutting. And politicians love cutting ribbons: at stadiums, business incubators, and convention centers. Just like politicians hate "the appearance of being lavish," they love the appearance of construction.

Economist's hate this sort of nonsense, but the decisions to create these political boondoggles emerges from the same irrational political forces that created policies like the one DOJ issued to restrict travel to fun cities. Urban politics, as focused as it is on real visible areas and real infrastructure, is particularly susceptible to the politics of appearance. A new local stadium will always be more concrete than a new national policy concerning social security benefit checks. As much as possible, the goal should be to remove such decisions from the ever fickle public sphere, and allow private citizens and groups to evaluate the real costs and benefits of a proposal on their own.

Pre-Depression Public Housing in America

2009-08-19T01:00:00.000-07:00

Today, many New Yorkers claim that the First Houses, built in 1934 on the Lower East Side of Manhattan, was America's first public housing project. When considering the subsequent history of public housing in this country, that may not be something to brag about. Still, it is important to get the record straight, and though New York City was central to the development of government housing, the earliest experiments began elsewhere.

Of course, the first stirrings were abroad. Some British city governments began building houses after years of misdirected slum clearance projects left them with acres of vacant and windswept land. In 1890 the national government passed the Housing the Working Class Act (with the support of such conservative bulwarks as Lord Salisbury). The act allowed local councils to build housing for laborers. The London and Glasgow councils went at it with gusto, each building almost 2,000 houses, mainly on their suburban fringe. That same year Germany allowed its innovative social insurance funds to invest in limited-profit housing corporations. Soon France and Belgium established national banks for low-cost housing. American reformers lamented that their nation was falling behind.

The earliest American program was probably in Massachusetts. The Massachusetts Homestead Commission was created in 1911 to assist "mechanics, factory employees, laborers, and others" in building suburban homes, and after a state constitutional amendment allowing direct government construction, it started a 50 house demonstration project outside of Lowell. But only 12 were completed due to the beginning of World War I, and it seems that these were quickly sold off to private interests.

The Emergency Fleet Corporation and United States Housing Corporation were formed during the First World War to build housing for naval workers. Their programs represented an unprecedented federal intrusion into local housing construction, and combined they completed a total of 16,000 dwellings. One could argue that this program is outside the evolutionary history of public housing since it built homes for direct government employees and not the broader working class. The program, however, was formed by administrative fiat, not legislation, so the intentions of its designers are somewhat unclear. The U.S. Housing Corporation, started by the Department of Labor, encouraged much comment about its motives by maintaining federal ownership, control, and management of its buildings throughout the war. Program architects like Frederick Ackerman and AIA president Charles Whitaker clearly wanted to use these projects as springboards for more government housing for all workers, and as an advertisement for community design and amenities. Unfortunately for them and their allies, most homes were rapidly sold off to private owners after the war, after what one observer called an "orgy of investigation" by Congress.

The initiative then moved to the individual cities, as it often did in that period. In 1920, during the reign Daniel Hoan, the city's second socialist mayor, Milwaukee started a municipal Garden Homes Corporation in order to construct suburban housing for industrial workers. In a plan even more complex than Massachusetts's, the city condemned 28 acres of land on the outskirts of town and issued stock that was purchased by the city, the county, and a local trade union council. This stock was used to fund a cooperative housing project modeled on British precedents. Residents also bought into the co-op by buying common stock. About a hundred homes were built but within two year the tenants voted to privatize the cooperative (not surprisingly). Though the city was intrigued by the grand experiment of public housing, public housing residents were significantly less interested.

That was the sum total of public housing in the U.S. before LaGuardia, and its record is about as ignominious, if less extensive, then the record of public housing after the LaGuardia. Unfortunately there as been little study to date about these early experiments. There are some references to these early projects in Daniel Rodger's Atlantic Crossings, and Gail Radford's Modern Housing for America, but for such an important subject the work is relatively scanty. Budding PhDs out there, you have your work cut out for you.

The Municipal Bond Market Versus the Regulators

2009-08-16T20:43:00.000-07:00

As impossible as it would seem, federal financial regulators are today the subject of constant and fawning media attention. The Washington Post recently did an obsequious source greaser on Commodities Financial Trading Corporation (CFTC) head Gary Gensler. Time magazine did a leading article on SEC chairwoman Mary Shapiro. Even The New Yorker did an extensive profile on the once anonymous head of the FDIC, Sheila Barr. This sort of attention would have been inconceivable just two years ago, but between the financial meltdown and Obama's cheerleading of Washington oversight, financial regulators have taken center stage in America's political theater.

Soon enough the press will return these multi-acronymned agencies and their titular leaders back to the relative obscurity from which they so recently emerged, but not before leaving a semi-permanent shine on their reputations. The press almost invariably draws them as bright young defenders of the common people against the unceasing depredations of private capital. It is a picture the regulators themselves have been only too ready to acquiesce in.

One recent move, however, doesn't quite fit the image. In fact, it looks conspicuously less like public-interest regulation than like old-fashioned government empire building.

It is the burgeoning attempt to regulate municipal bonds.

By almost any measure, the municipal bond market is massive. It totals around $2.6 trillion in value, with over $400 billion in sales every year, making it equivalent to around 3% of our country's annual GDP. It alone composes about 25% of all state and local spending. (I discussed the market's origins in a previous post). It's vicissitudes are watched by state and local governments like farmers watch the weather, and even minor attempts to tweak or reform the system elicit howls of protest.

But even before Obama entered office, regulators were chomping at the bit to extend federal control over "muni" issuance. In early January the Municipal Securities Rulemaking Board told the incoming administration, through the New York Times, that they needed more power to control the market. They claimed that the muni market was the last bastion of "mom and pop investors" who needed government protection, that over a third of such bonds were held by individual households, and that the average muni trade was "just" $25,000.

The "just" should prick one's ears. The reason so many bonds are held by individuals and not institutions is because the tax-exempt bonds provide more benefit to those in higher tax brackets, and so extremely wealthy individuals are most likely to buy them to offset their own tax losses. Obviously most America's don't think of people who lay down $25,000 in a minute as "mom and pop" investors, and typically regulators treat the wealthy individuals who can afford such investments as sufficiently sophisticated to look after their own interests, but they ignored both common sense and their own traditions in this case. The SEC is already asking for significantly more power over underwriters. Recently, they voted to increase disclosure requirements, making muni bond disclosures more like extensively documented corporate bonds.

One would think that the intelligent, wealthy investors and mutual funds who compose so much of the muni bond market would know how much disclosure they need. If investors don't trust the disclosure statements of municipal issuers, they are certainly free to keep their money clear of them. Instead, the SEC believes that only government fiats will force information on investors, even if these fiats are directed not against corporate evil-doers so often attacked in their rhetoric, but against the state and local governments so lavishly praised and conspicuously supported by the current administration.

Even if investors were inept enough to need this sort of regulatory intrusion, the municipal bond market has proven itself far and away one of the safest and most secure investment markets in America; safe enough for even the un-savviest of investors. As much research has shown, municipal bonds default at a vastly lower rate than equally rated corporate bonds. Connecticut even filed a lawsuit demanding that the ratings agencies change their evaluations to reflect the incredible safety and stability of municipal bonds (they aren't listening). The last time a major city defaulted on its municipal bonds was way back in 1978, when then-Cleveland Mayor Dennis Kucinich drove the city into bankruptcy rather than release his grip on the publicly owned power plant, a rather exceptional circumstance. Even then the city almost immediately resumed payments and was out of default by 1980. The few defaults today are mainly among small utilities or industrial development projects. Overall, this does not sound like a market that is crying out for extensive government regulation.

Of course there is a public interest in investigating the political back-scratching and occasional criminal collusion that surrounds municipal bond issuance. Munis are still an incredibly lucrative market controlled entirely by politicians, and as such they will remain subject to seedy political machination. But this is an entirely separate subject from increasing the regulatory burden on investors who place their money in these bonds. Increasing oversight will only increase the cost to the states and cities who are today so desperately trying to stay solvent. More regulation will only make default more likely.

When the media talk about the current crisis, they often lament the rapacious self-interest and corporate greed that drove many individuals to bankruptcy, yet there is little mention of the fact that people don't cease being selfish or greedy the second they walk into a government office. Regulators, despite all the media blandishments, are not so different from the people they regulate. They want money, power, influence, and adulation, just like everyone else. They are climbing political ladders and burnishing their resume for future private-sector work (the Japanese call it "descending from heaven"). In this case, it looks as if the regulators simply want to extend their power over an area where it had been conspicuously absent for some time. Cities and states across America will now have to deal with the ramifications.

Municipal Bond History Link: Times article on Winston Churchill's grandfather, and the municipal bonds he helped issue to pay for a road in the Bronx. They are still paying out interest. If you want evidence for municipal bond safety, there it is. How many companies could pay every interest payment over 135 years?

And an innovative approach to munis, from the stimulus bill: Build America Bonds (BABs). Benefit: no more tax-write offs to wealthy investors. Problem: you really have to trust Uncle Sam.

Taxi Medallion Madness

2009-08-13T01:00:00.000-07:00

A license to drive a taxi in New York City now costs $766,000. That is ridiculous.

In New York a taxi license is given in the form of a medallion attached to the hood of a car. Mayor Fiorello La Guardia created the medallion system back in 1937, after a large taxi cab strike and shocking reports of the Checkered Cab Company bribing former Mayor Jimmy Walker. Medallions were supposed to end "ruinous competition" and insure high wages for drivers by limiting the number of taxis. Of course, in a classic example of the law of unintended consequences, a few companies bought up most of the medallions and turned many independent taxi drivers into low-wage workers. Still, most of America copied the New York system (or expanded on earlier regulations), and today almost ever major city in America regulates both taxis and taxi fares.

The book Curb Rights documents some of the negative effects of this regulation. Many taxi-drivers refuse to take customers on too short or too long trips because the regulated price makes them uneconomical. The limited number of drivers also tend to focus more on lucrative upper-income areas and ignore poor and minority neighborhoods. Regulations also limit the number of drivers who could have access to a potentially lucrative, though low-skilled, career. Taxi medallions themselves become prohibitively expensive speculative investments that often require large loans to purchase.

Economists have been aware of these disadvantages for some time. Back in the 1970s they convinced a few cities to deregulate their taxi services, but the results were mediocre. Fares and complaints were relatively stable after deregulation. Still, the number of drivers went way up and wait times for cabs went way down. The cities themselves no longer had to pay to enforce unnecessary regulations. Overall, one would have to call the experiment a clear success, and if taxi companies hadn't persuaded the cities to re-regulate so quickly, we most likely would have seen even more competition and lower prices. The only problem was probably that deregulation had been oversold by academics who didn't understand the difficulties in new companies and drivers entering the taxi market.

In the 1990s, though, there was another movement for taxi deregulation, this time pushed by activist groups such as the Institute for Justice. In 1993 the IFJ sued the Colorado Public Utilities Commission to break up the three company oligopoly that had run Denver's cab system for almost 50 years, and though they lost in court, the stories of the three black cab drivers who were barred from starting their own company was so compelling that the state deregulated taxis the next year, and in the process inspired other cities. In 1994 and 1995, Indianapolis and Houston, respectively, deregulated taxicabs in their cities, and they saw the same positive results as cities have seen since the 1970s. Unfortunately, most cities haven't followed their lead.

Today, despite the barriers to entry, there is much to celebrate in the oft-ignored taxi industry. Taxis today carry 40% more passengers than all other forms of public transportation combined. A study commissioned by the old Urban Mass Transit Administration also showed that by any measure the poor tend to use taxis much more often than the rich. And while most cars are idle 95% of the time, wasting both resources and a parking space, taxis spend most of the day actually moving passengers. And while most cars are considered to need up to 5 parking spaces to get through the day, taxis typically only need 1. Also, like the much ballyhooed ZipCars, taxis enable many people to get occasional mobility without owning their own car.

For the foreseeable future, taxis will remain the great unmentioned and unappreciated transportation workhorse of America. If we could free up the market and break down all the roadblocks in their way, who knows what they could accomplish.

Bonus: Another great New York City regulation fail, on the waterfront.

Westchester County and the Future of Affordable Housing

2009-08-11T03:15:00.000-07:00

After being prodded from every conceivable angle, Westchester County, New York, entered into a settlement agreement yesterday that will force it to build over $50 million dollars of affordable housing. This settlement may well affect every publicly supported housing program in the country.

It grew out of a innovative lawsuit by the Anti-Discrimination Center, which sued the county in federal court under the 1863 False Claims Ac t, known as the "Lincoln Law," claiming that the county willfully lied to the Department of Housing and Urban Development (HUD) about its attempts to desegregate housing.

You see, HUD requires the recipients of some of its major grants (such as the Community Development Block Grant) to "affirmatively further fair housing" (AFFH). Hitherto this meant nothing more than writing a somewhat pro-forma report on fair housing issues that was not even officially submitted to HUD. Of course the grantee was also required to take "actions to eliminate any identified impediments" to housing desegregation, but this requirement was based on regulations and statutory language so vague that courts and activist groups have, even in this case, ignored it.

In 2006 the Anti-Discrimination Center sued Westchester, claiming that the county's AFFH reports refused to consider race. This failure on its own was not enough for a lawsuit, but the Center also claimed that the county's certification of its own compliance with HUD requirements, which include the requirement to report on barriers to fair housing in its AFFH report, represented lying to the federal government. Seems kind of extenuated, but there you go. In February 2009 the District Court judge granted a partial summary judgement, stating, somewhat contrary to experience, that the the "the AFFH certification was not a mere boilerplate formality," and agreed with the Center that the county had lied in order to receive federal grants. While it is not often mentioned in yesterday's news articles, on April 28 HUD took the surprising action of refusing to pass on millions of dollars in grants unless the county settled the lawsuit, which basically ended any hope the county had to appeal the case.

On the whole, the history of this case represents the worse kind of judicial activism, abetted by the worse kind of federal government arm-twisting.

First of all, the county was sued merely for giving insubstantial consideration of race in its AFFH plans, not for actively discriminating against any minority. This was not a lawsuit over any concrete actions taken by the county, but over the precise wording of an obscure report it created. The county convincingly argued that it focused its fair housing report on income instead of race, and that furthering fair housing required first of all building more affordable housing. It showed that the report as a whole did not ignore race, it simply did not belabor the subject. Yet the Anti-Discrimination Center claimed, and the court accepted, that the fact that race wasn't mentioned in the particular section of the report that deals with AFFH meant the county was making false claims and lying to the federal government. So this isn't even a lawsuit about a report's wording, but over the degree of emphasis and the precise location of different "fair housing" factors in an obscure report.

The ability of a federal district judge to divine exactly how much emphasis of an HUD report should be placed on race, and exactly which sections of that report should be focused on race, is certainly open to question. Whether or not this lack of emphasis, and the subsequent self-certification of compliance, amounted to "lying" or making false claims to the federal government, is an even trickier subject. Also, since these reports were fully available to HUD over the intervening years and it took no action, a district court judge might assume that the county was abiding by the interpretation of HUD regulations common at the time, and not jump to damaging conclusions. (In fact, the only response the county ever received to to these reports was a 1996 letter from HUD that gave the county suggestions on how to categorize minorities and a few guidelines on discussing race.) One would think a district judge would see these murky waters and try to avoid them. Instead she plunged in head-first.

And even if the county completely ignored race in its AFFH report, completely withholding federal funds as HUD Secretary Shaun Donovan did in April was clearly outside of the typical purview of the department. The fact that the only county that HUD found to be out of compliance with AFFH requirements (ever, as far as I know) also just happened to have an activist lawsuit against it working its way through the courts is telling. And HUD didn't just withhold funds, it conditioned the granting of future funds on several precise stipulations in a proposed settlement agreement. HUD basically forced the county to spend millions of dollars in order to receive millions more. The combined arm-twisting from HUD, the activist groups, and the district court led to yesterday's unprecedented settlement.

In the long term, this means that HUD grantees will certainly smother their future AFFH reports with the discussion of race. They will be so racially saturated that they will look like they were written by Al Sharpton himself. Unless other judges extend the AFFH requirements even further, future reports should be lawsuit-proof. In the short term, however, the settlement will probably lead to a raft of new lawsuits on old reports. Activist groups will try to leverage this agreement to extract millions more in affordable housing funds from every HUD recipient that did not cross their Ts and dot their Is.

As I discussed in a previous post, building government-funded housing in the midst of the greatest housing glut in human history is ridiculous and destructive. Building government-funded housing on court-order is even more dangerous, subject as it is to the whims of court monitors and unelected judges. Whatever the merits of the original judgment, the remedies here are not only wasteful, they are positively dangerous. They are also completely unrelated to the proposed wrong. Instead of merely requiring changes in the report or new payments, HUD and the Center are requiring fresh new houses.

The Center's case is also based on the questionable idea that, as they put it, "residential segregation underlies virtually every racial disparity in America, from education to jobs to the delivery of health care." Consequently, these new judicial houses are supposed to be built in cities with less than 3% minority population. As I discussed in another post, the claims about the negative effects of racial segregation, and the positive effects of integregation, are vastly inflated. While ending residential segregation should be an important public policy goal, the Center's hope that new housing in white neighborhoods will magically end racial disparities in everything from education to health care will unfortunately only lead to disappointment.

But these inflated claims and platitudes are part of the nature of today's affordable housing industry. These groups have a perpetual imperative to build ever more wasteful housing, and now that HUD and the federal courts are apparently in sympathy with them, America can look forward to another housing glut and crash imposed by government fiat.

William J. Bratton's Legacy

2009-08-05T14:53:00.000-07:00

William Bratton announced his mid-term retirement from the position of Chief of Police of the LAPD today, just after a judge released his department from a eight-year old consent decree for its previously abusive behavior. Bratton managed to restore the LAPD's reputation while dramatically lowering crime in the city. This final career triumph proves him to be one of the greats.

Many point to his embrace of "broken windows" policing as central to his success, and this method, which he preferred to call "quality of life" policing, certainly helped him transform Boston, New York and L.A. Yet he himself emphasized his management reforms as the crux of his career. He decentralized authority to precinct commanders, calling them the equivalent of corporate line managers, and gave them carte blanche to run their own "miniature police departments." He encouraged these commanders to be innovative and to respond to the needs of their "customers." Along with John Timoney he created an internal promotion system for precinct captains that rewarded success and made sure crime reduction actually improved careers. He will leave behind him a textbook case of bureaucracy reform.

Even more importantly, Bratton was the first police commissioner to stop making excuses for rampant urban crime. Instead of blaming everything from racism to poverty, Bratton assumed the job of NYPD Commissioner with a dramatic promise to lower crime rates by 10% in a year, saying that crime was the responsibility of the police and could be stopped. He then exceeded his own expectations. He made another dramatic double-digit promise the next year, and exceeded it again. His "no excuses" mentality is now an inspiration to police forces around the world.

Privatization and the Public Good

2009-08-05T08:45:00.000-07:00

The Reason Foundation reports this month on trends in local government privatization.

They show that, for all the recent hoopla and hysteria (see, for instance, Lou Dobbs's maddening "America for Sale" segment), for-profit privatization of services actually peaked way back in 1997, at a modest 19% of local government spending. Other studies have shown that states contract out even less than local governments, around 14% of their total budget. The feds also like to do most of their work "in house." Even the record $450 billion dollars spent on contractors at the end of the Bush administration represents only 15% of the roughly $3 trillion dollar federal budget. The vast majority of government spending remains, as it long has, in government itself.

Beyond confusion about a putative "rising tide" of private contractors, much of the backlash against privatization results from a few fundamental misunderstandings, perhaps due to the fact that the word itself has mulitple meanings. In one community privatization can mean leasing a government asset such as an airfield, in another it can mean allowing volunteers to "adopt a highway" and provide for maintenance, in another it means merely deregulating and delicensing such non-essential industries as cosmetology. The general tenor of privatization could be summed up in the idea that civil society, composed of both for-profit companies and charitable organizations, should perform much of the work previously done by government workers and government rules.

In almost any sense, privatization has a long and fruitful history in America. In the earlier years of our republic, privatization would actually be a misnomer since contracting-out was the default for almost every major government service. Garbage service was licensed to "scavengers" who received a fee based on the amount of trash removed from the streets. Cities received competitive bids for the right to remove dead horses, since their bodies could be melted down and their parts sold for cash. Fire fighters were largely volunteers or paid employees of fire insurance companies. Private water companies received only "patents" from local governments, allowing them to use city streets to build and extend water mains. Turnpikes and toll roads were built almost exclusively by private investors. Railroads, of course, were built by private for-profit companies (even the much ballyhooed federal subsidies to railroads represented no more than 5% of total railroad costs and were prominent only between 1865-1870 for a few lines). The U.S. Postal Service contracted out everything from stamp production to the Pony Express.

These private companies built and maintained much of the early infrastructure of the nation at almost no cost to the public at large. By contrast, the few government-managed projects of the era drained taxpayer funds and provided nothing but scandal. The one federally-funded turnpike, the "National Road," started in 1811 and eventually reaching from Maryland to Illinois, cost three times more than an almost parallel private road of superior quality. The National Road also led to endless bickering between the federal government and the states on who should pay to maintain it (sound familiar?). The most-heavily federally subsidized railroad, the Union Pacific (1862), was tangled up within a few years of its birth in the infamous Credit Mobilier scandal and was bankrupt by the early 1870s.

Despite these failures, middle-class reformers succeeded in bringing almost all major services and infrastructure under the control of government civil servants by the end of the 19th century. These reformers worried that too many of the contracts under the old system were going to unworthy immigrants and Irish political machines. New literate civil service tests ensured that more government workers would be well-read white Anglo-Saxon protestants. It is only in the past 30 years that we have seen a real countervailing trend against the old "progressive" impulse and towards contracting, deregulation, and leasing of government services.

As E.S. Savas reports in his Privatization in the City, almost all these methods have real tangible benefits. Decades of studies have shown that privatization tends to lower costs by about 30% in almost every city, in almost every field. Savas describes the New Jersey Transit Authority's competitively-bid bus contracts, which cost 35% less than their publicly-run counterparts. New York City's contracts with private park maintenance companies also cost almost a third less than the previous public agency work. The key is competition. Competition between government workers and private contractors (described since Bush's 2001 OMB Report as "Competitive Sourcing") even improves the efficiency of the once staid public servants. The competitive sourcing contract for road-sign installation in New York City was won by the old public agency, who, once their jobs were at stake, were magically able to increase installations by 200% in a single year (after the end of the competitive sourcing they returned to their old habits and claimed that the new standard couldn't be maintained without vastly higher pay).

And savings are only one benefit of privatization. Almost all privately-operated services generate fewer complaints and more user satisfaction than their government-run counterparts. Ted Balaker and Sam Staley's The Road More Traveled describes the S.R. 91 Express Lanes in Orange County, California. This road is managed by a private company, CPTC, which performs a level of customer service that would be utterly unthinkable on a publicly managed road. They host "customer roundtables" to discuss user concerns, they constantly monitor traffic flow with dozens of cameras, and, if they detect a breakdown on the road, they send a special patrol with gas, tires, or a tow truck to keep traffic moving. Needless to say, this never happens on I-95 or the Jersey Turnpike.

This story also demonstrates that one of the most commonly-aired concerns about privatization, that the public "loses control" over their own resources when the government privatizes services, is categorically false. As Leonard Gilroy points out, the contract terms on most concessions are typically much stricter than the previous standards mandated by the state for their own agencies. In the case of the Pennsylvania Turnpike, the leasing company is required to repair potholes and clean graffiti in just 24 hours, collect illegal dumping within two hours, and collect all roadside litter once a week. This is far beyond what we've come to expect on most public roads, and, more importantly, these standards can actually be enforced against a private contractor through lawsuits, while a state has no recourse against one of its own public agencies that refuses to meet standards (can it sue itself?). As James Q. Wilson documented in Bureaucracy, private firms are actually more susceptible to government pressure than public agencies. When the Navy decided to push affirmative action for women in shipyards, private companies hired more women more quickly than the Navy's own in-house shipyards, and when state governments began pushing conservation on electric utilities, municipally-owned companies lagged far behind investor-owned companies in encouraging energy savings. The right to sue and the right to cancel a contract gives a government leverage over a contractor that is impossible with one of its own agencies. Privatization actually allows governments and the public more control over their own resources, even if that control involves pushing the sort of social legislation so often championed by privatization's opponents.

Also often ignored in the debate about privatization are the substantial contributions from non-profits. About 1/5 of privatized services, about 5% of total local government spending, represent contracts to non-profit or charity providers. When properly monitored, these contracts provide incredible benefits to the public at large. For instance, despite the uproar over Giuliani's privatization of New York's homeless shelters, almost all of the city contracts for the 109 shelters went to non-profit organizations active in homeless causes. These groups provided the city with superior shelters at an estimated savings of almost 3 million dollars a year.

Non-profit contracting shows that privatization is not fundamentally about increasing profits or eliminating workers, it is about letting civil society do what it does best, and paring government back down to the "core services" that it must perform. The history of business in the past 30 years has centered on the elimination of large, hierarchical conglomerates and their replacement by small, nimble companies who rely heavily on outsourcing. The history of successful local governments in those years demonstrates the value of this decentralized approach.

The record of privatization is strong; all we need now is the political will to carry it further. Unfortunately, the current political winds are blowing in the opposite direction. Obama is demanding a reduction of contractors in the federal government even while incongruously demanding more competition. Congress's elimination of DC's popular school voucher program, started only five years ago, is also indicative of the federal government's new push towards un-privatizing local services. We can only hope that local and state governments look towards their own experience in resisting this new trend.

The Battle over Building Codes

2009-08-03T05:14:00.000-07:00

The Center for Public Integrity (CPI) reports on the evolving battle over fire suppression sprinklers. Specifically, a few state boards, prodded by the International Code Council, are on the cusp of mandating their installation in all new single-family homes.

The policy default here, of course, should be to let people decide for themselves if they want to spend $3,000 to $7,000 extra on installed sprinklers.

Fire departments say that those people without sprinklers will have to be saved by public firefighters using public funds, and that a burning building is always in danger of spreading its flames to other buildings in the area. Consequently, they claim mandating sprinklers would save both other houses and public money. In reality, private incentives and fire insurance premiums should provide the best signals to demonstrate if sprinklers are a worthwhile purchase for homeowners.

If insurance companies discount premiums for a sprinkler-equipped house enough to make them a good investment, then sprinklers provides a net benefit to that individual and will probably be installed. If fire poses dangers to surrounding homes, insurance premiums will give an incentive to homeowners associations or smaller community governments to demand installation in their precise areas. Fire insurance companies vary their premiums by communities and individual streets, showing exactly where sprinklers are economical and where they are not. By contrast, a state-wide building code will inevitably use a broad-brush rule that will encompass many homes where a sprinkler would be overly costly and unnecessary. Of course that is precisely what the "International Residential Code Fire Sprinkler Coalition," which the CPI article describes as "a group of fire service and sprinkler industry advocates" and which forced the International Code Council's hand on the sprinkler requirement, wanted to do.

Ultimately, the costs of sending a few firetrucks over to a burning tract home pale in comparison to the costs born by private homeowners when their house burns down (especially since unions ensure that many areas are seriously overstaffed with underemployed firefighters anyway). The costs of house fires today are overwhelmingly born by private actors, so decisions about preventing them should be largely private. Also, the homes that this code would affect are typically detached and don't pose the same problems for firefighters that large commercial or apartment blocks do, where sprinklers are already mandated. Detached homes are also much less likely to spread flames to other houses.

If firefighters really wanted to force homeowners to pay for the increased cost of fighting fires, they could charge dangerous or flammable homes more for firefighter protection. All other insurance companies (outside a few government-owned ones like the PBGC) vary rates by perceived risk, and what are firefighters but another form of insurance?

Ever since the 19th century, excessive buildings codes have been pushed by construction and public sector unions who used them to needlessly increase the cost of housing. In 1890s Chicago, building-trade unions even wrote the building code itself and provided the inspectors to mandate compliance, often with rules that forbid the use of new equipment and labor-saving technology. The union gained, the public lost, and the tradition of excessive code-making lived on. In 1991, Jack Kemp's Commission on Regulatory Barriers to Affordable Housing (discussed in a previous post) showed that up to 25% of the cost of a house was due to regulations and building codes. Poor home-buyers, who are forced to pay for amenities that they may not desire, but that are common for higher-class homes, bear the greatest burden from these codes. Requiring sprinklers would be a particularly egregious instance of that long, unfortunate history.

CPI Extra: The sprinkler report is one of many quality articles CPI has done on urban development, including those on Indian reservation land and LULUs and Smart Growth in Maryland. These are all part of their innovative Land Use Accountability Project. Unfortunately, for all its fine research and reporting, this project typically hews to the old storyline of rapacious developers buying their way into bucolic towns with community-destroying subdivisions. This kind of journalism is perhaps inevitable when considering the political economy of developer/community relations in America...

Developers are in reality only proxy representatives for homebuyers who would like to move into a new home that has not yet been built. Since these potential homebuyers have no vote in the community into which they are about to move, their money, channeled through a developer, often tries to purchase the political influence that they cannot exercise. Hence the endless complaints about developers buying off county commissioners and the destructive influence of money on local politics. But developers wouldn't have to spend these funds if local communities didn't effectively have a veto on all new building. The true tragedy here is that future homebuyers have no local representation in America, so the default position is almost always set against building anything, a default developers fight against with cold hard cash. This unfortunate situation provides a bottomless trough of fodder for journalists of the muckraking variety. These stories provide even more ideological cover for local communities trying to restrict new building in their area, which in turn leads developers to have to pay more funds to gain entrance into a community. It is a vicious news cycle that constantly drives up the cost of living.

The Paratransit Explosion

2009-07-28T21:39:00.000-07:00

This week Governing magazine reports on the cautionary tale of Sioux Falls, South Dakota, a city of barely 150,000 people where almost half of all transit costs go to vans providing door-to-door service for disabled riders. While the disabled compose only a small portion of overall riders, the average van ride for the disabled costs the city $25 dollars a trip, and with more riders taking more rides, the costs are eating a progressively larger chunk of the city budget. This is merely the extreme version of a story that is being repeated across the country, as "paratransit" costs swamp local governments and threaten the very viability of public transportation.

It started with the 1973 Rehabilitation Act, especially the soon to be ubiquitous Section 504, which required the rehabbing of transit systems that received federal funds to accommodate some disabled passengers. Over the next 20 years scores of protests by groups like the American Disabled for Accessible Public Transit (ADAPT) forced the federal government to gradually ratchet up requirements for transit systems, eventually mandating things such as lifts for all buses. The 1990 American with Disabilities Act (ADA), however, took the requirements to the next level. The act not only required extensive rehabilitation of buses, trains, and stations, but demanded that public transit agencies provide a door-to-door paratransit service that "mirrored" the routes and schedules of the regular service. Like many federal requirements, it was conceived as an exceptional measure that would rarely be used. Also like many federal requirements, it quickly morphed and expanded beyond all recognition. In heavy transit areas such as Washington D.C. and New York City the service now consumes 6% of all transit subsidies. Most predict that it will soon cost over 10% of the total. In smaller areas with less transit like Sioux Falls, the costs are usually a much higher percentage of the total.

The small areas actually highlight some of the greatest dangers of ADA's paratransit requirement. In these areas, the liberal desire to accommodate all special interest groups is at war with the liberal desire to provide cheap public transportation as an alternative to driving. In the end both suffer. In small communities without much prospect of an extensive public transit system, the requirement to provide door-to-door service will certainly give any public official pause when considering starting or expanding an existing system. If any expansion of bus routes, especially over sparsely populated rural roads, has to be paralleled with van service, few new routes will make economic or political sense. In large cities, paratransit funding will result in reductions in funds for regular transit that will in turn involve reducing service, raising fares, and losing more riders to alternative methods. Paratransit is at war with regular transit.

Of course, any attempts to pare back the paratransit service today are met with lawsuits. The DC MetroAccess system was sued in 2004 for late van arrivals and circuitous routes. Riders also had to endure the indignity of sharing rides with other paratransit patrons. A recent settlement, though, forced Metro to improve routing, on-time performance, and spend almost $4 million more dollars improving the system. (Now many complain that MetroAcess is too early for appointments, which of course makes sense when the system is trying to avoid an arbitrary judicial ukase concerning late arrivals.) Of course the regular Metro riders cannot sue for late trains or irregular schedules, and the millions the court forces on paratransit will surely come from Metro's rail and bus service, which, as recent events show, has some use for those funds.

Some systems incoherently blame "aging babyboomers" for the explosion in paratransit use. Washington D.C.'s system says that the increased number of elderly will cause the use of MetroAccess to increase by up to 50% in the next five years, but of course the elderly in DC aren't going to increase by 50% in that time. The real reason for the increase is lax program admission standards, which end up giving $40 van rides to people who could certainly take the regular bus and rail systems that, after all, have been extensively rehabbed with lifts and elevators at the cost of millions to accommodate disabled riders.

The Governing article details several worthwhile and reasonable steps public transit systems can take to reduce paratransit costs, but unless there is a change in the law or in the legal environment, paratransit looks likely to be an increasingly unsustainable burden on America's transit systems.

Neighborhood Effects

2009-07-27T17:51:00.000-07:00

The Washington Post reports on a Pew Charitable Trusts study showing that the most important factor in explaining why middle-class blacks slide into poverty later in life is the poverty of the neighborhood they grew up in.

The report details the sad truth that roughly half of all middle-class black children (those in families earning over $62,000 a year) grew up in high-poverty neighborhoods (usually defined as having over 40% of their residents in poverty) between 1955 and 1970, while virtually no middle-class white children did. This disparity is unquestionably a result of the residential segregation that was rampant then and is still prevalent now. But what exactly are the causes and effects of this segregation and how does the Pew report relate to other studies on the subject?

Early Academic Studies of Segregation

The study of black residential segregation and its effects on black households has a long history, and, from the beginning, that study has been tied up in attempts to break down the barriers to black migration, specifically barriers to black migration to the suburbs.

In 1948 future HUD Secretary Robert Weaver wrote the The Negro Ghetto and declared, with some exaggeration, that the segregated black ghetto was a new phenomena in America. He blamed, inter alia, racially restrictive covenants in the suburbs for keeping blacks concentrated in the inner-city. His study did not focus on any of the social or economic effects of black concentration, but recommended federal housing policies and federal funding that would open more residential communities to black settlement.

In 1968 the Douglas Commission (sister to the infinitely more famous Kerner Commission) reported that suburban "snob zoning" kept blacks stuck in inner cities, away from the new suburban jobs they needed to remove themselves from poverty. That same year economist John F. Kain broached the "spatial mismatch hypothesis," which stated that inner-city minorities were incapable of acquiring the qualifications needed for executive jobs in downtown office buildings, but were also kept from the new low-skill factory and service jobs opening up in the suburbs due to numerous forms of segregation.

Let it be said that both the Douglas Commission's and Jain's evidence for spatial mismatch was pretty spotty, but they discussed for the first time the troubling ramifications of segregation beyond mere poor and expensive housing. For the next 40 years the holy grail of the open-housing movement would be consciously or unconsciously based on their assumptions that opening up the suburbs would end the black-white economic and social divide. Under their theory, people weren't the problem, only the neighborhood in which those people lived was. Their conclusions (along with, of course, the 1964-1968 riots) led to two early attempts to alleviate racial segregation: the Fair Housing Act of 1968 and Nixon's HUD Secretary George Romney's (yes, father of that Romney) "Open Communities" initiative. Unfortunately, there were few concrete opportunities to test the, admittedly modest, results of these programs.

Breaking Down the Barriers

The first real "controlled experiment" that seemed to test these theories came from a 1976 Supreme Court decision, Hills v. Gautreaux, which declared that the Chicago Housing Authority's housing projects had been illegally sited with the intent of maintaining segregation. The court demanded that several thousand black residents be offered special Section 8 vouchers to remove themselves to suburbs that were less than 30% black. Almost 7,000 families eventually moved to unsegregated communities due to the court order, and since many more families applied to the program, it also provided control group. Social science researchers descended on Chicago like a plague of hungry locusts to detail the effects. James Rosenbaum did the most and the best work.

The results were mixed, but seemed to corroborate the open-suburbs reformers. Gautreaux adults were about 15% more likely to find employment (though they earned no more than they did in the city), while their children were more likely to graduate from high school (95% as opposed to 80%), and tended to have lower rates of crime. Families reported much higher rates of life satisfaction and lower rates of mental illness. In this study, it looked like most of the problems with black crime and employment were only problems with poor, inner-city neighborhoods. This meant that the greatest social dilemma facing 20th century America was a dilemma that could not only be understood, it could be solved! And now the researchers had proof that it could be solved: real, hard proof.

Gautreaux's putative success led to another, more explicit experiment: Moving to Opportunity (MTO). Between 1994 and 1998, HUD voucher recipients were divided randomly into experimental and control groups, and the experimental groups got vouchers and counseling to go to middle-class suburbs. Shockingly, the effects were nothing like the Gautreaux program. While girls had generally positive experiences, doing better in school, reporting fewer mental health programs etc., young boys reported more crime, injuries, risky behavior, and drop-outs than the control group. Also, many of the families that moved into the suburbs quickly moved back into the inner-cities or other high-poverty areas.

The failures of MTO highlighted some of the earlier problems with Gautreaux that had heretofore been ignored. In that "experiment" there was some selective screening of recipient families and significant counseling. Consequently, it was not the ideal test that open-housing advocates had earlier claimed. And MTO demonstrated what housing researchers long knew, that many poor blacks, even when given the opportunity to move, often preferred to stay in the segregated inner-city communities that researchers claimed caused so many of their ills. Why?

Selection Bias

It isn't purely preference for a living near similar race. Most surveys show that blacks prefer an almost equally mixed community, with 50% white and 50% black residents. Most whites also say they want a diverse community, but they tend to prefer one with around 20% black or minority members. That difference is enough to create what economist Thomas Schelling called a "tipping point," whereby a small change in minority residents over a certain threshold leads a neighborhood to become entirely minority. That tipping point has generally gone up over time, from around 11% of a neighborhood in the 1960s to around 14% today, but it varies depending on the city and location of the neighborhood. (The entire existence of white flight and a tipping point has been questioned in several studies: here for example. Most studies still find the concepts relevant and useful.) So even if blacks want to live in an equally mixed neighborhood, opportunities are rare. But blacks' reported life satisfaction is intimately tied up with neighborhood quality, much more so than for whites. So why do many poor blacks, even when given the opportunity to move, stay in poor, troubled, black neighborhoods?

There are some benefits to the poor living in poor communities, and the MTO experiment showed that the dire warnings about spatial mismatch were vastly overblown. Many of the MTO groups moved back to their old communities because they had more accessible low-wage jobs than the suburbs, and these communities also had vast support networks and social services for low-wage earners. Many returnees cited the benefits of relatives who could provide free childcare. Other researchers raised more questions with the basis of MTO style dispersion. If these inner-city communities were so damaging to poor families and blacks, why were millions of immigrants streaming into exactly these same communities and successfully finding work? Perhaps these groups knew what the experiments now show, that the city provides advantages and moving to the suburbs is hardly a panacea for curing economic and social ills.

Conclusions

So where does this leave the study of neighborhoods? The Pew report highlights some of the problems with studying neighborhood effects on life outcome. Although the full report is not yet available, it is clear they will have difficulty explaining the precise "transmission mechanism" whereby living in poor neighborhoods as a child somehow explains poor economic outcomes much later in life. There is also the omnipotent problem of "self-selection bias," which merely means that those who live in poor neighborhoods choose to live there for a myriad of reasons that cannot be controlled. Perhaps they are less interested in their children's well-being, or perhaps they are not merely poorer but more likely to be poor for a longer period of time. There is simply no way to factor these problems out of the Pew study, so the supposed deleterious effects of poor neighborhoods are probably overblown, as the MTO experiment demonstrates.

Still, like more recent work (see William Julius Wilson's The Truly Disadvantaged and others), the report does not recommend moving black children into the suburbs wholesale. It breaks with the long history of the open-suburbs movement. Rather it explicitly endorses the "promise community" concept being pushed by Obama and Geoffery Canada of Harlem's Children Zone fame. They think bringing whole neighborhoods up to middle-class standards with massive subsidies and social and educational programs could finally break the cycle of poverty in those neighborhoods without blowing them to the four winds. They recognize the advantages of the poor living in poor communities.

Unfortunately, the entire program sounds like a recap of Clinton's Enterprise Zone and New Markets initiatives, and if history is any kind of predictor, that means our next president will still be groping for a solution to the intractable problems of inner-city black communities.

Quality Links

2009-07-20T21:51:00.000-07:00

1. Fascinating article from Reason Magazine on crime in El Paso.

Apparently this impoverished immigrant city just across the river from drug ravaged Ciudad Juarez is the third safest big city in America (behind only Honolulu and New York City). Lower crime rates for illegal immigrants have been well documented, but just how much lower is what is truly shocking here. Also this impoverished city gives the lie to the old "root causes" explanation of crime. The article goes on to discuss the lower crime rates for all immigrants.

2. USA Today says that Asians are remaking American suburbs into little Hong Kongs.

Of all the explanations for the increasing number of apartment blocks in suburbs, I have never heard Asian immigation mentioned. But this article assembles enough quotes from planners and developers to show this may be a real trend. Overseas Asian investors feel comfortable building apartments like the ones they build at home. Asian immigrants feel comfortable living in them.

3. Battle over mayoral control of New York schools leads to race-baiting extravangza!

African American State Senator Bill Perkins claims that New York mayor Bloomberg was “treating us like we’re some people on his plantation.” Another senator intones that, “The days of being intimidated are over. We will not surrender our children, and he needs to understand that.” Surrendering our children to the plantation master!? This certainly wins an A+ for over-the-top racial rhetoric over a basically administrative question.

4. Also from the Times, inexcusable union work rules prevent parents from hiring teachers' assistants.

They're not vetted by the city, union claims. Yes, they're only vetted by those parents who are paying them to supervise their own children. Who do you think has the better incentive to keep tabs on them? Quote: “How much do parents have to put up with?” Good question.

5. Tom Vanderbilt does another great article on roundabouts.

Australia has blanketed itself with roundabouts and has cut its traffic fatalities in half. Since about 7,000 traffic deaths a year in America (out of 37,000 total) are at intersections, roundabouts hold real promise here too.

6. New issue of City Journal investigates the New York that is and the New York that could be.

See especially articles on the litigation culture in New York (the state doesn't allow the city to have a separate court of claims), the LaGuardia legacy to the city, and the contribution of the police to the economy.

Also bonus Policy Review article from 2004 on "Bush and the Cities." If only for the quote from affordable housing activist Paul Grogan of the Boston Foundation, defending policies and agreements that pushed bank loans into high-poverty areas: “not one financial institution has ever failed — or even suffered a bad night’s sleep — because it overextended itself in poor or minority communities.” I wonder if he's singing a different tune in 2009?

Contrarian Randal O'Toole

2009-07-19T20:47:00.000-07:00

The New York Times takes a surprisingly even-handed look at Cato researcher and anti-Smart Growth enthusiast Randal O'Toole, author of the always thoughtful Antiplanner blog.

The article referred to, and was probably inspired by, his recent appearance before Senator Robert Menendez (D-NJ) and the Senate Committee on Banking, Housing, and Urban Affairs, where he got attacked by the Senator and a bevy of pro-Smart Growth witnesses for denigrating transit subsidies and defending highways. In my humble opinion he more than held his own, but watch for yourself.

Of course, Streetsblog had a different take on his performance. They applauded Menendez's statement that the $200 billion dollars in highway spending in the last transportation bill was a clear subsidy to cars, and that O'Toole's focus on transit subsidies was misleading.

The Department of Transportation's own numbers disagree with Menendez. They show that auto drivers pay more in federal gas taxes than they receive in federal highway funds. The "transportation bill," after all, is really just a divying up of gax tax (and wheel tax, etc.) revenue, and since about 15% of that revenue goes for transit, drivers are clearly subsidizing transit riders. In fact, the DOT says that transit riders are the single biggest receivers of transport subsidies, though passenger-rail receives more on a per mile basis.

The DOT report doesn't include information on state transportation subsidies, but again these take money from drivers through gas taxes and give it to transit riders. Only on a local level do general revenues subsidize roads, and even here local subsidies to transit on a per-passenger-mile basis are infinitely larger.

Personally, I prefer the kind of dense urban environment that Menendez and Streetsblog believe they are defending. I live in a large city, don't own a car, bike to work, and take transit for longer trips and buses for intercity travel. But I think that misleading statements about federal transport subsidies confuse the issues and lead to sloppy thinking and bad policies. We need to be clear about who is paying for what, and O'Toole is certainly doing his part to make that clear.

The Affordable Housing Ash Heap

2009-07-15T19:19:00.000-07:00

The current housing crisis throws into question the entire industrial-political complex that has grown up around the construction of "affordable housing."

Cities, after decades of haggling with developers to build a few extra condos at 10% off, and after decades of throwing reams of subsidies into "non-profits" and "community development corporations" who could knock a few thousand bucks off a new home, have seen a market correction that has thrown the entire civilized world into chaos also reduce housing prices nationwide by about a third since their 2006 peak, making them infinitely more affordable. And housing will probably just keep getting cheaper, and more plentiful; we still have 9.6 months of unsold residential inventory just waiting to be soaked up and literally millions of foreclosed homes still waiting to come on the market. This will continue dragging down prices, potentially for years. Without anyone actively working towards it, America is finally achieving affordable housing.

So what now for the affordable housing industry? With all these millions of rotting houses out there just collecting cobwebs as they wait for almost any available buyer to soak them up for a song, what does that particular perpetual-motion machine do?

What else? They keep building new houses.

This may seem illogical, maybe even incomprehensible, but that's only because it is. Building more government-subsidized housing in the midst of history's greatest housing glut shows a willful blindness that staggers the mind and demonstrates just how ill-equipped our current system is to deal with this crisis. Of course, there is a worthwhile debate to be had about whether to subsidize people buying existing homes, or about whether handing out more Section 8 vouchers would support rental housing, but there should be no debate over more building; we obviously have plenty enough without government adding even more fuel to the fire. Yet that is precisely what government is apparently intent on doing.

Bush was part of the problem last year. He helped create the National Housing Trust Fund in July of 2008, at the very height of the glut, in order to construct more cheap houses (with funds supposedly coming from those once bottomless political honeypots, Fannie and Freddie). That was certainly not enough for "housers" like current HUD Secretary Shaun Donovan. His Department just handed out a cool billion in recovery funds to state agencies to finance more housing construction, "while stimulating employment in the hard-hit construction trades," and he's asking for a billion more in this year's budget. Let's keep that building going!

Local governments are inexplicably still shelling out cash to build more houses. The Massachusetts Housing Partnership teamed up with philanthropists last month to build new homes for "extremely low income families." Tempe, Arizona just started a new construction program for affordable housing. Even local governments in Canada are getting into the act. Affordable Housers nationwide are also fighting every temporary cut in state and local housing trust funds whose job it is to keep creating more kindling.

The creators and defenders of these programs all point to troubles in financing new construction as the reason to pour out the public funds. As one New Yorker said as he was complimenting his city's new $20 million HARP fund to finish stalled housing projects, "There’s so much inventory, why would a bank finance any new construction?”

One wants to shout: EXACTLY! EXACTLY! A bank wouldn't do it because it doesn't make any sense to do it! It makes even less sense for cities to tax their own citizens to throw money at creating more excess inventory. In New York it's even more screwy, because a changed zoning regulation in Williamsburg that required more affordable housing in condos actually created many of the stalled projects that the HARP fund now seeks to save for affordable housing. Ingenious! The city's affordable housing regulations sabotage developments only to save them with more affordable housing funds!

Of course, the current programs may well look like a success after the fact because those subsidies will make the government-supported housing cheaper than the competition, and John Q. Homebuyer will take a liking to that housing instead of the market inventory housing. Then the politicians who funded it will point to their new occupied, affordable homes sitting across the street from abandoned REOs as proof of the program's success and their wisdom. But those city programs don't create new buyers, or suddenly invent more families. They just take a family that was going to buy one house, probably one sitting in foreclosure, and instead puts it in a subsidized one, leaving the other house to rot and to continue doing its part to drag down housing prices further.

The fact that politicians, now, in 2009, can regularly debate the need to construct more affordable housing, even while denouncing the evils of a capitalism "run-amok" that supposedly single-handedly created a massive housing bubble, is enough to boggle the mind and make one question the rationality of man. It is cognitive dissonance elevated almost to the status of a political principle.

Update: A Florida lawyer has a great rap sheet on all the programs in the stimulus bill to support affordable housing construction.

Cities and the Stimulus

2009-07-12T13:43:00.000-07:00

The New York Times posted an article last Wednesday claiming to show how cities and "large metropolitan areas" are getting the short end of the stimulus funding stick. There's been some blog discussion about it (here, here).

The article states that out of the $26.6 billion for highways in the American Recovery and Reinvestment Act (ARRA), "less than half" of the funds already dedicated by states have gone to the 100 largest metropolitan areas. Since, according to this article, those metro areas represent two-thirds of the country's population, they are getting a slightly smaller, although hardly minuscule, part of the road stimulus.

The putative inequity here is relatively mild, and much of it can be laid at the requirement that half of the stimulus money be dedicated for specific projects within six months. Since urban areas have more irate neighbors and stakeholders who can and do delay projects, rural areas are more likely to have "shovel ready" roadways. Later road projects, from the second half of the dedicated funding, are more likely to emerge in urban areas, as is actually required by federal mandates.

Also, as the Times article itself points out, their analysis does not include the 30% of those road projects designated by Metropolitan Planning Organizations (MPOs, discussed in my last post) instead of states. Those MPOs by definition favor metro areas (it's right there in the name). This eliminates if not overturns the supposed disparity.

And the $26.6 billion roads package is just one part of the approximately $40 billion dollars in surface transportation stimulus, the rest of which can hardly be said to favor rural areas.

For one, the $8 billion dollars in the ARRA for high speed rail can only be regarded as a subsidy for cities. Obama has pitched it as such: "Imagine boarding a train in the center of a city...Imagine whisking through towns at speeds over 100 miles an hour, walking only a few steps to public transportation, and ending up just blocks from your destination." This is more specifically a subsidy to large downtowns, who win out over suburban areas around airports. Rural areas get almost nothing for this, or from the $1.3 billion for Amtrak high-speed rail modernization. Since Amtrak and intercity rail carries only 1% of intercity trips, and almost one-fourth of the entire transport stimulus goes to them, there is a massive disparity here that overwhelms any inequity in the road stimulus.

Another $6.9 billion of the transport stimulus goes to public transportation equipment projects, which, of course, are not a staple of rural communities. Almost all of this will go to cities, specifically to large, central urban areas. There are also more specific transit grants to urban areas. There is $100 million to help public transit agencies in general, $750 million for new fixed rail systems (in case transit agencies were thinking of wasting their money on infinitely cheaper buses, which also can be used in rural areas, unlike rails), and $750 million to maintain and operate current transit agencies. So another $8.5 billion total for urban/metro transit. Again this swamps any potential disparities in the road budget. Almost one-fourth of all transportation stimulus funding therefore goes to those 1.6% of total trips taken by public transit, again almost exclusively in urban areas. That is a real disparity.

If people wonder why ever major central city in the country went for Obama last year (including conservative Dallas and Houston), or why rural areas were almost exclusively for McCain and the Republicans, there's your answer.

So claims that urban or metro areas are not getting their fair share of stimulus funding are total bunk, and should be treated as such. The New York Times merely diced up a larger bill and found small portions which seemed unfair. It's lazy if not disingenuous.

Lisa Schweitzer, though, states the crucial point. Why is the federal government even involved in intracity or metro area transportation at all? I can imagine few issues whose benefits are so exclusively local, and whose costs should therefore be born by the people who benefit from them. If we want to eliminate the supposed inequity in funding, why don't we stop bringing tax money to Washington only to redistribute it erratically to local communities? Why should Washington be sending out money to repave a local sidewalk, widen a local road, or fund a local bus system? I have no idea.

The Rise and Fall of Obama's Office of Urban Affairs

2009-07-03T07:14:00.002-07:00

Early in his presidential campaign, Obama promised to revivify federal interest in cities by creating an "Office of Urban Policy." He reiterated the promise a week after his election. His rhetoric and his background led many policymakers to believe the office would be centerpiece of his administration, perhaps even the nucleus for an LBJ-styled urban welfare presidency.

By the time he announced Bronx Borough President Alphonso Carrion as his choice to head the office on Feburary 2, 2008, it had been subtly downgraded to an "Office of Urban Affairs." Now the Washington Post reveals it has a grand total of five staffers. What happened?

The New "Metropolitan Policy"

For one, by Obama's own definition, an "urban czar" never made any sense. At Carrion's appointment Obama said he and his office would "bring long overdue attention to the urban areas where 80 percent of the American people live and work." But did Obama really believe that 80% of the population has been inexplicably ignored by politicians? Is there really an undiscovered continent out there of urban voters that swamps every other demographic known to man and Gallup? Of course, in Obama's much ballyhooed attempt to widen the tent, he extended the defnition of urban so broad as to lose all meaning. If 80% of the population is truly "urban," than urban areas are practically synomous with America itself and having an "Office of Urban Affairs" would make no more sense than having an "Office of People with Limbs" or an "Office of Adults."

Obama's big tent definition surely came out of Bruce Katz's "Metropolitan Policy Program" at the Brookings Institute. The 80% number comes straight from his playbook, except he refers to "urban areas" as "metropolitan areas," and attaches the addendum that they create almost 90% of GDP, which only amounts to the truism that metro areas are slightly richer than rural areas. His program creates such mind-blowing studies as one showing Illinois's metro areas compose 87% of their population and 93% of GDP. Who knew?

Katz's own numbers, demonstrating a very slight increase in GDP in metro areas versus rural areas, actually put to lie any inflated talk about the inherent efficiencies of such areas. Surely they have economies of scale, but are there any policy implications there? Should the government start herding people from "inefficient" rural areas to cities, by legislation or subsidies? I don't think anyone's proposing that. Note also that this debate has nothing to do with putative subsidies to suburbs versus cities, as OMB's definition of "Metropolitan Statisitical Areas", which is used to compute these stats, include all suburban and many exurban counties. (See the easy-to-read 12 page definition).

So what Obama's office really amounts to is either an odd attempt at creating another anti-poverty office (odd because rural areas have 15% poverty rates versus 12.5% for metro areas, as Katz's own numbers about GDP would indicate), or, more likely, a misguided attempt to foster "regionalism."

Regionalism and its Pitfalls

Regionalism as a movement has a long history in the United States. Beginning with suburban Brookline's rebuff of Boston's annexation drive in 1873, center cities, especially in the East, could not expand as fast as the territorial growth of their population, and many of their streetcar suburbs came under the authority of suburban counties or muncipalities. With the breaking of center-city water monopolies in the early 20th century, even more of these suburbs kept their independence. But during the energy crisis of World War I, the Army Corps of Engineers and corporate moguls such as Samuell Insull trumpeted the efficiency gains to be had from making regions instead of cities or states king. Under their plan, Insull and others would get regulated regional monopolies, the COE would get increased authority, and old cities would become part of giant government conglomerations. After the war, urban planners took increased heart at this movement and in 1923 created the Regional Plan Association, to advocate for regional planning and government. In the 1960s, regionalism was again resurgent among urban theorists, who claimed that the tax drain caused by suburban residents commuting to inner-cities in turn caused the urban crisis, and regionalism became identified with a movement to cause suburbs to bear more of the urban tax burden. Not surprisingly, suburbs didn't cotton to incorporation on these terms (St. Louis's suburbs rejected 4 different attempts since 1959). Yet regionalism is still regarded as the holy grail of modern planners. In 2000 Bruce Katz edited a book (foreword by Al Gore) entitled Reflections on Regionalism.

The few attempts at real regional government in America have actually shown that its potentials are vastly overblown. Metropolitan government is simply not the panacea it is often claimed to be.

For example, since 1975, the Department of Transportation has required that states create "Metropolitan Planning Organizations" (MPOs) to receive highway and transit funding. These groups are then given money to concoct 5 and 20 year plans for transportation spending for entire urban regions. In the 1991 ICETEA highway bill (the best acronymned highway bill in my humble opinion) MPOs were also given veto authority over transport spending in their regions, and many states now give them the power to direct regional land-use planning. The ultimate result is that millions are spent on unread and unfollowed plans while arbitrary and ad hoc decision-making leads MPOs to become yet another choke-point for transport projects and zoning decisions. These MPOs were supposed to overcome the old parochial differences of the millions of people and politicians they covered, but of course they are composed of those very same local politicians and can easily spend eons debating such important topics as the need for more bicycle lockers at an airport. As political scientist James Q. Wilson points out, requiring broad consensus from dissparate interest groups only leads to the "Law of Triviality," where the only subjects debated are the inane ones where agreement can easily be reached. MPOs perfectly demonstrate that principal. Few people today trumpet these as an example of successful regional planning, though they embody all of its supposed attributes.

There is also no indication that larger urban or regional governments solve the problems of urban poverty and inequality. In Texas, cities are given broad annexation authority, but few regional planners or urban liberals would uphold Houston, which has incoporated almost all of its suburbs, as a regionalist dream (for one, its citizens, especially its poor, have rejected zoning and planning in four separate referendums). Phoenix is another urban region with most of its "suburbs" incorporated into its central city, but again poverty has not been banished from there. In 1988 the Advisory Commission on Intergovernmental Relations (ACIR) even released a study that showed that urban residents benefitted from the competition between different municipalities in an urban region. ACIR showed that a political monopoly was just as bad as an economic monopoly, and that the ability of residents to "vote with their feet" kept smaller, more local governments more honest. William Fishel's economics work corroborates this.

Even the very premise that suburban commuters are "costing" urban residents money, and therefore need to be incorporated in metropolitan areas, does not hold water. For one, over 40% of workers now commute suburb to suburb, while less than 20% commute suburb to city, yet nobody complains about those more commuter-oriented suburbs being drained of funds. As any planner knows, and as this Washington Post series demonstrated, most counties actually perfer businesses to residents, because businesses pay the same property taxes but don't send kids to school or get arrested for attacking their neighbor's dog. It's common knowledge that businesses are usually tax winners and residents are usually tax losers but few commentators make the obvious equation that businesses minus residents equals commuters, who are therefore also tax winners. The assistance of commuters is shown by the amount of assessable property per capita in central cities, which is almost invariably higher than in the suburbs. The result is that the poorest people typically live in areas with the most taxable property (as Ed Glaeser shows this is mainly because such areas have more public transportation), but clearly these are not the solution to urban poverty. Besides, Phoenix's wide regional embrace has not saved it from the current fiscal tsunami, and having more regional or metro governments nationwide would not have saved us either.

Despite all the press interest in Obama's new office, the travails of previous attempts at bureaucratic shuffleboard should give one pause. It's easy to forget that LBJ's HUD (remember? the Department of Housing and Urban Development) was created in 1965 to be the same kind central clearing house for city issues that Obama clearly desires for his office. The lamentable results of that previous attempt are well known (see here, and here). The truth is redrawing the lines in a bureaucratic maze, just like redrawing them on a map of local governments, will not and cannot solve serious social problems. When considering HUD's checkered past, one can only hope that the Office of Urban Affairs will slip more quietly into the dustbin of history.

The Act to End Greed

2009-06-28T17:24:00.000-07:00

Back in March, the chair of the House Judiciary Committee, John Conyers of Detroit, sponsored the "End GREED Act," which would limit "excessive" compensation at banks that received bailout funds. Conyers said it was the only way to respond to "the bonus outrages that have inflamed the entire country," which seems appropriate enough. Legislation by blind emotional outrage.

Just a few months earlier, his wife, a first-term Detroit council member, was discovering other ways to take from the rich. She was receiving envelopes full of cash in a McDonald's parking lot with the understanding that she would switch her vote on a crucial sludge contract. Unfortunately for her and her congressional representative, the feds caught on (See also WSJ).

I assume Rep. Conyers does not think his constituents will be "inflamed" at this act of chutzpah, but for him it does beg the ole question about the pot and the kettle, and it should give anyone pause when future congressman start denouncing the evils of unearned emoluments.

It should also remind America the dangers of following Detroit's lead, which has done its very best over the past 30 years to drive the rich as far away as possible. Between former Mayor Coleman Young declaring his own police force to be an "army of occupation," an almost unparalleled municipal corporate income tax rate of 1%, and the corrupt likes of Monica Conyers and Kwame Kilpatrick, Detroit has done all it can to make sure nobody (outside of government of course) earns too much money in the city. Conyers' bill aims to replicate this success across America.

The End GREED Act failed a vote in April, but is working its way through the Congressional intestines once again.

The Metro Crash and Tax Shelters

2009-06-26T06:48:00.000-07:00

Maryland Congressman and Majority Leader Steny Hoyer promises to discover if insufficient funding "caused" the crash. DC delegate Eleanor Holmes Norton claims that the crash presents a "wake-up call" on the need for Metro appropriations. As discussed in my previous post, that's hogwash. Senator Charles Grassley of Iowa, however, discusses something that might have actually contributed to the crash: Government-sanctioned tax shelters.

These tax shelters allowed Metro to sell their cars and equipment to another company who then leased them back to Metro. The purchasing company then got to claim the capital depreciation for this equipment on their income tax returns, which Metro as a tax-exempt corporation could not do. It was a win-win for everybody except the taxpayers.

These deals became common for subway systems in the mid-1990s when the Federal Transit Administration explicitly sanctioned them, purely as an unmeasured tax subsidy to such agencies. The FTA did this even while the IRS was recommending they keep away. Oh the intricate wheels of government!

The Metro system already narrowly averted default on these leaseback deals after AIG's downfall forced them to pony up more insurance money that they plain didn't have. A federal judge saved them by forcing the lenders to reach a settlement with Metro, which they did just before the deadline.

In regards to the crash, since the shelters transferred ownership, Metro certainly had less incentive to maintain cars they were, after all, only leasing. A 2006 inspection also explicitly cited the terms of these leaseback agreements as a reason for low maintenance. What exactly did the agreements demand? They're secret so it will remain a mystery. The agreements did apparently prevent Metro from phasing out the dangerous 1000 model cars until 2014. Metro also said unwinding the deals, probably at IRS insistence (they began cracking down in earnest in 2005), was preventing them from spending more on maintenance.

I will note though that Grassley's proposal to forbid using new appropriations to pay back leaseback obligations will at best only add an extra two seconds billable time to a Metro accountant, who will have to move the balances around on Metro's sheet. Whatever you thought about the deals back then, Metro will have to pay them back now if it doesn't want to go bankrupt or incur more of the IRS's wrath.

Economix also chimes in. Ditto Tax Prof Blog.

The Metro Red Line Crash and "Dedicated Funding"

2009-06-25T03:37:00.000-07:00

The Washington Post has decided that there is only one reasonable explanation for the Metro Red Line crash: Metro didn't have enough money. Specifically, they claim it didn't have one particular kind of money..."Dedicated funding."

Yesterday the Post printed an editorial making the connection, while today they printed a story claiming that the crash "raised questions" about funding, and the new Metro page columnist Robert McCartney took another stab at convincing his readers that this all could have been avoided with a steady source of federal finances.

House Majority Leader Steny Hoyer, of Maryland, agrees, and said that if lack of funding caused the crash, then he will push for more cash.

First, a word on dedicated funding. Metro has to ask local counties every year for straight payments, instead of a relying on a steady tax, and Metro advocates endlessly bewail this as the root of all Metro evil. Yet as Alan Altshuler points out in his book Megaprojects, dedicated subway funding is actually a fairly recent innovation for many transit lines, and even for those with the most dedicated funding, like Chicago with its sales tax, such funds cover only about half of the subway's operating costs and less of their capital costs. They too still need to go crawling to politicians. And as Zachary Schrag, author of the The Great Society Subway, has pointed out many times, the ultimate question is the total amount of local and federal support, not the means by which Metro acquires it.

And about that federal support: Columnist McCartney does mention one fact that may be surprising to non-DC area residents. Just last year the federal government promised $1.5 billion dollars to the system over 10 years if local jurisdictions matched it. They have, and now Metro has $3 billion dollars of dedicated funding over 10 years. This is not chump change from the fed. Also, nobody in this affair is mentioning the $900 million dollars the Department of Transportation is pouring into the ridiculous Metro connection to Dulles Airport 26 miles away from downtown DC. Yes, it's for a specific capital cost, but when one claims that Metro is being short-funded, well...

And obviously the Metro system didn't just now sidle up to the government teat. It was created by fed fiat in 1965 with a putative price tag of $2.5 billion dollars, but by the end of the construction in 2001 (a mere two decades behind schedule), it had ballooned to $10 billion dollars, and somehow billions in loans from the government had quietly morphed into billions of grants.

The logic of all this fed support, repeated time and again by Virginia and Maryland Congress reps, is that over a third of all Metro riders are federal employees and therefore the government has a responsibility to them and the region to pay for it.

Never mind that federal employees, like the local employees I discussed in my last post, earn almost 50% more than comparable private sector employees. Or that the region to which these Metro subsidies go is already built and sustained entirely by the government, and is the second wealthiest metro area in the country, and has all top 3 of the wealthiest counties in the United States, or that the average Metrorail rider earns more than $100,000 dollars a year. And nevermind that the federal government already provides its employees with SmartBenefit cards for free transit (which, by the by, the GAO has said led to millions of dollars in fraudulent claims). Or nevermind the simple fact that Metro has been throughout its history the most heavily fed supported transit system in the country.

Why poor taxpayers in rural Alabama should be paying countless billions to support the rich commuters of Fairfax is simply beyond me. This is redistribution to the rich at its absolute lowest, and if Steny Hoyer manages to "discover" (how in the world will he do that?) that lack of funding caused the crash, it will only confirm in the minds of all Americans that Washington rewards failure, takes care of its own, and punishes the rest of the country.

Obama and One Muncipal Union's Kamikaze Attack

2009-06-19T16:47:00.000-07:00

Apparently Obama has a clear, categorical policy about not crossing union picket lines under any circumstances. It sounds very progressive and noble, like something out of the Jane Addams' era, when all the cigar chomping bosses were on one side and the good-hearted populace was arrayed on the other. Under the Obama theory, wherever there is marching and posterboard there is good: then, now, and forever.

Perhaps aware of this policy and this theory, some disgruntled firefighters earning a measly $130,000 a year in compensation decided to set up shop outside the US Conference of Mayors meeting that Obama was planning on attending. Their target was the progressive Democratic Mayor of Providence, who their wordsmiths labeled a "DemoRat" for trying to make them pay health insurance co-pays. Obama saw the line, turned tail, and the Conference and all the mayors, including poor Providence's, were denied the audience of the most explicitly pro-urban president in history. Of course both the union and Obama deserve equal credit here.

Obama needs to realize that municipal unions are not the imperiled working class of old. Over one third of the public sector is now unionized, as opposed to barely 9% of the private, and public sector workers earn about 15% more in wages and about 50% more in total wages and benefits than private sector workers. That's without counting the uncountable benefit of functional lifetime employment and all the slacking possibilities that brings.

And the municipal unions are not taking these emoluments from the fat cats of old. The typical union local today is taking from the taxpayers and citizens of some of the most depressed cities in America. Firefighters' unions are among the most egregious takers of them all. The recently bankrupt Orange County government has been paying individual firefighters hundreds of thousands of dollars for years, and that's before counting the sweetest benefit package on God's green earth.

So now, if a SEIU local decides to start parading around a hotel Obama's staying at, what then? Or what if AFGE starts marching round the Old Executive Office Building? Time to march out? Much like his "no lobbyist" policy, it will probably require some creative verbal legerdemain. I'm sure Rahm will manage.

Propagandizing the Public

2009-06-16T17:38:00.001-07:00

The federal government should not be in the business of proselytizing the people about the politics it wants.

When the federal government becomes another interest group in the political sphere, one which can throw its inimitable weight behind this subject or that, it becomes a kind of perpetual motion machine. The money it accumulates from taxing people can be used to convince those people of the necessity of more taxes, and to convince them what kind of taxes or programs they need. The people pay to be told how they should pay. It becomes a Ouroboros.

In 1964 America witnessed one example of that destructive tendency, the Community Action Program. Sargent Shriver, special assistant to President Johnson, created CAP to circumvent America's putatively staid urban hierarchy, and used it to fund small, outsider organizations. In practice, CAP groups were often no more than local street-toughs and radicals who were paid by the feds to picket mayors, print socialist literature, and, eventually, in the only logical conclusion, even heckle Shriver himself. The government-hating Black Panthers actually received their start in the North Oakland Anti-Poverty Center, which was supported with CAP funds. By 1967 the program was substantially cut off, but not before it managed to destroy forever the public's conception of a beneficient urban liberalism. Daniel Patrick Moynihan's fantastic Maximum Feasible Misunderstanding captured its tragic rise and fall.

One would think the feds had learnt their lesson, but over the next forty years an array of movements would have their politicking funded by the very government they were influencing. Among those is the Smart Growth movement.

Although not even close to the largest or the most significant of those fed-funded groups, the diverse Smart Growth movement has received a vital boost from government money that is rarely acknowledged and often denied. This money has given it a disproportionate weight in the political sphere and allowed it to alter the course of America's development without many Americans knowing from whence its power came.

The Pre-Smart Growth Period

Despite early subsidies to America's sprawling suburbs, there is also a substantial yet little known federal movement that has long worked to oppose "sprawling development," what Adam Rome, in his Bulldozer in the Countryside, called the "Federal Critiques of Tract-House Development." It began when many federal agencies in the 1960s realized that they had to expand their mandate or die. They understood that they would have to find new fields of influence if they wanted to remain "relevant." Land-use was a fertile field for such federal intervention. The United States Geological Survey, originally created in 1879 to map the West, began issuing reports on the storm water runoff issues associated with suburban development and advocating "blue-green development." The Soil Conservation Service, a Depression-era agency created to help farmers retain top-soil, started advising urban developers on land-use decisions. It helped pass a pioneering Fairfax County, Virginia erosion ordinance, and funded a documentary on suburb-caused soil loss, "Mud." The Fish and Wildlife Service began advocating for more open-space and in 1968 hosted a conference on "Man and Nature in the City," to encourage greenspace in suburban development.

As in later Smart Growth campaigns, much of this probably contributed to sprawl by demanding more open land and lower densities, but the bureaucracies achieved their purpose; they managed to expand their influence and gain relevance.

The Modern Federal Spigot

When the Smart Growth movement was officially christened in 1997 by Maryland Governor Paris Glendening, the feds were there to help it at its birth. As Randall O'Toole's research showed, the EPA in the 90s funded their own "Smart Growth Network" with millions of dollars in grants, including $700,000 towards the Growth Management Institute's workshops (which were billed as "antidotes to sprawl"), $155,000 towards an Urban Land Institute conference on Smart Growth, and $165,000 to the Congress for the New Urbanism itself. The EPA also spent millions in grants to anti-highway lobbying groups through its Transportation Partners program before it was substantially curtailed by congressional investigation.

FEMA's "Project Impact," began advocated not just flood-plain strategies, but broad goals concerning "sustainable communities," and they began supporting and attending Smart Growth conferences.

The bureaucracy has its own motors, of course, and the Bush election and Republican rule didn't stop its propagandizing push. In 2002, Bush's own HUD funded the American Planning Association's 1,500 page paperweight on "Growing Smart," which, among other Smart Growth nostrums, advocated "amortizing...non-conforming homes," in a word, forcing older homes to evolve into Smart Growth ones or face the bulldozer.

In one of the more unlikely and certainly unintended Smart Growth support programs, the aesthetes at the National Endowment for the Arts decided that they also knew how to design American cities. In 2004 they hired a Duany Plater-Zyberk architect and co-author of Suburban Nation as their "Director of Design" to oversee the Institute on City Design and Your Town projects, which hand out grants to Smart Growth groups. In 2005 the NEA teamed up with the EPA and the Smart Growth Leadership Institute to provide workshops for public officials interested in Smart Growth. As an NEA official explained it, when one joins the government one wants to have an impact, and one finds a way to make an impact. It's certainly not NEA's mandate, but they found a way.

Other government funded groups got in the rush. Although officially private, the National Trust for Historic Preservation is a congressionally chartered institute and receives substantial federal help. It too uses that help to provide its own "Smart Growth Toolkit," and it publishes extensively on its opposition to "Big Box" retail and roads.

Today, the EPA still provides the most significant government funds for Smart Growth advocacy. Last year they entered into "a cooperative agreement" with the Congress for the New Urbanism to assist in urban design, and they solicited proposals from outside groups to fund the Smart Growth Network's website, while making the website appear substantially independent of government control. And Obama has pushed this one step further. HUD and DOT and EPA have now all teamed up to create an "Interagency Partnership for Sustainable Communities." Since almost any activity that influences "sustainable communities" will be at a local government level, much of this Partnership's activity will certainly involve throwing grant money at local politicking groups in order to change those local systems. Perhaps we'll even have a CAP-style radical Smart Growth campaign, with funds once again coming from the Feds. One never knows where this money ends up.

Tilting the Scales

The important thing to remember is that "Smart Growth" is not just an innocuous term with vague positive sentiments. It is a real political movement with significant implications based on research that still remains hotly debated in the academic world. For the feds to spend millions promoting it is not an act of government but an act of advocacy.

Ultimately, my point is not whether to support this or that brand of government politicking. All of it is potentially destructive, and, as is seen in CAP, it often backfires on its creators. As an example, HUD's "Growing Smarter" book traces its own origins back to Jack Kemp (Bush I's HUD Secretary) and his right-wing Regulatory Barrier Commission, which advocated removing government regulations on housing in 1991. The Regulatory Barriers Clearinghouse that emerged from it still publishes research and advocacy pieces (some very well done) funded by HUD. Yet it now also serves as a model for those advocating the exact opposite tendency. While a rare example of anti-government government funding, it poses the question of whether the feds should be involved with such advocacy groups at all. The DOT is funding highways that EPA is funding groups to halt, one part of HUD is publishing anti-regulation literature while another publishes pro-regulation pieces.

The ultimate result will make any good bureaucrat smile; they're all "having an impact." The question is what sort of impact, and who's paying.

Review: Empire on the Hudson

2009-06-12T05:06:00.001-07:00

I just finished reading Jameson W. Doig's Empire on the Hudson: Entrepreneurial Vision and Political Power at the Port of New York Authority, and let me begin by saying that anyone who picks this up needs to be prepared for a seriously slow read. Stories are often repeated as "reminders" just paragraphs after they were told, and then repeated time and again throughout the course of the book. Some of the author's motifs, on such perennial historical conceits as "rationalization" and "the Progressive Era emphasis on efficiency," are played with numbing regularity.

It is fortunate that one can easily skim these parts, because there are also some fascinating chapters here. The best is the one on municipal bond taxation.

First the background. In 1895 the Supreme Court in the the Pollock case shot down any income tax as unconstitutional, but they reserved a particular scorn for the taxing of state and municipal bonds, declaring this invasion of federalism "repugnant to the Constitution." The Sixteenth Amendment of 1913 allowed income taxes, but didn't mention anything about such bonds. This seemingly minor omission has had enormous ramifications, and today everything from jumbo stadiums to convention centers to public-private partnerships can be credited to the fact that tax-free cities can borrow cheaper than just about anyone else.

Now an accepted commonplace, Doig shows that at the time tax-free bonds created a storm of opposition. The US Chamber of Commerce weighed in against the "unfair competition," Harding and Coolidge's Treasury Secretary Andrew Mellon fought them, and eventually FDR himself made it his mission to simplify the tax code and make the rich (who benefited most from the tax-free bonds) pay their "fair share."

Austin Tobin, the hyperkinetic wunderkind who was then in the Port Authority General Counsel's office, managed to organize a national campaign against FDR's scheme and succeeded in changing the course American history. He flooded Congress with sympathetic witnesses like Mayor Fiorello LaGuardia, local politicians from across the country, and the only economist he could find that supported tax-free bonds. He had researchers travel to the districts of those Congressmen most sympathetic to FDR and collect telegrams from local mayors and city managers to send to Washington. All his efforts paid off, and his "Coalition for State Defense" managed to save tax-free bonds, much to Roosevelt's amazement. This alone would secure Tobin's place in history.

Yet Tobin later organized the Port Authority takeover of airports in New York and Newark, against the wishes of most New York politicians (who would miss the patronage possibilities), and against Robert Moses's own planned City Airport Authority. He then created another national coalition, this time against the oligopolistic airline industry, in order to negotiate higher rates for leasing landing space at airports. His group made those once perpetual sink pots financially self-sustaining for the first time. He fought yet another epic battle with Robert Moses over the construction of the Port Authority Bus Terminal (which Moses seemed to oppose because of his financial contracts with Greyhound), and won again. The book shows that Austin Tobin could twice overcome that supposed municipal mastermind. In fact Doig, contra Robert Caro, demonstrates that in almost any battle, Tobin was the titan who came out on top.

Tobin of course also spearheaded the building of the World Trade Center.

Despite the the book's faults, Doig convincingly shows that Tobin's Port Authority was at the very center of national development politics in the twentieth century, and that Austin Tobin may have been the most underrated local leader in American history. For this, the book is a worthwhile contribution.

New York's High Line Phase 1...

2009-06-10T06:49:00.000-07:00

...is finally finished, and it gets a rave review from the New York Times' architecture critic Nicolai Ouroussoff.

The High Line is one of 1,400 former rail lines across America converted to "rail trails" through the good graces of the Surface Transportation Board (the 1995 successor to the ICC), which consents to the convenient fiction that these old tracks are only being "rail banked" for some imaginary future railroad, typically so as to comply with the land easements requiring continual use.

There are countless legal issues of course. The main federal law, the 1983 "Rails-to-Trails Act," created rail-banking after earlier attempts to keep rights-of-way open fell to state law and local landlords. In Preseault v. ICC in 1990, a unanimous Supreme Court declared that this was not an unconstitutional taking of property since litigants already had a potential relief through the Tucker Act, and those litigants as well as others took them up on the offer. Many rail trail takings cases are still working their way through the courts, and they may prove to be much more expensive then originally supposed.

Yet this has definitely not stopped the flood of conversions. Chicago is starting an elevated rail trail of its own, though it is apparently more in imitation of Paris's 3 mile long elevated pedestrian and bicycling path than New York's modest pedestrian pleasance.

Considering the problems in assembling new land for trails or parks, this may be the best possible use of all these abandoned tracks, but I would still like to see more studies proving that they substantially increased local land values. While not as applicable to elevated lines, Oscar Newman's research into defensible space shows that opening multiple pathways to a residential area may increase crime (contra-Jane Jacob). His research has proven so persuasive that many British police forces now have "architectural liaison" teams who have successfully deterred crime by limiting street access and closing alleyways. The complaints of many local residents along opened rail trails concerning increased crime should not be cavalierly dismissed as they often are today.

Ultimately, we need to come up with a system for municipal improvements that matches costs and benefits. Most of the benefits of the High Line and similar trails, if any, will be captured by adjacent property owners, but they will be paid for out of funds for the entire city. The only convincing way to discover if these are worthwhile projects and not just featherbedded boondoggles would be to get local landlords to pay the cost of such trails, and to vote on them, as was common for special assessments in the nineteenth century, as Robin Einhorn documents in his book Property Rules. Einhorn also notes that carrying the weight of the project made local proprietors more conscientious, and made corruption more difficult. Now cities decide projects like the High Line based on the same sort of ad hoc earmarking principles so often attacked when it is used in Congress. Perhaps we need to localize the funding and decision-making process as was done in Chicago's old park districts, which raised funds and voted for parks in separate, smaller parts of the city, or perhaps we need better models to discover who benefits from those improvements, and then find out ways to get them to decide on and pay for them. Billions of dollars are at stake, and more research and experiments are necessary to discover the best possible path.

Post-script: Since 1973 funding for bike and pedestrian trails in general has actually come through that bugbear of anti-sprawl advocates and perpetual honey pot for Congress, the national gas tax. The law requires that these supported trails be principally for transportation not recreation purposes, but transportation is of course a very fungible term.

Making History Pay

2009-06-07T06:59:00.000-07:00

I love old buildings. I spent a year with the Colonial Williamsburg Foundation surveying and drawing them. I drag my girlfriend to more of them than I'd like to admit, usually for house tours run by sesquipedalian octogenarians with a particular penchant for plastering process history. Still, they're (almost) always beautiful and fascinating.

But the historic landmark designation system in almost any city in America is an arbitrary and capricious mess that hurts homeowners and, occassionally, history.

An unsigned editorial in the Washington Post today attacks Montgomery County Council's attempt to reform one such system. Council Member Michael Knapp's proposed rule makes it more difficult to nominate a property as historic when the property's owner objects, in this case simply by requiring a 4 out of 5 vote on the Planning Board instead of a 3 to 5 majority to nominate. This is hardly an insuperable obstacle.

But the Post didactically states that "what ultimately determines if a site is designated as historic should be whether it is historic not who owns it." Of course "determining" whether or not a site is historic is exactly the problem, and the process to determine it is precisely what is up for debate. One would think that owners might have some say in the matter.

And almost everyone else recognizes that they should. After the interminable battles over the Third Church of Christ, Scientist's brutalist concrete hexagon, now sitting just blocks from the White House, the DC government decided that the owners should have a say, and the congregation is currently planning to tear down this white elephant so that they can move and survive. A revolt by the District's Chevy Chase residents over historic district designation forced the city to back down from a proposed historic district, despite complaints from preservation groups. There were also attempts by the DC Councilmembers Mary Cheh and Muriel Bowser to require a majority vote by the residents of a historic district being nominated, attempts that were also attacked and, in this case, ultimately scuttled by preservation groups and the Post.

Sometimes an owner consents to the designation of their property as a historic site, and in these cases the designation has benefited both the city and the owner. Such historic sites have often formed the nucleus of inner-city community revivals. The historic renovation tax credits created in 1976, along with many comparable state credits, have of course helped these revivals and incentivized owners to accept the designation.

But when an owner objects the process can be pointlessly destructive. An investigation by the New York Times detailed how far owners were willing to go to fight historic designation, often to the point of defacing and damaging their own buildings. This represents a net loss to society as a whole with no conceivable gain. The Times attributed this to loopholes and delays, but it is obviously part of the peril of an arbitrary government ukase. Economist William Fischel documented the case of a few South American houses that were completely torn down to avoid possible historic designation, and wondered whether the possibility of designation might make builders reconsider creating an architecturally significant building in the future, for fear that it might be unwillingly preserved. Now that preservationists have almost totally abandoned their own "50 year rule," once the supposed minimum to recognize a property as historic, this becomes even more of a danger. The Third Church of Christ, Scientist was built in 1971. Its travails will stand as a warning to future builders who want to create oddball or interesting properties.

Historic restrictions also pose a greater danger to the city as a whole, a danger of creating what some urban economists have called a "frozen city," one that is incapable of evolving due to pervasive restrictions on building or adaptation. In New York almost 3% of all building lots in the city have historic designation status and are therefore presumed to remain inviolable for all time. Although 3% may not sound significant, these buildings are invariably in the densest downtown regions that could benefit most from development. Enemies of sprawl need to consider how historic designation is pushing potential development out of the city and towards the greenfields and purlieus, and how it is preventing troubled inner-cities from expanding their tax base and services.

Historic designation can add or subtract tens of thousands of dollars of value to a property, and in the case of historic districts it can significantly affect the future of the city. Giving property owners a say in the process is the only way to ensure that they become friends of history, and not sworn and embittered enemies as they often are now.

Update: "Rebuilding Place in the Urban Space" blog has a very different take on the editorial, but focuses on the same Post line. It also links to a Times article with the greatest, most extreme example of the preservation hard-line that I've ever seen: “The fact is, Chicago could not exist without its landmark ordinance,” said Jonathan Fine, the executive director of Preservation Chicago, a nonprofit group. “It’s the line that holds us back from the Neanderthals.”

Green Grocers in the Ghetto

2009-05-27T12:11:00.000-07:00

The never-ending quest to stuff the poor full of green vegetables continues.

New York Mayor Bloomberg, Governor Paterson, and City Council Speaker Christine Quinn are pushing a new program, creatively acronymed FRESH, to encourage more grocery stores in low income areas.

It is a less imposing program than LA's moratorium on fast food (which the FRESH announcement makes an unsubtle dig at) and hopes to use gentle financial and zoning incentives to push developers into including grocery stores in newer developments, but it could lead to a rash of empty or shuttered stores across the city.

The centerpiece of the program is the offer of one extra square foot of developable space for every square foot of a FRESH grocery, up to 20,000 square feet, and a reduction of minimum parking requirements. The program also allows the New York City Economic Development Corporation to issue mortgage recording tax waivers and sales tax exemptions on materials used to construct the store.

The problem with these incentives is that they're all at the front end of process; they throw a lot of money at building a store and a lot less at making sure that someone can actually afford to keep it running. Even if a developer thinks a grocery store is going to lose money for years it may make economic sense to build the space to acquire all the government goodies, and then try to gently push the store out of the building. Sure, the developer has to sign what the proposed zoning amendment calls "a legal commitment, in the form of a declaration of restrictions" binding him to keep a grocery on the premises, but it also allows the City Planning Commissioner to certify that a grocery is no longer economically viable and then the developer can use the space for whatever his heart desires. It would not be at all remiss for the developer to pass some of those goodies down to a grocery store for a few years to convince it to operate in a unprofitable area (say two years of reduced rent), then withdraw those subsidies and let the thing go under.

The requirement that at least 30% of the grocery space be devoted to "perishable goods" makes these stores' eventual failure even more likely. For one, what store are these planners going in where 1/3 of the space is used for fresh foods? And two, merely providing the space for rotting vegetables does not mean that anyone will buy them. I once worked at an urban grocery store with plenty of fresh vegetables, but food-stamp purchasers, many of whom were dangerously obese, inevitably spent their money on the fattiest and most unhealthy foods imaginable. Even if the whole grocery store survives, the fresh section could become a stage piece for inspectors, or merely be loaded up with such "perishable foods" as pork ribs.

It all goes back to those front-loaded subsidies, which the city uses, of course, for the same reason it front-loads most subsidies: it fears having a bunch of white elephants on its hands. The developers do to, but they have an out, which means this could be a smaller version of the 1961 zoning code debacle which created New York's unfortunate empty-plaza syndrome. Those "public spaces" were also created with the promise of more FAR, but at the time there were few means to force these areas to stay public, and many were roped off for restaurants or private gatherings. Most just remained deserted. They demonstrate the dangers of bright-line government regulation like the percent perishable requirements.

Of course, this may all remain academic. Like most incentive programs for impoverished areas (see: enterprise zones) the goodies will likely not be good enough to overcome the economic problems of operating in low-income communities. The problems for groceries in these areas have more to due with the lack of the cars to load up large purchases, high security costs, employee turnover, and shopping cart theft (which can cost stores up to $300,000 dollars a year), all of which inhibit stores more than zoning restrictions. And the fact is these are just variations on the problems of any retailer in a poor area. Countless studies and reams of dissertations have only proven that supermarkets and groceries are no different from a host of other retailers that don't operate in low-income areas: banks, sit-down restaurants, big box electronics, etc. Almost everything in fact. Not surprsingly, people with less money tend to spend less money, and they therefore attract fewer stores. Perhaps New York could try to help the poor by not kicking out those few retailers patronized by the poor with a long history of low food prices (see: Wal-Mart).

But the best method if we want to have the poor eat healthier may be to simply subsidize fresh foods, say giving discounts in food stamps. In any case, as in all anti-poverty programs, we should focus our assistance on poor people and not poor neighborhoods.

Nathaniel Hawthorne and Real Estate

2009-05-25T09:44:00.000-07:00

Usually American haunted house stories rely on an Indian burial ground to cause all the havoc, which is perfect in its way. It allows the blissfully unsuspecting family to confront America's original sin, and owns up to our collective unease with the fact that all our marvels are built on turf that we either stole or bought for a string of shiny beads some hundreds of years back.

In Nathaniel Hawthorne's The House of the Seven Gables, the house is haunted by a victim of the Salem Witch Trials, a victim who was persecuted for his land. The haunting represents the same principle though, the idea that the land carries certain crimes with it, and that ill-acquired land is the root of most of our discontents...

One character from the book: "What we call real-estate -the solid ground to build a house on - is the broad foundation on which nearly all the guilt of the world rests. A man will commit any wrong - he will heap up an immense pile of wickedness, as hard as granite, and which will weigh as heavily upon his soul, to eternal ages - only to build a great, gloomy, dark-chambered mansion, for himself to die in, and for his posterity to be miserable in. He lays his own dead corpse beneath the underpinning..."

It brings to mind the great David Sedaris story where, in the midst of a frenzied house search, he happens to visit the garret which harbored Anne Frank during the Nazi era. He wonders what would motivate people to cause such evil, then he notices the spacious living area, and the cozy nooks, and the view, he marvels at the view...and sees his reflection in the window. Like all of Sedaris's best stories, it's disturbing but its played for laughs. His point is the same as Hawthorne's. Real estate is, in a fundamental sense, irreducible. It causes ridiculously outsized passions about ridiculously undersized parcels. There's much evil tied up in it.

One of Hawthorne's reformers, however, sees an out, a means to escape the ghost of the past: "But we shall live to see the day, I trust, when no man shall build his house for posterity. Why should he? He might just as reasonably order a durable suit of clothes....If each generation were allowed and expected to build its own houses, that single change, comparatively unimportant in itself, would imply almost every reform which society is now suffering for." Hawthorne is far too fond of everything old and moldy to believe this, but he was drawing attention to the housing and land reform movement that had been blossoming in America and England for the past twenty years. The reformers often disagreed about the what shape reform should take, but the principle was always the same. Fix the evil ramifications of current land and housing policies and all other issues would take care of themselves.

Take Dickens, who, while he was writing about the interminable troubles of London's lower classes, believed firmly that the only means to end them was housing reform. Newly built houses with plenty of fresh light and fresh air. Fresh new houses would create fresh new people. We could escape all that evil scheming and all those ancient burdens. Hawthorne identified the impulse even if he didn't agree with the sentiment.

The world, however, followed Dickens. Much of philanthropy and public policy over the next 150 years was tied up in building people clean and modern homes.

And so the story goes down to the present. The countless billions being shoveled by the federal government at homeowners, from the 30% of mortgages insured by the FHA to the $4 billion dollars thrown away in the Neighborhood Stabilization Program, money we've been shoveling for the past 70 years, is all based on the same almost mystical premise that Hawthorne saw in his young reformer. Our new HUD secretary, Shaun Donovan, proudly calls himself a "houser," part of that same tradition that sees a panacea in housing reform. He, and apparently we, believe that if we just give people secure homes on secure land, they'll be healthier, happier, just plain better people. We believe we can civilize the sordid business of real estate. We hope to escape the ghost.

It hasn't worked yet, but that won't stop us from trying.

Zipf and the City

2009-05-22T06:48:00.000-07:00

Steven Strogatz's New York Times post, Math and the City, has inexplicably remained one of the paper's most emailed columns for a few days now.

Don't get me wrong; it's a great article, but typically any article with the word "math" in the title gets roughly and rapidly tossed into the internet's dustbin. It's welcome to see some interest in the subject.

Strotgatz's article deals with Zipf's law, which states that any city's size is inversely proportional to its rank in the "urban hierachy." For example, the second largest city in most countries has roughly half the number of people as the largest city, and the third largest city has about a third as many. This shocking regularity has puzzled urban scholars for decades. Strotgatz goes on to discuss the "3/4" rule, which shows that many aspects of urban infrastructure, such as gas stations and roads, increase at only 3/4 the rate of the increase in the size of the city. So with 20% more people, there are only 15% more gas stations. And this seems to be true of many types of infrastructure, in many different cities. That means increasing economies of scale. This is why cities are efficient.

Then Strogatz goes for the jugular; he relates the 3/4 rule to living organisms, who, as they get larger, need only a 3/4% increase in metabolism for every 1% increase in size. There appears to be a massive mathematical mystical confabulation going on here, a la Pythagoras. The spheres are singing.

And the truth is one can even extend the equations. Zipf was a linguist, and his law was originally used to describe the distribution of commonly occurring words in the English language. Pareto, whose distribution is also at the heart of both Zipf and the 3/4 equations, was trying to describe income inequality. It's everywhere.

Unfortunately, there are problems. Some studies show that Zipf's law does not apply so uniformly to cities (such as this article from LSE). It tends to overestimate the size of the largest city, and underestimate the sizes of the smaller cities. Strogatz quotes Paul Krugman on Zipf's law, but Krugman has also done work describing why the "primacy factor" (the size of the largest city) differs depending on political situations. He has shown that dictators tend to create larger primary cities, while free trade tends to shrink them.

And, more importantly, Zipf's law may be just a statistical artifact. If it's everywhere it's also nowhere and therefore has no real implications for policy or research. One study shows that a random distribution of letters creates a Zipf's law function for words. In regards to the 3/4 rule, Brendan O'Flaherty's fantastic City Economics also discusses a similar 2/3 rule of engineers, where the perimeter of a container only increases at 2/3 the size, and this rule applies to many types of city infrastructure just like the 3/4 rule does. To paraphrase Rapoport (1968), all sorts of activities, animal, vegetable, or mineral, tend to organize themselves into what are called "power law" functions. That cities (sometimes) do should not surprise us.

Strogatz's article holds up the tantalizing prospect that "Aristotle's metaphor of a city as a living thing is more than merely poetic," and that we can extrapolate from that insight. Unfortunately, although Zipf proposed his law in 1949, there's been no convincing explanation for why it holds true, and therefore few theories can be divined from it. We know of its existence, we can work off it as a rough baseline for research, but comparing cities to organisms based on Zipf's law or the 3/4 rule may be no more fruitful than comparing them to languages, ant hills, or planets. There is a profound connection between all these systems, but it may just be how our universe organizes itself. It's just the music of the spheres.

The Inaugural Blog

2009-05-16T14:17:00.000-07:00

Apparently it's very easy to start a blog. I'll see how easy it is to keep one going.

I am a 27 year old American History MA who works for a historical research firm in Washington DC, and for as long as I can remember I've been fascinated by cities.

If I had to trace my fascination back to something in particular it might be the 250 year-old market square in Alexandria, Virginia, where, as a high-schooler with far too much free time on his hands, I talked, smoked, and annoyed passersby for upwards of eight hours a day. There were other high-schoolers doing the same thing. We sometimes referred to ourselves as "Square Kids." In retrospect much of it seems like a colossal waste of time, but I loved it. I also quickly realized that time like that could not have happened anywhere else. It was a peculiar confluence of space and place that drew an absurdly diverse group of people for hundreds of years to that same well-trodden ground. I later stumbled across an article from the late 1700s in the Alexandria Gazette that lamented the great number of unemployed youths who whiled away their time at the market square. I wanted to know what created such a meaningful place. I eventually got a history masters with a focus on American urban history.

This blog will deal with many aspects of American cities: their politics, their economics, and their past. I will post stories that I feel are illuminating or relevant, and reviews of books I've been reading. Much of the blog, of course, will be commentary. At first I was worried about adding my voice to the ever-growing chorus of bloggers writing on American cities, and wondered what I could have to add, but after reading Jill Lepore's New Yorker article on early American newspapers, I realized that "from the beginning," commentary, often biased, uninformed, and shrill, has spilt more ink in this country than anything else, much more than fresh reporting, and that a glut of self-appointed experts has never stopped one more from shoving his or her two cents into the pile. Let that be an inspiration to all loud-mouths and bloggers.

Adding one more can't hurt.

Note: The Market Square (along with Old-Town Alexandria, which surrounds it) is now listed as a Great Public Space by the Project for Public Spaces. It will remain my favorite.