Shovel Ready

35 thoughts on “Shovel Ready”

  1. “I’ve had city officials all over the country explain that each new resident costs the municipal government money, but each new business generates tax revenue and creates jobs. Preferential zoning to induce more income has been the default model for planning agencies chasing cash for decades. ” ~ Johnny

    The problem with all municipalities is this:

    One one side you have politicians, unionized municipal workers and some businessmen who rely upon crony politics to skirt marketplace competition as well as protect returns from their ever-growing inefficient extant capital.

    On the other side you have residents, all too often who are naive, disengaged and disinterested.

    Politicians and the representatives of unionized municipal workers see residents as merely a money tree to be shaken as needed both to increase wages and pensions.

    Ideally, a municipality should exist for the residents and never for politicians and unionized municipal workers. So to solve the problem for every municipality, municipalities should be required by law in the various states to offer publicly-traded shares, the same as many other incorporated entities.

    At the start, all residents should become shareholders of their respective municipalities. After a holding period, they should have the option of selling their shares and conversely, buying more shares, on organized markets, which handle the buying and selling of stocks in municipalities.

    With ownership and thus stakes in the outcomes, you would see profound changes in cities across the USA. The stock prices would reflect the efficiency or lack thereof. Would-be bond holders would have far better mechanism than bonds ratings agencies.

    Enough residents of the various cities would have incentive to control their respective destinies. Politicians would be forced to decide right as pushing up the stock price of a municipal corporation would prove to be the ultimate measure of performance.

    1. “Blame the unions” is the battle cry from the last war and leads to remedies which are increasingly irrelevant now. Half the country never had particularly good public unions to begin with, and the other half has bifurcated into older employees with the good union deal while new hires that get radically less. Most municipalities are shedding workers through attrition and replacing retired employees with outsourced contractors and/or technology. Police and fire will be the last public unions standing after the teachers, garbage men, and such are thrown under the bus.

      Selling shares of a municipality is an interesting concept. But isn’t that what an HOA is? (Private governance?) Or bonds? There are some sticky wickets. Is it one house/condo one vote? All residents including renters? Are non-residents allowed to buy shares? Can one person or corporation own an unlimited number of shares? It’s a theoretical patch that can and will be used to re-create the same dynamic it’s meant to cure.

      For the record, residents are disengaged 99% of the time – until a hot button issue is raised. Then they come out with pitch forks and fire brands. “Think of the children!” Politcal figures limp from one superficial crisis to the next. Meanwhile, the larger more subtle and complex processes quietly play out in the background.

  2. Johnny,

    Is this the canary in the coal mine, so to speak?

    A major theme of your blog is that maintaining the distributed, low-density infrastructure built since World War II is unaffordable in the long term, and much of it will simply have to be abandoned. Is this now starting to happen?

    As your piece points out, people cost municipalities money. (I’m assuming that raising property and other taxes to the point where they aren’t a cost is politically impossible.) To get round this, cities have sought retail and other businesses, but that strategy is now pretty much played-out. America has far too much retail space and much of what there is will likely close because of the rise of online sales.

    Time, perhaps, to start thinking about what is saved and what isn’t?

    1. It’s complicated. The best suburbs are thriving as wealth concentrates in specific areas. Wooing successful companies and upscale retail really does work in these select locations. These hot spots also tend to have the very best schools as well so people who can afford it pay a premium for the homes within the right jurisdictions. But the majority of suburbs try and fail using the same model. It’s winner-take-all.

      In the fullness of time things will sort themselves out. I remember the 1970s when New York and San Francisco were written off as bankrupt wastelands that could never be saved. Things change. Places can and do reinvent themselves. We’ll see…

  3. Davis, CA, where I lived for a while, heavily restricted residential and commercial development to retain its “small town feel”. City politicos would go on and on about the need for more jobs and businesses, but ignored where folks having these jobs would live. So the result was housing costs 50% higher than surrounding areas. And keeping out larger retailers to preserve mom and pop shops meant routinely driving out of town to get everyday items, as the local shops were mostly boutique exotica. (There was even a local saying: ‘you can’t buy underwear in Davis’.) I cite this as an example of how refusing “big development” can have counterproductive effects too.

    1. From the perspective of most people who already own property 50% premiums on a limited supply of real estate is nothing but good news. If you can’t afford to buy in you’re likely to be a burden to the municipality anyway. There’s always a mobile home park next to a freeway offramp, a landfill, and a oil tank farm 45 minutes away for the great unwashed.

  4. Here in Ohio the local governments are moving their offices into the dead strip malls and old factories.
    Consequently the downtown areas are hollowed out even more and the people needing county services can”t get to them on public transportaion.

  5. I’m at a the tail end of Gen X (born 1978) and as this generation did for aging, underutilized, abandoned factory buildings on the fringes of cities, the next ripple on the frontier will take place in these dead suburban strip malls, chain stores, etc..

    People (esp. my parents who live comfortably in Floridaburbia) thought I was crazy to move into my current neighborhood of Bushwick, Bklyn after graduating from college in 2001. It’s dangerous. No restaurants. Graffiti everywhere. Concertina wire atop fences and buildings. But it was a quick 20 minute subway to all the the opportunities and amenities of Manhattan (Where the streets were paved of gold! haha) and spaces rented for cheap because only a few hardy souls braved to venture amongst the industrial grit, projects, and (heaven’s sake!) minorities. The industries had long fled to greener pastures and the buildings sat vacant contributing to blight and not to the tax base. These spaces made for excellent homes for artists, queers, and young people who can’t afford $3,000/month in rent. Today there’s a diverse mixture of longtime residents & newer ones, old & young, of all backgrounds who now enjoy amenities in the area: restaurants, improved parks & streetscapes.

    Theres no reason that last image of the Peteluma ‘Factory’ Outlets wouldn’t make for a, dare I say, communal living situation – with studios, one, two, or three room living arrangements. The central courtyard could be an amazing garden area. While some of the other outlining buildings and courtyards would make great day-care and playground areas, etc.

    It just takes a bit of creative thinking, A LOT of change from the top-down authorities, and some changes to the zoning and I could see this being an almost utopian village to live within. Plenty of parking, a short jaunt to two SMART trains, a decent drive into SF and beautiful nature, hiking, coastline, wineries all around.

    When can i move in?

    1. I wonder why governments in NorCal don’t just buy some of these properties and turn them into housing for government employees like teachers and cops. Those people are definitely needed and valuable members of the community and so it would make sense to ensure that there is housing for them.

      1. Why? Because (1) they would have to admit the problem, (2) take responsibility, and (3) take an unorthodox, “not invented here” and seemingly fraught idea that no one has tried yet, and run with it.

        In other words, human nature and inertia.

        Until a property owner tries it.

        1. …and then the full force and fury of the regulatory apparatus (fire marshal, building inspector, water utility, zoning police) will begin paying inordinate attention.

  6. Great post. I know your “Schaumburg, IL” example well. It’s actually in the Village of Arlington Heights, IL, but the point is well taken (I actually was a city planner for Arlington Heights and Hoffman Estates from 2002-2010). Schaumburg, Rolling Meadows, Elk Grove Village, Hoffman Estates et al are just examples of your point in the NW Chicago suburbs and are prevalent and pervasive throughout all Chicagoland…and metro Kansas City, St. Louis, Houston, Boston, Buffalo, Miami, Orland, Phoenix, Denver, Seattle, Detroit, Minneapolis, Salt Lake City, Huntington, Columbus, Cleveland, Nashville, Atlanta, etc….

    But this stasis (the Guitar Center, office building, Applebees example) is also in a housing constrained area and could easily redevelop to more needed residential, if it weren’t for the frustrating opacity and rigidity of commercial real estate financing, management and loans.

  7. So, how to solve the math problem: Just looking at the scenario you present above, there are all kinds of people who need affordable housing and there’s all kinds of mall space that could be converted into housing with economics that suits both buyer/tenant and owner. But the municipality wouldn’t be interested because it wants jobs and revenue, not more people…

    My solution would lead toward giving those people that housing, but then finding (or allowing them to find) ways to turn a profit, to actually pay for themselves. This would include small businesses run out of their homes, which of course means a zoning of mixed residential and small-scale commercial. In fact when my layout was all done it might look suspiciously like a town of 200 years ago where the mix of work and play is more organic and everything is right next door to everything else.

    This would also put big manufacturing either way outside of town – treated like a necessary evil – or non-existent. I think large-scale industries and corporations are really too big for most of us. While we like some of the benefits they bring, ultimately they’re just way too expensive for our lifestyle. They give us cheap products and a paycheck, and we give them our livelihoods, our autonomy, our environment, our ability to feed and clothe ourselves, our imagination, our intelligence. For the most part we would be better, living local, working local, eating local.

    I say let’s call it a worthy social experiment. Let people rent space in the shopping mall at a reasonable price point – and then give them to freedom to use the space however they choose, with the only stipulation being that it works for their neighbors. They couldn’t do any worse than the current status quo.

    1. Voters won’t. Why, I am not entirely sure. Some combination of a desire to keep things the same, not yet having to foot the bill for failing infrastructure, and perhaps a fear that denser, more fiscally sustainable development would make housing more affordable and bring in the wrong element.

  8. Johnny, I think we are about the same age. I remember visiting with one of the older professors in college, early Seventies, who told me, as he struggled to become proficient in computers: “Dan, as soon as someone invents a practical use for these things, they’re going to explode into the home.” Computers populated the universities and some industry, only, at the time. By the way, I’m probably one of the few people that still visit the bank, but I’m almost as old as dirt.

  9. Regarding malls and retail in general, mileage may vary.

    Up the hill from me is Serramonte Mall (just south of San Francisco in Daly City). It’s always packed to the gills and is in expansion mode. The mall was resold a couple years back and the new owners “realized” (https://regcorpweb.blob.core.windows.net/marketingassets/FullDemoReport/6bc70888-dc30-4cf8-82cd-efa6781c781a.pdf) that it was no longer a blue collar mall but rather an ethnically diverse high-ish income clientele that wasn’t being served by say, JCPenny as an anchor tenant. As such as the whole mix of shops has changed and the mall is thriving.

    That doesn’t discount your larger point. I’m familiar with the Outlet Mall example. It’s pretty sad. I went to H.S. in the area and it’s a great town. They can do better than that. They have fantastic examples of a self sufficient development pattern right in downtown and around. Residential doesn’t have to be a drain on muni finances.

    1. Fair enough. My point isn’t that every mall is dead. Refer back to my point about the bifurcation of the income distribution. Some places are booming. Many more are in decline.

  10. Perhaps it’s different where I live, but aren’t residents paying their way via property taxes? Are residents heavily subsidised in that location by business rates?

    1. In the U.S. residential property taxes almost never cover the costs of municipal services. That’s been well understood for a century. For example, the cost to provide one child a public school education per year is about $11,000 on average. If you have three kids that’s $33,000 per year. How many families do you know that spend that kind of money on property taxes? Now add in police and fire protection and all the other municipal services.

      Towns do backflips to get new commercial space to open up in their jurisdictions to generate more revenue. They also create regulations that restrict new housing, particularly more modest accommodations at lower price points. Minimum size requirements (typically 2,800 square feet / 260 square meters) per new home and larger lot sizes are standard to filter out the riffraff.

      Many municipalities embrace age restricted communities where school age children are illegal in order to keep taxes and government costs in line. Other towns prefer one bedroom and studio apartment/condo complexes that attract childless residents.

      Here in California voters embraced Proposition 13 in 1978 which reduced and capped property taxes that further starve government of funds. https://en.wikipedia.org/wiki/California_Proposition_13_(1978)

      Colorado enacted the Taxpayer’s Bill of Rights in 1992 that achieved similar goals. https://en.wikipedia.org/wiki/Taxpayer_Bill_of_Rights. Many other jurisdictions found similar ways of limiting property taxes as well. The list goes on…

      1. Children are expensive.

        Senior citizens are vastly more expensive, but most of their costs are covered by the federal (Social Security, Medicare, Medicaid) and state (Medicaid) governments.

        Troubled people are expensive (police, jail, prison, mental health and substance abuse care).

        But working adults who don’t have school age children are cash cows. What do they need? In more urban places, parks and transit. In the suburbs, usually just the road. Water and sewer don’t cost much once they are already built.

        Municipalities zoned out apartments working, childless adults out of fear that poorer families with children would occupy those smaller spaces. That’s the suburban dilemma all over the country. To keep out people who were poorer and, perhaps, darker, they forced out their own children and empty nest downsizers. Forgoing tax revenues with special property tax deals for seniors to keep them rattling around in their large homes.

      2. not known US taxes, but looks as before 200years, not change by actual situations and prefer company profit and egoism
        but it is your choice in religion of money

        similar as previous blog, if I need parking before path to garage I add table with phone number with notes please call me, or not use break (some country not use lock in car and sometimes you have car 2-5 meter shifted)

      3. Johnny, regarding education, property taxes are levied at the county level and then go to school districts, which have their own problems but are totally separate from muni finance. Other than playgrounds, kids cost the city zero.

        While it’s true that residents are a net cost center for cities, that’s because a) The Suburban Experiment spreads the tax base too thin b) Pensions, police and fire cost a lot more than they did in the past (http://www.sacbee.com/site-services/databases/article2573210.html). These 2 things reinforce each other. Houses deep in the canyons need more robust fire departments, for example. I’m preaching to the choir..

        But there’s more nuance to it than that. Prudent finances, either by choice or force (bankruptcy), bring cities into financial fitness (https://www.ocregister.com/2018/01/23/ca-city-finances-many-are-broke-and-not-telling-you-about-it/)

        1. Schools are financed differently depending on where you live. Everyone I’ve ever talked to swears their town is solvent. The reality is that almost no jurisdiction could really pay for much of anything (schools, roads, sewerage treatment plants, pensions) on its own without county/state/federal funding. But when you look at the condition of each of those institutional funding sources you have to conclude that sooner or later there’s going to be a serious problem with business-as-usual. I’m not suggesting the end of civilization. Just the end of our present set of arrangements that will need to be restructured eventually. That process is necessary, but it will be painful.

          1. Has Mr. SanPhilippo written about what kind of changes he sees coming to the economy? I guess that I am sceptical that there will be tectonic changes in the economy, as the US economy is actually pretty insular and consists of people in the US selling and performing services for other people in the US. So the fundamental constraint on the US economy is how many people are willing and able to work, and what skills they bring to the table. Of course, if government is the problem, that cannot be easily solved ( just look at how Russia’s government keeps Russia from rapid economic growth).

            1. The US economy is far from insular. Just look at the trade deficit with China. Or the level of agricultural exports from the US.

              1. It’s complicated… For example, the U.S. is a huge exporter of bulk commodity crops such as corn and soy (most destined for animal feed.) Only 15 percent of the U.S. food supply is imported. But that includes 50% of fresh fruits, 20% of fresh vegetables, and 80% of seafood. In an import/export disruption we would have all the calories we needed, but the supply would be unbalanced.

                Here’s an example I remember from my days wandering around Russia in the last days of the Soviet Union. Russia always insisted that its satellite colonies were being supported by the central system in Moscow. But when the Soviet economy unraveled the situation was revealed to be messy. Crude oil came from Russia, but it was refined into usable fuel, chemicals, plastics, and pharmaceuticals in places like East Germany and the Baltic republics. Heavy machinery may have come from Russia, but the best shoes came from Czechoslovakia, the best produce and pork came from Poland, sugar from Cuba…

                On the same theme, Cuba was a huge exporter of a few bulk commodities like sugar, but its domestic production collapsed when the Soviets stopped delivering fuel and equipment. Cuba wasn’t able to feed itself during the “special period” so an emergency restructuring of the internal economy had to be implemented to rebalance things. The average Cuban lost 20 pounds in two years until things stabilized.

                Venezuela exported oil and imported just about everything else. The dependence on commodity exports was a critical mistake. When oil prices fell the flawed political system collapsed (lots of moving parts there..) and the domestic economy wasn’t able to produce necessities in spite of abundant national resources and an educated population.

                It’s the inter-related supply chains that are critical, not the gross suppliers of particular items. And if all of the above examples can be dismissed as incompetent governments that couldn’t get their acts together – there’s no reason the US can’t suffer the same fate.

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