American Dream

Albert Crenshaw, a Washington Post columnist who focuses on saving people money, does the math and finds that riding Washington DC's Metro Rail is more expensive than driving even at recent high gas prices. He notes that most of the cost of car ownership are fixed, including the car itself and insurance. The variable cost of driving -- gas, oil, maintenance, tires -- are about 18 to 25 cents per mile, while Metro rush hour fares average 25 cents per mile. He adds that Metro now charges to park in many of its suburban park-and-ride stations, which offsets any savings from not having to park at work.

Crenshaw doesn't say so, but his analysis assumes just one person per car. At the average occupancy rate of 1.6 people per car, driving is even less expensive relative to taking the train. Of course, the actual numbers are different for every individual, so some people will find the train less expensive than driving. Certainly the train might be less nerve-wracking than dealing with DC traffic, but of course that traffic wouldn't be so bad if the region had invested in highway improvements instead of trains.

Any consideration of subsidies is beyond the scope of Crenshaw's analysis, but it is worth noting that highway subsidies average about 0.3 cents per passenger mile while transit subsidies average about 60 cents per passenger mile, or about 200 times as much. According to Washington Metro's transit profile, the operating subsidy alone for Washington Metro transit is more than 30 cents a mile. If the rail system cost $10 billion to build (which, considering inflation, is probably low), the annualized cost (amortized at 7 percent over 30 years) is about $800 million, which adds another 40 cents per passenger mile to the subsidy.

So no, Metro is no bargain.

John Frece worked for Maryland's "smart-growth" Governor Parris Glendenning for seven years, spending much of that time helping to lead the state's smart-growth programs. Now he has written a candid article for the Vermont Journal of Environmental Law describing what they did right and what they did wrong with smart growth in Maryland.

One of the most important things they did right, he says, was to brand the program "with a name people would recognize and that would be hard to oppose." I've often agreed that applying the term "smart growth" to some very unpopular policies was a brilliant tactical move. As Frece says, "it became obvious that those who opposed 'Smart Growth' must inevitably favor 'dumb growth.'"

Frece also says that the program was good because it relied on incentives rather than regulation. However, this was only true in the context of the state government's relationship to local governments: the state would withhold funds from local governments that failed to impose the regulations the state wanted. In the context of local government to private property owners, the program was expected to be just as regulatory as anything in Oregon.

Yet Maryland's program failed, Frece says, in that it "made very little headway in changing the paradigm of local land use control." In retrospect, letting local planning officials make the actual decisions allowed them to make decisions that smart-growth advocates would consider bad. But -- fortunately for Marylanders -- Glendenning did not have the power or political support to impose an Oregon-style state planning regime on local governments.

Frece also notes that smart-growth advocates failed to institutionalize the program sufficiently for it to survive the "regime change" that took place when Republican Robert Ehrlich replaced Democrat Parris Glendenning as governnor. Too bad he doesn't learn the real lesson here: unpopular programs, now matter how you dress them up in cute names, will not long survive in a democracy. It is notable that the previous "program" of letting people live where and how they wanted managed to survive decades of "regime changes" in Maryland and other states.

Frece still believes in smart growth, and merely laments the fact that Glendenning couldn't force it through on a permanent basis. A more objective observer might question whether a program that requires enormous government power to overcome the interests and desires of individual families and landowners is really in the best interest of society.

A mild-mannered professor from Texas comes to Portland to tell people how the city is wasting their money, leading the Portland Development Commission to do a full-court press to present their propaganda. The subject isn't light rail but convention centers.

Portland built its convention center in the early 1990s. Then Metro put a measure on the ballot to nearly double its size and it was voted down. Naturally, they expanded it anyway. As a result, the convention center is largely empty: Forbes magazine reports that it has an occupancy rate of only 43 percent.

Now they want to build a hotel next to the convention center, and are so adamant that they used eminent domain to get the land to build it on. But the Brookings Institution recently published a study by a University of Texas professor, Heywood Saunders, showing that convention centers are failing nationwide.

Saunders says that consultants such as Thomas Hazinski of HVS International routinely overestimate convention business to help cities justify tax investments in convention centers. Hazinski replies that Saunders' fails to account for the effects of 9/11 on convention travel. But Saunders shows that the convention business was declining even before 2001, which he attributes to the increased use of teleconferencing and other telecommunications. Even as dozens of cities build new tax-subsidized convention centers, he says, the nation's 200 largest trade shows are no larger today than they were in 1993.

Saunders was brought to Portland by a group of business leaders, including the owners and managers of several hotels that will have to compete with the tax-subsidized convention center hotel. Many of them insisted on anonymity so that the city could not undertake reprisals against them, which says something about Portland policies. But, as Jack Bog's Blog reported yesterday, the convention center hotel is probably a done deal and opponents will probably not do much more than generate a few letters to the editor that will be dismissed by Portland leaders intent on spending tax dollars.

Follow-up: On October 25, Portland Tribune columnist Phil Stanford swatted the convention-center hotel plan, saying that for the city it was just "another multimillion-dollar make-work project for one of their favored developers." If providing easy access to a hotel was so important to the success of the convention center, he asks, why don't they just provide a free jitney from downtown hotels to the convention center? He fails to note that they already do in the form of a $200 million light-rail line which is a free ride from downtown to the convention center.

Portland land-use planners are excited to report that the urban-growth boundary has driven land values up so high that it is now profitable for developers to buy existing suburban homes, tear them down, and replace them with high-density housing. They call this the "tipping point."

Planners admit that they "envisioned" this in 1997 when Metro, Portland's regional planning agency, formally adopted its 2040 plan. At the same time, they continue to claim that the urban-growth boundary did not increase land and housing prices.

One development consists of attached townhouses that are 1,200 square feet in size. The developer says, "Our price point, between $279,000 and $310,000, is perfect for first-time homebuyers." What a laugh! $79,000 to $110,000 would be perfect for first-time homebuyers, and such prices -- for single-family homes, not townhouses -- are not unusual in cities that don't have lots of land-use regulation. Never again in Portland.

Swedish retailer Ikea plans to build a 280,000-square-foot store at Cascade Station, Portland's ill-fated transit-oriented development. As this news site has previously reported, Cascade Station is on Portland's airport light-rail line and in fact has two light-rail stations on that line. Planners zoned the area for small-box retail shops and office spaces, but four years after the light-rail line opened not a single store or office has been built on the site.

Last October, the city gave up and rezoned the site for stores as large as 200,000 square feet. Officials talked about Ikea, but I reported here that I was skeptical as Ikea stores are much larger than 200,000 square feet. Today, Portland Mayor Tom Potter and Ikea announced plans for a 280,000-square-foot store.

"The transit infrastructure will play a key role in this area," said Fred Hansen, TriMet General Manager in a press release issued by the Portland Development Commission. "With IKEA offering home delivery, shoppers can travel to the area on the MAX red line that serves the area every 15 minutes from Beaverton to Cascade Station without a transfer." The press release alsonoted that "the store will also have bike racks for riders utilizing the new bike lanes in the area."

I am sure lots of people will take light rail and ride bicycles to the store to get their Ikea furniture, much of which is made of particle board and is very heavy.

Okay, even with home delivery, I guess I am not so sure.

A new study claims to show that policies that encourage people to live in inner cities rather than the suburbs will reduce, not increase, housing prices. But the study does not show this, and the author's claim that it does is misleading.

The paper, written by a California State University public policy professor and a policy analyst with the California legislature, claims to be a response to, among others, Harvard Professor Edward Glaeser and Wharton Professor Joseph Gyourko's paper, The Impact of Zoning on Housing Affordability. Glaeser and Gyourko compared housing prices with levels of land-use regulation and found that more regulation made housing less affordable.

The problem is that the California study does not compare housing prices with regulation. Instead, it compares housing prices with the percentage of people who live in an urban area's central city. Yet this percentage is more a result of historical happenstance and state laws than of land-use regulation.

For example, Texas grants cities strong powers to annex adjacent land without permission from the residents. As a result, a high percentage of people in Texas urban areas live in the central cities of those urban areas. But most Texas cities have a very low level of land-use regulation so, as Glaeser and Gyourko would predict, housing in those cities is very affordable. Yet the Texas data would also support the California paper's claim that a large central-city population (i.e., less sprawl) makes housing more affordable. Obviously, there is no cause-and-effect relationship between the California definition of sprawl and housing prices.

Of course, supporters of smart growth will use the California study to justify more land-use regulation. Opponents of such regulation should be ready to respond by showing that the study does not provide any support for such regulation.

This article from two planners with the Brookings Foundation suggests that people would drive less, and thus save gasoline, if only we would redesign our cities so that more people could live near urban centers. As evidence, they point to studies showing that people who live in urban centers spend less on driving.

The problem with this evidence is the selection issue: People who don't want to drive tend to live in urban centers where they can be close to shops, services, and transit. These people are overwhelmingly young, single, or childless couples. That doesn't mean that plopping some family of five in downtown San Francisco will suddenly reduce their need to drive to Wal-Mart, soccer practice, or suburban jobs.

The fact is that our cities have already redesigned themselves, with jobs moving to the suburbs. Yet this doesn't mean that people live any closer to work. As UC Berkeley's Robert Cervero has found, cities in the San Francisco Bay Area that have a balance of jobs and housing still see long commutes because people don't bother (and may not even want to) live in the same cities in which they work.

The prescriptions offered by these planners -- concentrate housing in urban centers, offer people "choices" (meaning transit or walking, not driving) for travel -- are, of course, smart growth. These are, in fact, the policies that have been followed in European cities for the past sixty years. Due to high taxes, Europeans have also long paid much higher prices for fuel than Americans are now paying. Yet European driving is growing rapidly, their cities are suburbanizing, and transit is losing market share. If these policies don't work in Europe, why should they be expected to work in the U.S.?

Good news: High gas prices have increased transit ridership by 13.8 percent.

Bad news: High gas prices have increased transit costs by 2.2 percent (i.e., 2.2 percent more than costs were expected to increase) -- and revenue from the new riders is not covering this added cost.

This is a memo from the general manager of Madison, Wisconsin's transit agency, but similar memos are probably going out from the general managers of most transit agencies in the country. Madison Metro's solution is more taxes -- specifically, the general manager would like to have the power to tax the entire Madison metropolitan area.

Yet this only shows the deepness of the dark pit that transit has fallen into. We accept the proposition that transit will lose money, so we completely lose sight of any need to contain costs. With bloated costs, transit riders pay such a small fraction of operating costs -- in Madison Metro's case, just 17 percent -- that the system is extremely vulnerable to a tiny change in operating costs (link will download Madison Metro's transit profile for 2003).

Just what would Madison Metro do if it had regional tax authority? Raise taxes every time fuel prices go up? Of course not; taxpayers wouldn't stand for it. So the system would be just as vulnerable to changes in operating costs as it is today. The general manager is merely using fuel prices as an excuse to get more tax subsidies.

The only real solution is to get transit riders to pay a greater share of costs. If they did, then transit agencies would be less vulnerable to changes in fuel prices and would also be more inclined to provide better services so they can earn more revenue. This doesn't mean increasng transit fares. It means reducing costs.

How do you reduce transit costs? Here's a hint: 79 percent of Madison Metro's costs are labor, while fuel and other supplies are less than 7 percent. This suggests that the real problem is that transit agencies are so beholden to unions that they are unable to address their bloated labor costs.

By comparison, Las Vegas's transit agency contracts out all of its bus operations to private non-union operators. Fares cover 39 percent of expenses, and costs per passenger mile and costs per rider are both less than 60 percent of Madison Metro's. During the 1990s, Las Vegas saw a huge increase in transit ridership, while Madison Metro's ridership was stagnant.

Is the purpose of transit to give people mobility? Or is it to give labor unions more members and power? Transit can't do both, so we have to make a choice.

No wonder downtown Portland has become such a real-estate hot spot. Developers have received $92 million in annual tax breaks, for ten years, to build 5,000 condos, apartments, and other housing units. Over the full ten years that's $180,000 per dwelling unit! Considering that most of these are one- and two-bedroom apartments, that's more than it would cost to build most of them if they were built as single-family homes in the suburbs.

Of course, tax breaks aren't the only subsidies to Portland's downtown housing. Others include the streetcar, at $55 million and counting; removal of a major bridge off-ramp that was considered unsightly, which I believe cost $12 million; and various other infrastructure subsidies. According to the John Charles of the Cascade Policy Institute, infrastructure subsidies to the Pearl District alone total upwards of $200 million.

This Oregonian article says that Portland's city council is having "second thoughts" about the tax abatement program, not because it is so expensive, but because developers aren't providing as many "public benefits" as the city would like. The city wrote guidelines requiring that a certain percentage of units be "affordable." But when a developer submitted a major project that included exactly that many affordable units, the city rejected it, saying they wanted more. But if they wanted more, why didn't they say so in the first place?

Originally, the justification for the subsidies was that a few model developments were needed to demonstrate how popular they would be. But, of course, developers now expect that these subsidies will be provided for all such developments.

One obvious side effect is that subsidized apartments have destroyed the rental market in Portland. According to a company that tracks apartment rental rates throughout the West, rental rates in Portland have actually declined in the past year. As a result, many downtown apartments are evicting their residents and converting to condos. It remains to be seen just how well such condos will hold their value in the future.

During the 1990s, there was an influx of Latino and Somali immigrants to Minneapolis. Immigrant businesses revitalized the Lake Street corridor - increasing tax revenues by 40%; now in the name of "redevelopment" the city and county are destroying some of these immigrant businesses:

Hennepin County and Minneapolis are spending millions to rebuild south Minneapolis's main east-west thoroughfare in a new image. But whose vision is it?