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    We are supposedly living in an age of austerity, but many federal programs are leading many states into overspending and potential fiscal insolvency.  Transit spending is a case in point, as is indicated by the proposed Orlando Sunrail commuter rail project.

    How Washington Induces Higher State and Local Spending: For decades, the federal government has encouraged state and local governments to build expensive projects, as is the case in Orlando. Under the Federal Transit Administration (FTA) "New Starts" program, state and local governments can obtain federal funding for such projects, contingent on their taxpayers providing "matching funding." This can be in the form of higher taxes, budget increases or in unplanned subsequent expenditures that are higher than projected. The responsibility for cost overruns and operating subsidies belong exclusively to state or local taxpayers.

    Inaccurate Cost Forecasts: This can prove very expensive. European researchers Bent Flyvbjerg, Nils Bruzelius and Werner Rottengather (Megaprojects and Risk: An Anatomy of Ambition) and others have shown that new rail projects routinely cost more than planned (Note 1).

    Flyvbjerg et al found that the average rail project cost 45 more than projected and that 80 percent cost overruns were not unusual. Cost overruns were found to occur in 9 of 10 projects. Moreover, they found that despite increased attention to these cost blow-outs, final costs continue to be far above the projections presented to public officials and the taxpayers at approval time. Further, they found that ridership and passenger fares also often fell short of projections, increasing the need for operating subsidies.

    Moreover, urban rail systems are of questionable value. Transport economist Clifford Winston of the Brookings Institution has noted that "the cost of building rail systems are notorious for exceeding expectations, while ridership levels tend to be much lower than anticipated" and that "continuing capital investments are swelling the deficit." 

    Federal policies, however, often force state and local taxpayers to guarantee the accuracy of notoriously inaccurate cost projections. The standard FTA "full funding agreement," a prerequisite for federal funding, requires state or local taxpayers to pay for any cost overruns. Further, if the projects are not completed, state and local taxpayers are required to pay back the federal grants (more on Florida's experience with that later).

    Sunrail: The "Sunrail" commuter rail project is planned to parallel Interstate 4 in the Orlando metropolitan area. From the perspective of Florida taxpayers, the tragedy is that the project has proceeded so far. Project forecasts say that in 2030, Sunrail will add only 1,850 new round trip riders daily to Orlando's already sparse transit ridership (barely half a percent of travel). Even if all Sunrail trips were for employment, it would not even be a "drop in the bucket" in a metropolitan area likely to add more than 400,000 jobs by 2030. Further, despite inferences to the contrary, this will have less than negligible impact on traffic congestion. It is likely that traffic on Interstate 4 will increase by at least 100,000 cars daily by 2030 (Note 3), many times the cars that Sunrail could possibly remove, even under its probably exaggerated ridership projections.

    Sunrail also will do little to increase job access to jobs in a metropolitan area where less than two percent of employment can be reached by the average commuter in 45 minutes using transit, according to Brookings Institution research. By contrast, at least more than 80 percent of jobs in the Orlando metropolitan area are reached in 45 minutes by car, and more than 55 percent in 30 minutes. Despite the high costs of all this and Sunrail's negligible effect on regional mobility, politics may preclude cancellation of the project.

    Sunrail's first phase is projected to cost $350 million (after a half-billion dollar right-of-way purchase). The Federal Transit Administration intends to pay a maximum of $175 million for the project. State taxpayers (through the Florida Department of Transportation) will be required to match that funding with another $175 million, though that amount could grow.

    Florida Taxpayers Already Burnt Once: In addition in paying for likely Sunrail cost overruns, Florida taxpayers would be obligated to fund service levels that satisfy the Federal Transit Administration. Otherwise the federal government can demand that taxpayers send the money back. This is no idle threat. When the Miami commuter rail system (Tri-Rail) provided service levels deemed insufficient, FTA demanded a return of $250 million in federal grants. This repayment was averted only by a state bailout that provided up to $15 million in annual subsidies to increase the service levels (Note 2).

    Essentially then, to obtain federal funding for Sunrail, Florida taxpayers must write a blank check out to a rail construction industry that has repeatedly demonstrated an inability to build rail projects for promised amounts.

    Negotiating a Way Out? Florida taxpayers, however, may have some options to avoid writing the blank check. In March, the US Department of Transportation (USDOT) desperately sought to find governments in Florida willing to provide a blank check to fund the now cancelled Tampa to Orlando high-speed rail line, with costs that were so low that they had "big cost overruns" written all over them.

    In a February 27 letter USDOT told local officials the federal grant repayment provisions were negotiable. Based upon this policy latitude available to USDOT, Florida officials could seek less unreasonable terms with USDOT. For example, a revision might be negotiated to limit Florida's cost overrun liability to amounts resulting from state actions. Further, Florida should seek agreement that it does not have to operate service levels that are greater than required by demand or can be afforded. This would prevent a repeat of the unhappy Tri-Rail experience.  

    Provisions such as these would provide important protections to Florida taxpayers, who could otherwise be forced to pay hundreds of millions in cost overruns and higher operating subsidies and potentially higher taxes.

    Lessons for Taxpayers: Projects like Orlando's Sunrail provide important lessons for the nation. The stimulus, now winding down, boosted questionable spending policies well outside the Beltway. Washington needs to stop writing blank checks on taxpayer accounts. It’s time for the feds to stop inducing state and local governments to mimic its fiscal irresponsibility.

    -----

    Notes

    1. Flyvbjerg is a professor at Oxford University in the United Kingdom. Bruzelius is an associate professor at the University of Stockholm. Rothengatter is head of the Institute of Economic Policy and Research at the University of Karlsruhe in Germany and has served as president of the World Conference on Transport Research Society (WCTRS), which is perhaps the largest and most prestigious international association of transport academics and professionals.

    2. The Florida Department of Transportation has made agreements local governments to participate in funding of Sunrail cost overruns. However, in the event that local governments are unable to pay their share, it may be expected that the state will pay, as it did in bailing out Miami's Tri-Rail (discussed above).  

    3. Assumes that automobile traffic would grow at the projected population growth rate (based upon University of Florida population projections). 

    -----

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life

    Photo: Downtown Orlando (by author)


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  • 06/07/11--13:31: California’s Green Jihad
  • Ideas matter, particularly when colored by religious fanaticism, wreaking havoc even in the most favored of places. Take, for instance, Iran, a country blessed with a rich heritage and enormous physical and human resources, but which, thanks to its theocratic regime, is largely an economic basket case and rogue state.

    Then there’s California, rich in everything from oil and food to international trade and technology, but still skimming along the bottom of the national economy. The state’s unemployment rate is now worse than Michigan’s and ahead only of neighboring Nevada.  Among the nation’s 20 largest metropolitan regions, four of the six with the highest unemployment numbers are located in the Golden State: Riverside, Los Angeles, San Diego and San Francisco. In a recent Forbes survey, California was home to six of the ten regions where the economy is poised to get worse.

    One would think, given these gory details, California officials would be focused on reversing the state’s performance. But here, as in Iran, officialdom focuses more on theology than on actuality.   Of course, California’s religion rests not on conventional divinity but on a secular environmental faith that nevertheless exhibits the intrusive and unbending character of radical religion.

    As with its Iranian counterpart, California’s green theology often leads to illogical economic and political decisions. California has decided, for example,  to impose a rigid regime of state-directed planning related to global warming, making a difficult approval process for new development even more onerous.  It has doubled-down on climate change as other surrounding western states — such as Nevada, Utah and Arizona — have opted out of regional greenhouse gas agreements.

    The notion that a state economy — particularly one that has lost over 1.15 million jobs in the past decade — can impose draconian regulations beyond those of their more affluent neighbors, or the country, would seem almost absurd.

    Californians are learning what ideological extremism can do to an economy. In the Islamic Republic, crazy theology leads to misallocating resources to support repression at home and terrorism abroad. In California green zealots compel companies to shift their operations to states that are still interested in growing their economy — like Texas. The green regime is one reason why CEO Magazine has ranked California the worst business climate in the nation.

    Some of these green policies often offer dubious benefits for the environment. For one thing, forcing California businesses to move to less energy-efficient states, or to developing countries like China, could have a negative impact overall since shifting production to Texas or China might lead to higher greenhouse gas production given California’s generally milder climate.   A depressed economy also threatens many worthy environmental programs, delaying necessary purchases of open space and forcing the closure of parks. These programs enhance life for the middle and working classes without damaging the overall econmy.

    But people involved in the tangible, directly carbon-consuming parts of the economy — manufacturing, warehousing, energy and, most important, agriculture — are those who bear   the brunt of the green jihad. Farming has long been a field dominated by California, yet environmentalist pressures for cutbacks in agricultural water supplies have turned a quarter million acres of prime Central Valley farmland fallow, creating mass unemployment in many communities.

    “California cannot have it both ways, a desire for economic growth yet still overregulating in the areas of labor, water, environment,” notes Dennis Donahue, a Democrat and mayor of Salinas, a large agricultural community south of San Jose. Himself a grower, Donahue sees agricultural in California being undermined by ever-tightening regulations, which have led some to expand their operations to other sections of the country, Mexico and even further afield.

    Other key blue collar industries are also threatened, from international trade to manufacturing. Since before the recession California manufacturing has been on a decline.  Los Angeles, still the nation’s largest industrial area, has lost a remarkable one-fifth of its manufacturing employment since 2005.

    California’s ultra-aggressive greenhouse gas laws will further the industrial exodus out of the state and further impoverish Californians.  Grandiose plans to increase the percentage of renewable energy in the state from the current unworkable 20% to 33% by 2020 will boost the state’s electricity costs, already among the highest in the nation, and could push the average Californian’s bill up a additional 20%.

    Ironically California, still the nation’s third largest oil producer, should be riding the rise in commodity prices, but the state’s green politicians seem determined to drive this sector out of the state.. In Richmond, east of San Francisco, onerous regulations pushed by a new Green-led city administration may drive a huge Chevron refinery, a major employer for blue collar workers, out of the city entirely. Roughly a thousand jobs are at stake, according to Chevron’s CEO, who also questioned whether the company would continue to make other investments inside the state.

    Being essentially a religion, the green regime answers its critics with a well-developed mythology about how these policies can be implemented without economic distress.  One common delusion in Sacramento holds that the state’s vaunted “creative” economy — evidenced by the current bubble over   surrounding social media firms — will make up for any green-generated job losses.

    In reality the creative economy simply cannot  make up for losses in more tangible industries. Over the past decade, as the world digitized, the San Jose area experienced one of the stiffest drops in employment of any of the 50 largest regions of the country; its 18% decline was second only to Detroit.  Much of the decline was in manufacturing and services, but tech employment has generally suffered. Over the past decade California’s number of workers in science, technology, engineering and math-related fields actually shrank. In contrast, the country’s ranks of such workers expanded 2.3% and prime competitors such as Texas , Washington and Virginia enjoyed double-digit growth.

    So who really benefits from the green jihad? To date,  the primary winners have been crony capitalists, like President Obama’s newly proposed commerce secretary, John Bryson, who built a fantastically lucrative  career (he was once named Forbes’  “worst valued chief executive”) while  running the regulated utility Edison International. A lawyer by training, Bryson helped found the green powerhouse National Resources Defense Council. He’s been keen to promote strict  renewable energy  standards  that also happen to benefit solar power and electric car companies in which he holds large financial stakes.

    Other putative winners would be large international companies, like Siemens, that hope to build California’s proposed high-speed rail line, the one big state construction project favored by the green-crony capitalist alliance. Fortunately , the states dismal fiscal situation and  rising cost estimates for the project, from $42 to as high as $67 billion, as well as cuts in federal subsidies, are undermining support for this project even among some liberal Democrats.  Even in a theocracy, reality does, at times, intrude.

    Finally, there are the lawyers — lots of them. A hyper-regulatory state requires legal services just like a theocracy needs mobs of mullahs and bare knuckled religious enforcers. No surprise the number of lawyers in California increased by almost a quarter last decade, notes Sara Randazzo of the Daily Journal. That’s two and a half times the rate of population growth.

    The legal boom has been most exuberant along the affluent coast.  Over the past decade, the epicenter of the green jihad, San Francisco, the number of practicing attorneys increased by 17%, five times the rate of the city’s population increase. In the Silicon Valley, Santa Clara and San Mateo counties boosted their number of lawyers at a similar rate. In contrast, lawyer growth rate in interior counties has generally been far slower, often a small fraction of their overall population growth.

    If California is to work again for those outside the yammering classes, some sort of realignment with economic reality needs to take place.  Unlike Iran, California does not need a regime change, just a shift in mindset that would jibe with the realities of global competition and the needs of the middle class. But at least with California we won’t have to worry too much about national security: Given the greens anti-nuke proclivities, it’s unlucky the state will be developing a bomb in the near future.

    This piece originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by msun523


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    Less than a decade ago, major American energy companies were investing billions in constructing new terminals for importing liquefied natural gas — the cooled, dense state of methane that makes it economical for it to be transported by ship. Today, some of those same companies are contemplating spending billions to retrofit those facilities in order to export LNG.

    What happened in the interim? Natural gas boomed in the U.S., thanks to major discoveries of unconventional gas deposits in shale rock and new extraction techniques. In 2011, the U.S. Energy Information Administration raised its estimate for “technically recoverable” natural gas reserves in the U.S. from 353,000 billion cubic feet to 827,000 billion cubic feet. At $4 for every million BTU, natural gas isn’t that much more expensive than coal, which trades at a little over $2 per million BTU but produces twice as much greenhouse gas and significantly more air pollution.

    A “gas glut”

    Despite increased demand and a push to replace coal-fired power with natural gas, the U.S. is suffering what experts call a “gas glut.”

    “The real problem for shale gas is demand — they don’t know where to put all of it,” says Ben Schlesinger, an independent consultant to the natural gas industry. Meanwhile, Europe is paying two to three times the prices in the U.S., and countries that are entirely dependent on LNG, including Japan, Taiwan and South Korea, are paying even more — between $20 and $30 per million BTU.

    Europe also has security and political reasons for wanting access to U.S. gas. Its current primary source, Russia, has shown a willingness to use Europe’s dependence as a bargaining chip. In three of the past five winters, Russia has cut off the supply of gas to some part of Europe in a dispute over prices and other issues.

    Currently there are plans for up to three LNG export terminals on the U.S. gulf coast, and one on the Pacific coast of Canada, in Kitimat. Historically, the only LNG export facility in the U.S. was in Kenai, Alaska. LNG ships bound for Japan have departed from the terminal since the 1960s, but it’s slated to be shut down in the near future. If the first two export plants in the U.S., both converted import facilities, come online by 2015 as projected, they would be the first constructed in the U.S. in 40 years.

    The next Qatar?

    Whether or not the U.S. will become “the next Qatar,” which is the largest exporter of natural gas in the world, will depend on a number of factors. Together, these variables will determine whether investors think LNG export terminals are worth the risk, and whether or not the U.S. will even be capable of sending its bounty overseas.

    First, U.S. gas consumption must remain low. That means no “Pickens Plan” for using our natural gas reserves to fuel our trucking fleet, and no quick changeover from coal to natural gas for energy production. Second, we have to continue to drill at the rapid pace set over the past few years. More than half the natural gas consumed in the U.S. today comes from wells drilled in the last three years, and unconventional wells deplete rapidly, unlike conventional gas fields.

    Economics and more responsible drilling practices suggest that the drilling bonanza will continue, however. Pennsylvania, for example, could turn into the a state literally covered with wells. One engineer at Cornell speculated the state could eventually be home to as many as 100,000.

    “The increase [in unconventional natural gas production] has been so dramatic it’s amazing,” says Schlesinger. Ten years ago, production was a tenth what it is today, and fracking technology is evolving rapidly. If current trends in the U.S. continue — slow turnover of old power plants, reduced demand due to efficiency — it’s likely that much of that gas will be sent overseas as LNG.

    Christopher Mims is a contributor to Good, Technology Review and The Huffington Post, and is a former editor at Scientific American and Grist.org. He tweets @mims.

    Photo by jermlac


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  • 06/10/11--04:38: Education as an Export
  • A trade deficit is a negative balance between a nation’s imports and its exports, so a country with a trade deficit is spending more on imports than it is receiving for selling its exports. Is there any more that can be done to reduce this deficit over the course of time? One potential solution the US trade deficit would be to increase the attractiveness of its higher education institutions to international students, and to therefore increase the amount of money coming into the country. Money from abroad that is spent in the US, such as on tourism, or in this case, on education, is considered an export.

    President Obama identified a key element for future growth of the US economy as “exporting more of our goods,” and whilst this is a great way of decreasing the trade deficit, the actual ability of the country to create more manufactured goods or natural resources is fairly limited.
    But the US has a great potential for growth in the services sector, including financial services, licensing fees, entertainment, and telecommunications. Education could be a particularly high earner for the US, if it were prepared to put more money forward to attract international students.

    The US currently has around 691 thousand international students enrolled in higher education, with the tuition fees estimated to total around $13 billion during the 2009-10 academic year. Consider as well the cost of living for international students, and you can see that the economic impact of international students can be a major earner for the country.
    A Centre for Studies in Higher Education paper was released in support of the development of US Higher Education as an export. The Obama administration has set a goal of doubling export growth by 2015. Whilst this is an ambitious target, it is not beyond achievable.

    Increasing higher education for international students makes viable economic sense not only because the service itself is an extremely profitable one, but also because it will help meet future labour market and growth needs of the country, and fulfil "a diplomatic and cultural mission like no other form of trade”. International students can benefit from the experience of a well-organized educational system.

    There have been countries that have recognised this opportunity for growth and acted upon it. Australia, for example, has grown its educational market to attract more international students, although it has recently announced plans to prop up the educational system with a price hike for lower school years. It seems that the demand for Australian education has been on a steady rise, and there has been a corresponding increase in spending and development by higher education institutions. In the opinion of Michael Andrew, Chairman of Australia's Skills and Innovation Task Force, after recognising the value of international students and scrutinizing the lengthy application process for higher education, Australia expects that the natural growth in interest will not be enough to keep maintain the industry's economic boom.

    Andrew has highlighted the benefits of a strong educational policy which educates graduates to opportunities of forming strong links with Australian companies that currently operate in their home countries within Asia and India.

    Australia, the US and Canada would certainly benefit from working harder to encourage learning in industries that are suffering a skills shortage. Foreign students provide what's been accurately called a ‘rich talent pool’ for industries that these countries have failed to utilize effectively.

    America and Canada differ from Australia in that their markets for labour are already quite saturated, so pushing education as an export and the advantages it can bring to the economy can be overlooked as an investment into future economic development.

    Exporting education can benefit the US in a way that not many other services can, by monetary gain, as well as by continual benefits should international students stay to ply their trades. And even those who don’t remain in the US will thereafter be advocates of the US educational system, and may inspire future generations to learn in the US. Finally, there will always be opportunities for the students to work in their own countries but under US corporations.

    Whether or not the Obama Administration will meet the targets they have set by positioning education as an export is another question in its own right. The US can not expect to grow this lucrative industry without further pushes to attract foreign students looking to learn at the higher education establishments of America.

    Either way, they are on the right track, and are onto how much of an advantage they have over other nations in the education system they can offer. With the right development and marketing, education, sold as an export, could grow to become one of the United States’ highest earners.

    Andy studied International Economics at University but now works as a freelance Search Engine Optimizer and travel advisor for All Inclusive holidays provider Tropical Sky. Comment here or follow him on his twitter @andym23

    Photo by Evive: International Student Week


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    We all know or have heard about the overwhelming development going on in China. Journalists enthuse and analysts throw magnificent statistics of what seems to be a miracle. Yet there is little discussion of the daily life of the common people, and their struggle. There are miracles aplenty in China, but the astounding figures only partially reflect the reality.

    Thousands of people from rural areas move to the big cities of China in search of job opportunities. Strenuous work funds an often meager existence. No social security, no benefits of any kind. Like immigrants from Europe to America’s cities in last century, they often find in the streets an answer to their needs.

    In the year 2011, in the streets of Chengdu, one of the fastest growing cities in the world, many people still have no other option than fixing their dentures under the most unimaginable poor hygiene conditions. For about 20 RMB a street dentist will fix it for you.

    It takes only 4RMB to get yourself a haircut, right there, on your block.


    And add 5 RMB more to the bill for a deep, though dubious, ear cleaning in one of the many neighbourhoods in Shanghai still south side of the mass production of crystal-clad skyscrapers.

    In those neighbourhoods of all-in-one houses (all-in-one-room), the space is so reduced that the food needs to hang out of the windows. For many neighborhoods that still inconveniently survive in areas of real estate dementia and speculation of the 21st century, it may be just a matter of time until they disappear.

    In China, everything is cheap, and that wonderful home appliance that you just got in the shopping center at a ridiculous price even includes delivery costs. All stores include the cost in the price. There are hundreds of hands out there ready to take everything right to your door for a few coins.

    Real estate developments constantly reconfigure the skyline of Chinese cities selling wonderland views of the contaminated horizon of the Chinese skies. England New Town in Chengdu seems to offer it all, summed up in fantastic Chinglish phrase: “Leads a pious life by the city by view mountain keeping in good health.”

    And even though the children of some will go to the new IMAX around the corner, the people who build the miracle that others can enjoy go to the movies only at improvised movie theaters around the construction sites where they live.

    In the meanwhile, the garbage produced by the miracle accumulates in the suburbs. There are still people ready to make the most out of it.

    They never get the English right, but the Chinglish we find everyday on the streets usually defines the country’s situation better than the proper English. Protect Circumstance: Begin with me. I think Ayn Rand has some followers in the People’s Republic.

    Born and raised in Buenos Aires, Argentina, Nicolas Marino is a 33 year-old architect and photographer currently based in Chengdu, China. For the last 6 years he has chosen a bicycle as means of transport to reach the most remote regions of the world where he focuses most of his documentary work. Some of his journeys include a 10.000km ride from Tehran to Shanghai and several trips around remote and rural China where he has now cycled over 8000km.


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    I was interested to read the views of Rick Boven of the New Zealand Institute about central and local government needing to resolve their differences about the future of Auckland.  Well, they have worked on that since the establishment of GUEDO in 2005 (now the Auckland Policy Office). 

    But that’s not what the article was really about.  Under the pretext of calling for “new ways of working together” Rick promotes urban containment and greater train travel for Auckland’s future. Well, we’ve heard all that before.

    What Rick may have noticed by way of differences is not a failure of cooperation, but growing realisation that the old prescription for a compact Auckland is not working.  And while it may pain me to say so, in this instance the centre may be looking ahead, while the city continues to look to the past.  Any differences, Rick, arise from diverging views, not from a failure to work together.

    Fallacies and frailties

    And in this case I’m on the side of the centre.

    One can’t pick away at the frailties of urban consolidation planning in one article, but consider the following propositions about the compact city:

    • A focus on centralisation guarantees congestion;
    • A focus on centralisation reduces green space and concentrates urban pollution;
    • Consolidation prejudices old infrastructure, increasing overload and the risk of failure;
    • A focus on rail transit escalates costs, reduces flexibility, and caters for only a minority of trips among even those (relatively few) households that have ready access to it;
    • A focus on rail transit commits us to developing unattractive brownfield sites with high remediation costs if we intend to increase residential densities nearby;
    • A commitment to centralisation and higher densities increases vulnerability to extreme climatic events, rising sea levels, and other natural disasters;
    • Medium to high density living is socially flawed, as it is associated with transience, increased urban crime, diminished quality of life, and loss of a sense of community, especially for households in middle to lower income brackets (and, ultimately, razing of failed apartment blocks);
    • The market does not favour medium to high density housing unless well located, well appointed, and therefore out of the price range of most households;
    • Refurbishment and restoration of inner city suburbs for higher density living leads to gentrification that displaces lower income households;
    • Mixed use developments reduce the amount and push up the price of land for business while lowering the quality of life of residents;
    • Limiting new business land and expecting to take up new employment by increasing densities on existing sites forces up business costs, reducing the attractiveness of investment and competitiveness of business.

    None of this makes compact city policies look very smart.

    Pushing for alternatives

    The current council vision is for Auckland to be the world’s most liveable city.  Well, we won’t achieve that by “me-too” urban consolidation.  Don’t forget, in the corporate world consolidation is a defensive strategy, associated with stagnation not growth, holding the line, not forging ahead.

    A better answer may be to take advantage of our distinctive physical environment and make sure that our urban form complements and takes advantage of it as we move ahead.

    Here are some very broad ideas:

    Allow decentralisation to continue.  It’s happening, don’t fight it.  Provide for it.  That means ensuring that people can meet most of their needs close to where they live.  A sustainable city won’t work without sustainable suburbs.  These should be at the heart of our plans.  And some of them might just have to spill over the urban limits.  Now there’s a real opportunity to practice some innovative urban design.

    Let the city breathe:   We want a CBD which stands out among cities.  Well, by promoting sustainable suburbs we can lay off simply playing with structures and instead seize the opportunity to restore a green (and blue) heart to our city.  A timid but worthy start was made to Queen Street with the (re)introduction of Nikau palms, but we can go a lot further than that.  Barry Lett had great idea for the radical conversion of mid-Queen Street and Myers Park into an urban garden.  What a great place to visit!

    If we take the pressure off forcing housing into the CBD, among other things, we could do a lot more of that.  We could think seriously about creating a pedestrian precinct the length of Queen Street. I would also push for my hot spots to be green – and forge walkways and cycle ways among them.  We could better Integrate the CBD with the quality areas around it.  On the harbour front we need to find ways to cross Quay Street, for example, to merge water and land.  We might start by taking note of Lambton Harbour in Wellington, and how it blends hard and soft surfaces, restores the harbour edge, and creates a place for all people. 

    Develop Smart Sub-Urbs:  Forget Jane Jacobs’ nostalgia for the lost American city.  Those images belong to another age and another place.  Our life, our cultures, and our communities are in the suburbs.  Let’s ensure that strong communities can develop and thrive around urban villages and suburban centres throughout Auckland. 

    If we are serious about sustainability, the suburbs are where it must happen. Here we can deliver smart urban design, strengthen social relationships, and provide capacity for improving the quality of life at all levels.  It’s also at a sub-regional if not suburban level that labour markets operate most efficiently, and employment opportunities might best be promoted.

    And while we’re at it, we need to make sure that the suburbs are well interconnected by generous arterial corridors. This call for some difficult retrofitting.  It may mean reviewing how we use motor-ways; thinking more creatively about buses and bus-ways; and getting over an all-consuming desire to focus everything on the CBD, turning it into a giant interchange instead of a great destination.

    Launch the Satellites: Some of the best places to live in Auckland are beyond the bounds.  We seem so desperate to cling to urban limits that we ignore the fact that people like Auckland because of what lies beyond them. Let’s see if we can encourage smart growth in places like Warkworth, Bombay, Pokeno, Wellsford and Drury, Beachlands, Pukekohe, and others.  Let our rural villages prosper, too. These are all places where we could do some exciting planning and design.  And let’s make sure that we have wide, green corridors linking them, corridors that can cater for whatever modes of transport the future might throw at them – electric cars, light rail, and the like.

    If nothing else, let’s lift the discourse so that our ideas begin to match our aspirations.  The last thing we need to do, Rick, is to get together to recycle the old stuff.

    Phil McDermott is a Director of CityScope Consultants in Auckland, New Zealand, and Adjunct Professor of Regional and Urban Development at Auckland University of Technology.  He works in urban, economic and transport development throughout New Zealand and in Australia, Asia, and the Pacific.  He was formerly Head of the School of Resource and Environmental Planning at Massey University and General Manager of the Centre for Asia Pacific Aviation in Sydney. This piece originally appeared at is blog: Cities Matter.

    Photo by Mark Benger


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    From Appalachia to Alaska, the growth is eye-popping. Thousands of new jobs have sprouted up, most well-paying and all boons to their regions. There’s no denying oil and gas extraction jobs are on the rise, and not just in Texas and Oklahoma.

    North Dakota is drilling oil at a blistering pace. Pennsylvania and West Virginia, along with parts of New York and Ohio, are seeing a natural gas boom with their Marcellus Shale reserves. And Colorado, Wyoming, Alaska, and other Western states are adding extraction jobs in droves.

    The six fastest-growing jobs for 2010-11, according to EMSI’s latest quarterly employment data, are related to oil and gas extraction. This includes service unit operators, derrick operators, rotary drill operators, and roustabouts. Each is expected to grow anywhere from 9% to 11% this year, in an otherwise stagnant economy.

    But that’s not all. A mixed bag of other extraction and petroleum-related jobs—wellhead pumpers, all other extraction workers, geological and petroleum technicians—are also expected to see healthy gains. In total, nine of the top 11 fast-growing jobs in the nation are tied in one way or another to oil and gas extraction.

    Occupation

    2010 Jobs

    2011 Jobs

    Change

    % Change

    Service unit operators, oil, gas, and mining

    42,110

    46,766

    4,656

    11%

    Derrick operators, oil and gas

    23,323

    25,747

    2,424

    10%

    Rotary drill operators, oil and gas

    28,116

    30,981

    2,865

    10%

    Roustabouts, oil and gas

    75,636

    82,678

    7,042

    9%

    Helpers, extraction workers

    44,303

    47,247

    2,944

    7%

    Petroleum engineers

    29,063

    30,917

    1,854

    6%

    Biomedical engineers

    16,065

    17,061

    996

    6%

    Wellhead pumpers

    24,186

    25,616

    1,430

    6%

    Extraction workers, all other

    23,423

    24,784

    1,361

    6%

    Geological and petroleum technicians

    35,304

    37,205

    1,901

    5%

    What’s driving this employment spike? A push for increased domestic oil production is certainly a factor, as are technology breakthroughs in collecting massive shale gas deposits. But more subtle shifts are also happening, including how federal and state agencies track the oil and gas extraction workforce.

    A Prime Example

    For a case study on the skyrocketing employment picture on the shale front, just look at Pennsylvania. Without a tax on natural gas extraction and perfectly located to take advantage of the Marcellus Shale formation, parts of the commonwealth have become a hotbed for drilling. More than 3,000 wells have been drilled in the last three years, and much more is expected in coming years.

    Since 2008, Pennsylvania has added more than 15,000 jobs in the mining, quarrying, and oil and gas extraction industry, a 41% jump. Only Texas and Oklahoma have added more of these jobs in the last three years. Meanwhile, North Dakota has seen an 80% jump in employment in this sector, second only to Delaware since 2008.

    Where are these well-performing oil and gas jobs located? We mapped the data for the four fastest-growing jobs — roustabouts, service unit operators, derrick operators, and rotary drill operators. Here’s what we found: Texas and Oklahoma of course have a large percentage of these jobs, but California, Alaska, and other Western states have a fair share, too.

    The map below shows 2-year job growth in these oil and gas extraction jobs for every county in the continental US. Williams County, North Dakota is No. 1 with 1,539 jobs added, which amounts to 80% growth.

    More Than a One-Year Trend

    Mining, quarrying, and oil and gas extraction is expected to grow 6% in the US from 2010-2011. That’s the fastest projected growth among the 20 broadest-level industries—twice the rate in fact, as the next fastest-growing industry (administrative and support and waste management and remediation services,).

    This is hardly a one-year bump, though. Over the last five years, the explosion in the sector has been than staggering—even with a minor employment dip from 2009-2010. The industry added more than 345,000 jobs nationally from 2007 to 2009, and is expected add another 85,000 this year, which equals 11% growth.

    It’s also helpful to break out mining and oil and gas extraction from the broad sector to more specific industries to locate the real driver of the growth. In this case, it’s easy to see: Of the 506,401 new jobs in the sector since 2006, more than 431,000 have been in the crude petroleum and natural gas extraction industry (NAICS 211111). This sub-sector has grown by a whopping 113% nationally in the last six years while mining (except oil and gas) remains at its ’06 employment level.

    Every state except for Maine has added jobs in crude petroleum and natural gas extraction since 2006, with Texas, Oklahoma, California, and Kansas leading the way.

    The Rise of Contract Oil and Gas Workers

    In last month’s GOVERNING Magazine, William Fulton wrote about the “1099 economy”—the shift by employers to hire temporary workers who file a 1099 form with the IRS rather than a W-2 and don’t receive benefits. No other industry has seen this move to 1099 workers more dramatically than mining, quarrying, and oil and gas extraction.

    A recent EMSI analysis revealed that the share of 1099 workers in this sector increased from 33% in 2005 to 53% in 2010, the biggest percentage jump among the 20 broadest-level industries. Mining, quarrying, and oil, and gas extraction now has the third-highest share of contract workers, behind real estate (74%) and agriculture, forestry, fishing and hunting (68%).

    At least part of this influx could be attributed to land owners cashing in on royalties after leasing their property for drilling. Through the quirks of how the Census’ Bureau of Economic Analysis* tracks the oil and gas extraction industry — and how the industry data is tied to occupations — some of these jobs could be counts of landowners who are claiming additional income from oil and gas royalties. If that’s the case, these jobs would be better placed in the real estate and leasing industry.

    Please note: For these reasons, EMSI “noncovered” data (i.e., data on 1099 workers plus more traditional state data, etc.) for oil and gas jobs should be treated with caution. Also, the jobs numbers for 2010 are estimates at this point, so it will take more time to see how these trends play out.

    *The Bureau of Labor Statistics measures only workers covered by unemployment insurance and who thereby file a W-2. EMSI’s “complete” dataset adds proprietors and other “noncovered” workers by combining BLS and state data with various Census datasets.

    Joshua Wright is an editor at EMSI, an Idaho-based economics firm that provides data and analysis to workforce boards, economic development agencies, higher education institutions, and the private sector. He manages the EMSI blog and is a freelance journalist. Contact him here.

    Lead illustration by Mark Beauchamp.


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    For most of the nation’s history, the Atlantic region — primarily New York City — has dominated the nation’s trade. In the last few decades of the 20th Century, the Pacific, led by Los Angeles and Long Beach, gained prominence. Now we may be about to see the ascendancy of a third coast: the Gulf, led primarily by Houston but including New Orleans and a host of smaller ports across the regions.

    The 600,000 square mile Gulf region has long been derided for its humid climate, conservative political traditions and vulnerability to natural disasters. Yet despite these factors, the Gulf is destined to emerge as the most economically vibrant of our three coasts. In our rankings of the fastest-growing job markets in the country, six Gulf cities made the top 50: Houston, Corpus Christi and Brownsville, in Texas; New Orleans; and Gulfport-Biloxi and Pascagoula, in Mississippi. In contrast, just one Pacific port, Anchorage, Alaska, and one small Atlantic port, Portsmouth, N.H., made the cut.

    This reflects a long-term shift of money, power and jobs away from both the North Atlantic and the Pacific to the cities of the Gulf. The Port of Houston, for example, enjoyed a 28.1% jump in foreign trade this year, and trade at Louisiana’s main ports also reached records levels.

    This growth stems from a host of factors ranging from politics, demographics and energy to emerging trade patterns and new technologies. One potential game-changer is the scheduled 2014 $5.25 billion widening of the Panama Canal, which will allow the passage to accommodate ships carrying twice as much cargo as they are able to carry currently. This will open the Gulf to megaships from Pacific Basin ports such as Singapore, Shanghai, Pusan and Kaohsiung, which have mostly sent their cargos to West Coast ports such as Los Angeles and Long Beach. Some analysts predict that more than 25% of this traffic could shift to Gulf and South Atlantic ports. “More of Asia will be heading to this part of the world,” says Jimmy Lyons, CEO of the Alabama State Port Authority.

    The area also is getting a big jolt from ascendant Latin America, the Gulf’s historic leading trade partner. Bill Gilmer, an economist with the Federal Reserve Bank of Dallas, notes that Latin America is home to many of the world’s fastest-growing economies, with overall growth rates last year exceeding 6.1%. Since 2002 about 56 million people in the region have risen out of poverty, according to the World Bank.

    Trade with Latin American partners — including Mexico — is ramping up growth in Houston as well as other Gulf ports. Brazil, for instance, has risen to become Mobile, Ala.’s leading trade partner.  Latin immigration to virtually all the Gulf cities, including New Orleans, can only strengthen these economic ties.

    The energy industry represents another critical force in the Gulf’s resurgence. It employs at least 55,000 workers in the Gulf, which produces roughly one-quarter of the nation’s natural gas and one-eighth of its oil. Although Houston seems assured of its spot as the focal point of the world fossil fuel industry, oil and gas also boosts numerous economies throughout the region, notably in Corpus Christi and various ports across Southern Louisiana.

    Though the Obama administration puts its bets on subsidizing “green jobs,” traditional energy jobs may prove, in the short and medium term, far more important.  There is even widespread talk about the Gulf emerging as a center for the export of natural gas. Over $ 6 billion in new investments are already being proposed for export facilities, notes David Dismukes, associate director of the Louisiana State University Center for Energy Studies.

    The energy-related economy produces high-wage jobs that range from geology and engineering to the muscle work on the oil rigs, which provide well above average wages for blue collar workers. Such growth is particularly critical to regions such as New Orleans, long dependent on generally lower-wage industries like hospitality and personal services. The energy business also will help accelerate the expansion of business services such as law, accounting, architecture and advertising.

    The shift to the Gulf includes some rapid industrial expansion, particularly for energy intensive industries. Huge natural gas supplies are creating enormous opportunities for expanding petrochemical industries. The German firm Thyssen Krupp opened a new $5 billion steel mill last year, and Nucor Steel announced a large new facility to be built just outside New Orleans. Like energy production, these facilities tend to pay above-average wages for blue collar workers, which will likely raise living standards for a region that has lagged historically.

    At the same time, demographic trends suggest these areas will continue to become more attractive to international commerce. Despite a legacy of hurricanes and floods, Houston, with over 5 million people, has emerged as among the fastest-growing large metropolitan regions in the country. The region’s population is expected to double in the next 20 years. Most of the economies its port serves — Dallas-Fort Worth, San Antonio and Austin — also have experienced rapid growth. Recoveries are in place in many other hurricane-devastated areas, including greater New Orleans.

    Overall the Gulf is expected to be home to 61.4 million people by 2025, a nearly 50% increase from its 1995 base. This expanding domestic market — along with the possibilities posed by the canal — have already persuaded two larger retailers, Wal-Mart and Home Depot, to establish modern new distribution centers in Houston.

    Finally there is the matter of political will. Both the Northeast and the Pacific regions are increasingly dominated by environmental, labor, urban land and other interests often hostile to wide-ranging industrial expansion.  A legacy of labor unrest, most notably a big strike of West Coast ports in 2002,   convinced some shippers to diversify their operations elsewhere.   Growing regulation in California, suggests economist John Husing, a leading expert on port-related issues, makes the prospects for growing warehouse, logistics and manufacturing jobs increasingly “impossible”  there.

    East Coast ports, subject to some of the same pressures, may be slow to make the “intense capital improvements” required to capture expanding trade. In contrast, the Gulf’s leaders in both parties support   broad based economic growth.  New Orleans’ Democratic Mayor Mitch Landrieu is no less friendly to industrial and port expansion  than Republican Gov. Bobby Jindal. Houston Democratic mayors like Annise Parker, Bill White and Bob Lanier have been as strongly in favor of critical business and infrastructure investment as their Republican counterparts.

    Such differences in attitude have driven power shifts   throughout American economic history. In the 19th century New York through a combination of ruthless ambition and greater vision  overcame aristocratic Boston and more established Philadelphia. Icy Chicago performed a similar coup over its then far more established and temperate rival, St. Louis, in the mid- and late 1800s.

    In the last century, unfashionable Los Angeles, without a great natural port, overcame the grand Pacific dowager San Francisco, blessed by one of the world’s great natural harbors, as the economic center of the West Coast. Los Angeles built a vast new modern and largely artificial port to make up for what nature failed to provide, and also nurtured a host of   industries from aerospace, oil and entertainment to garments.

    Now history is about to repeat itself as Texas, Louisiana and other Gulf Cities seek to reorder the nation’s economic balance of power.  Unless California and the Northeast awaken to the challenge, they will be increasingly supplanted by a region that seems more determined to expand their economic dominion.

    This piece originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by NASA Goddard Photo and Video


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    As the 2012 election approaches, America is in a state of malaise. Massive debt, unfettered spending, economic decline and partisan divide have served to undermine the great American narrative that is predicated on optimism and a “can do” attitude.

    As I assess the candidates for President, I will be looking for the one who most fully understands why we need to resurrect the compelling narrative for America. The compelling narrative has four basic components:

    Aspirational: President John F. Kennedy spoke to our better nature in 1962, when, at Rice University, he laid down the challenge of reaching the moon in a decade, His words still inspire us nearly 50 years later:

    We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.

    His vision was ambitious, his goal worthy, and his target understandable. This is why his words excited a nation to follow. Similar aspirations drove the pioneers west to settle America, drove our nation to wage world wars, hot and cold, against evil, and drove a president to declare war on poverty.

    Visceral: The legacy of President Dwight D. Eisenhower is a national interstate system of highways that crisscross America and connect our economy. In 1955, he spoke of systems that unite us as a people. His words rang true to a shared vision for America:

    Together, the united forces of our communication and transportation systems are dynamic elements in the very name we bear—United States. Without them, we would be a mere alliance of many separate parts.

    Most of post-World War II America was still dependent on the two-lane national highway system that included Route 66 and Route 30. Americans instinctively followed Eisenhower’s leadership that they saw as advancing their quality of life and jump starting the economy into higher gear. They knew instinctively that this would require a modern, multi-lane, high speed roadway system, so Eisenhower’s narrative was enacted and 50,000 miles on interstate highway were constructed over the next five decades.

    Fills a Gap: Martin Luther King, Jr. eloquently framed the civil rights issue in human terms in a 1967 speech:

    Being a Negro in America means trying to smile when you want to cry. It means trying to hold on to physical life amid psychological death. It means the pain of watching your children grow up with clouds of inferiority in their mental skies. It means having your legs cut off, and then being condemned for being a cripple.

    Americans understood that a moral, political and economic gap existed between black and white America. The compelling narrative of the civil rights movement led to proposals for new policies and programs to narrow the gap and Americans responded.

    Pays Dividends: The compelling narrative pays dividends all along the way. The space program produced better computers, materials and science. The interstate system gave rise to the motel industry and suburban development. The push west provided impetus to build the transcontinental railroad. World Wars sent men to war and women into industry. Policies that grew out of the civil rights movement made America a more inclusive nation.

    In 2011, we have no compelling narrative. The space program is about to be de-funded, as we have retreated from the moon and settled for a low orbit space station. The interstate system is beginning to crumble as the benefits have been exhausted and no new vision has been created. Public policies designed to close the racial gap are being scrutinized because the problem still exists. In short, the great movements have stopped paying dividends and Americans have lost interest and, more important, lost confidence.

    President Obama has tried to create a compelling narrative around renewable energy. This has been undermined by the burst of the ethanol (corn fuel) bubble and the relatively low return on investment from wind and solar power. New alternative sources like shale gas find their energy narrative competing with the aspirations of the environmental cause. As a result, Obama’s vision is not gaining traction as a compelling narrative.

    America’s next great leader will not only see the future, but will be able to articulate a clear path to get there. He/she will inspire us to join in the pursuit of the cause. We will know in our guts that the cause is right for America. We will clearly see the need to be filled. And, we will understand the benefits that will be derived from the undertaking.

    Debt, deficits, entitlements, taxes and spending are not compelling narratives in and of themselves. They are mere building blocks in our quest to articulate the next great American narrative. What it will be is the great unknown.

    Photo by Alfred Hermida: Watching The President.

    Dennis M. Powell is founder and president of Massey Powell, a strategic communications and digital strategy development company headquartered in Plymouth Meeting, PA. He can be reached at dpowell@masseypowell.com.


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    Suggestions that we can grow the Auckland, NZ economy by encouraging business into the central business district (CBD) in the interests of innovation do not reflect the weight of experience.  Sure, higher order professions have tended to concentrate there, and become relatively more important as manufacturing, retailing, and distribution have decamped.  And in Auckland, at least, tertiary education has become a major player in the CBD.  University employment has boosted the scientific as well as education sector.

    But much as introductions might be made and ideas swapped over coffee, the real capacity to bring innovation to fruition belongs in the workshops, laboratories, production lines, and sales office of real companies. 

    Obvious as it may seem, we need more – and bigger – businesses to lead the way if Auckland is to grow through innovation and the resulting productivity gains.  This blog is about why this is so and how we might help.

    Firm growth and local linkages

    The argument reflects a long-standing interest in industry, but the principles also apply to things like financial services, software, and design. 

    My most compelling experience is dated.  In the seventies I visited 120 firms in the emergent electronics industry in inner London (the heart of creativity according to the density gurus), outer London, and central Scotland.  What I learnt then still seems relevant today.

    I wanted to know how businesses in different localities grow.  I examined where they made their purchases and where their markets were.  I was particularly interested in how much they depended on the local area to sustain their growth.

    The results were no surprise: the more successful firms depended least on their local area.  As higher value, higher growth firms expanded, though, they did strengthen reliance on their local workforce.  Critical local skills became embedded even as businesses became international in scope.  A commitment to and dependence on an established workforce became a key to maintaining the presence of innovative or high tech firms in an area.  This experience still rings true when we think about firms like Fisher and Paykel, Glidepath, and Rakon in Auckland today.

    Growth firms are nevertheless highly likely to invest away from their home base.  By itself that’s no bad thing.  It may be the beginning of the end, though, if they cannot raise the finance locally.  As the weight of their equity shifts offshore, so their local presence becomes more tenuous.

    The best outcome is probably when innovative and growing firms can be supported locally, generating local jobs, deepening local skills, and building local household and business income even as their business with the rest of the world grows.

    And that’s where we seem to struggle in Auckland, despite some exceptions.  As firms succeed here they often cannot find the resources they need to grow and maintain their local roots. 

    Relocating to grow

    The companies I analysed all those years ago more or less sorted themselves out.  In Inner London there were still a few post-war innovators beavering away.  For the most part these had not grown much.  The real inner London success stories, the firms that had prospered, were largely gone.  They may have kept an office in the city but R & D, production, and distribution had moved elsewhere.

    Elsewhere was outer London, or the new towns, villages, and cities in southeast England.  This included a world-leading electronics belt centered on Reading, an hour from the City of London. 

    A key step in firm growth is the ability to relocate from small start-up premises.  Consequently, localities away from congested inner cities were where the real innovation was taking place.

    The new firm nurseries

    Where do new companies come from in the first instance?  It’s not coffee shops in the CBD and there aren’t too many enduring ideas sketched on beer coasters in inner city pubs.  Some – the exceptions – may be born of enthusiasts working in garages. 

    Most new firms I found in the UK research were outside London.  Many had spun-off established companies.  This suggested one key to innovation: knowledgeable employees leaving firms to do it their way.  Often they spied opportunities in their former employment that the established business could not exploit – new processes or materials, new products or applications, or new markets. 

    In some cases, existing businesses spun off their own new enterprises to exploit new opportunities outside existing operations. 

    The rise of innovative, growth firms in low density areas outside London was hardly surprising.  Space was affordable, whether a start-up factory unit or land or premises for expansion.  Firms could attract staff because the living and commuting was easy.  Compared with London, costs were favourable.  And when they relocated, firms tried to go where key staff could easily follow.

    Later – in the late eighties – I visited the Cambridge Technology Park some 90 minutes north of London.  This was a highly successful centre of innovation and investment.  A low density environment attracted innovative light industry to easily accessed sites on the fringes of a provincial city –itself a university centre – set in an attractive living environment. 

    The dynamics behind Silicon Valley near San Francisco were similar.  Leading edge firms here have continued to spin off imitators and innovators in an area with room to expand and access to great living conditions.  Again, a key university, Stanford, is a contributor to ongoing success and business vitality.

    The ingredients of a dynamic economy

    This, then, is another key to a dynamic economy: the capacity of larger, older firms (and other institutions) to create the seed bed from which the new ones grow and expand in a continuous process of industry evolution - birth, growth, decline, and death. 

    As a variation aside, the process of firm evolution today includes the take over and reconfiguration of the old and tired.  Under-performing businesses are acquired and their assets rationalised, potentially renewing creative energy.  Leaner businesses may result, with new capital, a new sense of direction, and more vigorous management. 

    (Of course, a takeover may also be a financial play, with assets stripped, pumped, and packaged for a share market float, with precious little value added).

    We need the places -- and space -- where old firms can operate without incurring endlessly increasing costs, growth firms can expand, and new firms come into being.  What we cannot expect to do is conjure new enterprise out of an entrepreneurial vacuum.  And we definitely shouldn’t seek to straitjacket new firms and old within an inner city environment.

    What can we do?

    One reason for Auckland’s under-performance may be that our planning has acted inadvertently against sustained business renewal and growth.  Plans have may have over-focused on the inner city.  Planners have concentrated on how and where we can live and failed to plan for where we might work.  We dragged our feet in the zoning of substantial areas of affordable business land.  As a result, we have pushed up the cost and pushed down the appeal of Auckland as a place for growing firms. 

    One simple thing we could do is make sure that there is plenty of industrial land available.  This should be well connected, preferably removed from the congestion of inner Auckland.  There are a few good opportunities on the books of the council at the moment.  Large parcels at Silverdale, Massey North, Drury, and Pokeno are in various stages of planning, for example.  Bringing these plans to fruition will lift the prospect of Auckland participating in a productivity-led recovery.  Tying the areas together – and to the ports and airport – through the motorway system will provide the connections they need locally and internationally. 

    There are other issues to be addressed.  We could do with a focus in education on the skills, culture, and aptitude to make things happen.  Our universities must continue to connect individually and jointly with diverse vocational needs across the business board.  And let’s continue to explore how to attract capital to invest in expanding firms within the region.

    I am not assuming we can compete with the cheap land and labour of Asia, or match the host of engineers that Asian universities turn out each year.  But when people with the right skills and background do come along, let’s ensure that they encounter an environment that supports entrepreneurship and growth, and not leave them doodling and dreaming in inner city coffee shops.  And let’s do what we can to make sure that leaving town is no longer the mark of a successful firm.

    Phil McDermott is a Director of CityScope Consultants in Auckland, New Zealand, and Adjunct Professor of Regional and Urban Development at Auckland University of Technology.  He works in urban, economic and transport development throughout New Zealand and in Australia, Asia, and the Pacific.  He was formerly Head of the School of Resource and Environmental Planning at Massey University and General Manager of the Centre for Asia Pacific Aviation in Sydney. This piece originally appeared at is blog: Cities Matter.

    Photo by man's pic


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    In 2009, former California legislator Bill Maze proposed dividing his state, hiving off thirteen counties as Coastal (or Western) California (see map). Maze, a conservative from the agricultural Central Valley, objects to the domination of state politics by the left-leaning Los Angeles and San Francisco metropolitan areas. The initial impetus for his proposal was the passage by state voters in 2008 of Proposition 2, requiring larger pens and cages for farm animals. Agricultural interests denounced the measure, arguing that it would increase their costs and threaten their livelihoods. Meanwhile, the state’s on-going water crisis, which largely pits farmers against environmentalists, widens the divide. Unforgiving invective marks both sides of the debate. A post in Politics Daily characterized secessionist farmers as dolts fighting against “liberal Hollywood types [who] don’t understand the importance of torturing animals.” The Downsize California website, on the other side, fulminates against coastal “radicals” who are “infatuated with nature over mankind and are sympathetic to illegals and criminals.”

    The desire to divide unwieldy California may be quixotic but it is nothing new; at least 27 divisional schemes have been proposed since statehood in 1850. Most have sought to split the state along north-south lines. In the mid 1800s, southern California secessionists felt marginalized and ill-served by a state government based in the distant Sacramento. By the mid 1900s, the tables had been turned, as northern Californians came to resent the demographically and economically dominant greater Los Angeles (LA) area. The California State Water Project, with its vast pipes snaking over the Tehachapi Mountains, was a particular irritant. As a child growing up in northern California’s Bay Area in the 1960s, I almost never heard positive statements about LA, which was widely condemned as a vast suburban wasteland inhabited by shallow people scheming to “steal our water.” Such naked regional bigotry was spouted by people who would have been ashamed to say anything remotely smacking of racial or religious prejudice.

    Economic and political evolution, coupled with substantial immigration and emigration, gradually reduced the tensions between the Los Angeles and San Francisco metropolitan areas while accentuating the division between urban coastal and interior agricultural regions. But as the 2004 “voter index map” reproduced above shows, the state’s actual political divide is far more complex than that. Close inspection reveals a Democratic voting zone essentially split between coastal northern California and the Los Angeles area, with a few interior outliers in college towns, urban cores, Hispanic rural areas, and mountainous recreation sites. Contrasting to this area is a spatially larger and more contiguous but demographically smaller Republican-voting block covering the rest of the state.

    Maze’s scheme places several relatively conservative countries (Ventura, San Luis Obispo) in liberal Coastal California, doing so largely for reasons of geographical contiguity. Less explicable is his exclusion of the left-voting northern coastal countries of Sonoma, Mendocino, and Humboldt. These may be relatively rural counties, but where the main crops are wine grapes and marijuana one should not expect conservative voting patterns. Note that certainly highly rural and relatively remote regions have solidly left electoral records, an unusual pattern. These include the Big Sur coast in Monterrey County, with its artistic heritage, and the counter-cultural “hippy” centers of Mendocino and southern Humboldt counties, such as Willits and Garberville.

    Martin W. Lewis has taught college-level geography for 20 years, and is currently a senior lecturer at Stanford University. He is a co-author on two leading textbooks in world geography, Diversity Amid Globalization and Globalization and Diversity. He is also the author of Green Delusions: An Environmentalist Critique of Radical Environmentalism, and Wagering the Land: Ritual, Capital, and Environmental Degradation in the Cordillera of Northern Luzon, and is co-author of The Myth of Continents.


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    When it comes to the winds of change, Florida remains in the horse latitudes.  This zone of the Atlantic around 30 degrees latitude was so named by ship captains because their ships, becalmed in the water, seemed to move faster when they lightened their load by throwing off a few horses.  Florida’s governor Rick Scott, who campaigned on a promise to create 700,000 jobs in this state, appears to have adopted the same tactic by throwing overboard the Department of Community Affairs, the state agency that regulated real estate development.  Other bureaucracies may be next in line if the state doesn’t show signs of improvement soon.

    Billy Buzzett, appointed head of this bureaucracy, was in Orlando last week to discuss the new future of Florida growth management.  Growth will now be lightly monitored by the Department of Economic Opportunity , which is in charge of reviewing development plans, and will handle unemployment benefits as well.  Mr. Buzzett stated that the department’s mission will also include items such as weatherization of structures for hurricanes. All of this is good, but it’s a puzzling mix to throw into a single bureaucracy.  Obviously, real estate regulation is not the focus of this governor, who saw regulation as one of the chief obstacles to creating jobs in this state.

    The Department of Community Affairs was created in 1985 to set some standards for quality of life as well as for environmental protection.  Failing at both tasks, the DCA came under fire during the last election cycle as a statewide referendum (Amendment 4) on growth gained support from people tired of seeing forests converted into strip malls.  The referendum, narrowly defeated, would have people vote in Cailfornia-style ballots for such changes.  This may have been a bad idea, based on how California’s growth controls have stifled its once vibrant economy.

    In this era of minimal new building, the reinvention of growth management may be seen as a way to pass the time while we wait for the economy to recover.  In reality, however, there are some very large implications in the future.

    Governor Scott wants the state to be more like Texas, which regulates with a far lighter hand and seems to be navigating through this particularly horrid recession better than other big states.  Texas has growth and does not have an onerous, time-consuming process which weeds out all but the deepest pocketed investors.  Unlike Texas, however, Florida has few natural resources like oil and mineral wealth to fall back on for revenue, and therefore deregulates itself without any diversification of income stream.

    What this means to the local economy will be hard to predict.  Certainly, the DCA was able to negotiate with private developers, and helped to shield cities and counties from a lot of the pressure from out-of-state interests.  Without the DCA, it will be interesting to watch which of Florida's regions stand up to this pressure and which regions, starved for cash, cave in to the pressures of growth.

    Although defeated, Amendment 4 clearly scared the real estate interests to death.  Legislation now prevents anything like that from happening again.  While real estate development clearly needs to be left in the hands of professionals, it also seems to have risen to the top of citizens’ awareness.  Whether it stays there or not is up to the state’s citizens, most of whom immigrated from elsewhere in search of the good life.  Growth benefitted the lowest economic class by creating cheap housing, construction jobs and access to consumer goods.  Florida, however, by grabbing the bottom tranche of workers, has missed a chance to build a more vertically integrated middle class with higher skilled workers.

    Orlando in particular is in an unfortunate situation, as it has no natural hard boundaries like the sea.  Like Atlanta, Central Florida’s metropolitan area can grow in concentric rings forever and ever, gobbling up more agriculture, wetlands, and forests.  Such a development pattern puts value on the rim, rather than in the center, leaving the older parts of the city devoid of investment, energy, and hope.  With private interests, whose mission is to grab the low hanging fruit, in chargethere will be little redevelopment of these interior districts, despite the sunk costs of infrastructure that could give them an edge. 

    Making more stuff is the business of growth.  Making stuff better is the business of development.  And development is what older neighborhood areas like this sorely need.  Successful in-fill redevelopment, in both suburban and urban locations, can still happen if employment can be added to the mix.

    It is up to our region's leadership to turn this pattern around, and start valuing our real estate a little differently than in the past.  For example, debasing our wetlands to their mere economic value overlooks their larger value in terms of biodiversity.  Bringing wetlands and agriculture into our growth management policy would be a good first step towards creating a sustainable future for Central Florida.  Florida’s environmental movement need not turn into a shrill anti-growth machine as has happened elsewhere, but should be a partner with the real estate interests to protect the more long-term natural assets that bring so many to the Sunshine State in the first place.

    Recycling also need not be just the job of the utility department.   Recycling land through the EPA’s brownfield program is already underway by many municipalities, and provides a vehicle to reinvent neighborhoods that have failed. 

    As always, clean water will be the limiting factor to growth.  Already a concern of Florida, the state is divided into various water management districts, who regulate how clean water can be removed from the aquifer, and what kind of dirty water can be put into it.  No doubt this regulation will be under assault next.

    Without Secretary Buzzett’s new department, Florida is already showing signs of new employment opportunities and diversity.  Military spending in Florida is up, thanks to the National Center for Simulation, and medical research spending is continuing at a steady pace.  These were added to the mix of growth, tourism, and agriculture upon which Florida has traditionally relied. More jobs that revolve around these two industries will include support technology, computer science, manufacturing, and services. 

    These industries grew despite the regulatory burden of the state.  What is dangerous about Secretary Buzzett’s new department is its blasé treatment of the public’s genuine desire for better environmental management and a better quality of life.  Like many places, Florida has its share of “not in my backyard” sentiment reacting against more development.  The anger voiced in 2010 through Amendment 4, however, represented something new and deeper:  a collective sense that enough is enough.  Speculative development, built during the boom and remaining unoccupied to this day, is in every community, urban and rural.  Few believe that the empty condos, ghost town subdivisions, empty strip shopping centers, and vacant office parks are improvements over what was there before, and fewer still want this kind of insanity to return.

    So the death of the DCA, which allowed speculative development to the point of embarrassment, may have been a good thing.  Employment-based growth, which so far has eluded Florida’s regions, may now have a chance to take place.  With the new industries arriving, job creation is already a reality - no horses had to be thrown overboard to make that happen. What Florida needs now is some leadership at the local level to promote more employment-based growth that is slow, but sure, and that is sustainable for the long haul.   

     Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

    Photo: Desiree N. Williams


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    In the sixties and seventies, Dallas’s prime tourist attraction was an assassination site. The town seriously needed a new image. It got one in a soap opera that revealed a city besieged by blonds, big  hair and big homes. “Dallas,” which premiered in 1978, did for Big D what “Sex in the City” and “Seinfeld” did for New York: it painted a portrait of the city for the world.

    The last “Dallas” episode aired in 1991, but TNT recently resurrected the hit show. This iteration features a new crop of Ewings beside originals Larry Hagman, Linda Gray, and Patrick Duffy. Dallas, of course, was never like “Dallas.” Since the series premiered, Dallas evolved. From its residents to its politics, Dallas today bears little resemblance to the city the show depicted. Which Dallas will J.R. come home to?

    When the series debuted, Dallas was a conservative place. In 1980, Reagan took 59 percent in Dallas County, the anchor of the much larger Dallas-Fort Worth metroplex, now home to more than 6 million people. As the county grew, it became more diverse, and consequently, more Democratic.  No one would mistake it for San Francisco, politically and demographically, but it more resembles present-day Los Angeles than old Dallas.    

    In 2008, for example, Obama won 57 percent in Dallas County. Since “Dallas” first aired, Dallas elected two female Jewish mayors and an African-American, current U.S. Trade Representative Ron Kirk. Although voters rejected gay marriage in 2005, they sent openly gay city councilor Ed Oakley to a mayoral runoff two years later (Oakley lost). If a real J.R. today causes trouble, he’ll contend with Sheriff Lupe Valdez, who’s also gay.     

    Minority growth transformed Dallas County politics. In 1980, there were two white residents for each non-white resident. Now, it’s the other way around. After “Dallas,” whites fled to northern exurbs. African-Americans, Hispanics, and other minorities spread throughout the urban core and inner-ring suburbs. Dallas votes Democratic; the surrounding counties don’t. Southfork Ranch, the white mansion in the “Dallas” opening, sits in rock-Republican Collin County, a mostly white, upper-middle class area with more than five times the residents as were there in 1980. In many respects, this is where “Dallas” culture – as defined by the old series – still thrives.

    Outposts of the exclusive “Dallas” lifestyle still exist in much of North Dallas. George W. Bush settled into his post-presidency in an 8,500 sq. ft. Preston Hollow estate. Old-moneyed enclaves Highland Park and University Park draw the ire and envy of the metroplex. In Good Christian Bitches, socialite Kim Gatlin dishes about Botoxed beauties and Bible belt back-stabbers. These clichés sell: ABC used her Park Cities-inspired tale for their upcoming series “Good Christian Belles.”

    Besides the population, the economy has also diversified: oil is now an ensemble player, not the lead. Exxon Mobil has headquarters near Dallas, but Houston is the energy superstar, despite not getting its own show. The metroplex hosts twenty Fortune 500 companies, including Southwest Airlines, Texas Instruments, and GameStop. This mix, along with the fact the region mostly avoided the housing crisis, explains why the recession hurt Dallas less than other cities.

    If you only saw “Dallas,” you’d suspect shoulder pads and cowboy boots pass for high-fashion. But Dallas was always more cosmopolitan than the series let on. Neiman Marcus started in Dallas. Dallasites who can afford to—and many who can’t—gather at upscale eateries, fashion premiers, and charity galas.  J.R. Ewing-types may fill Cowboys Stadium suites, but they also fill box-seats at the $354 million AT&T Performing Arts Center. It’s not all BBQ, rodeos, and pageant queens in Big D.

    That perception, nonetheless, persists as does the idea of J.R. as the archetypal Texan. On a trip to Spain, his name came up after I told my hosts I was from Texas. Who knew Sevillanos loved Aaron Spelling productions? As Dallas transforms, it can’t shake the cowboy/oilman stereotype. Like a Hollywood starlet, Dallas has been typecast.

    But still I hope the next “Dallas” includes a broader cast of characters. An uptown Indian high-tech executive or feisty female mayor would be nice. Producers must show off the city’s grandiosity. Dallas strives for bigger and best, for bragging rights if no more; it never lets up. The same year it lost a quixotic Olympic bid, it opened the colossal American Airlines Center. Ridiculed in the nineties, the Dallas Mavericks stand as N.B.A. champs today. Always scouting for new business, Dallas lured AT&T from San Antonio in 2008.

    “Dallas” left fans wondering, “Who shot J.R.?” The real mystery, three decades later, is why a multi-layered city retains a one-note reputation. Dallas, after all, has remade itself.          

    Writer Jason Thurlkill grew up near Dallas. He reported for “The Hotline” and a “New York Observer” publication. Previously, he worked for a Washington D.C. political consulting firm. He studied government at the University of Texas and earned his Master of Public Policy at the University of Chicago.

    Photo by david.nahas.


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    Lunching at Seattle's Space Needle, the casual observer might imagine that one of the nation's most dense urban areas is spread out below. To the immediate south of the Space Needle is one of the nation's premier downtown areas. In 2000 downtown Seattle had the seventh largest employment base in the country and was one of the most dense. Its impressive, closely packed buildings witness a storied past. For more than 60 years, between 1914 and 1990, downtown Seattle has had the tallest building on the West Coast, Smith Tower, and was the fourth tallest building in the world when built. It held the title for an impressive 55 years, from 1914 to 1969, when another Seattle building briefly took the title (1001 4th Avenue). Later (1985), Seattle's Columbia Center became the first building on the West Coast to exceed 75 floors, but by 1990 had been passed by the U.S. Bank Tower in Los Angeles (see Elliot Bay photograph and Note 1).

    However, looks can be deceiving.  In 2000, Seattle ranked last in urban population density out of the 11 urban areas in the 13 western states with more than 1 million population (just behind Portland, which ranked next-to-last).  The Seattle urban area's density was approximately 60 percent below that of Los Angeles, the US’s  densest urban area. Even the Houston and Dallas-Fort Worth urban areas, famous for their great expanse, were denser than Seattle. Updated urban area density data from the 2010 census will not be available for at least a year.

    Nor is the historical core municipality of Seattle particularly closely packed. With a population density of 7,200 per square mile, the city of Seattle is considerably less dense than a number of Los Angeles suburbs such as Santa Ana (12,000) and Garden Grove (9,500). Even so, the city of Seattle is nearly two-thirds more dense than the city of Portland (4,400), despite the latter's densification claims.

    The 2010 Census: The 2010 census indicates a continuing dispersion of population in the Seattle metropolitan region (Figure 1). The Seattle metropolitan region, formally the Seattle combined statistical area (Note 2) is composed of the core Seattle metropolitan area (King, Pierce and Snohomish counties) and five exurban statistical areas, Bremerton (Kitsap County), Olympia (Thurston County), Mount Vernon (Skagit County), Oak Harbor (Island County) and Shelton (Mason County).





    Seattle Combined Statistical Area: Population 2000-2010
    Area 2000 2010 Change % Share of Growth Share of Population
    City of Seattle        563,374        608,660           45,286 8.0% 9.2% 14.5%
    Balance: King County     1,173,660     1,322,589        148,929 12.7% 30.3% 31.5%
    Pierce & Snohomish Counties     1,306,844     1,508,560        201,716 15.4% 41.0% 35.9%
    Metropolitan Area Outside Seattle    2,480,504    2,831,149        350,645 14.1% 71.2% 67.4%
    Metropolitan Area     3,043,878    3,439,809        395,931 13.0% 80.4% 81.9%
    Exurban Metropolitan Areas        663,260        759,503           96,243 14.5% 19.6% 18.1%
    Combined Statistical Area    3,707,138    4,199,312        492,174 13.3% 100.0% 100.0%
    Calculated from US Census data

     

    City of Seattle (Historical Core Municipality): Overall, the historical core city of Seattle grew 8.0 percent, from 564,000 to 609,000 between 2000 and 2010, which was one of the healthiest increases among major cities. In adding 45,000, the city still only accounted for 9.2 percent of the Seattle metropolitan region population growth.  The city of Seattle now constitutes less than 15 percent of the metropolitan region population, down from 36 percent 1950 (same geographic area). In 1950, the city of Seattle had nearly two thirds of the population of King County. By 2010, the city of Seattle was less than one third of King County's population, despite annexations. As the city has continued to decline in its share of the metropolitan region's population, the impressive downtown area has also lost its dominance and by 2009 had fallen to 8 percent of the metropolitan region's employment.

    Inner Suburbs: Areas outside the city of Seattle accounted for more than 90 percent of growth in the metropolitan region. The inner suburbs, which include the residential development to the south, north and east of Seattle in King County grew more than 50 percent faster than the city of Seattle, at 12.7 percent between 2000 and 2010. The inner suburbs grew from 1,170,000 to 1,320,000, adding nearly 150,000 new residents, more than three times the city of Seattle increase. King County outside Seattle also captured 30 percent of the metropolitan region's growth and now has 32 percent of the metropolitan region's population. The eastern suburbs of King County are home to one of the nation's largest, most diverse and successful edge cities, Bellevue, as well as the Microsoft campus in neighboring Redmond.

    Outer Suburbs: The outer suburbs, which include Pierce County (Tacoma is the county seat) and Snohomish County grew 15.4 percent, nearly double the growth rate of the city of Seattle. The outer suburbs grew from 1.3 million to 1.5 million, adding 200,000 new residents, more than four times the city of Seattle’s increase. Pierce and Snohomish counties captured 41 percent of the metropolitan region's growth and now account for 36 percent of the metropolitan region's population.

    Exurban Areas:  The exurban statistical areas grew nearly as quickly as the outer suburbs. Between 2000 and 2010, the exurban areas increased their population by 14.5 percent.  The exurban statistical areas accounted for 20 percent of the metropolitan region's population growth. These more distant areas grew from 660,000 to 760,000 people, adding nearly 100,000 new residents. This is more than double the increase in the city of Seattle population. Approximately 18 percent of the population in the metropolitan region lives in the exurban statistical areas, a larger number than residing in the city of Seattle.

    The Dispersion Continues: The dispersion of Seattle, like that of metropolitan regions around the nation and the world, has been going on for decades. The city of Seattle has accounted for only 5 percent of the metropolitan region's population since 1950 (Figure 2) with suburbs and exurbs accounting for the vast majority of the nearly 3,000,000 increase.

    Despite the pre-2010 census media and academic drumbeat to the effect that metropolitan areas were no longer dispersing, the census revealed a totally different and even inconvenient truth. This does not mean that both residents of the entire metropolitan region, suburbs and core city, should not be proud of an attractive urban area in an incomparable natural setting. Yet, the vast majority of the region’s population and employment growth is taking place outside the core. Seattle is following the national and international pattern to ever greater dispersion.

    _________

    Note 1: Downtown Seattle is on a hill and the newer buildings are generally on higher ground than Smith Tower, which makes the difference in height look greater.

    Note 2: "Combined statistical areas" were formerly "consolidated metropolitan statistical areas."

    Top Photograph: Downtown Seattle from the Space Needle (by author)

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life


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  • 07/01/11--03:38: Drones on the Prairie
  • When the Base Realignment and Closure Commission was drawing up its list of military installations to close back in 2005, consultants assured the city of Grand Forks, North Dakota, that its Air Force base would be spared. Days before the list was made public, though, word leaked out that Grand Forks was on the chopping block, after all.

    North Dakota’s Congressional delegation swung into action and managed to win the base a reprieve; its KC-135 Stratotankers would be reassigned, but they would be replaced by unmanned aerial vehicles (UAVs). Earlier this month, in a ceremony that drew local dignitaries, industry executives, and military brass, Grand Forks Air Force Base marked the arrival of its first Global Hawk aircraft.

    Gunmetal gray, with long, white wings stretching out from the fuselage, the Global Hawk can stay aloft for 30 hours at a time, transmitting sensor data back to operators on the ground. The plane, manufactured by aerospace giant Northrop Grumman, has become a staple of the Air Force’s intelligence, surveillance, and reconnaissance efforts in Iraq and Afghanistan. Eleven Global Hawks will eventually be stationed at Grand Forks, along with 450 additional base personnel.

    “The base is our second largest economic engine,” said Eric Icard, senior business development officer at the Grand Forks Region Economic Development Corporation. “To have a new mission with a new technology solidifies the Air Force’s commitment to the Grand Forks region.”

    Sgt. Joseph Kapinos couched the plane’s arrival in more personal terms: “I think people are excited, because they feel like we have a mission again.”

    Grand Forks AFB

    Col. Don Shaffer, Commander of the 319th Air Base Wing at Grand Forks Air Force Base, told a crowd of dignitaries that the arrival of the Global Hawk marked a transition for the base to a "global vigilance mission." Photo by Marcel LaFlamme

    The ceremony came on the eve of the fifth Unmanned Aircraft Systems Action Summit in Grand Forks, which was sponsored by the Red River Valley Research Corridor. With military procurement of unmanned aircraft projected to double over the next decade, North Dakota has worked to position itself as one of the nation’s hubs for UAV research and training. Last month, the University of North Dakota (UND) awarded degrees to the first five graduates of its unmanned aircraft operations program. At the Summit, Northrop Grumman presented Minnesota’s Northland Community and Technical College with a full-scale model of a Global Hawk for use in its UAV maintenance and repair shop.

    It’s too soon to say whether the Upper Great Plains will emerge as a new powerhouse of the military-industrial complex, a new buckle on what regional planners have dubbed the Gunbelt. Participants at the Summit said that the real economic boom would come as UAV technologies begin to find commercial applications. One major impediment is the ban on flying UAVs in the National Airspace System; North Dakota Congressman Rick Berg has pushed for the creation of test sites where UAVs could fly (and it’s no secret that North Dakota is angling to be one of them), but the FAA reauthorization bill that would make that possible is currently mired in conference committee.

    North Dakota has been riding a wave of media adoration as of late, buoyed by low unemployment numbers and a massive oil strike. But 42 of its 53 counties still posted population losses in the 2010 Census.

    How, the question remains, do rural communities stand to benefit from the burgeoning UAV industry? Are all of these "knowledge economy" jobs bound to spring up in Grand Forks
    and Fargo, even as the state’s struggling farm communities continue to wither away?

    Not if Carol Goodman has anything to say about it. Goodman heads the Job Development Authority in Cavalier County, up by the Canadian border; the county lost 17% of its population between 2000 and 2010, dipping below 4,000 people for the first time in over a century. She’s working to redevelop an abandoned missile base from the Cold War era as a UAV testing site, which could create as many as 670 jobs in the county.

    “Tell them to send some of those UAVs over here,” said Bob Wilhelmi, owner of the lone bar in the wind-blown town of Nekoma. A man from neighboring Walsh County said that, the year after next, his school district will not have a single child enrolled in kindergarten. 

    Mickelsen Safeguard Complex

    The Stanley R. Mickelsen Safeguard Complex: once an antiballistic missile site with its eyes on Moscow, now a potential test bed for unmanned aircraft. Photo by Marcel LaFlamme

    The unmanned aircraft industry in North Dakota is a sort of test case for what happens when a traditionally agrarian state decides to pursue high-tech growth. It’s still not clear whether the state will succeed. But to watch those airmen jostle for a picture with their base’s newest piece of hardware, or to hear a recent UND graduate pitch the start-up company that will keep him in Grand Forks, or even to look up for a while at the clear, empty Dakota sky, you start to think that the state’s drone charmers may just have a shot.

    This piece originally appeared at Daily Yonder.

    Marcel LaFlamme is a graduate student of the Department of Anthropology at Rice University in Houston.

    Lead photo: Official U.S. Air Force


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    We used to call it “Free Agent Nation.”  Now, it seems like the new term of art will be “The 1099 Economy.”   While the names may change, they all point to a phenomenon of rising importance: the growing number of Americans who don’t have a “regular job” but instead work on individual contracts with employers or customers.   These folks don’t get the traditional W-2 paystub at the end of the year; they report their taxes with the IRS form 1099.

    The 1099ers are a growing part of our economy.   There are a number of ways to slice the data.  If you look at US Census Bureau figures on the self-employed, we find 21.4 million self-employed Americans in 2008.  Recent data from EMSI suggests that the figures might be even higher.   Tracking workers who are not covered by unemployment insurance, the EMSI researchers suggest that more than 40 million Americans operate in the 1099 economy.   This represents about 1/5 of the total US workforce.

    As someone who has operated in the 1099 Economy for a decade, I can state that there are many benefits to this status:  more flexibility, more opportunities for unique and creative work, and more control over one’s work circumstances.    And, 1099 status can be profitable. Many fast growing ventures operate as sole proprietorships.  For example, in 2008, the Inc. 500 list looked at the ownership structures of firms on this list of US’s fast growing companies.  The largest sole proprietorship, Milwaukee’s Service Financial, had $11 million in revenue, but only one employee, its owner. 

    While the freedom of operating in Free Agent Nation can be tempting, there are downsides.  The data suggests that for many people, operating in the 1099 Economy may not be their first choice.  The EMSI research cited above found that the number of non-covered jobs in the US grew by 4 million between 2005 and 2009.   The fastest growth occurred in the mining, quarrying, and oil/gas extraction sectors where more than half of all workers are now non-covered.  Other areas with high concentrations of 1099 workers are in real estate (74% of workers are non-covered) and agriculture/forestry (74%).  This non-covered status creates a more flexible labor market, but it also creates potential challenges for these workers operating in notoriously unstable industries. 

    The 1099 Economy has emerged somewhat below the radar over the past decade.  Few economic development organizations have devoted much thought or research to the needs of this segment of the economy.  And, that’s not a good thing if 20% of the local workforce is invisible to community leaders.   Based on my experience, I see several segments within the broad category of the 1099 economy:  the reluctant 1099ers, the entrepreneurial 1099ers, and the “gig economy” work force. 

    The Reluctant 1099ers:  This group includes those who operate in the 1099 economy because they have no choice.   This group includes those sectors that have previously operated with traditional employment contracts, but have now shifted to the new structures.  Examples include mining, utilities, finance and insurance, and some administrative fields.  While individuals in these specific jobs may be happy with their circumstances, the workers, in a collective sense, face a more uncertain and probably less profitable work situation as 1099 contractors.

    The Entrepreneurial 1099ers:   Many budding entrepreneurs operate in the 1099 economy.  Sole proprietorships and LLCs/LLPs may have numerous workers under contract, yet appear in government statistics as a self-employment venture.  While most sole proprietorships are quite small and generate limited revenue, a sizable portion does generate significant incomes and may be poised for rapid revenue and job growth.  These individuals and their firms are the invisible portion of many local entrepreneurial ecosystems.

    The “Gig Economy” Workforce:   Last but not least, the gig economy workforce refers to those who operate in industries that traditionally operate on a project or “gig” basis.  Perhaps the best known example is film-making where crews come together for a film and then break up for other projects.  Other examples include the arts, theatre, writing, web design, and construction.  These sectors have a long history of operating via these structures.  It is clear that more industries are moving in this direction as well.   In response, a host of new kinds of support organizations, such as New York’s Freelancer’s Union, are emerging.  If current trends continue, we can expect to see similar groups arising across the US.

    Regardless of how one classifies these workers, they remain largely invisible to policy makers and to economic and workforce developers.   That needs to change.  In addition to recognizing the importance of this part of the workforce, we also need to develop a more nuanced understanding of their concerns and needs.   At a minimum, providing a stronger safety net—as suggested by the Freelancer’s Union and others—makes sense.   It also makes sense to develop work spaces that support the 1099ers.   Here, the recent growth in co-work spaces is a positive trend.    Finally, we need new kinds of support and services for the 1099ers.  These might include traditional training in business development, but other supports, such as networking or peer-to-peer lending or on-line tools to find customers and partners should also be part of the mix.    It’s time to recognize that the 1099 economy is here to stay and will be an important part of every community’s workforce for decades to come.

    Erik R. Pages is the President of EntreWorks Consulting, an economic development consulting and policy development firm focused on helping communities and organizations achieve their entrepreneurial potential.


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    Within weeks, the Australian government is expected to announce a package of measures including a carbon tax to stimulate renewable energy sources and abate carbon emissions. Officials, activists and journalists around the world will hail Australia as a courageous and forward-looking country, ready to take its responsibilities seriously. Some will rebuke their own governments for being less bold. Yet they will ignore an inconvenient detail. According to opinion surveys, at least 60 per cent of Australians strongly oppose the tax. Since it was flagged in February, support for the ruling Labor Party has fallen to its lowest level in 40 years. Only 27 per cent of Australians now nominate Labor as their first preference. Nor did they vote for it. In the lead up to last August’s federal election, both major parties ruled out a carbon tax. Prime Minister Julia Gillard declared, just hours before polling day, that “there will be no carbon tax under the government I lead”. Her job approval rating is 31 per cent.

    So why is this happening? The current malaise can be traced to a combination of long and short term causes. Like other western countries, Australia was profoundly changed by the 1960s social movements. In the decades after World War II, as Britain lost its empire and turned to Europe for an economic future, Australia shifted its agricultural and mineral commodity trade to Asia, admitted growing numbers of immigrants from outside the British Isles, and came to rely on the United States for security. Elites in the professions, judiciary, churches, universities and bureaucracies conceiving Australia as an outpost of British civilisation, found the ground moving under them.

    Radicalised by Australia’s participation in the Vietnam war, baby boomers poured out of an expanded university system to spearhead a range of movements, over time supplanting the old elites. By the 1980s, universities, schools, many professions, the media, and most of the public sector were dominated by left-progressives. Their “long march through the institutions” was perhaps more thorough-going than in the United States, since anti-leftists had yet to find a substitute for British imperialism.

    One of the social movements was environmentalism. Australia is an isolated, sparsely populated continent with hauntingly beautiful landscapes and unique natural species. Late-coming westerners found a pristine wilderness, populated by aboriginals with close spiritual ties to the land. Since European settlement, these features have, in various forms, injected a romantic strain into the country’s transplanted British culture. That strain was mostly confined to the arts and radical fringe movements. In large part, the colonies, federated in 1901, evolved a practical outlook shaped by nineteenth-century liberalism and the blessings of trade, industry and commerce.

    The 1960s saw a fusion of the romantic strain with ideologies shaped by streams of Marxism, left-wing anarchism and revivals of Counter-Enlightenment Romanticism. Sharing a preference for ecological protection over economic growth, inner-city-based activists, including many socialists, current or former communists, Trotskyites and others from counter-culture circles, like hippies, together with aboriginal peoples, campaigned to lock up remnant bushland, native forests, wetlands and traditional aboriginal sites in “green-belts” or national parks. They targeted urban expansion and industries like logging, cattle-grazing and mining, which boomed in a mineral-rich arc across northern Queensland and Western Australia. Conflicts over mining projects were routine in the 1970s and 1980s. Uranium was particularly contentious.

    But it was in Tasmania that the new environmentalism came of age. State government plans for a hydro-electric dam on the Franklin River became a cause celebre, attracting strong opposition from environmentalists, and wide public interest. Many leading-lights of the movement, including the current Greens Party leader, made their name in that struggle. Ultimately, the activists came out on top, winning support from federal Labor just before the 1983 election, at which they returned to power.

    The Franklin tussle cast a long shadow over Australian politics. Many analysts thought it contributed to Labor’s victory. Nature conservation crept onto the mainstream agenda. In 1984, various green lobby groups, including some of the more hard line activists, came together to form Greens parties in New South Wales and Queensland, modeled on the German Greens. Other states followed, and in 1992 a national Greens Party emerged. Over time, Greens gained a presence in state and federal parliaments. Some were ideological refugees from defunct communism. Before joining the Greens, for instance, one serving Greens senator was a member of the Socialist Party of Australia, a successor organisation to the Communist Party.

    While open to compromise on environmental concerns, Labor never embraced green ideology. A moderate party in the British tradition, built on craft trade unionism rather than socialism, Australian Labor was essentially pragmatic. Its environment agenda was adapted to job security, rising living standards and the interests of mining, forestry and transportation workers. For most Australians, the environment was still a marginal issue.

    Then came the climate panic. Australia is a land of climate extremes, where severe drought alternates with devastating floods. By 2006 the continent had been in the grip of drought for virtually a decade. Water restrictions even hit the major cities, as morale began to sag under fears of interminable dryness. That year also saw some unseasonably hot days. From their posts on the “commanding heights” of academia, politics and media, green ideologues sensed a chance to ramp up their rhetoric on global warming, claiming the drought would persist until carbon emissions were cut. Now they hoped to impose their anti-growth philosophy on the whole economy, not just individual projects.

    This time their message fell on fertile ground. Surveys began to show majority support for strong action on climate change. Conservative Prime Minister John Howard, who was lukewarm on the issue, and had refused to sign the Kyoto Protocol, was caught off guard. Looking to the election due in 2007, Labor succumbed to opportunism. They took to spouting green rhetoric, promising ratification of Kyoto, an emissions trading scheme (ETS) and a renewable energy target. Come 2007, the sense of exhaustion around Howard’s eleven year government was enough to tip Labor into office. But the party’s green chickens eventually came home to roost. Having hyped global warming as a great moral cause, Prime Minister Kevin Rudd suffered the indignity of returning empty-handed from the failed Copenhagen Conference. By this time the drought had broken, and the Liberal-National opposition changed course, defeating Rudd’s ETS in the senate.

    Public support for climate action began to slide. According to the authoritative Lowy Institute Poll, it is now down to 41 per cent, from 68 per cent in 2006. Workers grew nervous about the implications for trade-exposed or energy intensive industries like mining, steel production and power generation. They shifted back to former attitudes on the environment, leaving the government stranded. Following advice from his inner-circle, including then Deputy Prime Minister Gillard, Rudd deferred the ETS until after the election scheduled for late 2010, but he suffered a crushing loss of credibility. His colleagues dumped him for Gillard.

    For city-based progressives, especially in the publicly-funded sector, climate action became a vehicle to burnish their moral authority and claim a larger share of the nation’s wealth, reversing two decades of market-oriented reform. Prompted by Labor’s turmoil, more of them defected to the Greens. At the election hastily called for 21 August 2010, neither major party won a majority in the House of Representatives. The balance of power was held by the Greens and four other independents. In the senate, the balance went exclusively to the Greens. Desperate to survive, Gillard signed up to a formal alliance with them. After weeks of negotiation, the Greens and enough independents sided with Labor to form a minority government. Their price was the carbon tax she ruled out just hours before election day.

    When the dust settled, Australians found that, by pure chance, their country was in the hands of a climate junta, euphemistically called the Multi-Party Climate Change Committee, consisting of Gillard, the Treasurer, the Minister for Climate Change, the Greens leader and his deputy, and two independents. Posing as an open-minded enquiry into Australia’s climate options, the Committee is driven by an inescapable political logic. None of them can break ranks without bringing down the government, ending the most power any of them will ever have. This logic overrides everything, even rising public anger. The opposition’s line, that “Labor may be in government but the Greens are in power”, resonates widely. Few think Gillard really believes in the tax. Moreover, it comes at a time when consumer confidence is weak, and cost-of-living pressures dominate surveys of public concerns.

    Never has such a gulf opened up between elite and popular opinion. Nothing has turned around opposition to the Committee’s tax, not Gillard’s promise of compensation for low to middle income earners, not favourable media coverage, not reports by scientific experts, not declarations signed by eminent citizens, not even an advertising campaign fronted by Oscar-winning actress Cate Blanchett. Urging Australians to “say yes”, the ad unleashed a wave of resentment towards the globe-trotting star, who owns a $10 million “eco-mansion” in one of Sydney’s exclusive suburbs. Tabloid newspapers dubbed her “Carbon Cate”.

    Most opinion-leaders will applaud Gillard’s carbon tax package. They will ignore the real story: Australians are being made to walk the climate plank, with a cutlass at their back.

    John Muscat is a co-editor of The New City.

    Photo by MystifyMe Concert Photography


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    An exorbitantly costly rapid transit heavy rail project has been proposed for the small Hawaiian island of Oahu, where the leading metropolis, Honolulu, ranks 53rd in population among U.S. cities, with less than 500,000 people. If the project moves forward it will be the world's only elevated heavy rail in a metro area with a population of under four million.

    Nothing about this 20-mile long rail project makes sense, except for its politics and its cronyism. It is projected to cost $5.3 billion according to the financial analysis of the city, or $7.2 billion, according to the state. For comparison, the Blue Line between Los Angeles and Long Beach that opened in 1990 has the same length and would cost roughly $1.5 billion to build now.

    Cities worldwide and in the U.S. have shown a clear preference for light rail. The only rapid transit (heavy rail) system built in the US since 1990 is the one in Los Angeles in 1993; another was constructed in San Juan, Puerto Rico in 2004. In the same period, 19 light rail systems were installed.

    Honolulu lost a case against the EPA concerning its sewage in 2008; the current bill for fixing its sewage treatment stands at between four and five billion. Note that project costs in Hawaii have a wide range. That’s part of being a remote island state with high transportation and inventory costs, and of crony politics that generate multiple change orders and inefficiencies which result in large cost overruns.

    Hawaii's liabilities add up: a total of the sewer consent decree, the proposed rail, the necessary airports and harbors modernization, repairs to some of the worst road pavements in the nation, and one of the nation’s highest — and underfunded — public employee pension and medical benefit systems comes to $40 billion over the next 20 years, for a state of 1,360,000 people. That's about $120,000 per family of four, of which 17% is for the proposed rail, which is the only discretionary project in the mix.

    The 2008 recession sensitized the previous governor, Linda Lingle, to the mounting liabilities. She ordered a financial analysis of the rail project by one of the nation’s leading financial assessment firms. They opined that it will cost $7.2 Billion. Current Governor Neil Abercrombie and the pro-rail mayor dismissed the report as an “anti-rail tirade.”

    The city’s advocacy forecasts for the rail project are seriously suspect. Bent Flybjerg, Chair and Professor of Major Program Management at Oxford University's Saïd Business School, has revealed that forecast manipulation is the norm in rail proposals, internationally. For example, the Blue Line in Los Angeles was forecast to carry 35,000 trips in the opening year. It carried only 21,000. A more suitable comparison for Honolulu is Tren Urbano in San Juan, Puerto Rico, which opened in 2006. The similarities are eerie. Both are unique island cities with heavy rail projects under Federal Transit Administration (FTA) oversight, and have the same project planner, Parsons Brinkerhoff, who estimated 80,000 trips in the opening year for Tren Urbano, and a construction cost of $1.25 billion. FTA approved both. Tren got 25,000 trips, and was ultimately built for $2.25 billion, a nearly 100% cost overrun.

    After the first year of operation, bus fares were doubled to push people to use the Tren. It didn't work. A new sales tax of 5.5% was eventually enacted, and San Juan added 1.5% on top of that. Tren Urbano was a catalyst for financial hardship.

    Another recent example is the Edinburgh trams, originally scheduled to open in July 2011 but rescheduled to 2014. The original cost was projected at $640 million, but estimates now are over one billion dollars. As of spring 2011, 72% of the construction work remains to be done, but only 38% of the budget is left.

    Past experience and hard evidence have never fazed politicians in Hawaii. In 2008, Honolulu’s mayor Hannemann used several million dollars of taxpayer and political contribution funds to convince voters that his fully elevated (heavy) rail is actually a light rail system that would cost under $4.5 billion, and would solve Honolulu’s congestion problems.

    Hannemann gave then-Minnesota Congressman and Transportation Committee Chair Jim Oberstar a helicopter ride along the route. He failed to indicate that three of the train route's 20 miles would be on prime agricultural land, and that 12 of the 20 miles would be in low-density suburbia. Oberstar declared it a good project, and offered promises of federal funding.

    Then the city released the draft Environmental Impact Statement (EIS), just two days before elections which included a referendum or rail. The EIS was several thousand pages long. Many cried foul, but Senator Inouye advised the people to read the abstract. It was devoid of any quantitative information. The plan for passage barely worked: 50.6% of the voters voted in favor of rail.

    The 2010 final EIS revealed that congestion in 2030 with rail will be far worse that it is now. The project is not green, given that 96% of Honolulu’s electricity comes from oil and coal. The present marketing push has switched to jobs and development opportunities. But six billion dollars would produce many more jobs and benefits if spent on almost any other infrastructure endeavor.

    In late March, Transportation Secretary Ray LaHood, FTA Administrator Peter Rogoff, Senator Inouye and Hawaii Congresswoman Mazie Hirono descended on Honolulu to stage a pro-rail rally with the mayor, the unions and the cronies. However, anti rail sentiment is growing, and, following an earlier lawsuit, a second one was filed in May 2011.

    Honolulu is still completing the paperwork for its heavy rail, but preparatory construction has already started. This irrational project needs to be stopped. Stopping it will save the federal government $1.8 billion, save overtaxed Hawaii residents well over $5 billion, and save visitors to Hawaii about $700 million. It will save prime agricultural land, preserve island beauty and, importantly, save Honolulu from decades of added taxation, debilitating construction, and lack of funds for essential infrastructure projects.

    Panos D. Prevedouros, PhD, is a Professor of Civil Engineering at the University of Hawaii-Manoa.

    Photo by super-structure (Jason Coleman), "Honolulu Murals".


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    What cities are best positioned to grow and prosper in the coming decade?

    To determine the next boom towns in the U.S., with the help of Mark Schill at the Praxis Strategy Group, we took the 52 largest metro areas in the country (those with populations exceeding 1 million) and ranked them based on various data indicating past, present and future vitality.

    We started with job growth, not only looking at performance over the past decade but also focusing on growth in the past two years, to account for the possible long-term effects of the Great Recession. That accounted for roughly one-third of the score.  The other two-thirds were made up of a a broad range of demographic factors, all weighted equally. These included rates of family formation (percentage growth in children 5-17), growth in educated migration, population growth and, finally, a broad measurement of attractiveness to immigrants — as places to settle, make money and start businesses.

    We focused on these demographic factors because college-educated migrants (who also tend to be under 30), new families and immigrants will be critical in shaping the future.  Areas that are rapidly losing young families and low rates of migration among educated migrants are the American equivalents of rapidly aging countries like Japan; those with more sprightly demographics are akin to up and coming countries such as Vietnam.

    Many of our top performers are not surprising. No. 1 Austin, Texas, and No. 2 Raleigh, N.C., have it all demographically: high rates of immigration and migration of educated workers and healthy increases in population and number of children. They are also economic superstars, with job-creation records among the best in the nation.

    Perhaps less expected is the No. 3 ranking for Nashville, Tenn. The country music capital, with its low housing prices and pro-business environment, has experienced rapid growth in educated migrants, where it ranks an impressive fourth in terms of percentage growth. New ethnic groups, such as Latinos and Asians, have doubled in size over the past decade.

    Two advantages Nashville and other rising Southern cities like No. 8 Charlotte, N.C., possess are a mild climate and smaller scale. Even with population growth, they do not suffer the persistent transportation bottlenecks that strangle the older growth hubs. At the same time, these cities are building the infrastructure — roads, cultural institutions and airports — critical to future growth. Charlotte’s bustling airport may never be as big as Atlanta’s Hartsfield, but it serves both major national and international routes.

    Of course, Texas metropolitan areas feature prominently on our list of future boom towns, including No. 4 San Antonio, No. 5 Houston and No. 7 Dallas, which over the past years boasted the biggest jump in new jobs, over 83,000. Aided by relatively low housing prices and buoyant economies, these Lone Star cities have become major hubs for jobs and families.

    And there’s more growth to come. With its strategically located airport, Dallas is emerging as the ideal place for corporate relocations. And Houston, with its burgeoning port and dominance of the world energy business, seems destined to become ever more influential in the coming decade. Both cities have emerged as major immigrant hubs, attracting on newcomers at a rate far higher than old immigrant hubs like Chicago, Boston and Seattle.

    The three other regions in our top 10 represent radically different kinds of places. The Washington, D.C., area (No. 6) sprawls from the District of Columbia through parts of Virginia, Maryland and West Virginia. Its great competitive advantage lies in proximity to the federal government, which has helped it enjoy an almost shockingly   ”good recession,” with continuing job growth, including in high-wage science- and technology-related fields, and an improving real estate market.

    Our other two top ten, No. 9 Phoenix, Ariz., and No. 10 Orlando, Fla., have not done well in the recession, but both still have more jobs now than in 2000. Their demographics remain surprisingly robust. Despite some anti-immigrant agitation by local politicians, immigrants still seem to be flocking to both of these states. Known better s as retirement havens, their ranks of children and families have surged over the past decade. Warm weather, pro-business environments and, most critically, a large supply of affordable housing should allow these regions to grow, if not in the overheated fashion of the past, at rates both steadier and more sustainable.

    Sadly, several of the nation’s premier economic regions sit toward the bottom of the list, notably former boom town Los Angeles (No. 47). Los Angeles’ once huge and vibrant industrial sector has shrunk rapidly, in large part the consequence of ever-tightening regulatory burdens. Its once magnetic appeal to educated migrants faded and families are fleeing from persistently high housing prices, poor educational choices and weak employment opportunities. Los Angeles lost over 180,000 children 5 to 17, the largest such drop in the nation.

    Many of L.A.’s traditional rivals — such as Chicago (with which is tied at No. 47), New York City (No. 35) and San Francisco (No. 42) — also did poorly on our prospective list.  To be sure,  they will continue to reap the benefits of existing resources — financial institutions, universities and the presence of leading companies — but their future prospects will be limited by their generally sluggish job creation and aging demographics.

    Of course, even the most exhaustive research cannot fully predict the future. A significant downsizing of the federal government, for example, would slow the D.C. region’s growth. A big fall in energy prices, or tough restrictions of carbon emissions, could hit the Texas cities, particularly Houston, hard. If housing prices stabilize in the Northeast or West Coast, less people will flock to places like Phoenix, Orlando or even Indianapolis (No.11) , Salt Lake City (No. 12) and Columbus (No. 13). One or more of our now lower ranked locales, like Los Angeles, San Francisco and New York, might also decide to reform in order to become more attractive to small businesses and middle class families.

    What is clear is that well-established patterns of job creation and vital demographics will drive future regional growth, not only in the next year, but over the coming decade.  People create economies and they tend to vote with their feet when they choose to locate their families as well as their businesses.  This will prove   more decisive in shaping future growth   than the hip imagery and big city-oriented PR flackery that dominate media coverage of America’s changing regions.


    Cities of the Future Rankings
    Rank Metropolitan Area
    1 Austin, TX
    2 Raleigh, NC
    3 Nashville, TN
    4 San Antonio, TX
    5 Houston, TX
    6 Washington, DC-VA-MD-WV
    7 Dallas-Fort Worth, TX
    8 Charlotte, NC-SC
    8 Phoenix, AZ
    10 Orlando, FL
    11 Indianapolis, IN
    12 Salt Lake City, UT
    13 Columbus, OH
    14 Jacksonville, FL
    15 Atlanta, GA
    16 Las Vegas, NV
    16 Riverside, CA
    18 Portland, OR-WA
    19 Denver, CO
    20 Oklahoma City, OK
    21 Baltimore, MD
    22 Louisville, KY-IN
    22 Richmond, VA
    24 Seattle, WA
    25 Kansas City, MO-KS
    26 San Diego, CA
    27 Miami, FL
    28 Tampa, FL
    29 Sacramento, CA
    30 Birmingham, AL
    31 New Orleans, LA
    32 Philadelphia, PA-NJ-DE-MD
    33 Minneapolis, MN-WI
    34 St. Louis, MO-IL
    35 Cincinnati, OH-KY-IN
    35 New York, NY-NJ-PA
    37 Boston, MA-NH
    38 Memphis, TN-MS-AR
    39 Pittsburgh, PA
    40 Virginia Beach, VA-NC
    41 Rochester, NY
    42 Buffalo, NY
    42 San Francisco, CA
    44 Hartford, CT
    45 Milwaukee, WI
    45 San Jose, CA
    47 Chicago, IL-IN-WI
    47 Los Angeles, CA
    49 Providence, RI-MA
    50 Detroit, MI
    51 Cleveland, OH



    This piece originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by Exothermic Photography


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    "Soaring" land and house prices "certainly represent the biggest single failure" of smart growth, which has contributed to an increase in prices that is unprecedented in history. This  finding could well have been from our new The Housing Crash and Smart Growth, but this observation was made by one of the world's leading urbanologists, Sir Peter Hall, in a classic work 40 years ago. Hall led an evaluation of the effects of the British Town and Country Planning Act of 1947 (The Containment of Urban England) between 1966 and 1971. The principal purpose of the Act had been urban containment, using the land rationing strategies of today's smart growth, such as urban growth boundaries and comprehensive plans that forbid development on large swaths of land that would otherwise be developable.

    The Economics of Urban Containment (Smart Growth): The findings of Hall and his colleagues were echoed later by a Labour Government report in the mid-2000s which showed housing affordability had suffered under this planning regime. Author Kate Barker was a member of the Monetary Policy Committee of the Bank of England, which like America's Federal Reserve Board, is in charge of monetary policy. Among other things, the Barker Reports on housing and land use found that urban containment had driven the price of land with "planning permission" to many multiples (per acre) above that of comparable land where planning was prohibited. Under normal circumstances comparable land would have similar value.

    Whether coming from the left or right, economists have demonstrated that prices tend to rise when supply is restricted, all things being equal.  Certainly there can be no other reason for the price differentials virtually across the street that occur in smart growth areas. Dr. Arthur Grimes, Chairman of the Board of New Zealand's central bank (the Reserve Bank of New Zealand), found the differential on either side of Auckland's urban growth boundary at 10 times, while we found an 11 times difference in Portland across the urban growth boundary. 

    House Prices in America: The Historical Norm: Since World War II, median house prices in US metropolitan areas have generally been between 2.0 and 3.0 times median household incomes (a measure called the Median Multiple). This included California until 1970 (Figure 1). After that, housing became unaffordable in California, averaging nearly 1.5 times that of the rest of the nation during the 1980s and 1990s (adjusted for incomes). Even after the huge price declines from the peak of the bubble, house prices remain artificially high in Los Angeles, San Francisco, San Diego and San Jose, with median multiples of six or higher.

    William Fischel of Dartmouth University examined a variety of justifications for the disproportionate rise of California housing prices and dismissed all but more restrictive land use regulation. He noted that "growth controls (restrictive land use regulations) have the undesirable effect of raising housing prices." Throughout the rest of the nation, more restrictive land use regulations have been present in every market where house prices rose substantially above the historic Median Multiple norm, even during the housing bubble. No market without smart growth has ever reached these heights.

    Setting Up for the Fall: Excessive Cost Increases in Smart Growth Markets: The Housing Crash and Smart Growth, published by the National Center for Policy Analysis, examined the causes of house price increase during the housing bubble. The analysis included all metropolitan areas with more than 1,000,000 population. It focused on 11 metropolitan areas in which the greatest cost increases occurred (the "ground zero" markets), comparing them to cost increases in the 22 metropolitan areas with less restrictive land use regulation (Note 1).

    • Less Restrictively Regulated Markets: In the less restrictively regulated markets, the value of the housing stock rose approximately $560 billion, or 28 percent from 2000 to the peak of the bubble (Note 2). In nearly all of these markets, the Median Multiple remained within the historical range of 2.0 to 3.0 and none approached the high Median Multiples that occurred in the "ground zero" markets.
    • Ground Zero Markets The value of the housing stock rose $2.9 trillion from 2000 to the peak of the bubble in the "ground zero" markets, all of which have significant land use restrictions (Note 3). The 112 percent increase in the "ground zero" markets was four times that of the less restrictively regulated markets. The Median Multiple rose to unprecedented levels in each of the "ground zero" markets, peaking at from 5.0 to more than 11.0, four times the historic norm.

    The 28 percent increase in relative house value that occurred in the less restrictively regulated markets (those without smart growth) is attributed to the influence of loosened lending standards. The excess above 28 percent, which amounts to $2.2 in the "ground zero" markets is attributed to to the supply restricting strategies of smart growth (Figure 2).

    The Fall: Smart Growth Losses

    The largest house price drops occurred in the markets that had experienced the greatest cost escalation, both because prices were artificially higher but also because prices in smart growth markets are more volatile.  The "ground zero" markets, with only 28 percent of the owner occupied housing stock, accounted for 73 percent of the pre-crash losses ($1.8 trillion). Thus, much of the cause of the housing crash, which most analysts date from the Lehman Brothers bankruptcy (September 15, 2008), can be attributed to these 11 metropolitan areas.

    By contrast, the 22 less restrictively regulated markets accounted for only six percent ($0.16 trillion) of the pre-crash losses. These 22 markets represented 35 percent of the owned housing stock (Figure 3).

    If the losses in the ground zero markets had been limited to the rate in the less restrictively regulated markets (the estimated impact of cheap credit), losses would have been $1.6 trillion less (Note 4). The Great Recession might not have been so "Great."

    Economic Denial and Acknowledgement: In his writing forty years ago, Dr. Hall noted that English planners denied the connection between the unprecedented house price increases and urban containment. This same denial also informs smart growth advocates today. This is perhaps to be expected, because, as Hall noted 40 years ago, an understanding of the longer term consequences would have undermined support for these policies.

    To their credit, some advocates recognize that smart growth raises house prices. The Costs of Sprawl – 2000¸ a volume largely sympathetic to smart growth, also indicates that urban containment strategies can raise housing prices. The only question is how much smart growth raises house prices. The presence of urban containment policy is the distinguishing characteristic of metropolitan markets where prices have escalated well beyond the historic norm.

    The Social Costs of Smart Growth: Moreover, the social impacts of smart growth are by no means equitable. Peter Hall says that the "less affluent house-owner ... has paid the greatest price for (urban) containment" (Note 5). He continues: "there can be little doubt about the identity of the group that has got the poorest bargain. It is the really depressed class in the housing market: the poorer members of the privately-rented housing sector." Finally, Hall laments as well the impact of these policies on the "ideal of a property owning democracy."

    Hall's four decades old concern strikes a chord on this side of the Atlantic. Just last week, a New York Times/CBS News poll found that nine out of ten respondents associated home property ownership with the American Dream. Planning needs to facilitate people's preferences, not get in their way.

    --------

    Note 1: The housing stock value uses a 2000 base, which adjusts house prices based upon the change in household incomes to the peak.

    Note 2: The underlying demand for housing was substantial in some of the less restrictively markets, which is illustrated by the strong net domestic migration to metropolitan areas such as Atlanta, Austin, Dallas – Fort Worth, Houston, Raleigh and San Antonio. At the same time, some more restrictive markets (smart growth) that hit historically experienced strong demand were experiencing huge domestic outmigration, indicating little in underlying demand. This includes Los Angeles, San Francisco, San Diego and San Jose. Demand, however is driven upward in more restrictively metropolitan areas by speculation which, according to the Federal Reserve Bank of Dallas is attracted by supply constraints.

    Note 3: The 11 "ground zero" metropolitan markets were Los Angeles, San Francisco, San Diego, San Jose, Sacramento, Riverside-San Bernardino, Las Vegas, Phoenix, Tampa-St. Petersburg, Miami and the Washington, DC area.

    Note 4: The pre-crash losses in the 18 other restrictively regulated markets were $0.5 trillion. These markets accounted for 37 percent of owner occupied housing in the metropolitan areas of more than 1,000,000 population, compared to 35 percent in the less restrictively regulated markets, yet had losses three times as high.

    Note 5: The Containment of Urban England also indicates that new house sizes have been forced downward by the planning regulations (see photo at the top of the article).

    Photograph: New, smaller exurban housing in the London area (by author)

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life


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