Friday News Digest

Those of you that have been here a while know that I enjoy going to the movies, especially action flicks. Justin and I caught the late showing of Planet of the Apes in 3D last night – loved it! The entire Apes story arc from the last movie through this one hits that latent apocalyptic vein I have just perfectly. In fact, at one point as the apes are descending on the ruins of San Francisco – all the buildings either collapsed or grown over with moss and vines -- I look over at Justin and say, “Baxter in twenty years.” He said he was thinking the same thing. If you’re thinking about going, I’d recommend it. My favorite movie of the summer thus far.

Enjoy the news.

• I have to admit that I have no clue what Global Site Plans is and I suspect their list of the Top 20 Urban Planning Websites of 2014 is one of those ploys to drive up their Google score, but the company we are surrounded by at number seventeen on this list is pretty flattering. Thank you, Global Site Plans.

• I also want to say a quick thank you to our member, a longtime supporter and a really good friend, the Restless Urbanist Edward Erfurt, for using his blog space to help us out during our membership drive. I am really blessed with some great friends and colleagues.

• Speaking of friends, quite a few readers sent me this article about the city of Harmony, Minnesota, paying up to $12,000 per new home wondering if I could comment on it. Already did (in the article).

Five years is too long, said Charles Marohn, a planner and president of Strong Towns, a nonprofit based in Brainerd, Minn. “That’s five years of free services — snowplowing, police protection, fire protection — that everyone else in an otherwise really poor town is going to subsidize.”

• Instead of subsidies, there are a lot of very low cost, practically free things that cities can do to make room for private investment. The Economist this week had an article explaining how regulation, far more than taxes, is the primary burden for small businesses. Reducing unnecessary regulation and streamlining things that create positive outcomes is something almost every local leader can agree on.

Minnesota, a high-tax state, earns a respectable “B” for business climate, partly because it is easy to start a business there. Washington and Florida, both low-tax states, earn a “C” and a “C+”. Entrepreneurs fault Washington’s harsh zoning laws and gripe that in Florida new firms must jump through hoops like dolphins at SeaWorld.

The lesson for politicians is: “no matter what else you do, make things easy,” says Jon Lieber of Thumbtack. “This may seem obvious but a lot of governments don’t do it right. Don’t require a plumber to spend two days at city hall pulling permits when he could be doing jobs.”

• Want an example of reducing regulation? Minneapolis is having a very adult conversation about ride share services that is actually prompting them to repeal some of the antiquated regulations on traditional taxi service. This is the kind of stuff my state used to lead the nation with so I’m really excited to see our primary city taking such leadership.

Vehicles could be inspected at non-city facilities, for example, and cabs could be five years older than they are now. A requirement to have a certain number of wheelchair-accessible cabs was replaced with an incentive program for both taxis and the transportation network companies.

Drivers would also be able to use the cabs as private vehicles, giving them more parking privileges, and owners could charge drivers more than $85 a shift.

• Speaking of regulation, the Minnesota Department of Natural Resources is soliciting feedback for new rules regarding development along the Mississippi River. Two questions: (1) Will the rules allow us to build Paris on the Seine in our wonderful urban areas and (2) will the rules preserve the natural and ecological function of our critical rural areas? Didn’t think so.

• Shout out to Nate Hood and Matthias Leyrer for shouting into the wind on their home town of Mankato’s push to build a new school way out on the periphery of the community. Like me with our airport project here, the powers that be decided this one long before they opened it up for serious public discourse. I’m still proud of the reasoned arguments these guys are putting forth. If not here, then hopefully some other city can learn from this folly and not repeat it. Oh, but they need athletic fields. Yeah, way better to transport ALL the kids EVERY day to a remote site than to transport a few kids infrequently to athletic fields. Public officials with access to large sums of money seem to suddenly develop such small, unimaginative minds.

“Mankato's new school is built on an inhuman scale, unwalkable by design, with a disregard to long-term operational costs and devaluing our existing neighborhoods,” said an email from Strong Towns member Nate Hood of St. Paul, who grew up in Mankato.

Mankato City Manager Pat Hentges and Supt. Sheri Allen, however, want people to look at the bigger picture and the numerous factors that led to the site selection, as well as the city's plans for the land surrounding the middle school.

“There's no site in the city, or a (short) distance from the city, that you can make walkable at this point in time,” Hentges said. “(Sixty-five) acres of land, that's as big as most residential subdivisions.”

• I’m neck deep in transportation stuff these days working on the infamous “mobility report” and so when a think tank purporting to be “conservative” comes out with a ridiculous recommendation, I’m a little more sensitive than usual. Don’t get me wrong: I’m opposed to ANY tax increase for transportation prior to substantive reform of the system, but the notion that we can magically afford to continue building auto-based transportation to our heart’s content simply by borrowing money and making magic, unidentified cuts to other parts of the budget….that’s a special kind of stupid. It’s definitely not fiscally conservative.

In a "Minnesota Policy Blueprint" proposal to be released Thursday by the Center of the American Experiment, the authors assert that Minnesota needs to spend more money to upgrade its transportation systems and contend that it can be done without tax increases if state policymakers place a higher priority on moving goods and people.

• One place we can look to reform is in the types of highway projects we do fund. Projects that move goods and people between productive places are important, but once we are in a city, creating real, measurable wealth becomes the priority, far more than fighting congestion, level of service or any of the other highway metrics. It is good to see a publication like Governing ask the central question: why would you have a highway run through a city? The answer is: nobody that wants to see their city financially viable.

As a developer, Doucette sees the 1.4-mile-long viaduct as a wasted opportunity. Interstate 81 is the line of demarcation between the city’s two most vibrant neighborhoods: downtown and University Hill. But it is not a clean separation. For blocks in either direction of the interstate, parking garages and surface lots dominate the landscape. The aging highway cuts off many streets on the city’s grid. “There is this gulf,” he says. “What we’ve done is take an incredibly important piece of this city off of the development map. This highway runs through the part of the city that should be some of the highest-producing parcels of land in the region.”

• Speaking of cities that have been destroyed by transportation projects, few have embarrassed me to be an engineer more than Chester, Pennsylvania, a great city that we have destroyed – and continue to abuse – with our “improvements”. This week someone sent me a collection of historic photos from Chester. While I realize a lot of places used to look like this, seeing it here – and knowing how it is suffering now – was really painful.

• The headlines in my small town local paper last week expressed the general consensus that “housing is back.” Sales are up, permits are up, foreclosures are down and it really feels like America is getting its mojo back. In fact, it’s starting to feel a little 2004, and not a decade too soon. Remember how we all believed that housing was an investment, one where the value magically went on a continuous upward trajectory? Loved that feeling – never want it to end. (You aren’t going to want to read this.)

The only way a young household can buy a $150,000 house for $600,000 is if interest rates are low enough to enable a modest income to leverage a huge mortgage. This is the basis of the Federal Reserve’s campaign to buy Treasury bonds and mortgages: by driving interest rates to unprecedented lows, the Fed enables marginal buyers to become the last greater fool.

The first housing bubble circa 2001-2008 inflated as a result of financialization. The second, current echo-bubble has inflated on the socialization of financialization: the FHA and other government agencies have essentially taken over the entire mortgage market, guaranteeing or backing 95% of all mortgages, while the Fed has pushed rates down to historic lows to enable marginal buyers to make bets in the housing casino.

The current echo-bubble has another speculative source: cash buyers of homes to rent. About a third of all home sales in many markets are cash buyers, speculators hoping to cash in on the bubble by selling to a greater fool, or investors seeking the safe returns of rental housing.

• Although if the Federal Reserve really does stop buying all our mortgages, I know a country with trillions of dollars just burning a hole in their pockets with fewer and fewer places wanting them.

Chinese purchases of U.S. homes are likely to continue increasing as the country's swelling ranks of affluent consumers seek refuge from pollution and political and economic uncertainty, according to Thilo Hanemann, who tracks cross-border investment for the New York-based Rhodium Group.

"A lot of people are trying to hedge against a generally bearish outlook for the Chinese economy," Hanemann said in a telephone interview. "Buying real estate overseas has been in the past limited to a relatively small group of wealthy individuals and sometimes government officials. But it's become a much bigger trend, involving affluent middle-class people."

• And for those of you that so badly want to believe everything in our economy is now just rolling right along as planned, here’s an update on the Long Emergency from none other than James Howard Kunstler.

It’s a tragic fact of history that sometimes societies lose their bearings. They make terrible choices and bad things happen. It doesn’t have to take the form of a conspiracy, but rather a consensus -- that is, a simple agreement between people in charge (and the public subject to their rule) about where that society will direct its priorities and make its investments. Proof of this was the behavior of national leaders and the public in the aftermath of the 2008 financial crash. The system was hugely burdened by the debris of loans gone bad, a lot of it packaged into fraudulent bonds. The biggest banks in the nation were implicated in the creation of these frauds and left holding a lot of their own bad paper when the music stopped. Clearing the debris would have restored structural integrity to the banking system. Prosecuting financial criminals in the executive suites of the banks would have disincentivized racketeering and control fraud.

American leadership allowed neither restructuring or prosecution. Banks (except for Lehman Brothers, the unloved “fall guy”) were not only prevented from failing, they were stuffed with taxpayer bailout money, plugged into a new Federal Reserve carry-trade racket (ZIRP), given a green light on unlimited accounting fraud (FASB 157), and allowed to continue their old rackets in new ways, e.g. the new bundled rental payment bonds, “covenant-lite” junk bonds,  and new iterations of shady collateralized loan obligations. And, of course, not one bank executive was prosecuted (not to say jailed) for criminal shenanigans that cost the US economy $22 trillion according to the US General Accounting Office.

• The entire saga of Las Vegas is just fascinating to me. A place in the middle of the desert using gambling to establish itself as this artificial getaway destination. As casino gambling became more ubiquitous, it got caught up in the building of itself as an industry. It’s now trying to figure out what the next stage will be – if there is one – as it comes to grips with the fact that decades of mining limited water resources has severely limited future options.

“The situation is as bad as you can imagine,” said Tim Barnett, a climate scientist at the Scripps Institution of Oceanography. “It’s just going to be screwed. And relatively quickly. Unless it can find a way to get more water from somewhere Las Vegas is out of business. Yet they’re still building, which is stupid.”

• And in New Jersey, it isn’t so much finding the water as getting it to people in the town of Haddonfield where the city, unable to operate the system in a solvent manner, is looking to sell it to a private utility. While I’m an advocate for real markets and private utilities make a lot of sense to me, it isn’t clear to me how losing the ability to bond at low rates for long terms along with the need to show a profit will help users avoid the need to raise rates and cut service. But maybe raising rates and cutting service is just too hard for a local government; easier to just get out of the water business entirely.

Haddonfield has “enormous infrastructure challenges” that would be financially difficult to address “as just one small town.

“A private operator like [New Jersey American Water] could spread the cost of things out,” he said.

Even were the borough to keep the water and sewer system and outsource management of it, the commissioners say Haddonfield will spend another $48 million by 2034 to maintain it.

That’s in addition to some $14 million the borough still owes for repairs to the infrastructure.

“In the oldest parts of town, you have pipes that are literally 100 years old,” Kasko said; “old terracotta clay pipes that break and have tree roots in them. We even have instances where a sewer pipe cuts into a water pipe. Fifty or so years ago when they came upon that, they just did that kind of stuff.

• My tolerance for meetings has dropped dramatically in recent years. If it isn’t worth my time, I get really cranky, really quickly. I must admit, however, that I’ve pretty much done all of these tips for looking smart at a meeting. I perfected number four – nod continuously while pretending to take notes – long ago and used the technique to develop the base thoughts and insights that are now the core of Strong Towns.

• And finally, you may have seen this already – I’ve found it in a social media feed every day this week – but if not, prepare to spend five or ten minutes thinking about what you would need to make something like this happen near you.

Thanks everyone. Hope you have a great weekend. See you back here early Monday.