Back to the 1970s?

The middle part of every decade usually sees a renaissance of cultural artifacts from some decade past… usually two decades behind, which means we should be seeing a flannel-and-fleece revival of the 1990s very soon. In the world of municipal finance, a different revival is taking shape. That of extreme fiscal austerity placed on states and local jurisdictions last seen on a widespread scale in the 1970s. Whereas the last crisis profoundly affected cities losing their blue-collar economic bases, this scenario stems from our prolonged recession and political focus on reducing the federal debt burden. As such, it effects areas large and small.

As a result of the topsy-turvy changes in our economy, funding to states is declining, and states are cutting their aid to municipalities in drastic numbers. Worsening matters is a trepidation to find or increase revenue sources by raising taxes at a time when so many are tightly pinched. Not all municipalities have avoided the dreaded tax hike, however. In Minnesota, with declining state aid since 2003, locales have made up for 2/3 of these cuts by hiking property taxes. Others, including places as large and stressed as Cleveland, as well as more moderate and growing areas, like Lincoln, Nebraska, are facing decisions of tax hikes, service reductions, or a combination of both (every politician’s nightmare). As states and cities must balance their budgets, painful cuts to government programs are being deliberated, and since government wealth often lags behind improvements in economic prosperity (short of payroll taxes, much of government income sources are not realized until “after the fact”), this dialogue will continue for some time, regardless of whether the economy improves.

Thus, as the federal government catches a cold, states catch a strong fever, and municipalities come down with the flu. Or as Michael Cooper of The New York Times eloquently puts it, “budgetary pain flows downhill”.

NYT article on US state and local fiscal austerity

Tactical Urbanism: Concept Testing for Urban Development

Additional information on the Tactical Urbanism Salon I attended yesterday in Long Island City, Queens. The more I dig into and understand this, the more I like it. With a professional background in market research, I like its “try before you buy” and small-scale experiment mantras. In the market research world, such experiments are called concept or concept/product tests, which prove whether or not an idea has legs, identify its strengths and weaknesses, and determine what improvements could be made before either a future re-stage or larger-scale deployment. What I also like about this concept is that it need not rely on any one sector or party per se, and can be an inexpensive way to improve a community’s built and social environment rather quickly.

The links below provide more information about tactical urbanism:

Tactical Urbanism, Volume 1 (Document defining Tactical Urbanism and its practices)

Tactical Urbanism Salon

A volume 2 document on tactical urbanism will be released within the next few weeks.

Revitalization, not “Gentrification”

I have spent the past three days at two conferences covering several issues related to city life. Though each had their own theme, in essence, both discussed how we can make our communities more lively and engaging, presenting large and small scale ideas meant to stimulate and expand the diverse populace and interests that comprise our society. In each of these ideas, the promise of “cultural revitalization” and perils of its more maligned synonym, “gentrification” exists. The greatest challenge with urban development has been, and will continue to be, how we can stimulate enrichment, cohesion and activity in communities, without bringing on a wholesale evolution that brings in speculators and creates a bifurcated two-class environment.

Digesting everything I’ve learned over these three days (which will take quite a while, I must say, and that’s a good thing), I was enlightened in finding a recent New York Times Magazine article about Greg O’Connell, a.k.a. “The Socialist Developer”. One of the pioneers behind the transformation of Brooklyn’s Red Hook neighborhood, he is now plying his practice on a small upstate NY town, Mount Morris, located about halfway between Rochester and Elmira.

His tactics mix small-town booster with large-scale developer. Buy up a series of undervalued properties clustered together, rent them for cheap, instill Jane Jacobs-esque policies (rotating store displays, lights at nighttime) that foster a welcoming, vibrant image, and let things develop as they may. Without selling out to commercial developers. For him, revitalizing cities and towns is a “community effort”, and at a time when many up-and-coming neighborhoods fall victim soon enough to luxury developers, this perspective is refreshing.

For his successes and philosophies, he also proclaims that timing is everything.

‘“You’ve got to buy things right,” he says. “You’ve got to be 15 to 20 years ahead of the trends.”’

Interesting. O’Connell’s practices echo that of other rebuilding and revitalizing communities, though more deliberate and absent an influx of creative types. Could this spawn a tide of boosterism-based development? Are these practices more suitable for areas well off the beaten path only? What of this approach is applicable to “hot urban neighborhoods”?

Conferences attended October 13-15, 2011

Municipal Arts Society Summit for NYC

Tactical Urbanism Salon

Cold Revival in Winnipeg

In my twitter travails, I follow a few people who either are based in or stay abreast of culture and events in the Great White North, a.k.a. Canada.  I have noticed several interesting tweets from these sources over the last few days, ranging from “most important sporting event in Canada since Vancouver Olympics” to “today (Sunday) I will be watching the Jets play twice.  Rooting against them in one game and for in another”. 

The reason for these tweets: the return of the National Hockey League, and major professional sports, to Winnipeg, Manitoba.  A city of about 650,000 people with few outlying suburbs (i.e. just about all residents of its metro area live within Winnipeg’s city limits), it is both large and small at the same time.  On a city basis, Winniepg is among the 30 or so largest cities in the US and Canada, combined.  When examining population based on metropolitan areas, however, Winnipeg has roughly as many people as Syracuse,Toledo or Des Moines.  All cities with “triple-A” status.

In a day and age when sports is increasingly controlled by big interests, big markets and big money, this makes the revival of the NHL in the Canadian heartland all the more impressive.  Yes, it helps that the new Winnipeg Jets are relocating from a somewhat awkward hockey market, Atlanta. (The NHL once tried a team in Hotlanta during the 70s and 80s, which eventually migrated north to Calgary, Winniepg’s more polished sibling) It also helps that the richest man in Canada owns the team.  Who better to subsidize the potential operating losses that come with a market of it size and an arena of approx 15,000 (small, even by NHL standards). 

Still, the reunion of Winnipeg and its Jets signifies a victory for David at a time when the economics of professional sports seem to be working much less in favor of it and its smaller-market brethern.  Let’s see just how long this can hold up.

Chris Jones’ Grantland.com article on the revival of the Winnipeg Jets

One Way How Google Stays Profitable: Shift Income to Bermuda

NPR article and podcast highlights a perfectly legal mechanism for US corporations to lower their federal tax liability: shift income from America to overseas tax havens, simply by setting up a PO box in such corporate hotbeds as Bermuda.  This process, known as transfer pricing, allows US corporations to lower their taxes by as much as 60%!

Now the catch with this is, income from US based corporations can only be “temporarily deferred” so as to lower their present liability.  Companies can, however, claim credits when terms expire, accounting for taxable income paid to other nations.  Now I understand this helps support the US as a corporate-friendly nation, and entices companies to remain engaged here, while also supplying income to other nations that may lack ample resources (how they use this income is a completely different matter).  Still, this scenario is estimated to cost the US as much as $90 billion annually.

Now, I’m not for tax policies that will entice companies to establish themselves outside America, but at a time when our government needs new sources of revenue, and we argue over tax loophole strategies for the wealthy, perhaps this is an area we need to evaluate.

Article and podcast from NPR on transfer pricing and foreign tax shelters

Roger Lowenstein’s Article on US Cities and Municipal Bond Debt

“Determining who will suffer from budget cuts is a political and a legal calculation. The cities’ problem is that annual spending is greater than revenue; that imbalance does not entitle them to walk away from bond payments.”

Between a subscription to audiobook site Audible.com and the New York Public Library‘s extensive collection of e-books, I have a list of several titles on mp3 I am slowly wading through, or intend to get to in the near future.  Among these are two titles from Roger Lowenstein; “While America Aged” (impact of Baby Boomers’ pensions on America’s fiscal health) and “The End of Wall Street” (don’t need to think too hard about that one).

With a history of insightful journalism on economics and finance, I was intrigued by his recent article in The New York Times Magazine on the challenges facing American cities and states as they confront their own budget crises.  Unlike the federal government, these institutions cannot deficit spend.  In other words, they must balance their budgets.  Additionally, these municipalities must try, as hard as they can, to satisfy creditors and holders of municipal bonds, which locales use in large part to fund capital expenses (road and transit improvements, parks, construction and rehabilitation of government buildings, etc.).

As evidenced in the quote above, states and cities have increasingly taken it on the chin, as declining tax revenues in 2008 and 2009 have yet to improve.  The strain this is putting not only on government and public agencies, but society as a whole, is significant.  This has led to a series of debates over painful cuts and concessions, largely in one of two areas: basic and high-impact services (police, fire, sanitation, education) or public-employee benefits (i.e. pensions).  The challenge in all this is how to navigate these changes through a highly unionized labor force, while continuing to show good face and promise the public that it will do its best to minimize these losses on the public, despite the necessary sacrifice.  Unfortunately, another popular alternative to these hard choices is bankruptcy, which not a single official, creditor, resident, employee, business person or stakeholder wants to see.  Rough road ahead.

New City Amenities? Great! As Long As We Have Funding

Public amenities like parks, pedestrian plazas, playgrounds, monuments, and even more smaller scale things like benches, can do a lot to freshen up urban environments and strengthen a locale’s atmosphere.  Building a network of these are great, so long as there is the funding to support them, especially with regards to maintenance that arises from both routine usage and spontaneous damage (vandalism, theft, graffiti, severe weather).  So it is in Seattle, where a recent article by its major newspaper, The Seattle Times, highlights  how the city is facing a backlash as it is having problems keeping its growing parks system in good order.  Even the “city of sustainability”, which has been relatively less affected than many others in this recession, is feeling the effects of resource constraints amidst a larger capital budget.

Perhaps the morals of this story are two-fold: when building or expanding, make sure that you can not only get the project off the ground, but support it over the long-run in event of a range of consequences.  It may also be better to build out slowly in phases, so as to not “spend” or build too much, too fast.