Wednesday, April 16, 2014

The suburban partnership

Cities and their suburbs form a partnership.  An ecosystem, if you like.  For most metropolitan regions, the bulk of the population lies in the suburbs and the bulk of the industry lies in the city.  That relationship doesn't hold for every metro region, but it is often true.  Thus cities form a partnership with their suburbs.  If the partnership is healthy then they can cooperate on issues like taxes, transit, and public safety to enhance the region and increase the overall region.

For several years, some aldermen in Chicago have bloviated about imposing a commuter tax on suburbanites who work in the city.  You can see its roots in 2011 when it was proposed by city Inspector General Joseph Ferguson and praised by several aldermen and opposed by the mayor.  It was ressurected in 2013 by the Grassroots Collaborative, where alderman Emma Mitts supported it but alderman Ariel Reboyras opposed it.  It is getting legs again in 2014 with support from alderman Bob Fioretti.

While this tax may never pass due to legal reasons, I oppose these sorts of punitive deals that cities and suburbs dither about.  It is divisive and unconstructive.  And there is a clear precedent that Chicago should learn from and avoid.

I have long opined that there is not a more dysfunctional city suburb relationship than metro Detroit. There is, at times, an almost visceral hatred betwixt the two.  Recently an interview with L. Brooks Patterson, the Oakland County commissioner, has surfaced which gives a voice to that acrimonious relationship.

"Anytime I talk about Detroit, it’s not positive. Therefore, I’m a Detroit basher."

This sort of acrimony is par for the course with Detroit and its suburbs.  There is much hand-wringing over former Detroit Mayor Coleman Young's phrase "Hit eight mile".  And this acrimony has played itself out in public policy.  Look at how little cooperation exists concerning an abundant resource; the water department.

“I tell my team no deal is better than a bad deal — and right now it’s a bad deal, so we’re probably going to walk,” Patterson told a crowd of public officials at Governing magazine’s Outlook in the States & Localities conference.

The Free Press reported last month that Orr was considering forming a regional authority without Oakland and Macomb as members, if they wouldn’t agree to a deal, according to sources involved in the negotiations.

Also consider some of the fits and starts that have plagued regional transit in the Detroit area:

  • 1988 – On December 7, 1988 Public Act 204 was amended and SEMTA was restructured from its seven-county operation into a three-county agency, which excluded the City of Detroit (emphasis added) and renamed the Suburban Mobility Authority for Regional Transportation (SMART).  SMART began operations on January 17, 1989.
  • 1996 – SMART and DDOT establish a common regional bus pass but further attempts to merge services fail.
  • 2001 – The Detroit Regional Chamber spearheads legislation to create a Detroit Area Regional Transportation Authority (DARTA).
  • 2002 – Legislation to form DARTA is vetoed by Governor John Engler
  • 2003 – In May of 2003 DARTA is formed through an interlocal inter-government agreement (IGA) that includes the City of Detroit, Wayne County, Macomb County, Oakland County, Monroe County and SMART. The agreement proposed that the parties utilize existing constitutional and statutory law to establish more effective and efficient public transportation services. Under this agreement the parties agreed to transfer to DARTA powers, duties, functions, responsibilities and authority essential to providing quality public transportation. However, under this agreement DARTA could not levy taxes nor could DARTA bind any Michigan municipality to any obligation without the consent of that municipality.
  • 2006 – In May of 2006 the Michigan State Supreme Court decision dissolved DARTA and the IGA.
  • 2009 – During 2009 the legislature failed to approve legislation to develop a regional transit authority.
  • 2011 – The City of Detroit cuts DDOT bus operating subsidy and approves a bond issue to help fund Woodward Light Rail required match. No operating funds have been identified for the Woodward Light Rail. 

It is to Detroit's detriment that the region failed to cooperate on regional transit issues.  These sorts of disagreements have spilled over into other areas of civic life, such as the Detroit Zoo.  The region has wasted taxpayer funds trying to poach industries from the suburb to the city.  Quicken Loans relocated to Detroit from the nearby suburb of Livonia .  Thus the net job growth for the region was essentially nothing.  Quicken Loans moved into the Compuware building, itself a transplant from the neighboring suburb of Farmington Hills.

Detroit and her suburbs tell a cautionary tale.  Chicago has, in comparison, a robust relationship with its suburbs.  The RTA, despite its faults, manages transit agencies that provide a comparatively well integrated network of trains and buses.  I have personally used all three of them for commuting:  Metra, PACE, and the CTA.  I have taken the traditional perimeter/suburb to downtown commute as well as the reverse commute to the suburbs.  And I can say that, while not always a joy ride, they exist.  And this allows households with fewer than one car per working adult to commute to work, a trend increasing over time.  It also allows downtown Chicago to enjoy greater density, which leads to more diversity and specialization.

Chicago needs to resist the call to arms against its suburbs, just as its suburbs need to resist a call to arms against the city.  Plans for a punitive suburban tax increase are the sorts of petty squabbles that made Detroit so dysfunctional.  Instead of looking to punish the suburbs, grassroots organizations and alderman should look at ways to work better with the suburbs to ensure the continued prosperity of both city and suburbs.

Chicago aldermen warmed to the concept of a one percent commuter tax on suburbanites who work in Chicago.

“People who live outside the city and work in the city utilize our streets, our transportation systems. They’re in Chicago. They’re out of Chicago. Perhaps, there’s a price to be put on that,” Ald. Pat Dowell (3rd) said at the time.

Ald. Leslie Hairston (5th) added, “A lot of people come in the city. A lot of people outside do business with the city and we don’t recoup those dollars.”

Resist the call to arms.  Remember that these aren't free riders.  Suburban commuters pay tolls and transit fares.  They dine and shop downtown.  They are a valuable commodity to the city businesses that need a skilled and diverse workforce.  Remember that the suburbs can levy a price on city dwellers that use suburban streets and transportation systems.  And look at where that road leads.

Monday, March 10, 2014

The big housing crunch

The story of housing costs increasing rapidly in many cities across America is becoming a popular tale. But this was all too predictable. Back in 2011 Brad DeLong observed that the housing boom was followed by an even larger housing bust:


As you can see new housing construction fell an estimated 5 times the size of the construction boom.  Thus we reach the situation where home prices increased an average of  12% nationwide last year.  Combining the low pace of inflation and wage increases, housing costs are putting a squeeze on households.

Consider Chicago, where the price of rentals has increased 17% over the last decade.  An increasing number of renters pay over 30% of their income on rents.  But as they say, all real estate is local.  And while Chicago did very well last year, with home prices showing their biggest advance in 25 years, the south suburbs have done very poorly.  Prices in many south suburbs have declined to 1990s levels.

I think what we are seeing is the hyper localization of real estate.  Neighborhoods with low crime and good access to transportation are increasing in value, while those without those two factors struggle.

Monday, March 3, 2014

The geographical problem reconsidered

Previously I suggested that JC Penny's problems were more than just the death of retail problems that have plagued many brick and mortar stores.  Rather I suggested that not having a location in cities was a problem. Since then Sears announced they are closing their flagship Loop location in downtown Chicago. So perhaps my assessments were wrong. If the downtown location didn't help Sears it probably wouldn't help JC Penny.

Friday, February 21, 2014

Downzoning Chicago

Chicago's 49th ward, in the Roger's Park neighborhood, is shrinking.  Situated on the north side of Chicago adjacent to the lake and the border with Evanston, it has several red line L stops in the vicinity.  And for some reason it is getting smaller.

The 49th ward, well serviced by transit and on the shores of Lake Michigan.

The shrinking was mostly in the last decennial, as you can see in the demographics of Rogers Park:

1990 60,378
8.7%
2000 63,484
5.1%
2010 54,991
−13.4%

Roger's Park lost significant population after a few decades of gain. It is not clear why.  Crimes are down in the neighborhood.  Big time.





The current alderman worked with the local community to reduce density.

Below are the zoning changes that resulted from the process: 
Downzoned portions of the 7300 block of Bell from R4 multifamily to R3 two flat/single family.
Downzoned portions of the 1400 block of Birchwood from RT4 multifamily to RS3 two flat/single family.
Downzoned portions of the 1300 block of Chase from RT4 multifamily to RS3 two flat/single family.
Downzoned portions of the 2000 block of Chase from RT4 multifamily to RS3 two flat/single family.
Downzoned portions of the 1400 block of Estes from RT4 multifamily to RS2 single family.
Downzoned portions of the 1500 block of Estes from RT4 multifamily to RS2 single family.
Downzoned portions of the 1800 block of Estes from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 1900 block of Estes from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 2000 block of Estes from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 1200 block of Farwell from RT4 multifamily to RS3 two flat/single family.
Downzoned portions of the 1400 block of Greenleaf from RT4 multifamily to RS2 single family.
Downzoned portions of the 1800 block of Greenleaf from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 1900 block of Greenleaf from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 2000 block of Greenleaf from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 1600 block of Lunt from RT4 multifamily to RS2 single family.
Downzoned portions of the 1800 block of Lunt from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 1600 block of Jarvis from RT4 multifamily to RS2 single family.
Downzoned portions of the 1700 blocks of Jarvis from RT4 multifamily to RS2 single family.
Downzoned portions of the 1900 block of Lunt from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 2000 block of Lunt from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 7300 block of Oakley from R4 multifamily to R3 two flat/single family.
Downzoned portions of the 1200 block of Pratt from RT4 multifamily to RS2 single family.
Downzoned portions of the 6900 block of Ridge from RS3 two flat/single family to RS2 single family.
Downzoned portions of the 7000 block of Ridge from RT4 multifamily to RS2 single family.
Downzoned portions of the 7100 block of Ridge from RT4 multifamily to RS2 single family.
Downzoned portions of the 1500 block of Touhy from RT4 multifamily to RS2 single family.
Downzoned portions of the 1600 block of Touhy from RT4 multifamily to RS2 single family.
Downzoned portions of the 1800 block of Touhy from RT4 multifamily to either RS3 two flat/single family or RS2 single family.
Downzoned portions of the 1900 block of Touhy from RT4 multifamily to either RS3 two flat/single family or RS2 single family.
Downzoned portions of the 2000 block of Touhy from R4 multifamily to R2 single family.


The 49th ward is downzoned!  But what is the cause of this push to downzoning?

Did the downzoning cause population loss, or did population loss cause downzoning?  Unfortunately Chicago's zoning maps and laws are a byzantine piecemeal thing not easily parsed.

According to Zillow, Roger's Park property values increased 12.9%.  Over that same period the nation wide inflation rate was 1.6%, making property values in Roger's Park rising at a rate that is 8 times the rate of inflation.  So what is going on in the 49th ward?  It is getting smaller, less dense, and more valuable all at the same time.

Wednesday, February 12, 2014

The shifting tides of Chicago transit

The Chicago Transit Authority's ridership numbers came out a few weeks ago, and the numbers look good on first glance.

In 2012, Chicago’s mass transit system saw its largest growth in 22 years, the Chicago Transit Authority announced on Wednesday.  The CTA said that ridership grew to 545.6 million rides last year, an increase of 2.4 percent from 2011, according to a statement from CTA.  Rail ridership was at its highest level in 50 years, increasing to 231.1 million rides in 2012, according to the CTA.  Bus ridership was also up, increasing to 314.4 million rides, an increase of 4.05 million rides from 2011.

Stepping back and looking at the RTA's numbers as a whole since 1980 gives nuance.  Ridership on the CTA's rail lines is up since 1980, but was more than offset by a decline in bus riders.  Thus the CTA is providing fewer riders today than in 1980.  The system as a whole is up from its trough in 1995, but below its 1980 levels.  The declines all came from bus transit.  Both the CTA rail and Metra are up from 1980 but the CTA bus and PACE are down.  And thus the RTA as a whole is down since 1980.



It shouldn't be that surprising that the CTA gives fewer rides today than it did over 30 years ago, as the population of Chicago is smaller today than it was 30 years ago.  However the region is bigger today, so it does not explain the RTA's net losses.  What is surprising is the rise of rail transit and the decline of bus usage, not just in Chicago but the whole region.

This presents a real puzzle.  Does the decline of bus ridership and rise of rail ridership reflect a changing taste in RTA patrons?  Does it reflect the demographic changes of Chicago's neighborhoods; rail accessible neighborhoods growing in population while bus accessible neighborhoods declined?

It is also possible that we are looking at a shift in office space.  As the Loop continues to transform from sleepy downtown to vibrant city core and suburban employers move their offices in or near downtown, this might be the result of a change in employment patterns.

Tuesday, January 21, 2014

The death of retail: JC Penny's geography problem

The retailer JC Penny is going through a round of store closings as part of its long standing financial difficulties.  You can find a list of the 33 stores closing here.  One thing you will notice is that all of these stores are in the suburbs.

And you can see on this quick google map search, JC Penny's stores are all in the suburbs.  There are no locations inside Chicago.


The JC Penny optical location in the Loop is defunct

In contrast Target has 2 locations in downtown, Macy's has a downtown location, and Sears has a store in the Loop on State Street.  Even Walmart, ever known for large parking lots, has multiple locations in Chicago.  With the growth of suburban poverty, that seems like a geographical problem.

Monday, January 13, 2014

Specialization and diversity

Ricardo Hausmann has a superb article on cities and specialization.  The takeaway is that specialization is a myth.  Cities that focus on specialization are too often losers, and that the true key to a city's success is diversity.  Money quote:

But specialization at the individual level actually leads to diversification at a higher level. It is precisely because individuals and firms specialize that cities and countries diversify.

This is why the idea that cities, states, or countries should specialize in their current areas of comparative advantage is so dangerous. Focusing on the limited activities at which they currently excel would merely reduce the variety of capabilities – or “letters” – that they have. The challenge is not to pick a few winners among the existing industries, but rather to facilitate the emergence of more winners by broadening the business ecosystem and enabling it to nurture new activities.

I recommend reading the whole thing because I largely agree with the thesis.  Many big cities in America have declined.  Those that were more diverse were better able to weather the destruction that the 1970s wrought.  Chicago has lost a number of important industries over the years; from meat packing to steel many of Chicago's specializations have disappeared.  Being large and diverse was important for Chicago's survival.  Today it is more important than ever.