Lessons for cities in these hard times: get it together
A conference with experts from numerous American cities draws inspiration from Seattle's approach to regional economics, and provides fair warning to this fractured region as well.
Rockefeller’s estate in Sleepy Hollow, New York was the perfect place to have a three-day discussion, a few days before Halloween, on the current situation in America’s metropolitan areas. Congress is bewitched, the public is spooked, and public budgets are being beheaded. Eek!
The opportunity to stay in Kykuit, Rockefeller’s mansion and now an historic site of the National Trust for Historic Preservation, was a great personal experience and reminded me that wealth was widely distributed throughout American history. The estate was once 3,000 acres but is now only 300 acres, the remainder a state park or still in the family.
Across a majestic view of the Hudson River and its valley is a unique geologic feature, the Palisades, a nearly 20-mile line of steep cliffs along the west side of the river. To prevent development on the top of the Palisades, the family purchased 18 miles of the bluff and gave it to the state for a linear state park. Small public tours are given of the Rockefeller estate and its gardens. The old coach house is now the conference center. I admit that while walking back from the coach house to the home late at night, I did keep listening for the sound of horses’ hooves. Washington Irving is buried nearby, and his spooky stories were much on my mind.
The biography Titan describes Rockefeller’s rise from an accountant for a kerosene company to one of American wealthiest men. His use of monoply power to drive competitors out of business by using profits from one region to subsidize a loss in another region led to America’s antitrust laws.
It also led to a discussion of an article in the New York Times the morning of the conference. The Chinese have purchased the best technology from around the world to build a desalination plant in Tianjin. The plant is operating at a loss. When questioned, a representative of the plant said that the loss was acceptable since it was a state-owned company. The purpose he noted was to learn the technology so that China could manufacture the plants in this industry of the future. Of course if a state-owned company sells the plants at a subsidized cost, the competitors go out of business. A WTO action would take years and even if a tariff was awarded, there would be no one left to protect (read solar panels). Titan must have been required reading in Chinese business schools.
The meeting was hosted by the Rockefeller Brothers Fund and organized by Neal Peirce, a national journalist whose syndicated column is carried by the Seattle Times. The 25 participants included the former mayors of Detroit and Indianapolis, the director of the Atlanta Chamber, staff from the Chamber executives association, senior academics, journalists, and representatives from The Ford Foundation, National League of Cities, and federal agencies. It led to a great discussion and recommendations on metropolitan America.
The focus of the discussion after three years of recession and slow growth turned from urban sprawl to economics and competitiveness. The story on China was a segue into a new global economy. The changed circumstances for the United States over the past 30 years, as technology and global competition have accelerated, have cities and metro areas all over the country searching for new strategies and partnerships to assist their economies. A significant topic was discussing education, such as the degree that our schools are not preparing our youth with the basic skills to participate in the job market. The need for skilled workers also led to a discussion of our dysfunctional immigration policy: The attraction of the best and the brightest to America has been a foundation of our success; now we send them home to compete against us.
While the geographic foundation of an area’s ability to compete was recognized as the metro area, the messiness and fragmentation of our government system was central to the discussion. The general consensus was that structural reform was difficult and the areas of the country that would be more successful were those that developed the least messy systems. Small steps were important. The creation of Sound Transit, The Prosperity Partnership, and the Trade Development Alliance were examples of coordinating steps in our region that I gave as local examples.
There was significant concern about the environment and how to include its importance with a public that is greatly concerned about jobs. The Atlanta Chamber president spoke about the winners and losers in the competition. The metros that will be winners in a technology economy will be those that attract and retain talent; a metro with dirty air and water and an image of smokestacks will be a loser. A clean environment is critical to future economic success.
What about the role of state governments in creating competitive metros? Cities, counties, and metros are created by state government. Few states with the exception of Oregon and Minnesota have created strong metro organizations. The feeling was, with state governments distracted by their budget issues, locals need to weave together their own solutions. There was a recognition that business leadership was essential to pushing the local governments in the metro areas to work together and collaborate. In Seattle, the Trade Alliance partnership was created by leadership from the business community.
But how to raise the local game? How to get metro areas into the world series of job competition? Some steps: First, each area should develop an honestly frank business plan or economic strategy. That plan should recognize the economic crisis but be aspirational. That plan should include a strong focus on how to employ the less educated in the metro, creating a fair and productive economy. Second, states should give incentives for metro collaboration.Third, foundations like Ford and agencies like HUD should pass around information on successful models.
As much as we sit around and complain about conditions here, our region seems to be a national model, notably the development of a metro economic strategy five years ago, the creation of the Trade Alliance 20 years ago, and numerous international study missions that impacted collaboration, leadership development, and the recognition of our global economic circumstances. The National League of Cities published a guide for cities a week before the conference. It is based on a March meeting in Seattle and is titled “Strategies for Globally Competitive Cities.” Again our region is featured.
A book 10 years ago depicted our country as a common market of metro economies. Together they are the national economy. It is clear that some metros will be winners and some will be losers. We have been doing well in this competition, so far. But our local business, government, and education leaders need to work quickly, outrunning the sound of approaching hoof beats. We should be scared.
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Comments:
Posted Wed, Nov 2, 9:44 a.m. Inappropriate
Yes, let's take a course from the Captains who ran their ships aground! I wonder if anyone takes them as serious as they do themselves.
Posted Wed, Nov 2, 10:47 a.m. Inappropriate
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From the piece:
The creation of Sound Transit, The Prosperity Partnership, and the Trade Development Alliance were examples of coordinating steps in our region that I gave as local examples.
Sound Transit is a disaster by all financial performance metrics when compared to its peers. Holding it up as a “success” adds insult to the financial injuries it causes people here.
We’ve got about the highest sales taxes in the country here, and the state’s economy and the region’s economy both are lousy. The state and local political leadership put that oppressive tax regime into place; they meant to that harm the least well-off, and encouraged a growing gap between the rich and the poor. Nowhere has this been more evident than the fevered zeal that high regressive taxes have been imposed in the name of transit.
Sound Transit has been “doing its thing” (including collecting high taxes and selling bonds) since 1997. Anyone think they can identify any tangible economic benefits that taxing district has delivered for the 98% of the 2.7 million people in this region who don’t make money off it and who don’t use its trains or buses on a regular basis? Good luck.
Posted Wed, Nov 2, 10:47 a.m. Inappropriate
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In case some Crosscut reader might be ignorant of the reality regarding how transit costs are covered everywhere else . . . having good bus and train service does NOT mean the people of a metro region should be forced to pay a 1.8% sales tax rate (upping the total to 9.5%), plus car tab taxes, plus property taxes.
Sound Transit’s financing plan is abusive and more than negates the kinds of benefits light rail provides to the peer regions. The peers use mostly federal dollars, and little or no new regressive taxing, to cover capital costs. The new local taxing set to be imposed pursuant to the terms of the ST2 local legislation will be about $85 billion over the next forty years. That’s because of the security terms Sound Transit sticks in its bond sales contracts. That’s a terrible way to finance trains and buses – no other government leaders do that to their communities. Punishing people financially is the name of the game here though. The fact that Sound Transit deviates in those critical ways from its peers makes it a huge, negative economic force in this state.
Take as examples how smarter, more frugal, and less abusive peers pay for buses and trains. The Twin Cities and Portland come to mind. Those metro areas’ leaders do a great job of providing transit – especially light rail – to people and businesses at NO regressive tax cost targeting people.
In the Twin Cities they built out a new light rail system from downtown to the airport (with a tunnel) in just a couple of years in the mid-2000’s. There was NO new local taxing for that. About the same population is served as in Sound Transit’s area (2.8 million) but just check out how no long-term bonding and no new taxing was used there for light rail:
http://www.metrotransit.org/facts-about-trains-and-construction.aspx
TriMet serves three counties around Portland. It only needs about $230 million in local taxing each year to provide expanding bus and rail systems and services to roughly the same population as the Sound Transit taxing area. The TriMet financing plan imposes taxes on businesses directly. The average family there pays $0 in direct taxes for transit each year. The way it was designed here though is nasty: Sound Transit and Metro taxes cost the average family of four here $500 every year, and that amount is set to increase for decades. Oh, and the Seattle TBD is putting car tab fees on top of that ($20 in new annual taxes per vehicle per year, and maybe another $60 per vehicle per year if voters approve the thing at the general election next week).
Unlike any of their peers the bus and train services providers here impose crushingly-heavy regressive taxes. The details are disgusting. Taxes targeting individuals and families in the name of transit are very high. Metro obtained (mostly sales tax) tax increases in 1980, 1993, 2001, 2006, and this year. Sound Transit obtained very high sales tax powers twice recently. All of those tax hikes were designed by the political leadership to target individuals (for the most part).
So where are the supposed “economics and competitiveness” dividends this author contends Sound Transit has delivered? Hint – he is blowing smoke.
Posted Wed, Nov 2, 10:52 a.m. Inappropriate
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This state is the poster child for how exceedingly heavy regressive taxing (especially in the name of transit) is bad for a local economy.
Who is doing well around here? BA, AMZN, MSFT . . . those corporations are very profitable. They don’t have to rely on the health of the local economy for their success though. Also, for the most part they are free to sell to the vast majority of their customers without “collecting and remitting” a 10% sales tax (as is required of most businesses in this state).
Who is not doing well around here? People and businesses dependant on the local economy. The real unemployment rate around here is about 17%. Residence values have not yet found “the bottom”. One key measure of overall economic activity (the state “Revenue Act” tax receipts) dropped significantly beginning in 2008, and it has recovered now only to 2006 levels.
The role of taxing in the name of transit is a large negative for the local economy. Metro, the transit governments in Pierce and Snohomish counties, and Sound Transit will confiscate something on the order of $1.5 billion in local tax revenue this year alone. All the peers do a great job of providing bus service, and expanding train systems, with far less annual local tax revenue:
- TriMet (Portland) - $233 million;
- DART (Dallas/Fort Worth) - $385 million;
- San Diego Metropolitan Transit System - $100 million; and
- RTID (Denver) - $241 million.
There is no excuse for that high taxing level; it’s many times higher than in the peer metro areas.
Not only are dedicated transit taxes too high here, they are the wrong kinds of taxes. The 1.8% sales tax for buses and trains, plus existing car tab taxes and Metro’s property tax, are designed to target people. That’s exactly what we don’t need now. Those regressive taxes act as an anchor on consumer spending, and it is consumer spending that pulls areas out of recessions.
Moreover, consider how much of the regressive tax revenue confiscated for “transit” is lost to the local economy, immediately. Sound Transit can’t ship sales tax revenue out of the local private sector fast enough. It makes huge payments to institutional bondholders, bankers, non-local contractors, and multi-national engineering firms. Vast sums are sent off to BNSF and Amtrak. Oversees contractors get hundreds of millions of dollars for railsets and tunnel boring machines. The size of Sound Transit’s payments to entities such as other local governments, state governments, and indirectly to unions are staggering – far larger than its peers make. That kind of taxing and spending is terrible for the local economy.
Want to elect smarter, more frugal individuals onto Sound Transit’s board to get better results out of that local government? Tough nuts. It was designed to be entirely unaccountable to people. That means its treatment of the public – especially in a financial sense – will deteriorate. Is that the “structural reform” and the kind of “least messy system” this author touts? Those features of Sound Transit are in fact directly contrary to one of the federal constitution’s protections for Americans – we have a right to vote for local government policy makers.
The author of this piece posits that Sound Transit pays “economics and competitiveness” dividends to this metro area. Anyone want to try identifying (and quantifying) those supposed benefits?
Posted Thu, Nov 3, 3:09 p.m. Inappropriate
and to the poster on CC who recently claimed the GMA "moderates" our region's housing prices...
http://seattletimes.nwsource.com/html/businesstechnology/2016682452_homesales04.html
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