Platters II

There’s another aspect to the platter system which deserves a little thought. The rules put into play at the higher, overarching levels need to be the most useful to the most people. If they are too specific, they set the lower platters, or ecosystems of exchange, a kilter, setting up rules to counter act the rules.

Take a subway system as an example. The governance and maintenance of the infrastructure is managed as a system for a large population. The NY subway handles over 3 million rides a day. So in terms of setting user fees, the calculation is done with inclusivity in mind, pricing so as to be accessible to the most people, in this case of upwards of 20 million residents

User fees work well in carrying the cost of water delivery, but come up short in paying for sewer line replacement. User fees in subway systems are also insufficient in maintaining the physical structure. In sewer lines it is easy to assign the replacement cost to each dwelling. In metro stops it is less clear who should pay.

As different locations benefit to different degrees from their proximity to the subway stop and the line, who benefits the most from a particular piece of the system is more difficult to identify. But those who enjoy its use the most, are also those who are most likely to be agreeable to paying a surcharge in order to preserve its use.

Similar to the example of waste water removal, the daily patrons at any metro stop are the most likely to realize a tangible benefit. Another way to put it is the people who use the property, apartment towers, businesses, shoppers, office complexes, realized a benefit and hence receive an increased value in rents, level of employee employee satisfaction, and so on. Wouldn’t it be great is there were price signals to tell us how much they would be willing to pay?

Being able to price out the maintenance expense would realize another mid-level platter efficiency. The building owners who do not value the proximity to the subway, and hence would find the maintenance assessment a burden, would be incentivized to leave the property. There maybe ten other desirable aspects to their building keeping them in place. Hence they stay put neglecting the benefits of mass transit.

But if the market value expense of subway maintenance were great enough, the building owner may move five blocks away from the subway line where some combination of the ten other features would maximize their needs. By not have to pay for the line, which they don’t value, they voluntarily relinquish that space to others who value it more.

When new construction goes in, the cost of putting in sewer lines, roads, curbs, and so on are built into the price of the purchase. Developers are only able to go forward with a project if there are buyers who would pay for the package– including infrastructure costs. Last time I checked, these ran around $25-30K per household in Minnesota.

If all the decision making is done at the largest, most encompassing level of cooperative agreements, then then there is a glossing over of the pockets where the benefits are compounded. Infrastructure is an amenity to an entire city, and those who travel to see it. But to afford such a significant amenity, the details of all the various levels of users and daily riders could be better understood.

Numbers, pictures, and what they tell you.

I’m a sucker for images, and these new graphic representations at the intersection of maps and data are lovely.

A consulting firm out of North Carolina, Urban3, has a new measure for assessing the productivity of land in an urban environment. It’s an interesting new twist.

Urban3 makes maps that show the value of city buildings on a per-acre basis. That last detail is the kicker.

“We make the models to provide information equity,” explained Joe Minicozzi when I asked him about his approach. “We show a financial picture of what’s going on with the cash flow. You see where the holes are, what’s doing well, what’s not doing well. You can’t see where you’re leaking your money if you don’t know what’s going on.”

Per-acre analysis: a unique way of looking at urban economics | MinnPost

The general process is to take the tax revenue on the section of land and divide it by a spatial measure. Under this calculation, downtown buildings are more ‘efficient’ than suburban malls with lots of surrounding acreage of asphalt parking spaces. And in this way the analysis has flaws. Consumer (pre-covid) enjoyed the ease of mall access. Downtowns discourage shopping traffic. So if the objective is to encourage downtown visits, an understanding of transit and traffic and parking would be more valuable.

Reframing a means of analysis is exciting, but there are many more features of the built environment than simply tax collection and land space.

State capacity MN style: Stay off the roads!

Around 4pm this afternoon the temp in the Twin Cities creeped above zero ending a 95 hour streak of negative highs and lows. As far as I know there have been no deaths during this polar vortex. But down I35 W, past Iowa, Missouri, Kansas and Oklahoma, a tragic 133 vehicle pile up left 65 hospitalized and 6 dead in Texas. The winter weather conditions coated the interstate with glare ice jackknifing semis across the thoroughfare. Approaching cars helplessly collided into each other as they skated into the metal mangled mess.

Around the same time last week, in Minnesota, a “bridge appeared to be ice-covered when the driver crashed and nearly went over the edge…”Take a look at the video where bystanders stopped a pickup from teetering over a bridge rail into the Minnesota River. When it comes to winter weather, Minnesotans have high state capacity. As a group we have the extra skills and initiative to respond to unexpected winter weather challenges.

It’s not that the people down in the Lone Star State are hick, uneducated or inept. It’s not that they’re too poor to be responsible nor too rich so as think they’re above it all. It’s not that they are too stupid or too smart. Capacity is a combination of knowing what to do, and being able to engage when the need arises. It’s an identification process, a communication process and a step-up-if-you-are-there-and-available process.

The group has to have the expertise to distinguish the glean on the pavement as black ice, and not innocent damp asphalt. A network has strength to communicate the concern when it is reliable and trusted. Parents put in the extra ‘no’ with persistent teenagers who want to go meet their friends, errands are put off. Stories of cars sliding into holding ponds and drivers waiting through the night, half submerged, until someone comes to the rescue, are retold to confirm the nature of the situation. All these activities enforce behavioral sacrifices which lead to successful outcomes.

Our cities are well rehearsed to handle the weather, whereas the Texas Department of Transportation lacks the physical equipment to plow off the half a foot of snow from the roadways. Formal government and its preparedness are just one feature of the ability of a community to identify, communicate and respond to the challenges, or ambitions, at hand. But it’s really the coordination abilities of the whole group which delineates its capacity.

Labor Wedge

Some words or phrases latch onto you like thistles while walking through blooming prairie grasses. They tag onto your pant leg until you notice them and pluck them off for a closer look. Labor wedge has such a nice visual, a separation between what a model is predicting and the empirical data, I think that’s how it wedged its way into my thoughts.

It seems to be a fairly new macroeconomic term, defined at the start of a paper by Loukas Karabarbounis, University of Chicago, as:

Do fluctuations of the labor wedge, defined as the gap between the firm’s marginal product of labor (MPN) and the household’s marginal rate of substitution (MRS), reflect fluctuations of the gap between the MPN and the real wage or fluctuations of the gap between the real wage and the MRS? For many countries and most forcefully for the United States, fluctuations of the labor wedge predominantly reflect fluctuations of the gap between the real wage and the MRS.

https://www.nber.org/system/files/working_papers/w19015/w19015.pdf

At different time periods, American households have found it advantageous to substitute out paid work for something else. They preferred to spend their time, perhaps at home, performing valued activities for their families. Or perhaps the value was found in associational life of another nature. De Tocqueville said years ago that Americans are apt at associational life.

More interesting are the measuring questions. How do we categorize where people have the opportunity to perform duties which build capital for themselves and, most probably, their communities? Where are they exerting energies in lieu of showing up for a paycheck?

Sorting by their economic benefit seems sensible. If the ambitions fall under health related activities (staying out of the workforce to care for an aging parent) then the credit goes to pubic health. If education (during these Covid times people are staying out the workforce to supervise their children’s education) is the goal then shuffle those hours to the public education column of the ledger. If governance (people are choosing to spend their time on park boards or citizen commissions instead of working) is where the hours are spent, then register the tally under civics, and so on.

A better understanding of these motives and ventures will smooth out the prickly problem of labor wedges.

Home after Covid

Lots of folks are speculating about what the world will look like once people emerge from the Covid induced hibernation. Zoom, Teams and other internet mediums have shown how it is possible to run companies and services remotely. But will people use this flexible employment opportunity and choose to live elsewhere?

One way to consider this is to look at why people moved before Covid-19. Porch.com is a home remodeling site and tracks this information. On average people relocate every seven years, and people don’t take it lightly. As Porch explains:

Moving is a hassle. From boxing up one home to finding another, facing a move can feel like scaling Mount Everest. It’s no wonder Americans have been moving at decreasing rates since the 1980s. In fact, the moving rate in America reached its lowest in 2018 since 1948, when the U.S. Census Bureau began tracking moving rates.

Buyers diligently write out a list of wants and needs when they start their home search. Some of these criteria change of the course of evaluating all the amenities that different areas have to offer. One in four (on Porch’s sample of 1000) said that more space was the greatest driver for a move. Realtor Magazine broke the other reasons down by percentages:

  • Desire for a larger home: 26%
  • Desire to own, not rent: 19%
  • Downsizing: 12%
  • New job or job transfer: 11%
  • Desire for a better neighborhood: 9%
  • Separating from a significant other: 6%
  • Establishing own household (e.g. moved out of parents’ house): 6%
  • Desire to be closer to family: 5%
  • Desire for a shorter commute: 5%

Only 5 percent (said) they made a decision based on commute times. A job relocation prompts a greater response. Still–few buyers consider distance from employment as a significant determinant. Perhaps we should consider how many types of jobs are really affected by the ability to dial-in from a home office?

Anyone involved in the construction or maintenance of built structures (plumbers, sheet-rocker, bull doze drivers, HVAC contractors) will always drive to job sites. Then you have all the service providers who interact face-to-face and hence are tied to location such as k-12 school teachers and administrators, nurses and hospital staff, lab workers. People who build stuff like workers in a production plant are also anchored by their workplace location.

That leaves white collar jobs such as attorneys, accountants, mortgage underwriters, IT workers, architects, engineers and actuaries. Many of these jobs have already provided opportunities for their workers to work remotely. And as some of these jobs grow to include management and partnership opportunities, it is less clear that the full-time remote option would be available. A transition to more of a business ownership role would require better proximity to clients and/or employees.

I speculate that remote work won’t send homeowners off to new locations as much as their home’s floor plan. With more time spent at home, the functionality of their living space comes sharply into focus. Many will decide they need more space. Or it maybe the issue of how the space is distributed. An accountant might be fine with spending one day a week wedged in a cinder block space in the basement laundry room of a 50’s rambler, but becoming a full-time home office worker will demand a more comfortable office with appropriate buffers from family life.

This should make We Work types of built-place solutions more popular, especially in neighborhoods with smaller homes which are more difficult to expand due to limited lot sizes. Suburban neighborhoods may have more elbow room, but residents here may feel overwhelmed with the increased together-time. Whereas suburbanites used to enjoy their anonymity, perhaps this will diminish when a bunch of them no longer depart to their other lives across town. Those who seek the old sense of distance and privacy may shift out to the third tier suburbs and beyond.

Maybe the post-Covid environment won’t be about people moving away from their present communities as much as employers reaching across the country into a larger pool of talent. There will be community upsides to more folks working from home as well. Keeping people out of cars and airplanes will give back more time for family work, free up roads from congestion, and reduce pollution. Overall the great work-from-home experiment of 2020 will contribute to increased productivity in both the private and public spheres.

7 Billion for a Transportation Revolution

That’s the election news from Austin, Texas. A pretty hefty purchase for a metro of 2.2 million people. More on the deets from the local Patch:

The project came in two separate parts for voters, Proposition A and Proposition B — both of which gained support from the majority of registered voters. The former, which passed with 59 percent of the vote, calls for an 8.75-cent increase per $100 valuation to the city’s property tax rate, resulting in around a 4 percent increase to the total bill, toward a high-capacity transit system known as Project Connect. Prop B, which passed with 68 percent of the vote, provides for $460 million in debt issuance toward transportation improvements —sidewalks, bikeways, urban trails, safety projects and the like.

This wasn’t the first run at a rail transportation package in the capital of Texas. It wasn’t for lack of need. The urban’s center’s population growth for the decade ending in 2018 was 37%. Yet two prior funding attempts had failed. This time things were different.

“There were three main arguments that were made,” says Austin mayor Steve Adler. “One was congestion. One was climate change. One was mobility equity in our city.”

This time the city was all in. The focus was not only on light rail to improve commute times and to connect various parts of the city, goals which appeal to those who could better use the hour from a daily commute, and to those who prioritize emission reduction. But the plan also provides for “transportation infrastructure including sidewalks, transportation-related bikeways, urban trails, transportation safety projects (Vision Zero), safe routes to school and substandard streets.”

Let’s count the public objectives: transit, health, environment, access to jobs, recreation, safety. And lest you think they forgot about housing:

The plan, funded by an increase in property taxes, also includes $300 million to help make sure that as transportation improves in some neighborhoods and housing values rise, residents aren’t displaced from their homes due to gentrification. They’ll do this by offering rent subsidies, building more affordable housing, and giving financial assistance to home buyers. 

Austin’s business success and hence population boom has put it in the enviable position of having a need for all these public projects as well as the financial ability to fund them, which they have tied directly to the assessed values of real estate.

But what about cities that just need one of those amenities, or even just a leg of light rail, or upgrades to a suite of bridges, or replacement of a water treatment facility? What are the standard pricing mechanisms and what are they tied back to in such a way that is financially acceptable to all those who support the improvement? What are the combinations that upsell a project and close the deal, such as this one in Austin?

Minnesota passed a 1.87 billion bonding at the fifth special session held in 2020. Two years of touring and evaluating worthy projects, and still the delays and posturing and addon’s. The beauty of a standardized pricing mechanism is that the crazy haggling is reduced to more amenable swings. And more importantly people don’t feel the hazy disbelief that I did when I walked away from a souk off the central square in Marrakesh after paying $20 for two sad sticks of incense.

Remote real estate

Saint Helena hangs in the Atlantic between the eastern reaches of South America and the west shores of Africa.

It is one of the most isolated islands in the world and was uninhabited when discovered by the Portuguese in 1502. It was an important stopover for ships sailing to Europe from Asia and Southern Africa for centuries.

A five day ferry ride from Cape Town takes Napoleon buffs to his final resting place on the island. See more great photos from The Atlantic.

Put me in title

In the is-it-private-or-is-it-public game, I agree that a home is a private good. The event which makes you a home owner is a closing, which in Minnesota, is usually held at a title company. On the chosen day the buyers and sellers sit down (pre-Covid) and the buyers sign up for a mortgage to finance the purchase while the sellers sign over a warranty deed. Done deal. No take-backs. The fees include a little state tax and filing fees so the documents are filed publicly in the county recorders office.

The process almost seems trivial but it so powerful. This singing over of a title and its public recording in a government office is the most significant feature of private wealth in the US system.

Interestingly, there are a whole assortment of local norms and customs revolving around closings across the United States. Most states either close at the table or over an escrow period. In Wyoming, however, real estate agents conduct the closings. Also specified and unique to almost every state is a foreclosure process. Most weigh heavily on consumer protection. And here is an interesting table breaking down all the nit picky processes and fees.

Owning a home is a staple of the American dream. Owning a home ties you to a community where you participate in measure of all public venues: public safety, pubic schools, public transportation, parks trails and the environment, governance and civic pride.

The History of Hennepin Ave Bridge

When trying to understand why some goods and services are provided in the private sphere versus the public sphere, let’s consider the history of the Hennepin Ave Bridge. Back when Minnesota was just a territory, full of trappers and prospectors and a military force down the river at Fort Snelling, two entrepreneurs took it upon themselves to get folks across the mighty Mississippi. From MNopedia:

In 1847 businessman Franklin Steele and his friend John Stevens established a rope ferry from Nicollet Island to the western side of the river to help travelers cross.

While the ferry helped initially, an increase in traffic necessitated new construction. In 1851 a bridge was built from St. Anthony to Nicollet Island to make the trek to the island easier for travelers. A short time later Steele and local business leaders took steps to build a bridge that would reach both sides of the river.

On March 4, 1852, Steele and his associates were granted a charter by the Territorial Legislature to build a bridge. The group formed the Mississippi Bridge Company and soon after began planning for a new bridge along the same path as the rope ferry. 

The bridge opened to the public in January of 1855. The business partnership of Steele and Stevens charged a toll of 3 cents to the 1450 residents on both sides of the banks to alleviate their $36,000 investment. But there were problems.

The bridge was almost immediately plagued with safety issues. On March 25, 1855, a tornado tore through the area, nearly destroying the bridge. Although it was rebuilt and reopened on July 4, safety and capacity concerns persisted throughout its lifetime that eventually led to its being replaced.

After 14 years, the bridge changed ownership from private to public ownership.

In 1869 the charter the Mississippi Bridge Company held on the bridge expired and Hennepin County paid the company $37,500 to assume ownership. The toll requirement continued until the bonds sold to buy the bridge were paid off in 1872.

This bridge, as well as all other highways and bridges in the state, continue to operate as part of a public transportation infrastructure system. Why some products are deemed private and some are public is a topic this blog will continue to explore. Products and services that meet the demands of numerous groups, whether business groups, family groups, associational groups and so on, in conjunction with a need for some measure of public safety seem better suited to the public sphere.

Meet the Met

The Metropolitan Council was conceived a little over fifty years ago with the foresight that the Twin City Metropolitan Area of Minneapolis and St. Paul would benefit from a multi-county planning entity. Large infrastructure projects like transit and water/sewer in particular would be best coordinated regionally in lieu of by an aggregation of cities. The 17 member council serves at the pleasure of the sitting governor. Here is a nice fact sheet providing an overview of the council’s latest accomplishments.

The council wields a tremendous amount of power for an unelected body. Over the years objections to this structure have been voiced by champions of both the left and the right. But for the time being, it is a structure which continues to influence the growth of residential settlement through patterns of transportation provided by bus and light rail, and through the provision of city and water.

In a presentation last week, Charlie Zelle, the chair of the council stressed that his agency is responsible for planning. In light of this spirit, I would like to propose a new way to frame up some of the research.

There are two new infrastructure projects which will offer circulation options for residents. First off, a new interchange off interstate I94 will provide direct access to the city of Dayton, a third tier suburb. Dayton, with a population of 6,302, was bypassed for development and become donut hole to suburban expansion while the populations of neighboring communities grew: Maple Grove to 71k, Champlin to 25k and Rogers to the NW to 13K. The mayor of Dayton touts the economic potential that will be unlocked by the anticipated increase in vehicle traffic from the off ramp.

The second infrastructure project is the Southwest Light Rail which recently received its Full Funding Grant Agreement from the Federal Transit Administration. This transit option links the four SW suburbs of St. Louis Park, Hopkins, Minnetonka, and Eden Prairie to the City of Minneapolis.

Excitement around Southwest LRT in not just confined to transportation advocates, already the alignment has seen hundreds of millions of dollars of private investments along the line. From affordable housing to commercial centers, Southwest LRT is making an impact on the state’s economy a trend which will continue far into the future.

Both of these projects will allow a new pattern of circulation for residents. One will experience growth and transformation from rural low density to suburban. The other will allow a built community to circulate more readily to and from the downtown core.

Whereas commuters and businesses are often the focus of the benefits to transit, I would be interested in seeing how all pubic goods in these communities fare following the completion of these two projects. Are there effects to public safety? Are the public schools over-loaded or better-funded? Are people healthier due to better access to medical care?

Maybe part of the concern regarding representation within the Metropolitan Council is for this reason; for the need to voice both the positive and negative impacts of transit and water/sewer infrastructure (restrictions) on the suite of public goods underwritten by a city. Elected officials, especially mayors, manage a boutique of goods for their residents, and they are not seeing the Council take all of them into consideration