Thursday, July 19, 2018

New York’s Economic Future Rides on Its Subways

My Manhattan Institute colleague Nicole Gelinas has a new study out looking at subway ridership growth, and particularly the changes in traditionally poorer neighborhoods that have fueled much of it. It’s called “New York’s Economic Future Rides on Its Subways.”  Here’s an excerpt:

New Yorkers are aware that subway ridership has soared in recent decades, nearly doubling between its modern-day trough in 1977, when 917.2 million people took the train, to its recent peak of nearly 1.8 billion in 2015. But they may not be aware of one of the biggest identifiable reasons that it has soared. New York’s once-poorest neighborhoods, where joblessness and estrangement from the working world was the norm, have added record numbers of people to the labor force since 1990, and these new lower- and middle-income workers are disproportionately dependent on the subway system to get them to and from work.

To be sure, many factors have contributed to subway growth in the modern era. As crime has declined since the early 1990s, the city’s population has grown to a record high, from 7.1 million in 1980, the city’s nadir, to 8.6 million people today. New York’s economy has thrived over the past four decades, with private-sector jobs reaching a peak of 3.9 million this March, up nearly 40% from 2.8 million in 1980. Tourism has steadily broken records each year since the 1990s, with 62.8 million visitors in 2017, well more than double the 25.3 million people who came in 1990, adding to ridership.

Finally, starting in the 1980s, New York invested billions of dollars in public money to rebuild its deteriorated transit infra structure, inviting more riders with more reliable service. In 1998, the introduction of the unlimited-ride monthly MetroCard enabled New Yorkers to increase their usage of this sturdier system without paying extra money per trip.

Yet subway ridership has not grown evenly across the city, nor has it grown fastest where jobs and tourism are concentrated. One commonality stands out among a myriad of contributors to growth. As the number and share of New Yorkers in the labor force have grown, the number and share of those workers who rely on mass transit—especially the subway system—to get to where the jobs are have also grown.

Click through to read the whole thing.

Another interesting study is also out from Michael Pagano and Christopher Hoene at Brookings. They take a look at how state laws create different fiscal systems for municipalities in terms of revenue sources and spending limits.

Here’s a chart of local source revenue streams:

 


from Aaron M. Renn
http://www.urbanophile.com/2018/07/19/new-yorks-economic-future-rides-on-its-subways/

Wednesday, July 18, 2018

The Buffalo Billion Reconsidered

Buffalo Light Rail at Fountain Plaza by David Wilson from Oak Park, Illinois, CC BY 2.0

You may recall my City Journal feature on Buffalo from 2015. This was written about the time New York Gov. Andrew Cuomo’s Buffalo Billion program – a pledge to spend $1 billion in state funds to bring back the city economically – was in the earlier stages of development.

Fast forward, and Cuomo’s Buffalo Billion chief Alain Kaloyeros and Buffalo construction magnate Louis Ciminelli were recently convicted on corruption charges. A lot of the heavy lifting journalistically that raised questions about the Buffalo Billion was done by Jim Heaney and his team at the Investigative Post.

As this was ongoing, the New York Times did an analysis of whether the Buffalo Billion was living up to the hyper. They found mixed results and an overall underwhelming program to date:

But an examination of the plans and progress of projects included in the Buffalo Billion reveals a far more uneven return on investment to date: a mix of street-level successes, expensive brick-and-mortar gambles and ill-conceived misfires.

While some projects have bloomed, others have been delayed by years or show no sign of progress, beyond their initial news release. And Mr. Cuomo’s promises of well-paying, permanent jobs at the most costly projects have repeatedly fallen well short….“I think the Buffalo Billion sounds better than it probably turned out to be,” said Isaac Ehrlich, a SUNY distinguished professor of economics at the University at Buffalo.

“The last seven years have undoubtedly been the best in Buffalo for a very long time,” said Howard Zemsky, the president of Empire State Development, the state’s primary economic development agency. “And I don’t think it’s coincidental that the way the governor transformed economic development has had a very positive impact.”

Mr. Zemsky noted some 25,000 new private sector jobs have come to the city during the Cuomo administration, and added that many of the Buffalo Billion projects — both past and future — were not exclusively about jobs, per se, but support for long-term solutions like downtown revitalization, smart growth, opening up the waterfront and keeping younger generations from fleeing.

Still, the governor’s rhetoric has often proved overblown: At Riverbend, a state-funded $750 million solar plant, Mr. Cuomo promised at least 3,000 jobs. Tesla, which runs the plant, now employs about a fifth of that number — between 600 and 700 employees — working with Panasonic, which is a subtenant. And last month, amid concerns about its solar operations, Tesla said that it would trim its work force by nearly 10 percent, though it is not clear if Riverbend’s work force will suffer.

At an I.B.M. “innovation hub” where the governor said 500 people would be employed in information technology jobs, the actual number is about half that, according to company officials, with many working for subcontracted agencies and earning between $30,000 to $40,000 a year.

In Niagara Falls, the Wonder Falls resort, a planned $150 million project that includes an indoor water park and 300-room hotel, was to create “1,500 direct and indirect jobs” during construction, and 300 more permanent positions, the governor said in 2013.

The project, however, hasn’t even broken ground; an empty former mall and a parking garage remain on the site, though state and company officials said it is still in the works.

When I looked at Buffalo for my article, the impression I got – which I should point out no one said explicitly – was that Cuomo, looking for a signature upstate economic development initiative, found the recently completed Western New York Regional Economic Development Strategic Plan from 2011 and seized on it, redirecting it for his own purposes. I though the original plan created by regional leaders was good, but you’ll note it doesn’t directly map to some of the Buffalo Billion key initiatives. The original plan doesn’t include anything about subsidizing major manufacturing plants, for example. To the extent that things went sideways with some of this, I would look to the Cuomo people, not local Buffalo leaders who put together a pretty strong plan of their own.

I noted in my piece that the size of the Solar City plant created reputational risk to the city if anything went wrong. The headlines about corruption and underwhelming performance at Solar City are an example of this coming to light.

That’s a shame because a lot of good things have been happening in Buffalo. Howard Zemsky is always in the press because of he heads the state’s economic development agency. Properly so, he’s repping their work. But you don’t hear much about the Larkinville development that he spearheaded, which includes a really fantastic renovation of a large former industrial complex. That’s much more significant than sound bites about Empire State Development.

Similarly there is great activities in the neighborhoods, and some of the demographic and economic stats I’ve seen have been somewhat positive, particularly relative to upstate.

It’s unfortunate that this corruption scheme and some ill-advised crony capitalism are detracting from on the ground reinvention happening in a city that does have strategic reason for long term optimism about its prospects.


from Aaron M. Renn
http://www.urbanophile.com/2018/07/18/the-buffalo-billion-reconsidered/

Economic Development Is a Multi-Factored Thing

Image from Wikipedia via Governing

My latest column is now online in the July issue Governing magazine. It talks about the various factors that drive company location decisions. There’s a tendency to adopt what I term a “single factor determinism” model of economic development (and other things). That is, people pick some X factor – say, talent – and use it as an all-powerful explanatory lens to understand the world. While many of these are important factors, actual reality is complex.

In my column I look at the move of fund manager Alliance-Bernstein from New York City to Nashville.

Economic growth, then, appears to spring from an amalgam of factors. Talent, wherever it can be found, really is of great importance. If you don’t have or can’t get the labor force to meet the demands of business, it’s going to be tough to grow your jobs base. And if other places have or can get the same talent — or perhaps easily convince your talent to move there — and have other advantages over you in terms of costs and business climate, then the talent you have may not save you.

There’s another troubling labor factor: Many places have shrinking labor forces, or will have them soon. This means it’s not very likely they will be able to grow their economies significantly no matter how favorable their tax climate. While it’s possible for them to become higher-value economies while shrinking in jobs, that’s not likely either. For some places, their struggles to attract people may be in part related to high taxes or onerous professional licensing and other regulations. In others, quality-of-life issues like crime may loom larger. Or perhaps problems like a bad brand in the market lag behind the reality of positive changes.

Click through to read the whole thing.


from Aaron M. Renn
http://www.urbanophile.com/2018/07/18/economic-development-is-a-multi-factored-thing/

Monday, July 16, 2018

Louisville’s Billion Dollar Basketball Arena

Photo Credit: Jamesmac96, CC BY 3.0

I was conveniently in Louisville the day this Courier-Journal article I was quoted in about the KFC Yum Center came out. So much of the writing about the boondoggles of publicly financed sports venues focuses on stadiums. But this piece shows that arenas can be plenty expensive too. Including interesting, Louisville spent $1 billion on a new arena – for a college basketball team.

I spoke to the reporter a while back and gave some general context about other arena projects, but much of the specifics around the financing of the KFC Yum Center was new to me. And quite eye-popping.

The arena’s total cost, including debt repayment, is estimated around $1 billion. And unless the debt is paid off early, the taxpayer subsidies will keep coming until Yum Center is 37 years old. “There is more public subsidy of the arena than was intended at the beginning or that anyone believed would happen,” said Pam Thomas, senior fellow at the Kentucky Center for Economic Policy. She called the arena a “cautionary tale” about the need to vet costs and benefits of big economic development projects.

Keeping Yum Center afloat now costs Louisville Metro nearly $11 million per year — more than three times the city’s annual budget for such emergency equipment as fire trucks and ambulances. Over the next 30 years the city is expected to pay more than $300 million toward the arena. The state, with its own budget issues, also has pledged hundreds of millions more in taxpayer dollars over the life of the debt and has lifted a cap originally set at $265 million.

“It’s one of the major local scandals in recent history,” said Wayne, who was a member of the Legislature’s capital projects and bond oversight committee as the arena project moved forward. In 2008 he voted for the bond issue but still expressed reservations about the finances and the volatility of the credit market. “It’s what happens when a power elite tries to impose something in kind of an autocratic way,” Wayne said.

Civic leaders were confident the arena would pay for itself, even after choosing a waterfront site in 2006 that was criticized as $114 million more expensive than a smaller downtown alternative. In 2007 they killed an on-site hotel designed to provide more income, saying it would cut into the plaza space and wasn’t needed. With the exception of $75 million from the state, the arena was largely financed with bonds – a form of debt much like a home mortgage….Goldman Sachs called the arena financing a win for Louisville, even putting out a slick video touting how it would help revitalize downtown in 2011.

To help compensate for the TIF’s poor performance, arena officials began raiding a maintenance fund to make debt payments. Metro Louisville in 2012 also bumped up its $6.5 million annual subsidy to $9.8 million, the maximum then allowed under the agreement with the arena. But debt payments and other expenses still exceeded what the arena was generating. In 2013, U of L agreed to a three-year cap on its share of Yum Center advertising revenue, freeing up an estimated $1.5 million the arena could use for debt payment. And the authority tried a fix that seems counter-intuitive — shrinking the TIF to two square-miles as a way to remove some areas in decline. TIFs capture changes in revenue from the base tax year. That usually means revenue goes up, but change can cut both ways. When Boland Maloney Lumber Co.’s downtown lumber yard closed in 2008, for instance, the TIF lost value.

Adding to the arena’s money woes were escalating annual debt payments. In 2013, annual debt service was nearly $21 million. By 2022, it would exceed $31 million. Cox became the authority’s fourth chairman in a decade in 2016 and said he quickly learned the arena faced a bond default within a few years. “We were so far behind what everyone expected,” Cox said. “To me, that was overwhelming.”

One area that deserves further scrutiny is how the University of Louisville was able to secure an almost NBA-style lease on the new arena.

As the Yum Center’s debt struggles became commonly known, U of L’s lucrative lease became the subject of debate. The lease, which originally ran through 2044, gave U of L 88 percent of private suite revenue; half of net revenue from merchandise sales, whether the school was playing or not; half of net concessions during U of L events; and other revenue. In recent years, the men’s basketball team made about $20 million from ticket sales, concessions, premium suite rentals, advertising and other revenue. In 2016-2017, the program paid the arena a net settlement of $1.36 million.

This exceptionally lucrative lease, which former arena board member Todd Blue says allowed the university to “commandeer” a community asset, was part of what made U of L the biggest money-making basketball program in the NCAA.

Part of how U of L did this was by threatening to build their own arena on campus. City officials wanted a downtown arena. I question whether the university’s threat to build a campus arena was credible. The state likely would not have given them the money. Meaning that if the university wanted to build a super-lucrative money maker with luxury suites and such, it would have had to directly borrow the huge amounts of money needed to do it – meaning most of the revenue would be pledged to debt repayment. I doubt they would have netted anything nearly as much out of their own arena.

As reporter Allison Ross points out, conflicts of interest suggest this negotiation with the university may not have been all that it seemed:

Denis Frankenberger, a Louisville businessman and outspoken critic of arena finances, questioned whether there were conflicts of interest in the original contract negotiation, noting that several of the arena’s board members have ties to the university. They include former U of L basketball star Junior Bridgeman and Jim Patterson, for whom the U of L baseball stadium is named.

Given what we know about Louisville’s basketball program, some kind of shady situation can’t be ruled out. There should at least be some sort of forensic investigation into this to find out exactly what transpired.

In any case, don’t think that stadiums are the only sports projects that can suck up huge cash. Arenas can also be far more expensive than you might think.

Click through to read the entire article in the Courier-Journal.


from Aaron M. Renn
http://www.urbanophile.com/2018/07/16/louisvilles-billion-dollar-basketball-arena/

Thursday, July 12, 2018

The Once and Future Lagos

Lagos, Nigeria. Image via City Journal

City Journal just ran a very interesting piece on Lagos by Armin Rosen. Lagos is by some estimates Africa’s largest city and is well known as a creative capital. I don’t know anything personally about the city, but found Rosen’s description balanced and fascinating. Here are some excerpts:

Poverty, confusion, and moral fluidity haven’t stopped Lagos from achieving global prominence. Maybe an all-pervading looseness has even been a source of the city’s growth, since it has expanded with a velocity that prudent planning would avoid. Lagos is now West Africa’s economic and cultural hub, as well as perhaps the continent’s largest city, depending on which population figures one accepts. By most accounts, Lagos has twice as many people as London, along with a GDP greater than all but six African states. In its successes and failures, the city offers a cautionary preview of where an urbanizing developing world is hurtling.

The project seeks to expand the congested Victoria Island area, while creating a glittering showcase of world-class high-end real estate, thus helping to reverse Lagos’s reputation for disorder. But the initiative reflects a certain myopia: the landfill destroyed Bar Beach, once a popular public space in a city with no large parks and few major squares or monumental avenues. It’s not obvious whether the existing infrastructure can support such a large development so far off the mainland; as it is, Victoria and Lagos Islands are accessible only through a gauntlet of traffic choke points. The development is also aimed at a tiny upper sliver of an overwhelmingly poor city. “The plan is to create a Dubai and just ignore people who can’t afford to live in the proverbial Dubai, which describes most of the population,” says Olaolu Ogunmodede, a researcher at the Lagos-based Center for Public Policy Alternatives and an editor at The Republic, of the Lagos state government’s approach. (The city is organized as a state within the Nigerian federal system.)

In nearby Ikoyi and Victoria Island, affluent Lagosians have little reason to venture too far, either—they live in gated estates, with their own security, garbage collection, electricity, and private bus services. One gets frequent reminders of how segmented Lagos is, how cordoned off its parts are from one another. Cut down a side street in Ikeja, and you’re suddenly in a squalid parallel world, where generators scream beside narrow mud streets, lined with freelancing numbers-runners and peddlers hawking broken clocks. The alley ends, and the modern downtown resumes again. From the Third Mainland Bridge, travelers can see the plush villas of Banana Island and Lekki glimmer in the distance at night, while the vast lagoon-side Makoko slum, less than 500 yards west of the six-mile-long causeway and home to an estimated 250,000 people, is invisible in the darkness. Makoko has become a transit point for timber from farther down the coast, creating yet another vibrant hyper-local poverty economy. You can smell the tang of burning garbage and wood from the bridge whenever traffic slows.

Cheta Nwaze, a researcher at SBM intelligence, offers more insight into the city’s divisions. Nwaze and another SBM analyst, Ikemesit Effiong, meet me at Seven Eagles Spur, a diner-style restaurant inside Ikeja’s City Mall, decorated in images of southwestern American desert highways and chiefs in feather headdresses. Nwaze informs me that, a decade ago, the land that the mall now occupies was a slum. Residents were removed with a minimum of due process or public deliberation—still the standard procedure for any big-ticket Lagos development project. The mall has a KFC and a Nike store, and our lunch bill comes out to 9,100 naira, or $25. The people who had lived on the site of the future mall probably never imagined such a thing. “You give someone 9,100 naira and tell them to kill someone, and they will do it,” Nwaze says, only half-joking.

Lagos is booming. Credible estimates put the population at 17 million or 18 million, but the city defies understanding of its true scope. “Most Nigerians can’t be accessed even by the government,” Effiong notes. This relative lack of data could turn out to have broader significance, since the world is sure to look more like Lagos in the coming decades. An estimated 54.5 percent of the global population now lives in cities, but urbanization is less complete in the developing world. Slightly more than half of Asia’s population, and nearly 60 percent of Africa’s, still lives in rural areas. The number of cities with 500,000 inhabitants or more is expected to grow by 80 percent in Africa alone between now and 2030, and the ten cities that the UN projects to cross the 10 million–inhabitant “megacity” threshold by 2030 are all in developing countries. By 2030, some 730 million people, or 8.9 percent of the people on earth, will live in these megacities, up from the current total of 500 million, or 6.8 percent. Success has made Lagos an unnerving glimpse into the near future.

This constant flux can make for a verdant creative environment. Jumia and iRoko, West Africa’s leading e-commerce and entertainment streaming services, respectively, are regionally important companies founded in Lagos during the past decade. Music and movies produced in the city dominate West Africa and beyond—it was a Lagosian, Wizkid, who appeared alongside the Canadian pop star Drake in his 2016 megahit “One Dance.” As Edet Okun, an assistant curator at Lagos’s Nimbus gallery explains, the city has also fueled a burgeoning art market. “The money is here, and you have a high concentration of people,” Okun says, guiding me through a collection that includes traditional Ife bronzes, as well as striking monochromatic abstract works from Nigerian artist Olu Okekeanye.

Attracting Nigerians of every description, Lagos offers hope for a country often defined by its religious, regional, and ethnic cleavages. It is the exception to Nigeria’s fault lines, “probably the one place in the country where, regardless of where you came from, you can feel like you belong,” one Nigerian told me. For some Lagosians, the rationalized marketplace of the city is also the only way of escaping a dead-end village economy, in which labor is a social or familial obligation, rather than a source of money and freedom. “A lot of these many odd jobs that people do for free in rural areas, people pay for in Lagos,” says Ray Ekpu, cofounder of the magazine Newswatch. Ekpu moved to Lagos from Nigeria’s southeast in 1980 and has seen the worst of the city: he was imprisoned six times during military rule, and a close colleague at Newswatch died in a mail-bomb attack in 1986 that many suspected was linked with the magazine’s work. “People come searching for the bright lights,” Ekpu observes. “They think they can find a good life here. Some of it is true. Some of it is a myth. They think if they can get here, they can find something to do.” That Lagosian myth—of opportunity and an escape from Nigeria’s various social and political ills—has an intense hold over the country.

Infrastructural lapses aside, Lagos uneasily embodies one of civilization’s fundamental divides: the split between the city and the provinces, between a flagging periphery and the center toward which that periphery gravitates. The numbers reflect an astounding imbalance. Lagos contributes more to Nigeria’s GDP than any other state, and twice as much as the second highest-ranked state. Only 214 Nigerians pay 20 million naira ($56,000) or more in taxes each year; all live in Lagos, which collects some 39 percent of Nigeria’s internally generated revenue. Lagos state governor Akinwunmi Ambode has claimed that 60 percent of the country’s industrial and commercial business takes place in his city.

Click through to read the whole thing.


from Aaron M. Renn
http://www.urbanophile.com/2018/07/12/the-once-and-future-lagos/

Tuesday, July 10, 2018

America’s Aging Counties and Migration Destinations

Here are a couple of quick hit items. The Census Bureau has out a press release touting new data showing the Midwest has the large number of counties where the media age is declining. But what we see is that it is really more the Great Plaines by common view, and the Great Lakes area most people think of as the Midwest continues to age.

And over at New Geography, Laura Dzwonczyk has some interesting charts and maps of migration using what looks like ACS migration data. Here’s one sample:


from Aaron M. Renn
http://www.urbanophile.com/2018/07/10/americas-aging-counties-and-migration-destinations/

Monday, July 9, 2018

The Decline of Boating

Monroe Harbor in Chicago. Photo Credit: Diego Delso, CC BY-SA 3.0

The Chicago Tribune ran an interesting story on the declining number of boats moored in some of Chicago’s lakefront harbors.

Experts in the industry offer a few explanations for struggling harbors like Monroe and 31st Street in this post- recession era: An aging demographic of boaters, competition from other marinas, the time-intensive nature of the sport and the fact that many boat owners want slips — which allow boaters to park right at the dock — because they’re generally more convenient, if more expensive. Monroe Harbor only has moorings which require boaters to hail a tender out to their boats.

In 2007, there were 980 total moorings at Monroe Harbor and all of them were occupied, according to Westrec. With hundreds of moorings removed in recent years, there were 390 available at the start of July and 373 were snapped up.

Those in the local boating community say the sport is on the rebound. But the overall occupancy rate in Chicago harbors is still significantly lower than the mid 2000s. In 2007 Westrec told the Tribune the harbors were 99 percent occupied with 5,100 spaces. As of June, the occupancy rate was at 80 percent with 4,281 of the 5,339 spaces taken.

It’s surprising that even has Chicago is experiencing an in-city white collar residential and employment boom, boating is in decline.

CityLab also recently wrote about the declining Millennial interest in country clubs and golf. CityLab follows the trend of speaking of this this mostly in terms of Millennial high mindedness. But they lead with a more likely cause: not enough money. Millennials today are burdened with student loans and paying a high fraction of their salary for an apartment in the neighborhoods they desire. This makes it harder for them to afford club expenses, even for hip places catering to them. Even in New York City, there are probably more old line city clubs than there are new school places like SoHo House.

Obviously each new generation is going to have different consumer preferences than their predecessors, and this challenges established institutions to constantly reinvent themselves to stay relevant. But the comparative lack of available income resulting from real declining salaries, student loan debt, and high real estate costs is going to prove a structural challenge for people hoping to induce Millennials to open their wallets for what are at core luxury purchases.

 


from Aaron M. Renn
http://www.urbanophile.com/2018/07/09/the-decline-of-boating/