Category Archives: Planning

How Planners Can Rescue Virginia from the Fiscal Abyss

This is a copy of a speech that I presented to the Virginia Chapter of the American Planners Association Monday, with extemporaneous amendments and digressions deleted. — JAB

Thank you very much, it’s a pleasure to be here. Urban planning is a fascinating discipline. As my old friend Ed Risse likes to say, urban planning isn’t rocket science – it’s much more complex. Planners synthesize a wide variety of variables that interact in unpredictable, even chaotic, ways. In my estimation, you don’t get nearly enough respect and appreciation for what you do

OK, enough with the flattery. Let’s get down to business.

toastThis is you. You’re toast. Unless you change the way you do things, you and the local governments across Virginia you represent are totally cooked. … Here’s what I’m going to do today. I’m going to tell you why you’re toast. And then I’m going to tell you how to dig your government out of the fiscal abyss, earning you the love and admiration of your fellow citizens.

Why You’re Toast

old_people2Here’s the first reason you’re in trouble — old people. Or, more precisely, retired government old people. Virginia can’t seem to catch up to its pension obligations. The state says the Virginia Retirement System is on schedule to be fully funded by 2018-2020. But the state’s defines 80% funded as “fully funded,” which leaves a lot of wiggle room. The VRS also assumes that it can generate 7%-per-year annual returns on its $66 billion portfolio. For each 1% it falls short of that assumption, state and local government must make up the difference with $660 million. As long as the Federal Reserve Board pursues a near-zero interest rate policy, depressing investment returns everywhere, that will be exceedingly difficult. A lot of very smart people think 5% or 6% returns are more realistic. In all probability, pension obligations will continue to be a long-term burden on localities.

potholesSecond, the infrastructure Ponzi scheme — that’s Chuck Marohn’s coinage, not mine — is catching up with us. For decades, state and local government built roads and infrastructure, typically with federal assistance, proffers or impact fees with no thought to full life-cycle costs. State and local governments have assumed responsibility for maintaining and replacing this infrastructure. Well, the life cycle done cycled, and the bill is coming due. We’re finding that we built more infrastructure than we can afford to maintain at current tax rates, leaving very little for new construction.

accotinkThird, after years of delay, serious storm water regulations are kicking in. Local governments bear responsibility for fixing broken rivers and streams like Accotink Creek, showed here. (Yeah, that’s a creek. It’s having a bad day.) Best guess: These regs will cost Virginia another $15 billion. But no one really knows. And it may just be the tip of the iceberg. I recently talked to Ellen Dunham-Jones, author of “Retrofitting Suburbia,” and she noted that a lot of the storm water infrastructure that developers built in the ‘50s and ‘60s is crumbling. The developers are long gone. Someone’s going to have to fix that, too. Guess who?

property_taxMeanwhile, the largest source of discretionary local tax dollars – real estate property tax revenues – is stagnating. According to the Demand Institute, residential real estate prices in Virginia will increase only 7% through 2018 – the third worst performance of any state in the nation. Don’t count on magically rising property tax revenues to bail you out.

In fact, the tax situation is worse than it looks. Demand for commercial real estate is dismal, too. Consider what’s happening to the retail sector. We’re going from this…

shopping_centerTo this..

amazon_warehouse

Every Amazon.com distribution center represents dozens if not hundreds of chain stores closing. It means more vacant store fronts, more deserted malls, less new retail development. Continue reading

Boomer….Wha?

a-bomb peace signBy Peter Galuszka

Remember the federal deficit that lurked behind the corner? Where did it go?

Al Kamen of The Washington Post asks that question in a column today. He writes:

“Not long ago, the federal deficit was projected to destroy the country, our country’s future and just about everything else. The politicians and the news media regularly fretted about what to do. Budget battles shut down the entire government for a couple of weeks.”

He continues: “So, what happened? The simple answer, of course, is that the deficit is way down and, for now, is no longer a big problem.”

The Congressional Budget Office estimated last week that the deficit for f/y 2014 is $492 billion or 2.8 percent of GDP. That puts us back in the early years of the George W. Bush administration.

Hmm. Kinda of makes you wonder where all this out-of-control spending is coming from that the Tea Party types talk about so much.

It is off the media radar screen. The Post has a graphic showing that the words or mention of the “national debt,” federal debt” or “federal deficit,” reached a high around the first half of 2010. The conservative Washington Times the most at 18; The Post with 13; and the New York Times with 10. Now it’s around three.

This isn’t to say that federal spending doesn’t merit watching. But where is Jim Bacon when you need him?

RAM, Coal and Massive Hypocrisy

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

By Peter Galuszka

Sure it’s a photo op but more power to him.

Gov. Terry McAuliffe is freshly arrived from the cocktail and canape circuit in Europe on a trade mission and is quickly heading out to the rugged and impoverished coal country of Wise County.

There, he, Attorney General Mark Herring and Health and Human Resources Secretary William A. Hazel will participate in a free clinic to help the mountain poor get free health care. The political opportunity is simple: Many of the 1,000 or more who will be attending the Remote Area Medical clinic are exactly the kind of people getting screwed over by the General Assembly’s failure to expand Medicaid to 400,000 low income Virginians.

RAM makes its Wise run every summer and people line up often in the wee morning hours to get a free medical and dental checkup. For many, it’s the only health care they get all year unless it’s an emergency. Another problem: Distances are great in the remote mountains and hospitals can be an hour away.

Mind you, this is Coal Country, the supposedly rich area upon which Barack Obama is waging war and harming local people by not going along with coal executives’ demands on environmental disasters such as mountaintop removal, keeping deep mine safety standards light and avoiding carbon dioxide rules.

The big question, of course,  is why if the land is so rich in fossil fuel, are the people so poor and in need of free medical care? It’s been this way for 150 years. And now, coal’s demise got underway in Southwest Virginia in 1991 when employment peaked at about 11,000. It is now at 4,000 or less. It’s getting worse, not better.

In June 2011, by coincidence, I happened along a RAM free clinic in Pikesville, Ky., not that far from Wise when I was researching my book, “Thunder on the Mountain: Death at Massey and the Dirty Secrets Behind Big Coal.” My photographer Scott Elmquist and I spotted the clinic at a high school. There must have been hundreds of people there –  some of whom told me they had been waiting since 1:30 a.m. It was about 8:30 a.m.

Attending them were 120 medical and dental personnel from the U.S. Public Health Service. They were dressed in U.S. Navy black, grey and blue colored fatigues. The University of Louisville had sent in about 80 dental chairs.

Poverty in Pike County had been running about 27 percent, despite the much-touted riches of coal. Pike is Kentucky’s biggest coal producer.

One man I spoke with said he had a job as a security guard, but he doesn’t qualify for regular Medicaid and can’t afford a commercial plan. In other words, had I interviewed him more recently and had he been a Virginian, he would have been lost through the cracks of Medicaid expansion. Alas, he’s in luck. In 2013, Kentucky opted for a “marketplace” expansion system where federal funds would be used to help lower income buy health plans through private carriers.

Lucky the man isn’t from here. The marketplace plan is exactly the kind that McAuliffe has proposed and exactly the one that stubborn Republicans such as Bill Howell in the General Assembly are throttling. The feds would pick up the bill for expanding Medicaid to 400,000 needy Virginians, at least initially.

Yet another irony. Expanded medical benefits are available just across an invisible border in two states whose coalfield residents somehow never got the great benefits of King Coal.

The Great U.S. 460 Swamp

swamp

VDOT had loads of warning that wetlands could kill the U.S. 460 project but the state charged ahead with a design-build contract that everyone knew could explode. The state has spent $300 million it may never recoup.

by James A. Bacon

Weeks after the release of the “Special Review of the U.S. Route 460 Corridor Improvements Project,” submitted last month to Transportation Secretary Aubrey Layne, important questions remain about how the Commonwealth could have paid $250 million to US Mobility Partners, the design-build contractor on the $1.4 billion project, and run up another $50 million in expenses without turning a single spade of dirt. The Special Review is a dense and tangled document but one important theme comes through loud and clear: The wetlands controversy that caused the McAuliffe administration to suspend the project this March was bubbling on the front burner when the McDonnell administration put the project into overdrive two years ago. VDOT and the McDonnell transportation team had ample warning of the project’s problems and took no effective action to defuse them.

The Army Corps of Engineers (USACE) had been expressing reservations for years about the route preferred by the Virginia Department of Transportation (VDOT) for the 55-mile highway project, and it reiterated those warnings repeatedly as McDonnell’s transportation team lined up funding for the project and signed a contract with US Mobility Partners to design and build the highway. The inability of VDOT to obtain a USACE wetlands permit on a timely basis prompted the McAuliffe administration to put the project on ice in March until the differences could be resolved.

The question before the public is how did VDOT find itself paying tens of millions of dollars monthly to US Mobility Partners to mobilize for a massive construction project while knowing that the USACE was unlikely to issue the necessary wetlands permits — indeed, without even having submitted the documentation to begin a formal USACE review! Unless we know what went wrong and take appropriate corrective measures, citizens and taxpayers have no assurance that comparable fiascos will not occur again in future mega-projects.

The Special Review, prepared by VDOT and the State Inspector General’s Office, is extremely cautious in drawing conclusions. But the report does provide a wealth of documentation, primarily in the form of emails involving senior VDOT employees and members of the Office of Transportation Public Private Partnership (OTP3) staff who structured the public-private partnership and negotiated the contract. As I noted in a past post, deciphering what transpired is like peeling back the layers of an onion. For now, I am focusing upon the onion peel documenting the wetlands controversy between VDOT and the Army Corps of Engineers.

A long running disagreement. The origins of the wetlands controversy predate the McDonnell administration. VDOT had been noodling the proposed Interstate-grade highway for years, and it had identified a preferred route, one that would swing north of the existing U.S. 460 highway, a four-lane highway with top speeds of 55 miles per hour interrupted by numerous stoplights and plagued with local traffic. VDOT argued that only a limited access highway could provide the mobility that was needed for trucks serving the Virginia ports and in the event of a hurricane evacuation, and that the existing route would be impractical to upgrade. But that was not a decision it could render on its own. VDOT’s appraisal had to pass muster with the USACE, which is tasked with ensuring that any route chosen is the “Least Environmentally Damaging Practical Alternative.” The USACE preferred a route with a lower environmental impact, preferably one grafted onto the existing U.S. 460 with bypasses around the hamlets along the highway.

The Special Review correspondence between VDOT and USACE details the disagreement as far back as 2003. As the authors conclude from their review of the documentation:

The correspondence … indicates an ongoing, decade long, discussion between VDOT and the Corps over whether CBA-1 (VDOT’s preferred alternative) or CBA-2 (the Corps’ preference) was the best location for the 460 project. Although VDOT employees have indicated nothing unusual about this discussion, the length of the ongoing discussion seems unusual to us, particularly since no resolution as to an accepted route was reached.

The discussions were ongoing in 2012 when the McDonnell administration was moving heaven and earth to move the project forward. As various emails cited in the review make clear, Governor McDonnell regarded the Route 460 corridor as his “number 1 transportation priority,” and Transportation Secretary Sean Connaughton rode herd on the VDOT bureaucracy to meet the goal of closing the deal by the end of the year.

By mid-2012, Connaughton and VDOT were closing in on a deal structure for the public-private partnership but had not resolved the environmental issues. In a letter dated May 30, 2013, Kimberly Prisco-Baggett, chief of USACE’s Eastern Virginia regulatory section, wrote the following to VDOT’s environmental project manager:

We are concerned that the project has moved ahead with CBA 1 (VDOT’s preferred route alignment) as the alternative, and that although seven years have passed since we indicated that CBA 2 appears to be the [Least Environmentally Damaging Practical Alternative], neither FHWA (the Federal Highway Administration) nor VDOT has requested to meet with us to discuss this apparent conflict. It is not helpful to the public, or any potential private-public partners, not to address this critical matter before incurring additional expense and delays associated with pursuing a project that may not be permittable.

In an email chain between June 7 and July 13, 2o12, Morteza Farajian, program manager with OTP3 (the public-private partnership office) warned senior VDOT officials that the three construction consortia bidding for the project were getting nervous about the unresolved permitting issue:

I have received serious concerns from our Offerors in regard to the Comments from the Corps of Engineers on the Route 460 reevaluation. They would like to know where we stand today and how we will resolve the issue with the Corps of Engineers and FHWA. They emphasized that this is a huge risk to the procurement and they might stop working on this procurement if the issue between VDOT and COE is not resolved.

Continue reading

Some Answers, More Questions about the 460 Fiasco

July2014_coverby James A. Bacon

If you’re new to the U.S. 460 Connector controversy and need a primer to bring you up to speed, I’d recommend you read the new Virginia Business cover story written by Paula Squires. She provides an digestible overview of a complex story and advances public understanding with some fresh reporting. In particular, she homes in on a central question for which I have yet to see a clear, concise explanation: How did the Virginia Department of Transportation come to pay $250 million to its public-private partner in the $1.4 billion project, US Mobility Partners, before critical wetlands permits were issued by the Army Corps of Engineers?

Squires does not provide the answer but she gets us closer to the answer. She interviewed Charlie Kilpatrick, the current highway commissioner who was deputy commissioner under the McDonnell administration.

Asked why the state signed off on such a high-risk project, Kilpatrick says, “It was a high risk if a permit was not obtained. When we went to closing [in December 2012], we believed that we had a permittable project.” However, he adds, “It was recognized from the beginning that this was going to be a complex and challenging permitting process.”

As a VDOT veteran, Kilpatrick observes “I don’t know that it has ever happened in Virginia, where a project was not ultimately permitted, after it went through the regulatory steps … I do think we will get a permit.”

According to him, pressure from the McDonnell administration played a role in how the project was handled. “This project was a clear priority of Governor McDonnell,” Kilpatrick says.  “Move it as quickly as possible … Deliver the project. Get it under construction.”

Those were VDOT’s marching orders, he recalls. “VDOT’s job here was to deliver. The project — it complied with the law.”

The state agency began to balk, though, after the original route became questionable last September because of its wetlands impact. The administration wanted to begin right-of-way proceedings and public hearings.

“We said no,” says Kilpatrick. “We’re not going to go out and acquire right of way, because we don’t have a permit … I had the potential of VDOT purchasing land that would not fit with an ultimate road alignment … To have a public hearing on a roadway that may need to shift the alignment, that’s not a prudent thing to do.”

Boiling it down: In December 2012 VDOT believed that it had a “permittable project.” In other words, there were issues but VDOT believed they could be worked out, as they always had been before. What’s still not clear to me is what happened after December 2012 to disabuse VDOT of the notion that the permitting issues could be resolved within an acceptable time frame. Did some new knowledge come to light? Did the Army Corps of Engineers become more assertive in expressing its concerns? I’m sure the answer is out there, possibly buried in the McAuliffe administration’s internal review. It just hasn’t been brought forth clearly in the media.

Finally, Some Sense on Climate Change

mowbray archBy Peter Galuszka

Pulling the state’s head out of the sand, Gov. Terry McAuliffe has reversed his predecessor’s policy on addressing climate change.

He has reestablished a 35-member panel to see what the state can do to deal with what many scientists believe is an impending crisis. McAuliffe revived the panel first created by Democratic Gov. Tim Kaine and then left to wither away by former Republican Gov. Robert McDonnell.

Ironically, the new panel includes Michael Mann, a former University of Virginia climatologist who was the target of bitter and petty attacks by former arch-conservative Atty. Gen. Kenneth Cuccinelli over his view that mankind was responsible for carbon dioxide-driven greenhouse gases that are helping warm up the earth, melt polar ice caps and potentially flood huge sections of coastal cities such as Norfolk.

It’s about time that Virginia rejoined the 21st Century. McDonnell took the state backwards on environmental issues by gutting commissions such as this one and creating others that were devoid of ecological viewpoints and stacked with members of the fossil fuel industry and utility executives.

McAuliffe’s new commission has utility people like Dominion Virginia Power President Robert M. Blue and Bernice McIntyre of Washington Gas Light Company. But it is also well stocked with green types such as the Sierra Club, the Chesapeake Bay Foundation and the Southern Environmental Law Center whose views were pretty much in the wilderness during the McDonnell term.

It is finally time for the state to realize that climate change is real. Study after study shows that the state is vulnerable – from agricultural impacts brought on by different weather patterns to rising water in coastal areas. One area worth study is doing more to speed the switch to renewable energy sources like solar and wind.

McDonnell had pushed a policy that would make Virginia “the Energy Capital of the East Coast,” but the effort excluded renewables in favor of offshore oil and gas companies, nuclear power and coal.

Curiously, McAuliffe also favors such endeavors as offshore petroleum development. That raises questions in the face of massive fracking onshore for natural gas and the revolution it has sparked. Perhaps the new commission can provide some guidance.

It is refreshing that Virginia is finally emerging from the intellectual horse blinders that kept the debate stuck in Benghazi-style debates over emails at a British university or trying, unsuccessfully, as Cuccinelli did, to harass scientists globally over a ridiculous claim that Michael Mann had defrauded Virginia taxpayers by asserting what most climatologists do – that climate change is real and mankind is a reason for it.

Finally. . .

Two UMW Daughters of the ’60s

Birmingham By Peter Galuszka

Just a few days ago, Elena Siddall, a Mathews County Republican activist and Tea Party Patriot, posted her account on the Rebellion of being a social worker in New York in the 1960s and the wrong-headedness of Saul Alinsky, a leftist organizer who had had a lot of influence back in the day, among others. I won’t comment on Ms. Siddall’s lively account and conservative point of view. But I do notice one thing: she is a 1963 graduate of what is now the University of Mary Washington, which then was considered the female side of the University of Virginia (campuses being segregated by sex back then).

I have a tie as well to Mary Wash, which is now coed. My daughter graduated from there last year and my cousin-in-law, now living in Tennessee, went there was well before moving on the U.Va. nursing. Our family experience at Mary Wash has been a big positive and I support the school. So, it is with considerable interest that I noticed that the Spring 2014 issue of the University of Mary Washington Magazine had a cover story of a different kind of graduate than Ms. Siddall with some very different views.

So, in the interest of providing some equal time among women who came of age during those years of intense ethical and political awareness, I thought I’d toss in the magazine story to further the debate and show that not every Eagle from Mary Wash thinks like Ms. Siddall (no disrespect intended).

The story has to do with Nan Grogan Orrock, class of ’65, the daughter of an Abingdon forest ranger, who got the civil rights fever when it wasn’t always easy for a young, white woman in Virginia to be an activist. But activist she was, from exhorting her classmates to join protests, to spending summers and other time in the Deep South demonstrating with African-Americans in SNCC, to staring down the real possibility of being beaten or killed and to even today, when she’s been active in the Georgia legislature shaking things up, such as trying to get the Confederate flag off public buildings.

The article, written by Mary Carter Bishop, class of ’67, is intriguing. The writer is a career journalist who was part of a team that won a Pulitzer in 1980 for the Philadelphia Inquirer when that paper was one of the liveliest and best in the nation.

As Bishop writes:Nan Grogan Orrock ’65 is among the South’s most veteran and well-respected advocates of social change. She is one of the longest-serving and most progressive members of the Georgia legislature and has left her mark on every sector of social justice: civil rights, women’s rights, worker rights, gay rights, environmental rights.

“She’s chased after cross-burning Ku Klux Klansmen, cut sugar cane in Cuba, started an alternative newspaper, organized unions, led strikes, been arrested a bunch of times, and still stands on picket lines. At 70, she’s far from done. I had to finally get to know her. The week before Christmas, I flew to Atlanta and sat down with her at the State Capitol.”

Please read both accounts – Ms. Siddall’s and Ms. Bishop’s article – and see ideas through opposite prisms of the 1960s involving two obviously very bright women.

Denying Truth on the Outer Banks

Sun Realty

Sun Realty

By Peter Galuszka

North Carolina’s Outer Banks have always been a touchstone for me – in as much as anyone can associate permanence with sandy islands being perpetually tossed  around by tremendous wind and water forces.

The Banks and I go back to 1954 and Hurricane Hazel when I was an infant. They mark many parts of my life. So, I read with great interest The Washington Post story by Lori Montgomery about how real estate officials in Dare County and other coastal parts of North Carolina are trying to alter clear-cut scientific projections about how deeply the islands will be under water by 2100.

State officials say that the ocean should rise 39 inches by the end of the century. This would mean that 8,500 structures worth $1.4 billion would be useless. Naturally, this has upset the real estate industry which is pushing for a new projection of an 8-inch rise 30 years from now. Think of it like a photo in a rental brochure. You don’t choose shots of dark and stormy days. The skies must be blue.

Ditto science. The insanity is that so many still don’t believe what is going on with climate change and carbon dioxide pollution. Over the past several years, Virginians, many of whom vacation on the Outer Banks, endured and paid for former Atty. Gen. Kenneth Cuccinelli’s legal attacks against a former University of Virginia climatologist who linked global warming to human activity. The assaults went nowhere.

Instead of addressing such profoundly transitory events, too many in the region say it isn’t so or pick away at what is really happening as we speak. And as Mother Jones magazine points out, it isn’t because weather change deniers, usually conservatives, don’t understand science.

The Outer Banks are an extreme example because of their incredible fragility. Anyone with even a cursory understanding of the islands knows that they are completely under the thumb because they are where two major ocean currents meet.

The only reason Hatteras has developed at all is the Bonner Bridge, an ill-conceived, 51-year-old span over Oregon Inlet so decrepit that it is often closed for repairs. Replacing it has been constantly delayed by the lack of funding and the threat of lawsuits. The federal government has been complicit for decades by spending at least hundreds of millions on sand replenishment programs or offering flood insurance coverage.

About 15 miles south of the bridge is Rodanthe, a flyspeck village just south of Pea Island National Wildlife Refuse. It is at the point of the Banks that sticks out farthest into the Atlantic and is under the strongest attack by ocean currents and storms. Route 12, the only way to evacuate by car when a hurricane comes, is on a narrow spit of constantly shifting sand trapped between the ocean and Pamlico Sound.

I’ve been going to Rodanthe for years. Starting in the 1980s, friends and I would pool our money and  rent one of the big beach houses. We have been constantly amazed how the distance between the structures and the surf is disappearing. One favorite spot was “Serendipity,” a skinny, tall beach house that we rented perhaps twice and featured fantastic views from the top-floor bar.

It was dressed up as a bed and breakfast in the movie ”Nights At Rodanthe,” a 2008 weeper starring Richard Gere and Diane Lane. The film was panned and the house was equally threatened. In fact, the next year, the owner had the whole thing placed on a truck and moved nearly a mile down the coast where there’s a little more sand.

More hurricanes followed, cutting a new inlet a few miles into Pea Island and its watery bird impoundments. The oceanfront houses we used to rent are in trouble. The ones across Route 12 now have dramatic new views.  A small, new bridge spans the inlet.

One can argue that building on the Banks is madness, global warming or not. There’s a lot of truth to this. But rising ocean water is truly going to accelerate the changes no matter how hard politicians or North Carolina’s real estate industry say it isn’t so.

Virginia Transportation in the Slow Lane

Private-sector transportation...

Private-sector transportation…

by James A. Bacon

Alvin and Heidi Toffler once wrote about the mismatch in speeds at which private corporations and governments evolve in response to social, economic and technological change. Nowhere is that differential more obvious than the automobile sector. The automobile industry is a Ferrari blazing down the Interstate at 120 miles per hour while government is an old jalopy loaded up with chicken cages, poking along at 30 m.p.h.

Transportation operated and regulated by government...

Transportation operated and regulated by government…

I’ve written about the onrushing era of self-driving vehicles. The technology is within grasp. Auto manufacturers are eager to build the cars. There will be millions of willing buyers. Whether the American legal system can work out a way to allocate liabilities in the event of accidents is another question entirely. (See Holman Jenkins’ latest column in the Wall Street Journal to see how prickly this will be.)

Meanwhile, an auto revolution of an entirely different sort is now upon us, as I detailed in the preceding blog post, “Coming up: Car-Lite Burbs.” We have seen inklings of this revolution with the likes of ZipCar, Lyft, Uber, Bridj, RelayRides and other start-ups that link drivers and riders through the Internet and smart phones. Those services thrive mainly in dense urban locations. What’s so startling about the Daimler AG-Rancho Mission Viejo venture in Orange County is that it effectively rolls up the concepts of all those start-ups and packages them as a subscriber service. In the suburbs.

The first phase of that program rolls out in July. Residents of the Ladera community will have access to scooters, buses, shuttle vans, car-pooled cars and about every other ride-sharing arrangement imaginable. The goal isn’t to replace all cars in the community, it’s to make it feasible for homeowners to reduce the number from three to two, or from two to one. While the venture hasn’t divulged details of its pricing packages, backers aim to provide the service at half the cost of owning a car.

Nobody knows if this particular experiment will prove financially viable. Can Daimler-Rancho Mission Viejo provide the service at sufficiently low cost to induce Californians to give up one or more of their cars? If so, will that price cover the cost of providing the service? Expect a lot of tinkering and a lot more experimentation before people figure out how to make the idea profitable. But the tinkering and experimentation will take place. Daimler might be the first out of the gate with with a transportation-as-a-service product but the marketplace is a seething pool of innovation. The transportation industry will be radically disrupted.

Meanwhile, here in Virginia, we’re pretty much stuck on the same old argument — should the government spend more on roads and highways or spend more on mass transit? Even questions that I was asking a year ago — how can we prioritize projects on a Return on Investment basis — are looking shop-worn and irrelevant. The question we should be asking now is this: With all the innovation in the marketplace, do we have the faintest idea how the transportation sector will be organized five or 10 years from now? Do we have the faintest idea of what the demand will be for either roads or mass transit? Any honest answer is, “No, we don’t.”

But that won’t stop us from spending billions and billions of dollars to fix yesterday’s problems. It should escape no one’s notice that Virginia has tumbled to the No. 8 spot in CNBC’s eighth annual listing of America’s Top States for Business — a humbling come-down since we scored No. 1 in 2007, 2009 and 2011. We won’t climb our way back to the top by blindly throwing money at transportation projects conceived in a different era when the technology and economics of transportation were totally different than they will be five years from now. Please, Virginia, open your eyes and see what’s happening in the world around you. We resist change, and we fall further and further behind.

Menu Items on the Free Lunch Smorgasbord

Last week I published “Lean Urbanism and the Bureaucratic State,” a post that described a New Urbanist project to rectify the baleful effects of excess regulation upon urban re-development efforts. Questions arose in the comments regarding this initiative. What were these terrible regulations? Were the New Urbanists exaggerating the costs they imposed? Reader Richard N. Maier, a real estate manager for a major Central Texas homebuilder, contacted me to share his experience trying to redevelop a single property in Austin a few years ago. I republish this with his permission. Remember, this is Texas, where it is easier to build than almost anywhere in the country. — JAB

Bungalow for rent in Austin, Texas

Bungalow for rent in Austin, Texas

The Cost of Regulation: The Effect of Municipal Land Use Regulations on Housing Affordability

by Richard N. Maier

One of my professors at the University of Chicago told the class on the first day, “I don’t expect you to remember everything I talk about here, so my suggestion is for you to walk out of here with one takeaway from each class.” I can’t really say I did that every time, but sitting at convocation at Rockefeller Cathedral, I decided the one takeway that trumped all others was, “There is no free lunch.”

Throughout my career it has intrigued me how many of us travel through our careers and personal lives thinking otherwise.

A discussion of “affordable housing” is a perfect platform for testing this statement. While attending the University of Pittsburgh as an undergraduate, I worked for the Allegheny County Housing Authority in Pittsburgh. Our mission was affordable housing. The Authority constructed, rehabilitated and managed thousands of housing units aroud the count. This program was provided courtesy of the Federal government (a/k/a the American taxpayer). After getting my Bachelor’s degree, I entered the private sector and began my lessons in the practicalities of how such programs became re-titled as “exactions,” “incentives,” “impact fees,” “water quality preservation” and so forth. While I understand that various governments believe their regulations, laws and ordinances serve a variety of purposes that are in the public interest (neighborhood and historical preservation, safeguarding of public safety and the environment, “saving” resources, and so forth), the cost of that menu of delicacies can be expensive to the homebuyer and therefore a tax on the economy.

Inasmuch as my career the lat twenty-five years or so has centered around Austin and Central Texas, my examples will be drawn from that experience.

If life in the development/homebuilding business were simple, we could find a property, get it properly zoned, develop the lots or building sites, and construct the homes. But then it’s not, in fact, simple.

Let’s start with an actual example of building on a single lot in a central city residential neighborhood in Austin. A few years ago we contracted to purchase a lot in an area known as North Hyde Park. This example is utilized to illustrate the extreme costs incurred when developing in the central city, an area of high demand and low supply. The various regulations that overlaid this property were the zoning code, a residential design compatibility ordinance known as the “McMansion Ordinance” (all 26 pages of it), impervious cover limitations, “Neighborhood Conservation Combining District” regulations (a 28-page ordinance that supplements the zoning ordinance), handicapped accessibility requirements, sidewalk construction ordinances, a tree protection ordinance and an historic preservation overlay (which threatens even the simplest of structures with the prospect of being labeled “historic” or “significant”). While each of these eight regulation categories (which I consider to be menu items on the free lunch menu) have what the municipalities or jurisdictions consider to be public purposes, in many instances they are very costly to the ultimate homebuyer and contribute to the reduction in home affordability. As such, they are certainly not free. The following addreses a few of these categories and their impact on development.

Menu Item #1: Historic Preservation

The building lot in this real example in the City of Austin, Texas, was 80′ x 130′; approximately 10,400 square feet in total area. Situated thereon was a bungalow constructed in the early ’40s. It was about 90 square feet in size, had no particular architectural significance (there are probably a hundred similar structures within a mile and a half), was generally rented to students at the University of Texas and was acquired for the value of the land ($266,000) for new home construction. Despite the builder’s determination that the structure was beyond its useful life, the demolition permit was opposed by a neighbor (a renter, in fact; it should be noted that none of the neighbors who owned their homes opposed the demolition). This neighbor posited to the municipality that the structure to be demolished was historically significant and should be preserved. This declaration launched the seller of the house into an entirely new and unanticipated process of having to fight historic designation of the structure. The process from start to finish took approximately nine months during which time the property was left empty.

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