Donjek :: The Cents of Place Blog

Transportation Stimulus Projects Should Reflect Modern Economy

A New York Times analysis of over 5,000 transportation-related stimulus projects released today indicates that less than half of the funds are slated for investment in metropolitan areas. The analysis suggests that these transportation investments have been selected based on formula as opposed to what the American economy of today looks like.

As I’ve recounted at the Cents of Place in the past, the nation’s 100 largest metropolitan areas:

• Use 12% of the U.S. land area;

• House and employ 65% of our population;

• Generate 78% of patent filings; and

• Create 75% of total U.S. economic activity.

The report shows that the Minneapolis-St. Paul metropolitan area, while producing 1.36% of the country’s economic activity, is the location of 0.72% of the transportation-related stimulus projects authorized. Readers will note that the seven-county metro area contains just 12% of the state’s total lane miles. So doesn’t it make sense that stimulus funds reflect lane miles?

In its most succinct form, the answer may well be no. Here’s why: The federal stimulus legislation will provide capital grants to build, renovate, and replace transportation infrastructure – but it does not fundamentally address how state and local governments will pay for maintenance and operations. Over 87% of Minnesota’s total lane miles are county, township and city streets, paid for from limited state and local sources. Overbuilding may create long-term costs that will stifle prosperity in greater Minnesota, not the reverse.

Just ask my colleague Chuck Marohn, President of the Community Growth Institute, who provides planning and zoning expertise to small towns across Minnesota. In recent weeks, Chuck has blogged extensively about how and why our current approach to locating infrastructure investments is financially unsustainable. Moreover, it undermines the quality of life in communities like Brainerd, Minnesota, where Chuck grew up.

In metropolitan areas, the higher concentration of economic activity will allow for the funding of ongoing maintenance of road, rail and other systems, which will in turn bolster the metro economy as well as the statewide economy. Future stimulus funding, and the coming debate about a new federal transportation bill, ought to be designed in this light.

Photo courtesy of Resedabear/Flickr: http://www.flickr.com/photos/resedabear/ / CC BY 2.0

@Strib Forum: Minnesota State Budget Stress Impacts Redevelopment

I continue to post regularly at the Star Tribune as a member of the Your Voices forum. My most recent post relates to the current state budget problems in Minnesota, where the Legislature and Governor continue to disagree about an appropriate fiscal response to recession and to the structural imbalance in the budget existing before the economic downturn.

Multi-billion dollar deficits don't come with easy fixes; plans relying exclusively on service cuts or tax increases are similarly painful to implement. This biennium, the Governor is using an executive power known as unallotment at an unprecedented level, to reduce spending unilaterally. From property taxes to transportation infrastructure, this approach is sure to impact those of us involved in redevelopment and placemaking.

Already, forecasts have been presented suggesting that this deficit is not a product of recession alone, but another iteration of a chronic budget imbalance. Jay Keidrowski, former finance commissioner, and nonpartisan Minnesota Senate Research analysis indicates the budget deficit for the next biennium (2011-12) to be in the $4.5 - $4.9 billion range.

Talking Open Space

On May 28, I presented to the quarterly meeting of a land conservation  collaborative that has brought together groups including the Metropolitan Council, the Minnesota Department of Natural Resources, the McKnight Foundation, Trust for Public Land, and 1000 Friends of Minnesota. Embrace Open Space has released an analysis of five years of Hennepin County housing sale data, which illustrates the influence of nearby open space on home values. The analysis has identified that a typical Hennepin County home located near open space is roughly $15,000 more valuable than a comparable property located elsewhere. The study follows a related analysis of Washington County sale data, released in 2007, which reached similar findings.

As part of the program, I will present context for the study, describing the range of economic, fiscal, and ecological benefits that flow from parks and other conserved lands, in cities, suburbs and in rural places. I also expect to discuss how open space produces benefits that cross sectors - for example, open space has been shown to produce improvements to health and serve as transportation infrastructure (as with greenways), as well as meeting recreation needs. 

View the Donjek five-page summary here.

Photo: Post Office Square in Boston; courtesy of Flickr.

Donjek Project: Public-Private Partnership Plan for Proxima.us

I am pleased to announce the launch of Donjek client Proxima.us, a software development and maintenance enterprise. Proxima’s founders, Mike Bougie and Patrick Lynch, are experienced software designers who hail from small towns, and have established Proxima to create top-quality software in rural areas of the United States. 

Outsourcing information technology (“IT”) services to India and elsewhere is widely assumed to be a permanent fact of life, but in fact many U.S. companies are becoming less satisfied with the costs and benefits of working internationally to fill these needs. A recent survey of chief financial officers by Information Week magazine revealed that while 79% outsourced IT work overseas last year, only 42% anticipated doing the same this year.

The benefits of reduced wages abroad have narrowed and many U.S. clients have experienced inconsistent quality of service. More important, international outsourcing exposes clients to risks to data records and intellectual property, as well as financial risks associated with currency and interest rate fluctuations.

Proxima’s service couples highly skilled and educated programmers working in rural America, with clients who desire top-quality IT assistance, personal contact in a domestic time zone, and legal protection in place under U.S. law.

Donjek’s role has been working with Proxima to develop a public-private partnership plan, illustrated above. Watch for this company’s development in Minnesota and elsewhere, as its market shifts and they create professional IT jobs in rural America.

The American Dream, Part 2

Yesterday, I participated in a program that generated some very interesting discussion. The Urban Land Institute’s event, titled “The New American Dream: The Demands of a New Generation,” brought together four of us with varied backgrounds and perspectives. A few of the ideas on which I focused:

• The American Dream isn’t specific to the postwar suburban boom – it’s a desire for choices and access to ownership (or at least investment) that Americans have long held.  

• The average annual U.S. GDP growth, when examined in constant dollars, has declined each
decade since the 1940s. The shorthand interpretation is that we have become less able to afford the maintenance of a system of development and financing created during times of economic plenty. Not only is the status quo growing less affordable – it is also saddling us with environmental costs we simply cannot continue to accept.

• Prices do motivate us, including the kind we recognize in full (such as taxes), in part (such as gas, which is heavily subsidized), and the kind we ignore (such as costs associated with stormwater runoff into area waters). As a society, we decide which to recognize and which to ignore, and with rapid improvements in GIS analytics, we can measure costs and benefits more than ever before.

• Younger Americans’ aesthetic is more urban than previous generations, but the extent of this is unclear. For example, even in nearly fully-developed Ramsey County, Minnesota, 70% of 20-24 year olds drive to work solo, as opposed to 75% statewide. Of family households under age 45 in the Minneapolis-St. Paul metro area, only 20% live in either of the Twin Cities. (2007 Census data).

I enjoyed the event and the opportunity to engage the prospects for the American Dream, and am enclosing my slides – presented in twenty seconds of fewer each, according to the Pecha Kucha format – here. Contact me for more discussion!

The New American Dream

How does the contemporary American Dream appear? Has it fundamentally changed in recent years as the public will to invest in infrastructure has waned, and Americans grapple with the implications of climate change, fluctuations in energy prices and the current recession? 

What types of development will be in demand in ten or fifteen years in our cities and statewide?

On Thursday, April 16, I will be contributing to an effort to address these questions, and I hope you join me for the event, starting at 3:30pm at the downtown Minneapolis offices of the Dorsey and Whitney law firm. Consistent with a presentation approach called pecha kucha, each of the four speakers will make a brief, rapid-fire series of statements to brew up and engage in a vital discussion.

In their current form, my comments will touch on Athens and Venice, how younger Americans are not as different as they may believe, business improvement districts, and why property taxes may be destined to join the buggy whip and the dodo bird. I hope you will attend and heckle the panel!

Donjek Tools: Evaluating Commercial Property with GIS

A thread that has connected my work over the last eighteen months: An interest by placemakers in more fully understanding how and why places work in an economic sense. Doing this effectively is more important in this economic climate than at any other time in recent memory. We have varying reasons for wanting know what makes a place economically vibrant:

• Lenders want to know more about factors that influence the value of collateral, that are external to the property itself. They seek a basis to evaluate the surrounding environment.  
  
• Urban designers are assembling ideas with an eye on how physical layout can most powerfully combine with topography and geography, land use, and transportation. 

• Developers are evaluating opportunities based on the land and its relationship to nearby assets, as well as on the attractiveness of location to prospective tenants or buyers.

• Planners working with public agencies and private firms are seeking to use available data to better understand market values, the impact of foreclosure or public investments, and a range of other factors essential to planning and policy formation.

This month, Donjek has introduced tools to strengthen the ability of each of these parties to reach these objectives. These tools harness geographic information systems (“GIS”) analytics to provide a comparison of the area surrounding one property versus others, and provide additional capacity to plan, rate and prioritize projects.

Clients need GIS, but don’t need to invest the resources to develop GIS tools in-house. Read an example of how Donjek’s GIS tools are applied (in this case, to the needs of a lender), and contact us to discuss gathering and understanding information that influence your land use decisions.

Join a broader discussion about using GIS to explore urban life by joining a LinkedIn group I just started, called Planet Mashup.

@Strib Forum: Deciphering the News in the Economic News

After a hiatus that included time eating grits in Dixie, I am back at the Cents of Place, sorting through multiple notes for articles. Primary among them are GIS-related services for placemakers available soon from Donjek, and new content on business improvement districts. The first is posted at the Star Tribune this morning, and is available here.

Donjek Project: Identifying the Economic Impact of Housing

An economic impact analysis produced by Donjek for the Minnesota Housing Partnership and Greater Minnesota Housing Fund was released at a news conference held at the State Office Building in St. Paul on February 18; the Finance and Commerce coverage of the release is available here.

The key findings of the report, titled "Housing as a Lever for Economic Recovery," include:

• Public investments in housing leverage private capital; a 2008 analysis by the Minnesota Housing Finance Agency (MHFA) indicates a commitment of $1,310 in private funding for every $1,000 investment by the agency. Financial leverage broadens the impact that state housing investments bring to bear as a stimulus measure. 
• Housing investments are an effective vehicle to stimulate spending and revenue creation; analyses show that $1 million invested in housing generates $1.75 million to $2.1 million in economic activity, resulting in income, sales, property and other tax revenues.
• Studies reviewed in this report indicate the job creation potential in housing as well; an investment of $1 million (in public funding leveraged with private capital) in housing generates 14 jobs according to the MHFA analysis, and up to 21 jobs in other studies.

An application of the findings to a Minnesota setting is included in the final report and is also available here. An effective stimulus ought to have a broad range of approaches. Substantial leveraging of private equity and lending, as well as the funding of federal and other public partners, make housing finance a powerful approach for the state to consider in its plans to support economic recovery.

Photo: Courtesy of Flickr.

Of Borrowers and Fortresses: Hoping for Something Other Than "TARP 2.0"

Where have all the lenders gone?

Local banks are here, and they’re lending. That’s the good news.

The bad news, as we’ve all been discussing, is that the larger institutions aren’t here, and they’re not lending. So where have they gone? In a burst of sarcasm, one colleague suggested they’ve been camped out in Washington, D.C., and have canceled meetings of the credit committee until further notice.

Markets and commentators have been busy today examining the latest proposal to stabilize the lending sector. Observations from the Wall Street Journal and the Accrued Interest blog provide initial feedback about the plan. Reviewing this plan, I am most interested in its distinction from the Troubled Assets Relief Program (TARP) passed last year, which appears to have flaws rendering it ineffective.

As I discussed on this forum last month, interest rates suggest banks may have become more disposed to reengage in lending activity. In retrospect, events in the last few weeks seem to highlight that more than interest rates and capital will be required to improve the lending environment. TARP isn’t doing the job. I have multiple clients who are nearly at a loss for how to procure construction or investment financing – and these are seasoned, entrepreneurial borrowers.

In mid-January, the New York Times ran a piercing article about why the first round of federal funds targeted to financial institutions hadn’t spurred more lending activity. The article quoted three bankers with particularly striking perspectives about the premise of the public investment in their respective banks:

“We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.” – John Hope III, Chairman, Whitney National Bank

“With that capital in hand, not only do we feel comfortable that we can ride out the recession, but we feel that we’ll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.” – Walter Pressey, President, Boston Private Wealth Management

“Adding $400 million in capital gives us a chance to really have a totally fortressed balance sheet in case things get a lot worse than we think. And if they don’t, we may end up just paying it back a little bit earlier.” – Christopher Carey, CFO, City National Bank

As evidenced by reports of tense discussions inside the administration, there is a range of opinion about what and how strings ought to be attached to the public purchase of warrants in U.S. banks. But the costs of “fortressing” particular balance sheets are widespread – just ask any borrower stymied by current conditions. Unless the mission of the federal assistance to the banking sector is to pick and support “winners” in that industry, any future public positions in the industry must hinge on institutions actually lending with the capital.