Greater Greater Washington

The silver lining of the real estate bust

According to the Washington Post, development has come to a halt downtown. This phenomenon is not unique to our region. Nearly any real estate project not financed before September is now frozen. While a dearth of new construction could hurt municipal budgets, it also has a large potential upside. As a nation, we now have the opportunity to plan and focus our growth, in preparation for the time when expansionary economic conditions resume.


The L'Enfant plan.

In "A Request For Proposals Isn't a Plan", Richard Layman discusses the causes and implications of the way the DC government handled projects around the city, such as Poplar Point. Last month, Clark Realty Capital withdrew from developing Poplar Point. The company cited the changing economic conditions as a cause of its reason to back away from its involvement with the project. In his Washington Post column entitled "Southeast D.C. Project Asked Too Much of the Private Sector", Richard Roger Lewis describes the deal's unusual characteristics:

[T]he boldest element was a very expensive piece of infrastructure: a three-block-long deck spanning Interstate 295 to visually and functionally unite historic Anacostia and a redeveloped Poplar Point.

Last month, Clark announced that it was dropping out. A year of dreadful market and economic conditions made the company want to change the terms of the deal. It reportedly asked the District to take on the front-end financial obligations and risks as an investment partner, with Clark to receive a fee as development manager. The District declined. Although Clark's decision to drop out surprised many, it was inevitable.

The company's withdrawal illuminates the fallacies of the District's Poplar Point strategy. Given the economic climate, the developer was asked to predict, promise and risk too much. It was unrealistic to demand a visionary program and plan whose feasibility was questionable from the outset and then expect the developer to provide all the financing.

We kept hearing for thirty years that the private sector always works better than government. Our experience with our economy these past few months has reminded us of why we have government. The private sector does a very good job with specific things. Government does other things better. Infrastructure has always been government's responsibility because we need infrastructure for a functioning civilization, but it almost always loses money. No rational business would build a deck over I-295 in Anacostia on its own. Businesses need to generate profits, or else they cease to exist.

Private developers would only take on the volume of risk associated with the infrastructure and planning costs of the failed Poplar Point project if the project also carried an extremely lucrative potential reward. The now-popped credit and housing bubble greatly skewed the risk-reward relationship of such a project. Because creditors were essentially begging customers to borrow money, a business could borrow as much as necessary to fund a mega-project. Creditors would overlook such high sunk costs as constructing a deck over I-295 and a 70-acre mega-park. Also, since land values and commercial rents were inflating, a developer would believe that the revenue from sales and rents would more than make up for the infrastructural sunk costs.

Such a business model was wildly optimistic, even under the conditions of the bubble. It was also wildly optimistic on the part of the Mayor's office to believe that any private developer could take on such large risks. Instead, as both Layman and Lewis suggest, the city should construct a long-term plan similar to Pierre L'Enfant's. They should devise a for a street grid, mixed-use zoning, sewers, pedestrian connections to the Metro, a possible deck over I-295, and parks, before bidding out any projects.

In fact, the plan should encourage different developers to bid on land and projects, building by building and parcel by parcel. That's how urban development happened before mid-20th century "urban renewal" introduced the idea of the mega-development. Rather than developing Poplar Point all at once by a single developer, the a wide array of builders should develop it block by block. That way, if one builder encounters financial difficulties, the whole project doesn't come to a halt.

Once the new neighborhood is fully constructed, if one parcel becomes vacant, it will not be as much of a fiscal strain on the whole neighborhood. A vacancy puts fiscal strain on the landlord due to lost rent. If one real estate company owns an entire neighborhood, one vacancy indirectly puts strain all other tenants. Or worse yet, what if the landlord company goes out of business? What happens then? A single landlord for an entire neighborhood also diminishes the diversity of real estate products, and consequently on the diversity of residents and businesses.

Nationwide, we've become accustomed to the suburban model of development that we start to see it as the only way to construct our built environment. In a car-dependent environment, a developer buys a huge tract of land and then constructs a subdivision, a strip mall or enclosed mall, an office park, or another large single use. Their footprint, including parking lost, occupies about the same land area as an urban neighborhood. Consequently, developers and governments continue thinking on the same footprint scale even as we returned to developing and redeveloping walkable urban places throughout this decade. However, the failed Poplar Point project has shown us the danger of turning over the future of such a large tract to a single company.

We would be wise to learn from successful urban planning of the past, such as the L'Enfant plan that created Washington. We need to plan for an economic environment where the mega-project is no longer desirable or feasible. It will take many years until the banks work through their bad debts and are willing to provide credit for real estate projects again. We should use this time to plan to direct the future pent-up housing demand into carbon-neutral walkable human-scale street-grid transit-oriented places. Our descendants will thank us.

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Cavan Wilk became interested in the physical layout and economic systems of modern human settlements while working on his Master's in Financial Economics. His writing often focuses on the interactions between a place's form, its economic systems, and the experiences of those who live in them. He lives in downtown Silver Spring. 

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Part of this is the continuing fallacy over the DC United stadium. No matter what goes into Poplar Point, the District is going to have to spend $200-300M on infrastructure.

Meh, too late, I suppose.

by William on Mar 9, 2009 4:02 pm • linkreport

Lewis' column was spot on.

As for the planning aspects of this - let's remember how many years it took to fully fill in L'Enfant's plan with development. Rome wasn't built in a day, nor was DC.

by Alex B. on Mar 9, 2009 4:18 pm • linkreport

Going to take me a while to digest this, so for now, excellent Post, Cavan. Very Thoughtful.

by JTS on Mar 9, 2009 4:19 pm • linkreport

I wrote this post to illustrate the changing times and the flaws of the mega-project. I think we will see more small development, building by building, block by block in the future because credit conditions will require it. Our local governments need to plan for those market conditions and use the strenghts of the private sector, rather than asking them for things they're not well equipped to do.

The District could ask for so many concessions from the developer during the bubble years due to the factors I mentioned in the post. However, those days are over and are not coming back in our lifetime.

We need to plan for the future in order to avoid a scenario with as many negative unintended consequences like the last time we had a huge contraction of credit during the Great Depression. Since our forebears didn't plan for the eventuality that the economy would return to health, we got uncontrolled, unplanned car-dependent sprawl that is not sustainable and is becoming a greater and greater millstone around our collective neck by the day. Since there was no planning, there was a 60-year overbuild of the (formerly) most fashionable and most subsidized housing product around. That's part of the reason why space in walkable places is now so much more expensive than in car-dependent places: there is too much car-dependent products and too few walkable urban products with respect to the market demand.

During this downturn, we need to focus our plans on sustainable growth and a diversity of real estate products, all in a walkable urban human-scale street grid. Otherwise, our great-grandchildren will have a mess that we can't imagine now. Much like we have this suburbia/traffic/alienation mess that our great-grandparents had no way of comprehending in their day.

by Cavan on Mar 9, 2009 4:22 pm • linkreport

I wonder what effect this idea would have on other major projects that DC is planning, like the SW Waterfront renewal:

http://www.swdcwaterfront.com/

Does this count as a "mega-project"? Does it make sense to split it up into separate projects? (It's currently designed as two phases, though still managed overall by one company.)

by Jim on Mar 9, 2009 4:34 pm • linkreport

Jim, I think if that one company already has financing they should continue with their plans. The key is the financing. That project is much, much farther along than the Poplar Point project was.

SW is a bit of a mega-project. I really don't have any personal problem with the mega-project per se. There are examples of successful mega-projects in a walkable urban environment in Silver Spring and downtown Rockville. Those projects were funded during the credit bubble earlier this decade. From here going forward though, it will be a different story for at least a decade, if not the rest of our lives. Our land use planning will need to reflect this new reality.

by Cavan on Mar 9, 2009 4:40 pm • linkreport

... a different story with respect to how much credit a developer will be able to obtain for any given project.

by Cavan on Mar 9, 2009 4:42 pm • linkreport

I truly hope this slower market will force DC to revisit their Mega block development RFP mania. First, because Smaller developments give DC the oppurtunity to restore and fill-in the urban grid. Secondly, to allow for opportunity for small local developers and business owners (who were formerly priced out) an opportunity to develop something other than residential projects.

by keithdcil on Mar 9, 2009 4:49 pm • linkreport

I think the only silver lining in the real estate bust is the affordability of housing returning to the area. Good post, though.

by SG on Mar 9, 2009 4:50 pm • linkreport

Infrastructure has always been government's responsibility because we need infrastructure for a functioning civilization, but it almost always loses money.

This is bogus. Without infrastructure, we would be sitting in a big mosquito infected stinking swamp surrounded by impenetrable woods here. Thanks to infrastructure, we have a thriving metropolis here, that beats the national statistics in many ways.

The problem is that people don't realize that you need more than a road[*] in front of your home or business to create commerce. You need roads in front of your employer and customers too. So, infrastructure is in the common interest, and needs to be decided in by the folks we hired to deal with our common interests: the government. In exchange for them doing the work, they get to tax us for their income, and the cost of their work. To keep them sharp, we get to vote on who they are and send them home, if they mess up.

The problem is that this basic deal is broken by many in the government, for a multitude of reasons: power, ego, corruption, stupidity, and a bunch of myths. One of the most hypocritical myths is that 'government is the problem, not the solution'. If you believe that, WTF are you doing in the government? Resign, and solve the problem!

[*]: Road: read: roads, railways, transit, airports, harbors, powerlines, internet etc etc.

by Jasper on Mar 9, 2009 4:52 pm • linkreport

Jasper, I don't think that passage is bogue. It seems to intersect well with your comment. We seem to agree. You did a good job and went into detail about why we agree.

by Cavan on Mar 9, 2009 4:59 pm • linkreport

@jasper -

are you sure you are disagreeing with cavan? It seems to me like he supports government's role, while pointing out that the role is essential because, as a business, roads [*] lose money. Taxes should support them because they are a public good too expensive and loss incurring to be maintained privately (like the military).

Also, to be clear, the internet is technically not public infrastructure. Cables are dirt cheap as is access because the business of laying down fiberoptics in the 90s underwent a bubble similar to the one we are in now WRT real estate. Tom Friedman has a nice write up on this somewhere. Today people argue that it is a public good (it is) and thus should be supported by the government (it should). This argument would not be taking place if it was still profitable to law down new transmission, as it was in the 90s.

by JTS on Mar 9, 2009 5:02 pm • linkreport

Clarification: It is bogus that infrastructure loses money. Without infrastructure, there is no commerce, there is no modern life.

Obviously, we need government to decide what infrastructure goes where. Government is our public forum, nothing else. Government allows us to deal with our daily lives, while some workers (politicians and civil servants) figure out all the crap we don't want to deal with.

Privatizing infrastructure (for instance through public-private partnerships or tolls) is the worst thing you can do, because you're basically allowing private companies to tax citizens, with minimal or no democratic oversight. I am no constitutional scholar, but I think you could argue it's unconstitutional.

If it quacks like a duck, waggles like a duck and looks like a duck, it is a duck. Likewise you can call something a "toll", a "congestion charge", or a "HOT lane", but it's still a (defered) tax.

by Jasper on Mar 9, 2009 5:15 pm • linkreport

It's all about how you frame the loss. Infrastructure costs money, but you gotta spend money to make money. It is indeed an expense for governments of all shapes and sizes, I don't think there's any way around that.

Regardless of how you frame the expense, I think it's far more appropriate to think of it as an investment (which has a long, historical record of paying off very well).

by Alex B. on Mar 9, 2009 5:29 pm • linkreport

Jasper: Are transit fares "taxes" too? Maybe if we called them taxes people would feel more strongly about funding Metro out of general budgets. Or maybe they'd feel worse about paying for rides.

by David Alpert on Mar 9, 2009 5:38 pm • linkreport

It looks like the Post columnist's name is Roger Lewis, not Richard.

by Scott on Mar 9, 2009 6:43 pm • linkreport

That's a smart idea about splitting up these huge projects. Another advantage is that you bring about more variety in use and architecture that one won't normally get with single-developer megaprojects. When megoprojects have flaws, their flaws tend to be amplified throughout the project.

by Capitol Dome on Mar 9, 2009 6:58 pm • linkreport

As a point of contrast, take a look at Rosslyn-Clarendon. I live in Rosslyn and walk my dog every day past under-construction high rises, vacant lots where financing surely stalled, and aging single family houses waiting for higher density redevelopment. But this redevelopment has generally been occurring block by block. Certainly, the projects being built here are still large (entire blocks at a time, rather than parcel or building at a time) but they are relatively self-contained. The vacant site of the former Dr. Dremos hasn't affected the condos being built a block away on Rhodes, or Central Place down the street.

by PJ on Mar 9, 2009 8:12 pm • linkreport

@ David Alpert: Are transit fares "taxes" too?

Well, that's where it gets murky. We often argue here (correctly, I believe) that the transit riders should pay for their transportation, while the government should take care of the infrastructure. Just like car drivers do.

So, I guess, at the moment: no. As far as I understand, WMATA riders don't even completely pay for their transportation, so we're getting of well.

The murky part is deciding what's part of the infrastucture and what's part of transportation. Obviously, the power needed to ride the trains should be paid for by riders, and the tracks by the government. However, how 'bout the trains? Are they infrastructure? Car drivers have to pay for their cars... Tricky.

However, you could argue that the rush-hour fare counts as a "congestion-fare" and hence is a tax. I-395 and I-66 riders don't get charged extra for clogging up the road during rush hour.

by Jasper on Mar 9, 2009 9:11 pm • linkreport

It also depends on how far you want to take the tax issue.

Jasper, you say that "WMATA riders don't even completely pay for their transportation, so we're getting off well." While true, it is also true for drivers in Loudon County (with jobs in DC) with similar incomes as those in Clarendon. One uses less road to get to work, but the same taxes are paid. In effect, one gets off well while the other makes up the difference. Or in my case, I bike, and although I use the roads, biking has negligible impact on road conditions, but I still pay the same taxes as everyone else that makes what I do (very little haha).

So is a WMATA fare a tax? I would say yes, albeit one that is implemented more fairly, as you pay based on distance, not per ride. I have no problem with this (and would support a mileage tax initiative if it was indexed to the car's fuel economy). I think your description more appropriately fits transit regimes that charge a flat fare like SEPTA or MTA. Just my two cents.

by JTS on Mar 9, 2009 9:23 pm • linkreport

i like the idea of long-term planning, that's for sure! the more people we have harping on the idea that planning is actually a good thing - contra Rumsfeld - the better off we'll be.

Businesses need to generate profits, or else they cease to exist.

not nitpicking this point, but i will say this -- i'm entirely excited about coops (cooperatives) -- in the many forms they come in. they seem to be one of the most inherently sustainable, least destructive organization structures for doing business (and possibly development). there are coops that are about groceries, brewpubs, housing,

developers will continue to want big blocks of property so they can get economies of scale (and build creepy tall buildings, etc.). the question is, can we do anything to stop them?

still, i need to find out more about this stuff.

by Peter on Mar 10, 2009 1:26 am • linkreport

What "concessions" did the District get from developers during the bubble years? The District would mandate a percentage setaside for affordable housing that would be whittled away to nothing by the time construction was finished, so they could "make the numbers work." The District was soiling itself in glee just to get more upscale tax revenue and gougeable $100+per-square-foot office space. Now with condo prices levelling off, they'll probably push mixed-use developments off the boards in favor of office only. When that happens, look forward to more sterile office blocks with zero groundfloor retail and no foot traffic after 5pm.

by monkeyrotica on Mar 10, 2009 7:04 am • linkreport

@Jasper:

We often argue here (correctly, I believe) that the transit riders should pay for their transportation, while the government should take care of the infrastructure. Just like car drivers do.

I get what you're trying to say here, but you're wrong that car drivers pay for their operational costs. They do not. They do not pay for the congestion they cause (whereas Metro riders both pay more on peak and also provide more of a benefit to the overall system as a whole by not driving). Drivers do not pay for enforcement and safety, while Metro's police force is part of their system.

Neither mode fully accounts for all costs. Both are subsidized. The difference is accounting - public transit has all of these figures 'on the books' for all to see, while driving has some of them privatized (like the car) and many that are borne by society (congestion, accidents, etc)

by Alex B. on Mar 10, 2009 9:37 am • linkreport

@ JTS: You are missing the point of my first post in thie thread. The point of infrastructure is that is enables modern society.

In terms of infrastructure you *can* *not* think only of your own usage. You need a bike path to work. But so do your colleagues. And the users of whatever you produce at work. And we need power. And internet. And stores. And all those stores need road from the production places of the goods they sell.

In other words, while you may be very green, and bike to work, you still need I-70 to get strawberries from CA to your supermarket, and I-95 to get orange juice from FL.

That's why infrastructure is of *common* interest, and why is is fair that everybody gets taxed the same amount. This is a principle point of why the government should build infrastructure, and not private industry. It is impossible (for practical purposes) to allocate infrastructure costs to users.

Now, this is a completely different debate than the debate of how much and what kind of infrastructure we need, and how we use it. That is what we have politics for. That's where we determine whether we want roads or transit, nuclear or wind power, and how we use our infrastructure.

Lastly, the matter of metro fares being taxes. You can argue that transit should be free. Just like road usage.

For instance, the Belgian city of Hasselt has completely free transit since 1997.

http://en.wikipedia.org/wiki/Public_transport_in_Hasselt

Some numbers from the first ten years (1997-2007).

1997: 8 buses on two routes

2007: 46 buses on 9 routes

1997: 1,000 riders per day

2007: 12,600 riders per day

1997: 500,000 km driven by the buses

2007: 2,258,638 km driven by the buses

The downtown has been made very green and nearly car-free. One of the weirdest things they noticed was that hospital visits increased significantly.

Whether you consider this a success depends on what you believe the government should do. Right-wingers tend to point out that the terms "free" is misleading, because it's paid out of taxes. Left-wingers love it. They tout livability, and ecofriendliness.

The bus company in the mean time has been looking way other cities can afford "free" transit. Apparently, for them it's a lot cheaper and more efficient too, to have a "free"

system.

Personally, I had "free" (and heavily discounted) transit as a student in my "socialistic" home country. It kept me from having, needing and wanting a car until I was 30, moved to Columbus, OH, where transit is an embarrassment. It leaves me with the strong impression that transit use would explode when offered to the general public. Just like people will use a road when it's there (and "free"), people will use transit when it's there (and "free").

On the whole, I think it's probably not a good idea to call metro-fares at large taxes. You will get into an unproductive and distracting war of words. At most, one can compare rush-hour fares to congestion taxes, or HOV restrictions, or tolls, but I would not go much further.

by Jasper on Mar 10, 2009 10:20 am • linkreport

@Jasper

"It is impossible (for practical purposes) to allocate infrastructure costs to users."

I think this is where we disagree. Everything else is a semantics issue. It is absolutely possible, and increasingly practical at that. If you incorporate, say, a mileage surcharge into goods and services, you allocate infrastructure (and environmental externality) costs to users. This doesn't harm business or benefit economies of scale, it simply encourages appropriate consumption patterns. As it stands, while I may eat lettuce and carrots grown thousands of miles away, I might redistribute my spending habits if they were more expensive relative to plants grown hundreds of miles away.

The roadblock to this is political; it is easy enough to pass on costs that can be deferred, and it is easy enough to outsource pollution to regions with lax emissions standards (China sticks out). The Tragedy of the Commons. I don't see an attempt to implement a "fair usage tax" or whatever as regressive or anti trade, but I do see it as more equitable to end users who have adopted or otherwise maintain a low impact lifestyles, consciously or not. I also think it would do a lot to encourage entrepreneurship at the local level, as new businesses emerge to capitalize on local demand as of yet unmet.

As for your Belgian example, zero fare systems are obviously not free (which you acknowledge). Many of them are supported by high gas taxes (or usage surcharges) that reflect the negative impact driving has on government spending, and seek to reward users who effectively "save" the government money in the form of decreased pollution costs and infrastructure maintenance. But other, more elaborate schemes have been devised in the past, such as pass systems paid for by neighborhoods and employers to link communities with job centers. Or (to cite a wiki entry) shuttle services provided by universities. Universities save on parking (we can turn that parking lot into a dorm), maintenance, etc., and communities benefit from increased connectivity to a university (and all the students' disposable income). In both cases, a decision was made that facilitated the passing of infrastructure costs to users. No more free parking at universities (we have a shuttle bus!), no more need for that long commute (I save all this money if I live in town!).

I guess would think about it this way. 98 percent of Maryland will never, ever, travel to new development X in Hagerstown. Why is everyone paying for all the new roads being laid down to support it? Shouldn't a decision to move far away incur a cost that reflects all that added spending? This is certainly applicable to consumption patterns as well

But seriously though, otherwise, you are on point. Infrastructure enables modern society. Subsidizing it as if all roads[*] are arterial to society does not.

by JTS on Mar 10, 2009 11:19 am • linkreport

@ JTS: It is absolutely possible, and increasingly practical at that.

Good luck setting up a system that everybody deems fair. I am not holding my breath. The necessary accounting bureacrazy will be huge and prone to abuse. It's easier, more efficient and hence cheaper, to not do it.

Mileage surcharges are useless. If you want to tax usage, do it by pollution and a gas tax increase. Europeans have done so, and are fine with it. I.e., they complain just as much about high gas prices as Americans.

I don't know how the Hasselt system is supported. One really big difference between European and American taxes is that Europeans rarely earmark their taxes, unlie Americans. Europeans tax, dump all the money in the treasury and then start spending. Belgium has the most complex government system in the world (a mere 7 hierarchical layers), so I have no clue where the money comes from. Quite frankly, I don't care. They managed to do it, and the citizens are happy. That's what counts.

Or (to cite a wiki entry) shuttle services provided by universities. Universities save on parking (we can turn that parking lot into a dorm), maintenance, etc., and communities benefit from increased connectivity to a university (and all the students' disposable income). In both cases, a decision was made that facilitated the passing of infrastructure costs to users. No more free parking at universities (we have a shuttle bus!), no more need for that long commute (I save all this money if I live in town!).

It is inefficient to hand out infrastructure to private entities, like universities. By letting them soley handle their campuses, you lock out visitors of the campuses and other people. Case and point: The GUTS bus vs the blue shuttles in Georgetown. It would be more efficient to merge those buses lines. With a bit of smart planning, you can transport more people, at a higher frequency, with less buses, less noise, and less pollution.

Secondly, I don't know of any university that has free parking. Not here in DC. Not in VA, and even OSU charges the hell out of its employees and students despite having a 4 square mile campus and a bus system.

98 percent of Maryland will never, ever, travel to new development X in Hagerstown.

98% of Marylanders never drive by Hagerstown on I-81 or I-70? 98% of Marylanders never go shopping at the outlet Mall in Hagerstown? 98% of Marylanders will not profit from the sales and corporate and income tax generated by the outlet Mall?

Because that's where the people who live in development X work: The Hagerstown Outlet Mall. They provide good deals to citizens of MD, PA, WV, VA and DC. They collect sales tax for ALL citizens of MD. They need I-81 and I-70 to get goods in the Mall. They need I-81 and I-70 for you to get to the Mall. The need power lines. They need water treatment to sell you food in the food court of the Mall.

This is exactly what I mean. You can not allocate infrastructure to individual users. Infrastructure enables economical activity. Without infrastructure, there is no economy, and you can go chase squirrels in the woods.

Everybody is paying for those roads, because the people that live their provide economical activities that benefit everybody through taxation.

by Jasper on Mar 10, 2009 11:49 am • linkreport

I am so swamped at work today, so I gottat cut out, but I look forward to reading your response later.

"Everybody is paying for those roads, because the people that live their provide economical activities that benefit everybody through taxation."

No. Not always. There are wide swaths of Maryland, as well as America, that receive huge amounts of money to support industries and economies that, on the whole, contribute nothing back. Tax money flows to where the votes are, not where it gets the most bang. Which is why I brought up the fact that what I proposed would never work. Politics is too intrinsic. You think Wyoming would back a usage fee? Alaska? Loudon County? I'm idealistic, not naive.

"It is inefficient to hand out infrastructure to private entities, like universities. By letting them soley handle their campuses, you lock out visitors of the campuses and other people."

Not sure what this means, but I thought you were advocating this all along. The public foots the bill for infrastructure investment while the public benefits from the jobs, taxes, etc. Would you rather a tax generating entity exist in lieu of campuses? University of Wal Mart? I am confused. Plus, the whole idea behind connectors is to link campuses to communities. Like that WVU initiative to build custom public transit pods, or the UVA one to get students into town (the drunk bus). Or PennLink, which connects not only Upenn to philly, but West Philly to Philly.

And no, 98 percent of Marylanders will not profit from the sales generated at Hagerstown (or anywhere that fits its description, I just used hagerstown as an example). How many mom and pop small businesses are in that outlet mall? Did Best Buy install a community playground? When you compare the huge sunk investment over the long term, exurban developments are a massive drain on resources. We wouldn't be awash in an unprecedented economic crisis were it not for the fact that money was speculated on building exurban mega suburbs 50 miles from anything. How do you think this country would have developed had excess infrastructure cost been permanently factored into expansion projects? We might have had speculation,

but we'd certainly have a hell of a lot less infrastructure obligations to cover. In the 21st century, the engines of economic growth in America lie in its urban and inner suburban cores. To use a Bushism: make no mistake about it.

"Mileage surcharges are useless. If you want to tax usage, do it by pollution and a gas tax increase. Europeans have done so, and are fine with it. I.e., they complain just as much about high gas prices as Americans."

Semantics. All I'm saying is change the incentive structure by making those who use it the most pay for most of it. Gas Tax, Mileage Tax, Pollution Tax, whatever you want to call it. They do different things, for sure, but all appropriately change the incentives.

This is why Cavan's post is so money; When government invests in dense and transit oriented infrastructure, diverse industries can use that and contribute to growth in a manner that, in the long term, is sustainable and profitable. Mega Projects price out the young upstart companies. Innovation is stifled. When gov't builds in anticipation of new development in far flung places, it effectively subsidizes, permanently, bad development choices.

Ok, ranting here. ttys.

by JTS on Mar 10, 2009 1:17 pm • linkreport

Metro fares are considered a user fee, and if metro fares reflect less than the true price of the metro trip, you could say that Metro is funded by a combination of user fees and general tax revenues. I think this shared burden is appropriate as the riders benefit directly from the service, and everyone benefits from the reduction in car trafic congestion and having the option to take the Metro when they want to.

But back to the topic of this post, I thought the reason for the mega-development approach was in part to encourage more thoughtful and efficient planning. So rather than let an area evolve block-by-block (with no overarching vision for what the end resulting area would be like), the city gets its say in requiring certain things (good access to public transportation, for instance), and the developer has more control over the profitability of their development because they do not have to worry that other companies won't go through with their projects nearby and/or compete with them for tenants. That said, Poplar Point is a pretty large area and I would support having several large parcels developed by different companies.

by DC_Chica on Mar 10, 2009 1:20 pm • linkreport

Would you rather a tax generating entity exist in lieu of campuses?

No. I want one single public transit system. I don't want 345 separate systems (WMATA, GUTS, blue shuttle, Fairfax County Connector, DASH etc etc) to deal with their local needs and compete with each other, and worse, create barriers between themselves. Merge them all, and make the system efficient for everybody, in stead of just efficient for their current subsidiaries.

We wouldn't be awash in an unprecedented economic crisis were it not for the fact that money was speculated on building exurban mega suburbs 50 miles from anything. How do you think this country would have developed had excess infrastructure cost been permanently factored into expansion projects?

Well, that's because the wrong politicians took the wrong decisions on what infrastructure to build. Don't look at me. I'm not from here. But it is an issue everywhere, also accross the big pond. Politicians are less and less concerned with long term issues, and fall more and more for short term gains.

Semantics

No. If those dumbasses in Congress hadn't fixed the gas tax at 18c/gallon, but set it at some percentage, the infrastructure funds would have grown, and the infrastructure bank account would not be empty. In that case, we would now be able to build some really cool infrastructure in stead of having to use all stimulus money on overdue repairs. Furthermore, the tax would have encouraged more fuel efficiency.

I do agree with your last paragraph. Unfortunately, this is the country where big is better, and where the sky is the limit. Americans often forget how deeply these things are ingrained in your culture. There's downsides. But also a lot of upsides. It is, for instance, the reason why you guys were on the moon first, and not the Ruskies, or the French. It's also the reason why Velcro is now a household item.

by Jasper on Mar 10, 2009 3:13 pm • linkreport

heck of a thread here.

I just want to point out that "This is why Cavan's post is so money" is really making me grin. :)

by Cavan on Mar 10, 2009 3:17 pm • linkreport

Check out this great article from a kansas city blog (by way of newurbanist).

http://blogs.pitch.com/plog/2009/02/during_this_nerve-racking_week.php

a point that isn't reinventing the wheel (for us), but certainly raises good thoughts about infrastructure investment

by JTS on Mar 10, 2009 9:33 pm • linkreport

That's very heartening that someone is starting to get it out there. Kansas City is notoriously car-dependent.

by Cavan on Mar 11, 2009 1:58 pm • linkreport

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