Tuesday, December 11, 2012

Incentivize Develoment

By Greg

I led a walking tour at the American Planning Association (APA) conference in Philadelphia in 2007. As I herded the group of planners along Market Street on the east side of City Hall, one of my flock asked me, "how can there be a parking lot right here in the center of the city?" Good question. Philadelphians just take for granted that we have a slew of surface parking lots downtown, but in other cities this is not an economic possibility because of the cost of owning high-value land that is not maximizing revenue.

For years now I've been telling planner friends about my theory of why these parking lots can exist. It has to do with the way Philadelphia taxes property at a higher rate than land. It is extremely cheap to own land in Philadelphia, even in a very valuable location. A study in Minneapolis revealed the same problem and rationale for why there are so many downtown parking lots there, and proposed a solution: "taxing land at a higher rate than buildings."

In recent history there have been several mayor-appointed and independent tax reform studies in Philly, and they almost always recommend some kind of reform that has to do with changing the way we tax land. Cities that have implemented a full "land-value tax" have not found great success. Pittsburgh did this then repealed it. However, many cities tax both property and land in a way that makes it financially desirable to develop vacant land to its highest and best use in an area that has high or appreciating value.

This problem extends well beyond parking lots, though. There are thousands of vacant lots across Philadelphia, even in neighborhoods with high property values, like Northern Liberties. The same tax policy solutions could be used to incentivize development in neighborhoods as well as downtown.

Right now there are neighborhoods around the city that appear blighted, but where many vacant buildings and lots are owned by speculators--sitting on them, waiting for them to maximally appreciate. In a sense this causes the neighborhood to gentrify before anybody on the street knows it. The neighborhood still looks rundown, but it is already bought up. The reason those speculators don't develop their property sooner is because it is so cheap to sit on vacant land.

Adjusting the way we tax land would greatly change the development scene in Philadelphia. It would increase the pace of neighborhood redevelopment, and, importantly, give people on the ground a better visual cue about the state of their neighborhood's pace of development.

So why doesn't the City address this? The only thing I can think of is politics. There are companies that benefit from parking lots being cheap to own, and developers who don't want to pay more taxes for vacant land. But City Council should get beyond that and do something about this. Not only will it boost Center City development, but it will change the way neighborhood redevelopment operates. That will benefit the whole city, not just downtown.

Sunday, December 9, 2012

What Would a Smart Family Do?

By Greg

Anyone who has been paying attention knows that our nation’s infrastructure is falling apart, without the funding to rebuild and upgrade. An editorial in the New York Times today explained: “Civil engineers in every state are monitoring ominous cracks in roads and bridges that carry freight and school buses. … Around the country, there are 70,000 structurally deficient bridges…” In conclusion: “The need for investment in public works, never more urgent, has become a casualty of Washington’s ideological wars.” This war has revealed itself most recently by house Republicans standing in the way of President Obama’s proposal to invest $50 billion for “transportation improvements.”

The counter argument, of course, is that in a recession, with a huge national debt, we simply can’t afford any new spending. Opponents of new infrastructure investment often compare our nation’s fiscal situation to that of an American family sitting around at home, making tough belt-tightening decisions in order to pay the bills (remember John McCain’s “kitchen table” speech?).

This comparison of our nation’s spending to the average American family has become ubiquitous in discussions about our nation’s financial future. Of course there are differences between a family and our government (most families I know can’t print money and set interest rates). But other parts of the argument are apt, so I want to focus on what this average American family would actually do (if it were smart) to get back on its feet.

Cutting costs is a necessary short-term strategy for unexpected situations that adversely affect our finances. But a family that simply accepts a “new normal” and, month after month, finds new ways to cut spending is not going to rebuild wealth in the long-term. If this family is smart, it doesn't just work on cutting expenses, but also focuses on strategies for increasing revenue, such as seeking an advanced degree or additional job training/professional development, finding a higher-paying job, changing jobs/careers, re-aligning investments, etc.

Often revenue-building strategies involve some degree of risk and up-front costs; you have to spend money to make money. And those costs have short-term repercussions, such as incurring additional debt, (yet more) belt tightening, getting a second job, refinancing, selling assets, withdrawing money from savings, etc. But in the long-term this approach may be necessary to regain financial stability and growth. Focusing on both reducing expenses and also increasing revenue is what families do, it's what businesses do... it's what our federal government should do too.

The federal government should be spending money now, when times are tough, to invest in our workforce and global competitiveness. Our lawmakers talk about not wanting to “kick the can down the road,” but why not? Once we have recovered and times are flush, then we can work to reduce our national debt. For now, the discussion should be about how we keep funding for essential programs stable, while “spending money to make money” by rebuilding our infrastructure and investing in the competitiveness of our businesses and workforce.

So much of our nation lacks high-speed internet, has crumbling roads, rails, and bridges, lacks the basic systems needed by industry to compete with companies overseas. If we want our businesses and workforce to be competitive, but are unwilling to invest in infrastructure now, then we are truly kicking the can down the road. Making critical investments in the future when times are tough is exactly what the smart American family, sitting around its kitchen table would do. So why won’t our lawmakers?

Sunday, November 25, 2012

Is the end of DRPA's Econ. Dev. Spending a Good Thing?

By Greg

This article today criticized the Delaware River Port Authority (DRPA) for failing to collect on its economic development loans, and quotes a DRPA spokesman explaining that soon "DRPA will be completely out of the loan and grant business." In recent history DRPA has been criticized for using toll money to fund economic development projects, and the media have exposed that some of DRPA's loans and grants seem to have been politically motivated, going to private developers (who may not need the assistance), and the selection process was at times more discretionary than competitive.

For these things DRPA deserves the heat it has received. However, this is not an open and shut case of a corrupt agency being put in its place. It is important to look at the larger issues of what demonizing DRPA's economic development investments (and DRPA subsequently rolling back those investments) means for the region.

Firstly, the article criticizes DRPA's lax collection on its loans. It is simple to characterize this as back-patting government corruption. But maybe it's more complicated than that. There is no mandate that public or quasi-public entities loan out their money (rather than grant it). If the point of a loan is to seed a project that improves a commercial corridor, creates jobs, or has educational/social outcomes, and the project is not cash flowing adequately to repay the loan, it may be in the public's best interest to turn that loan into patient capital. Lots of worthy projects that have significant social outcomes never make as much money as projected. If a charter school is seeing student progress but can't repay its loans, should DRPA take steps that would put the school in financial hardship? A bank will call in its loan regardless. The government has to weigh its responsibilities. Projects like waterfront redevelopment and schools may take a long time to truly have an impact.

Secondly, the article explains, "Spending on non-transportation projects has long been a source of controversy for the DRPA. Many motorists complain their tolls shouldn't go for development projects..." There are lots of examples of public revenue from one source funding something somewhat unrelated; in many parts of the country, property taxes are used to fund schools (even if you don't have school-aged kids). For a long time, and in many places, toll revenue has been used to fund non-transportation projects. This is neither novel nor necessarily wrong. True we have a huge need for transportation funding in this country, but the reality is that it is perfectly okay to invest public revenue from one source into a different but worthy public need. Some of the DRPA-funded projects would not have been my top priorities, but others were very worthy economic development investments.

This brings me to my third point: just as there is a shortage of transportation dollars in America and in the Delaware Valley, so is there a shortage of economic development dollars. Federal sources that fund economic development, such as CDBG and EDA are annually on the chopping block. SBA programs for microlending are way underfunded. In Philadelphia, the Commerce Department uses CDBG money as well as periodic bonds to fund economic development work, but those dollars are few and far between. PIDC has few grant programs, and its loan dollars are very competitive. At the state level there is RACP (another controversial program that Governor Corbett recently gave an overhaul), but that also has had its budget slashed. DRPA used to be one of these few pots that could fund risky but worthy economic development projects, and that could be counted on as relatively patient capital. No longer. 

Now with DRPA vowing to stop these kinds of investments it's unclear whether any of these other sources will fill in the economic development funding gap that is left behind. Unlikely, if you ask me. Again, none of this excuses political favoritism, helping private developers who don't need the help, or a closed-door selection process, but it's important to see that the end of DRPA's economic development funding is not necessarily a good thing. Is using toll dollars to fix roads more important than building schools and rebuilding communities? Hard to say. Could DRPA's process have been reformed to make it accountable and transparent? Now we'll never know.


Tuesday, March 20, 2012

Now Hiring Center for Culinary Enterprises Director

By Greg

My friends have told me I won't shut up about the Center for Culinary Enterprises. It's true, a big part of my life right now is managing the construction of this project that will be Philadelphia's first large-scale food business center when it opens this summer. It's over 13,000 square feet at 48th and Spruce Streets, including:

- four kitchens for rent by the hour to entrepreneurs who need a licensed kitchen,
- over 1,000 square feet of cold and dry storage space,
- a multimedia demonstration kitchen/TV studio/classroom,
- loading and holding areas,
- and three new retail spaces.
- Plus business technical assistance and a range of food/health/nutrition programs for entrepreneurs, youth, and the community at-large.

It's an awesome project, and just yesterday we posted the announcement that we are looking to hire the Center's Director. If you or someone you know may be interested, please check out the job posting here. I hope we get some great applicants and bring on a dynamic, entrepreneurial director who can come on board and take this project to the next level!

Tuesday, January 17, 2012

Janette Sadik-Khan in Philly to Receive Bacon Prize

By Greg

New York's headline-making transportation commissioner, Janette Sadik-Khan, will be in Philadelphia on February 1st to receive the Edmund N. Bacon Prize from the Center for Architecture. This is an annual award bestowed "on an accomplished figure who has achieved outstanding results in urban planning, development, and design through conviction of vision, effective communication, and commitment to improving their community."

The Bacon Prize is coupled with the awards ceremony for the winners of the Ed Bacon Student Design Competition--an international urban design challenge. The 2012 competition, INTERSECT competition challenges the next generation of urban thinkers to propose novel solutions to integrate Philadelphia’s major transportation corridors into its urban fabric. Students were asked to devise an Interstate solution that addresses freight and passenger traffic that currently flows along Interstate 95 on the Eastern edge of Philadelphia.