Towns for Sale!

You can buy a French village for $440,000. Looks nice! Or, if you want to buy a place in the U.S., you can buy the town of Pray, Montana for $1.4 million. Or maybe the town of Scenic, South Dakota for about $800,000.
Or buy all three towns for less than the lowest cost apartments on the priciest blocks in Manhattan, which begin at around $5 million.

Paying Access Fees on Congestable Networks

When road networks congest it's pretty obvious that the problem is too many vehicles are trying to use constrained capacity at the same time. One solution to this congestion is to charge the drivers a toll, thus nudging some drivers to switch the time or mode of their travel and limiting the demand for road space.

In the United States our internet access is through congestable networks, and we are now reaching the limits of free-flowing data in many areas, especially on mobile networks. (Other countries feature data plans where you pay more based on usage. Such plans are deeply unpopular in the US, just like congestion pricing!) AT&T has a novel solution to congestion on their mobile data networks, and that is to sell the data usage from apps and services to the companies who develop the apps and services. Here is a bit about how this works from Gizmodo:

Comparing it to the data equivalent of a toll-free 1-800 number, AT&T's network and technology head John Donovan, said that AT&T is working on creating a service that would let developers foot the bill for data usage in its apps. Like if all the data you used in an app would be free to the user and not count against data usage limits.

 Gizmodo is largely in favor of this arrangement as it will keep costs down for consumers. For a more nefarious take on this arrangement, here is conclusion from a piece from Digitopoly:

Add this up and it is worrisome for smaller developers. And it is precisely the sort of development that Net Neutrality advocates were worried about. To be sure, given sufficient competition between mobile carriers, this is all shifting around the deck chairs. But if competition isn’t strong enough, the money will stay with the power.

And if that doesn’t worry you, think about what this means for Netflix. On one level, it sounds like opportunity — they could pay for user’s data and open up the mobile viewing space. But on another level, so then can AT&T, Verizon and others who also have Cable TV operations and their own content. It costs them nothing to offer a data 1-800 service to themselves while at the same time being able to charge rivals for it. And then think about what happens if we don’t stop at mobile and move on to broadband.

There is a lot to unpack here, but Digitopoly's complaint raises lots of the concerns lobbed at congestion pricing, namely equity, fairness, competition, privatization and privacy. Overall, this seems like a second best solution. It would be better to keep the costs of production low and have consumers pay their full marginal costs of usage, whether road or data. And we should price mobile data and then move on to pricing broadbrand!

In Support of Ten Science Policies the Government Should Implement

io9.com has a list of ten science policies that the government should implement in order to improve science and our understanding of research. I agree with most of them! Here is one about building a city of the future:

6. The Government Shall Always Be Building One "City of the Future"

Every few years in a magazine, or every time Disney builds a new theme park, people start showing off a 'City of the Future.' It's stylish and minimalist, sometimes with innovative new public transportation systems, sometimes with extraordinary vertical farms, sometimes with inspiring or insane cooperative ways to power the city, and always with building that look like soaring groups of white wings. None of those cities actually happened, did they? And why? Because no one built them. America has a growing population that has to live somewhere. It's time to just build one. Pick a place and really do it right. It could be a boon to research and a goad for other cities to modernize. If nothing else, it will make for a fascinating documentary in a few decades.

This may be an improvement over many of our current urban policies. I do like the experimental aspects. We can randomly assigning people to live and/or work in these new cities in order to test our devious theories.

These two are also worthwhile:

10. Creationism is Only Discussed Publicly if it Involves a Randomly Selected Creation Story

This goes for all debates, articles, and talking heads on TV news shows. Anyone can talk about teaching Creationism as a scientific theory or advocate for it. The catch would be that, before they go into the debate, the city hall meeting, or the tv show, they would head to a computer, press a button, and one of the many creation stories would pop up on screen for them to use. So on any given day, or television set, you would see people advocate for teaching kids that the world was created by Odin and the human race emerged from between his toes, or that the Titans are trapped in Tartarus and the human race was created when Gaea the Earth banged Uranus the Sky, and so on. Not only would it add a great deal of variety and novelty to the debate, it would neatly separate out those who think Creationism has scientific merit and those who just want to teach their own religion.

8. Every Study That Uses Public Funds is Published Publicly

This is as much to help scientists as to help everyone else. A lot of public money is spent on a lot of scientific studies. Those studies, if they are judged (often by people who volunteer their time) to be worthy of publication, are published in journals far less widely read than the people who do the work, or the people who need the work, would like. Scientific journal subscriptions can be massively expensive, and a barrier to people having the scientific information they, kind of, paid for. 

Read the rest for inspiration.

What NIMBYism Looks Like: It's All About the Parking Requirements (and Lenny Russo is a Wise Man)

This post by Lenny Russo in the Twin Cities StarTribune is a great, if depressing, explanation of how NIMBYism actually occurs.  Read the whole thing, but this is a key story and it involves parking:

Most recently, Kevin VanDeraa, owner of Cupcake on University Avenue in Minneapolis, attempted to open a second location on St. Paul's Grand Avenue.  The plan for the new location included a wine bar.  According to the code, VanDeraa would be required to have ten off street parking spaces in order to receive his licenses to operate.  The previous tenant, a toy store, was only required to have three such spaces.  Consequently, VanDeraa applied for a seven space variance which was reduced to six spaces with the condition that he install a bike rack.  The six space variance was granted on December 27, 2011.  At that time, VanDeraa agreed to lease parking from a nearby dry cleaner to satisfy the St. Paul Board of Zoning Appeals.

When a variance is granted in St. Paul, there is a ten day waiting period to allow for appeals from those who might be opposed to the variance.  VanDeraa waited ten days, and then he began work on his new location.  Unfortunately, he was unaware that the variance wasn't actually finalized until January 9.  That effectively pushed the appeal deadline to January 19.  In the meantime, two appeals came in just under the deadline.  One was made by the Summit Hill Association, and the other by a neighboring law firm.  Consequently, city officials pulled a previously granted building permit.  Why there was a delay in finalizing the variance and why he was granted a building permit before the deadline expired is not clear to me, but the result was a new hearing on the variance.

At the new hearing, a thorough review of Cupcake's parking proposal showed that VanDeraa could guarantee at least eight parking spaces, but he would only be able to temporarily guarantee two additional spaces.  Under the leased parking agreement, the dry cleaner would have had the option of reclaiming those spaces if it needed them in the future.  On a vote of 5-2, the City Council upheld the appeals and denied Cupcake its previously granted variance.

The Pioneer Press quoted City Council President Kathy Lantry as saying that, "We've got to stop voting for the applicant...The code is very clear. You cannot, for economic reasons alone, grant a variance."  I admire and respect Kathy Lantry, but those seem to me like pretty good reasons to grant a variance, especially at a time when LGA money has been withdrawn and property taxes have skyrocketed as a result.  For perspective, the property tax assessment on the commercial property owned by Heartland in Lowertown increased by nearly $17,000 this year.  Also for perspective, Mark Prokop, who owns the building that Cupcake planned to lease, was quoted in thePioneer Press as saying that due to increased property taxes he could not charge a tenant less than $5,500 per month.  One would have to sell a lot of cupcakes to make that rent payment.  VanDeraa needed the additional wine and beer sales to help Cupcake make rent.

I am not sure what the reasoning is behind requiring a business that is selling wine and beer to have seven additional parking spaces when the previous business only required three.  I can only wonder if there is any empirical evidence that a place selling cupcakes and wine would generate any more traffic than one selling cupcakes and coffee.  Nonetheless, 15 to 20 jobs were lost; a $300,000 investment in a commercial property was discontinued; and a landlord is left with an unleased space with a mortgage that needs to be serviced.  This is because the business owner fell short by two parking spaces.  I wonder how anyone can justify that such a variance would have contributed immensely to congestion on Grand Avenue or to the long term detriment of the community.  Bad precedent was cited as a reason to deny the variance, but variances are reviewed and approved on an individual basis.  There is no reason why a similar request could not be denied in the future if circumstances justified that.

I know the restaurant business well as I spent nearly a decade owning and operating a place in downtown Minneapolis (where there were not minimum parking requirements). This story is all too common. If parking requirements were based on science that was any better than voodoo I would support the community concern. However, planners have argued for decades that they know exactly how many parking spaces are required for specific land uses. So forgive communities for thinking tht planners knew what they were talking about. But this, and many other, cases,  show how nonsensical minimum parking requirements are.

Consider that the city is specifically telling this restaurant that they city knows something about the restaurant's customers that the restauranteur does not. The city is saying, through their minimum parking requirements, that the cupcake buyers will all drive. I know this area quite well (and used to go to the toy store), and this is exactly how minimum parking requirements destroy a vibrant commercial area by forcing too much parking and preventing adaptive reuse of existing structures. But importantly, why not let the restaurant succeed or fail on its own? The city won't require a certain number of cupcake flavors, so why a certain number of parking spaces?

Listin to Lenny Russo. And if in the Twin Cities, eat at his restaurant Heartland. Both will improve your life.

Some Data from Land Costs for Air Rights Development

In New York City air rights development is a big deal.* The city has conducted a study identifying nearly 500 opportunities for development using decking opportunities above transportation facilities. On the west side of Manhattan, many of the air rights are owned by Amtrak and have been leased by developers for building. There are still plenty of areas where construction can occur above railroads, however, including the areas around Hudson Yards.

I've been interested in air rights development for awhile, and use it as a focus of course projects. But finding actual data on acquisition and development costs is difficult because there are relatively few projects. The New York Post has a story about Brookfield Office Properties' project to build a large new development that includes about a three acre deck above Amtrak facilities. From that story there are some data about costs:

Industry sources estimated Brookfield’s land-basis cost for Manhattan West at a below-market $200 or less per buildable square foot, compared, for example, to the $300 a square foot incurred by SJP Properties at its new 11 Times Square. 

The $200 per square foot would include $300 million to build the deck — half what Brookfield first expected to pay. Last year, it learned it could use bridge-construction engineering to install the deck in prefabricated segments by cranes, rather than on supports rising from the yard itself.

Here is a link to a map of the site. Using these cost figures as a guide, air rights development is cost effective in Manhattan and will likely lead to new development in the west side as long as there is demand for new construction. It's a good thing there isn't a Jets stadium to get in the way.

On the flip side, if these numbers for deck construction transfer to other metro areas then I don't think decking will be cost effective in most cities.


*Many cities, including New York, are interested in air rights development over trenched freeways.

Autonomous Cars and Transport Finance

A few links of interest:
CNN has a video with a UT researcher working on autonomous cars.


The LA Times reports on car to car communication to improve safety.

And two from the NY Times on transport finance:

The federal tax credit for alternative powertrains will increase to $10,000. Will this lead to a corresponding increase in prices? We shall see!

And a post about whether or not electric vehicle drivers should be taxed for road use. As gasoline and diesel decline in importance as a transport fuel for personal travel the conventional way to pay for transportation will also decline. In my opinion, the sooner we shift towards more user fees to finance transport the better.

Two bonus links:

The unions finally have some good news.

Lots of new money for NASA's space taxi. There are lots of private companies also developing space taxis.  The good news is space travel will be cheaper. The bad news is that there will be more space travel, which will accelerate climate change emissions entering the atmosphere.  These effects will likely more than offset any reductions in emissions from ground transport. More bad news is that orbital space junk will make private space travel impossible. Or so says Policymic. Unless this works.

How Much Control Do States Have Over Transport Funding

The proposed (and DOA) House transportation spending bill has lots of people thinking about the federal role in transport funding. In short, the US House bill eliminates federal transit support and allocates the gas tax to roads. It's a bit jarring, for sure, but raises lots of issues about federalism and transport policy. Lisa Schweitzer has a series of excellent posts about this at Urban Ethics and Theory (start with her conclusion), and I suggest you review what she has to say about this.

But others are supporting the federal role because they claim that states and local governments are already making their transport investment choices, so the federal role doesn't alter how the money is spent. The Transport Politic has a post about this here. He argues that "devolution is overrated." I'll argue that this analysis is not quite right because it is limited to the role of fuel taxes and because it undervalues the political distortions.

Freemark does say that states and localities have screwed up spending projects before, and he's right that they have. This doesn't mean that the federal government is better in the role of deciding what projects to fund, however. In fact, many states, counties and metro areas use sales taxes to build new systems and maintain roads, and these taxes are often voted on directly buy the voters. (Sales taxes may be a more regressive form of paying for infrastructure than fuel taxes, and perhaps an analysis of tax incidence might support a federal role, but that's not what the opponents of the House measure are arguing.) When put on a ballot new taxes for transportation projects are overwhelmingly passed (about 75% of the time), even when the new taxes are going to be used for expensive transit investments. These may not be good investments in many cases, but there is ample evidence to suggest that in the absence of federal funding or a complete devolution to local and state decision making transit would not be defunded or in danger of going away.

The federal role complicates local decision making due to political constraints. First, as a piece of background, nearly all gas taxes collected are returned to the state where they were generated. By law at least 92% of all receipts has to be returned to the state where they were generated, and in many cases it is much higher. (This is a new-ish law so don't look at historical donor-donee figures for this.) But all new projects, even if they are listed as a priority by the states, must comply with all federal guidelines and policies. These can greatly increase the costs of projects in both time and money. New York City moved forward with the 7 line extension of the subway system without federal money because of compliance concerns.* Moreover, the federal guidelines through SAFETEA-LU favor commuter oriented projects that have a lot of time savings. These may not actually be high priorities for states and cities, but if you want any money you have to adhere to these guidelines. In addition, federal matching money policies act as incentives for transport plans to maximize their matching dollars, not design the best transport investment. Remember, 10 years ago no one was considering street cars in US cities. Now there are over 70 projects under consideration because the Obama administration committed $280 million for streetcars. Those 70 projects are there because of federal priorities, not because of local preferences. (I've mentioned this before.)

To make a point about local mistakes versus federal mistakes, these streetcars are likely to be a disaster. Operating in mixed-traffic, they will slow down transit, congest auto travel and worsen pollution. This occurred in Paris as dedicated bus lanes were replaced with streetcars. However, if cities paid for these themselves then a few would install streetcars and the rest would realize they are a bad idea.Instead, the federal government will pay for all the streetcars so everyone will realize they are a bad idea after they are all built, so rather than a few bad projects and a little cost we will get lots of bad projects at a lot of cost.

Overall, the role of federal funding for transportation has likely peaked as the gas tax has peaked. I doubt that any federal tax will replace that buying power, and it will be the onus of states, regions and cities to  fund more of their transport investments. (If you think the prospects of higher federal gas taxes are grim, you should consider how much worse the prospects for federal user fees are.) I won't speculate as to what that means for road or transit funding, but will say it will be different. The sooner that states and cities start crafting policies to pay for their transport priorities the better off we will all be, and the more responsive these policies will be to people's concerns.

*The city did ask for federal help with a second station when costs increased but was turned down.

An Allegory for Justifying Transportation Investments: A Brand New Bathroom!

There are many justifications for investing in transportation infrastructure. Some of the most common and widely used claims for why the public should spend lots of money on new trains, roads, bike lanes or other such things are that such investments will create jobs, lead to new economic activity and offer future environmental benefits. These are all offered as unambiguously positive characteristics. To evaluate these claims a bit I developed an allegorical situation where a household decides to build a new bathroom on their house. 

Picture a four person family who lives in a nice little house with three bedrooms and two bathrooms. They decide that their current bathrooms are old and inadequate and something should be done. They can either fix up the two bathrooms they already have or add a third bathroom. They decide to add the third bathroom. So far, so good. The family has a bathroom designed and gets bids for construction. The first bid has five workers completing the project in a week. The second bid has ten workers completing the project in two weeks. The third bid has 20 workers completing the project in a month. Let’s assume all bids are under the same labor rules. Should the family “create” the most jobs and take the month long bid with 20 workers? It seems obvious that the family should take the first bid once they have verified that the company is honest and legit. Jobs are a cost to the project.

But perhaps the family wants to be job creators, so they take the high bid. They figure they will make it up in new productivity from having a new toilet, shower and sink. Will the new bathrooms make them more productive? Are toilets a derived demand? Considering that bathroom use (production) is a matter of inputs (food and activity) it’s not likely that the family will start pooping, peeing or showering more than they did prior to the new bathroom. So productivity is a wash (no pun intended). However, because there is a new place to “produce” the location of production will shift. This may be in everyone’s interest considering the potential externalities, but the family needs to weigh whether the cost of the new bathroom is worth the benefit.

What about the future benefits? There are potentially many from a new bathroom such as lower water flow and nicer fixtures. Yet these could also be achieved through remodeling the existing bathrooms, which will need maintenance and upkeep anyway. Maybe everyone would be better off with a new hot water heater instead so there is always adequate warm water for the existing showers. A new bathroom may allow the family to put off fixing up their old bathrooms, but not forever, and money spent on a new bathroom cannot be spent on an existing bathroom. 

Ultimately, undertaking a new bathroom addition is something that the family may decide they want to do for a variety of reasons (maybe to accommodate new members to the household or congestion before everyone goes to school and work). However, a new bathroom will only shift the time and location where bathroom activities take place rather than causing each member of the family to poop, pee and shower more. Remember, they have adequate bathrooms now and do not bathe in the river. 

In the bathroom expansion case, I suspect most people would insist on hiring the low labor cost company and would never consider that an additional bathroom would increase the need for a toilet.* Yet for transport investments we tend to argue that we need to invest in what has the highest labor cost and claim increases in productivity that have not been borne out through research. In the US the existing infrastructure needs a lot of work, and new facilities (roads, trains, etc) tend to just shift economic activity instead of creating new economic activity.**  While travel is not entirely a derived demand, it largely is, just like using a bathroom. I’m not saying that governments should plan and budget like households, because they shouldn’t. But we should remember that jobs are a cost to projects and that when an economy has a mature, well functioning transport network additions and subtractions to that network will affect the location of economic activity far, far more than create or destroy economic activity.

*It’s entirely possible that the current number of bathrooms is inadequate for peak demand, which the family may want to address, but this is different than increasing overall use.

**In the UK the official policy of the expected net effect on productivity of High Speed Rail investment is zero for precisely this reason.

Super Bowl Parking is Slightly Less Than the Average Apartment Rent in Indianapolis

According to Rent Jungle, the average rent for a one bedroom apartment in Indianapolis is $599 per month. According to this story parking spaces will go for close to $500 for a few hours.

Maybe Someday I'll Retire to Take Care of My Own Little Toll Bridge

The BBC reported on a toll bridge in Herefordshire that was recently purchased. That's not so unusual, but it was bought by a fellow who will retire on the property and hang around to collect the tolls motorists pay. The even better part is that all the toll income is completely tax free! Such a deal. Maybe future pensions should be funded by giving people roads directly to collect money as they see fit. Lots of public pensions are already investing in P3 projects. This is just more direct!

Here Michael Munger translates the toll bridge story to a nice class exercise for econ students.