Thursday, December 8, 2011

Or wish-lists?

Plans and Lists

US lobbyists, Chinese five-year plans

The international consulting firm McKinsey & Company sent a note out to its corporate customers this past summer, urging them to sit up and pay attention to China’s new five-year plan. McKinsey looked at the potential impact of Chinese government policies on 33 industries, and recommended likely winners for foreign investors. China’s leaders want more urbanization, greener energy to replace their horrific dependency on coal, more public transportation, more consumer goods, and “greater social harmony.” Their 12th five-year plan “targets a 13 percent increase in minimum wages each year, along with a more modest annual increase in household income (about 7 percent).” China will avoid inflation because costs will probably increase as a result of new policies for pricing energy, raw materials, and water; tighter environmental regulations; and enhanced consumer protection, and their soon-to-be-richer consumers will just have to pay those costs. And along the way, the Chinese planners unapologetically plan to “incubate” (i.e., subsidize and protect) technologies that have the potential to become “national and global champions,” specifically in alternative energy.

Back home in Buffalo, we have plans, too. Western New York’s Regional Economic Development Council just last week submitted its recommendations to Governor Andrew Cuomo for $74.5 million worth of projects that have a lot in common with the Chinese plan. The council’s wish-list is about intellectual capital, green infrastructure, urbanization, and helping low-skill workers become higher-skill (and presumably higher-wage) workers.

But there was another wish-list or plan released here in November, the one by the lobbying group called the Buffalo Niagara Partnership. Although the staff of the Partnership was included in Cuomo’s Regional Economic Development Council, the Partnership came up with a very different list of projects it wants government to fund. The Partnership list doesn’t have an overall price-tag, like the council’s list does. The Partnership list doesn’t present any discussion of regional population dynamics or income trends or industry analysis, as the council list does, and as do the documents that any city or county or other government entity provides whenever it goes to Wall Street seeking to borrow money for a specific piece of infrastructure. Instead, there is a seven-page list of projects, some with price-tags, some without, and there’s no context, and precious little explanation. Some of the Partnership’s “regional agenda” asks are huge: There is an ask for “gubernatorial approval of the plan to relocate the UB School of Medical and Biomedical Sciences to the Buffalo Niagara Medical Campus,” which is at least a $350 million project in construction costs alone. (The intellectual capital that the UB medical school needs is not addressed at all.) The Partnership regional agenda list is rich in other site-specific details for some speculative projects, too. There is a $2 million ask for an agribusiness park “that can be marketed for value-added food preparation and processing projects.” There is a $3 million ask for an “complete infrastructure build-out” for the North Youngman/Riverview Industrial Park “to make these sites shovel-ready and attractive to potential solar technology production projects.” That particular ask was released in Buffalo even as Republicans in Washington slammed the Obama administration on solar-technology producer Solyndra, which defaulted on a $500 million government loan, largely, most say, because government-subsidized Chinese solar-technology producers have become completely dominant in the growing world market for solar technology. What’s striking about the Partnership request for $3 million for a specific site for this specific industry is the global context, and the lack of detail as to why $3 million will do something here for a yet-to-be-named producer when $500 million wasn’t enough for a producer with a factory, capital, staff engineers and staff scientists, and the endorsements of two US presidents.

The two Buffalo plans that were put forth in November have been put before the region’s elected officials just a few months after the Partnership hosted a two-day Accelerate Upstate conference, which also produced a document with eight broadly drawn recommendations that it called an “action agenda.” That agenda—which included non-controversial items like calls for more venture capital, better coordination of workforce-training programs, and better Upstate-Downstate coordination—were framed in the positive, unlike the harshly negative rhetoric of the Partnership’s “Unshackle Upstate” campaign. One of the items on the “Accelerate Upstate Action Agenda” is this statement: “All levels of government in both Canada and the US must work together to protect, and create industries around, one of Upstate’s most attractive assets—the fresh water resource of the Great Lakes.”

Curiously, there is not a word in either the Partnership 2012 “regional agenda” nor in the Western New York Regional Development Council report about that particular issue. In August, the Great Lakes Restoration Initiative, water quality, the crisis of combined sewer overflow, the toxic algae blooms in Lake Erie, the fish tumors in the Buffalo River, the four billion gallons of raw sewage that flush into the Niagara River, and other component issues underlying the Accelerate Upstate Action Agenda were under discussion in Buffalo. The document that cited “Fresh Water” as one of eight action items was released not sometime in the 13th century in a language other than English, but rather only a few months ago, in Buffalo, by the same people who participated in producing both the Partnership and the Council lists, which overlap on several items. But not on this.

Plans, lists, and anti-planners

The Partnership endorsed Chris Collins, the county executive who vetoed legislation to create a countywide planning board. The Partnership has a history of actively undermining regional governance initiatives, including the Greiner Commission’s plan, which endorsed former Erie County Executive Joel Giambra’s administration’s plan to create a Buffalo version of the “unigovs” that run Indianapolis, Nashville, Hamilton, and Toronto. There are six industrial development agencies in Erie County today in large part because the Partnership has consistently thwarted efforts to unify them.

Nobody has bothered even to attempt a campaign to unify the 28 school districts in Erie County into a single countywide school district, with regional resource-sharing, which is the system that has succeeded so admirably in places like Raleigh, North Carolina, specifically because concentrations of poverty are broken up by regionalization.

The Buffalo metro area still has three cities, 25 towns and 16 villages, plus three separate water utilities, six sewer districts, 19 separate police forces, 26 public safety answering points (Monroe County has one; New York City has one; Los Angeles has one), and dozens upon dozens of special districts—all for an area that has shrunk from 1.1 million in 1970 to just over 900,000 today. Regionalization and consolidation, regional planning and regional thinking, are disempowered here because the Partnership opposes them.

By 2025, the population of Erie County—including Buffalo and all those towns and villages—will be about 800,000. One would think that, given the prospect of further regional shrinkage, someone in leadership, in business or in academia or in elected office, would sense the urgency of making a plan to deal with the fact that fewer taxpayers will be left to foot the bills, just as the Chinese sense the urgency of making a plan to cope with a rate of economic growth Americans can only fantasize about.

The current crisis in funding the metro Buffalo regional transportation system, which moves low-wage workers and students on the buses and trains, and high-income travelers and Canadians at the airports, is only the latest warning sign about the consequences of bad planning—or, more accurately, of inadequate, uncoordinated planning. Apparently, the Buffalo metro’s economic thinkers are oblivious to the current reality that oil prices have once again topped $100 a barrel, and are projected by responsible energy analysts to rise to $150 a barrel over the next few years. Therefore, there is a need to do infrastructure planning such that workers can get to work other than in oil-powered personal vehicles that many can’t afford today. What is the point of asking New York State to fund moving a medical school and building speculative industrial parks for yet-to-be-identified industrialists when the transport system for workers and students, which will need retooling anyway, is in a jam?

Where, in short, is our version of the Chinese five-year comprehensive plan for energy, water quality, transportation, worker training, increasing the minimum wage, and what they call “social harmony”?

The plan is to have a plan

The answer, of course, is that we won’t have one. Americans lack the cohesive leadership class that understands the concept of national purpose the way that Chinese, Russians, Brazilians, and even Canadians understand it. Our WASP aristocracy has long since given way to the hegemony, both cultural and political, of the Wall Street speculators and oil-industry thugs who are deal-focused and globalized. While the Chinese build bullet trains on a quick-step, and muscle their solar-energy and wind-turbine technologies and products into the global market, our financial and petroleum elites fund a message machine with roots in the anti-regionalism of the Kennedy School of Government at Harvard, and in the right-wing fever-swamps of Washington and in the Republican Party, that promote an anti-planning creed. They ever cite the gospel of economist Friedrich Hayek, whose anti-modernism seemed bizarre and even pathological to his contemporary John Maynard Keynes.

That doesn’t mean, however, that we should throw our hands up. Public money will continue to be spent. The question is not whether, but how, and to what effect.

That’s why the August work of the Partnership, and the November work of the Regional Development Council, should both trump the latest Partnership regional agenda—the one that mixes all sorts of unexplained and unpriced mega-asks of government with the sensible thinking of the far less grandiose, much more contextualized thinking of the Regional Development Council. The Partnership asked lots of the right questions in the summer, but gave many irrelevant answers in the fall.

Let us not, however, forget some of the fundamentals that neither of these groups adequately addressed. First, there is no regional or even countywide planning entity here, and there needs to be one. Second, the regional workforce’s transportation needs, current and future, cannot be addressed by reducing the NFTA’s petroleum-dependent services today when those services need not only to be enhanced, but to be re-based on an energy source that won’t skyrocket in price and, preferably, that can be produced within the region. Third, the water-quality question that the Accelerate Upstate Action Agenda asked in August needs to get back on everybody’s agenda. Fourth, the best defense against expensive decline is for the region to reconvene at its core, where the unit cost of basic services, from libraries to parks to transport to utilities, will always be smaller than where people are spreading out, farther and farther from one another.

Urbanization, environmental quality, green energy, and efficient public services—all of these should be achievable for our region without asking the Chinese Communist Party to come in and run it for us. A better aristocracy than the one we’ve had, however, would probably be useful, and a few elected officials with the will to stand up to the speculators and petrocrats would help too. But without some enduring regional framework that can outlast individual personalities, or some public, transparent structure that can actually govern with a long-term, integrated plan that addresses energy, environment, transportation and land-use, we will have a new plan every couple of months, and lots of little school districts and municipalities and police forces and PSAPs, and dirty water, and a shrinking tax base.

Like now.

Bruce Fisher is former deputy executive for Erie County and currently visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

Friday, November 18, 2011

Cuomo's Dilemma

News Analysis
Cuomo's Dilemma
by Bruce Fisher

Regional councils need funds he doesn’t have

Last week, the astounding occurred. It wasn’t that an economic development committee chaired by a university president and a heavy-hitting civic leader announced a list of projects they want the governor to fund. So far, no surprise: Everybody around here wants Albany’s money. Governor Cuomo announced last year that he would put a billion dollars on the table for economic development projects, and he appointed broad-based councils for each of the Upstate regions and Downstate, too. He tasked them to work cooperatively, and then he went off by himself to do what governors do—he attended a ribbon-cutting where, once again, a multi-billion-dollar state subsidy for a peripatetic international technology corporation got announced, and hailed, as a breakthrough.

That’s long been the paradigm. It’s because capital crosses borders at the direction of Wall Street bankers to whom public officials have to stand and deliver if they want some of that capital to stay here at home. That’s why nobody expected much from the regional economic advisory councils except more of the same—more handouts to powerful insiders, more taxpayer shakedowns for established companies, more cynically empty promises from comfy bureaucrats of jobs, jobs, jobs.
That’s not what happened, and the usual insiders are not happy. The committee led by UB President Satish Tripathi and civic heavy-hitter Howard Zemsky put forward a set of requests for stunningly atypical investments based on a stunningly realistic assessment of where the five counties of Western New York are and where they’ve been going unless we change. Tripathi and Zemsky ask for money for job training, for two hard-science projects at Roswell Park and Hauptman-Woodward research institutes, for some transportation infrastructure for downtown Buffalo, for tourism assistance for the tourism hub in Niagara Falls, and for help for the city centers of Jamestown and Olean.
They did not ask for real-estate subsidies for the “medical corridor,” but rather for support for the scientists already working there and for training the people who should one day work there. They did not ask for more money for buildings to replace buildings recently reconstructed at the UB South Campus, but rather for some long-needed infrastructure for getting people to work at the crossroads of the region in downtown Buffalo. Downtown Niagara Falls could use better tourist amenities, and the Tripathi-Zemsky committee endorsed that ask. And since it is a regional committee, help for Jamestown and for Olean was framed as helping those struggling small cities to revitalize their centers, specifically citing findings that restraining sprawl means avoiding higher infrastructure and maintenance costs for a shrinking tax base.
Unlike what has come out of the developer-driven committees of the past, this plan is reality-based. The final document the Tripathi-Zemsky group produced looks quite different from the first draft, but only in one aspect: Instead of leading off with a portrait of a region that is dramatically shrinking in overall population and specifically in its cohort of young adults, those data got move to the back of the book. But each proposal the committee entertained was subjected to a three-part test that was rooted in consideration of those data. They asked whether a project would create, retain, or fill jobs; whether it will maximize return on investment; and whether the project was ready for implementation.
Participants report what the document shows: that the leaders were focused intently on Western New York’s regional population loss, on the economic costs of sprawl, and on making the promise of the state university system meaningful specifically because of this region’s need to do a better job of retaining and attracting talented young people—or any young people. The report calls for $74.4 million in direct state assistance for 20 projects. (That number has a history here: From 2009 through 2011, Erie County government under just-defeated Chris Collins received $74.4 million in federal “stimulus” funding from the 2009 American Recovery and Reinvestment Act, funds which Collins stored in the county’s fund balance rather than using them for economic stimulus.) The $74.4 million in New York State funds that the committee asks would leverage a total of $284 million in other investments.
The new voices in the room
The report, available online from Empire State Development Corporation, is much heavier on process improvements, civic engagement, and identifying actual trends in the regional economy than on financial asks. It is the first participant-shaped strategy document whose participants were more than the usual local insiders—which is probably why the first “ask” in the document is for a car-repair training center, and also why the document is focused on smart growth and the potential infrastructure cost savings if smart growth principles are endorsed rather than ignored—even though one member, Tom Kucharski, the president of Buffalo Niagara Enterprise, objected, in full earshot of the media, expressing his utter disdain for focusing investment in downtown Buffalo, downtown Niagara Falls, downtown Jamestown, downtown Olean. The choice of projects—so clearly focused on human capital and on ending sprawl—indicates that the previous hegemony of the self-styled economic development class here has been challenged.
The other stunner in this document, besides the project recommendations and the frank footnoting of demographic decline, is the positive, hopeful tone about the “unique opportunities” that the region has. The Tripathi-Zemsky approach was to bring every community segment into a room that was heretofore barred to labor, community activists, technocrats, and micro-entrepreneurs. In this room, data mattered more than muscle, and the prospect of creative problem-solving now looks much more real. The negativity of Buffalo Niagara Partnership and Unshackle Upstate propaganda is missing entirely.
But will the developer-driven, insider-focused process that has so dominated the economic conversation here, and Empire State Development Corporation’s previous practices, change? That’s a fair question, because today, the developer-focused, insider-subsidizing, parking-ramp extravaganza called Erie Canal Harbor—which is still all about creating more dollar-sucking retail in one of the most over-retailed areas of America—has cash on hand, actual cash money, with a total of $153 million getting drawn into projects that will help our regional economy about as much as a Mars bar helps a starving man whose fields are salted and whose herds are gone, and for about as long.
How will Andrew Cuomo meet the Tripathi and Zemsky request for $74.4 million now that our governor has just announced a $350 million current-year state shortfall?
Cuomo’s golden handcuffs
Wall Street, which spent the last generation redirecting industrial capital away from places like Upstate New York, is currently sputtering, which is a principal reason why New York State faces a revenue shortfall. In the last year for which data from tax returns are available, tax revenue from Manhattan alone constituted about 25 percent of total New York revenue. Most of that money is attributable to Wall Street, including its absurdly outsized bonuses and salaries, but also all the money that got spent on the 300,000 people in the financial services sector. As New York State Comptroller Thomas DiNapoli warned in an October 2011 report, that sector is shrinking—and with it, the tax revenue it produces. Undergraduate students of public economics learn that when a state budget has to be balanced, there are approximately four tools available: cuts, taxes, loans, or sales. Andrew Cuomo presented a budget this past spring that cut significantly, avoided tax increases (most notably on Wall Streeters), pulled back on loans, and divested the state of some property. Now, in the middle of his budget year, he has a problem: how to balance a budget that relies so very heavily on Wall Street.
Wall Street speculators have been amassing enormous wealth from steering investment capital away from companies that make things in New York State. Returns to capital have long been higher from goods-producers in China, and from boondoggle housing schemes here, than from investments made here. But the rest of New York State has been receiving services and investments paid for by the taxes collected from the people who, every day, put on their designer suits and Swiss watches and drive their foreign-made luxury cars down to Wall Street to do it to us some more.
The sad irony is that tax collections on the Wall Street wreckers are down just as the Tripathi-Zemsky committee delivers its well-reasoned, smart, and positive recommendations on how to get Western New York off Wall Street’s dole.
Governor Cuomo needs to find the money to get the Tripathi-Zemsky process from document to action. The $74.4 million project list is reality-based, in sharp contrast to Erie Canal Harbor Development Corporation’s $153 million agenda, which is focused on a fantasy of rich or at least employed people willingly parting with large chunks of discretionary disposable income in taxpayer-subsidized restaurants and retail stores. The proper place to go for the revenue to fund the Tripathi-Zemsky plan is Wall Street, because Wall Street speculators are not “job-creators,” in the current Republican consultant-speak—they are speculators, and their actions have injured the American heartland’s ability to become sustainable, self-funding communities.
But Cuomo has reiterated that it won’t be he who tries to claw back their gains, for fear that they will leave New York. If not he, then who? If not now, then when? Upstate’s long-overdue plans for economic sustainability and renewal depend on someone from Albany meeting the challengeRead more:

Thursday, November 10, 2011

A new era?

Messages From Home

by Bruce Fisher

Can Obama heed the Hochul and Polancarz wins?

Forty years ago, Western New York voters sent a seemingly nice California football star named Jack Kemp to Congress, where he helped Ronald Reagan destroy the social contract, empower the financial services industry, and perfect a cynical politics of racial code words that equated social insurance with handouts to chaotic, fornicating ghetto-dwellers, all to mask a money-grab for oil companies, defense contractors, and any other outfit that can intimidate witless local politicians into agreeing to call such theft “economic development.”

But four decades after putting the happy face on this historical calamity, Western New York voters awakened to the impact of Kemp-Reagan economic royalism by rejecting its newest iteration in the person of Jane Corwin, choosing instead Kathy Hochul, an unapologetic advocate for government. Hochul is the anti-Kemp: She does not endlessly repeat a phrase from a Cliff Notes version of a cranky Austrian economist. She does not offer a single policy nostrum for all policy challenges, as did Jack Kemp when he said that tax cuts could heal the wounds in Northern Ireland. Hochul got elected by bravely calling for ending the special tax treatment of bumptious millionaires who live in exurban cul-de-sacs, wear over-large jewelry, and order takeout from the country club. Jack Kemp and his contemporary epigones refer to those people as “job creators.” Western New Yorkers who voted for Kathy Hochul, in a congressional district that was Republican since Lincoln, know that they are not.

This week, Western New York voters sent that message again. This week, Western New York voters are once again a national vanguard as we were, sadly, in 1972. The message hasn’t quite gelled, but so far we know that the elderly, the Boomers, the moderate-income households in first-ring suburbs, and a solid majority of young voters once again rejected anti-government rhetoric and chose to focus on government as a provider of services that also happens to require the payment of taxes. And voters here, after decades in their sprawling, shrinking fantasy-land of not-getting-richer, have figured out that even those services that Republicans deride as the province of the poor are for them, too—because so many people who were never supposed to be poor recognize that they actually, now, are.

Mark Poloncarz ran as a cautious manager with a dour but not sour manner. His candidacy had little life, however, until the incumbent Republican claimed—against readily available evidence to the contrary—that his superior business experience before he took office was enabling him to create jobs in the here and now. The Democrat and his union allies were effective in using official statistics to show that the Republican’s bizarre and baseless claim was, well, bizarre and baseless. The ads said that there are 13,000 fewer jobs in Erie County since 2008. (The Bureau of Labor Statistics says that there are more like 19,000 fewer jobs here than there were three years ago.) Voters who were polled last summer didn’t actually like the Republican incumbent, but they thought he was doing a good job. But once the Republican claimed that night was day, and then went on to say that sour was sweet—that the economy is on the uptick, with a lower unemployment rate than anywhere else—voters started to become the political equivalent of the little boy at the parade of the Emperor’s New Clothes. Once Collins made that claim in September and again in October, the regional experience of great and widespread economic distress became, for the second time in six months, a political fact.

Facts alone are never enough: They have to be personalized. This column has cited the Food Stamps upsurge in Erie County, which in 2008 went to just over 102,000 people, but today in 2011 go to over 143,000. We have cited the statistics on household income here, where more than 72 percent of the 410,000 households in Erie County report annual incomes of under $49,000, and only a tiny sliver—less than one percent—have incomes above $200,000. The Occupy movement does a great job reminding the people who witness their demonstration that there is the 99 percent, and that we are different from the one percent. But for three and a half years, the Republican who used the phrase “like a business” in every public utterance looked like an easy re-elect. Only when Collins told a job-hungry area that he was creating jobs did the middle class here awaken from its Jack Kemp slumber.

Will Democrats be Democrats now?

The night that Poloncarz won, Ohio voters resoundingly rejected a ballot measure that would have further reduced the collective bargaining rights of public employees. Polls collected by Anzalone Liszt Research, one of President Obama’s consultants, continue to show broad national support for restoring tax rates on high-income individuals at least to the levels in place during Bill Clinton’s presidency. A new study by Bob McIntyre at Citizens for Tax Justice shows, as his study in 1985 showed, that the largest and most profitable US corporations don’t pay taxes at the 35 percent nominal corporate income tax rate that Republicans say is stifling American business; instead, McIntyre shows that the nominal corporate income tax rate is a loophole-ridden fiction, and that the 300 biggest corporations don’t pay any corporate income taxes at all!

Harvard-trained economics professor Jeffrey Sachs, in his hopeful but politically na├»ve new book The Price of Civilization, says American elites must once again accept what even iconic free-market icons Milton Friedman and Friedrich Hayek accepted—that there is a role for government in the economy, that “public goods” include not only roads and bridges but also a hand up for the unlucky and for the poor. What he imagines is that we will have a new aristocracy step forward, led by somebody like Michael Bloomberg, who can grab the “vital center,” and end corporate welfare, and end rule by the egregious nouveaux riches who flash their dough around, condescend to the middle class, and sneer at the poor from Spaulding Lake.

Yes. And giant lobsters will soon play cards on top of a downtown hotel, just as humor columnist Dave Barry said they would.

The sad political fact is that places like Spaulding Lake exist and keep producing Republican candidates, because suburban cul-de-sacs are full of people who look at you funny when you cite Professor Sachs’s call for “civic virtue” or “public purpose,” and who giggle when you use a word like “fairness,” and roll their eyes when you, or the earnest Sachs, say “sustainability.”

The trouble with the message that Western New York has sent to America this year is that the consultants who shape campaigns are still advising candidates that they have to sound like cul-de-sac favorites Jack Kemp and Ronald Reagan rather than like Franklin Delano Roosevelt or Bobby Kennedy. The genuine aristocrat Roosevelt warned against “malefactors of great wealth.” The aristocratic, Aeschylus-quoting Kennedy warned against soulless materialism.

We are still forming our next political paradigm. Perhaps there is a Bloomberg who can become the philosopher-king by out-spending, out-messaging, and out-organizing the corporations who rent consultant-thugs to run Republican campaigns. But Republicans have been winning Polonia for a long, long time—since at least Richard Nixon’s day. The cul-de-sac crowd defeated civic virtue and public purpose for many years with Cheektowaga’s racial anxieties. In Nixon’s day, Republicans amplified the brand-new tensions of the sexual revolution, equating anti-Vietnam protesters with the betrayed Poland at Yalta, and blaming unions for the massive deindustrialization that made the Great Lakes industrial zone into the Rust Belt.

That technique might have worked again, had the Republicans in Erie County fielded cannier, more sensitive, less self-satisfied candidates. The Republicans here, in 2011, didn’t. Does that mean that the Democrats understand what FDR and RFK were talking about? Will we ever have an aristocrat, or even a person of aristocratic outlook, campaign on what Sachs calls “the price of civilization”? Perhaps. But we’ll only get to that stage if Western New York’s 2011 economic realism and class self-consciousness reshapes American politics as effectively as Western New York’s 1972 status anxiety, racism, and manipulability shaped it.

Thursday, October 20, 2011

Solving the Cynthia Wiggins problem

Street Cars, Kids, and Jobs

A 10-year-old boy sells newspapers to passengers on a Buffalo streetcar in 1910.

Northern cities plan light rail. Will Buffalo?

Hamilton is so deeply in the shadow of gigantic nearby Toronto that nobody outside the neighborhood knows that it exists. But Buffalo, Rochester, Syracuse, and other Rust Belt cities should sit up and take notice because Hamilton, with its 500,000 or so souls, is walking through some policy changes that have a special resonance in cities that are not likely to become international megacities like Toronto.

A decade ago, Hamilton went regional, merging its city and county governments. It already had a regional school district. Prosaic functions like property-tax assessment were never localized the way they are here. But some of the same patterns of suburban sprawl and suburban self-isolation, and the same kind of sorting of neighborhoods by income, were threatening to leave the old central city a lot like Buffalo, Pittsburgh, Cleveland, and other Rust Belt towns—full of major cultural institutions, and home to the financial and governmental centers, but also home to most of the region’s poor.

It recently dawned on Hamilton that leaving poor kids in schools that serve only poor kids was a recipe for failure for both the kids and the community at large.

For the past two years, a community conversation has been underway in Hamilton, a conversation whose focus has been addressing the persistent reality of poverty in a region that is experiencing the new Canadian miracle of rising incomes, rising population, and rising prospects. Canada’s mix of stability and innovation has put it high up on several lists of business-friendliness. But there’s still poverty—even in a place where the European-style social safety net programs keep the wolf far from the door.

The conversation in Hamilton today is about schools—specifically, how to mix poor kids in with richer ones, so that all the pathologies of poverty get attacked early. But recently, the conversation turned to streetcars. And just as the data that the Canadians are utilizing to drive their policy decision about schools come from US sources, so do the data about transportation come from here. The question for Rust Belt cities is whether Hamilton, which deliberately and quite quickly went regional a decade ago while American policy elites and Rust Belt politicians continue to dither, will once again leapfrog us on a big policy initiative.

A cheap way to go

Streetcars, also known as surface-only light rail rapid-transit systems, are becoming a bigger presence in some American cities because streetcars are relatively cheap to install, power, and maintain. Streetcars share city streets with cars and buses in Toronto, Portland, Charlotte, San Diego, and elsewhere in North America the same as they do in most cities in Europe. Some systems, like the one that connects downtown Cleveland to a couple of its suburbs, run both alongside cars and on their own lanes. The Canadians point to a stack of studies that show that streetcars attract higher-income users than buses, and that they work very well in revitalizing poorer areas if they run many times a day. An hour north of Hamilton in the adjacent cities of Kitchener and Waterloo (the latter is home to a big public university and to Blackberry smart phones), a prospective streetcar line is causing a stir: Carloads of real estate speculators have been spotted inspecting properties along the proposed route.

This past week in Hamilton, community leaders met to map how to go from concept to execution on a new two-line streetcar system for the town they call the Hammer. Plans have been on the books there since 1978, including all the engineering that will be required to get trolleys up “the mountain,” otherwise known as the Niagara Escarpment. One problem the Hamilton folks have: overcoming the nay-sayers who point to Buffalo and say that light rail wrecked our city.

Bloodless engineers and history-innocent streetscape designers like to point out the many benefits of streetcars. Green energy types correctly point out that they run on electricity and that the electricity can be generated by wind turbines and hydropower, neither of which create emissions externalities. But the real issue for Hamilton and for every other city that is contemplating a streetcar system is neither aesthetics nor efficiency. It’s much more profound even than the question of the cost of the new infrastructure that streetcars require wherever they aren’t already in place.

It’s more or less a civilization issue. Should there be public space or will we keep it all private? Public space requires government, closeness, and the mixing of social classes. Streetcars are strands of the fabric of urbanism, which is about conviviality and clustering, not isolation. Oil-powered personal vehicles have made geographic isolation not only the landscape norm but also the psychological and hence the political norm, as suburban voters now vastly outnumber city-dwellers.

And then there’s the uncomfortable problem that so many would like to forget: the Cynthia Wiggins problem.

Poor, urban, and invisible

In December 1996, Cynthia Wiggins died trying to walk across Walden Avenue to get to her cashier job at the suburban Walden Galleria Mall. The scandal was that, at that time, city buses full of city people were not allowed to stop on investor-owned suburban mall property. That arrangement effectively excluded low-income city-dwellers from going there. (The landlord of the downtown shopping mall at Main Place has done his best to shutter most of the retail establishments there, in favor of commercial and utility tenants, thus further reducing retail options for carless city-dwellers.) Buses are now allowed access to suburban malls, but the overwhelming majority of people who go there drive to them—because the bus routes may go there, but Cynthia Wiggins’s bus commute took her 50 minutes to get the three miles from home to work just to cross the great divide from the black East Side into overwhelmingly white Cheektowaga. Buses are efficient compared to cars, but buses are slow: It takes a damned long time, an hour or more, to ride the bus from the Amherst Street Metro to the Galleria.

A new Brookings Institution study of the millions of carless households in the top 100 metro areas finds that America still has a problem called “spatial mismatch.” Let’s call it the Cynthia Wiggins problem: Many of the jobs for low-wage workers are far from where low-income people live, and while there are transit systems (mainly bus routes) in place, the distances are so long that the trip to work is an hour or more one way. If one owns a reliable car, an hour commute in the Buffalo area means you can live anywhere from Cattaraugus Creek to Lake Ontario, or east to the hills of Wyoming County. Don’t have a car? The only real option is to live where there’s public transportation, i.e., in the city.

So long as oil remained affordable, the separation of income groups by highway miles was affordable even to people of very modest means. But now, gasoline purchases as a share of family income have leaped. And since the credit-bubble economy blew up in 2008, the Cynthia Wiggins problem has now spread to the suburbs, where public transit access is much more difficult than in the relatively densely settled city. New data from the Census show that poverty is rising in the suburbs, where the cost of driving is greater because distances are greater. Food Stamp recipients in Erie County went from just over 100,000 in 2008 to over 143,000 in 2011—and you can’t buy gasoline with food stamps.

The big new report from the New American Foundation says that America is going to be seeing more of the same for years to come—which is to say, suburbanized poverty, high unemployment, slow job-growth and not a lot of new disposable income for our consumption-driven economy. The report recommends new infrastructure inputs, specifically transit, because so much household income already goes into gasoline.

Streetcars should be part of that infrastructure for tomorrow. Yes, for job access. Yes, for efficiency. Yes, so that greenhouse-gas emissions can drop. Yes, so that we can connect workers in far-flung suburbs so that they don’t have the Cynthia Wiggins problem.

But the biggest reason, the most important reason, is to meet the great civilizational challenge that our privatization mania created for us, and that burdens us, especially in the north—namely, the spatial isolation of kids whose parents are in low-wage jobs.

The terrible number 77

Of the 32,000-odd kids in the Buffalo Public School system, 77 percent—more than 28,000—are eligible for free or reduced-price school lunches. According to a forthcoming analysis by Ryan Keem, a graduate student in applied economics at Buffalo State College, they constitute almost half the poor kids in Erie County, which last year had about 130,000 kids in school.

Unlike Hamilton, and unlike Raleigh, North Carolina, we do not have a regional or county-wide school system. Keem’s analysis shows that there is a statistical correlation of .77 between low scores on the standardized statewide math and English tests for fourth and eighth graders and high concentrations of poverty. He is looking at black kids, white kids, urban and suburban and rural kids. The correlation is there. It’s not about race. It’s about household income. Where the poor kids are clustered, the poor kids perform below standard. Where they are mixed with higher-income kids, they perform better.

The reality of residential clustering by income is not going to go away. Families occupying 5,000-square-foot manses in well ordered neighborhoods are part of a structure—including a localized school system funded principally by taxes levied on the value of real estate—which needs for their manses to stay valuable. But the lesson of regionalized school systems, like the one in Raleigh, is that kids from low-income households and low-income neighborhoods can be mixed with kids from higher-income households if they get to travel to schools where the mixing by income is made to happen. The evidence is that at everybody wins and nobody loses.

Also good, from the point of view of property-taxpayers, regionalizing the property-tax base for a countywide school system seems to have had beneficial effects for the entire county. As Gerald Grant reported in his book Hope and Despair in the American City: Why There Are No Bad Schools in Raleigh, administration costs are lower, as one would expect, because 28 separate school districts (the number in Erie County) require 28 separate administrative structures. The cost of moving kids around in Raleigh in order to achieve their goal of having no more than four out of 10 poor kids per school is an issue, but no more so than here, where kids are bused already.

Up in Hamilton, they’re trying to connect these dots. The Hamilton Community Foundation’s CEO asked every member of his board to read Grant’s book. They have taken Grant’s analysis to heart, and now they’re moving toward a plan to start mixing poor kids into schools where the family incomes are higher—which means coming up with a good system for moving them around. Connecting transit customers through a faster, more energy-efficient system means investing in a landscape that will refocus private investment into areas that today have a higher proportion of poor people. But American experiences and American data show that mixing kids from different income groups achieves better outcomes, and so does having streetcars. Communities do better when these two things get done in tandem.

If we were to reorganize the way public money is spent on schools and on transportation at the same time, we would fix up the school buildings in the city where the school census has dropped from 45,000 in 2000 to 32,000 today, making sure that state-of-the-art technology is on hand everywhere that technological dysfunction used to be the norm. (The good news is that we just did that in Buffalo, through the Joint Schools Construction Program.) And then we would take the next step—we would make sure that kids and their parents had a way to get to where the new technology has been installed.

“[L]imited job access via transit in most metropolitan areas leaves many jobs out of reach for zero-vehicle households,” say the Brookings researchers. In other words, if you’re too broke to drive, you need a quick way to get there.

We can solve the Cynthia Wiggins problem. Installing streetcars costs about $600,000 a linear mile. Everywhere that streetcars get put in, higher-income people use them as well as the car-less poor. Everywhere that streetcars get put into a shared roadway, that is. Everywhere that there’s a community leadership that understands the desirability of shared public space, that is. Everywhere in North America that doesn’t want to remain the Rust Belt. One wonders: Will any of the new subsidies for new jobs coming out of Governor Andrew Cuomo’s new economic development councils be tied to getting people to the new jobs? We have invested untold billions of taxpayer dollars in going it alone, which has bought us isolation, sprawl, population decline, and pockets of intransigent poverty. Will the next money buy us more of the same?

Thursday, October 6, 2011

What's in your capitol?

Absent Governors

Withering Rust Belt cities wait for action

Yet another grant-funded think-tank analysis of Rust Belt cities has been published, with findings that are eerie echoes of studies read, written, and cited for decades. The new study, written for the Center for Community Progress by Brookings Institution scholar Allan Mallach and Michigan State economist Eric Scorsone, finds that old, sprawled-out, depopulated former industrial cities can’t make it on their own. State-appointed control boards that seek to impose inside-the-enterprise accounting solutions have no answer to the question of declining tax base, high unit-costs of service delivery, and concentrated poverty. The study’s title frames the problem: “Long-term stress and systemic failure: taking seriously the crisis of America’s older cities.”In a tentative sort of way, Mallach and Scorsone endorse regionalizing, i.e., combining the property-tax bases of cities and their surrounding suburbs. There are precisely three ways to accomplish that objective: incrementally, through a tax-base sharing plan like that devised 20 years ago in the Minneapolis-St. Paul metro by Gary Orfield and laid out in his book Metropolitics; through annexation, which is what Omaha, Nebraska and most Southern and Western cities do because that’s how the law works there; or through state-sanctioned consolidation.

The real contribution that this new report makes is to remind policy-makers that state governments are the key issue, because local municipal governments are creations of, and fiscally integrated with, the state governments that created them.

One expects that this latest restatement of findings known since the 1950s won’t get much attention from urban-policy veterans from Toronto, Indianapolis, Nashville, Louisville and Hamilton—places which, between 1953, 1976, 1977, 2000, and 2004, all answered the question of whether their once-marooned central cities should be governed in unified regional structures. But for the rest of America’s older cities, especially those in areas of stagnant or declining population (i.e., the Rust Belt), the critical question that hasn’t been answered is not whether governance needs to change, but rather this: when will state governments start getting engaged?

A long process

Starting in the 1950s, when the great post-war expansion of North America’s metros began, service after service and function after function, from libraries to hospitals to social-service offices, shifted from being the sole domain of the anchor municipality of Rust Belt regions to being regional responsibilities. Here in the Buffalo area in the late 1950s, the daily newspaper the Courier-Express explained the rationale for regional governance with a year-long series of articles, which were credited with the change of Erie County government from one governed by a board of supervisors to one led by an elected executive and an elected legislature. The express hope, in 1960, was that the next increment of change would be toward a true metropolitan-wide government that would at least unify urban and suburban tax bases and unify land-use planning. Industrialists loved this idea: In 1973, the chairman of Bethlehem Steel Corporation came to Buffalo to ask for unified regional planning, not only because he was tired of footing the lion’s share of the tax bills in Lackawanna but because his executives complained of having to deal with too many jurisdictions and authorities. Regional governance had legs as a political movement in that era, especially in the Rust Belt.

But as Gerald Grant pointed out in his book on the defeat of regionalized school districts in the Rust Belt, Republican President Richard Nixon didn’t want cities and suburbs to be unified, and he appointed his William Rehnquist to the Supreme Court expressly to ensure that keeping black kids out of suburban schools would remain the Rust Belt norm. The 1976 Milliken decision, in which the Rehnquist court found that school-desegregation need only happen within already established district lines, and not across regional or metropolitan areas, made sure that racial segregation and go-it-alone city governance has been the deal wherever the streets are paved with rust.

Study authors Mallach and Scorsone never get to that history, though they do recite the well known roster of facts about what used to be called, in refreshingly plain English, “shrinking cities,” but which now, in the aftermath of a consultant-dominated conference in Detroit earlier this year are more politely called “legacy cities.” In the current discourse of the American urban policy establishment, reference to racial polarization is not just downplayed, but made to disappear. We are reminded that poverty is concentrated in old cities, like Camden, New Jersey, across the Delaware from Philadelphia, where 38 percent of the households are under the poverty level, compared to the very pretty little town of Haddonfield just down the road a bit, where the property tax base is worth 10 times Camden’s. The median household income in Camden is $26,752; the median household income in Haddonfield is $110,316.

And unless the governor of New Jersey dictates that the tax bases of Camden and Haddonfield are combined into a regional tax-base sharing arrangement, or unless the governor of New Jersey makes Camden and Haddonfield unify governance in a structure that will pick up the garbage, fix the streets, put out the fires and pay the public workforce, 45 percent black, 44 percent Hispanic and 5 percent white Camden’s services, infrastructure, and tax base will continue to erode just down the road from where 94.2 percent white Haddonfield’s do just fine, thank you.

“Unless fundamental changes take place to the way in which regional resources are allocated and service delivery boundaries defined, the vision of a stronger, healthier Flint, Youngstown or Rochester may remain unreachable,” Mallach and Scorsone helpfully conclude.

Crossing the great divide

The populations of counties where visible minorities and poverty is concentrated, and where cities are governed alone and their school districts not regionalized, are dropping. More simply: regions with self-governing poor cities lose. Camden County, where prosperous Haddonfield sits near shrinking Camden, is losing population. Buffalo’s Erie County is losing population, 3.3 percent since 2000. Genesee County, home of Flint, Michigan, saw its population shrunk over 2.4 percent since 2000. Mahoning County, Ohio, home of Youngstown, shrunk 7.3 percent since 2000. Monroe County, home of Rochester, actually had a 1.2 percent increase since 2000. But Cuyahoga County, home of Cleveland, shrunk 8.2 percent. Michigan’s Wayne County, home of Detroit, shrunk 11.7 percent. Pittsburgh’s Allegheny County shrunk 4.6 percent. Whether one uses the “legacy cities” moniker or plain English, Rust Belt regions with Rust Belt cities in them are shrinking.

It’s in the political self-interest of ambitious governors to jump into this quagmire because economic outcomes are better when costs are contained and service-delivery mechanisms are consolidated, with one caveat—land-use planning has to be a part of the deal. (The main agenda of the outfit that hired Mallach and Scorsone to write this report is to help communities set up land banks, i.e., inventories of vacant and abandoned parcels in shrinking cities.) But no governors have jumped in—except Andrew Cuomo, whose state is home to America’s most successful example of consolidated, regionalized governance, namely, 300-square-mile New York City. Cuomo carefully assembled opt-in consolidation legislation while he was Attorney General. Communities that want to merge their governance structures can do so. He said, essentially: Here, here’s the tool; use it if you choose.

But of course, local politicians and their financial backers in shrinking communities tend to accept the state-appointed control boards that Mallach and Scorsone scoff at, because control boards don’t disturb the power of the financial and real-estate sectors that thrive from the cities-alone status quo. Control boards also arrive with bags of State cash for strapped municipal governments. Governors in New York State have tended to focus their energies on New York’s growing New York metro area, not on the weak, small, faraway shrinking cities of the north. Prospective presidential candidate Chris Christie of New Jersey isn’t going to tell the rich lions of Haddonfield to lie down with the poor lambs of Camden any time soon. Better to have a control board in Camden, as there was for a decade.

But these broken cities get more and more expensive the more they shrink. And as their regions shrink, the politics of race and sprawl don’t go toward regional solutions unless there’s a political leader with the energy, and the cover, to move things that way.

The most relevant success story in recent times is that of Terry Cooke in Hamilton, Ontario. Cooke campaigned on city-county merger and won both a mandate from his county-wide electorate in 1999 to merge the city and the county, thereafter the suburban townships, too. The critical difference for Cooke: He had the support of his provincial premiere (Ontario’s version of governor) to back the deal. Cooke also moved on this initiative before Hamilton, which was two-thirds of the county’s population, went the way of Buffalo, Cleveland, Pittsburgh, Youngstown, and other Rust Belt towns that shrunk to less than half the population of their metro regions.

Regionalization in the 1950s happened when expanding regional populations, and smart local elites, recognized that library systems, hospitals, public safety and other services could meet new demands if and only if they had new support. Regionalization in the 1970s happened in the state capitols of Indianapolis and Tennessee when bold state politicians convinced capitol-district business barons to create great regional cities out of backwaters. Pittsburgh, with its very rich foundations, its recent downtown-centered mega-developments and its centrally-located universities plural, may be a candidate for revitalization via refocusing. Even Rochester, whose hugely successful three-term mayor Bill Johnson got clobbered running for county executive on a merger platform, could be a candidate for a new regionalization movement based on the resilient strength of its urban core. But absent gubernatorial engagement, regionalization as a solution to Rust Belt decline cannot happen. Witness what happened in Erie County, New York, where in 1999 and again in 2003 a county-wide candidate was elected on an explicit platform of regionalization, and specifically, of Hamilton-style city-county consolidation. Joel Giambra’s administration put together a specific plan, with legislation and a service-by-service implementation program, and a county-wide land-use plan, too, all of which was endorsed by a blue-ribbon commission headed by the late UB President William Greiner and that included Buffalo State College President Muriel Howard, the president of the largest suburban chamber of commerce, the heads of major churches, businesses and philanthropies. They delivered their proposal, and the then-governor shrugged. Everybody in Buffalo looked to the second floor of the State capitol, but the white smoke never issued. No governor, no change. Not in Michigan, Ohio, Pennsylvania, New Jersey, or New York, either.

Bruce Fisher is former deputy executive for Erie County and visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

Wednesday, August 31, 2011

Climate change, engineering and us

Ready For Our Own Irene?

Toronto, Chicago, Portland prepare for climate change while we pursue real estate development schemes

While the world’s scientists get closer to unanimity about the human role in catastrophic climate change, the American political process produces a mixture of equivocators like Barack Obama and deniers like Rick “pray for rain” Perry and Michelle “God’s will” Bachmann, with the ever-cautious Mitt Romney boldly staking out a position somewhere between “maybe” and Rush Limbaugh’s bad performance art. There’s no serious money or campaign acumen changing the green movement into an electoral force in America, as it is in Europe and even in Canada, where the New Democrats sound as green as can be even as Canadians enjoy the swell times created by another oil-sands petroleum boom. The $10+ billion cost of hurricane/tropical storm Irene will probably not become a political fact except in Vermont, where the damage was worst, and where the electorate—about the same size as Erie County’s—already embraces the green analysis.

Here in Upstate New York, except in the flooded Mohawk valley and in a few towns along the Hudson, the language of politics and policy ignores environmental concerns. It’s all about economic development up here. That’s why Governor Andrew Cuomo has already endorsed a go-forward approach to horizontal drilling for natural gas in the Marcellus Shale, and has gone the Seneca Gaming Corporation and other Native American groups one better by hinting that the big casino development for the Catskills may well be a state affair. The 2011 storm named Irene is a short-lived phenomenon, but the jobless non-recovery from decades of deindustrialization, capital flight, and the gruesome bank collapse of 2008 grinds on and on.

And despite studies from think tanks and engineers and economists who all conclude that we’d better get cracking on cutting carbon emissions, start more mass transit, start resettling cities, stop sprawling—indeed, that we need action on a long policy agenda to address what the climate scientists say is coming—New York’s language consists entirely of the platitudes and slogans of real-estate-oriented economic development.

Not so elsewhere. An impressive roster of big cities got engaged in 2005 with former President Bill Clinton’s Global Initiative because leading citizens and political actors responded to his call to start taking science seriously as a matter of local public policy. Clinton has gotten 40 city governments around the world to put climate-change action plans together, and every American one I’ve read comes complete with two issues addressed: economic-impact documentation and citizen-engagement plans.

In other words, there’s a cost-benefit analysis that lays out the case for undertaking action. And there’s a chapter in each plan on how to get the word out. In the best documents, there’s evidence that the very process of putting the plan together was a long, deliberative, public process that brought lots of citizens out to lots of meetings, so that the plans represent buy-in by many constituencies. It is great stuff.

One should expect great things from great cities. New York, Toronto, Chicago, LA, Philadelphia, and a few big European, Asian, and South American cities have made some commitments that occasionally make news, as when Mexico City set a modest-sounding but somehow believable one for 2012: reducing carbon-dioxide emissions by 12 percent from the 2008 baseline. It’s a big-city PR effort, to be sure: Chicago’s plan was big news for the year that its committee spent working up its plan, and bigger news when the plan was released in 2008. But what it shows is this: A sufficient number of business people in Chicago figured out that if scientists at the University of Chicago, the University of Illinois, and Northwestern were all willing to say that Chicago’s weather is going to make the place feel like Baton Rouge within a few decades, then they’d better sit up and pay attention—and get with the program of deciding how public money should be spent.

Here’s the program that the business leadership in Chicago, and all these other cities, too, signs off on: more public transit, better insulation of public buildings, more efficient vehicles that burn less carbon-based fuel, plus better solid-waste disposal, an end to flushing raw sewage into the watershed, a big infrastructure investment in better rainwater management, and overall, less energy-wasting. Chicago’s “Climate Action Plan” has a target of reducing greenhouse gas emissions to 25 percent below 1990 levels by 2020, and 80 percent below 1990 levels by 2050.

Stirring the blood?

But of course, money to create sustainable cities—whether for Toronto’s crosstown subway, for Chicago’s clean water initiative, for light rail projects everywhere (set aside for now the issue of high-speed inter-city trains, which China, Japan, and Europe have already)—all must come from taxpayers. The way these projects get done is with public-private cooperation, using borrowed money that taxpayers have to repay. Investment banks would be delighted to lead in lending city governments the money to create all this sustainability and science-driven public infrastructure. That’s why the attendees at the 2011 Sustainable Infrastructure Financing Summit, held earlier this year in Switzerland, included lots and lots of bankers. The figure they kicked around for global sustainable infrastructure investments by the year 2030: $25 trillion. With a “t.”

“Make no little plans; they have no magic to stir men’s blood…Make big plans, aim high in hope and work,” wrote Daniel Dean Burnham, architect of the Ellicott Square Building and planner of Chicago at the end of the 19th century.

Investment bankers love the idea of big projects. So do construction workers, engineers, planners, pipe-makers, concrete fabricators, the folks who drive the lunch wagons—everybody loves big public works projects. Paul Krugman, Joseph Stiglitz, and the post-Keynesian economists all love it, too, because they understand what Ronald Reagan understood: When you borrow money and invest it in stuff that reduces future costs, the jobs created along the way are worth more than the borrowing costs.

The cynical and the free-market fundamentalists assume that the term “sustainability,” and the climate scientists’ consensus, is just a ruse to justify flying off to Switzerland to hear former investment banker Michael Bloomberg embrace the concept of “a new multi-stakeholder approach to infrastructure financing.” Indeed, it’s hard not to conclude that a great many sophisticated people have figured out that there is a whole lot of money to be made in making the switchover from old, oil-powered urban life to a new way. One recalls the massive over-promising of benefit in the late Clinton presidency, when we all went from paper to PC. That was a nice bubble, too, while it lasted. Eric Janszen warns of a green technology bubble.

What’s different, though, is that climate science says ever more consistently that big change is ahead. One may be forgiven for noticing hurricane/tropical storm Irene more than the news that the big 40 cities of the Clinton Initiative are getting new company. This past month, the Kresge Foundation granted the University of Michigan $1.2 million to help some of the Great Lakes cities get ready for climate change impacts—specifically, the massively disproportionate, record-shattering rains that climate scientists expect will be hitting us harder and more often, and the shrinkage of those gigantic pools of 10,000-year-old glacial melt-water, called variously Lakes Superior, Michigan, Huron, Erie, and Ontario, which are evaporating away, shrinking like Great Lakes cities, because global warming has shortened the ice season.

As the scientists say that they are in agreement that the climate is changing, and as the big cities are already at work addressing both the public cost and the potential opportunity that will be caused by climate change, and as the Wall Street people have already figured out how much it’s going to cost all over the world, then the line of questioning in our community should go something like this: Is anybody looking into our situation? Is anybody crunching our numbers? What happens to our costs if we don’t prepare for climate change—and what does spending today on a plan like Chicago’s, Toronto’s, Philadelphia’s mean for “economic development” tomorrow?

None of the 40 cities in the Clinton Initiative waited for the Great Equivocator. There’s no point in waiting for the anti-scientific Rick Perry, Michelle Bachmann, Sarah Palin, or Mitt Romney to make the connection between climate change, new technology, and public cost/benefit calculations. They already have the answer.

Tuesday, July 5, 2011

Casino nation II

A Pro-Casino Presidency?

Slot jockeys: not a pretty sight.

When he was a state senator in Illinois, Barack Obama was skeptical to the point of downright hostility toward casinos. His opposition was still in evidence in the earliest stages of his presidential candidacy.

The Obama administration, however, is anything but. In June, Assistant Secretary of the Interior Larry Echo Hawk, who heads the Bureau of Indian Affairs, rescinded a January 2008 memorandum issued by an outgoing Bush administration official—a memorandum that strongly asserted a policy of limiting the ability of Native American tribes to acquire off-reservation land for the purpose of building and running casinos. “The 2008 guidance memorandum was unnecessary and was issued without the benefit of tribal consultation,” Echo Hawk said. President Obama recently met with tribal leaders, many of whose reservations have seen unprecedented economic benefit from off-reservation gamblers spending money in tribally owned casinos.

On-reservation casinos exist in every state where a federally recognized tribe has a reservation. But at this writing, several state governors are actively opposing plans for off-reservation casinos. Tribes in Michigan, Minnesota, Mississippi, Oklahoma, and California are actively seeking to establish more off-reservation casinos. The Seminole tribe of Florida, which operates a casino near Miami, is seeking to purchase land in Atlantic City, New Jersey, and to run a tribally owned casino there, more than a thousand miles from its home.

New York Senator Charles Schumer hailed the Department of Interior’s policy change in a June 13 statement. Schumer is an advocate for a Catskill Mountains casino, which the St. Regis Mohawks, the Stockbridge-Munsees of Wisconsin, and the Senecas of Western New York have all been interested in developing. None of those federally recognized tribes have federal “trust” or reservation land within hundreds of miles of the Catskills.

The Center for Responsive Politics, a Washington public interest group that tracks political campaign money, found the Seneca Nation of Indians donated approximately $352,000 to federal candidates in 2007 and 2008. Other records show that the Senecas spend heavily on lobbying, legal fees, investment counsel, and underwriting expenses related to bonds issued by the Seneca Gaming Corporation, which recently refinanced over $500 million of outstanding debt. In a recent article in Indian Country, an online publication on Native American issues, Seneca Nation President Robert Odawi Porter is quoted saying that “If anyone wants to be critical of what Indian nations are doing, then they better be critical of the entire system in which money flows through American politicians and political parties.” Indeed, the Senecas’ contributions are dwarfed by those of other tribes that own casinos. In the list of the top 20 casino-based political donors, 15 are Indian tribes. In 2010, they gave over $10 million of the nearly $13 million the casino industry gave to national politicians. Two-thirds of the money went to Democrats.

The question for American policy-makers is whether the economic impact of off-reservation casinos is positive or negative for non-reservation communities. In a recent study of he Seneca Niagara casino in Niagara Falls, Professor Steven H. Siegel of Niagara University was extremely critical of the Seneca Gaming Corporation’s practice of handing out hotel rooms, food and beverage services, and entertainment for free. Using data on the first nine months of 2010 from the filing with the Securities and Exchange Commission, Siegel found that the Seneca Gaming Corporation spent over $42 million subsidizing those items, giving away more hotel room-nights than were sold by Buffalo’s Adams Mark and Hyatt hotels combined, yet still had over $83 million in net revenue. “In my 34 years researching and teaching in the area of strategic management for the hospitality industry,” Siegel wrote, “I have never encountered a competitive situation where one business entity has such a staggering competitive advantage over other entities.”

Official Seneca pronouncements about the Buffalo casino have recently included a pledge that there will be no such hotel. But Seneca Gaming Corporation has proved that the formula of combining hotel beds, restaurants, bars, and nightclubs in one self-contained entertainment complex is hugely profitable. Unless new court action or the July 2008 ruling of Federal District Court Judge William Skretny results in the Buffalo casino being closed, there is no way of predicting whether the Senecas will or won’t duplicate their Niagara Falls operation in Buffalo. The potential impact on existing non-Indian businesses could be huge.

bruce fisher

Casino nation

The Judges Obama Ignores

(photo by Rose Mattrey)

Will casino money trump law in Buffalo?

It has been more than seven years since the Second Circuit Court of Appeals told a judge in Buffalo that he was correct in deciding that the Seneca Nation of Indians had no claim to 19,000-acre Grand Island or any of the other islands in the Niagara River. Back in 2002, Judge Richard Arcara of the Federal District Court here, wrote a 212-page decision that includes a comprehensive history of who has owned or controlled land on both sides of the Niagara as far back as the early 17th century. Arcara’s decision is all the more remarkable because all the parties—including the Senecas, New York State, and the United States—agreed to a set of stipulated facts, among which is that neither Buffalo nor any part of the Niagara River area was ever a part of the “aboriginal territory” of the Senecas. (See note below.) In 2004, Judge Arcara was upheld by the Second Circuit Court of Appeals. In legal terms, that’s about as good as it gets for a Federal District Court judge. But it got even better for Arcara when the United States Supreme Court refused to hear the Senecas’ appeal.

But when it comes to the Seneca Gaming Corporation, the Seneca enterprise that is distinct from the Seneca Nation but that relies on the special legal status of the Seneca people, the law seems to have no meaning. Judges decide things, parties make binding agreements, federal agencies are given their instructions—and business as usual goes on.

That’s what’s happening now in a separate case decided by Arcara’s fellow Federal District Court Judge, William Skretny. Judge Skretny decided in July 2008 that the little “temporary” Seneca Gaming Corporation casino in Buffalo was illegal. Two months later in August 2008, Skretny was irritated with the National Indian Gaming Regulatory Commission, the federal body that he’d directed to act in compliance with his ruling. In July, Skretny said that the casino at Michigan and South Park was “illegal.” In August, Skretny directed the federal agency to act “forthwith.” Further, he said, “[Federal law] mandates that the [gaming commission] take prompt action once it has reason to believe a violation exists,” Skretny wrote. “...The Chairman is directed to take such action as is consistent with the Court’s July 8, 2008 Decision.”

The casino, as of June 23, 2011, is still open.

It has been almost a decade since Judge Arcara denied the Senecas’ claim to Grand Island, which is where the then-minority of pro-gambling Senecas had wanted to put their casino. Back in the early 1990s, when the Senecas had first filed their claim for Grand Island, New York State had been actively debating whether to legalize Class III “gaming,” including slot machines and the card games that up until then had been confined to church picnics and back rooms. All across the USA, especially in the Western states, federally recognized Indian nations had gone into the gambling business after the 1988 enactment of the federal Indian Gaming Regulatory Act (IGRA). The rule was straightforward: With federal oversight, specifically of the Department of the Interior, a tribe could erect a casino on its own sovereign territory. Back in New York, there was no political will in Albany to legalize state-sanctioned casinos: Both Donald Trump and the Mashantucket Pequot Tribe of Connecticut defeated what will there was by lobbying hard to keep the buses full of New Yorkers headed to Atlantic City and Foxwoods. But momentum built for New York State to do a deal with Indian nations here to help them get around the State constitutional ban on casino gambling, even as the province of Ontario, just across the Niagara, jumped into the gambling business quickly. But one of the significant provisions of the IGRA law was that a tribe could, in some very limited circumstances, before a certain date, put up a casino outside the strict boundaries of its reservation or sovereign territory.

The Senecas lost their claim on Grand Island in 2002 after the window had closed on setting up a casino on newly acquired land. But with money Congress sent the Senecas to compensate them for the grossly unfair reservation lease deal in Salamanca, the Senecas purchased land in Niagara Falls, New York. In fact, they purchased the old Niagara Falls Convention Center. With great ceremony, then-Governor George Pataki helped inaugurate the Seneca casino era—even though the land they’d bought had never been “aboriginal territory.” There was an unmistakable New York State stamp of approval on the deal: The state that had refused to amend its own constitution had enacted a “compact” with a sovereign Indian nation, which had used federal funds in manner that Congressman John LaFalce—who’d championed getting the money in the first place—relentlessly asserts Congress never intended.

Then, a few years later in 2005, the Senecas bought land in Buffalo—land that had never been “aboriginal territory,” but that had, between 1794 and 1838, been Seneca land. More recently, the land had been aggregated by Buffalo developer Carl Paladino. The Senecas made no secret of their intention to put a casino there, and the federal government was required by IGRA to ask whether the state, the City of Buffalo or Erie County objected. Governor Pataki didn’t object. Anthony Masiello, then mayor of Buffalo, didn’t object. Joel Giambra, then Erie County Executive, objected. When the federal government went ahead and let the Senecas start a casino in Buffalo, a citizens group sued to stop it. Erie County joined that suit.

The case went before Judge William Skretny in the federal courthouse here in Buffalo. Skretny’s decisions were mixed: he found that the Senecas’ purchase of 9 acres of Buffalo land technically turned that land into “Indian land,” but in a crucial legal distinction, he found that that piece of land does not meet the federal law’s criteria for using it to put up and run an off-reservation casino. So Judge Skretny said, three years ago this July, that the casino should be closed. And then he said it again, later in the summer of 2008. “Forthwith,” he said.

So why is the casino still running three years after a Federal District Court judge said it should close? And why did the current Seneca Nation president issue a press statement just last month that calls the site of the illegal casino “aboriginal land” when his own lawyers agreed that it is not?

The answer is simple: President George Bush’s politicos conspired to change the rules after Barack Obama was elected, and subsequently, Barack Obama’s politicos are not only going along with what the Bush people did, but they’re also ignoring the Federal District Court’s decisions.

The smoking gun

As of Thursday, June 23, 2011, the citizens who challenged the Bush administration are challenging the Obama administration. Their legal papers are filed and they’re ready to go back into Judge Skretny’s court. Citizens for a Better Buffalo is going to court to ask for actual consequences to flow from the decisions the judges make.

And this time, they think they have proof that corruption and insider-dealing is what keeps the Senecas’ Buffalo casino operating.

The political appointees of George Bush who changed the rules to keep the Senecas’ Buffalo casino operating are Buffalo people, the lawsuit alleges. The suit names Mike Rossetti, a former assistant Erie County Attorney and son of a local judge, who first went to work for the Department of the Interior under George W. Bush, then subsequently went to work for a law firm called Akin Gump. The Akin Gump firm is a Washington powerhouse: Its other Buffalo connection is former Republican Congressman Bill Paxon, a partner there who was succeeded by Republican Tom Reynolds. The lawsuit alleges that Mike Rossetti’s mate, Edith Blackwell, a “highly placed lawyer” in the Department of Interior Division of Indian Affairs, was “directly involved in reversing the Division’s long-standing position” on the applicability of the rules that prohibit Indian tribes from siting off-reservation casinos on newly-acquired land.

The killer paragraph in the court papers is this:

At the time of these events, Edith Blackwell was living and sharing a residence with Michael Rossetti, a partner with Akin Gump Strauss Hauer & Feld, LLP, which provides legal respresentation to the SNI [Seneca Nation of Indians] and was receiving hundreds of thousands of dollars from the SNI for that legal representation and for lobbying the federal government on issues affecting Indian sovereignty, among others. The SNI, which holds the Buffalo Parcel in restricted fee, was the sole tribe that stood to benefit from the DOI’s reversal of its position. Edith Blackwell was recused, presumably due to her relationship with Michael Rossetti, from all matters involving the SNI. Yet when the SNI pressed the DOI to reverse is position on the applicability of Section 2719, Edith Blackwell un-recused herself and orchestrated the change.

This lawsuit was filed only a week after New York State politicians and political appointees of Governor Cuomo joined with Seneca Nation President Robert Odawi Porter in announcing plans to make Seneca Gaming Corporation and other Seneca business interests a major part of the future of Buffalo’s publicly funded waterfront development. The very day that the lawsuit was filed, in fact, the Seneca Gaming Corporation involvement in downtown Buffalo was endorsed by the Buffalo News in its lead editorial.

The connection to New York State politics continues. The appointed leader of the Erie Canal Harbor Development Corporation, Jordan Levy, happens also to be a member of the board of directors of Seneca Holdings, Inc., a Seneca Nation entity chaired by Seneca Nation President Robert Odawi Porter, whose job is to invest the profits from gambling into other ventures that will benefit Seneca Nation members. Apparently, it’s now the official policy of the State of New York to commingle the business interests of a separate sovereign nation with those of New York State citizens.

A $600 million local business

As noted in many of the Seneca Gaming Corporation’s filings with the federal Securities and Exchange Commission, the 2002 compact with New York State gives the Senecas “the exclusive right to operate specifically defined gaming devices, including slot machines, within a 10,500 square-mile, geographic area in Western New York, beginning on Route 14, approximately 30 miles East of Rochester, and extending westerly throughout New York State.”

The casinos are extraordinarily profitable. According to the last available annual report, Seneca Gaming Corporation revenues in 2009 were over $568 million from gambling, plus food, beverage and hotel revenues of over $106 million. Earnings before interest, depreciation and amortization were over $250 million. The Seneca Nation is a tax-exempt entity.

And most of the money its casino operations brought in came from residents of Buffalo and Niagara Falls. More than 50 percent of the holders of the special “frequent gambler” cards issued at the Niagara Falls casino are local people.

What now?

A question arises as to the plans of the Erie Canal Harbor Development Corporation, given that its board overlaps with the Seneca Holdings board, which overlaps with the Seneca Gaming Corporation, which apparently has the Washington muscle to get regulations changed and judges ignored. Could there be a plan to move the “temporary” Seneca casino closer to Erie Canal Harbor? Could the former state office building named for General William “Wild Bill” Donovan, World War I and World War II hero, founder of the Central Intelligence Agency and scourge of the Saturn Club, become a new Seneca Gaming Corporation property?

Even before the new lawsuit was filed, it seemed strange that these plans would be going ahead while a Federal District Court judge’s finding that the Seneca Gaming Corporation casino is “illegal” and should be shut down “forthwith” are on the table.

But ignoring the law is now settled practice here. Last month, the Seneca Gaming Corporation’s Buffalo-based public relations firm issued a press release which asserted that the casino that Judge Skretny decided is illegal is sited on “aboriginal” Seneca land. (The contact person on that press release is Stephen Bell, the former managing editor of the Buffalo News.)

This is a key assertion that gets right to the heart of the problem that the Obama Administration evidently wants to avoid—namely, the fact that the huge, well-established, immensely profitable Seneca Niagara Casino in Niagara Falls is in the same kind of non-aboriginal territory whose history was so thoroughly described in the 2002 case Judge Arcara decided.

Here’s why the Obama Administration is now the issue: it is now being sued. When Judge Skretny decided in 2008 that the Buffalo casino was illegal, the Seneca Gaming Corporation did not appeal the case to the Second Circuit Court of Appeals for a resolution. Instead, the Seneca Gaming Corporation went to the Bush Administration’s Secretary of the Interior for a ruling on its pending application for permission to operate a casino—because under the federal Indian Gaming Regulatory Act, the Secretary of the Interior is the administrator, and his lawyers, and the commissioners in the Indian Gaming Regulatory Commission, are in charge.

Literally hours before Barack Hussein Obama took the Oath of Office to become the 44th President of the United States, the outgoing Bush Administration appointees granted the Seneca Gaming Corporation brand-new permission to operate their casino.

And everybody ignored Judge William Skretny’s order of July 2008. No federal marshal went in to lock the doors. No higher court said “Skretny’s wrong, let the games continue.” Political appointees of the President Bush gave their permission. And today, political appointees of the new president continue to ignore Skretny and to do as Bush’s politicos did.

Today, President Obama is going to have to go to court to defend the activities of Mike Rossetti and Edith Blackwell. The names have changed since then. But the illegal Buffalo casino is still operating.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

Sunday, May 8, 2011

Yes he did.

Unity After Victory

President Barack Obama delivers a statement in the East Room of the White House on the mission against Osama bin Laden, May 1, 2011. (Official White House Photo by Pete Souza)

The moment Bush squandered could be Obama's opportunity

It was Professor-in-Chief Barack Obama who killed Osama bin Laden. The day before the Navy SEALs went in, Obama the Lecturer finished his one-liners at the White House Correspondent’s Dinner with an admonition to his guests to stay focused on serious business. What he did not explain to them Saturday night became known on Monday morning: that success in taking bin Laden out was not the result of a technological magic act or a drone strike, but was only achieved through extraordinary patience, discipline, inter-agency coordination, and tight secrecy.

This should be the great clarifying event in American politics. The Republican attack machine might well still try to market doubt about Obama’s American identity, doubt about the role of government in our lives, and doubt about whether the country’s economic future is secure. But now, with a definitive military success—after almost a decade in Afghanistan and Iraq in which nothing definite seems to have been achieved except Saddam Hussein’s demise—Democrats might have a chance at unity. And so may the country.

It may be that Obama will be the first president since Jimmy Carter to ask the country for shared sacrifice in confronting a national crisis. We can hope that a national call to action will come about without Osama bin Laden’s disciples first taking some ugly retaliatory action. But if there is such an event, you can double your bet on Obama’s call coming.

What he should ask for

Immediately after the Western democracies dug into their treasuries to bail out the big banks and thus stabilize the global financial system, American financial elites began funding the Right. Investment bankers and hedge-fund managers have recently made no secret about their antipathy to Obama for his call, now renewed, to raise taxes on high-income individuals. Mega-speculators are especially incensed that there has been talk, even in Obama’s deficit-reduction commission, about taking away the preferential treatment of capital gains, which is what happened back in the 1986 tax reform. The highest tax rate on ordinary income today is 35 percent. But the highest tax rate on income from the sale of stocks, bonds, real-estate, or other assets—including the portfolios of hedge-fund billionaires—is 15 percent. Obama has said that he wants to change that. The speculators like Republicans better, because the GOP line, endlessly repeated, is that the 15 percent capital gains rate is all about “small business.”

Taxing the richest people in America might seem disconnected from issues of national security. But of course these issues are intimately connected. America has no draft, so the burden of fighting these long, protracted, undeclared wars in Afghanistan, Pakistan, Iraq, and now Libya falls squarely on the working-class boys and girls who see military service as the surest pathway to economic security in their deindustrialized country. That’s how the “volunteer” armed forces recruit, and that’s what recruits want. They’re the only people in America, besides unionized public-sector workers, who get the benefits that Canadians, Britons, and other European members of our NATO alliance get as a matter of national birthright: publicly funded healthcare, education, and job training. In our country, there is a war of the investor class—a war waged by Republicans and often by Democrats, too—on the class whose sons and daughters fight our wars. Making a national policy of getting the investor class to foot more of the bill for those wars would be a gesture toward spreading the burden to those who can best afford it.

Obama, surprisingly, is willing to take on that fight. What makes him a prospect for being the first president since Jimmy Carter to ask for shared sacrifice is that he is willing to ask rich investors to pay more taxes to fund our wars, like the one he just won against Osama bin Laden. But the ask should not stop there—for why have these wars been fought? You know the answer: America has been engaged in wars to secure energy supplies. We and our NATO allies fight oil wars. The next presidential ask should be for the country as a whole to get busy on many fronts, immediately, with a renewed sense of urgency, on what Carter asked us to do more than 30 years ago—to declare what he called “the moral equivalent of war” on imported oil.

Energy conservation, renewables, and alternative low-carbon sources of power will cost everybody. Not only are there no guarantees of success, but the prospects of failure are everywhere. Worse, because government programming will be involved in getting these alternative energy sources going, there will inevitably be corruption and waste and stupidity. The ethanol program is the best example of all three—ethanol being such an egregious fraud that even the Wall Street Journal opines against it.

A consensus to strive for

Obama was patient about bin Laden. He was also patient in trapping Republicans. After the 2010 elections, Obama sent a political message that drove progressives crazy: He conceded and conceded and then he pre-emptively conceded some more. Some of us sought deep-seated psychopathologies as the reason Obama caved in on extending the Bush tax cuts on America’s richest two percent. Some opined that Obama was terrified, as a mixed-race person, of conflict that might make him lose his temper, so that he would go from being the man of the center to a man of the fringe. Some of us missed just how subtle and smart and tough-minded this guy really is, because what he seems to have done is the following: He gave the appearance of abandoning his Left base, which emboldened the adventurers on the Right to burst forward with their over-reaching budget plan, which pledged even more tax relief for the haves and the have-mores, explicitly at the expense of Medicare and Medicaid—and then he pounced. Obama waited until the Republicans trapped themselves with their own votes. One does not have to be all that well versed in politics to understand that old white people, whose votes Obama did not win in 2008, are now part of his coalition. Tea Party adherents who loathe him for being black need only be reminded that it is Republicans who are on the Congressional record as being out to wreck their Medicare; chances are better than ever that they will either support Obama because he supports Medicare, or that they will simply not vote, thus depriving Republicans of their once-reliable base.

By being disciplined and patient and lucky, too, in having arrogant opponents with tin ears, Obama won the opinion war, such that moderate- and low-income seniors now want the rich to pay more taxes. By being disciplined and patient and surrounding himself with smart people instead of ideologues, Obama got Osama bin Laden.

The 2012 agenda is in formation before your very eyes. Social Security will be untouched. Medicare may require an additional tax in order to keep it solvent, but if solvency is described as shared sacrifice, it will win. The higher tax rates on millionaires, and a restored estate tax, are now, for the first time in a generation, emerging as consensus items. Consensus on ending the foreign wars encompasses everybody from Ron Paul on the looney Right to Lockport’s own Stephanie Miller on hilarious Lefty radio. Republicans will be left to plead the cases nobody wants to hear: cutting Medicare by turning it into a voucher program, cutting student grants and loans at a time when family income is stagnant or falling, cutting taxes for investors when super-majorities want them to pay more.

What the national unity consensus agenda lacks is an aspirational item. That item needs to be energy. The sooner Obama offers it, the better—because it’s the issue that can credibly be said to save us from worry about the next bin Laden. And though local and state politics always lag the national trends, 2011 elections for local offices, and statewide campaigns by governors, could set the stage for 2012 in exactly the way that the special election to fill Pennsylvania’s open Senate seat set the stage for Bill Clinton in 1994, The aspirational issue then was healthcare reform. It motivated Democrats in Pennsylvania and alerted them nationwide. Democrats all over, had they but a president to lead them, could spend 2011 pushing progressive agendas on energy, green infrastructure, tax progressivity and the local equivalent of funding National Public Radio. The moment is upon us. Let’s hope that the coming appeal to national unity is bold enough to inspire, for as the comedian at the White House Correspondents Dinner had it, the only candidate who could beat Obama 2012 is Obama 2008.