If Your City Cries Poverty, Examine the Books.
Here's something from the draft archives that's finally seeing the light of day. How appropriate to discuss snow just as we're entering the first several heat waves that will be hitting us this summer.

This blog entry was started nearly two years ago. Talk about procrastination!

Here we go with the beginning of the draft:

In the last few years, many state and local governments have blamed budgetary shortfalls on a weak economy, the growing use of internet-based sales, and policy decisions at other levels of government.

But a more fruitful place to begin is unnecessary spending.

The government of Traverse City, Michigan, is dealing with a $994,700 shortfall.

Nearly 9 percent of that money, or $84,594, can be found on the slopes of the Hickory Hills ski area.

Last season on the hill's operation--or 9 percent of the city's budgetary shortfall.

One resident's comments illustrated the folly of taking the "cool cities" fad too seriously. "We talk about wanting to be a cool city, and I just don't know what could be cooler than to have your own city ski hill." (The Traverse City Eagle-Record has details.

And that's it. I ended up turning this post into a commentary for the Mackinac Center for Public Policy.

Here's the commentary as it was published in 2004. (I'm not going to bother to re-create the links.)

Cities that Cry Poverty Should Sell Their Money-Losing Ski Areas

In the last few years, the state government, as well as local governments across Michigan, have blamed budgetary shortfalls on a weak economy, loss of sales-tax revenue to the Internet, and policy decisions at other levels of government.

Rather than point the finger elsewhere, however, government officials ought to look first at some of their own unnecessary spending.

A bad example of public priorities – and a good example of the need to reorder them – comes from the northwestern town of Traverse City. It is currently dealing with a $994,700 budget shortfall.

Nearly 9 percent of that deficit, or $84,594, can be found on the slopes of the Hickory Hills ski area, a city-owned facility. The ski area’s loss has come even with the financial help of the Grand Traverse Ski Club, a private group that has provided funds towards snowmaking and lighting equipment.

In the last few years, the state government, as well as local governments across Michigan, have blamed budgetary shortfalls on a weak economy, loss of sales-tax revenue to the Internet, and policy decisions at other levels of government.

Rather than point the finger elsewhere, however, government officials ought to look first at some of their own unnecessary spending.

A bad example of public priorities – and a good example of the need to reorder them – comes from the northwestern town of Traverse City. It is currently dealing with a $994,700 budget shortfall.

Nearly 9 percent of that deficit, or $84,594, can be found on the slopes of the Hickory Hills ski area, a city-owned facility. The ski area’s loss has come even with the financial help of the Grand Traverse Ski Club, a private group that has provided funds towards snowmaking and lighting equipment.

The city’s parks and recreation commission has explored various ways of closing the budget gap, including raising prices or cutting services, to save $20,000 a year. Even so, local officials hope to spend $3 million to purchase a 117-acre parcel next to the ski area, which might give the money-losing operation a chance to expand. Or it might be an investment in another money-losing city operation.

BELOW-MARKET RATES
One reason for the red ink is the below-market rates charged for this non-essential government service. During the 2003-2004 season, an adult season pass cost $90; city residents paid $85. The maximum daily rate was $12.

By contrast, adult daily passes at nearby private slopes bring in more money. An adult daily pass at Boyne Mountain cost $37 in the late season, when prices are already discounted. At Caberfae, the maximum daily rate for the 2003-2004 season was $38. A similar difference can be found by comparing Hickory Hills to other, privately-owned ski areas throughout northern Michigan.

Even non-profit Mt. Holiday Inc., which also operates a ski area in the Grand Traverse area, charges more than Hickory Hills. But it does not enjoy the luxury of passing along its debts to taxpayers. During the last season, a daily lift ticket for adults cost $30 at peak times. Adult season passes cost $261 to $290, depending on the date of purchase.

One reason often given by proponents of government ownership of recreational facilities is that it is needed to bring sporting opportunities to youth and as low-income people. But profit-seeking companies already have incentives to attract new customers, and non-profit Mt. Holiday offers scholarships to the financially needy. According to federal reports available through Guidestar, Mt. Holiday Inc., does this without accepting government money.

DIVEST UNNECESSARY BUSINESSES
Owning and operating recreational facilities is at best a low priority of government. This is doubly so in a region, such as northern Michigan, with a wealth of facilities already offered by private sector businesses and the civil society.

A partial but long-lasting solution to Traverse City’s budget woes – and indeed, of any government – is cease money-losing, unnecessary, and inappropriate functions. The state Department of Natural Resources last year contracted out management of a state-owned ski resort, The Porkies, to save taxpayers an estimated $200,000 this year.

The sale or privatization of the city’s Hickory Hills ski area provides a sterling opportunity for the city to begin to get its financial house back in order.

[In the time since this commentary was published, I visited Boyne Mountain. According to the staff members I talked with, people visit from Traverse City all the time.)

Labels: Cool cities fad, privatization

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Detroit: Blues City?
The Detroit Free Press says that Michigan is at the brink:

"Michigan could be a state of either upscale malls or shuttered factories. Right now, Michigan has both. But it could tip more one way or the other. And with its bedrock automotive industry going through unprecedented turmoil, the signs are worrisome."

The state is holding ground by some measures, but it's being outpaced by other states on others:

"The inflation-adjusted dollar value of Michigan's total output grew by 9% from 1997 to 2004. But the value of the U.S. output as a whole grew by 24%. Florida's output grew by 31%, California's by 38%, and Arizona's by 47%."

Unfortunately, the article concludes by mentioning two ill-advised projects that are favorites of Governor Jennifer Granholm: "cool cities" (pork by another name--call it dressing up the pig) and dumping a billion-dollar debt load on the state so that government officials can place large bets on winners in the next evolution of the economy.

Labels: Cool cities fad

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Is There Hope for Michigan and Detroit?
Detroit, and to some extent, Michigan, has been in trouble for quite a while. Is it going to have to get worse before it gets better?

Though the auto industry is not as important to the state and metro region as it used to be, it's still a player. But the prospect for long-term success is challenging, at best.

Auto manufacturing is a mature industry; cars can be made in a lot of different countries, many times at a lower cost than in the U.S.

Costs for retirement and health benefits (and health benefits for retirees) are a significant burden on companies in the industry. If you want to look at the problems caused by third-party payment of health insurance costs, look no further.

The recent bankruptcy of auto supplier Delphi (a company spun off a few years ago by GM, in an attempt to get out from under some of the heavy legacy costs) suggests that current and former workers may have some "downshifting" to do in expectations for pay and benefits.

Who or what is responsible for the mess? There are a lot of possibilities, most of which can be lumped under "stupid management" and "overly generous union contracts." Don't forget federal tax and regulatory policy, which encouraged the third-party payer system for health insurance and the defined benefit approach for retirement planning. Add in environmental and safety regulations that drive up the price of vehicles, encouraging people to delay purchases. Subtract the benefit of those regulations, which raise the barrier to entry from other countries. (Companies in India can make autos, but they won't pass U.S. legal requirements.)

How lawmakers and the public respond to these problems will affect the state and region for years to come. The Democratic governor has dabbled in economic development fads such as "Cool Cities," and her Republican predecessor spent the latter part of his 12-year tenure plumping for government-directed economic development projects. Neither approach is promising.

Unions, of course, are important in the political system of the state, and not just unions in the auto industry. Include the MEA (the teachers union) and other government employee unions, and you've got a lot of people who have an incentive to lobby for traditional policies that may have worked for a while, but cannot last in an increasingly competitive economy. But the pressure for continued dependence and expansion of the regulatory, welfare, government-influenced economy is likely to continue if not increase.

The Rust Belt may rust some more--as has happened in upper New York State. I fear it's going to get worse before it gets better. Old ways of thinking die hard.

Labels: American automakers, Cool cities fad, Health care, Pensions

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Michigan: Why Being #1 is Bad.
Sometimes it isn’t good to be the leader. But that’s the situation that Michigan faces as it
tops the charts of the unemployed, and today’s 7 percent rate is projected to increase to 7.4 percent by next year.

Instead of pursuing frivolities such as rebranding pork-barrel spending as a "Cool Cities" campaign, risking public money in start-up companies, or handing out selective breaks on the Single Business Tax (SBT) through the Michigan Economic Growth Authority, whose track record is less than stellar, Michigan needs to take another path.

Simply put, it’s time for public officials to stop chasing after fads and trying to micromanage Michigan commerce. Stick with the basics: provide a predictable business climate that does not drive business away.

There are many element that make a state business friendly or hostile, including its legal system and the productivity of its people. One factor that public officials can influence is the tax climate, which is one place where Michigan could improve.

The Tax Foundation ranks Michigan as a lowly 36th place among the 50 states, beating only Wisconsin, ranked at 41, in the region. Other states in the region doing better than Michigan are Indiana (12th), Illinois (23rd), and even scandal-ridden Ohio (29th).

On the plus side, Michigan beats its neighbors when it comes to small business, pulling in a ranking of 6 out of 50 from the Small Business and Entrepreneurship Council, whose Small Business Survival Index for 2004 can be seen in this PDF file. (Indiana is 10, Illinois is 19, Wisconsin is 27, and Ohio is 40).

But Michigan still depends a lot on large business. The auto industry, chief among them, is subject to global competition. Taking stands for the home team makes for striking symbolism. Better yet would be Michigan’s congressional delegation doing what it can to lessen the grip that federal fuel efficiency standards have on the industry, which would allow Michigan’s companies to adjust to market demand in a more cost-efficient (and job-saving) way.

Labels: Cool cities fad

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Cool Cities: The Latest Version of Bread and Circuses.
Joel Kotkin diagnoses the ills of cities, and dismisses faddish solutions such as "cool cities," in this TNR essay reprinted at the blog Fix Buffalo Today.

Here's the nickel version of the "cool cities" approach: "Richard Florida ... seems to offer a simple formula for urban revitalization: Get hip and gay. Hip cities like San Francisco, Portland, Seattle, and Boston are the new role models, Florida has argued; and non-hip locales are duly forewarned, as a headline in The Washington Monthly put it, that cities 'without gays and rock bands are losing the economic race.'"

Here's my favorite dismissal of the "cool cities" notion: "The number-one destination, in terms of net migration gains of young, single, educated people as a percentage of the total population? Naples, Florida."

Naples?

The idea that "cool" is the key to city life is just one of several propositions--call them a different kind of urban legend--that Kotkin takes apart.

Among the other urban legends:

• Cities are again gaining people;
  
• Cities are where the successful people are, or what Kotkin calls the "cult of ... the Darwinian superiority of cities."

So what can cities do? Make sure that the basics are available to residents: high-quality education for children, at a decent price; transportation systems that let people move from here to there at a reasonable price; policing that keeps crime under control, and so forth.

This will take mayors and other city leaders with formidable political courage to take on obstacles to reform. Kotkin cites teacher unions as a prime example.

"Right now school reform is often hostage to the power of teachers' unions. City budgets, which could be applied to improving economic infrastructure, are frequently bloated by, among other things, excessive public sector employment and overgenerous pensions. In the contest for the remaining public funds, the knitted interests of downtown property holders, arts foundations, sports promoters, and nightclub owners often overwhelm those of more conventional small businesses and family-oriented neighborhoods that could serve as havens for the middle class."

Boring policy, it turns out, is good for cities.

Labels: Cool cities fad

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Wasting Money is Now Cool.
Lipstick on a pig. That's the "Cool cities" initiative of Governor Jennifer Granholm (D-Michigan). Her latest PR campaign: a tour to announce the distribution of "Cool Cities" grants. Among the projects receiving funding: fixing a gay/lesbian gathering place, moving "a unique metalworking school, gallery, and sculpture" from one part of town to another, and putting in a few skating rinks.

Labels: Cool cities fad

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Economic Development: Trying Too Hard to Be Cool.
Economic development policy is prone to fads, as government officials swerve from one idea to the next in the search for jobs and increased tax revenues. The latest idea is to chase the "creative class" with that might be called "Pleasant Life Planning 101."

Michigan's governor is pursuing this idea, articulated by Richard Florida, in her "Cool Cities" initiative. In today's Current Comment from the Mackinac Center for Public Policy, I explain why this isn't such a hot idea.

Labels: Cool cities fad

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How Cool is a "Cool Cities" Plan?
Writing in Governing magazine, Otis White comments on the "cool cities" fad/initiative of Michigan's governor, Jennifer Granholm.

It doesn't look like a permanent link to the Urban Notebook is available, so I'll liberally excerpt portions of White's remarks.

What makes for a "cool city?" Now, White says, we know: "Granholm recently chose 20 projects from among 151 applying for state grants, and it turns out that what’s considered cool in Michigan would be called streetscaping, building rehab and facade improvements elsewhere."

In other words, some cosmetic surgery.

The logic behind it all is yet another stab at urban renewal, an attempt to attract the "creative class" to selected cities with urban eye candy.

The Mackinac Center dismisses the initiative as merely shifting money around: "The small [initial] grant is a negligible inducement, and the hip artists and creative young people they hope to draw are not going to make investments on the mere promise of extra goodies.” Besides, “Coolness created in Detroit is coolness destroyed in Ishpeming or whatever city doesn’t get the favor."

Another person quoted by White, a worker in Detroit, gets it half-right. The theme of this criticism: the state is diverting money that should be spent on K-12 education instead. "In other words," the sarcastic note proceeds, "it’s OK to be dumb as long as we’re cool."

True enough, it is folly to try to be both dumb and cool. It's a case of misplaced priorities to create "cool" (something beyond government's ability anyway), when the education system needs so much improvement. That improvement, it should be repeated, will not come merely through throwing more money into the status quote of K-12 education.

That's both dumb and un-cool.

Thanks to Chip Taylor for the tip.

Labels: Cool cities fad

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Cool Cities Aren't So Hot
The latest fad in urban planning and economic development theory is the idea that the creative class is the cultural and economic salvation of cities and states. Michigan's governor, Jennifer Granholm, has embraced the idea under the rubric of "Cool Cities." Among the themes: it's important to attract and retain the under-40 crowd in urban areas, "walkable" communities, attention to the arts as a development tool, and 24/7 entertainment options. In short, Manhattan.

The always-useful Mackinac Center for Public Policy has been cool to the idea, however, arguing that competitive bidding for city services, cutting back on the weeds of the regulatory state, and increasing educational choice would do more to improve the attractiveness of the urban core.

Now, the Boston Globe introduces the entrepreneur-cum-author of the notion, Richard Florida, as well as critics from the left and right. A leftist magazine, for example, says that the idea "reads like satire." The author of that article, Paul Maliszewski, likens Florida's recommendations to class-based urban renewal. Over on the right, a writer for a group based in the place that serves as a putative model--the Manhattan Institute--criticizes it as "plain wrong."

Sigh. It's so much easier to be flashy and come up with "paradigm-shifting" fads than address the entrenched obstacles to improved urban life, such as teachers unions and a culture of corruption.

Labels: Cool cities fad

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Free Loans in Michigan?
It's expected that the governor will ask the legislature to develop a no-interest loan program for college students. Well, some college students. This news report suggests that the students must be in "technical" fields. It's all part of a plan to promote "cool cities" by keeping youth in the state.

Unfortunately, this suggestion rolls several policy mistakes into a single package. First, the benefits of a college degree accrue more towards the graduate than to society--suggesting that subsidizing more time in college is a bad thing. Second, it is a sort of industrial policy for higher education financing--get this bonus, but only if you study in an approved field. Finally, it continues a social policy that focuses on "being hip" rather than making the state more attractive to people as a whole.

Labels: Cool cities fad

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Economic Development Through ... Poetry?
George Dila, who is founder and director of the Ludington Visiting Writers Series, says that what this vacation spot on eastern Lake Michigan needs is more poetry.

The Ludington Daily News says that Dila wants the city council to designate a week next year as "Poetry Week." He says "There’s no other poetry event like this in Michigan. I want to bring hundreds of people to Ludington, buses of them." He says he will ask for "additional help in the future."

I wonder if that means some taxpayer dollars for a poetry festival. Sounds as if Dila has been listening to Governor Granholm's "Cool Cities" initiative to keep the "cool" people from fleeing to the suburbs. (OK, Ludington isn't exactly a suburb of anywhere, except perhaps, during Summer weekends, Chicago).

Poetry is cool, isn't it?

UPDATE: Mr. Dila wrote to me with these comments: "Actually, Ludington Visiting Writers HAS received a grant from the Michigan Rural Arts and Culture Program to hold the Ludington Poetry Festival 2004. The event is scheduled for May 20 - 22. My presentation to the Council was to inform them of this grant and event, and to early-on enlist their support."

By the way, Ludington is worth visiting, whether you listen to poetry or not. Here's a link to tourist information.

Labels: Cool cities fad

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Suburban Flight
The Detroit News reports "more than 33,000 young adults left the [metro] region between 2000 and 2002," or one busload a day. (This brings back the line from the 1970s, when people were moving to Texas: Will the last person leaving Michigan please turn out the lights?)

Of course, this has businesses and government officials worried--lost consumers, lost workers, and lost taxpayers. The population loss is not uniform throughout the metro area, though: semi-rural Livingston county (between the state capital of Lansing, and Detroit) had the largest population gain of the 7-county region, and was the only one to gain among the gen x (ages 24-34). Wayne County, home of Detroit, continues its prolonged death, leading the region in emigration.

To be sure, Detroit, like all of the Midwest, will always have a competitive disadvantage when it comes to the weather. But the economic climate and tax policies may have a role not suggested by the article.

Of the 10 metro areas that gained the most in the gen x crowd, six were in low-tax states (Phoenix, Las Vegas, Dallas, Houston, Austin, Provo), though somehow California got 3 area on the list (LA, Riverside, and -- how can this be -- Sacramento).

Governor Jennifer Granholm wants to make Michigan "cool," and an academic quoted in the article suggests that "walkable cities" may be a key component. Expect gen x flight to be used as an excuse to justify land use controls under the guise of "smart growth."

Labels: Cool cities fad

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