Designing the Future . . .

Just because the officials in charge refuse to acknowledge new realities, changing paradigms, credible science, expert experience, sound reasoning and dissenting insight; this doesn't mean we sit down and shut up.  We keep trying.  Our community is filled with individuals who have so much to offer. There is international recognition (with Bernard Minster being one), brilliance in other branches of science too. Russell Levan has demonstrated for decades that there is dedication here.

Possibly our best hope would be to charge each and every activist, advocate, commissioner and council watcher to select one or two people to mentor.  Even if our strong community members for example a former mayor, Sheila Cameron, could give a prepared piece to some neophyte to present to council and then have this new gal help prepare the next and so on - we'd bring a new wrinkle in the process. More than anything it would prepare another wave of activism.  Plus it would be harder for the complicit press and sneering mayor to dismiss so many wonderful contributions out of hand.

Speaking of expertise, the following two clips are filled with sound information and probing financial concerns for the Hall property park.

For many years the science, financial, ecological, design, historic, landscape, use and other concerns have been couched as either - or choices, or considerations that will jeopardize deadlines, EIR approval, regulatory constraints or other obstacles.  Most of these are and were just not true.  It was political worldview to deliberately use of this property to create win - lose battles that demonized individuals and communities.  The future holds the new culture possible for us where diverse ideas can be accommodated without needing accusations and blame as the only strategy.

Skateboarders Rejoice!

At the end of the day (literally) the skateboarders were the most joyous crowd at the Special City Council Meeting at the Encinitas Community Center last night (7/11/12). Thomas Barker, a young man many of us met through Teresa Barth last year, gave a rousing, genuine appeal to the city council and to the community to bring a skate board park to a reality. The council voted unanimously to go ahead with the entire park.

Thomas Barker's Skateboard Park Facebook page.  Great shots & park layout, details.

How can you not look at these faces and see the future of Encinitas?  Now that is a subject for a Tell-A-Vision post.

Public Lands Private Profits: 3 Clips Released

One week ago we previewed the 3 documentary stories from the Center for American Progress, the Sierra Club an others. 

Yesterday the following clips were released with this introduction.

Dancing with the World

After all of the crash course posts focused on the artificial world of finance for the past five days, the financial math contortions for tonight's special council meeting . . . a stimulating endeavor for the left brain functions, its time to shift.

Here is a respite steeped in the right brain functions swirling with the arts, the heart, humanity and deep emotion.

Where the Hell is Matt? "See with eyes, we're going to trip the light" . . . A new approach just released. Enjoy.


Have you followed Matt over the years?  He's been dancing for years.
As Abby Zimet reports,

Having badly "danced" his way through 100 countries, self-described deadbeat Matt Harding of Seattle has released his fourth "Where the Hell is Matt?" video with a key difference: From doing a goofy dance alone in iconic places, he has evolved to the collective act of dancing, from Egypt to Mongolia to Gaza to North Korea, with the people who live there. En route, he raises money for groups from Generation Rwanda to Haitian Relief to Afghan Mobile Mini Circus for Children. Intoxicating.

Humanity. We won't make it without it.

Growth Ponzi Scheme, Crash Course Part 5

In lieu of the regular Tuesday is Dues-day, this is the crash course finale to the Growth Ponzi Scheme.  Rather than just a day for citizen tips, this last week following "Independence Day" has been devoted to the dues of a five comprehensive installments regarding the destruction of wealth in our current development model.  Independence Day is in quotes as is its getting tougher to deny the utter dependence on our current broken economic practices and the effect on our lives.


by  CHARLES MAROHN
There is a fine line one walks when doing a series like this, and I struggle with it myself. On one side of the line, there is a tremendous problem we've identified, it has dramatic consequences that we are largely unaware of as a culture, and I want to yelp at the top of my lungs to make people aware. On the other side of the line is an awareness that the world does not want to listen to a sky-is-falling, doom-and-gloom, pessimist. We tend to call such people "crazy" and, in time, zone them out.

In this regard, I am certain that some people felt my last comment yesterday was unnecessarily provocative. 

Our national economy is "all in" on the suburban experiment. We cannot sustain the trajectory we are on, but we've gone too far down the path to turn back. None of our dominant political ideologies can solve this problem. In fact, there is no solution.

I feel bad, but I am not trying to be provocative. There truly is no solution. This may be disappointing to those of you that have hung with this series -- or by the hit counts on our site, joined mid-week -- because I have no magic bullet, no series of policies and no simple course correction that solves our current financial spiral. There truly is no solution.

Let me pass on an analogy I have used here before. Let's say that a person gets in a car accident. For whatever reason, they are seriously injured -- maybe even disabled -- and they don't have insurance of any type. They are unemployed and have no savings. What's the solution? There really isn't one. But looking at the situation, there are responses that a third-party observer would call "rational" and "irrational". 

America is in a slow-motion car wreck. Lots of people are being hurt by it, some very badly. We've long lost our insurance by accumulating so much debt. We've also relinquished our production capacity. And we have little savings to speak of. What's the solution?

I wish I had one. I really do. I would be a very popular person, indeed. Unfortunately, all I can offer are rational and irrational responses.

For me, the rational response starts with this picture.

This is my hometown as it appeared in 1894. Today this street looks like Dresden in 1945, an empty wasteland of parking lots and low-value, partially-abandoned buildings. But in 1894, this place rocked. Look at it! Look at those buildings -- we'd give anything to have that here today.

Now ask yourself how this existed in the first place. How did we build such an amazing place before the home mortgage interest deduction? How did we accomplish this before zoning? Before the International Building Code? What created this place before we had state and federal subsidies of local water and sewer systems? Before HUD? Before DOT? Before the state highway system? Before Fannie and Freddie and subprime mortgages and collateralized debt obligations? How did we ever accomplish this before tax abatement, tax increment financing, SBA and local economic development? Heck, we did this before the advent of the 30-year mortgage!

Here's the answer, and the key to the correction we need to make: We built places that financially sustained themselves. Do you know how I know this? Simple. If this place did not financially sustain itself, it would have gone away. In 1894, nothing was going to artificially prop it up.

This is not an anti-government argument. In fact, just the opposite. To pull off what my ancestors created -- a successful town in the center of the deep woods of Minnesota -- they had to have excellent government. Their future depended on it.

They had to organize themselves and use their collective resources very wisely. I look at the pictures of the beautiful way in which they maintained our now decrepit parks, the purposeful way in which they placed grand public buildings, the way in which they regulated the public realm and it is clearly evident to my trained eye that these people understood how to wring every penny of value they could out of their built environment. They knew the art of placemaking.

Today we have largely relegated this art to Disneyland and isolated parts of the faux-downtowns we are trying to "revive". We have the New Urbanists to thank for resurrecting the lost knowledge of placemaking, much the same way engineers of the Renaissance recaptured the knowledge of the Roman bridges and aqueducts, an understanding literally lost for centuries. The transition in our understanding has been no less dramatic.

So there's the primary supporting strategy: placemaking. We need to wring more value out of our places and that is only going to happen if we understand how to create value in the first place. This is a monumental task because for two generations we have built our places without bothering to consider how they would be sustained (or whether they would even be worth sustaining). None of our public officials has ever asked the question: Will this public project generate enough tax revenue to sustain its maintenance over multiple life cycles? Try asking that -- you will be amazed.

So a rational response is to start insisting that our places show a positive financial return. That will require a completely different approach to building our cities along with a completely different understanding of growth. If you need help getting started on this, check out our Starter Strategies for a Strong Town as well as our Strong Towns Placemaking Principles. 

In addition to this, there are two irrational responses that we need to acknowledge. The first irrational response is to simply continue the present course until we are forced to change.

I'm astonished and more than a little depressed at the shallow nature of the public debate we are having over this crisis. Do we cut the budget or spend more? Do we raise taxes or reduce them? Does raising the debt ceiling signal fiscal responsibility or a lack of restraint? Do we build rail lines or highways? How do we restore housing values? How do we lower unemployment? And this is a sampling of the more intelligent lines of thought going on amidst the salacious and the ridiculous.

Nobody has acknowledged that a) the bubble economies of tech and housing were not financially real, b) we can not "recover" to a condition that was not financially real in the first place, and therefore c) we need to start focusing on a transition to something close to reality, which is a long ways from where we currently are. (editor emphasis)

This brings me to the second irrational response; Clinging to the belief that nothing needs to really change. 

Yesterday I had someone tell me, "Chuck, I think you are right. I can't argue with a thing you say. But I believe in the ability of the American people to adapt and innovate and overcome any challenge we face."

Let me interpret this statement because I hear it all the time. "Chuck, I think you are right, but I believe that someone, somewhere is going to come up with some trick or gadget that will solve this mess and keep me from having to change my lifestyle too much." I wonder if the Americans of 1870 or 1930 had this same belief (or the inhabitants of Easter Island).

I firmly believe that we have the ability to adapt, innovate and overcome. We will emerge from this a better people. But I don't see a way through this that allows us to keep the same lifestyle, the same living pattern and the same lack of productivity in our places. Like our innovative and resourceful ancestors before us, we'll find a way. But like those ancestors, it is going to involve a lot of painful change. Wishing for a miracle is fine, but depending on a miracle is irrational.

At Strong Towns we are trying to explain our current financial crisis -- and the transition in our living arrangement that must happen -- in a way that local officials can understand and discuss in their own communities. We are also working hard to develop the tools that are needed to help our cities, towns and neighborhoods make this difficult transition. [snip]

by  CHARLES MAROHN
This Crash Course is a product of Strong Towns and use is authorized via  a Creative Commons Attribution-ShareAlike 3.0 Unported License.

Growth Ponzi Scheme, Crash Course Part 4

In today's Myths Encinitas at the Our Mayor Stocks blog, is the mythical strength of described in this crash course. Jerome's Stocks state of the city speech excerpts the perfect illustrations of the growth Ponzi scheme. No, he didn't invent this, but he is unwilling to invite any alternatives. Part 4 follows here.

The great American experiment in suburban development entices communities to take on long-term liabilities in exchange for near-term cash advantages (see Part 1). But as those liabilities cost the community more than the development creates in overall wealth, the approach ultimately results in insolvency (see Part 2). To forestall the day of reckoning, more growth is induced, setting up a Ponzi scheme scenario where revenue from new development is used to pay liabilities associated with old development (see Part 3). This is unsustainable, but that has not kept us from trying desperately to keep it all going.

Much of my thinking in this post was shaped by my reading of Richard Florida's The Great Reset, as well as follow-up research I have done into the causes of the Long Depression of the 1870's and the Great Depression of the 1930's.

While these events defy simple explanation, the Long Depression included an over-development of the nation's railroad system and a corresponding malinvestment in speculative real estate associated with railroad expansion. Also, the increased access for farmers to broader markets helped create a commodity price crash, which was exacerbated by overproduction. Farmers with declining profits produced more to compensate, driving down prices. Price drops were so dramatic that some crops became more valuable for burning than eating.

The depression persisted until there was, as Florida calls it, a "spatial fix". In essence, our capital and productive capacities were redirected from farm expansion and railroad-based speculation into industrialization and building of the industrial city. The result was the Industrial Revolution, a dramatically different living arrangement than the formerly-agrarian America had known up to that point. For many people of that era, this was a painful transition.

Fast forward to the 1930's. Economists and social scientists argue over the causes of the Great Depression as well as the factors that ultimately ended it. What is clear is that the lack of fundamental growth in our real economy was made up for with an expansion in the paper economy. Industrialization had brought huge gains in productivity, production-capacity that actually outstripped our consumption-capacity. Leverage-driven speculation on continued profit gains created a financial bubble that, when deflated, proved destructive.

Years of New Deal spending failed to create enough demand to correct the imbalances. Spending for World War II provided a temporary recovery, but economists at the time were concerned that the end of war spending would send the United States back into depression. What happened next was another spatial fix; suburbanization. We redirected our capital and productive capacities to building suburban America and created the greatest economic advancement the world had ever seen. It was a very painful transition, especially for our major cities.

This is where I (humbly) depart from Richard Florida. It is not that I think he is wrong -- he argues that suburbanization has run its course and that the new, creative economy requires a spatial fix that will favor highly-connected mega-regions -- but that there is a pivot point critical to understanding our current situation.

That pivot point comes roughly one life cycle into the suburban development pattern, the time when the financial structure of the Growth Ponzi scheme starts to have outflows (maintenance costs) in addition to inflows (new suburban growth). This would have been roughly during the mid-1970's, when we were forced to leave the gold standard, had an energy crisis and experienced a convulsing economy characterized by the new term "stagflation". Another new term -- the Misery Index -- was used to measure the painful impacts of high inflation and high unemployment.

Once again, there is a ton of complexity here and I'm not trying to oversimplify things, but ours is an economy that relies on growth and, in the post-WW II era, growth has largely meant horizontal suburban-type growth with all of the related consumption. We embarked on a path that makes us reliant on new growth to generate excess wealth. When that new growth becomes old and starts to cost us money, it puts contraction pressure on the economy that counteracts the near-term, financial benefits of new growth. (See Part 3).

The critical insight today is to understand how we reacted to the end of the first life cycle of suburban development, when those maintenance costs started to come due and cut into our growth-generated wealth. This time there was no spatial shift as seen in the other large, economic corrections. Instead, we made a choice to double down on the suburban experiment by taking on debt.

We used debt to drive additional growth and sustain the unsustainable development pattern for a while longer. A lot of this debt was public debt, but we facilitated mechanisms for increases in private debt as well (for example, Fannie and Freddie early on and then subprime mortgages and securitization later). Here is a graph showing our public and private debt levels since the beginning of the suburban experiment. I have noted roughly the first and second life cycles of those initial investments.

Debt levels post WW II as compared to GDP. Note that the green line is private sector debt, which far exceeds public sector debt..The first generation of suburbia we built on savings and investment, but we built the second -- and maintained the first -- using debt. Unprecedented levels of debt. 

And in the process, we transformed our industrial economy into one based on consumption. As James Kunstler has noted quite often, when you take away the suburban-growth-related jobs from our economy, what you are left with is "heart surgery and KFC workers" (his way of saying highly-skilled professionals and low-skill wage earners).

This strategy is a disaster of monumental proportions for the United States. Not only have we created an entire economy based on a growth model that can't be sustained, in the process we have highly indebted our population. The quality employment opportunities available for the masses rely solely on the perpetuation of this unsustainable model, so we can't even work our way out of this mess. We've tied up our individual wealth into homes -- homes whose value is tied to community infrastructure that we cannot afford to maintain without continued hyper-growth, which we are now powerless to induce. So as our wealth disappears and our economy painfully grinds to a halt, we're left with no options to continue on this path.

And to top it all off, we've tethered our national psyche to the suburban ideal we call the "American Dream", our auto-based, utopia where everyone gets to live a faux version of European aristocracy on their own mini-estate. 

Oh, and by the way, the American Dream, as so defined, is absolutely non-negotiable.

Our national economy is "all in" on the suburban experiment. We cannot sustain the trajectory we are on, but we've gone too far down the path to turn back. None of our dominant political ideologies can solve this problem. In fact, there is no solution.

This is why tomorrow we will offer some rational responses -- ways that communities can begin to prepare for the spatial shift that is coming.

 by  CHARLES MAROHN
This Crash Course is a product of Strong Towns and use is authorized via  a Creative Commons Attribution-ShareAlike 3.0 Unported License.

Growth Ponzi Scheme, Crash Course Part 3

Day 3 in examination of growth with Encinitas in mind. Time to roll out the graphs and charts. The ones in this lesson are from a well run town. Looking closely at facts behind the happy talk we in this town hear at every financial presentation reveals a break down on the horizon or even at our feet.  In a few days we'll be able to challenge this happy talk with some real language from these lessons learned.

So far this week we have examined how the American development pattern of the post-WW II era entices cities to exchange the near-term cash advantages of new growth for the long-term maintenance obligation of new infrastructure. This is a bad trade, because as we also looked at yesterday, the pattern of development costs more to maintain over the long run than it produces in revenue. In short, our development pattern is not productive enough to sustain itself.

A new development goes in. The developer builds the street and then turns it over to the city for maintenance. Houses are built and the city sees its property tax receipts rise. Imagine for a moment that the city took and saved the portion of those new receipts that was to be used for street maintenance. If the city did that every year throughout the life of the street, adding the new tax receipts to those already saved, and then used the cumulative savings to repair the street, here is how the cash flow diagram would look.

Cash Flow Diagram for a single street. Revenues are from collected taxes and expenses are due to infrastructure maintenance costs.Everything looks great until the end of the street's life cycle. At that point, the cost of the repairs far outweighs the revenue collected. If the city were reduced to this one street, it would be insolvent.

But a city is not one street. A city has many Peters to rob in which to pay Paul. For example, if the project modeled above were repeated every other year -- a condition where the city was growing at a steady rate -- the cumulative cash flow diagram changes substantially at the end of that first life cycle. By adding the tax receipts from multiple projects together, here is what it would look like.

The cumulative cash flow of multiple projects in succession.

So growth "solves" the insolvency problem. As long as a city continues to grow, as long as it can continue to exchange near-term cash flow for long-term liabilities, it will be just fine. Or so it may appear at the end of the first life cycle.

Here is what happens during that second life cycle. The model I am using assumes that growth continues at the same moderate pace, with a new development of similar size added every other year. 

The cumulative cash flow of multiple projects in succession over two life cycles.The results are obvious and devastating. When the private-sector investment does not yield enough tax revenue to maintain the underlying public infrastructure, the balance can be made up in the short term with new growth. Over the long run, however, insolvency is unavoidable.

We need to pause here and point out a couple of important things. First, this is actually a model of a well-run city, one that puts money away for future improvements. I've yet to see one that has such fiscal discipline. We can spend all day blaming politicians for wasting money on "big government" or giving unwarranted tax breaks to "the rich". These debates are ultimately tragic sideshows to the underlying lack of productivity in our development pattern.

Second, this model shows the impact of continuous and steady growth. In reality, that is not the pattern most cities experience. Most cities have a phase of rapid growth followed by stagnation and then decline, as described by Jane Jacobs in The Economy of Cities. Superimpose the financial underpinnings of the American model of development and the results are even more devastating - a flood of liabilities all coming due right at the time that growth is starting to wane.

I know I promised "rational responses" for tomorrow, but I need to put that off. [snip]  Tomorrow we will examine how America has responded to the economic reality of our places thus far.

by CHARLES MAROHN

This Crash Course is a product of Strong Towns and use is authorized via  a Creative Commons Attribution-ShareAlike 3.0 Unported License. 

Photo by Kevin Dooley via Flickr


Editor note:  There's some serious disagreement around here about the "sideshow" of tax breaks for the rich. LOL Yet, the point is strong about the fundamental issue of lack of productivity in our development pattern.  Bedroom community or not, resilience demands this.