Monthly Archives: April, 2008

The Not So Hidden Cost of Regulation

The Charlottesville area news outlets have been widely reporting the eviction of 30 families from a trailer park in Fluvanna County. NBC 29 has a copy of the Eviction NoticeThe Daily Progressreporter Brian McNeill has the story.

According to the news outlets, Property owner Robert Glass is shutting down his Fluvanna trailer park rather than fix the central wastewater treatment system that is producing higher than allowed levels of zinc and copper into the Chesapeake Bay Watershed.  Reports indicate the upgrade to the system serving 30 families in the 41 year old trailer park would be between $500,000 and $750,000.

The purpose of this post is not to question the environmental regulations designed to protect and revitalize The Chesapeake Bay but to identify these evictions as a cost associated with achieving this benefit. 

In addition, The Free Enterprise Forum does not have a position regarding what the landowner has chosen to do with their land.  Rather it is important to highlight the conflict between the desire for affordable housing options and the environmental need.  Too often, environmental (and other) regulations are adopted without a clear statement of economic and socioeconomic impacts of the regulation. 

There will be some that will suggest the landowner should have chosen to build the wastewater treatment plant at a cost of $500,000 to $750,000.  Of course, he could.  He would likely review the payback period of such an infrastructure improvement.  After this analysis, he would like weigh his options and the rate of return on the investment.

Thus the community cost benefit analysis for this property:  October 31, 2008 the level of copper and zinc being added into the Chesapeake Bay system will be reduced and 30 of Fluvanna’s low income families will need to find a new place to live. 

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Are High Gas Prices the End of America’s Automobile “Addiction”?

In recent weeks, the main stream media has been touting the many lifestyle and commuting changes Americans are making now that we are faced with the very real prospect of $4.00 a gallon gasoline. 

NBC Nightly News this past week profiled a young man who has hung up the keys of his spanky new BMW for the city bus (except on dates). 

A recent BusinessWeek article “Suddenly its Cool to take the Bus” cited the private bus service Microsoft provides [roomy coaches with wifi access] to employees has become so popular their software engineers hacked into the bus service reservation system and filed it up one bus before the route was even announced.

In the same May 6, 2008 BusinessWeek, one headline announced “Gas May Finally Cost Too Much“.  The article highlights many statistics how Americans are handling the change in energy costs: down-sizing vehicles, combining trips, carpooling and increased transit usage.  The article also mentions the important demographic shifts that may also be driving down gasoline consumption.  Baby boomers are now exiting their prime driving years.

Increased fuel costs are changing consumer patterns far beyond just gasoline.  Local REALTOR and Blogger Jim Duncan highlighted the increased attention buyers are placing on their commute as a factor in their home buying decision.  He goes further to suggest in his headline that the solution to sprawl is high gasoline prices.

Depending on Jim’s definition of sprawl, this may or may not be the case in the long term.  What we are seeing are increasing economic pressures on those workers who choose to live further from their place of business.  The commuting cost (on the pocketbook, on family life, quality of life) is one factor of consideration.  This economic factor may tip the scales for some on the fence families but just as better transit operations will only capture a larger portion of the choice riders (those who have a choice), higher gas prices will only impact one cohort of the home buying population. 

The public is increasingly aware, and building business is consistantly responding to, environmental and energy efficency concerns.  The increase in energy costs positively changes the dynamics of the payback model of some of the higher cost enery efficenicies that can be built into new buildings.  Clearly this, too, will enter into buying decisions.

Randal O’Toole highlights another concern regarding the benefits of autoownership (or gasoline dependency):      

“Those who fervently wish for car-free cities should take a closer look at New Orleans. The tragedy of New Orleans isn’t primarily due to racism or government incompetence, though both played a role. The real cause is automobility — or more precisely to the lack of it.”The white people got out,” declared the New York Times today. But, as the article in the Times makes clear, the people who got out were those with automobiles (http://tinyurl.com/adgjx). Those who stayed, regardless of color, were those who lacked autos.

What made New Orleans more vulnerable to catastrophe than most U.S. cities is its low rate of auto ownership. According to the 2000 Census, nearly a third of New Orleans households do not own an automobile. This compares to less than 10 percent nationwide. There are significant differences by race: 35 percent of black households but only 15 percent of white households do not own an auto (see http://tinyurl.com/bpw4z).But in the end, it was auto ownership, not race, that made the difference between safety and disaster.”The evacuation plan was really based on people driving out,” an LSU professor told the Times. On Saturday and Sunday, August 27 and 28, when it appeared likely that Hurricane Katrina would strike New Orleans, those people who could simply got in their cars and drove away. The people who didn’t have cars were left behind.Critics of autos love the term “auto dependent.” But Katrina proved that the automobile is a liberator. It is those who don’t own autos who are dependent — dependent on the competence of government officials, dependent on charity, dependent on complex and sometimes uncaring institutions.”

The question that remains is, Are Americans rethinking their auto addition?  Or phrased a different way, Is America’s Automobile love affair over?

The automobile represents freedom and mobility to Americans.  Even those riding the Microsoft Bus have free access to a ZipCar for running errends while at work.  Just because Americans are rethinking their energy use, America’s love affair with the automobile is not about to end.  The standard garage will continue to hold at least two cars. 

Economic Development Role of Government

In the general, most folks are in favor of economic development as a concept.  The idea of increasing business revenues (and thus relieving some of the homeowner tax burden) is very close to apple pie on the political spectrum.  The difficulty comes in when one starts to discuss what economic development looks like.

Should local economic development activities be restricted to business retention?  If we fail to retain even some existing businesses, shouldn’t we have a plan for attracting new “replacement” enterprises? 

Two years ago, there was a thirty minute discussion at the Albemarle County Board of Supervisors meeting regarding the proper title for a new position in the county charged with business vitality – especially in the growth areas.  There was significant reluctance on the board to call this position an Economic Development officer, in the end they determined a business facilitator would better suit the duties of the position.

Next week, Susan Stimart, Albemarle County’s business facilitator will start work sessions with the Planning Commission on the Economic Development chapter of their comprehensive plan.  Buried in the text of the 50+ page chapter of the comp plan are significant decisions for the Planning Commission regarding the need for larger tracts of light industrial land the related exodus of small vibrant service companies from Albemarle County.

One question The Free Enterprise Forum routinely asks regards the proper function of government (if any) in a market segment.  At this time when both Greene and Fluvanna are updating their comprehensive plans and Albemarle is working on their Economic Development chapter, it is approriate to look at where government should and should not interceed.

The economic development environment is directly tied to the quality of life of the citizens.  Rather than looking toward a single large employer to woo to your locality, the Free Enterprise Forum believes government should focus on making business/government interaction minimally invasive and highly efficent.  In addition, government should regularly work with business as members of the Chamber of Commerce, Thomas Jefferson Partnership for Economic Development and other civic activities.  

Business must be a partner in this process as well.  Our region’s businesses have regularly pulled together to improve the quality of life of our residents (who are their employees and customers).  Business must work to have a seat at the table for discussions of local issues and be a strong voice for the importance of economic vitality. 

Perhaps the toughest thing for some government and quasi-government practitioners of economic development to understand is many businesses want to be good citizens and want government to simply  get out of the way.  Too often, localities layer ordinance on top of ordinance without recognizing the increase cost of complexity they are passing on to the businesses charged with complience.  If each locality required a cost/benefit analysis of each new regulation and a clear understanding of who is paying the cost (and the impact on that business), this would go a long way to building the economic vitality of the locality and the region.

 

Using a Sledge Hammer to Kill a Fly

Last night, Albemarle County’s Planning Commission, in a knee jerk reaction to an application plan it reviewed last week, (Charlottesville Tomorrow has the story here) approved a Resolution of Intent – to amend a section of the zoning ordinance. 

The Readers’ Digest version of this story is that last week the Planning Commission was very frustrated that the did not have the legal power to halt a plan they did not like, so this week they took immediate steps to garner this authority.  

While this may seem like waay inside baseball, I raise the issue because rarely does such knee jerk regulatory action result in positive public policy.

The section the Planning Commission is seeking to amend provides owners of Planned Districts (Neighborhood Model, Planned Urban District, Historic District, Rural Preservation District, etc.) the option of having their plans reviewed utilizing the regulations that were in force at the time of their district designation or the regulations in place the day of the review.

In last night’s meeting, the Free Enterprise Forum raised the concern that this proposal had not properly been vetted for the scope of its potential application.  We also called for stakeholder roundtables prior to drafting the ordinance.

In subsequent testimony, Valerie Long of Williams Mullen cited Biscuit Run, Northpointe, The University of Virginia Research parks, Martha Jefferson Hospital, and Monticello as just a few of the projects that could be impacted by this amendment. 

In response to our comments, one commissioner deftly turned the burden of proof of over regulation to those being regulated.

The Albemarle County Planning Commission sees this amendment as closing a loophole in the ordinance.  Based on the manner in which ordinances are drafted in this community I am certain there was careful thought in the creation of this loophole.  The genesis of this section of code was not discussed in detail last night.

 

At no point were metrics provided regarding the number of applications that had utilized this section of code.  It was clear this proposal was a way for staff to answer the concerns raised by the Planning Commission in the previous week without any critical analysis [or staff report] to support the action.  

IMHO this is using a sledgehammer to kill a fly.  Since 2002, I can only think of two projects that utilized this provision in the code. 

Albemarle County staff has taken great pains to express their concerns with the ever increasing workload being placed on their department, which has been decimated by frozen positions.  I fear that since this is a pet project, either items higher on the priority list may be moved down the pecking order or, more discouraging, the planning commission attempts to move this proposal through with all deliberate speed at the cost of stakeholder involvement. 

The optimist in me hopes staff will be able to dedicate the appropriate time to evaluate if this ordinance change is really needed and not be pressured into wasting limited staff time drafting an ordinance whose primary mission may be to soothe a frustrated commission.

 

 

 

 

 

 

Economic Education by Giving Away Money

 

 

A few years back, I was pained to have a discussion with a number of very bright students who did not know the first thing about free markets or how the free enterprise system provided very structure required for the great American experiment of democracy to succeed.  I am not looking for students to have a working knowledge of supply side economic theory but I do believe the understanding of free markets and how they interact with political systems is helpful in preparing our youth for the global economy. 

 

 

The Free Enterprise Forum intentionally does not comment or cover school boards and education issues.  We do however promote the concept of economic education in our schools.   I am always amazed at the multitude of intersections between politics, economics and our lives.  Each quarter, when the Charlottesville Association of REALTORS©cites the supply of homes and number of sales on thier blog, many of our students are not equipped to analyze the impact this report will have on the market and the ripple impacts on other important economic sectors (banking, durable goods, home improvement, etc.). 

I was lamenting this lack of understanding with members of the business community when, in a brilliant but brief moment of free market clarity, the Free Enterprise Forum Economic Opportunity Essay Contest was born.  Rather than petitioning the schools to include economic education in their classrooms, let’s provide a learner incentive [read cash money] to go above and beyond the normal level of school work. 

 

All entries must be post marked by May 1st 2008. 

The Free Enterprise Forum believes a better economic understanding builds better citizens.  Please encourage any middle or high school students you know to participate. The deadline is fast approaching.  

 

Regulatory Purgatory

While I often write in the abstract about onerous regulation and the high cost of complexity of regulation, I received an e-mail from a reader today who’s story had to be shared.

 

To be clear, this project occurred outside the Free Enterprise Forum’s area of operation in a neighboring state.

 

The project is a small trailer containing new water treatment equipment to be installed on a property requiring environmental remediation.  The first concern was that the wiring of the brand new equipment might not be of an acceptable quality level.  Although the wiring and equipment was third party certified (per the locality’s ordinance) this inspector  questioned the integrity of this foreign (Canada) built system to the point of conducting his own inspection.  The applicant, baffled by the lack of common sense and recognition of the locality’s printed regulations, told the inspector’s supervisor that if the inspector rewired the machinery all product liability would be on the locality.

 

Following this intense conversation and six more months of missteps by both the applicant and the locality, the project was ready to receive an occupancy permit.  During the six month lag, a new regulation was enacted that required a fire inspector to physically inspect the trailer prior to connecting the trailer to the electrical grid. 

 

The trouble was the applicant had changed their building plan ever so slightly and added an illuminated EXIT sign over the door.  This sign is powered by electricity with a stored energy battery back up.  The fire inspector said he could not issue an approval because the sign did not light up.  The applicant argued the sign did not light up because he had no electricity and he could not get any electricity until he received the fire inspector’s approval.   

 

Thus this applicant was stuck in Regulatory Purgatory.  This was a valid application that was designed to assist in the environmental remediation of a challenged site but because of overzealous enforcement of highly subjective and conflicting regulations, six months had already been lost.  Finally, the fire inspector found a solution.

 

The solution:  the understanding fire inspector encouraged the applicant to get a non illuminated “No Smoking” sign hang it where the dark EXIT sign now hung.  He could then issue the approval because the trailer no longer had a malfunctioning OSHA certified EXIT light.

 

Too often, good projects with good intentions are stuck in such a regulatory quagmire. The Free Enterprise Forum believes regulations should be evaluated with the consent of those regulated prior to adoption.  Such openness would reduce the number of productive days lost and reduce the onerous regulatory burden that results in cost increases to the end users. 

Trophy Economics

 

I am always amazed the end of a sports season when each and every child who played receives a trophy.  As a player, lo these many years ago, only the season’s champion received a trophy everyone else got a pin (I got a lot of pins).  Recognizing the danger of applying this sports analogy to economic philosophy, the parallels are too distinct to ignore.

 

This morning’s Daily Progress trumpets for anyone not already aware “Housing stock at record high level”.

 

The Charlottesville Area Association of REALTORS (CAAR) 1st Quarter market report is out highlighting the differences between today’s real estate market and just one year ago. As a region home sales are down 27%.  The majority of this drop is in Albemarle and Fluvanna Counties.

 

The Free Enterprise Forum shares the rather emotionally detached view of market based economists who see the recent drop in sales as a natural ebb and flow thanks to influences within and outside of the local economy. 

 

It is a difficult pill to swallow as many residents have become accustomed to significant increases in the value of their homes and have refinanced to generate cash.  The downturn in the property value may place such homeowners “upside down” in their mortgages where they now owe more than the property is worth.

 

Sometime ago, I was walking in my mother’s decidedly middle class neighborhood in Northern Virginia.  Over the course of my ½ mile walk, there were several vacant homes with HUGE foreclosure sale signs covering their garage door.  Each of these garish yellow signs seemed to scream of a family (or families as I am told) who failed to make the payments required to own a home.

 

The Free Enterprise Forum does not believe home ownership is a right, it is an opportunity.  As politicos are calling for the government (nanny state) to bail out the bad loans, many economic philosophers would suggest such action would reward borrowers and lenders who gave or accepted questionable loans. 

 

 

This is the sharp edge of market based economics and the “Horatio Alger story”, if someone can pull themselves up by their bootstraps and you can’t, you must share some of the blame. 

 

The message of self reliance is not well received by those who believe everyone who competes deserves a trophy. 

 

 

 

 

 

Economic Development as Rural Preservation

 

Last night, The Fluvanna Planning Commission held a work session focused on the rural aspects of their Comprehensive Plan update.  State law mandates each locality develop a twenty year Comprehensive Plan and that the plan be reviewed and updated every five years.

 

Under the direction of Chair Elizabeth Fortune, the Fluvanna Planning Commission, operating without a staff Planning Director, had a highly thoughtful debate regarding the definition of rural.  While the standard open space, agricultural use language was discussed, so were the concepts of rural lifestyle where neighbors knew each other but were independent which at times led to issues between neighbors.  The “downsides” of a farming atmosphere were also discussed citing the fumes from manure and slow moving vehicles on state roads tying up traffic.

 

After the discussion of rural designation and a review of their proposed planning map, Vice Chair Joe Chesser gave passionate comments regarding the dearth of land currently committed to economic development.  He highlighted the vast amount of land dedicated to rural preservation and suggested without economic development such preservation would not be possible.

 

The discussion that followed, including members of the audience, was exceedingly polite even where clear philosophical disagreements seemed to exist.  One member of the audience cited the tax revenue shortfall each new home produces compared to the services it demands.  Contrasting this shortfall to the positive tax revenue of business, she suggested creating a business corridor or “enterprise zone” along the top edge of the county where possible a corporate campus might have access to I-64 [through about a mile of Louisa County].

 

Another citizen suggested setting up positive zoning requirements for such a corporate campus proactively.  His suggestion was to include significant dedication to open space and to allow office buildings that look like office buildings in this zoning designation.  He highlighted low land costs as a competitive advantage for Fluvanna County.  He thought working together to develop building guidelines, a corporate campus zoning designation could be both cost effective and environmentally responsible. 

 

The Free Enterprise Forum concurs with Mr. Chesser’s admonition for creating business overlay to the map.  The Comprehensive Plan must seek to positively guide economic development in the community.  By creating a business friendly landing zone with existing infrastructure, solid transportation grid, a positive workforce and “Shovel Ready” zoning, Fluvanna County can position itself into a leadership position in the economic development circles. 

 

Nothing will better protect the Rural Preservation Areas better than a vibrant business sector located where it best utilizes Fluvanna County’s assets.  In this way, Economic Development is rural area protection.

 

By choosing to encourage appropriate positive businesses to locate where it makes sense [up zoning], Fluvanna may be able to continue to preserve their rural lands without down zoning rural land owners.

Is Water a Growth Management Tool?

 

Let’s start with a given:  Water is essential to human life.  If we accept this as a given, the level of debate in many localities regarding the community water supply is eye opening. 

In Albemarle County and The City of Charlottesville, the Rivanna Water and Sewer Authority (RWSA) has developed a Community Water Supply Plan.  Their highly public process considered a number of options [including a pipeline to the James River] before selecting to build a new dam at Ragged Mountain Reservoir and a supply pipeline from the South Fork Rivanna Reservoir to the Ragged Mountain facility.  This plan received the endorsement of a number of citizen and environmental groups.  Now as the plan moves towards its implementation phase, there is vocal opposition from some community leaders at the price tag and the lack of phasing of the plan.

Interestingly, Louisa County and Fluvanna County have taken a different tact to provide water to their community – a pipeline to The James River.  Their joint proposal (3.12 MB PDF), as presented to the Fluvanna Board of Supervisors last week and Louisa today would establish a joint wholesale authority (similar to the RWSA model) to own and operate the raw water lines, pump stations and water treatment facilities.  Each municipality would have its own separate water distribution network.

In discussions at the Fluvanna Board of Supervisors, there seemed to be some reluctance on the part of some Board members to expend the significant funds required to build the infrastructure of the proposed water supply system. 

In some of these discussions, it has been clear to even the most casual observer that the future growth of the region is really the topic of the day.  In the case of RWSA, the authority has gone out of its way to emphasize the community water supply plan is designed to serve the fifty year needs of the community as described in the respective comprehensive plans. 

Fluvanna has not been as explicit but The Central Virginian reports “..maintaining the rural character of Fluvanna’s County’s preservation zones was a key consideration for [County Executive Cabell] Lawton and the consultants.  Another advantage they cite in the plan is that only untreated water lines run through rural preservation districts.” Fluvanna also recognizes this is not a fifty year solution.  They are actively considering a reservoir project at Pleasant Grove as well as an additional pipeline project in the future.

The public will get a chance to see the Fluvanna/Louisa project presentation at any one of these four informational meetings:

April 17th       Lake Monticello Clubhouse  7 pm – 9 pm

April 22nd       Beaverdam Baptist Church   7 pm- 9 pm

April 23rd       Betty J. Queen Center            4 pm – 7 pm

April 24th       Betty J Queen Center             4 pm – 7 pm

In addition, the consultant team is seeking community questions. Questions about the joint project may be e-mailed to JamesRiverWaterProject@timmons.com 

The Free Enterprise Forum recognizes the desire of localities [as expressed in their respective comprehensive plans] to focus residential density into development areas where government services can be provided more efficiently.  A public water system is required to achieve such densities.  Any community water supply plan should be developed with significant input of rate payers, citizens, environmental groups, businesses and other important stakeholders.  The plan should sharply focus on how to provide an adequate safe water supply for the citizens of tomorrow.  The discussion of the shape of new development is better placed in the regularly schedule locality Comprehensive Plan updates.

 

New Urbanism

While not technically correct, sprawl is a four letter word in most communities today.  There is a strong contingent of well intentioned planners that believe sprawl, as defined in this post as the diffusion of population across a wide geographic area, is the cause of most, if not all environmental and community issues. 

The “New Urbanist” planner concept of utopian village is significantly more compact and with higher residential densities in an urban core.  As there will be more people in this urban core and walkable jobs with in walking distance of residencies, the need for automobiles will be reduced, or eliminated. 

Nationally recognized New Urbanist Phillip Langdon author writing in the Planning Commissioners Journal defines the argument succinctly:

The central argument of the New Urbanists is that the country made a costly mistake in rigidly separating housing, retailing, employment, and other land uses and in conceiving the streets almost solely as passageways for motor vehicles. The New Urbanists want communities to have the walkable character that was widespread before the car became the all-conquering king. The assumption is that if public spaces — especially streets and sidewalks — can be made enticing, residents will become more involved in neighborhood and public life, and spur a reinvigoration of community activity.”

Reading carefully, one may perceive the enemy is the land use patterns developed by the previous generations of planners and facilitated by the advent of the automobile.   

Prior to the invention of the automobile, settlement patters were much more condensed, first surrounding factories and other places of highly dense employment and then as technology progressed along street car lines.  It was not unusual to see residential units above storefronts.   Folks would get off the streetcar grab some fresh produce at the market and walk home.  Urban growth limits were the length of the, usually privately run, streetcar lines. The automobile changed all of this, as it changed the world. 

In his 2006 paper, “How Automobiles Made America Great” (pdf), noted New Urbanist critic Randal O’Toole outlines the many economic and social advancements made possible by the country’s increased mobility.  I must question some of the paper’s dismissive nature regarding the very real environmental impacts created by our now auto centric society.

I, for one, accept the premise that a highly dense walkable community will find a niche in the demographically aging and increasingly environmentally sensitive market.  As many American families, especially those with high school and college aged children, are likely to have more than one car, I do not see this niche growing to a majority anytime in the near future.

In a classic chicken and egg question, proponents of New Urbanism suggest the lack of public demand is a lack of supply.  They suggest, and I concur on a very limited basis, until someone sees what such a development looks like they can’t possibly understand the concept enough to demand it.   

We have seen a number of New Urbanist concepts come into being in the last ten years.  These projects, in general, have sold well in well populated areas.   

These projects have also seen understandable conflicts between planner’s vision and reality.  In one project I toured in Portland, the planners placed a slightly elevated brick sidewalk with no curb in front of a community building on a tight street with no on street parking.  The concept was that as a walkable community people will need the sidewalk to get to the community center.  In reality, the lack of parking forced residents, who drove to the community center (on their way home from work, despite being on the bus line) to get their mail to park on the raised sidewalk.  I point this issue out not to be negative but to raise the real difference between New Urbanist rosy renderings and reality. 

Despite, or perhaps because of, the slow introduction of New Urbanist concepts into the market, many local governments (led by next generation planners) have developed land use regulations based on increased New Urbanist density in their tightly controlled development areas and increased regulatory restrictions in their rural areas.    

The very logical governmental rationale is to locate more people close to the services they need and to make the urban environment more desirable with increased amenities and opportunities for employment, education and entertainment.  This statement is where I have the greatest disconnect with New Urbanist philosophy.  What level of amenities would be required to entice the average homeowner in Greene County living on a ¾ acre lot to give up their car and move into a smaller house on a smaller lot closer to the downtown mall?    

For better or worse, I believe America is in love with the mobility and freedom car ownership brings.  The very real prospect of $4.00+ a gallon gasoline has driven many families to seriously consider downsizing from their SUV to a more economical vehicle but I do not believe it has converted a significant cohort to the idea of more urban living.   

I remain concerned that government is mistaken in mandating the New Urbanist philosophy in their development areas.  If new home buyers want to live in a non New Urbanist environment, they are forced, by government to build in the Rural Areas.   

While I understand local governments’ desire to see increased density in the development areas to help reduce the cost of delivery of government services, their actions strictly regulating a development philosophy in the areas dedicated to growth may result in increased pressure on the rural areas they were attempting to protect.