Building Opportunities in Cities

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Building Opportunities in Cities

• Joel Rogers
• University of Wisconsin-Madison
• JR Commons Center (COWS, CSI MIP, MSC,), Apollo,
  G4A
• Funders Network for Smart Growth, Kresge
  Foundation,
• May 29, 2008

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What Im going to talk about

• Why cities are good platforms
• Why buildings are a good target
• How to take current efforts to scale

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I made some slides for you
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Like this slide.
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And this one.
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I really wonder about power point sometimes
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An iron law of urban decay?

• Incomes rise and investment moves out
• Revenues decline
• Public goods deteriorate
• Middle class flees
• Tax base erodes
• Poverty concentrates

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Or a wasting of obvious assets?

• Big
• Strategic location/regional linkages
• Population and firm density, with agglomeration
  effects
• Buying power and complementary skill sets,
  innovation
• Infrastructure (ports, airports, other
  transportation networks)
• Higher wages/productivity
• More easily organized
• Lower waste
• Centers for research, education, health care,
  knowledge economy, finance, business services,
  hospitality, etc.
• More diverse, tolerant, attractive to youth and
  immigrants

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Location Efficiency the Transect RevealsCarbon
Benefits of Good Urban Form
9.7-14.6
Transport Carbon in Tons of CO2/HH/Year
5.8-10.7
This Place Has the Disappearing Carbon Blues?
3.9-6.1
2.4-4.4
0-2.43
Source Duany Plater-Zyberk and Company
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Working Class Consumption
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Typical Household Budget in 28 Metropolitan Areas
Source Barbara J. Lipman, A Heavy Load The
Combined Housing and Transportation Burdens of
Working Families, Center for Housing Policy,
October 2006
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Building contribution to CO2 emissions
Building contribution to CO2 emissions
Building contribution to CO2
Building contribution to CO2 emissions
Building contribution to CO2 emissions
Transportation 32
Residential 21
Buildings 43
Commercial 17
Industrial 5
Industry 25
Source Pew Center on Global Climate Change
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Rebuilding America?
Source Nelson, Toward a new Metropolis
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What Influences CO2 From Passenger Transportation

• Net Residential Density
• Transit Level of Service
• Pedestrian Environment
• Income
• HH Size
• Gasoline Price
• Journey to Work
• Access to Amenities
• Urban Form

VMT
CO2
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RRIDDLLS

• Regulatory surround is bad
• Risk aversion among tenants and owners,
  especially given uncertain duration of
  tenancy/ownership
• Information problems on everything (benefits,
  cost, reliable service)
• Disaggregated savings
• Disruption
• Lack of capital
• Lack of interest
• Split incentives (tenants vs. owners)

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Basic Idea

• Combine on-bill repayment with a mix of private
  and public capital to do a cost-effective
  retrofit of Milwaukees entire building stock.
  This should generate about 7000 person years of
  local employment, save Milwaukee residents about .

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Your pre-Me2 average energy bill 170 Your
energy consumption this month 135 Me2 savings
charge 25 You owe 160
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2,252,800 Wisconsin households
Available capital/annual WI public spending on
residential energy efficiency, (less
administration) 140/1 with administration
100/1
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Your pre-Me2 average energy bill 170 Your
gross energy bill this month
135 US climate exchange credit (
30) MISO negawatts credit ( 30) Community
value/health credit ( 30) Your net energy
bill this month 45 Me2 savings charge
25 You owe
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• Politics
• Capital
• Business plan
• Equity

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Key issues for Me2

• PSC approval
• Financing details (public and private,
  tax-sheltered and not)
• Depth of intervention vs. participation
• Training, equity, career ladders
• Governance structure, other legal
• Assignment of secondary benefits
• Marketing strategy
• Money!

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• 10M in TA
• 20 city plans
• Milwaukee example 500K ? 500M investment
• 1,000/1 return on foundation investment
• 500M 5K person years of employment with
  multipliers, easily 10K cost per person yr 1K.

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The end of shared prosperity
Index 1973100
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The end of shared prosperity
Index 1973100
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Same story, upside down
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Normalized tax rates by quantiles, 1960/2004
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Revenue outlays as GDP, 1962-2015
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10 US Metros and Non-US economies
Germany 2.4T, UK 1.7T, France 1.7T, Italy
1.6T, Brazil/Russia 1.5T, Canada/Korea/Mexico
1T
3.51 trillion
Switzerland Turkey Sweden Taiwan
Saudi Arabia Austria
Poland Norway Indonesia Denmark
South Africa

3.42 trillion

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High road low road
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• Two ways to compete high road and low road.
  Ones good for workers and the others not. Ones
  sustainable and the others not. Ones socially
  accountable and the others not. Both are
  profitable.

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High Road vs. Low Road Firms
High Road
Low Road

• Competition based on price, resulting in ...
• Economic insecurity
• Rising inequality
• Poisonous labor relations
• Little firm commitment to place
• Environmental damage

• Competition based on value (distinctive
  performance), requiring ...
• Continuous improvement/invention
• Better trained and equipped workers
• More varied and abundant public goods
• and producing
• Higher worker incomes profits
• Reduced environmental damage
• Greater firm commitment to place

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Some dashboard metrics

• Value-Added / FTE gt average for its industry
• Avg. Hourly Wage gt 3 Federal Minimum Wage
• Hourly Worker Payroll Benefits gt 0.5
  Value-Added
• Healthcare Coverage for gt 85 of Hourly Workers
• Employer Healthcare Premium gt 5,000 / Covered
  Worker
• Employees Using Computers gt 67 of Employees
• Employee Turnover Rate lt 20

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So whats the basic program?

• Close off the low road, help pave the high road,
  help workers and firms stuck on the first to roll
  along the second.

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Grounds for hope

• Possible to increase firm productivity
  dramatically, raising wages and promoting
  investment here
• Huge amount of wasteful consumption can be
  eliminated, increasing disposable income
• National economy largely regional, and regions
  can be organized to provide the place-specific
  productive infrastructure that adds value,
  reduces waste, and captures the benefits of doing
  both locally
• Doing (1) (2) in (3) will increase
  competitiveness while grounding the economy
  reducing credible capital exit threats,
  increasing wage and government income, moving
  toward sustainability through democratic action

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Very wide variation in productivity
Source Performance Benchmarking Service
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Working Class Consumption
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• So why dont we choose the high road?

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The basic economics of the firmValue
added/employee drives wages, owner return, and
reinvestment
Owners'
Reinvestment /
Taxes /
Compensation /
Employee
Employee
Employee
Wages /
Profits /
Employee
Employee
Value Added / Employee
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Qualified workers for quality jobs
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Getting to living wage jobs

• Entry-level employment that prepares workers for
  and connects them to future opportunities
• Reliable and understood methods of access to
  decent paying sectors jobs
• Routine career advancement through incremental
  moves

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Why is that so hard these days?

• Deregulation, privatization, de-unionization
• Changes in work organization outsourcing,
  contingent/temporary work, cellular production,
  etc. in smaller establishments, generally in
  service sector
• End of job ladders, employer-based welfare state,
  industry wage norms

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Old world vs. new world
New World
Old World
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Training alone wont do it

• Training alone only creates jobs for the trainers
• Implausible to get the commitment to training
  needed, based on current returns
• Employer variation swamps variation in human
  capital
• Many jobs just dont have more rungs
• Adults more complicated than kids (need to handle
  social insurance and non-actuarial risk)

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This said of course you should

• Ease transitions and access to training
  (modularize, bridge programs, etc.)
• Establish presumptive career pathways
• If youre worried about poor adults, get them
  literate, get them tied to credentialing
  programs, fix leaks in the system, measure public
  systems by moving people through critical points
  of transition

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Another way of saying this the 5 As

• Adult focused since current workforce is
  tomorrows and the day afters, and because
  returns are clear if tied to demand
• Aligned across agencies, through the pipeline,
  with employer needs
• Accessible through the states, to all types of
  students
• Affordable focus more on adult education, use
  more Perkins Career/Technical Education on
  adults, provide aid for short-term non-degree
  courses, focus TANF and WIA money on adult
  education
• Accountable measure employment and income
  outcomes, track across agencies and programs,
  guide investment strategically

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Demand side strategies

• Standards (public or private) minimum wage,
  living wage, community benefit agreements, PLAs,
  unionization, community organization, show me
  the money on EWD, etc.
• Upgrading (public or private) technical
  assistance, extension services, subsidies or tax
  discrimination, productivity bargaining, linkage

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WRTP

• Partnership of 100 employers and unions
• Intermediates employers, community, training
  providers, and funding
• Dedicated to qualified workers for quality jobs
• Programs in incumbent workers training,
  modernization, and recruitment
• Has improved the behavior of employers, unions,
  CBOS, and public training system
• Critical to RSA program under Clinton.
• Influential nationally in thinking about sectoral
  partnerships.

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Regional high road partnerships
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WRTP roots

• Manufacturing in the early 1990s (apprenticeship
  a wreck, international competition growing,
  labor-management relations bad to worse)
• Labor and management leaders agree to work
  together on training and workplace modernization,
  shifting compensation to skills plus, but
  providing those skills more broadly
• Agree to do this collectively, to have real labor
  market impact and realize economies of scale and
  scope in operation
• Gradually WRTP builds enough linkages and trust
  to adjust to new workforce issues in the late
  1990s (skills shortages, welfare reform, etc.)

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WRTP evolution in a decade

• Worker participants expanded from incumbent to
  future workers
• Sector expansion from manufacturing to
  construction, healthcare, hospitality, IT,
  transportation
• Coordinating role expansion from employers/unions
  to government/community
• Program expansion from stand-alone project to
  motor of system EWD (economic and workforce
  development) reform
• Becomes independent of COWS!!

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Demand-driven coordination

• Employers certify job demand
• Public system and CBOs identify and evaluate
  applicants
• Trainers prepare applicants for available jobs
• WRTP coordinates this and establishes a common
  public presence and agenda
• Employers get more certainty, government gets
  more leverage on investments, workers get
  opportunity and reward to effort, region and
  industry gets economies of scale and scope in
  coordination in satisfying EWD needs

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Example of Milwaukee Jobs Initiative

• Approximately 2000 placed in full time jobs at an
  average wage of over 10.50/hour plus family
  health benefits
• 73 of participants still working after a year,
  with 41 at the same or better wage
• Independent verification by Amp Associates showed
  MJI projects among most cost-effective in country
  at getting and keeping central city residents
  into better jobs

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Who got the MJI jobs?

• Average annual household income was 12,000
• 90 non-white
• 32 had high school dipoma
• 50 had received public assistance

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How to start

• Map the economy
• Get a picture of sectoral/regional foundations,
  and their supply chains and value flows
• Benchmark practice to desired value added
• Identify local barriers to value-added
• Convene regional table on both demand and supply
  sides
• Offer a value proposition (if you take the HR,
  well help you in these particular ways)
• Make all subsidies conditional on performance
• Use your purchasing power throughout
• Cooperate across programs, regions
• Support display of best/emerging/mistaken
  practice

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Waste not, ye surly workers
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Working Class Consumption
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Typical Household Budget in 28 Metropolitan Areas
Source Barbara J. Lipman, A Heavy Load The
Combined Housing and Transportation Burdens of
Working Families, Center for Housing Policy,
October 2006
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More cars or more wealth?
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Rebuilding America?
Source Nelson, Toward a new Metropolis
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Building contribution to CO2 emissions
Building contribution to CO2 emissions
Building contribution to CO2
Building contribution to CO2 emissions
Building contribution to CO2 emissions
Transportation 32
Residential 21
Buildings 43
Commercial 17
Industrial 5
Industry 25
Source Pew Center on Global Climate Change
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Basic idea of Me2

• Combine a mix of private and public financing
  for comprehensive application of cost-effective
  retrofit measures to Milwaukees building stock,
  with on-bill payment and maximum benefits
  captured locally. Could generate up to 4,300
  person years of employment for measure
  installation (more with administration,
  materials, and multipliers) and save Milwaukee
  residents gt120M annually.

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An offer they cant refuse?

• To buy and install cost-effective energy
  efficiency measures in their homes and businesses
  with no up-front payment, no new debt obligation,
  the assurance that their utility costs will be
  lower, and the guarantee that each customer will
  make monthly payments only for as long as the
  customer remains at that location and the
  measures continue to work.

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Me2 work and money flows
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• This is about adding value, reducing waste, and
  capturing the benefits of doing both in smart,
  organized, democratic places. It bets on the
  productivity of democracy. Its about adding
  value, not just values, to the private economy.
  Its about setting the rules for free
  competition, not managing the economy. It
  treats markets as tools, not gods. It doesnt
  throw money at problems, but is prepared to
  make specific scaled investments of proven social
  value.This demands accountability of government
  as well as citizens. It applies the private
  sectors metrics revolution and benchmarking to
  government and public administration. It aims at
  greater government efficiency, which is not the
  same as simply cutting prices. It values
  experiment and learning. It is clear on its
  values but works collaboratively. It is against
  business as usual but for social wealth
  creation. It recognizes the business contribution
  to society, but that of everybody else as well.

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Policy takeaways

• Training wont do it alone, and tends not to do
  well with those most in need you can fix the
  latter problem, but it not enough
• Demand-side strategies important, and need not be
  limited to minimum wage and social wage
• Regional aspect important, since thats how labor
  markets are organized
• Dont diss waste reduction, or not think of it as
  an equity issue
• This demands a much smarter government, but
  thats gettting easier