Modeshift

There still isn’t much to be happy about when it comes to the political conversation in Lansing, our state capital. Though she won more than 50 counties in the 2006 election, more than any Democrat running for any state office in Michigan history – she also delivered a Democratic-led  House;  Republicans hold the state Senate by a slim majority – Michigan’s governor hasn’t done anything with her influence.

Politics is a full contact body sport.  Ms. Granholm, though, has spent more than four years convinced that politics is a courteous waltz. And the more she dances, the further Michigan slips. In an era defined by educational achievement, Michigan drains resources from its public  schools and universities, yet battles to retain the same number of incarcerated state prisoners at more than $30,000 each a year. In an age when more miles of rapid transit determines regional and state economic health, Michigan is doing nothing — repeat nothing — to help the Detroit region actually use the $100 million set aside by Congress to build a starter heavy commuter rail line between Detroit and Ann Arbor. And in a century when clean, renewable energy is the order of the day, Michigan state government and the governor’s office appears more than pleased to foster the development of two new power plants that use 19th century technology and an 18th century fuel source — coal.

It is for these reasons and more that at least one of the state’s prosperouos regions — Grand Rapids — has largely decided to avoid state government officials and political leaders to advance new economic development strategies that are producing jobs, higher incomes, an enhanced quality of life, and real prospects for its citizens in this century. 

I spent the day in Grand Rapids last week and every time I go I find something new and impressive. This time I discovered a medical and biological research construction boom had overtaken Health Hill on the city’s north end. From the summit of the hill, and stretching roughly half a mile in both directions along Michigan Street, a stunning array of buildings is under construction, reflecting a commitment of nearly $1 billion by the area’s prominent families and medical institutions. There are a new medical school, a children’s hospital, a biomedical research center, a cancer treatment center, and two medical treatment and office buildings. All told the buildings will cover 1.2 million square feet.

By 2010, when construction is completed, those buildings, several designed by world-renowned architects, will provide enough space to treat thousands of people a day and employ 5,000 people, 2,500 more jobs than exist now on Health Hill. Grand Rapids may be executing the largest biomedical and patient care construction project in the United States at the moment. I could find only two other projects of near the same magnitude – one at the University of Kentucky in Lexington, which is building a $450 million hospital that is part of a 20-year $2.5 billion medical campus construction program, and a $160 million building that was just finished by the Oregon Health and Sciences University in Portland, the first of three big buildings it plans to construct in the city’s new South Waterfront section.  

In essence, Grand Rapids has developed its next big new strategic economic thought around biological research and medicine, focusing on patient care and cancer research. A city that was founded on cutting down trees, later developed furniture, evolved into manufacturing, has found a way to shed its rust belt image by developing new means to treat the sick and prevent disease. My colleague at the Michigan Land Use Institute, Andy Guy, has written about Grand Rapids’ ascent more expertly than any journalist in Michigan.  

 A last thought. Grand Rapids accomplished this feat by joining the vast wealth of its industrial families, many of them ideological conservatives, with the progressive ideas of its city government, neighborhood organizations, non-profit civic groups, and academic institutions. Partisanship wasn’t an issue. Neither was ideology. Collaboration in a collaborative century was the watch word. Big ideas were hatched and are being achieved.

Grand Rapids is little more than an hour’s drive to Lansing. You wonder why the smart people there are having such a hard time with this.

Illinois, our neighbor to the west, has been doing a lot of things right of late for its residents, environment, and economy. It makes a Michigan resident a bit jealous. The Center for Neighborhood Technology and Bethel New Life, for example, convinced the Chicago Transit Authority to rebuild rather than tear down the elevated Green Line in the 1990s, helping to promote the revival of the city’s West Side. Chicago Mayor Richard Daley turned a tree-planting campaign into a full-fledged green economic development strategy that not only helped Chicago become, arguably, the most beautiful city in America but also among its fastest growing and most prosperous. Lots of great Chicago organizations were involved included the Metropolitan Planning Council and its A list dynamic leader, Mary Sue Barrett (see pix).

Now comes the state General Assembly and state Senate, which last month approved The Green Neighborhood Grant Act, an experimental economic incentive to encourage developers to build healthy, energy efficient, environmentally sustainable, walkable, beautifully designed new neighborhoods. In becoming the first state to approve a LEED-ND incentive package Illinois had some very big 21st century ideas in mind, according to Mandy Burrell, the communications associate at the Metropolitan Planning Council.

Ms. Burrell told me that the Legislature is seeking next year to provide three builders of sustainable LEED-ND developments grants of up to 1.5 percent of their total cost. Of the three projects that qualify for the grants not more than one can come from Chicago. Legislators expect to encourage the construction of 300 new households in Illinois, said Ms. Burrell, and more than $944,400 could be redirected annually into the state’s economy because of the money that home owners will save in energy and vehicle expenses alone because of where they live. 

Other interesting forecasts:

• A family living in a LEED-ND certified neighborhood stands to cut annual costs by $3,148, due to savings from their well-designed, energy-efficient homes, the easier access they have to transit, jobs, schools, and recreation - meaning they won’t spend nearly as much money on cars. 
• LEED certified developers also earn more for their homes, and buyers gain higher resale premiums, according to a number of studies and realty assessments.

Jennifer Henry, who manages the LEED-ND project for the U.S. Green Building Council, said she knows of no state other than Illinois that has adopted  publicly financed incentives for LEED-ND. And while the pilot project is small, the consequences can be huge.

You may recall that the LEED idea itself, promoting better design through environmental sensitivity and energy efficiency started small. But in certifiying standards for green design LEED had the effect of creating a market that never existed previously. The LEED idea is now written into zoning standards and building codes. Cities, like Chicago, compete to be the place that has the most LEED-certified buildings. Neighborhoods that promote walking rather than riding, energy efficiency rather than profligacy, healthy living rather than conventional toxic design just make sense in a world of higher expenses and scarcer resources, space, energy, and time. And Illinois, right here in the economically scarred upper Midwest, was the first to get there.  Nice work Illinois.

In 1954, the year that Detroit was busily completing the Lodge Freeway and starting construction on the city’s other major highways Toronto (see pix) opened 12 stations on the Yonge Street subway line, the city’s first. Since then Toronto has built three more regional rapid transit lines, 69 stations, and nearly 43 miles of subway and rapid transit track. The city’s subway and surface streetcar system carries 1.2 million passengers a day, many of whom also use the seven commuter train lines into town. Only New York and Mexico City have a more extensive rapid transit system than Toronto. Detroit, meanwhile, has none.

 The contrast between the two cities in economic competitiveness, quality of life, and opportunity is just as stark. Detroit’s population, now less than 900,000, is less than half of what it was in 1954, when the number of Detroit residents peaked. The Detroit metropolitan region, where 4.8 million people live, has grown by roughly 100,000 residents since 1970. The number of vehicles, meanwhile, has increased by 1.6 million during the same period. Southeast Michigan has the highest rates of racial and economic segregation, joblessness, income stagnation, home foreclosure, heart disease, diabetes, and obesity of any major metropolitan region in the United States.

Toronto, meanwhile, has steadily grown to a city of 2.5 million, and the population of the metropolitan region — 5.1 million — is nearly double what it was in 1970. The largest city in Canada, and the fifth largest city in North America, Toronto also challenges New York as the continent’s most racially diverse and most prosperous. 

Toronto’s economy is booming, and a great deal of its well-being has to do with how regional managers and residents view rapid transit as an excellent investment for responding to the new market signals of the 21st century. Canada was a signatory to the Kyoto Accord, which commits the country to reducing global climate change gases by 2012 to 6 percent less than the levels produced in 1990. Canada also has a national transit strategy that calls for:

• Improving the global competitiveness, quality of life, and environmental sustainability of Canada’s cities.
• Requiring cities to have land use and transportation plans that favor transit as the primary means of accommodating future travel demand.
• Providing funding necessary to maintain and expand Canada’s urban transit systems in order to accommodate population growth and to allow transit to attract a larger share of the total travel market.
• Providing increased mobility for people so that they can take advantage of the employment, educational, recreational, and many other opportunities cities offer.
• Improving air quality and, in doing so, improve people’s health and their ability to enjoy outdoor spaces and activities.
• Ensuring the long-term economic stability and environmental sustainability by reducing climate-changing emissions and reliance on fossil fuels.

These, by the way, aren’t just hopeful words. Canada means what it says, and nowhere is it more visible than in Toronto. On June 15, Ontario’s Premier Dalton McGuinty announced that the provincial and federal governments are teaming up to spend $17.5 billion to modernize and build roughly 550 miles of rapid transit lines throughout the Toronto metropolitan region by 2020. It is the largest and most extensive metropolitan rapid transit investment in North America since New York spent $24 billion from 1982 to 1999 to modernize its aged subway and bus system. That investment helped to spur an economic and demographic revival that reestablished New York as a choice place to live and do business.  

Toronto already is a grand place. Its downtown is a hub of activity 24/7 with outdoor cafes busy well into the evening. Its suburbs, though jammed with vehicles, are a display of gleaming office towers set amid a natural and agricultural landscape that the provincial government is determined to conserve. One of the region’s land use plans calls for preserving 1.8 million acres of open space and farmland in the region; one million acres already have been saved. 

Detroit turned down a $600 million federal transit grant in 1976 and can’t agree even now on using $100 million in federal funds to revive a heavy commuter rail line between Ann Arbor and the central city.  Toronto’s new transit construction plan, meanwhile, will reduce pollution, congestion, and travel costs in a world where temperatures are rising and gasoline is heading to $8 a gallon. If you were a young person, which city is more inviting?  

Democrat Bill  Richardson, a member of President Bill Clinton’s cabinet and the current governor of New Mexico, this week became the first 2008 presidential candidate to formally introduce a Mode Shift idea into the national race. Richardson was in West Hollywood on Monday, and according to the Associated Press promised “to create a partnership to build a light rail network and help untangle the Los Angeles region’s notorious traffic. With gas prices rising and roadways jammed, Richardson said it was time to rethink a federal transportation policy that pumps billions of dollars into new roads each year. Mass transit, he said, will be the best, cleanest way to move metropolitan residents in the future.”

If elected, Richardson said he would “make it a major effort to refocus transportation construction of roads into light rail and more energy efficient transportation,” the New Mexico governor told reporters at a news conference. I would make light rail at least an equal partner” with highways, he said. With more rail and clean-running buses, “it’s going to improve the quality of life in this country.”

Richardson, who’s not done nearly as well as he needed to in early national television interviews, is nevertheless no slouch on energy or transportation policy. Last July New Mexico opened the first stations and 15 miles of the Rail Runner Express, a new north-south heavy commuter rail line that is now a nine-station, 55-mile system that will extend next year to 117 miles and reach Santa Fe. The system is carrying 2,000 passengers a day now, and is expected to cost $393 million, according to the Albuquerque Tribune. 

We’ll see more such Mode Shift ideas from presidential candidates. Static incomes. High energy prices. Falling home sales and rising rate of foreclosure. Global climate change. Traffic congestion and declining quality of life in American suburbs. Issues too close to home for candidates to ignore. 

If you travel to Las Vegas, Knoxville, Chicago, and Salt Lake City one of the surprising trends you’ll see is the abrupt shift in housing markets. Downtowns in these and other cities are outpacing the suburbs in new home construction and existing home sales. Two of the critical reasons for both are the shrinking size of American households — not a new trend — and the fact that transportation costs exceed housing expenses in household budgets. Though builders are intent on constructing the 3,000 square foot McMansion in the distant suburb, the fact is that there are far fewer households than there once were capable of both filling them up and  being able to afford to get there in the first place. 

Let’s tease out both trends. The US Census Bureau noted earlier this year that the conventional American nuclear family — husband, wife, and kids under one roof — now composes less than a quarter of all households. The Census Bureau also reported that single people now make up the majority of US households. Long story short: the market for those cul-de-sac McMansions is shrinking. The downward slide in new suburban home sales is further exacerbated by reckless lending practices, static or shrinking family incomes, traffic congestion, and the growing popularity of downtown living shared by young people and retirees alike. 

The other major influence in the soaring interest in American downtowns and shrinking housing markets at metropolitan edges is the cost of transportation, now the number one expense in the majority of American households, according to a study by the Center For Housing Policy in Washngton, D.C.  Researchers evaluated households that earned from $20,000 to $50,000 — the majority of households, by the way — in 28 metropolitan regions. They found that on average households spent 30 percent of their monthly income on transportation and 28 percent on housing. Such supposedly low cost cities like Atlanta were actually very high cost places to live. Atlantans spent 32 percent of their income on transportation, more than supposedly high cost cities like New York (24 percent), and Washington, D.C. (28 percent). In fact, when transportation and housing costs were combined Atlanta — one of the most sprawled out, drive through places in the world — was the second most expensive metropolitan region in the nation, next to San Francisco.  Detroit, by the way, had among the highest transportation costs (31 percent) but also near the lowest housing costs (24 percent of household income), the researchers found.

What does it mean for patterns of American development? The old rules of the housing/income/time/distance game have changed.  Working people sacrificed their time in order to find decent housing distant from their jobs. Their commutes in relatively inexpensive vehicles with cheap fuel made it work economically. No more. Vehicles are expensive to buy and maintain and insure. Fuel prices are rising fast. For every dollar people spend each month on housing in the distant suburbs, they’re spending as much or more on transportation. Living far away just doesn’t cash flow like it once did. And that reality is translating into depressed suburban housing markets, downtown redevelopment, and Mode Shift projects occurring all over the nation to finance and build new forms of work force housing and rapid transit systems. Very soon researchers may find that the footprint of major American metropolitan regions has begun to stabilize and then shrink.

NEW YORK — Early this morning, before the sun peaked over the roofs of the grand old apartment buildings of the Upper East Side, I followed the road bikers and dog walkers and joggers over to Central Park for a splendid four-mile run. New York is full of young people now, bright, educated, trim, and ambitious. A whole bunch of them are up just after dawn to clear their minds and keep their bodies tuned sufficiently to compete in a global capital that is at the leading edge of what great cities are becoming in the 21st century — clean, green, energy efficient, safe, and beautiful. This is a different place than the polluted, crime ridden, deficit-panicked, dirty city that I grew up with when I came of age in the 1970s. New York, according to demographers, is young, younger than its suburbs. Traffic is barred from most of Central Park’s perimeter roadways in the morning, making it a surprisingly quiet green garden for thousands of them to exercise.  

This week, Democrats in the United States Senate introduced their version of an energy bill that the message guys in the party described as — hold your breaths — a plan to wean the country from foreign oil and promote domestic energy supplies. The bill has next to nothing in it that will produce more of the prosperous metropolitan regions, like New York, that are becoming ever more energy efficient, and not surprisingly, the strongest generators of jobs, income, and opportunity in the United States. Instead, the Democratic bill is almost solely intended to benefit the corn belt in the Midwest, keep the oil companies happy drilling for domestic oil supplies that no longer exist, and sustain what author Jim Kunstler describes as “America’s drive through economy.”

The 2007 Senate plan deploys almost precisely the same language used to advertise every energy bill introduced in Washington since the 1973 Arab Oil embargo, which produced long gas lines and helped a lot of teenage guys like myself bond with friends as we waited to fill our Dad’s cars. The bills did nothing to reduce America’s oil apetite, especially for foreign oil. In 1973, the United States consumed under 16 million barrels of oil daily, less than half of it imported. In 2006, oil consumption reached 21.9 million barrels a day, according to the Energy Information Administration, of which 13.21 million barrels or 60 percent was imported. At current prices, the US is sending roughly $800 million a day out of the country, nearly $300 billion in cold, hard, needed American cash sent overseas a year. 

What’s so dismaying about the Democratic plan, like the Republican plans before it, is that the hyped legislative exercise comes as home prices are falling in the suburbs, mortgage foreclosures are rising (they’ve nearly quintupled since 2000 in my corner of rural northwest Michigan), Walmart sales are static, gasoline prices are climbing to nearly $4 a gallon in some parts of the nation, incomes are static, and a war fought for oil in Iraq is not going well. These are the unmistakable signs of the new global order for the United States, still strung out on oil, unable to agree on a national response other than doing more of the same. Even Democrats are divided about plans to secure higher fuel mileage standards, conservation initiatives, and massive subsidies to the nation’s corn growers who already receive 51 cents a gallon from taxpayers to produce ethanol. Meanwhile energy consumption, especially gasoline, continues to rise despite record high prices.  

All of America is addicted to oil, of course, and there are no foreseeable substitutes. Which is precisely why Washington needs to pay attention to the places where the habit isn’t quite as strong. One of those is New York City, which has been doing a lot of very smart things for two decades to insulate its citizens from an oil shock and simultaneously produce a better place to live and do business. Yet none of things that New York did, or is thinking about now, is on the national energy agenda considered by lawmakers in Washington. They should be.

From 1982 to 1999, according to a study by Schaller Consulting, New York City spent $24 billion — an average of $1.41 billion annually — to modernize its mass transit system. The intent was to reduce congestion, improve transportation efficiency, provide alternatives for getting around town, lower family costs, and attract residents and businesses to the new  nodes of business activity around the 468 transit stations and hundreds more bus stops. The money was spent to replace or overhaul the system’s 4,500 buses, 1,200 subway cars, 530 of 660 miles of subway tracks, and a quarter of the subway stations.

The demographic and economic results are impressive in every way. Subway and bus ridership in the 1990s increased much faster than the rate of car ownership and use and has continued since. Between 1990 and 2000, for instance, the number of new vehicles in the city climbed by 104,000, from 1.695 million vehicles to 1.79 million, or less than 7 percent. But subway ridership increased by 353 million riders, from 1.028 billion riders to 1.381 billion, or more than 35 percent. Today the system serves over 2 billion riders annually. The effect on gasoline consumption also has been impressive. Drivers in New York City consume an average of 146 gallons a year, less than drivers in San Francisco (238 gallons), much less than drivers in Los Angeles (392) and much, much less than the national average of 463 gallons a year.

The city’s population, which plummeted to just over 7 million in 1980 has climbed to more than 8 million. The number of visitors reached 44 million last year, 11 million more than in 1998, attracting $23 billion in annual spending that employed 333,158 jobs and $5.44 billion in tax revenue, according to city figures. Hotel occupancy rates exceed 85 percent annually. The city’s subway system, which I ride during my trips here, is clean, cool, inexpensive ($2.00 a ride), and the fastest way to get anywhere during business hours. The system is so popular again that peak hour crowding has returned  as a major civic issue. 

Earlier this month the city’s moderate Republican mayor,  Michael Bloomberg, proposed further increasing residents’ reliance on transit, and diminishing the influence of cars and light trucks by emulating a “congestion pricing” traffic management program that has been used in London since 2003. If the plan is approved, the city could significantly raise tolls on Hudson and East River bridges and require motorists to purchase permits, monitored by a system of surveillance code readers, in order to charge drivers headed south of 86th street $8 a day. Those who don’t pay face fines.

On Earth Day, Mayor Bloomberg proposed a separate plan to make New York the best big city in the world to live and do business, principally by making it a much greener, energy efficient, and more beautiful place to live. Among its 127 steps is further reducing the use of private vehicles, cleaning up power plants, requiring more green roofs on major buildings, and investing in rapid transit. Congress continues to hug the 20th century. New York and other big cities understand they need to find their own path to the 21st.

“I make this promise to you: I will not spend my last 984 days in office pretending that all is fine and leaving these challenges to the next mayor, who may well pass them off to his or her successor,” Bloomberg said in April. “Residents of a city that is a beacon to the world will not abdicate our responsibility to that world. That’s not leadership. Leadership is about recognizing challenges and seizing opportunities. And we are going to seize this opportunity – to lead the way forward and create the first environmentally sustainable 21st century city.”

Last November, just as they have in previous local and state elections stretching back to the mid-1990s, voters in 13 states considered 32 transit-related ballot measures and approved 70 percent of them, according to the Center for Transportation Excellence, a research group based in Washington, D.C. Spending on those projects will total $40 billion—bringing both immediate stimulus and long-term economic development tools to local economies.

Well, the beat goes on. Last month voters in the Grand Rapids region approved a property tax increase to enhance and expand that region’s first-rate bus system. It’s the third time since 2000 that Grand Rapids, the most conservative major metropolitan region in Michigan, approved tax increases for transit.

The Center for Transportation Excellence reports that Aspen, Colorado residents approved building a combination highway and bus rapid transit system, and Winter Park, Florida approved building a new commuter rail station. Of the five binding transit ballot measures this year in four states, only Kitsap County, Washington defeated a sales tax increase to provide new ferry service to Seattle. A fifth measure to establish new tax funding for transit has yet to be voted on in Washington’s Puget Sound region.

With such consistently strong non-ideological votes in favor of new transit service, and with gas prices climbing inexorably, you wonder when presidential candidates of either party will pick up the issue. Is it possible for the 2008 presidential campaign to be only about health care and the war? Doubtful given the global transition underway and the need to talk about much more than that.

 Though it’s completely understandable why the triple whammy of rising peak oil energy prices, global climate change, and record population growth might get you down, here are a number of promising Mode Shift trends that indicate the end is not nigh.

Singles now head the majority of American households and are repopulating America’s great cities. This from Baltimore, according to the May 29, 2007 edition of the Baltimore Sun: “Across Baltimore, single women – old and young, black and white – are buying houses, many for the first time, at rates far exceeding the national average. According to a 2006 survey conducted by the National Association of Realtors, 40 percent of city homebuyers last year were single females, nearly twice the national average and the Baltimore County rate.”

In Denver, the expanding Fastracks regional rapid transit system is encouraging suburban communities served by the light and heavy commuter rail lines to embrace higher density neighborhood development. The reason: It makes sense in a transforming world. ”Metro Denver now averages 4 or 4.5 homes per acre,” reports the Denver Post. ”Increasing that to 6.5 or 7 houses per acre will mean smaller lots, which use less water than larger lots, and more compact developments, which will shorten the length of vehicle trips and improve the air quality. Perhaps as valuable is the intangible effect of improving transit for commuters and creating more jobs that are closer to home.”

California Attorney General Jerry Brown is using the newly approved Global Warming Solutions Act, which requires reductions in greenhouse gas emissions, to challenge sprawling patterns of development. The San Francisco Chronicle reported on May 27, 2007, that Brown and lawyers in six other pending cases are using the landmark law enacted last year by Gov. Arnold Schwarzenegger to argue that the “state must rethink the kind of immense and far-flung housing developments that have defined California land-use patterns for decades. The global warming fight has given new ammunition to the battle against sprawl, which detractors argue creates more cars on the road and energy use and is therefore a key ingredient in the climate-change crisis that threatens the California coastline and snowpack. The need to rein in sprawl has not received much attention from Schwarzenegger, who has garnered international attention as he has talked about creating more efficient cars, boosting solar power, and developing new carbon-trading markets for industry. But experts, including the governor’s own climate advisers, argue that changing how housing is developed is key to meeting the emissions reductions.”

Lawmakers in the Arizona state House, by a 50-1 vote, late last month approved new legislation that has already passed the state Senate and provides authority under the state growth management law to limit new sprawl in communities that have tight water supplies. Democratic Governor Janet Napolitano, who supports the measure, is expected to sign the bill any day. The Los Angeles Times picked up the story in its May 27, 2007 edition:  “Legislative approval of the measure came a quarter-century after the 1980 enactment of a historic groundwater management law imposing new pumping and irrigation restrictions in ‘active management areas.’ Those areas include Phoenix, Tucson and Prescott. Those urban-oriented restrictions were aimed at curbing groundwater depletion that outpaced natural replacement. Subsequent population growth in the nation’s fastest growing state has started to crowd some rural areas, leaving some straining to secure adequate water supplies. In parts of eastern and northern Arizona, residents have to truck in water.” 

Indianapolis (see pix) is gaining national recognition as one of the nation’s most significant comeback cities. According to an article in the June 1, 2007 edition of the Rochester (Minn.) Post-Bulletin, Indianapolis has invested more than $6 billion of public and private funds in a host of downtown projects. More development is on the way — again through public and private partnerships — and $3.2 billion more in construction and renovation efforts are on the drawing board.  ”Some 1,500 residential units — condos, houses and apartments — totaling nearly $348 million will be completed by 2010. In just the past few years, the inventory of hotel rooms has increased 44 percent to a total of 5,338 rooms.”

Late on the Friday night before the Memorial Day weekend, Republican and Democratic lawmakers in Michigan reached agreement with Democratic Governor Jennifer M. Granholm on a very temporary fix to close an $800 million state budget deficit. The deficit, for those who might be unfamiliar, is what happens when what the state earns in tax revenue doesn’t keep up with what it spends on programs. Next fall the crisis worsens when lawmakers look down the raw throat of a $1.8 billion deficit.

“Some people might say that the agreement makes things worse,” said Governor Granholm in an interview last week with Michigan Public Radio. “They’re right.”

There are reasons to sympathize with our governor. Ever since she took office in 2003, Granholm has faced the nation’s largest state budget deficits. Their cause is two-fold. During the 1990s Michigan’s Republican Governor John Engler, and the Republican-led House and Senate engaged in a program of tax cutting that steadily diminished the percentage of personal and business income that Michigan paid in taxes. Then came the acceleration of energy, land, and living costs, globalization, and declining incomes across the country. The state’s manufacturing sector, which has lost over 300,000 jobs since 2000, went into free fall, further reducing income and sales tax revenue. The result is that over $4 billion in revenue has drained from state coffers since Granholm was sworn in. As recently as the 2004/2005 fiscal year, Michigan earned $9 billion in general fund revenues. In fiscal 2007/2008, it is expected to raise $7 billion in general fund revenue. Michigan now has 52,299 state employees, fewer than at any time since 1973, when the state’s population was 9.1 million or 11 percent less than the 10.1 million people that live here today. 

But if you’re getting ready for me to take a swipe at those tax-cutting Republicans, forget it. The governor and her Democratic allies, who are pressing for tax increases to balance the budget, have just as much responsibility for producing Michigan’s budget mess. Both sides are tangled in the heavy ropes of partisan and ideological conflict. 

There’s a way out — collaboration around new ideas — that is proving successful in the prosperous regions of the country and ought to be just as useful here. There’s nothing new about this approach, other than how well it works at the state level in California, Maine, and North Carolina, and in metropolitan regions like Denver, San Diego, Albuquerque, St. Louis, and Chicago. Those of us who’ve engaged in intense public disagreements over highways or new Wal-Marts, farmland conservation, windmills, natural rivers, and downtown development also know that the resolution often accompanies proposing a better idea. An alternative to the status quo. A vision that makes sense for its time and can generate common ground.

The problem with Michigan’s budget standoff, now in its fifth year, is that neither side has agreed on such a vision. Republicans want to keep cutting programs they don’t much like, including environmental protection, health care, and the union-dominated public school systems. Democrats want to spend in those same programs. But if you look at most state-financed programs, you see very quickly that, with few exceptions, they are meant to ensure the continuation of ideas that fit the 20th century, not the 21st. Put another way: As long as Michigan’s state government defends its authority to spend on the programs it’s financed over the last 35 years, it really won’t make much difference for ensuring prosperity for the next 35.  

Transportation’s $3.4 billion budget is heavily weighted to building and maintaining roads. Under 10 percent of the budget is devoted to public transit and not one penny is focused on regional rapid transit, which has proved so successful in igniting economic development in Washington, San Diego, Salt Lake City, Portland and nearly 30 more cities since the late 1980s.

The state’s $113 million agriculture budget includes $3 million to promote Michigan farm products for global markets, and next to nothing to promote local food networks, which have far more capacity to generate higher incomes for food producers and processors, not to mention the ability to help preserve the state’s farmland and rural beauty, both important ingredients to prosperity in the 21st century.

A year ago the Michigan Land Use Institute, Michigan State, and the Upjohn Institute collaborated on an economic study that found that if Michigan growers increased the amount of fruits and vegetables they sold in local markets the shift could increase net farm income by $164 million, or nearly 16 percent. As farm families spend this new income, the study shows they could generate up to 1,889 new jobs across the state and $187 million in new personal income from those jobs. In other words if Michigan spent a little — a couple of hundred thousand dollars a year for technical support and capacity building — it could gain as much new income and as many jobs as it now tries vainly to do by spending tens of millions unsuccessfully in trying to attract new manufacturers. 

The Department of Labor and Economic Growth, the principal economic development agency, spends 48 percent of its $1.3 billion budget on job training, and 9 percent on commissions, boards, and its own staff. But there isn’t any money devoted to the proposed Airport City that lies between Detroit Metropolitan Airport and Willow Run. The proposed new urban region of 450,000 residents and 350,000 new jobs takes advantage of the global reliance on air transport, the advanced manufacturing base, and the $1.3 billion a year in research grants earned by the three big universities in southeast Michigan — Wayne State, Michigan State, and the University of Michigan. The budget agreement reached on May 25, in fact, cuts $166 million in state support for higher education in 2007.

As Larry the Cable Guy would say, “I could do this all day.” The point is that as long as lawmakers are defending turf and ideology, Michigan loses. The vast pool of financial capital managed by our state lawmakers is being used to operate obsolete programs and support old ideas about growth and prosperity. The Michigan Land Use Institute published a report in 2005, “Follow The Money,” that identified $10 billion a year in state economic development funds used for schools, highways, universities, research, and other programs. 

Michigan doesn’t have a shortage of money, as Democrats argue. The state’s budget is $43 billion annually. Michigan has a shortage of ideas, vision, and willingness to collaborate. So long as the state’s budget is devoted to building more roads not regional rapid transit, promoting farm products in the farm-killing global commodity markets, subsidizing sprawl in rural areas, selling state forests and other assets at bargain prices, and cutting funding to higher education in the knowledge economy, we all lose. Unless Granholm and state legislators develop a prosperity plan and the programs to carry it out that fit the 21st century — programs that promote fresh local foods, rapid transit, energy efficiency, environmental protection, housing and urban neighborhoods, and access to great schools — it doesn’t matter how much money the state spends or doesn’t spend. The existing programs neither buttress the present nor prepare for the future. They do, however, ensure that Michigan’s standing in the world will continue to diminish.

Here are two more reasons why Michigan and the American Midwest are slipping to backwater status in the United States, and why we can’t give up on the capacity of our governor and state lawmakers to help work Michigan out of its economic mess. 

Fact one, according to a new analysis by the Metropolitan Policy Program at the Brookings Institution: Six of the 80 old industrial cities lagging far behind in economic performance, population growth, job creation, and business development are in Michigan. All but 17 of the 80 underperforming cities in the United States, according to the Brookings findings, are in the Midwest, Mid-Atlantic, or New England.

Fact two. Michigan’s residents are starting to give a lot more thought to struggling cities as fuel prices climb past $3.50 a gallon, as they did this week. The old rules about where the most affordable housing lies — far from the city center — no longer applies if it costs $12 a day in after tax income to commute for a working person who earns $70 a day. For every dollar a family thinks it saves in monthly housing costs  by moving to the far outer suburbs, according to the Center For Housing Policy in Washington, D.C.,it spends nearly a dollar more in transportation costs.  

In other words the cost of commuting is about to exceed the savings from buying a home distant from job centers. Michigan needs it cities because people need cities to become choice places to live again. The old pattern of development — flinging people across the landscape, putting them in cars, and then tying them together with expensive roads — just doesn’t fit the new market signals of this century. Anyway you look at it, we can’t afford the lifestyle.  

It’s not just in Michigan. The combination of rising energy, land, and housing costs, and the decline in real wages, is prompting more people to reconsider where they buy a home. Some states – notably Utah, Texas, New York, Oregon, Tennessee, South Carolina, North Carolina – anticipated the abrupt market transition and significantly improved their cities as places to live and do business. Central city populations are rising dramatically all across the country, as are housing prices. But Michigan and much of the Midwest, according to Bruce Katz (see pix), vice president of Brookings  and director of the Metropolitan Policy Program, are not keeping pace. The reason, he says, is that Midwestern states treat cities “as deficits not assets,” and allowed them to deteriorate. 

For the most part — with a few exceptions like Ann Arbor, Grand Rapids, Chicago, Milwaukee, Madison, and Columbus — Midwestern cities ceased decades ago to be competitive places to raise families. The result is that working people are becoming marooned in suburban and exurban homes they can ill afford, far from jobs they aren’t certain of keeping, and paying more every day to survive with wages that are static or declining. Michigan is at the head of the national pack in the number of young people and young families that are leaving to seek fortunes in more competitive places. And recruitment officers in every major Michigan city describe the hardships they experience in attracting young talent to settle here. 

Katz was in Michigan this week, exploring his group’s new Restoring Prosperity report, and telling audiences in Lansing and Flint that Michigan should look to its cities — not suburbs, not exurbs, not rural regions – as its most important economic assets. Nationally, he said, cities are emerging as the great incubators of new economic policy, housing, neighborhood development, and wealth because they are much more responsive to the new market and demographic trends reshaping the country. The country is growing older. Households with one or two people now far outnumber families with children. The number of immigrants is climbing. These demographic trends favor cities. Couple that with rising energy and land costs, and the desire by more people to move out of expensive, congested, and increasingly unsafe suburbs, and the future of cities in America is bright, he said. 

To some extent, Katz said, Michigan’s cities reflect those trends. Downtown Grand Rapids, Ann Arbor, and Traverse City are attracting new investment and housing. But much more opportunity exists in urban development, he said, and the state has an essential role in deciding where it should spend money to encourage metropolitan prosperity — for rapid transit, parks, housing, job investment strategies, neighborhood development – and where it shouldn’t, such as providing thousands of acres of state land and subsidizing a giant theme park in rural Roscommon County.

With the state’s help, Michigan’s other major cities also can prosper again, said Katz. That’s because they have the streets and neighborhoods, the educational and social institutions (particularly universities and medical centers), and the cultural amenities that underlie strong metropolitan economies. The six underperforming Michigan cities — Detroit, Flint, Kalamazoo, Saginaw, East Lansing, and Muskegon — collectively have 330 historic landmark properties, 14 four-year colleges and universities, 30 hospitals and medical institutions that employ 42,000 people, 14 major museums, and 5 major sports teams. They also support a third of the jobs in their respective regions. Those are the sort of strategic assets on which to build a more prosperous state. In Katz’s view, “cities totally punch above their weight economically.”