Austin Contrarian

Agglomerations

The nascent agglomeration of child-related services at Mueller got me thinking about other clusters.  (By the ways, folks, "agglomeration" isn't my term.)

Once you start looking for them, you see them everywhere.  Here are some that immediately came to mind:

• Art -- West 6th Street   
• Furniture -- Anderson & Burnet 
• "Hip" (no longer funky) restaurants & stores -- SoCo 
• "New" funky shops -- Burnet south of Koenig 
• Medical -- Seton/38th Street  (with a smaller one at St. David's)
• Used car dealerships -- South Lamar
• Car repair/service shops -- South Lamar 
• New car dealerships -- I35 South, 183 North 
• Music -- east 6th Street 
• Government -- duh 
• Legal/accounting -- downtown 
• Software/high-tech -- Research Blvd., 360 
• West Campus
• Mexican restaurants/bakeries/shops -- South First north of Oltorf 
• Vietnamese restaurants/grocers -- north Lamar (I hear) 

Any mall, of course, is simply an agglomeration of retail.

You can get an idea of the value of these clusters by looking at how they respond to rising land values.  For example, land values have been rising along South Lamar for several years but during that time South Lamar has actually added a couple of used car lots.  Being close to other used car lots is obviously very valuable. Proximity saves them marketing costs: Why advertise when everyone knows where you are? Also, a big cluster generates more trips than the lots would generate in isolation.

Some of these are more subtle than they appear. SoCo is a cluster calibrated for a specific demographic. Its counterpart is the large cluster of chain restaurants at Stassney and I-35.

Austin Children's Museum and agglomeration economies

I want to follow up on this post by M1EK on the Austin Children's Museum planned move from downtown to Mueller.

I'm personally disappointed with the move.  My wife has taken my son to ACM several times, usually with other moms, and grabbed lunch or gelato afterward or ridden the 'Dillo, which he loves.  I live south, so we probably won't go to Mueller very often.

But I think the ACM's move nicely illustrates the principle of agglomeration economies, which are one of the main advantages big cities offer over small ones.

Mueller is developing a robust agglomeration of child-oriented services.  ACM will be near the Dell Children's Hospital, pediatricians' offices, the planned Rathgeber Village, and a nice community pool and playgrounds.  ACM will benefit tremendously from being part of this cluster.  And this isn't even counting the benefit of being closer to more customers, particularly the gold mine of children in Pflugerville and Round Rock.  More visitors will allow it to offer more attractions, drawing even more visitors, and so on.  ACM will enjoy these spillover benefits for "free," sort of -- these benefits will simply be bundled with the rent it pays.

Downtown's Second Street is a different kind of agglomeration.  Its trendy shops and bars cater mainly to adults.  While ACM no doubt benefits from some spillover traffic, I imagine that on net ACM produces more spillover benefits than it receives.  It draws people downtown who might not otherwise come downtown, enlarges the market if just slightly for the other restaurants and shops downtown (including the library), and generally makes the downtown experience more enjoyable.  ACM can't capture these benefits unless it receives heavily subsidized rent.  It was supposed to move to Block 21 and receive a rent break from Stratus, but the subsidy apparently wasn't deep enough.  It may well need "negative" rent -- i.e., direct cash payments, to make downtown as attractive for it as Mueller.

Again, let me emphasize that I think downtown is a net loser from ACM's move.  I'm simply skeptical that its loss will be as big as the gain ACM will enjoy simply by changing address.

The Gridlock Economy

In American suburbs, home owners are the voting majority; in cities, renters may be the crucial pressure bloc.  Local officials, wanting to keep voters happy, create more and more mechanisms to restrict development:  environmental impact reviews, architectural review boards, subdivision regulations, historic preservation districts, landmark commissions, building permit requirements, rent controls -- all part of the multilayered gauntlet of American land-use controls.  Think of each of these mechanisms as a phantom tollbooth along the road to real estate development.  Each tollbooth may have made sense on its own terms when initially enacted.  Collectively, however, regulatory layering adds up to gridlock with mind-boggling costs for society.

That's from The Gridlock Economy, by Columbia law professor Michael Heller.

Lots  of people are familiar with the "tragedy of the commons," in which a shared resource is overused because no single decision maker can exclude use by others. Examples are overfished oceans, overharvested lobster beds, and congested highways.  Heller analyzes the "anti-commons," in which a resource is underused because ownership is too fragmented.  When too many people have a veto, one of them is bound to exercise it.  Drug development, for example, is stymied by a thicket of patents on basic genetic research.

Land-use policy is rife with anti-commons.  Fragmented parcels of land are next to impossible to assemble for large redevelopment; the only existing solution is often the troubling exercise of eminent domain by the state.  Regulatory approvals are not technically property rights, but they have the same effect when highly fragmented; too many cooks spoil the broth.  (Heller calls these "BANANA republics" -- "build absolutely nothing anywhere near anyone.")

Heller also points out an often overlooked consequence of overregulating land-use markets.  By driving out the least sophisticated, small-scale developers, brambles of regulations make the markets more profitable for sophisticated developers:

Although they are bad for society as a whole, BANANA republics, like most forms of gridlock, offer profit opportunities for savvy investors -- in this case, regulatory arbitrageurs.  As the New York Times noted a few years ago, "Some of the largest publicly held real estate investment companies say they would rather own property in Boston than in Atlanta and Dallas.  Steven Roth, the chief executive of Vornado Realty Trust, says there is an easy way to explain this seeming paradox.  It is difficult to build in Boston where land is scarce, residents are vocal, and zoning disputes can last years.  The opposite is true in Atlanta and Dallas,  'Whenever it's almost impossible to add supply,' Mr. Roth said, "that's where I want to invest.'"

Big developers enjoy economies of scale that allow them to invest in regulatory expertise.  It's the local developers who suffer most from the regulatory gauntlet.

Converting free roads to toll roads

I've argued several times for tolling I-35 through Austin to relieve congestion, lowering the tolls on SH 130 if necessary.  I'd never bothered to check whether the feds would permit it, though.

Apparently, they might. I glean this from a Federal Highway Administration press release disclosing that it has rejected Pennsylvania's application to toll parts of I-80.  According to the FHA official, “Tolling interstates is a viable option for many states to fund highway improvements or to improve performance conditions.”  "Tolling . . . to Improve performance conditions" sounds like congestion pricing to me.  (Pennsylvania didn't satisfy the federal standard, but a jurisdiction with a reasonable pricing scheme presumably could.)

If it's legal to toll I-35, all that's stopping us is the political will to do so.  No problem, right?

(h/t Ben Wear)

Update:  This is a bit more authoritative -- the Federal Highway Administration has apparently been paying to states to experiment with congestion pricing.  The FHA has even published a tool for estimating the impact of congestion pricing on urban highways.

The internet is cool.

Related posts:

They're tolling the wrong road (Jan. 22, 2007)

The political calculus of congestion pricing (March 6, 2007)

If Okies can do it . . . (May 17, 2008)

One other point on rail (Sept. 4, 2008)

What am I missing?

I meant to comment on this last week because Bill Bunch has me stumped.  

A developer is planning to develop 265 acres in Southwest Austin just south of Texas 45 Southwest and MoPac (the blue rectangle below).  The developer is calling it "Wildflower Commons": 

View Larger Map

The developer, with the City's encouragement, is proposing a dense, mixed-use development, . . . 

up to about 550 condominiums and town homes, 490,000 square feet of retail and 124,000 square feet of office space just south of Texas 45 Southwest and MoPac Boulevard (Loop 1). The plans would put the bulk of the development on less than half of the available land, leaving about 160 acres that would be preserved as open space through conservation easements. Portions of that land would be donated to the Hill Country Conservancy, a nonprofit group dedicated to open-space preservation, and adjoining property owners Geoffrey Weisbart and Diane Senterfitt.

Walters Southwest's attorney Steve Drenner said the amount of land covered by building materials impenetrable by water, also known as impervious cover, will be limited to 15 percent, the maximum allowed under the Save Our Springs Ordinance. Impervious cover includes rooftops, roads and parking lots.

Thanks to a settlement with Circle C's developer way back when, Walters could build up to 18% impervious cover.  Hence, it is proposing to use less than its allotted impervious cover, preserve in perpetuity 60% of the land as open space, and build the type of mixed-use development the City has been encouraging for years.  This is as good as it gets for development over the Edwards Aquifer, right? 

Bill Bunch of Save Our Springs opposes it, though:

Bunch disagrees, saying that he would prefer the single-family and office development allowed under current zoning, instead of what the developer has proposed. "More people and more density means more pollutant loading in the watershed and greater reliance on controls rather than prevention," Bunch said.

Huh?

Bunch claims the developer is understating the impervious cover because it is not counting perimeter roads, but surely that doesn't justify his opposition.  I'm not the professional environmentalist, but I assume it is easier to control and treat the run off from a compact, dense development on 160 acres than from several hundred single-family homes spread across 265 acres.

Note this is not about whether Wildflower Commons ought to be built.  The developer can build something there.  And I don't think Bunch is trying a backdoor blocking move:  there is no question a single-family subdivision would be viable there; a mixed-use development on that spot is just a "maybe."

What am I missing? 

“Keep Austin’s Word”

News bit:  Betty Dunkerley has formed a PAC called "Keep Austin's Word" to stop the Stop Domain Subsidies charter amendment.  

Update:

Much more on the SDS charter amendment here and here.

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Some congestion is good

One charge often leveled at planners is that they deliberately foster congestion in order to force people to live in dense, walkable developments.  I'm generally critical of planning, and I certainly don't believe one group should foist its preferences on another.

The fact, though, is that some congestion is good.  Not because compact, centrally located development is more virtuous than single-family homes in the suburbs. Rather, drivers are willing to pay only so much to avoid congestion -- which means they are willing to pay only so much for a given amount of road capacity.  Building more capacity than necessary is a wasteful overinvestment.

This follows from the result I cited in a recent post:

One important feature of congestion prices is that they not only discourage usage when congestion is present, but they also generate revenue for capacity expansion.  Indeed, it has long been recognized that under certain conditions the optimal congestion prices for a fixed amount of capacity will automatically generate the appropriate amount of revenue to finance capacity expansion.*

This really is a remarkable result.  We can pay all the costs of new road construction simply by calibrating road capacity and pricing the roads.

This has two other implications:

1.  We can build new, unsubsidized toll roads without charging drivers when the road is uncongested.  The roads could  be free most of the time; we just need "enough" congestion to pay the bills.

2.  We should not build so much capacity that roads are never congested.  Capacity costs money.  The only purpose of extra capacity is to relieve congestion.  When congestion pricing generates just enough revenue to cover the cost of construction we have, by definition, built exactly the amount of capacity drivers are willing to pay for.  Building more capacity is as much a waste of money as building a three-story school when one story would do, or buying 20 fire trucks when the town only needs 10.

Note that the optimal capacity does not change merely because we refuse to price the road properly.  The hypothetical stream of revenue tells us how much drivers would be willing to pay, whether they are charged for it or not.  Congestion pricing simply monetizes the waste from sitting in traffic.  Another way of looking at it is that when we refuse to price congestion, we "pay" for the roads twice. Drivers pay with lost time.  Taxpayers pay again with cash.

*I've attempted an intuitive explanation of this result below the jump.

Where are the New Urbanist developments?

I asked that here.

Perhaps there are more than I thought, although I honestly can't tell from the article whether these are the real thing.

Has anyone tried Spore yet?

Just wondering whether it lives up to the hype.

My piece on NIMBYism

at Newgeography.