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Oregon’s economic success: The triumph of the city

After decades of lagging the nation, Oregon’s income now exceeds the national average.

While some seem to think its a mystery:  It’s not.  It all about a flourishing Portland economy, especially in the central city of the region

This success has been powered by an influx of talent, especially well-educated young adults drawn to close-in urban neighborhoods

Income growth in Multnomah County accounts for essentially all of the net improvement in Oregon incomes relative to the nation over the past decade or more

Rising incomes, especially in the city, have markedly reduced racial and ethnic income gaps

The secrets of economic success:  talent, quality of life, urban amenities, and knowledge industry clusters.  This urban-powered success should bury old-school myths about business climate.

A new story in the Oregonian notes that the state’s median household income has surpassed the national average, something it treats as a kind of esoteric statistical mystery, one that has economists, in its words, “flummoxed.”  As someone who’s followed this metric for decades, and analyzed Oregon’s economic growth, it’s really no mystery at all.  Oregon’s recent surge in median income is the product of a strong Portland economy, one that’s been transformed and powered by its ability to attract talent.  It’s been a long time in the making.

Median household income is a key indicator of economic progress.  Here’s a half century long picture of how Oregon’s income has tracked relative to the nation.  Nearly all that time, Oregon has lagged.  During the 1980s, Oregon was particularly hard hit.  Since then, Oregon’s changes have tracked national trends, but through about 2012, income was always somewhat below the national median.  But in the last couple of years, Oregon’s income growth has surged and now surpassed the national median.  (The following chart, courtesy of Oregon economist Josh Lehner,  is in inflation-adjusted dollars).

Oregon’s strong trend is borne out by other indicators. Another data series, the Current Population Survey (CPS), which has a much smaller sample and somewhat different approach than the ACS suggests that Oregon’s median income is outpacing the national average by an even larger margin.  State labor economist Will Burchard wrote that the latest figures show that Oregon’s median household income reached $76,554 in 2019, which is higher than the U.S. median household income of $67,521.

Portland powered the state’s economic gain

The Oregonian article makes it sound like the state’s improving incomes are a kind of mystery. But there’s no mystery here.  The first bit of evidence comes from looking at where Oregon incomes surged over the past couple of decades.  Oregon’s economy is big and diverse, and different parts of the state have fared differently.  When we look closely at the county-level data it’s apparent that the income surge is centered in Portland, not just in the Portland area, but in the City of Portland (which is largely coterminous with Multnomah County).  Between 2010 and 2019 median household income (in current dollars) rose 39 percent in Multnomah County, compared to 29 percent in the remainder of the metropolitan area (the suburban counties of Clackamas, Columbia, Washington and Yamhill), and just 23 percent in the remainder of the state.

This is an urban success story.  In a statistical sense, Multnomah County’s income growth explains nearly all of the degree to which Oregon incomes now outpace the nation.  Excluding the effect of increasing median incomes in Multnomah County, statewide incomes median incomes would have risen about 3 percentage points less—enough to keep statewide median income growth from exceeding the national average.

In a way, this isn’t new news at all, even for the Oregonian.  State labor economist Christian Kaylor highlighted Portland’s exceptional growth a couple of years ago, as reported in . . . The Oregonian.

Talent drove Portland’s growth:  The Young and Restless

It’s become increasingly clear in the past two decades that a well-educated population, what economists call “human capital,” is a decisive factor in economic development. It’s no secret that cities that do a great job of educating their populations, and which attract well-educated people from elsewhere do better economically.  That’s more the case with each passing year.

As we’ve documented at City Observatory for years, smart young people have been moving to cities, and Portland has been one of the leading destinations for well-educated 25- to 34-year-olds.  Since the 1990s, Portland has outpaced the nation in attracting these young adults, and their arrival numbers have continued to grow. As we documented in our 2004 report, and in subsequent follow up reports on the Young and Restless, Portland has been a national leader in attracting well-educated young adults and they’ve settled disproportionately in the city’s close-in neighborhoods.  And after two or three decades of steady influx of young talent, this group, as it has matured into its prime working age years, has transformed the economic performance of the city.  Again, Portland’s key role in powering the state strong economic performance puts the lie to the old Portlandia joke that Portland was a place that young people went to retire (we debunked that at the time:  Portland has above average rates of employment and entrepreneurship among young adults). This steady influx of well-educated workers measurably increased the city’s educational attainment, making it one of the best educated large cities in the country.  A better educated population fueled income growth, something that is now clearly bearing fruit in the economic statistics.

When we look across Oregon, there’s more evidence for this talent/income nexus in the county level income statistics.  The Oregon counties that chalked up the big gains in median household income were the counties with the highest levels of educational attainment.  The following chart shows the fraction of the adult population with a four-year degree in each county and the percentage increase in median household income in that county over the past decade.  There’s a strong positive relationship between education and income growth.

On this chart, each dot represents an Oregon county.  As the regression line shows, counties with higher levels of educational attainment had faster rates of median income growth over the last decade than counties with relatively low levels of education.  Keep in mind, there’s always been a strong relationship between education and income; better educated counties have always had higher incomes.  What this data shows is that those better educated counties are increasing income even faster:  they’re pulling away.  It’s a core fact of a knowledge-driven global economy.

Oregon’s economic growth has promoted equity as well.

Any time we take rising incomes as a measure of economic success, it’s worth asking whether prosperity is widely shared.  The Oregon numbers show a further remarkable success story.  During the past several years, there’s been a dramatic reduction in the economic gap between White residents and people of color in Oregon.  Economist Josh Lehner used data from the American Community Survey to show the trend in poverty rates for persons of color compared to white Oregonians.

Despite the modest claim in the chart’s title “poverty gap remains large, but is narrowing,” this represents prodigious progress in just a few years.  In 2009, poverty rates for persons of color in Oregon were effectively double those for non-Hispanic white Oregonians.  After several years of sharp and steady declines, BIPOC poverty rates fell by ten percentage points, from over 25 percent to 15 percent, and so were now only about four or five percentage points higher than for whites.  And this is after four-decades win which there was no perceptible narrowing of these racial-ethnic differences.  It’s an indication of how tighter labor markets can play a key role in providing more opportunities for those who’ve long been marginalized.  These gains for people of color also strongly correlate with the robust growth of the Portland/Multnomah County economy.  Portland and Multnomah County are much more racially and ethnically diverse than the rest of the state, so a strong city economy translates into more local opportunity for people of color.

What this tells us about how to succeed at economic development

For someone who’s labored for decades in the vineyard of economic development, there’s one key indicator we pay attention to when summarizing a state or region’s economic success:  its level of income relative to the national average.  One of the best metrics is median family income, which effectively reveals how a typical household in the middle of the income distribution is faring relative to the nation.

For most of the past six decades, by this measure, Oregon’s economic performance has lagged that of the nation.  Our friend and mentor, the late Ed Whitelaw trenchantly pointed out that just looking at money income ignored the substantial “second paycheck” Oregonians earned from the state’s abundant and increasingly valuable natural amenities.  To that second paycheck, Oregonians can add another factor ignored in most conventional statistical comparisons:  the very sizable green dividend that Oregonians earn, largely because the state’s more compact development patterns (thanks to land use planning) mean that residents drive fewer miles than people in other more sprawling states, saving them a bundle on the cost of cars and gasoline.  Portland’s income is about $1 billion per year higher because of these savings.

Back in the 1980s, as the chief economic analyst for the Oregon Legislature, I documented the state’s lagging income levels in a series of detailed statistical reports: Losing Ground: The Growing Gap Between Oregon and National Income.   These reports showed that for a variety of reasons (the structural decline of the timber industry, the state’s disconnect from the Reagan era defense build-up, and other factors), that Oregon’s economy lagged the nation, and showed up in most prominently in a big decline in average incomes relative to the rest of the nation.  It was clear then that raising the state’s educational attainment, promoting innovation and building world-class knowledge industry clusters was the key to raising our income.  And over the past twenty years, led by the Portland economy, Oregon has transformed into a better educated, more innovative and more productive state, something that has been largely propelled and supported by investments in quality of life that have attracted and retained talent.

That success flies in the face of old school myths about the importance of business climate to economic success.  Portland’s strong showing, in particular, belies the bad-mouthing the city got during the last recession and disproves some outdated economic development nostrums.  Take, for example, the cynical doom-saying by the Portland Business Alliance, the city’s chamber of commerce, which in 2010 grimly intoned that Multnomah County ranked 198th of 199  Western counties and metro areas in job growth, attributing the problem to a bad business climate and a failure to attract large corporations.  It fretted that a continuing long-term decline in Multnomah County’s economic health would drag down the region and the state:

The Portland-metro region faces a crisis. If unstopped, the loss of jobs in Multnomah County and the stagnant-to-declining wages and incomes across the region will erode our quality of life, not just in Portland-metro, but across Oregon because of the region’s key role in the overall state economy.

These worries were echoed by pundits claiming that Oregon  somehow had an anti-business attitude, was over-taxed and over-regulated, or somehow lacked enough roads or industrial sites to accommodate growth. Far from dragging the region or the state down, Multnomah County’s ability to attract talent propelled the state’s economic success. The region’s strong performance also over the past decade also debunks other myths, like the notion that ours is a freight-dependent economy.  Portland flourished as never before even though ocean container service disappeared and port activity withered in the middle of the decade.  As the record of the past decade shows, these myths and self-serving claims were exactly backwards.  Far from being dragged down by a stagnant economy in the region’s center, the metro area and the state were propelled by income growth in Portland and Multnomah County.  Without the center’s strong showing, statewide growth would have been no better than the national average.

In the end, economic success in the 21st century is no mystery, nor is Portland’s recent surge.  Economic development is a long term proposition, not amenable to quick and easy fixes.  It’s fundamentally about having a well-educated populace and and environment conducive to innovation.  It’s about having the amenities (urban and natural) that knowledge workers find attractive.  It’s about building clusters of dynamic, innovative industries that draw on these resources, and enhance them further. That’s what Portland has done, and its success is powering the state’s impressive income gains.

Technical notes

The key metric we’re tracking here is median household income, the income of the household in the middle of the income distribution for a county, state or the nation.  Half of all households have income above the median, half have incomes below.  The median is a useful statistic for very simply describing the distribution of income.  But using it to compare different geographies (counties and states) over time is challenging.  Medians are influenced by composition effects.  In our case, because some higher income counties are adding households faster than lower income households over the past decade, the growth of the statewide median is greater than the average of the county medians.

For simple comparative purposes, we’ve computed the household-weighted statewide median income (weighting each counties median income by the number of households in that county).  Because we use weights that are based on the number of households in the 2019 ACS, this metric ignores the shifting composition of the state’s population and focuses on the changes in incomes across counties.  We compute that the household-weighted median income for Oregon counties in 2010 and 2019 including and (counterfactually) excluding, Multnomah County. Without the growth in incomes recorded in Multnomah County, statewide median income growth would have been about 3 percentage points less than it actually was over the decade, which would have been enough to erase the gains that enabled statewide income to exceed the national average for the first time.




Let’s stop whining about gas prices: Gasoline is cheap, too cheap.

Gas prices are going up, and it’s annoying to have to pay more, but let’s take a closer look at how much we’re paying for gas.

Even with a recent uptick, gas prices are still lower than they were a decade ago.

Cheap gas is burning the planet, and undercuts all of our efforts to lower greenhouse gas emissions.

After decades of disinflation or deflation, the US economy, in the wake of an dramatic effort to bounce back from the pandemic, is experiencing a surge of inflation.  The media love to point at rising prices at the pump.  Gas was going for around two bucks a gallon in the early days of the pandemic, and nationally has just broken through $3/gallon.

Everyone likes to complain about gas prices, but gasoline in the US is cheap. It’s cheap in historical terms, as the chart below shows: In inflation-adjusted terms, gasoline is cheaper now than it was a decade ago, and is well below its historic peak of more than $5 per gallon (in 2021 dollars).  From 2011 through 2014, the price of gallon of gas (in today’s money) was regularly north of $4.

The price of gasoline fell precipitously after 2014, leading to a dramatic reversal in all of the trends that were helping ameliorate the climate crisis.  Public transit ridership, which had been rising, fell.  The average American, who had been driving less each year after 2004, suddenly started driving more.  The share of new vehicles that were heavier, less fuel efficient light trucks went from less than half to almost 75 percent.  The big increase in driving after gas prices fell in 2014 is directly connected to a surge in transportation-related greenhouse gas emissions.  In Portland, for example, greenhouse gases per person increased by 1,000 pounds per year over the past few years.  Propelled by cheap gas, and combined with larger vehicles, there was a huge increase in crash fatalities and injuries.

Gasoline is cheap in the US compared to other countries.  In Italy, France, Germany, Denmark, the Netherlands and the UK, gas prices are roughly $2 per liter, compared to less than $1 per liter in the US.  These higher fuel prices prompt people and businesses to make different decisions: people drive more efficient vehicles, drive fewer miles, and kill and maim fewer of their brothers and sisters in crashes.  Cheap gas is a principal reason for America’s excessive greenhouse gas emissions and epidemic of traffic violence.

Higher priced gasoline prompts businesses and consumers to make choices and investment decisions that lower our fossil fuel emissions.  Higher gas prices make electric vehicles more competitive, and prompt people to buy more fuel-efficient vehicles.  Higher gas prices also discourage long commutes and make transit more attractive.  The evidence from places like Amsterdam and Copenhagen, where cycling works well for a large fraction of the population is that it isn’t just about bike lanes; high prices for gasoline and high taxes on fossil fuel vehicles provide strong incentives for more efficient travel.  It’s perfectly possible to have a prosperous productive economy and a high standard of living with gas prices that actually come close to asking users to pay something approaching the cost of their decisions.

The Bipartisan Infrastructure Bill just doubles down on continuing subsidies to driving.  It’s got a huge bailout of the Highway Trust Fund (which has roughly $100 billion in general funds since 2000), and these a $118 billion general fund bailout as part of the bill, plus a huge tranche of new money that will keep drivers from facing the true cost of building and maintaining roads and bridges, not to mention paying for environmental and health damage.

Not surprisingly, once conditioned to depend on cheap gasoline, people express dismay at the higher prices.  But getting gasoline prices to more accurately reflect the social, environmental and personal health damage associated with automobiles is essential.

The real macroeconomic concern about inflation is that somehow we end up in an accelerating spiral. Insulating Americans from the true cost that their gasoline purchases impose on other Americans, the rest of the world and the environment isn’t saving anyone in the long run.  We’ll end up paying for cheap gasoline in higher costs of figuring out how to reduce greenhouse gases in even more expensive, less efficient ways, and in paying more to deal with the damage caused by climate change.

How to solve traffic congestion: A miracle in Louisville?

Louisville charges a cheap $1 to $2 toll for people driving across the Ohio River on I-65.  

After doubling the size of the I-65 bridges from six lanes to 12, tolls slashed traffic by half, from about 130,000 cars per day to fewer than 65,000.

Kentucky and Indiana wasted a billion dollars on highway capacity that people don’t use or value.

If asked to pay for even a fraction of the cost of providing a road, half of all road users say, “No thanks, I’ll go somewhere else” or not take the trip at all.

The fact that highway engineers aren’t celebrating and copying tolling as a proven means to reduce congestion shows they actually don’t give a damn about congestion, but simply want more money to build things.

Picture this.  A major interstate freeway that connects the downtown of one of the nation’s 50 largest metro areas to its largest suburbs.  It’s a little after 5 pm on a typical weekday.  And on this 12-lane freeway there are roughly two dozen cars sprinkled across acres of concrete.

I-65 in Southern Indiana (Trimarc)


I-65 crossing the Ohio River at Louisville (Trimarc)

These pictures were taken by traffic cameras pointed in opposite directions on the I-65 bridges across the Ohio River at Louisville Kentucky on Wednesday, November 3 at about 5:30 pm.  Traffic engineers have a term for this amount of traffic:  They call it “Level of Service A”—meaning that there’s so little traffic on a roadway that drivers can go pretty much as fast as they want.  Highway engineers grade traffic on a scale from LOS A (free flowing almost empty) to LOS F (bumper to bumper stop and go).  Most of the time, they’re happy to have roads manage LOS “D”.

Somebody finally figured out how to reduce traffic congestion!  Usually, as we know, simply widening highways, to as many as 23 lanes as is the case with Houston’s Katy Freeway, simply generates more traffic and even longer delays and travel times.  And, with no sense of irony, highway boosters even tout the Katy Freeway as a “success story,”  despite the fact it made traffic congestion worse. In contrast, Louisville’s I-65  is an extraordinarily rare case where traffic congestion went away after a state highway department did something.

You’d think that the Kentucky Transportation Cabinet and the Indiana Department of Transportation would be getting a special award, and holding seminars at AASHTO to explain how to eliminate traffic congestion.  The fact that they aren’t tells you all you need to know about the real priorities of state highway departments–they really only care about building things, not about whether congestion goes away or not.

So how did they do it?  Let’s go back a few years.  In 2010, I-65 consisted of a single six-lane bridge over the Ohio River, which carried about 120,000 vehicles per day.  The two states decided this was getting too crowded (and predicted worsening delay due to ever expanding traffic volumes) and so spent about $1 billion building a second six lane bridge (the Lincoln) next to the existing Kennedy bridge.  After in opened in 2017, the two states implemented a toll to pay part of the cost of construction.  Tolls started at $2 for single crossings (if you had a transponder), but regular commuters were given a discounted toll: regular commuters pay just a bit over $1 for each crossing.  Today the toll for one-way crossings if you have a transponder (and 450,000 area vehicles do), is $2.21.  But if you cross the bridge 40 times a month (back and forth daily for 20 work days), your toll for each trip is reduced by half to $1.10.

And after the tolls went into effect, traffic on I-65 fell by half.  Here’s the average daily traffic count on I-65, according to data tabulated by the Indiana Department of Transportation.  In the years just prior to the tolling, traffic was in the 135,000 to 140,000 vehicles per day level.  But as soon as tolling went into effect, traffic dropped to barely 60,000 vehicles per day (with a very slight further decline due to Covid-19 in 2020).


The two states spent a billion dollars doubling the size of I-65, only to have half as many people use the bridge.  That money was wasted.  Nothing more clearly illustrates the utter folly of highway expansions.  As we’ve pointed out, highway engineers size roadways based on the assumption that the users will pay nothing for each trip.  Just as with Ben and Jerry’s “Free Ice Cream Day,” when you charge a zero price for your product, people will line up around the block.  But ask people to pay, and you’ll get fewer takers.

The fact that Louisville residents would rather drive miles out of their way or sit in traffic for an extra 10 or 15 minutes to travel on a “free” road, rather than spend a dollar or two for a faster, more direct trip tells you the very low value that highway users attach to these extremely expensive roadways.  In fact, they’ll only drive on them if somebody else pays for the cost the roadway.   This is also powerful evidence of what economists call induced demand:  people only taking trips because the roadway exists and someone else is paying for it.

The Louisville traffic experiment shows us that there’s one surefire fix for traffic congestion:  road pricing.  Even a very modest toll (one that asks road users to pay only a third or so, at most of the costs of the roads they’re using) will cause traffic congestion to disappear.  This traffic experiment shows the folly and waste of building additional capacity.  Kentucky and Indiana spent over $1 billion for a bridge to carry as many as 250,000 vehicles per day, and today barely a quarter of that number are using it.

If state DOTs really cared about congestion, they’d be implementing congestion pricing.  A small toll, probably less than a dollar per crossing, would be sufficient to get regular free-flow conditions on the I-65 bridge—without having to spend a billion dollars.  But the truth is, state DOTs don’t care about congestion, except as a talking point to get money to build giant projects. The next time you hear someone lamenting traffic congestion, ask them why they aren’t trying the one method that’s been shown to work.




The opposite of planning: Why Metro should stop I-5 Bridge con

Portland’s Metro regional government would be committing planning malpractice and enabling lasting fiscal and environmental damage if it goes along with state highway department freeway widening plans

  • The proposed $5 billion, 5-mile long, 12-lane freeway I-5 bridge project is being advanced based on outdated traffic projections using 2005 data.
  • ODOT is pushing freeway plans piecemeal, with no acknowledgement that they are creating new bottlenecks.
  • Freeway plans fail to address climate change and don’t acknowledge that new capacity will produce additional travel and increased greenhouse gases
  • I-5 bridge plans are inconsistent with adopted state, regional and city commitments to use road pricing to manage demand, which would obviate the need for expensive capacity
  • ODOT and WSDOT have not produced a viable financing plan for the project, which would be the region’s most expensive, and which has a $3.4 billion financial hole.

In theory, Portland has a smart approach to regional planning.  It has a directly elected regional government, with strong planning authority over transportation and land use.  That government claims to care deeply about the climate crisis, and regularly touts the sophistication of its transportation modeling team.  And it says it’s looking at how the whole system works to make Portland a greener more just place.

But when it comes to the single largest transportation investment in the region, a proposed $5 billion 5-mile long, 12-lane wide freeway project across the Columbia River, it’s simply abdicating its responsibility and betraying its stated principles.

Next month, the Metro government is being asked to approve $36 million in additional funds for further planning of this massive freeway project.  It should say no.

Supersize Me: The planned $5 billion widening of I-5 (Courtesy:  Bike Portland)


This approval is one more brick in the wall of an even larger freeway building plan.  The Oregon Department of Transportation is pushing an entire series of freeway widening efforts, including the $1.2 billion Rose Quarter project, $5 billion for the mis-named “I5 Bridge Program” and billions more for widening I-205 and I-5 at the Boone Bridge in Wilsonville.

In theory, a regional planning agency would be guided by current, accurate data and scientifically based models.  It would insist on knowing how each project fitted into a larger, long-term vision of how roads and transportation system would work.  It would insist on knowing what a project will cost, how it will be paid for, and who will pay for it.  And if it has committed itself to pricing roadways, it should know how pricing will affect demand before it commits billions on capacity that may not be needed or valued.  And if it is serious about its oft-repeated commitments to tackling climate change, it should insist that its investments actually result in fewer vehicle miles traveled, and less greenhouse gases.

In practice, Portland Metro has done none of these essential things as it has considered the I-5 Bridge.

No forecasts. Most fundamentally and technocratically, ODOT has not prepared, and Metro has not reviewed or analyzed current traffic forecasts that show the actual and projected demand for the I-5 bridge. The foundation of any road project is estimates of the future level of traffic the roadway is expected to carry.  Just last week, the staff working on the bridge project admitted that after more than two years of work to revive the failed CRC, they have no new traffic forecasts, and won’t have any for at least another year.  That hasn’t stopped them from claiming that they know just how big the project should be (they say “ten lanes”) and from claiming that other alternatives won’t meet the project’s purpose and need.  (As we’ve noted before, the two DOTs may claim it’s a “ten lane” project, but they’re planning on building a structure that would easily accomodate a dozen freeway lanes).

The last traffic projections prepared for the I-5 bridge as part of the project’s environmental impact statement date back more than a decade, and are based on data from 2005.

Ruling out alternatives and deciding on the size and design of a highway project before preparing and carefully vetting traffic forecasts is the opposite of planning.

No comprehensive look:  building a badder bottleneck for billions.  As noted earlier, the I-5 bridge project is just one of a series of Portland-area freeway widenings.  Metro should be asking what the region, its environment, and its transportation system would look like with and without all these projects.  Instead, it is considering them only piecemeal.

In effect, this approach amounts to approving the creation of new bottlenecks on the freeway system that will undoubtedly trigger efforts to widen freeways yet again in the future.  The I-5 bridge project would widen I-5 from six to as many as twelve lanes from Vancouver to Victory Boulevard (the project claims its just ten lanes, but in the past it has lied about the actual physical width of the project it plans to build). ODOT is also planning to widen I-5 at the Rose Quarter to as many as ten lanes.  Once these two I-5 projects are complete, a new bottleneck will be formed between them in the three-mile long six-lane wide section of I-5 between the Fremont Bridge and Victory Boulevard, with 12 lanes feeding into six at the north, and 14 lanes (I-5 plus I-405) feeding into this stretch of freeway from the south.  ODOT will then no doubt call for the construction of further “auxiliary” lanes) to carry traffic between exits on this newly bottlenecked segment of I-5.  In essence ODOT is building very large funnels at either end of this six-lane stretch of I-5 North, which will predictably lead to further traffic congestion, more pollution, and additional demands to waste billions of dollars widening roads to accommodate this traffic.

As Metro staff noted in their comments on the I-5 Rose Quarter project, the Oregon Department of Transportation routinely lies about the fact that it is expanding freeway capacity.  It wrote of ODOT’s claim that it was not expanding I-5:

This statement is not objectively true and is potentially misleading; auxiliary lanes clearly add capacity.

Piecemeal reviews that approve segments on an ad hoc basis, and don’t consider the long-term effects of encouraging even more car traffic are the opposite of planning.

Not following through on fighting climate change.  The original CRC was conceived with no notion of the seriousness of the climate challenge.  The proponents of the new I5 bridge have steadfastly opposed incorporating climate considerations in the project’s purpose and need statement.  It’s clear from their choice of alternatives (every one includes at least ten lanes of freeway), and claims that the inclusion of sidewalks, bike paths and transit as somehow make the project “climate friendly,” that nothing has changed with this new iterations of the project.  Never mind that the authoritative Induced Travel calculator based on research from the University of California Davis, shows that expanding I-5 to 10  or 12 lanes for five miles would add 155 to 233 million miles of driving and 800,000 to 2.5 million tons of greenhouse gases.  Freeway widening would worsen the climate crisis.

Of course, these calculations don’t include the effects of congestion pricing.  Tolling I-5, which will be needed to pay for this project, would likely reduce and divert traffic (as we explain below), and ODOT’s own consultants show that tolling would reduce I-5 traffic by enough to entirely eliminate the need for widening I-5 at all.  If the project manages somehow not to be tolled (as many in Clark County want) it would tend to produce vastly more traffic and pollution, as estimated by this calculator.

At $5 billion, the proposed I-5 bridge project is the largest single spending item in the Regional Transportation Plan.  If Metro isn’t going to undertake a serious appraisal of the greenhouse gas impacts of building or not building this freeway then it doesn’t really have a climate strategy.

Metro is officially on record as supporting efforts to address climate change.  Metro has said it wants to reduce greenhouse gases by 20 percent by 2035.  But so far, its efforts have yielded no decline in emissions.  And greenhouse gas emissions from transportation  in metro Portland have actually increased by 1,000 pounds per person in the past five years.  Metro has so far done nothing, and this and other freeway widening projects will make pollution worse.

At best, the I-5 bridge advocates pay lip service to climate issues, completely ignoring the effects of added road capacity on likely travel volumes and greenhouse gases, and instead making vague and unquantified claims that pedestrian and bike facilities on the bridge, plus transit improvements will somehow ameliorate the climate damage done by doubling freeway capacity.

Approving funding for a climate polluting freeway widening project, and failing to insist on developing a more climate friendly alternative way of spending $5 billion is the opposite of planning, and a betrayal of Metro’s stated climate commitments.

A failure to plan for road-pricing.  The State Legislature, ODOT, the City of Portland and Metro have all said that road pricing will be a key component of the region’s future transportation system.  Pricing can help better manage roadways, reduce peak hour traffic, lower the need for additional capacity, and provide funding for maintenance and equitable alternatives.  Metro should not approve a $5 billion freeway project without a clear idea of how the project integrates with a system of road pricing—and yet ODOT and WSDOT have done essentially nothing to integrate these two concepts.

ODOT faces a profound dilemma with regard to road pricing.  Its financial analysis counts on at least $1.4 billion in revenue from tolling the I-5 bridge.  But the project is being sized and designed as if it needs to handle 180,000 vehicles per day, based on traffic projections—outdated, using 2005 data, and built using a model that ODOT concedes can’t address the effect of tolling.

But imposing tolls will profoundly reduce traffic growth.  ODOT’s own consultants, in work completed after the CRC FEIS, have said that the proposed tolls on the I-5 bridges would reduce traffic levels on the bridge from their current level of approximately 130,000 trips per day to only 85,000.  (And this is a firm that routinely over-estimates traffic on toll roads).  Road pricing could dramatically reduce the need for expensive infrastructure.  Yet ODOT has not incorporated the traffic-reducing effects of tolling into its design or alternatives analysis.  They are treating it purely as a financial afterthought:  a way to pay for a over-sized roadway after they’ve borrowed billions of dollars to build it.  That’s exactly what Louisville did with a remarkably similar project (widening I-65 from 6 to 12 lanes across the Ohio River); there $1 tolls caused traffic to fall by almost half.

Louisville’s I-65 bridges at rush hour: $1 tolls eliminated tens of thousands of daily trips

If Metro were to demand that road pricing be implemented before squandering billions on this project, it would likely find that the region had more than adequate transportation capacity across the Columbia River. A region that says it is going to implement road pricing doesn’t commit to a multi-billion dollar freeway project based on outdated projections, and subsidize expensive freeway capacity that won’t be needed in a world with pricing. Going deeply into debt for a megaproject and failing to consider how paying for it will reduce traffic is the opposite of planning.

No financial viability.  At $5 billion or more, this will be the most expensive transportation project in this region for the next couple of decades.In theory, the project should be part of the region’s “financially constrained” regional transportation plan, but the budget documents prepared by the state DOT staffs show that they don’t know the actual cost of the project, and that there is a massive, $3.4 billion hole in the project’s budget.  Moving ahead with no clear idea how the project would be paid for is opposite of planning.

The original CRC effort foundered a decade ago because there was no stomach for its excessive costs in either Oregon or Washington.  Congressman Peter DeFazio famously declared the project to be a gold-plated monstrosity.   In the Oregonian on August 14, 2011, Representative DeFazio said:

“I kept on telling the project to keep the costs down, don’t build a gold-plated project,” a clearly frustrated DeFazio said. “How can you have a $4 billion project? They let the engineers loose, told them to solve all the region’s infrastructure problems in one fell swoop… They need to get it all straight and come up with a viable project, a viable financing plan that can withstand a vigorous review.”
(Manning, Jeff. “Columbia River Crossing could be a casualty of the federal budget crunch”, The Oregonian, August 14, 2011).
Later, Representative DeFazio told Oregon Public Broadcasting:
“I said, how can it cost three or four billion bucks to go across the Columbia River?  . . . The Columbia River Crossing problem was thrown out to engineers, it wasn’t overseen: they said solve all the problems in this twelve-mile corridor and they did it in a big engineering way, and not in an appropriate way.”
“Think Out Loud,” Oregon Public Broadcasting, August 18, 2011.

Ten years ago, the two state DOT’s squandered nearly $200 million on planning without first securing the needed funds for the project, and they are repeating this exact failed strategy today.  Now, in their efforts to revive the project, after two years of work, the project has not developed a definitive financial plan, and its estimates of Oregon’s needed contribution have inexplicably jumped by more than $150 million in a month.  ODOT and WSDOT are spending millions—$200 million is planned for staff and consultants before this project breaks ground—with no clear idea of how this will be paid for.

This amendment adds $71 million to the preliminary engineering (PE) phase of the IBR Program. With this change, the total available budget will change to $80 million ($45M from Oregon and $35M from Washington). The estimated PE cost to complete NEPA for the IBR program is approximately $135 million based on a completion of a supplemental environmental impact statement (SEIS) in mid-2024. Following NEPA completion, the IBR program will develop a program delivery plan and progress with right-of-way acquisitions and final design to prepare for the start construction in late 2025. The estimated PE cost for progressing final design to start the first phase of construction is estimated at approximately $70 million. In summary, the total estimate of PE to begin the first phase of construction is estimated to be approximately $205 million. This estimate is contingent on the scope of the IBR solution, as agreed to by program partners, that will be evaluated through the SEIS along with the scope of the program’s first construction phase. Right-of-way costs and construction costs are not included in this budget estimate.

[Chris Ford, Memo to Metro TPAC, “I-5:Columbia River (Interstate) Bridge: Requested Amendment to the 2021-24 Metropolitan Transportation Improvement Program.” Oregon Department of Transportation. September 24, 2021, aka ODOT/Ford Memo. Page 6. Emphasis added.)

The prospect for Build Back Better and a national infrastructure funding package is no reason to move ahead with a misguided, environmentally destructive bridge project.  Oregon and Washington will get their share of these monies whether they build this project, or whether they choose to use these funds more wisely.  A regional government that cared about the future would ask “what is the smartest possible use of $5 billion” rather than approving this project.

Cannibalizing maintenance to pay for megaprojects.  This particular project is a particularly egregious example of how state DOT’s beg for money by complaining that they don’t have enough money to fix potholes, but then use any additional revenue they can find to build massive new projects that simply increase the maintenance burden.  This project is no exception, ODOT is literally asking Metro to approve the reallocation of funds that would otherwise be used for maintenance to pay for planning the megaproject.

ODOT is reducing money for road maintenance and repair to hire consultants for this megaproject.  ODOT’s own memo makes this clear.

This project change requires adjustment to the fiscally constrained RTP. Funds from the fiscally constrained Fix-It buckets in the RTP will be reduced to allow for the $36M ODOT funds to be advanced on this project. Memo with details was sent to Metro 9/17/21 by Chris Ford. We find the analysis is still applicable with the addition of WDOT funds since RTP focuses on Oregon revenue only.

[ODOT/Ford Memo. page 12, Emphasis added.]

Diverting money from maintenance funds to pay for a megaproject is the opposite of planning.

This is a pivotal moment for Metro.  As former Metro President David Bragdon (who guided the agency through the original Columbia River Crossing) wrote in retrospect:

Leadership at ODOT frequently told me things that were not true, bluffed about things they did not know, made all sorts of misleading claims, and routinely broke promises. They continually substituted PR and lobbying gambits in place of sound engineering, planning and financial acumen, treating absolutely everything as merely a challenge of spin rather than matters of dollars or physical reality.

That history is important, because if you’re not honest about the patterns of the past, you are doomed to repeat them. Unfortunately, I understand that’s exactly what’s going on with the rebranded CRC: the same agencies, and even some of the same personalities who failed so spectacularly less than a decade ago – wasting nearly $200 million and building absolutely nothing – have inexplicably been rewarded for their failure by being given license to try the very same task, using the very same techniques of bamboozlement.

Metro has a choice: It can repeat the mistakes of the past and bow to the wishes of an entrenched highway building bureaucracy, or it can do its job, and live up to its professed values.  It can plan.  It can insist on accurate travel projections, it can demand a definitive finance plan, it can require that freeway construction be addressed comprehensively, rather than piecemeal, it can require that the vision for capacity be integrated with congestion pricing, and it can require a full financial plan before squandering more on planning this speculative project.  And above all, it can insist that the region’s next multi-billion dollar transportation project reduce greenhouse gases, rather than increase them.  Anything less would be the opposite of planning.

The Week Observed, November 19, 2021

What City Observatory did this week

Why we shouldn’t be whining about higher gas prices. Gas prices are going up, and it’s annoying to have to pay more, but let’s take a closer look at how much we’re paying for gas. Even with a recent uptick, gas prices are still lower than they were a decade ago. Cheap gas is burning the planet, and undercuts all of our efforts to lower greenhouse gas emissions.  In real, inflation-adjusted terms gas prices are still more than $1 per gallon less than they were from 2011 through 2014.

Cheap gas prices depress transit ridership, encourage more driving, lead consumers to buy less efficient vehicles and more SUVs, and undercut efforts to encourage transport electrification.  US gas prices are still only about half of what they are in most European countries.

Must read

1. Housing policy advice for states.  Around the country, states are rethinking the policy framework they put in place that governs local land use decisions, with an eye to easing housing affordability.  Housing policy is complex, and some simple prescriptions turn out to be bad medicine.  Brookings Institution economist Jenny Schuetz has some succinct advice for state policy makers.  Here are four things to keep in mind:

  • Base policy on a clear analysis of housing market conditions
  • Look to increase supply in high demand locations
  • Provide financial support for low income households
  • Use housing policy to reduce climate risk

States have generally delegated so much discretion to local governments that they’ve used it to block development in high demand locations, which has worsened housing affordability, sprawl, and transportation problems and contributes to climate change.  As Schuetz observes:  “building too few homes in places with high demand has serious economic, social, and environmental consequences for metro areas, states, and the country.”  In addition to this short non-technical article, Schuetz has published a longer companion paper that reviews policies in four states, and distills lessons for policymakers.

2. This is what “transit oriented development” looks like.  Many US cities are dabbling in increasing urban densities in neighborhoods well-served by transit, but for the most part, the scale of such development is modest, and frequently provokes NIMBY reactions.  Vancouver British Columbia, which is building a major extension of the region’s automated SkyTrain system is planning for a much more ambitious redevelopment of its Broadway neighborhood.  The plan envisions 30 and 40 story buildings, both residential and commercial.  The development would create a kind of second city skyline South of False Creek.

This is more than just about tall buildings:  it’s about accommodating tens of thousands of new residents and workers in a dense, walkable urban environment.

The emerging direction of the densification strategy calls for increasing Central Broadway’s population by up to 50,000 to about 128,000 residents — an increase of 64% compared to 78,000 residents today. This would be achieved by growing the number of homes in the area from over 60,000 today to up to 90,000 units, with much of this is intended to be more affordable forms of housing.  Added office, retail, restaurant, institutional, and creative industrial spaces would grow the number of jobs from 84,400 today to up to about 126,000 jobs. These residential and employment targets through redevelopment are for the next 30 years through 2050.

If you’re going to make a public investment in transit, it makes sense to allow and encourage this scale of development to maximize the effectiveness of the investment.  Vancouver’s example should show US cities how to think at scale.

3. Yet another induced demand explainer.  This shouldn’t even be necessary at this point; the concept of induced demand is now so well-established in the scientific literature that its called the “fundamental law of road congestion.” In dense urban environments, adding more road capacity simply encourages more driving, and quickly results in more vehicle miles traveled and no improvement in traffic congestion.  But our highway departments still aren’t learning, and many political leaders have yet to grasp the seemingly counter-intuitive idea that more capacity makes traffic problems worse.  Our friends at Transportation for America have a clear and simple explanation of induced demand, and link it to the recently released SHIFT induced demand calculator. They also point out that we can see induced demand, simply by looking in the rearview mirror.  Over the past two decades, we’ve added more than 5,000 lane miles of interstate highway.

All the lanes we’ve built have led to a predictable increase in driving. From 1980-2017, per capita vehicle miles traveled (VMT) increased by 46 percent. In 1993, on average, each person accounted for 21 miles of driving per day in those 100 urbanized areas. By 2017, that number had jumped to 25 miles per day. Every year, Americans are having to drive farther just to accomplish the same things we did back in 1993 every day.

Building more roads doesn’t solve congestion, it just generates more driving, more pollution and more greenhouse gases.

New Knowledge

How does Air BNB affect housing markets?  Several studies have supported the notion that on-line short term rental services, like AirBNB, tend to push up local rents and may displace existing residents.  But that’s just a first-order effect.  Higher rents and greater demand in some neighborhoods then prompts property owners to build more housing.  A new study published in the Harvard Business Review says that the economic impacts of this induced investment can be substantial.
Concerns about the effects of short term rentals on affordability and displacement have led many local governments to restrict or prohibit such rentals.  The variation in these policies over time and across communities provides a kind of natural experiment to see how these restrictions affect development.  The study focuses in on variations in building permit activity in Los Angeles County (which has dozens of different municipalities with widely varying policies).  The authors compared the changes in building permit activity in jurisdictions that restricted short-term rentals (STR) with the changes in activity in nearby or adjacent municipalities without such regulations.  They found that building permit activity was higher in jurisdictions that didn’t restrict short-term rentals.
On the sides of these borders without STR regulations, there were 9% more non-ADU permit applications and 17% more ADU permit applications than on the sides with restrictions. Clearly, demand for STRs has been driving the creation of extra housing capacity in LA, and it’s been especially driving growth for housing that is suitable for home-sharing (i.e., ADUs).
The study suggests that the demand created by AirBNB prompts investors to build more housing in neighborhoods that allow short term rentals.  Increased development increases market for local retail businesses and adds to the property tax base and local revenues, effects that can benefit local neighborhoods.  The research suggests that we need to take a more nuanced view of short-term rentals.  Also: if we’re concerned about affordability and displacement, we might want to look at the whole range of supply constraints, including zoning restrictions, which make it difficult to expand housing availability in the face of increasing demand.

Ron Bekkerman, Maxime C. Cohen, Edward Kung, John Maiden, and Davide Proserpio, “Research: Restricting Airbnb Rentals Reduces Development,” Harvard Business ReviewNovember 17, 2021

In the news

In an interview at New City, Infrastructure Fellow Mike Bloomberg highlights City Observatory’s analysis of the problems with the latest federal legislation, which we’ve labeled the “Bad Infrastructure Bill.”
Next City‘s Sandy Smith provides a nice summary of our analysis of the power of pricing to eliminate traffic congestion in Louisville, Kentucky.
StreetsblogUSA also re-published our analysis of the Louisville highway widening debacle.


The Week Observed, November 12, 2021

What City Observatory did this week

Has this city discovered how to solve traffic congestion?  Why aren’t they telling everyone else how this works?  A miracle in Louisville.

Actual, un-retouched photo of rush hour traffic on I-65 in Louisville.

Louisville charges a cheap $1 to $2 toll for people driving across the Ohio River on I-65.  After doubling the size of the I-65 bridges from six lanes to 12, tolls slashed traffic by half, from about 130,000 cars per day to fewer than 65,000.

Kentucky and Indiana wasted a billion dollars on highway capacity that people don’t use or value. If asked to pay for even a fraction of the cost of providing a road, half of all road users say, “No thanks, I’ll go somewhere else” or not take the trip at all.

The fact that highway engineers aren’t celebrating and copying tolling as a proven means to reduce congestion shows they actually don’t give a damn about congestion, but simply want more money to build things.

Must read

1. In Memoriam:  Tony Downs.  Economist Tony Downs died this past week.  He famously applied economic analysis to a wide range of subjects, including elections and voting, and most especially transportation.  Downs is credited with coining the term “induced demand” something that’s now been repeatedly proven in a series of detailed studies.  It’s now referred to as “the fundamental law of road congestion,” and Downs is its intellectual father. As the New York Times wrote of his work:
Mr. Downs moved away from politics in his books “Stuck in Traffic” (1992) and “Still Stuck in Traffic” (2003), in which he postulated “Downs’s Law,” applying it to roads without tolls: “On urban commuter expressways, peak-hour traffic congestion rises to meet maximum capacity.” He attributed the congestion to what he called “induced demand.”  He argued that the best way to reduce traffic is to impose a fee, toll or other form of congestion pricing during rush-hour, an idea that has gained currency in recent years in congested cities like New York.
2. What didn’t cause gentrification in San Francisco:  Building market rate housing. In a widely reported story, the San Francisco Board of Supervisors voted to turn down land use approval for a 495 unit apartment building that would have had 125 affordable units, replacing a parking lot in the city’s downtown.  The reason for their opposition, ostensibly, was fears the project would accelerate gentrification.  Randy Shaw, a local affordable housing advocate, and author of “Generation Priced Out” says the supervisors have it exactly backwards:  gentrification was caused by failing to build more market-rate housing:
Despite the Board’s belief, new market rate housing has not driven San Francisco’s gentrification process. . .  gentrification has overwhelming occurred in neighborhoods that had little to no new multi-unit development.  San Francisco began gentrifying in the late 1970’s. It was entirely unrelated to new market rate housing development. In fact, the massive gentrification of San Francisco through the 1980’s and again during the 90’s dot com boom was accompanied by little new housing; it was instead fueled by increased housing demand pursuing a fixed housing supply.  The city’s failure to build more housing to meet rising demand fueled the gentrification of once affordable neighborhoods.
It’s the acme of NIMBYism to block a market rate housing project that manages to meet a very tough 25 percent affordable housing hurdle, and claim that somehow by preserving a parking lot, you’re preventing gentrification.  This vote means more market pressure on rents because there will be several hundred fewer market rate apartments, and also fewer affordable options.  That, not building housing, will worsen affordability for everyone, and amplify displacement and, yes, gentrification.


The Week Observed, November 5, 2021

What City Observatory did this week

The Opposite of Planning:  Why Portland’s Metro government needs to turn down the highway department request for more money to plan future freeway widenings.  On paper, and to admirers, Portland has a pretty potent regional government.  Metro is directly elected, and empowered to make important regional transportation decisions.  It’s being asked by the Oregon Department of Transportation to bless spending a tranche of $36 million (out of an anticipated bill of $200 million) just to plan a revival of the failed I-5 Columbia River Crossing project (which will ultimately cost upwards of $5 billion).  We outline the reasons Metro should say “No!;” all of them are core to Metro’s professed commitment to planning.

Just a portion of the plan to Super-Size I-5 at a cost of $5 billion.

The project is based on 15-year old traffic data used to create obsolete models, it fails to incorporate what we no about induced demand, and how larger freeways simply generate more traffic and increased greenhouse gas emissions.  Despite the fact that the state and region have said they’re going to use road pricing, the project’s planning has failed completely to consider how pricing will affect road use, and how it may reduce or eliminate the need for added capacity.  All this spending on roads flies in the face of supposed commitments (Hello, Glasgow!) to address climate change.  Finally, the Oregon and Washington DOT’s don’t actually have a serious financial plan for the $5 billion cost, and to add insult to injury, they’re asking Metro to divert money from maintaining existing roads to subsidizing the planning for this expansion.  It’s the opposite of planning.

Must read

1. The problem with minimum bike parking requirements.  The hegemony of the automobile in urban transportation leads some to assume that, logically, promoting other modes requires somehow repeating for bikes or walking or transit the preferential policies that have favored cars. One case in point:  bike parking requirements.  Some communities now look to stimulate bike use by mandating bike parking as a condition of land use approvals. While superficially that may seem fair, New American Planning argues that the trouble is the connection between biking and particular land uses varies substantially from place to place, and we don’t have a really valid baseline for judging how much parking is really needed or useful.

2. A detailed picture of segregation in Philadelphia.  Last month, we ranked the nation’s 50 large metropolitan areas based on 2020 data on their racial segregation.  Philadelphia is one of the ten most segregated metro areas by that measure. The Philadelphia Inquirer has an impressive and detailed by of data journalism exploring the geography of segregation in the City of Brotherly Love.  The article has copious maps showing concentrations of different racial and ethnic groups.
It also has a lucid and well-illustrated explanation of the “dissimilarity index” commonly used to measure segregation, and compare levels of segregation over time, and across cities.  The Inquirer piece is a model exploration of segregation at the city level.
3. Our self-imposed scarcity of nice places.  Writing at Strong Towns, Daniel Herriges takes a close look at how the commonplace workaday neighborhoods of the 19th Century have become some of the most desirable and expensive places to live in any American city.  He notes that when they were built, streets like Milwaukee Avenue in Minneapolis were solidly working class.  Today, with their density, walkability and assortment of mixed use buildings, they now command top dollar in the real estate market.  It isn’t just the historic quality or quaintness of these neighborhoods that gives them their high value:  it is that they are in short supply.  For decades, all we’ve built is sprawling, low density auto-dependent places, with the result that the few remaining walkable places have a scarcity value.  In part, as we’ve argued at City Observatory, that’s because we’ve made it illegal, via zoning codes and parking requirements, to build this kind of neighborhood.
Herriges also makes an important point about recent “New Urbanist” efforts to replicate these design principles in purpose-built new communities like Seaside Florida.  Critics have observed, correctly that such communities have become expensive and elite.  But has Herriges points out, that’s not inherent to their design, its again, because such places are in short supply.  Developers of new urbanist places actually find that the public infrastructure is less expensive, largely because development is more compact.  The fact that dense, walkable places–whether old or new–command high prices isn’t a signal that their somehow elitist, but rather a clear market sign that we need much more aggressively increase the supply to meet an unrequited demand.

New Knowledge

Cities grew and and became more diverse over the past decade.  Brookings Institution demographer Bill Frey has a look at the trends population growth and in the racial and ethnic composition of large US cities based on the latest 2020 Census data.  In general, over the past decade, large US cities added more residents, and also became more diverse.  Of the 50 largest cities, 46 gained population in the decade between 2010 and 2020; and population growth in these cities was collectively faster in the past ten years (8.5 percent) than in the ten years from 2000 to 2010 (5.6 percent).  In addition to accelerating population growth, large cities led the nation in increased diversity.

Over the past two decades, the share of the population that is Non-Hispanic white in large cities has declined from about 42 percent to 36 percent.  In the aggregate the 50 largest cities are now a little more than one-third Non-Hispanic White, a little less than one-third Hispanic, about 20 percent Black and about 10 percent Asian. While the trend of increasing diversity is playing out nationally, these large cities are considerably more diverse than the nation as a whole.

Not surprisingly, increasing racial and ethnic diversity shows up most in the younger residents of cities.  Among younger age cohorts, the fraction of the population that is Black, Hispanic or Asian is higher than it is for older age cohorts.

It is important to emphasize that these are data for the population inside the city limits of the largest cities.  As we’ve frequently noted at City Observatory, municipal boundaries capture widely varied portions of their metro areas; some large cities encompass much of their region, including lower density suburban style development; while in other places, the largest city is just the higher density, older urban core.

William H. Frey, 2020 Census: Big cities grew and became more diverse, especially among their youth,
Brookings Institution Report, October 28, 2021

In the News

Streetsblog republished our essay calling out the one place where socialism flourishes in America:  in parking.

Strong Towns republished our commentary “Ten reasons not to trust your state DOT claims about highway widening.”