Portland’s $30 Million Container Shipping Folly

Cargo cults are a well-documented sociological phenomenon:  Cargo cults were religious movements that emerged among indigenous people in Melanesia during the early to mid-20th century. The cults were inspired by  the arrival of European colonizers and the material goods they brought. The islanders observed the seemingly magical ability of outsiders to receive vast amounts of supplies and desired objects. The natives didn’t understand the complex economic systems behind these goods and believed they were supernatural gifts. To emulate the magic of the outsiders, the natives performed rituals and practices aimed at appeasing spirits to obtain this “cargo” for themselves often mimicking the trappings of the colonizers, like building crude imitation docks, landing strips or radio towers.  Very much in that vein, Oregon leaders are proposing to prop up a similar cargo cult edifice, in the from of Portland’s failing container terminal.

Oregon policymakers are poised to pour $30 million per year of taxpayer money into a decades-old pipe dream: reviving container shipping service at the Port of Portland. Governor Tina Kotek has asked the legislature to subsidize this nostalgic cargo cult plan under the mistaken belief it will bolster the state’s economy. This is perhaps the most vexing example we’ve seen of policymakers chasing the symbolic images and physical artifacts of a bygone era rather than understanding the real economic forces driving growth and prosperity today.

An honest look at the economics of the container trade tells us this effort is doomed to failure—and irrelevant to our economic future.  Even at its heyday, Portland was never more than a bit player in the containerized shipping game, handling under 2 percent of West Coast traffic. Most container shippers already abandoned the Port of Portland’s container facilities once, from  2015 through early 2020. And what happened next? Oregon’s economy not only survived — it thrived, boasting record economic growth, exports and prosperity during the multi-year period sans local container service. Job opportunities kept expanding as countless innovative companies launched or relocated here, drawn by the talented workforce pipeline and entrepreneurial vision.  The growth of Oregon exports accelerated after the end of container service in Portland in 2015, with total exports growing from $20 billion annually to more than $34 billion in 2022.  Lack of container service was no brake on growth because the vast majority of this output was high value products like electronics, with negligible transportation costs.

The naïve assumption that goods transportation  is essential for urban economic success has been thoroughly debunked by economists like Ed Glaeser and development patterns nationwide. Glaeser wrote:

. . . over the twentieth century, the costs of moving these goods have declined by over 90% in real terms, and there is little reason to doubt that this decline will continue. Moreover, technological change has eliminated the importance of fixed infrastructure transport (rail and water) that played a critical role in creating natural urban centres . . . These reduced costs, and the declining importance of the good-producing sector of the economy, means that in our view, it is better to assume that moving goods is essentially costless than to assume that moving goods is an important component of the production process.

Thriving cities like Denver, Austin, Nashville and Minneapolis clearly demonstrate you don’t need container cranes in your skyline to cultivate a world-class, globally-connected regional economy in the modern era. Production has long since decoupled from high shipping costs, and save for a handful of load center ports like Los Angeles, container shipping is a money losing business — lessons Portland’s cargo cultists stubbornly refuse to learn.

Even the temporary blip of container services resuming in Portland during COVID-19’s supply chain chaos failed to generate positive returns, underscoring how thoroughly uncompetitive its port infrastructure and economics have become. The Port of Portland reports losing $14 million last year alone on its container operations.  The industry is rapidly consolidating into mega-vessel, networks that can only call at a small number of deep-water ports like Los Angeles/Long Beach, leaving decreasingly tiny opportunities for smaller players.

The romanticized imagery of containers may have been an apt avatar for the globalized physical economy of the 20th century. But today those iconic boxes are merely symbols of an economic paradigm that Portland and most other successful metro areas have already outgrown. Futilely throwing $30 million per year at this nostalgic cargo cult is simply flushing taxpayer money down the drain.

If state leaders actually want to cultivate a robust economic future for Oregon, they need to focus on the real drivers of modern prosperity: human capital, amenities to attract talent, innovation ecosystems, and entrepreneurial environments. Not outdated boxes on a boat. Stop chasing the hollow symbols of the past and start capitalizing on Portland’s 21st century strengths. Our economy has clearly moved on — it’s time for policymakers to do the same.

The Oregon Department of Transportation (ODOT) has proposed a $1.9 billion freeway widening project for Portland’s Rose Quarter.  The agency proposes to cover a portion of the freeway in what it calls “restorative justice” for the Albina neighborhood, that was decimated by decades of earlier ODOT highway building.

But ODOT claims it can’t spend highway money to repair the damage its projects have done—and continue to do—to the historically Black Albina neighborhood.  That’s a clear misreading of federal law and policy, which imposes a substantial burden on ODOT to identify and mitigate the damage—past, present and future—from its highway projects.

Rhetorical contrition isn’t enough. Simply acknowledging the damage that its previous projects have done to the Albina neighborhood doesn’t comply with the law:  the Oregon Department of Transportation has a legal obligation to mitigate the effect of its past discriminatory practices.

Federal regulations both allow and require the mitigation of negative impacts caused by highway projects, including impacts on neighborhoods and housing losses. Several federal laws and policies mandate identifying and mitigating adverse effects on communities, including social and economic impacts on communities, not just impacts on the natural environment:

• The National Environmental Policy Act (NEPA) requires assessing adverse impacts and mitigating them, including impacts on the community environment through restoration or providing substitute resources.
• The U.S. Department of Transportation’s Environmental Justice policy requires addressing and mitigating the cumulative negative impacts of transportation projects on community cohesion and economic vitality.
• Title VI of the Civil Rights Act requires recipients of federal funds like ODOT to take affirmative action to overcome the discriminatory effects of previous highway projects.
• The new Reconnecting Communities program allows funds to be used for mitigating impacts identified through the NEPA process.

These regulations authorize and require the Oregon Department of Transportation to spend funds repairing the damage its past highway projects have done to the Albina neighborhood in Portland. ODOT’s own Environmental Assessment acknowledges demolishing 450 homes in Albina for highways like I-5, leading to a population decline from over 14,000 in 1950 to around 4,000 in 1980.

However, ODOT has falsely claimed it cannot spend highway funds on mitigation efforts, whether they involve building housing to replace demolished units, or even the added cost of strengthening proposed highway covers to support anything other than streets. There are many examples of how federal highway funds are routinely used for mitigating a wide range of impacts, including:

• Restoring wetlands, fish habitats, and building sound walls to reduce highway noise pollution
• Off-site improvements like paying for a new jail when the I-205 route impacted the existing facility
• Funding community development projects in the historically white Northwest Portland neighborhood impacted by I-405, while not doing so for Albina

Nationally, there are many examples of state DOTs using federal highway funds specifically to build new affordable housing to mitigate the impacts of highway projects:

• Kentucky used funds to establish a community land trust for up to 100 homes impacted by a highway widening project through a Black neighborhood.
• The Texas DOT allocated $27 million for building affordable housing impacted by the I-45 expansion in Houston.
• Nevada DOT provided funds and land for affordable housing replacement due to impacts from highway work in Reno.

using highway funds to restore housing lost to highways in Albina would achieve the “restorative justice” that ODOT claims to support. The I-5 Rose Quarter’s own public involvement efforts have found that the community has identified affordable housing as the top priority based on ODOT’s own public outreach.

Federal regulations give ODOT the ability and responsibility to use highway funds to mitigate past harms to Albina through efforts like rebuilding demolished housing units. It provides examples of how this approach has been implemented elsewhere as evidence that ODOT can and should take similar measures.

City Observatory has prepared a detailed memorandum documenting each of these laws and policies, and illustrating examples of how highway funds have been used to pay to mitigate the social and enviornmental effects of present and past freeway construction.  It is available here:

The $7.5 Billion Interstate Bridge Project is two years behind schedule

IBR’s Draft SEIS was supposed to be complete in December 2022—It now won’t be done before December 2024.

This two-year delay means the environmental review has taken twice as long as IBR promised

Not to worry, because the consultants will continue billing, and their total costs are now more than $200 million

Two Years Behind Schedule

The Interstate Bridge Project is two years behind schedule.  In December 2020, IBR told the Oregon and Washington Legislatures that it expected to publish and receive comments on its Supplemental Draft Environmental Impact Statement (SDEIS) by the end of calendar year 2022.  This key milestone has to be completed before the project can move on to construction.

As of now, it appears that the IBR may not even release its Draft Supplemental EIS much before the end of 2024, with the comment period possibly extending into the first quarter of 2025.  That would put the IBR project more than two years behind its own announced schedule.  This schedule implied that it would take two  years to complete the DraftSEIS process (from December 2020 to December 2022)—it’s now apparent that completing the Draft SEIS process won’t be completed until December 2024—a full two years longer, twice as long as described in that schedule.

This schedule spelled out specific milestones that it said it had agreed upon with the US Department of Transportation, i.e. completing the NEPA process by mid-2023, and starting construction in mid-2025.

According to the latest publicly available project schedule (dated May 4, 2023), IBR forecast that the Supplemental Draft Environmental Impact Statement would be released to the public in December 2023, and that a Record of Decision would be issued approximately a year later (in December 2024), and that construction would start a year later in December 2025.

That schedule shows that it will take two full years to move from issuing the SDEIS to actually starting bridge construction.  If the SDEIS is issued in December of this year (2024), that means that a ROD would be likely issued in December 2025, and construction would start in December 2026–a year later than forecast in 2023, and a year a half behind the announced 2020 schedule.

There’s little reason to believe the project can meet that schedule.  As the experience of the I-5 Rose Quarter project illustrates, completing the environmental review is no guarantee that the project will move ahead quickly.  ODOT got its initial “finding of no significant impact” in 2020, but then had to withdraw it, and four years later, there’s still no assured schedule of when the project will move forward.  The previous project, the Columbia River Crossing, finished its draft environmental impact statement in 2008, but didn’t obtain a  record of decision until 2011, before finally collapsing three years later in in 2014.  The plan to move from a draft supplemental environmental impact statement to a record of decision in just a few months seems plainly unrealistic, given this history.

Deadlines disappear down the memory hole

Transportation projects are claimed to always be “on schedule,” because transportation departments routinely change the schedule (move the goalposts) to reflect delays.  The IBR project has repeatedly changed the deadline for this key environmental report—but has never acknowledged that the original project schedule called for it to be completed in 2022.

In October, 2023, The Columbian reported

I-5 bridge environmental impact statement delayed, again — this time until 2024

Administrator: ‘We’re still on time and on schedule at this point’

On February 24, 2024, The Columbian reported that the EIS would be available in late April of 2024.

Columbian reported that the original deadline for the EIS was summer of 2023.   In April 2024, the Columbian told its readers

“Originally intended to be released last summer [2023], the document’s release has been pushed back a handful of times.”

But the Columbian dutifully repeated IBR claims that  the project remains on schedule, even though the release of the key environmental document is now more than two years behind the schedule announced by the project in 2020.

State transportation departments simply shamelessly re-write their schedules, and never own up to the fact that they are spending more money, and taking more time than promised when the project was originally announced.  The Oregon Department of Transportation has done this with its Newberg-Dundee Bypass—a years-delayed project that is still only half completed and has already gone well over its originally announced budget—claiming at a ribbon-cutting ceremony that the project was “on time and under budget.”  Similarly, ODOT spent $1 million on a McKinsey report on its management problems which conveniently omitted details of the department’s largest cost-overrun—a project that was several years behind schedule and cost nearly 3 times its original budget.

No accountability or consequence:  Connected consultants keep on billing

Highway agencies are apparently without either honesty or accountability for blowing through schedules and budgets.  And their consultants are more than happy to keep working—and keep billing—no matter how long the project takes.  The Interstate Bridge Project is a warmed-over version of the failed Columbia River Crossing—which itself reaped nearly $200 million in fees for consultants a decade ago.  Oregon and Washington have already awarded another $200 million for consulting work on the IBR, even though project director Greg Johnson has characterized the IBR as “basically the same project” as the old CRC.  Meanwhile, the cost of the proejct has increased from $4.8 billion to $7.5 billion and seems likely to go as high as $9 billion.  There are no consequences for cost overruns or schedule delays, except that Johnson’s former employer, the engineering firm WSP has reaped more than $75 million in fees, and stands to get even more money as the project drags on.

Note:  This commentary has been revised to more accurately reflect current information on the likely release of the Draft Supplemental Environmental Impact Statement.  In a response to a public records request received today (May 6), Washington State Department of Transportation officials say that the project has produced no new schedule for the project in the past five months.  Press accounts say only that IBR officials say the DSEIS will come out “later this year.”

What City Observatory Did This Week

Beware of phony claims that highway projects are “On-time and Under-Budget.” For highway departments, the key to being on-time and under-budget is Orwellian double-speak.

Oregon DOT projects are always on-time and under budget–because the agency simply “disappears” its original schedules and budgets. Delayed, half-finished projects are officially described as “On-time and on-budget.”  For example, when ODOT opened the first phase of the Newberg-Dundee bypass in 2017, it claimed the project met schedule and budget, even though it was years late, cost considerably more than its original budget, and was less than half-finished.

Must Read

Proximity trumps mobility.  Transportation engineers obsess about making things go faster, but in the real world, optimizing systems for speed just generates more sprawl and longer travel distances.  The Victoria Transportation Policy Institute’s Todd Litman has a compelling essay at Planetizen underscoring why we need to be paying attention to having destinations close at hand, rather than scurrying to go ever faster.

There are a growing range of tools that help us measure and visualize accessibility.  As an example Litman uses this heat map of Walk Score for the Chicago region–dark green areas, principally near the city’s Loop have the highest levels of walkability, with many common destinations nearby.

Litman concludes this will require sweeping changes in the way we plan and organize:

To create complete, affordable, livable, healthy, and sustainable communities we need to change departments of transportation that focus on moving vehicles into departments of accessibility that create compact, multimodal neighborhoods where the need for motor vehicle travel can be minimized.

Selling speed.  Car ads routinely feature people driving dangerously or illegally, usually with a miniscule disclaimer (professional driver, closed course).  The fantasy of single reckless driver on an otherwise empty road is a long established theme of such ads.  The Insurance Institute for Highway Safety points out that we’ve long since banned (or shamed) such anti-social behavior from advertising for other products, but its still widely practiced by automakers–notwithstanding the fact that driving kills more than 40,000 Americans annually (with a high fraction of these deaths attributable to excess speed.  IIHS argues:

Advertisers must treat unsafe speed the same way they would treat drunk driving or failure to use a seat belt — behaviors they wouldn’t think of showing in a positive light. The thrill of moving at extreme speeds should be confined to amusement parks and virtual reality games. Today’s vehicles are more reliable, more efficient, more comfortable and safer than ever before. Shouldn’t that be enough of a selling point?

A climate busting turnpike plan in Maine.  Like most state’s, the biggest source of climate pollution in Maine is transportation.  In spite of a much heralded “Maine won’t wait” climate strategy, the state’s turnpike authority (led by the Governor’s brother) is planning a quarter billion dollar expansion that will only make climate pollution worse.  Writing at the Press-Herald,Christian MilNeil points out the hypocrisy;

The Maine Turnpike is already the worst polluter in Vacationland, according to Turnpike annual reports and EPA data. It will be mathematically impossible for Maine to meet its climate goals without major changes to how the Maine Turnpike operates. Unfortunately, Turnpike leadership appears to be in denial of these facts. Instead of reducing traffic, the body wants to spend a quarter of a billion dollars of public funds to subsidize even more traffic on a new highway to Gorham – a boondoggle that will considerably increase traffic on connecting roadways and make Mainers’ commutes even longer.

Too many state climate plans are pledges to be met at some distant future date; meanwhile an entrenched and well-funded bureaucracy continues to double down on transportation spending the makes it even harder to meet climate commitments.

New Knowledge

Where new housing supply is located matters to affordability.  There’s mounting economic evidence for the fact that increasing housing supply helps moderate or reduce rents.  A new study from Harvard’s Kennedy School suggests that building more housing in the center of cities and closer to low and moderate income households facing affordability challenges pays the biggest returns to improving affordability.

The study examines the critical role of “vacancy chains”–the series of moves that are triggered by construction of new housing.  When a new home is built, a household moves in, and that creates a vacancy where they used to live.  Each new home gives rise to a series of moves, and creates vacancies in other locations, and ultimately in different price tiers of the market–new market rate housing produces vacancies in lower priced market segments.

French and Gilbert look at the geographic variations in these moving chains, and find that the construction of new homes in suburban and exurban locations produces fewer vacancies in central cities and more affordable neighborhoods than does construction of new homes in more urban and central locations.  As they write:

. . . residential vacancy chains initiated by new low-density suburban single family housing end quickly, before they can reach the urban neighborhoods in which residents are most exposed to rising housing costs. This descriptive feature of vacancy chains, when viewed in light of our simulation results, suggests that the non-local price effects of new housing supply are concentrated in nearby submarkets and that the incidence of the benefits of additional housing therefore depends crucially on what kind of housing is built and where.

The practical implication of this study is that building more housing in central cities, and relatively close to places where low and moderate income households are located will have greater efficacy in promoting housing affordability than simply adding more homes at the urban periphery.

Robert French and Valentine Gilbert, Suburban Housing and Urban Affordability: Evidence from Residential Vacancy Chains, Harvard Kennedy School† April 18, 2024

What City Observatory Did This Week

A costly cargo cult in Portland:  A proposal to spend $30 million per year subsidizing the revival of container shipping operations at the Port of Portland is misguided effort based on outdated economic thinking.

• Portland was never more than a very minor player in containerized shipping, handling less than 2% of West Coast traffic even at its peak.
• Oregon’s economy thrived with record growth, exports, and prosperity during the multi-year period from 2015-2019 when Portland had virtually no container service, demonstrating it is no longer dependent on this waterborne commerce.

• Modern metro economies like Portland’s are driven by factors like talent, innovation, and entrepreneurship rather than physical goods movement.
• The container shipping industry is rapidly consolidating to use mega-ships that only call at a few major deep water ports like LA/Long Beach, leaving little opportunity for smaller players like Portland.
• The nostalgic imagery of containers may have symbolized trade in the past, but today it represents an outdated “cargo cult” mentality mistaking symbols for real economic drivers.

Must Read

Doublespeak, double-standard for highway impacts.  CalTrans is moving ahead with its controversial I-80 widening project between Davis and Sacramento.  As Carter Rubin of NRDC points out, CalTrans claims that the project will both have no impact on truck traffic and will add more than 800 trucks a day.  It asserts the former claim (to pretend the project has no impact on air quality) and the latter to qualify for “economic development” funding.

Caltrans then purported to a key regional air quality advisory committee in April that the project would not significantly increase truck traffic and attendant lung-damaging pollution. Caltrans’s goal was to avoid the highway widening being flagged as a “Project of Air Quality Concern” under the Clean Air Act, which brings additional scrutiny and obligations. At the same time, Caltrans touted to the CTC in its TCEP application materials that “the project increases freight throughput by more than 800 trucks on a daily basis.”

The entire Caltrans approach begs the question of why the agency isn’t looking into shifting this freight to rail, and electrifying freight rail service: two measures that would reduce road traffic and air pollution.

Professional Engineers protecting the dominant paradigm:  Parking subsidies.  The association of city traffic engineers in Minnesota is lobbying the state Legislature to oppose a bill eliminating parking requirements for new construction.  Strong Towns Chuck Marohn explains why their arguments in favor of parking mandates are wrong, and more tellingly, shows how this lobbying effort reveals the long skein of car-dependent thinking that pervades so many of our policies and institutions.  Marohn challenges the engineers argument that limiting off-street parking requirements will constrict street capacity, forcing traffic into narrower travel lanes.

Engineers do struggle with and often push back on the idea of 9- and 10-foot lanes. Such lanes do pose an extreme difficulty for drivers when they are driving fast. That is why, when we use 9- and 10-foot lanes, drivers slow down. On local streets, slowing traffic is exactly what is needed for safety reasons. This claim by city engineers is all about traffic speed. If your city engineer is choosing wide lanes through your neighborhoods, they are asserting a value system that prioritizes automobile speed over public safety. That is a value judgment they shouldn’t be allowed to make.

Long term decline in population and its implications for home ownership.  https://www.home-economics.us/p/tldr-the-future-of-homeownership?r=249y2n

New Knowledge

In the News

Joe Cortright is quoted in Bike Portland’s summary of the legal challenge to the I-5 Rose Quarter Freeway project, for failure to comply with city and regional transportation, land use and climate plans.

What City Observatory Did This Week

The Oregon Department of Transportation can and should mitigate the negative impacts of its highway construction projects, including social and economic impacts.  ODOT’s massive $1.9 billion I-5 Rose Quarter highway project is billed as “restorative justice” because it would construct caps over the freeway that decimated Portland’s historically Black Albina neighborhood.

But what ODOT doesn’t acknowledge is that they are doubling the width of the freeway, which will worsen the damage, and that the project’s budget does nothing to repair the damage done to the neighborhood, especially the destruction of hundreds of homes—which ODOT has done nothing to replace.  The agency claims it can’t spend highway money remediating these harms, but federal laws and policies actually authorize and require ODOT to fix the effects of its past discriminatory practices.  We detail how four different federal laws and policies—NEPA, Environmental Justice, Civil Rights, and Reconnecting Communities—not only allow ODOT to spend highway money to fix these problems, but actually legally require it to do so.

Must Read

Declining rents in many US metro areas.  ApartmentList.com is one of the nation’s keenest analysts of local rent trends, and they have a National Rent Report for April that shows rents declining, year-over-year in most large US metro areas.  After the post-pandemic rent surge of 2021, investors poured billions into building new apartments, and those are now coming on line, helping to push down rents.  Nationally, rents are down about 0.8 percent compared to a year ago.

There are, of course, wide variations by market.  Rents have been cool in the Sunbelt and the west, but are continuing to increase in the Northeast and Midwest.

As widely noted, a flood of new apartment construction in Austin has turned around that once hot market, which has seen a decline in rents of 7.4 percent in the last twelve months.

Austin’s MPO waves on a massive freeway project.  Freeway fighters in Austin mobilized to challenge the proposed multi-billion dollar widening of I-35 through the city at CAMPO, the region’s Metropolitan Planning Organization, which under federal law has to bless transportation projects supported with federal funds.

Even though nearly all of the City representatives voted to subject the plan to an air quality review before proceeding, they were handily out-voted by the suburban dominated membership of CAMPO.  Even though Austin represents nearly half of the  region’s population, it has just four of 22 votes on CAMPO.  It’s plainly undemocratic, but unfortunately the highway lobby prevails with the same shopworn arguments even when regional MPO’s are directly elected on a one-person, one-vote basis, as in Portland.

Jane Jacobs:  Urbanist, Cyclist.  Jane Jacobs is justly famous as one of the most incisive analysts and advocates for cities.  What’s perhaps less known, and especially interesting in light of today’s urbanist discussions, is that Jacobs, who never learned to drive, regularly rode her Raleigh around New York City.

Writing in Common Edge, Peter Laurance profiles Jacobs in the saddle, traversing New York, fighting Robert Moses, and being among the first to decry the automobiles toxic effects on urban living.   Jacob’s children described her as an avid cyclist, who traveled by bike to her honeymoon, and on vacation:

Cycling holidays later continued with their children who rode, Dutch-style, on the back of Jane’s and Bob’s bikes when they were still too young to keep up on their own wheels. In the 1950s, the family would escape the August heat of the city on bikes, cycling to Grand Central Station, loading their bikes for Cape Cod, then the ferry to Nantucket.

While she coined “sidewalk ballet” to describe the essential role of walking in cities, her own life has a lot to say about how integral bikes are to urban quality of life.  It’s a helpful reminder as some try to pit walking against biking as an organizing principal for cities that Jacobs supported—and practiced—both.

New Knowledge

The demise of the “spatial mismatch” hypothesis?  One of the most enduring theories for the persistence of Black-White economic gaps in the U.S. is the “spatial mismatch” hypothesis:  the idea that for Black workers and households tend to live further away from jobs, and growing job centers, and that this lack of proximity disadvantages them in getting employment and earning higher incomes.  The hypothesis was advanced by economist John Kain in the 1960s, who observed the growing suburbanization of employment opportunities in the US coupled with historic patterns of segregation that left a disproportionate share of Black households living in central cities, far away from newly created jobs.

A new paper from David Card, Jesse Rothstein and Moises Yi  uses data from the Census Bureau’s Local Employment and Household Dynamics (LEHD) data series to look at variations in wage earnings for black and white workers and their proximity to employment opportunities.  The analysis challenges some of the key assumptions underlying the Spatial Mismatch hypothesis, key among them that Black workers are further from jobs.  The data show, on average Black workers live closer to jobs, including to good-paying jobs.

This chart shows that Black workers have about 20 percent more jobs within ten miles of their homes than do white workers. These data are for older industrial metro areas; the same pattern holds to a lesser degree for Sunbelt metro areas.  The data also show that Black workers have, on average, shorter commutes to work.

Looking at wage differences between Black and White workers, the author’s don’t find any significant effect due to spatial mismatch:

Our findings suggest that geographic proximity to jobs – or to “good” jobs as measured by their AKM pay premiums – is not a major source of racial wage gaps in large cities in the U.S. today.  At the most basic level, we find no evidence that Black workers are systematically under‐represented at workplaces with above‐average pay premiums. Paralleling results that have been obtained in many earlier studies, we also find that Black workers live, if anything, closer to places where existing jobs are located. Importantly, this relative proximity for Black workers extends to “good jobs.”

David Card, Jesse Rothstein, & Moises Yi, Re-Assessing the Spatial Mismatch Hypothesis.  March 2024.  NBER Working Paper 32252 http://www.nber.org/papers/w32252

What City Observatory Did This Week

Another Oregon Department of Transportation exploding whale.*  The cost of one of OregonDOT’s megaprojects, the expansion of the I-205 Abernethy Bridge over the Willamette River south of Portland just jumped $750 million, now triple the amount the agency said the project would cost when it moved forward five years ago.

ODOT’s plans to cover these cost overruns would mean cancelling dozens of other projects around the state, and/or a huge statewide gas tax increase. ODOT specifically targeted cuts to Great Streets, Safe Routes to School, Pedestrian/Bike Strategic, Innovative Mobility, and transit programs funded from FHWA formula funds. The alternative, a gas tax in place of tolling would mean instead of the actual users paying $2-$3 each time they used one of these new billion-dollar-a-mile roads, every motorist in Oregon would be forced to pay $1-$2 every time they filled up their vehicle.

*- We call ODOT’s chronic cost overruns “exploding whales” in honor of the fifty year old video of Oregon highway engineers trying to remove a dead whale from a Pacific Coast beach with an excess of dynamite.  (The video has had 14 million views on Youtube).

The $7.5 Billion Interstate Bridge Project is two years behind schedule. IBR’s Draft SEIS was supposed to be complete in December 2022—It now won’t be done before December 2024. This two-year delay means the environmental review has taken twice as long as IBR promised.

The IBR, like many state highway projects is case study of  “Hurry up and wait”–if you have questions or doubts about the project, there’s no time to consider them, without delaying the project.  But state DOTs routinely blow through stated deadlines with no consequences.  No consequences, except, perhaps added expense, as project costs escalate and consultants continue billing—the total consulting bill now exceeds $200 million.

Must Read

Rent and Inflation rates.  Rising rents–and their mis-measurement are key components of overall national inflation.  The cost of rent is a significant component of the consumer price index—the nation’s key gauge of inflation.  But there’s a quirk in how rents and measured.  The Census Bureau uses a survey of newly signed leases that does a decidedly imprecise job of recording current rent levels.  Barry Ritholtz has an interesting comparison of Census rental estimates with contemporaneous private market data from Zillow and Apartment List.

It’s apparent that the Census Bureau’s rent measure (CPI Owners Equivalent Rent) lags what is happening in the market by about 18 months.  According to Census data, rental inflation didn’t peak until mid-2023, about a year and a half later than the peaks recorded by the two private-sector measures.  The reason, according to Ritholtz, appears to be that the Census data average both new and continuing leases, and an average of leases of various vintages always lags the market (understating increases on the upside, and overstating rents on the downside).  As a result, the current CPI is somewhat overstated, and is almost certain to decline further as older leases expire.  Ritholtz estimates that excluding rental inflation from the CPI would lower the overall index to about 2.3 percent annually, very near the Fed’s desired target.

The simple logic of 15-minute living.  Bloomberg’s  CityLab has an interview with Carlos Moreno, who popularized the 15-minute city idea in Paris.  In a new book, Moreno pushes back against the critics of 15-minute cities.  The concept has been caricatured and misrepresented as an effort to restrict where people can travel or live, when its real aim is to give people more choices close at hand.

The fundamental idea behind Moreno’s blueprint is that residents can reach essential services within 15 minutes by walking, biking or public transit.

The real social engineering was inflicted upon cities by highway engineers, and planners who insisted on the segregation of people and functions across the landscape, facilitating and necessitating automobile use.  As a result, Moreno argues:

. . . neighborhoods lost their vitality and internal coherence as the city became increasingly sprawling and car-dominated — a process in which the suburban house was just as much a culprit as the glass-clad downtown tower.

Why Climate Activists should be Urbanists.  Alex Brennan of Washington’s Futurewise has a great essay speaking to the importance of land use—specifically dense livable urban neighborhoods—to any strategy for combatting climate change.  Whether its reducing emissions from transportation and buildings, or protecting natural ecosystems, focusing development in urban areas has huge climate benefits:

. . . land use policy can have a big impact on greenhouse gas emissions. More compact cities have a lot less driving than suburbs. Apartment buildings use a lot less energy than single family homes. Keeping development in cities protects rural areas and keeps them sequestering carbon.

Brennan bolsters the case for the urbanism/climate connection with solid cross-sectional data on emissions and density.

This is the first of a four-part series exploring this connection–we’re looking forward to what comes next.

New Knowledge

E-Bike incentives reduce driving and greenhouse gas emissions.  A new study from the University of British Columbia demonstrates the efficacy of e-bike subsidies.  Many local governments are experimenting with subsidies for the purchase of electric bicycles.  The idea is that if households have e-bikes available, they’ll use them to substitute for many driving trips.  This study examined pre- and post-purchase behaviors of households that received e-bike rebates, and compared them to the travel behavior of a control group that already owned e-bikes (or conventional bicycles).  The key result is that automobile use declined significantly among households that purchased e-bikes with subsidies, and that auto use stayed down for an entire year.  As the author’s conclude:

The purchased e-bikes were used on average 3 to 4 days, or 32 to 70 km, per week . Around 40% to 44% of the reported e-bike use substituted for automobile travel, directly displacing automobile PKT[person kilometers traveled] by on average 7 km per e-bike (return) trip, or around 25 km per week.

The study looked at the effects of three different subsidy levels—a $350 rebate, a $800 rebate and a $1,600 rebate.  The post-purchase auto travel patterns of all three groups were similar, but the larger rebates had the effect of reaching households that drove more prior to participating in the program.  The authors explain:

Larger incentives were associated with greater auto travel reduction due to higher pre-purchase auto usage. This was likely achieved due to income-conditioning the larger incentives, which directed them to more financially constrained households who were interested in shifting some of their auto use to cycling, but hindered by the cost of e-bikes. Although e-bikes reduce marginal travel costs, the initial purchase price is still a major barrier, especially for low-income households, which is reflected in the high reported marginality for e-bike purchases made with the largest incentives. I

A key question for e-bike subsidies is how much of the subsidy goes to households that would have bought an e-bike even without a subsidy.  This question is essential for gauging the true net benefits of the program.  This study finds that even allowing for this effect, the program produces greenhouse gas reductions at a cost comparable to many other transportation investments, and provides collateral health benefits from increased physical activity.

Alexander Bigazzi, Amir Hassanpour & Emily Bardutzl, Travel Behaviour and Greenhouse Gas Impacts of the Saanich E-Bike Incentive Program Final Report Prepared for District of Saanich, University of British Columbia, March 2024