Strong Towns and job creation - navigating between Scylla and Charybdis

So far this blog has featured two posts directly on the Strong Towns movement, Strong Towns: The making of Place as Economic and Social Engine, and Strong Towns a closer look, as well as mentioning it a couple of times in Placemaking for communities the canvas becomes the art and Creating New Community Paradigms by Building Better Blocks TEDxOU - Jason Roberts. So there is a basis in claiming to have a basic understanding of the Strong Towns principles and a willingness to include those principles as part of this blog and creating new community paradigms.

However, there are still some points that either need further clarification or deeper inquiry. What I said before is that what I admire about the Strong Towns movement is not that they have all the answers, rather it is that they are asking the right questions. In this post I want to look deeper into some of the answers.

One difference raised before between the new community paradigms approach and Strong Towns that needs some elaboration is that a new community paradigm would depend far more on community members and not the political leadership or professional government management in city hall.

Under a new community paradigm scenario an individual or small group starts first organizing and then through increased inclusion creates a larger and growing component within the community. Then through direct democratic processes begins to involve the entire community rather than depending on the established institutional city hall government. The purpose of this blog and related wiki is to provide ideas, resources and connections related to that effort.

This could be done in partnership with the established institutional city hall government, in support of that government or in opposition to that government depending upon how those working to create a new community paradigm see their current municipal government’s relationship with the community. It does not depend upon permission from that government. This has been discussed before through Using Online Communities to encourage Direct Democracy for On-The-Ground Communities, Governance through Community and Finding Resources and Connections to Create New Community Paradigms.

It should be hopefully obvious that this does not apply to all city governments and this new community paradigms perspective is being freshly created on these pages and continues to evolve with far more being needed to square the circle.

Strong Towns seems to put their money on existing municipal government leadership, and while in some cases that could be a good bet, it is all too often the institutional political leadership of a community that has led that community down a non-sustainable fiscal path. A new community paradigm approach does not depend upon a four year cycle for meaningful community involvement.

Another area requiring some deeper inquiry is the relationship of jobs to local economic development. There is not really a disagreement with the Strong Towns perspective. It is the Strong Towns position that "jobs and growth are the results of a productive system, not the proxy for one". A new community paradigm approach takes the same view. It is also the Strong Towns position that:

In nearly every American city, the balance sheet does not benefit from a new job.

If we spend $100,000 at the local level to create jobs, there is no basis to believe that this will ever result in $100,000 being returned to the city through new tax receipts.

This perspective, though admittedly not without some resistance, has been accepted. The issue being raised here is what I will call a Scylla and Charybdis problem. In the story of the Odyssey, Odysseus or Ulysses must face two dangers at the same time. Being successful in avoiding one does not mean you can ignore the other.

The Charybdis problem, which Strong Towns focuses on, is pursuing growth by development scaled to the automobile. The result has been communities falling all too often into the trap of a government fiscal Growth Ponzi Scheme. This situation arises when additional revenue generated from new growth has to be used to pay off unfunded liabilities created from past growth rather than maintaining or creating new services.

There is a great deal of truth to what has been often expressed as the Strong Towns perspective on too great of a dependency on government professionals, though this is most often true when enmeshed in a bureaucratic system. A sizable portion of the responsibility is laid at the feet of economic development and planning professionals. However, the professionals I worked with have been talking about anti-sprawl planning for over a decade and sustainable development in California for at just about as long.

In some cases a Donald Trump mini-me style management, anxious to bring in new development, tells the city council what it wants to hear or doesn’t tell them what they need to hear, often on the implicit instructions of the city council itself. The Ponzi scheme has a dysfunctional relationship maintaining its existence. An approach to community based fiscal sustainability has been discussed in Economic Growth and Equity within a Community - Benefiting the 100%, Budgeting for Community Prosperity requires a Clear View and Second look at Making Cities Work.

Our current development patterns based on the automobile within a suburban landscape fail to create enough revenue within subsequent life cycles to be sustainable. The unfunded liability for infrastructure maintenance requires ever increasing rates of growth to sustain those long-term unfunded liabilities. We mortgage the future to pay for the past creating an ever growing hole pulling us down. Even if repented, the undoing of decades of mismanaged and misallocated development in a period of economic turmoil places communities in a fiscally precarious position.

The problem is that investment in basic infrastructure is not seen as generating a growing revenue stream or able to continue to add value to ROI or return on investment once built. The investment in five miles of road to a business at the outskirts of a community does not necessarily generate five times the revenue of a one mile road to a business in the community. The outside business may generate five times the municipal revenue through property or sales tax but the net benefit after the initial capital investment in the five mile road and obligation to maintain the road is often negative and not considered. Maintenance can also be easy to defer if a more politically popular use for funds can be found even if the funds were earmarked for infrastructure.

State and federal governments have also helped to enable this Ponzi scheme. Government transfer payments from the state or federal government have been used to build infrastructure but not to maintain it. Public money invested in transportation improvements—such as an increase in traffic lanes, construction of an overpass or bridge, installation of traffic signals, may have been intended to create a platform for enhanced local growth, but usually only for the initial capital investment and the community was left holding the long term maintenance obligation bag. In our current situation funding local improvements especially maintenance is unlikely to be a high priority going forward for either state or federal governments, more likely these programs will be cut for both financial and political reasons.

The ability of local governments to take on debt has been important in maintaining the Growth Ponzi Scheme, but the private sector’s ability to finance growth through leverage according to Strong Towns was even more important. In thinking about public debt, we have to question the purpose for that debt, whether to build bridges or fight wars. We also have to question the different types of private debt, whether investment in equipment or in subprime mortgages. Still, any hindsight view does not change the current financial reality.

Strong Towns advice to avoid this Charybdis is “Stop building to the scale of the automobile” and adopting as a means of adding value to the community landscape the concept of Economic Gardening that asserts that trying to capture growth from without is not as viable as building on growth from within. The Strong Towns perspective on viable community growth is also based on Placemaking Principles. This blog also supports Placemaking principles and agrees that the current propensity for automobile directed investment is not only a bad financial decision, it is also a bad Placemaking decision. Placemaking has been explored before in this blog in Placemaking, for communities the canvas becomes the art, Finding the soul of your community and the reason to create your own community paradigms, and Bicycles Build Communities, as well as the posts on Strong Town.

The Scylla, because it can be inflicted from numerous separate directions destroying the body of the community, comes through the economic malaise of job loss. Even if new jobs don’t consistently generate net municipal revenue for city hall, members of that community may still be in need of jobs. If a one industry community lost that industry then it can be well imagined that tremendous efforts would be made to bring in a new business to replace the old. The types of jobs available to members of a community will dictate the level of income, the value of property owned for residential or business purposes and the ability to contribute through taxes to city services. If this declines, it can be difficult to bring it back.

The question is what responsibility and capability does the leadership of a community and its government have in addressing this? Approximately 150,000 jobs need to be created to account for population growth on top of those needed to lower our current national unemployment rate of 8.3% and 10.9% in California. Communities today need to be able to deal with an ever changing business landscape with entire businesses being disrupted out of existence, Kodak being the latest example.

Geography will play a substantial factor in determining the extent to which either Scylla or Charybdis plays a role in a community. In one past discussion of Strong Towns somebody mentioned that there was no other town for 10 miles in any direction while in California I could drive about 50 miles before not running into relatively contiguous populated communities.

The economic demographics as to the types of businesses in a community and their relationship to other businesses will also play a role. The current perspective is that small businesses are creating the majority of new jobs. This has recently been questioned in both the Wall Street Journal Do Small Businesses Deserve Their Reputation as Job Creators? and the New York Times Small Companies Create More Jobs? Maybe Not. A study by the National Bureau of Economic Research says that it is not the size of the business but the age with young businesses being the primary job generators.

Regardless of the origination of jobs, each community needs to have at least indirect access to a diverse business environment depending not only on retail merchants or consumer services and business to business (or B2B) support but primary industries that create product or service.

According to the Wikipedia, article on the US Economy, the private sector employs 91% of the American workforce. Small businesses are the largest employer in the country representing 53% of US workers. Large businesses employ the second largest share at 38% of the US workforce.

One question that interests me is what is the percentage of employment created by small businesses that is in B2B support of larger businesses as opposed to small businesses that create product or services directly for consumers or are retail selling what others create. In this scenario, if the larger businesses say the automobile industry were to go out of existence then what is the impact of the smaller businesses located within the smaller communities that depended upon the larger car manufacturers?

Both the geographic and economic demographic factors also play an important role in the Brookings Institute’s report on Export Nation 2012: How U.S. Metropolitan Areas Are Driving National Growth. The report provides an interactive map to explore export trends in the nation's 100 largest metropolitan areas. Los Angeles County provides 540,700 jobs related to export making it number one for employment in that sector. On a national level, some consider the creation of a Jobs Engine to be essential in the coming global jobs war envisioned by Gallup Chairperson Jim Clifton.

This does not mean that because communities have to face the Scylla on their port side that they can ignore the Charybdis on their starboard side. The problem may be that communities are no longer the fundamental level of building economic growth and that both state and federal governments have placed an unfair and unsustainable burden on local communities. This only adds to the complexity of issues with which a community must deal raising issues of employment, fiscal policy and environment among others that have an impact on communities not only from a regional and state level but also at a national and global level. There are though some hopefully positive changes occurring at higher levels of government such as the HUD Sustainable Communities initiative.

It could be argued that Strong Town principles could form an effective basis for cooperation on a regional level because each community was more self-reliant locally. Locally self-reliant communities though still have to work together to create regionally sustainable economies. This blog will continue exploring how to do this from a bottoms up grassroots approach. I will leave the last word, for now, as how to do this to Chuck Marohn, Executive Director of Strong Towns to talk where he answers a question on community engagement. There is still far more to think about.