Opinion

Felix Salmon

Why is NYU building?

Felix Salmon
Jul 9, 2012 05:22 UTC

On Thursday, I looked at the way in which cultural institutions tend to spend a huge amount of money on architecture, even if they would be better off spending that money more directly on their missions. In response, I got a fascinating email from a professor at NYU, asking me about its plan to spend some $6 billion on a hugely ambitious construction project — one which is fiercely opposed by local residents and NYU faculty.

The opposition is predictable, of course: Greenwich Village is as Nimbyish as communities get, and the professors who are railing against the plan are precisely the people who are going to suffer the most from endless construction work and ultimately the disappearance of the views and light many of them currently enjoy. But that doesn’t mean they’re wrong to oppose the plan. As we saw at Cooper Union, ambitious construction projects can be hugely damaging to colleges — especially ones which don’t have a large endowment to fall back on.

At Harvard, the empire-building of Larry Summers resulted in a disaster — but at least the endowment is huge enough that if Harvard loses $1.8 billion, it’s not the end of the world. At NYU, by contrast, the size of the endowment is significantly smaller than the budget for the university’s expansion. And as a result, the whole project is significantly riskier. If NYU ends up having to dip into its endowment to fund losses on this project, then that could be hugely damaging for an institution which is already under-endowed by the standards of most top-tier US colleges.

The situation at NYU Is, I think, the flipside of the saga we just saw at the University of Virginia. There, a popular president found herself at odds with trustees who had been successful in the private sector; at NYU, the faculty is similarly opposed to the plans of the trustees, but in this case the president is very much aligned with what the trustees want.

In both cases, it seems, the faculty seems pretty happy with the state and status of the university as it stands, and are looking for low-risk stewardship. The trustees, by contrast, are much more aggressive, and are looking for growth and full-bore engagement in the higher-education arms race known as Bowen’s Rule. Here’s how Howard Bowen put his five-point rule in 1980:

  1. The dominant goals of institutions are educational excellence, prestige, and influence.
  2. In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational needs.
  3. Each institution raises all the money it can.
  4. Each institution spends all it raises.
  5. The cumulative effect of the preceding four laws is toward ever increasing expenditure.

On top of that, there are many New York-specific idiosyncrasies involved in the NYU plan. NYU is nestled in the heart of downtown New York, on some of the most valuable land in the world. That makes expansion insanely expensive, of course — but it also raises opportunities for a higher-education form of regulatory arbitrage.

New York has strict and recondite zoning laws, which are largely responsible for the value of any given plot of land. Take a site in Greenwich Village: if all you’re allowed to build there is a few townhouses, it’s going to be worth a fraction of its value if you’re allowed to erect a 40-story hotel. Every so often, zoning is changed, normally in the direction of allowing more development. When that happens, the people lucky enough to own the land in question make windfall profits.

This dynamic helps explain the way in which property developers are deeply enmeshed in city politics — and it also, I think, helps explain a lot of NYU’s behavior. NYU, quite aside from being an educational non-profit, is also the largest property developer in downtown New York. And with this plan, it’s trying to change the zoning for a lot of the Washington Square area in a way that will, if all goes according to plan, essentially drop a huge pile of money in the university’s lap. Hence the proposals for things like hotels and retail: they’re not allowed right now, and if they do become allowed, NYU fully intends to build such things and make substantial profits from them.

This isn’t a stupid plan. It makes sense, if you don’t have a $30 billion endowment throwing off huge amounts of cash every year, then you look for income in other places.

On the other hand, when a university turns property developer that’s decided mission creep — and it’s mission creep accompanied by billions of dollars in debt. Property magnates generally do really well for themselves — until they don’t. And here’s where you can see the cleavage between NYU’s trustees and its faculty. The trustees tend to be successful businesspeople — people who have had the requisite combination of risk appetite and luck that’s necessary to make lots of money. And rich people have another characteristic, too: they nearly always overestimate the amount of skill and underestimate the amount of luck which went into their success. Plus, they think that success is somehow infectious: if they’ve made their millions through levering up, then that’s probably a good strategy for the non-profits whose board they’re on, too.

On top of that, the president-and-trustee class of people has a natural tendency to want to build monuments to themselves, as well as a certain emotional detachment when it comes to empathy with other people. They’ve seen the plans: the architects have shown them glossy pictures of what Greenwich Village is going to look like in 2031, but they don’t really feel the amount of noise and pain involved in getting there from here. They don’t live in Washington Square Village.

And most importantly, they don’t need to rack up enormous student loans just to attend NYU in the first place. Here’s the chart, from the NYT’s excellent infographic on university tuition and student debt:

You can see from this chart that while there are lots of colleges which charge NYU-level tuition fees, NYU is among the very worst of them in terms of the amount of debt its students are burdened with upon graduation. That’s partly because it has a relatively small endowment, and therefore can’t offer the level of financial aid that, say, Princeton can; it’s also, of course, a function of the fact that New York is an incredibly expensive place for a student to live. But either way, if NYU cared about its students as much as it cares about its reputation, it would be searching hard for ways to decrease the debt they’re graduating with.

Instead, NYU is embarking on a building plan which will almost certainly, in one way or another, feed through into higher tuition fees and higher levels of student debt at graduation. After all, tuition fees are a hugely important source of income for NYU, and NYU is going to need all the income it can lay its hands on if it’s going to be able to pay off the loans it takes out to construct all these new buildings.

I’m no preservationist stick-in-the-mud: I think that cities need to evolve over time, and that if Greenwich Village had a bit more density, New York would cope just fine. I also carry no torch for things like “the acclaimed Sasaki Garden”, which turns out to be a bunch of concrete planters which are all but inaccessible to real New Yorkers. If NYU wants to replace that garden with something better, I’m all ears.

But I do think it’s worth asking some pointed questions about who exactly all this construction is supposed to benefit. It’s certainly not the current students, who will be long gone by the time it even gets started. It’s not the current faculty, whose lives will be disrupted and who are almost unanimously opposed. And there’s a strong case that it’s not future students, either, who will see even higher tuition fees and I’m sure won’t welcome the extra student loans they’re going to have to take out.

Universities will always have plans to expand — and indeed NYU already has campuses in no fewer than four different countries. Before embracing this particular plan, then, it might be worth looking at the history of previous university expansion projects, and asking whether they actually delivered on the promises they made at this point in the process. Because the costs of this particular project seem a lot more obvious than the benefits do.

COMMENT

The author makes a lot of good points (as do the 2 NYU profs and OceanDrive re: the Sasaki Gardens.) All you really need to know about the wisdom of NYU2031 is that NYU’s business school, which is no bastion of liberalism nor is it anti-development, voted 52 to 3 against the plan!

Most importantly (and impressively), Mr. Salmon has his finger on the key issue: Whom would or would not benefit from NYU2031? He also has the right answer: Almost no one would benefit from this outrageous grab for personal benefit at the expense of public good except NYU’s president (anyone want to bet whose name graces the project?), NYU’s trustees, who undoubtedly lead the companies that would construct, finance, lawyer and design the project, plus the legions hired by that president and those trustees to promote and support it in every way.

Consider this fact. I sat through the entire 9 hour NY City Council meeting on NYU2031 June 29th (which wasn’t fun), and I estimate that about 75 people testified in FAVOR of the project (as opposed to about double that number AGAINST.) Of those 75 supporters, maybe 8 were well meaning undergrads who see that NYU has inadequate space (never mind that NYU CREATED that problem itself by knowingly admitting more students than it had space for), and want “enhanced prestige” for their future alma mater. Another 5 or so (again, my estimate) fall into the category of “fringe opinions,” including 1 architectural “expert” whom I’ve noticed supporting, well, just about every development project out there. The remaining 60+ people who testified in FAVOR of NYU2031 were either paid directly by NYU to support the project (NYU administration employees), hope to profit personally from it (outside advisors hired by NYU’s administration), or general business support groups of which NYU is undoubtedly a major supporter. In contrast, I couldn’t pick out even a single person who testified AGAINST the project who would benefit financially from killing it. Instead, all of those people would be harmed personally, and severely in many cases, if NYU2031 goes through (anyone want to live in a 20 year construction zone? Or pick up and move your life because someone else insisted on inflicting that on you?)

So, there you have what’s most importantly at stake with NYU2031: it’s personal profit for a (private) minority at the expense of widespread social cost for the (public) majority. If that wasn’t the case, then why doesn’t NYU construct in a commercially zoned area that wants it, like the financial district? Or better yet, lease space there? Duh!

Posted by JustTheFactsMan | Report as abusive

The Shard as metaphor for London

Felix Salmon
Jun 26, 2012 19:16 UTC

Aditya Chakrabortty doesn’t like the Shard, the huge new skyscraper nearing completion next to London Bridge station, across the river from the City of London. It’s certainly a monument to the 0.01%: owned by the government of Qatar, and featuring Michelin-starred restaurants catering to guests at the five-star hotel; the hedge-fund managers who will rent out the office space; and of course the plutocrats in the 10 monster apartments (for sale at prices starting at $47 million or so).

Aditya’s not happy about this at all: the Shard, he says, “both encapsulates and extends the ways in which London is becoming more unequal and dangerously dependent on hot money”. The inequality point is inarguable, but it’s also inevitable, in any global financial center. And as for the dangerous dependence on hot money, that I’m less sure about.

Aditya cites “Who owns the City?“, a report from the University of Cambridge which shows that 52% of the City of London is now owned by foreigners, up from 10% in 1980. That’s a trend, not a hot-money capital flow: after all, the trend survived the financial crisis unscathed, even as property values plunged. He writes:

As the Cambridge team point out, the giddy combination of overseas cash and heavy borrowing leaves London in a very precarious position. Another credit crunch, or a meltdown elsewhere in the world, would now almost certainly have big knock-on effects in the capital.

I’ve read the Cambridge report, and I don’t really see them saying that at all. The closest they come is this:

For global financial office markets such as the City of London, functional specialisation not just in financial services but in internationally‐oriented financial services lock the fortunes of the occupier market to the state of the global capital markets; while growing international ownership and specialist global financial and real estate investment vehicles help to lock the investment and occupier markets together in a way that increases both upside and downside risk…

The locking together of occupier, investment, development and financing markets both within the City and across financial centres contributes to an inherent, systemic risk.

The point being made here, in less than crystal-clear language, is that the owners of the City are the same as the occupiers of the buildings in the City. Which means that if there’s a big bust in the world of international finance, the owners won’t just want to sell, they might well move out, as well — causing a double whammy to London office prices.*

But a reduction in London office prices is what Aditya wants! It would reduce inequality, and more generally it would provide a dividend of glossy and expensive real estate to a population which could never have afforded it on its own. That was Dan Gross’s point in Pop — while bubbles are bad for the people who invest in them, they’re generally good for the economy as a whole, which sees a lot of investment which would otherwise not have been made.

London’s a financial center, and like all other financial centers, it gets a lot of tax revenue from the financial industry. Come another credit crunch, that tax revenue will fall. But for the time being it makes sense to welcome the revenue, and the infrastructure improvements which international financiers are happy to pay top dollar for.

The fact is that new skyscrapers always cause an outbreak of nimbyish bellyaching. Here in New York, Christine Quinn, our probable next mayor, is refusing to come out and endorse a relatively modest addition to Chelsea Market, because although it makes sense from a city-wide perspective, the locals don’t like it. They never do.

But cities need density, and if they’re not going to degenerate into anachronism, they need big, expensive, modern skyscrapers. Especially if they aspire to being a financial center. Some of the criticisms of the Shard are just silly: the idea, for instance, that it somehow ruins the view of the Tower of London. What view of the Tower of London? You certainly couldn’t ever see it from London Bridge station, and in general the Tower is famous for being the least recognizable major landmark in London. I used to work as one of those tour guides on top of open-topped double-decker buses, for a summer, and I can assure you that long before the Shard was built, there was really nowhere you could get a good view of the Tower. Your best bet was to drive north across Tower Bridge, but even then the Tower itself just kind of shrinks into the riverbank, and a lot of tourists had no idea what they were meant to be looking at.

London is a city of large buildings on narrow streets (try finding the entrance to investment bank NM Rothschild one day), and the Shard is just the latest extension of that idea. I, for one, welcome it to the London skyline, even if I never set foot inside the place. It’s certainly a lot more interesting — and adds a lot more value to the city — than the bland mid-rise office buildings which Washington is doomed to, given its strict height zoning. Aditya’s right that the Shard hasn’t — yet — improved the lot of its immediate neighbors, but building nothing on that spot would hardly have been better for them.

I suspect that over time, the Shard will attract more money and gentrification to London Bridge in general, which is great news if your worry, like Aditya’s, is the area’s “deprivation and unemployment”. Cities are living things, and the construction of the Shard is proof that London’s still very much alive. And that, as Woody Allen would say, is definitely better than the alternative.

*Update: Colin Lizieri of Cambridge University writes to add that he was making another point, too: that diversification into office space in different financial centers is not really diversification at all, since the owners and occupiers of all that property are increasingly the exact same businesses, or at least very highly correlated ones.

COMMENT

“… the author is actually a local too,…” (JustinC)

Umm … well … if you say so.

Posted by MrRFox | Report as abusive

How to make New York’s cyclists safer

Felix Salmon
Jun 26, 2012 13:29 UTC

It’s becoming something of a trend these days: good report, bad press release. The latest example comes from John Liu, the New York City comptroller, who is warning about New York’s bikeshare program. “LIU: BIKE SHARE PROGRAM PEDALS PAST SAFETY MEASURES” says the release (geddit?) — and certainly that’s the message received by the New York Times, which wrote up the news under the headline “Bike-Share Program May Mean More Accident Suits Against the City, Liu Warns”.

The report itself, by contrast, is much less alarmist, and mostly extremely sensible. Biking in New York is dangerous, for cyclists and pedestrians both, and it’s important to make it safer. Especially as thousands of new bikeshare riders are going to start wobbling their way around largely-unfamiliar streets. Here’s the scary chart:

bds.tiff

The blue curve is the well-known safety-in-numbers effect: as biking becomes more popular, it also becomes safer. New York is an outlier here, and not in a good way.

Charles Komanoff has some on-point criticisms of Liu’s report, and if you read his report closely you’ll notice one big flaw in the chart. The x-axis shows bikers as a percentage of total commuters, while most bike trips in New York are not home-to-work commutes at all. If you included all New York cyclists, New York would have a higher ratio of cyclists, and fatalities per cyclist would go down. Put it this way: the chart is taking the total number of bike fatalities, and dividing it by the total number of bike commuters, rather than the total number of bicyclists as a whole. That results in low numbers for cities like Portland, where cyclists are much more likely to commute to work, and high numbers for cities like New York, where they’re much more likely to just be running errands, or shopping, or meeting friends.

That said, New York needs to become safer for cyclists and pedestrians both, and Liu has some very sensible proposals for helping it do that. The city should put a lot of effort into maintaing signage, bike lanes, and intersections, especially the most dangerous ones: the effect of that could be huge. It should expand the Safe Streets for Seniors program, which helps older New Yorkers navigate safely around vehicles of all types. It should educate bikers and drivers both on bike safety and the rules of the road; drivers in particular should look out to make sure they don’t cut in front of cyclists when making a turn, and also leave extra space when passing a cyclist just in case the biker has to swerve around a pothole.

The recommendations continue: kids should get taught bike safety at an early age. The “5 to ride” pledge should be promoted to all businesses with bike messengers or delivery people. There should be more police on bikes, and they should start handing out tickets to cyclists speeding through red lights or dangerously salmoning. On top of that, they should start ticketing cars and vans in bike lanes. And just generally be tougher on traffic. As the report says:

New York’s roads are an interactive, multi-modal system; increased enforcement from any surface modes will increase safety across all other modes. Through greater enforcement of speed limits and greater traffic signal compliance, the roads will be safer for all users.

Liu also wants to beef up New York’s overworked and largely ineffective Accident Investigation Squads; that’s a great idea. And he wants to collect lots of data on biking in New York and make it public. Which is a no-brainer.

Liu is also pushing to make helmets mandatory; I’m not such a fan of that idea. For one thing, I have yet to see any empirical data showing that mandatory helmets increase safety. And in general, insofar as a mandatory helmet law would reduce the number of cyclists, it would also reduce the safety-in-numbers effect. And as the chief fiscal officer of New York, he’s worried that increased biking might mean increased liability in terms of settlements paid out by New York City to injured cyclists. That worry seems small to me: as Komanoff says, the number of new cyclists will only increase the total by about 6%, and the $10 million of insurance that the bikeshare program has is much bigger than the $2 million to $3 million that New York has paid out annually in the past three years.

Overall, however, I’d say that the report is a very positive thing. And in that it stands in contrast to the press release, which quotes John Pucher of Rutgers University as saying that he “would expect at least a doubling and possibly even a tripling in injuries and fatalities among cyclists and pedestrians during the first year of the Bike Share program in New York”. I’ll happily take that bet: it’s ridiculously alarmist, such a rise hasn’t happened in other cities with bikeshare programs, and no such projection is made in Liu’s report. Liu also wheeled out the media-relations guy from AAA New York, of all people, to say that the best way to prevent cyclists incurring serious injuries is to force those cyclists to wear helmets. That’s just depressing: one would hope that a car-drivers’ organization might at least pay lip service to safer driving, rather than putting the onus entirely on the bikers.

I’m very excited about New York’s bikeshare program, and look forward to using it regularly. I hope that the increase in the number of cyclists will help bring a bit more civility to New York’s biking community, especially in terms of stopping at lights and riding in the right direction. Meanwhile, my biggest fear is that we’ll see the opposite: a bunch of people who have no idea what they’re doing, riding on sidewalks, salmoning, and generally causing chaos. I don’t think that’s probable, but it’s possible, and I look forward to Citibike and NYC doing everything they can to prevent it from happening. As they do so, Liu’s report — if not his press release — is likely to be quite helpful.

COMMENT

the x axis – cyclist commuters as a percentage of all commuters – presumably includes train and subway riders, which form a much higher percentage of NY commuters than of any of the other listed cities. Isn’t the relevant figure cyclists to drivers?

Posted by Blox | Report as abusive

Yuppies on bikeshares

Felix Salmon
Jun 20, 2012 16:24 UTC

Last year, I expressed some skepticism that Washington’s Capital Bikeshare program would have much if any success in getting the unbanked on bikes. And according to Capital Bikeshare’s latest member survey, it seems that I was right:

educ.tiff

Out of 5,157 bikeshare members surveyed, all of them had been to college; 95% had graduated; and more than half had graduate degrees. Assuming that most of the 5% with “some college” are current undergrads, I think it’s fair to say that this is a very well educated demographic, and very much not the poor or unbanked.

The people at Reason think this chart is grounds to stop subsidizing the bikeshare program altogether, which is silly: the government subsidy for bikeshare is basically a rounding error in the grand transportation budget, and I’m sure that the amount of government funds spent on maintaining roads in affluent suburban communities is orders of magnitude greater than the amount spent on bikes.

But it definitely seems to be true that the Capital Bikeshare scheme has done very badly at reaching the poor, the unbanked, and people of color. (Bikeshare’s membership is 79% white, in a city that’s 34% white.) Bikeshare’s most successful membership drive came from a deal at Living Social, which reportedly almost doubled Bikeshare’s membership; it’s fair to say that Living Social’s Washington email list probably skews white as well. But the deal does demonstrate, I think, that price matters: drop the membership fee, and membership rises. Which is something New York should pay attention to.

Or, to put it another way: there are surely hundreds of reasons why well-educated whites flock to bikeshares while blacks who haven’t been to college avoid them. But cost is surely very high up on the list. And so if you want your bikeshare program to be broadly adopted across social classes, it’s a really good idea to make it cheap.

Update: Thanks to WashCycle for paying more attention to the survey methodology section than I did. This member survey, it turns out, is not representative: members were solicited for their responses only via email, and the only way that you could take the survey was online. Which might well explain a lot. Also, the survey took place in November, before the scheme to enlist the unbanked went live. Apologies for missing both of those things, and well done to WashCycle for picking up on them. Let’s just say there’s no disclaimer anywhere in the survey that its results are not representative of Capital Bikeshare’s membership as a whole.

COMMENT

“the government subsidy for bikeshare is basically a rounding error in the grand transportation budget, and I’m sure that the amount of government funds spent on maintaining roads in affluent suburban communities is orders of magnitude greater than the amount spent on bikes.”

Well hey, if you’re against cutting it because it’s just a small “rounding error”, then I guess you’d be more amenable to tackling DC’s deficit by cutting the big expenditures: Pensions, public sector salaries, redundant public sector services, etc etc… Dishonest argument is dishonest.

So because we spend tons of money on roads for rich suburbs, we should thus also spend money on bikeshare problems that benefit the rich, but MAY, sometime, in the long run, possibly, benefit the poor, at some point? Libertarians generally favor toll roads by the way, so they’d agree that yes, funding “public” roads in rich subdivisions is silly.

Why not expand this? Why not add rollerblade, skateboard, unicycle, and horse shares? It’s public transportations! WE ALREADY SUBSIDIZE ROADS AND TRAINS!!!!!!! WHY DO YOU HATE POOR PEOPLE/BLACK PEOPLE/ THE CHILDREN!?!?!?

Posted by duh2 | Report as abusive

How New York will improve its on-street parking

Felix Salmon
Jun 15, 2012 14:37 UTC

My latest video, above, is a reprisal of my blog post about variable pricing, and why it’s a great thing. The insight here is that pricing for a product like Broadway tickets is not the zero-sum game that it might seem at first glance. Yes, the more money that theatergoers spend, the less money they’re left with, and the more cash flowing into the pockets of New York’s performers and producers. (Which, incidentally, is quite the racket: one day I want to write a post about how theater producers get to effectively charge their investors 4-and-50, way more than the 2-and-20 we see in the finance world.)

But if you look beyond that initial dynamic, there’s much more going on here. By perfecting the art of variable pricing, Broadway manages to minimize the number of ticket scalpers, and therefore keep more money in its ecosystem. It manages to sell out every show, which just feels great. And it a means that there’s nearly always a ticket available for any show you want to see. That convenience alone is worth a lot.

The masters of variable pricing, of course, are the airlines, and while people are often resentful that they paid five times more for their ticket than the person sitting next to them did, the fact is that they would be much more resentful if they regularly tried to buy air tickets and found that all the flights were sold out. And conversely, of course, the airlines would lose even more money if they regularly wound up flying half-empty planes. Without variable pricing, one or the other would certainly happen.

In New York, as we’ve seen, Broadway is great at variable pricing, while the Yankees and the Metropolitan Opera are still in the pricing dark ages. But there’s one much more important area of New York life which is in desperate need of variable pricing: on-street parking.

San Francisco recently introduced variable pricing for on-street parking, and it’s an idea which ought to have been implemented in New York years ago. The basic idea is incredibly simple: you just price parking meters so that there’s always one empty parking spot on every block. The effect is electric, for two reasons. Firstly, drivers no longer have to pad their journeys by some unknowable amount of time to account for the time spent looking for a spot. And secondly, the whole city speeds up, since a huge proportion of congestion is caused by cars driving around in circles, looking for one of those precious spots.

Which brings me to Matt Taibbi’s latest tirade, complaining about the idea that New York could raise as much as $11 billion by selling off its parking-meter rights. Anybody who wins this contract will have a contractual obligation to implement smart variable-pricing technologies, which will have to include apps showing where the spots are, the ability to pay by phone, and other ways of making everybody’s life easier. How is this not a good thing? Well, Taibbi’s upset that prices will rise:

Meter rates in some New York neighborhoods are already at $5 an hour. A Chicago-style price hike for fat-cat investors might leave us paying thirty bucks an hour to oil barons in Qatar and Saudi Arabia in order to park for dinner in the West Village.

I hate to break this to Matt, but has he seen the pricing at New York’s garages recently? Drivers would kill for the opportunity to pay $5 an hour. Matt lives in Westchester Jersey and therefore doesn’t pay New York City taxes, but he still seems to think that New York City should subsidize the cost of his jaunts in to the West Village for dinner. But even if Matt were somehow deserving of such a subsidy, which he isn’t, it’s a false economy: it might feel good to be able park for cheap, but it feels much worse to be stuck in traffic all the time. And the overwhelming majority of West Village diners manage to find a way of eating there which doesn’t involve a parking spot. Why should they subsidize Matt’s parasitical suburban lifestyle?

New York is not Chicago, where the mayor was forced to give up all control of the parking meters in order that prices might be able to rise to their optimal level. Instead, the city will retain control of pricing philosophy, holidays, and the like, while also receiving an enormous check.

A huge amount of good could be done with that $11 billion, both in the West Village and in the rest of New York. Even Matt, if he puts his mind to it, could probably think of quite a few areas where New York needs to beef up its infrastructure, both in terms of transportation and in terms of everything else. These are investments, which will pay off over the long term, and the rate of return on these investments is almost certainly going to be higher than the discount rate which the private sector is willing to pay right now for parking-meter revenues.

The fact is that right now is the best possible time for New York to sell off its parking meters. Matt says, with no backing whatsoever, that the meters will be sold “at a steep discount”, and that New York will only get “pennies on the dollar”. The truth of the matter is much more likely to be exactly the other way around: that by doing the deal now, when interest rates are at all-time lows, New York will be able to capture an impressive premium for these future revenues — while at the same time outsourcing all of the risks and difficulties associated with bringing parking meters into the 21st Century.

It’s not easy for New York City to borrow money, for various reasons. The city should be borrowing and investing right now, for all the same reasons that we need a second stimulus nationally. You don’t want to invest during a boom, because that’s expensive and pro-cyclical. You want to invest when interest rates are low and labor is more readily available. And by selling off its parking meters now, New York will have access to billions of dollars at extremely low interest rates.

If those oil barons in Qatar and Saudi Arabia are willing to send $11 billion to New York in return for future parking-meter revenues, I’d be inclined to take their offer with no little alacrity. $11 billion, if you do the math, works out at more than $120,000 per meter. Taibbi really thinks that’s a discount to the meter’s real value? How much would he pay for a parking meter?

The fact is that New York, like most cities, is bad at monetizing the value of its on-street parking. This deal gives the city the opportunity to change that, and at the same time to introduce technology which could reduce congestion substantially, while also raising billions of dollars for investment in the city’s future. It’s a win-win-win. Except, maybe, for commuters in Westchester Jersey.

Update: Matt responds, explaining that he actually lives in Jersey, not in Westchester. Sorry. He also says:

If prices do rise, some conglomerate of private investors, and not the citizens of New York, will see the benefit. The city might get $11 billion in the deal, but if that’s even a dime less than the real present value of these parking meters (to say nothing of the actual amount of revenue that will be collected over the life of this arrangement), then to me that’s bad and shortsighted public policy.

By this logic, then if $11 billion is a dime more than the real present value of the parking meters, then the privatization would be a good idea. And with interest rates where they are, and the way that cities are evolving, I’d guess that the present value of New York’s parking meters is more likely to fall from $11 billion than it is to rise.

COMMENT

I just want to chime in here supporting the Chicago parking deal, well, halfheartedly. Mostly, I don’t care how much drivers have to pay for parking since I ride a bike everywhere. When I do care about parking, it’s when my parents from the suburbs visit, and they need to find a parking space, and boy howdy it’s been a lot easier since parking rates went up. And municipal governments will always find ways of making ridiculously bad loans at shockingly poor implied interest rates. People just notice the parking because they encounter it day to day.

Posted by JamesLiu | Report as abusive

Bikeshare pricing charts of the day

Felix Salmon
May 15, 2012 20:47 UTC

When I wrote about New York’s expensive bikeshare scheme last week, I got a lot of pushback from people saying that I was missing the point. These bikes are designed for short trips around town, at a marginal price of zero: the large sums you pay if you keep them checked out for an hour or more are a deliberate attempt to discourage that behavior.

OK, fair enough — but in that case, if you’re charging high variable costs, the converse should be that you should charge low fixed costs. Most bike schemes work in much the same way: you pay a certain amount up front for membership, be it for a day or a week or a month or a year, and then the variable per-hour costs on top of that. If New York’s bikeshare scheme is indeed quite cheap, then one would expect the variable costs to be low.

But they’re not.

Ben Walsh put together some numbers for me, for various cities around the world with bikeshare schemes. Not all cities work in exactly the same way, and some have no direct comparison points with New York at all: in Chicago, for instance, the membership options are 1 month, 2 months, and 3 months. In any case, here’s what we managed to find, for New York’s three options:

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1wk.png

1yr.png

It’s pretty clear that New York is at the top end of the range, here: only Frankfurt rivals it in price. To have access to New York’s bikes for one day, you need to spend $9.95 — that’s more than six times the £1 one-day membership in London, and it’s significantly more, too, than you’d pay in Washington or Toronto or Paris.

The first reaction of New Yorkers, when they hear this, is surprisingly positive: they think of it as a tax on tourists, and everybody likes taxes on tourists. Let the tourists pay through the nose for their one-day memberships, and we locals will save loads of money, through an implicit cross-subsidy, on our one-year memberships.

But that doesn’t seem to be the case, either. Look at the cost of one-year memberships, and New York is still top of the league table, at $95. That’s the same as Toronto, and more than seven times what Romans pay. (Indeed, the one-time membership fee in Rome, at €10, is barely more than a daily membership in New York.)

New Yorkers, then, are being asked to spend much more money per year than bikeshare users in just about any other major city — even if they never take out a bike for more than 45 minutes. And what worries me is the deterrent effect that these prices will have.

The first trip you take, on one of the new New York bikes, will cost you at least $10, and possibly as much as $95. Cab rides don’t cost much more than that, and you can fit four people in a cab. Experienced urban cyclists like me will definitely cough up the $95, even if that hurts a little, because we know how convenient it can be to be able to take one-way bike trips in Manhattan, especially if it’s going to rain later, or if you don’t like biking back in the dark, or if you got in to work on the subway but then just need to go a mile or so to your lunch meeting.

But the great promise of the bikeshare scheme is that it will get people onto bikes who have never biked before — people who are generally very nervous about biking at all on busy urban streets. Those people are going to want to try before they buy, and the $10 cost of a trial one-day membership is high enough to give them a good excuse not to bother.

The East River Ferry is a great example of the benefits of low entry costs and the opportunity the city’s bikeshare program is missing. When the ferry was reintroduced last June, it was free for the first 12 days. Passengers flocked and even once full fares kicked in, it remained far more popular than planners projected.

That said, from a user’s perspective there are two costs worth considering before you opt into one of these schemes, and the dollar cost is only one of them. The other one is convenience — and on that front, New York’s 10,000 bikes look as though they’re going to be everywhere you might want one, so long as you stay south of 60th Street; there are even a few docking stations in Queens! In that respect, getting on a bike is (fingers crossed) going to be much easier in New York than in most other cities — and I can definitely see how that convenience might be worth paying for.

I don’t think the pricing for these bikes is going to cause the plan to fail: New Yorkers are used to paying lots of money for convenience. I just wish there were some cheaper way of getting New Yorkers to try these things out. Because $95 is enough money — roughly the same as an unlimited monthly transit pass — that a lot of people will simply not bother.

COMMENT

I believe the pricing is fair, it’s cheaper then most cab fairs and putting gas in your car put together. Plus look at the bright side you get to work out more which means your spouse will love you more as your body starts looking great. Me, myself I love bikes, I purchased a bike from http://www.bikesxpress.com and now I can ride all the time. I love it!

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New York’s expensive bikeshare

Felix Salmon
May 7, 2012 19:04 UTC

New York’s new bike-share program, sponsored by Citibank to the tune of $41 million (plus $6.5 million from MasterCard), will go live at the end of July, and the prices are public already. Transportation commissioner Janette Sadik-Khan called them “the best deal in town short of the Staten Island Ferry.” Which, not really.

The Staten Island Ferry is free, of course, but that aside, New York transportation has a very simple pricing scheme. To a first approximation, all rides, whether on the subway or the bus or some combination of the two, are $2.50, no matter how long they are.

And the bikes cost a lot more than that.

As with all bike schemes, there’s a base price to enter the scheme — $10 per day, $25 per week, or $95 per year. Then the first half-hour of bike riding is free (45 minutes if you’re an annual member); after that, you pay on a per-ride basis as well, starting at $4 when you bike for more than half an hour.

The $10-per-day cost is already a significant expense: that’s four subway rides right there. And then the hourly charges really start to rack up if you keep the bike for some length of time. If you take the bike around Governor’s Island, for instance, and stay there for a couple of hours, you’re likely going to end up in the 3-hour time bracket, which is $49. On top of your $10 daily rental. As Garth Johnston puts it, for any real let’s-bike-around-the-city plans, you’re definitely going to be better off just buying your own bike.

What’s more, New York is significantly more expensive than similar schemes in rival cities like Washington and London. Here’s a chart of the cost of one trip, based on a 24-hour membership:

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London’s 24-hour membership is just £1, or $1.61, and the cost for the second half-hour is only another £1. Which means that anybody can get on a bike, ride it for an hour, and pay just £2 — less than the cost of a journey on the Tube. In New York, by contrast, getting on the bike costs $10, and then the second half-hour costs another $4, for a total of $14. That’s more than four times the cost of the London bike. By the time you’re on the bike for 90 minutes, the New York cost goes up to $23; you’d need to be biking twice as long to pay that much in London.

Here’s the full chart, going out to the maximum charge for 24 hours:

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As you can see, none of these schemes are exactly friendly towards someone just taking a bike and using it to bike around for, say, six hours. But if you do that in London, you’ll “only” pay $58: in Washington, it’s $85, and in New York, it’s $131.

I can’t think of any other area where London is so much cheaper than New York: it’s just weird to me that New York would set the prices for this scheme so high. Maybe the problem is that they haven’t found a lot of places to put the docking stations, so they’re having to set the price high to keep the demand in check. All we’ve been told so far is that the plans for the docking stations will be available “soon”; it’ll be fascinating to see how many of them there are in the first instance.

But one thing’s sure: the price difference between renting a bike and hailing a cab is very small in New York, while it’s very large in London. Which probably makes cabbies very happy, while doing very little to reduce congestion.

COMMENT

Salmon,

You’ve been punked by DOT!!

Hope you and your little friends enjoy being overcharged to ride around on an overweight bike advertising for Citibank.

LMAO

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The case of the $400 million bike lane

Felix Salmon
Mar 26, 2012 07:24 UTC

Everybody’s favorite transportation geek, Charles Komanoff, has a fascinating new paper out on the economics of New York’s new Tappan Zee Bridge. The old bridge is decrepit, and needs to be replaced — everybody agrees on that. And the replacement is now in the works, at a cost of $5.2 billion. But does it need to cost that much? Komanoff makes a strong case that it doesn’t.

I won’t try to summarize Komanoff’s paper here. Instead, I’ll just point to one fact which is buried there. The new bridge comes with a combined bike/pedestrian lane, 12 feet wide. And the cost of building that lane — the amount that the cost of the bridge would decrease if you simply built it without that lane — is an astonishing $400 million.

To put that number in perspective, Komanoff tells me it would cost roughly $40 million, in the same 2015 dollars, to build two bike/pedestrian lanes on the Verrazano Narrows bridge — lanes which would get vastly more traffic than the one lane on the new Tappan Zee.

As for the cost of the first three years of New York City’s ambitious bike program under transportation commissioner Janette Sadik-Khan, that was just $8.8 million, 80% of which was paid by the federal government.

In other words, for the $400 million which governor Andrew Cuomo is planning to spend on a white-elephant bike lane almost nobody is going to use, you could utterly transform the bicycling infrastructure for millions of New Yorkers in all five boroughs.

Oh, and I almost forgot — it looks as if the old Tappan Zee bridge is going to be converted into a bike/pedestrian walkway anyway, making such a facility on the new bridge even more superfluous.

But this is how big projects always work: it’s weirdly easier to raise billions for something huge than it is to add millions to an annual budget somewhere. “Gridlock” Sam Schwartz, for instance, in his clever new congestion-pricing plan, is proposing three new massive bike/pedestrian bridges: one from Jersey City and Hoboken, in New Jersey, would span the Hudson River and land just north of Chelsea Piers. A second would go from Long Island City and Hunter’s Point, in Queens, and would cross the East River to midtown Manhattan. And the third, and most ambitious, would start in Red Hook, in Brooklyn, head over to Governor’s Island, and then continue on to the Financial District.

These are utterly wonderful ideas. If beautiful new pedestrian bridges can be built by Santiago Calatrava in Venice or by Norman Foster in London, there’s no reason New York can’t follow suit. Still, it’s a bit depressing that we don’t seem to have the mechanisms to take the billions available for vanity projects, and use some small fraction of that money for things which would make a huge difference to the daily lives of millions of New Yorkers.

This phenomenon isn’t confined to government, of course: anybody working in a big corporation has seen some huge acquisition made, using money which was never available for smaller projects from existing teams which had much clearer benefits. And there are hundreds of museums around the world which never have money for important things like conservation, but which somehow manage to find enormous sums for glossy new starchitectural projects. Basically, people want to be able to see where their money is going, in the form of something large and grand and headline-grabbing. Even if there are much more sensible uses for it elsewhere.

COMMENT

What the lane looks like is only half the story?

Whether car drivers drive like steroid-charged idiots,
and whether bikers cycle like methamphetamine-charged teenagers and terrorize pedestrians — those are common realities why responsible cyclists avoid certain streets in cities.

I know a bike lane which abruptly ends half a block before a busy intersection, and where the pedestrian sidewalks narrow to half its size. The result: cyclists go up the sidewalk and literally terrorize pedestrians,
and the police turn a blind eye. As a result, some residents of that block have to resort to driving, instead of walking, even for just a few short blocks, to avoid getting run over by bikes! Now tell me, does that save gasoline, or the environment. Worse, how many more anxiety stricken residents have to talk to their doctors for medications or lack of exercise because they don’t feel safe enough to walk to the park!

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Why jobs require cities

Felix Salmon
Feb 2, 2012 12:15 UTC

Many thanks to Mark Bergen for finding me this data; I asked him for it because I thought that maybe we could learn something from the way in which China has managed to keep employment growing steadily through some extremely turbulent economic times.

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What you’re looking at here is total Chinese employment from the All China database. Primary industry is commodities, basically, including agriculture; secondary industry is manufacturing; tertiary industry is services.

It comes as little surprise to see that agricultural employment has been falling steadily for 20 years. But it is surprising to see that if you take out the services sector, total Chinese employment has been going nowhere, and basically falling, for the same amount of time.

Caroline Baum, using a different data source, says that China lost 15 million manufacturing jobs between 1995 and 2002; according to these figures, employment in “secondary industry” was flat in those years, going from 156.6 million to 156.8 million before starting to rise again and reaching 218.4 million in 2010. (It’s worth pausing here to appreciate the sheer scale of this chart: each horizontal line is another 100 million workers.)

Meanwhile, the services industry — tertiary industry — has been on fire: it now employs 263 million people, more than are employed in secondary industry, and has doubled since 1992. All this, remember, in a country with more or less flat population growth, thanks to the one-child policy.

Of course it’s hard to find work in the services industry if you’re a rural peasant: tertiary industry is a fundamentally urban thing, which brings me to my second chart.

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It comes as no surprise to see that urban employment is growing incredibly fast — 13.7 million urban jobs were created in China in 2010 alone. What does come as a surprise is to see that urban jobs are still in the minority in China — which means that there’s a lot of room for growth going forwards.

In the U.S., we had a huge construction boom in the aughts, which was concentrated on building bigger suburban and exurban residential houses. That’s good for homebuilders and makers of granite countertops, but it doesn’t really boost the economy more broadly. The Chinese construction boom, by contrast, is building cities and roads and crucial infrastructure, which allows the service economy to keep on growing at a torrid place.

Realistically, there is very little chance that global manufacturing employment is going to increase in future at a rate which will provide jobs for a growing global population. If we’re going to find jobs in the U.S. and the rest of the world, they’re going to have to be found in exactly the area where China is finding them — tertiary industry, or services.

How do you create service-industry jobs? By investing in cities and inter-city infrastructure like smart grids and high-speed rail. Services flourish where people are close together and can interact easily with the maximum number of people. If we want to create jobs in America, we should look to services, rather than the manufacturing sector. And while it’s hard to create those jobs directly, you can definitely try to do it indirectly, by building the platforms on which those jobs are built. They’re called cities. And America is, sadly, very bad at keeping its cities modern and flourishing. 1950s-era suburbia won’t cut it any more. But who in government is going to embrace our urban future?

COMMENT

TFF – I agree with your overall vision of city design, with 1 tweak. Light rail makes sense sometimes, but I think that buses, in combination with bus/HOV lanes, are an important part of the mix that sometimes make more sense. Light rail is more effective if high enough ridership is there, but run more risk of being white elephant projects if built in areas that don’t justify it. Buses are easier to redeploy if future growth follows unanticipated patterns.

I’m cynical about the bias of local politicians – more ribbon cutting photos from light rail than bus system expansions. It’s not a phenomenon unique to light rail – see convention centers and sports stadiums.

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