Felix Salmon

Why taxi medallions cost $1 million

Felix Salmon
Oct 21, 2011 19:41 UTC


What on earth is going on with the price of taxi medallions in NYC? Two of them just sold for $1 million apiece — that’s a 42% increase just since August, when conventional wisdom had it that $705,000 was a top tick and that medallions would soon plunge in value.

Derek Thompson reckons that this is a sign of how great New York’s economy is doing:

It’s all about supply and demand. The tailwind behind medallion inflation is a cap on taxi cab licenses. Even as the economy of New York City grew at a furious pace across three decades, the number of taxi plates stayed basically constant, despite wage growth and population growth and rising demands for cross-town transportation. As a result, their value rose tremendously.

One problem with this theory is that if you look at the chart of medallion prices, it doesn’t seem to bear much relation to the strength of New York’s economy. The majority of the rise in price has happened over the past ten years, which haven’t been particularly great, economy-wise. And certainly there hasn’t been any citywide boom in the past two and a half months.

Jacob Goldstein has a similar theory.

Every cab in New York City has to have a medallion. And the city strictly limits the number — currently just over 13,000. So as New York has prospered over the past few decades, the price of medallions has gone through the roof.

The economics of this, however, don’t make a lot of sense. Cabs might get a little bit busier when economic activity picks up, but most of that extra income is taken home by drivers, rather than the owners of corporate medallions. (Corporate medallions are the ones where the owners don’t drive the car; they’re the ones being charted here.) The income from a corporate medallion is pretty steady, and was spelled out in the comments to this post:

The maximum amount a cab leased out to drivers can earn over a year is $82,524. This assumes that the cab had a driver every day and every night and that it never breaks down. The day shift maximum charge is $105. The maximum night shift charge is $129 and that is only for Thursday-Saturday. Sunday-Tuesday is $115 and Wednesday is $120.

You’ve also left out of your calcultions the cost of the car. Let’s call it $27,000 and you are required by law to buy a new one every 3 years.

This is the real reason why medallions are so expensive: good old-fashioned interest-rate calculations.

We’re basically talking about a real income stream, here, of about $75,000 per year. (Let’s assume, for the sake of argument, that the income from a taxi medallion rises at the same rate as inflation.) That’s a real yield of 7.5% on a $1 million investment — which isn’t half bad at today’s interest rates.

Put it this way: how much would a bond paying a real yield of $75,000 a year cost? At the most recent auction, the 29-year TIPS cleared at an interest rate of 0.999%. At a 1% real yield, an income stream of $75,000 a year would cost you $7.5 million.

Now you don’t actually get $75,000 a year if you own a medallion. You have to pay for maintenance, insurance, and workers comp; you also have to pay someone to manage your drivers. But even if you bring the income down to $50,000 a year, that’s still a pleasant 5% yield on your money, and what’s more it’s a yield which behaves much more like a real yield than a nominal yield. Paying $1 million for such a thing doesn’t seem silly to me, especially when there’s a lot of room for capital gains as well.

Of course, there’s risk here too. Any time you see a chart like the ones above, you have to worry that there’s a bubble. Plus, there’s political risk: the mayor can print new medallions, making the existing ones worth a little less (but not a lot less, given that the income from medallions is largely fixed).

That said, medallion owners have a lot of political clout, and historically they’ve been good at making sure that their income is maximized, rather than suffering anything which might reduce it. And when Goldstein starts dreaming of taxi deregulation, he quickly enters cloud-cuckoo land:

The medallions create a textbook example of what economists call rent-seeking behavior: Basically, gaining extra profits without providing extra benefits. If the number of taxis were allowed to increase (and if cab fares were unregulated), the number of taxis would increase and the price of a cab ride would fall.

No! if the number of taxis were allowed to increase, then the number of taxis would increase. Of course. That’s just a tautology. But the price of a cab ride would not fall, because that’s a separate piece of legislation — the price of a cab rate is set at a predetermined rate, and indeed has to be set at a predetermined rate. If you deregulated cab fares, utter chaos would result — New Yorkers would basically have to haggle over the cost of a fare every time they got into a cab.

Goldstein’s not the first person to have this cockamamie idea: Jim Surowiecki said the same thing in 1999. But in order to have a market where prices are set by supply and demand, people need to be able to choose how much they’re willing to pay to take a cab. And you can’t do that when you’re standing on the sidewalk (not in the bike lane, please!) sticking your arm out and trying to hail the first cab to turn up. In order to make that transaction work, the fare schedule has to be set, in advance, by the municipal government.

But I do worry that the way fares are set, too much money ends up going to medallion owners. If fares were brought down, the amount that medallion owners could charge drivers would also come down, and medallion prices would — finally — start to fall. Why does NYC ever raise taxi fares, when the income from those fares ends up going overwhelmingly to a handful of millionaire medallion owners? These medallions, right now, are licenses to print money. That’s why they’re getting extremely expensive. But it doesn’t need to be that way.


Did you ever think about the families who own these medallions and rely on them to support families? If the value of the medallions fell, my family would not be able to help out my two children and myself. My uber geek ex-husband who we put through Carnegie Mellon for his 3 degrees, pays peanuts in child support and would be all too happy to take my precious babies away if i cannot give them the kind of life, financially, that he could. Ironically, he too resides in San Francisco, where this computer dork who founded uber lives and runs his company who I curse. Before you talking heads analyze this situation ad nauseam, please know there are real families and fates surrounding these medallions. My parents came here almost 40 years ago, from the former Soviet Union and this is their legacy to their grandchildren. Shame on all of you who disparage Medallion Taxi Cab Owners, the majority of who are hardworking immigrants who came here for the American Dream. Shame on you!!!!!!!!

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Why congestion pricing will always be unpopular

Felix Salmon
Oct 19, 2011 16:04 UTC

Traffic expands to fill the space available. This is known as Down’s Law of Peak-Hour Traffic Congestion, and has been known since 1962; new research shows that it’s true even more generally than previously suspected.

Increasing lane kilometers for one type of road diverts little traffic from other types of road. We find no evidence that the provision of public transportation affects VKT. We conclude that increased provision of roads or public transit is unlikely to relieve congestion.

Eric Jaffe draws a simple conclusion from all this:

Whenever a driver shifts onto public transportation, another one quickly grabs the open lane. That leaves just one solution to the traffic problem plaguing American cities: congestion pricing.

“We cannot think of any other solution,” says Gilles Duranton, the paper’s co-author. “As soon as you manage to create space on the road, by whatever means, people are going to use that space. Except when people have to pay for it, of course.”

I’m a fan of congestion pricing. But I’m also realistic about it, and the fact is that for all Jaffe’s enthusiasm, congestion pricing has its own Down’s-like characteristics. Jaffe raves about the “success” of congestion pricing in London and Stockholm, but the only chart he provides gives numbers for the trial period in Stockholm. If you go looking for recent data on traffic in London, Stockholm, or other cities with congestion charges, it can prove surprisingly difficult to find.

Here’s Jaffe, again, quoting Duranton:

“My feeling is, yes, people tend to be against it before they see it at work,” says Duranton. “They think it’s going to cost them more money, which directly it will, but they’re all very unclear about the benefits; i.e. traffic is way more fluid, way faster, and pollution is going down.”

There’s another way to look at this phenomenon, though. When congestion pricing is first introduced, people recoil against it — they expend quite a lot of effort to avoid the charge, and traffic goes down. Over time, however, it becomes just another part of the cost of driving, along with gas and insurance and parking tickets. As that happens, traffic goes back up again. Congestion-charge revenues go up too, of course, and those can be reinvested into public transport.

But traffic is like water — it wants to find its own level, which tends, in cities, to be maximum capacity. If you want to implement a system which keeps traffic below maximum capacity, then you need to apply significant pressure on drivers to keep them away from the roads. And that means not just implementing a congestion charge, but also regularly increasing the amount of the charge over time.

This is how the Singaporean congestion-charging system works. Think of a shutter-priority camera: you set the shutter speed, and then dial the aperture so that the exposure is correct. In Singapore, they set the amount of traffic they want, and then dial up the congestion charge until they get it. It’s much the same idea as the one behind SFPark: you set the number of empty parking spaces you want, and then dial up the parking-meter pricing until you get there.

But the point in all of these cases is that the charge has to be variable over time — specifically, it has to increase over time. Without those steady increases, drivers become inured to the congestion charge, and traffic will go back up to its former level.

As a result, drivers are pretty much never happy with congestion pricing. Either it’s painfully expensive and going up in price — expensive enough to keep them from driving — or else it doesn’t have much effect.

That doesn’t mean that congestion pricing isn’t good public policy. It is. But it’s always going to be unpopular with a powerful constituency. (Drivers, in nearly any city you care to mention, tend to have a disproportional amount of political clout.) Local politicians looking for a popular platform will run on reducing or abolishing the charge, or at the very least not increasing it. And so the old fight keeps on being fought over and over again: while increasing a charge isn’t as politically difficult as introducing one, it’s still tough.

This is something worth remembering when urbanists start waxing utopian on the subject of congestion pricing: once it’s introduced, the fight isn’t over. It’s never over. And if you leave a system long enough without increasing its price, its efficacy starts declining dramatically.


As someone who lives close to London and regularly travels into the city I think the congestion charge is a fantastic thing.

The reality is that the charge does not hit the poor (because they weren’t driving a Bentley or Rolls-Royce into central London on a Thursday afternoon in the first place.) It hits the rich who want to do something that is in their interest but against the interest of everyone else.

Typical Londoners or travellers to London do not drive. Now the roads are far less crowded for the buses that these people do travel on.

Obviously this isn’t necessarily representative, but I don’t know anyone who actually lives in London who thinks the congestion charge isn’t good. Remember that highly efficient cars are exempt, as are people who live inside the congestion charging zone.

Providing the alternatives are viable (and in London, with the Tube and buses they are) the congestion charge works very well indeed.

Posted by James03 | Report as abusive

Counting intersections

Felix Salmon
Sep 19, 2011 16:30 UTC

Emily Badger — you might remember her from her great article on slugging in DC — has a fantastic post on street-map design over at The Atlantic Cities.

Garrick and Marshall’s research into street network patterns began in Davis, California. Often cited as the most bike-friendly city in America, it has the country’s highest rate – more than 16 percent – of people commuting to work on two wheels. It turns out, though, that Davis also has one of the lowest traffic fatality rates in the country, a counterintuitive discovery for traffic engineers who consider biking a riskier alternative to driving.

Inspired by Davis, Garrick and Marshall compiled data on 230,000 crashes spanning 11 years in 24 medium-sized California cities. And they began to parse and classify street patterns in a kind of taxonomy. There are networks that look like square grids and others that resemble trees, with one trunk, many branches. There are networks that have tributaries, like a river, and others that have main roads radiating out from a central hub. There are hybrids of all these, and street blocks of different lengths, and networks that have 45 intersections per square mile (like Salt Lake City) and others that have as many as 550 (Portland, Ore).

In their California study, Garrick and Marshall eventually realized the safest cities had an element in common: They were all incorporated before 1930. Something about the way they were designed made them safer. The key wasn’t necessarily that large numbers of bikers produced safer cities, but that the design elements of cities that encouraged people to bike in places like Davis were the same ones that were yielding fewer traffic fatalities.

These cities were built the old way: along those monotonous grids.

FHA 3_.jpgWhen streets are built to a human scale, rather than being built for cars, those streets are friendlier and safer. More generally, the metric of intersections per square mile is an incredibly useful idea to keep in mind. It’s correlated with density, but it’s not the same thing at all. For instance, Badger reproduces these maps from the Federal Housing Authority, back in the 1930s: we’re seeing two plans, here, with identical housing density. But the one labeled BAD has ten intersections, while the one labeled GOOD has only seven. And of course the distance you need to travel to get from any random point to a given house is much shorter, on average, in the BAD map than it is in the GOOD one.

Shorter distances mean that you’re more likely to walk or bike; they also make the neighborhood feel smaller. For many decades, suburbia was designed on the idea that Americans want to feel as though they’re far away from each other, but the fact is that we need community and linkages just as much as we need a space of our own.

A city with high density still feels inhuman if it has enormous blocks; it doesn’t matter how many people you squeeze into downtown Phoenix, it will never feel like a vibrant, high-density city. Even in New York, the distance between 5th Avenue and 6th Avenue is far too big: the shorter blocks east of 5th Avenue, between, say, 5th Avenue and Madison Avenue, are much more pleasant, as are the small blocks in the Financial District.

It’s astonishing to me that Portland and Salt Lake City can differ, in terms of intersections per square mile, by a factor of more than 12. According to Wikipedia, Salt Lake City has a density of 1,666 people per square mile, compared to Portland’s 4,288. Which means that Portland has almost five times as many intersections per person as Salt Lake City does.

Which raises another question. Do street intersections make you liberal?


Hmmm… How do fatalities in the Village or financial district compare to those in Hell’s Kitchen, where i hang my harness?

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Bike war datapoint of the day, rack-placement edition

Felix Salmon
Sep 14, 2011 18:10 UTC

Matt Chaban manages to get a quote today which perfectly encapsulates the self-defeating nature of anti-bike activists. He lays out the basics of New York’s bike-share scheme — 600 stations, 10,000 bikes — and then quotes one friend and one foe. The friend is Gene Russianoff of the Straphangers Campaign. Here’s the foe:

“DOT and Janette Sadik-Khan’s problem is they say, ‘Here’s what we’re doing, take it or leave it,’” said Sean Sweeney of the Soho Alliance, a frequent DOT critic. “Instead, it should be, ‘Here’s 20 racks, where would you like them?’” He expressed concern about whether the stations would be located on too-narrow sidewalks or in valuable parking spaces or other inopportune locations.

Still, he said it would be nice if done right. “I walk a lot, I’ll walk from 59th Street downtown,” Mr. Sweeney said. “Let’s say I don’t want to walk or take the subway, then a bike sounds nice. But it’s still a matter of giving over public space to a private company, so we have to be careful.” He added that no stations should be place in Soho.

I love the way that Sweeney starts by implying that he would be happy to place 20 racks around Soho, underscores that by saying that the scheme “sounds nice” — and then, at the end, drops the bomb that he’s already decided that the optimal number of racks in Soho is precisely zero. He can’t even pretend to be open to the idea for more than a couple of sentences.

Soho, for those of you who don’t know it, is a perennial traffic nightmare, for two reasons. One reason is Broome Street, a key approach to the Holland Tunnel — and it’s hard to do much about that. But the other reason is the curse of on-street parking. Soho is Exhibit A for anybody trying to demonstrate the high cost of free or underpriced on-street parking: there’s way too much space devoted to cars, both in terms of parking and in terms of open pavement, and a huge proportion of the cars driving in Soho are going around in circles looking for a parking spot.

The drivers of those cars are unhappy, and they make life miserable for pedestrians and cyclists, too. It’s a horrible state of affairs, especially given the numbers: according to a 2006 study, 54% of people on Prince Street came to the area by subway or bus, and an additional 35% by walking or bicycle. Only 9% drove to the area in a private car, while an additional 9% arrived by taxi or livery. (The numbers add up to a bit more than 100% because some people use two or more modes of transport.)

If Soho can’t have bike racks, there’s really no point in having a bike-sharing scheme at all. Soho is precisely where people want to go: it’s full of shops and restaurants and other destinations. But somehow the Soho Alliance has already decided that a bike rack is never as important as a “valuable parking space”.

Sweeney, then, is the embodiment of precisely the reason why the DOT can’t outsource rack placement decisions to community organizations: those organizations tend to be dominated by people who are going to be aggressively unhelpful on that front. There’s not a parking space in all of Soho which is so valuable that its street space wouldn’t be better off as a bike rack. If Sweeney can’t recognize that, he’s never going to be a useful person to consult on placement decisions.


“In addition, the survey finds that 45% of respondents would visit Soho *less* often if there were more vendors taking up sidewalk space, which is *exactly* what this program contemplates. Only 10% would visit *more* often.”

Who is playing fast and loose with the facts here?

The reason people said they’d visit less often is because closing the streets of Soho to automobiles was not presented as an option in that survey.

If you keep car access the same — both for on-street parking and throughput — but allow vendors to take up more sidewalk space, of course pedestrians will feel squeezed and not want to spend time in the neighborhood. That’s explains the survey results.

But if you reduce car access in SoHo and eliminate it on some streets altogether, you could get the vendors onto the roadway and give back tons of sidewalk space to the overwhelming majority of people who visit the neighborhood on foot.

Ask pedestrians if they’d like to see the sidewalks cleared and the vendors moved into one of the lanes currently available for the storage of private automobiles, and you’d likely see a huge amount of support.

NYPedSafety is an anti-bike organization masquerading as a pro-pedestrian advocacy group. They are notoriously silent on the subject of the pernicious effects of automobiles.

Posted by Walking | Report as abusive

Yankee Stadium’s conduit-bond boondoggle

Felix Salmon
Jun 16, 2011 21:52 UTC

Is there something fishy about the bonds used to finance the parking lots at Yankee Stadium? Of course there is. And you don’t need to look far before you see two big reasons why. The first is that the bonds were issued by the Empire State Development Corporation. That’s Empire State as in New York State, one of the most corrupt and dysfunctional states in the union. The second is that these are conduit bonds — an asset class which, as Nathaniel Popper explains, is only for the very brave:

Conduits have grown roughly three times faster than the general municipal market over the last five years, according to data from Thomson Reuters, a New York data firm; $84 billion of these bonds were issued last year alone…

Although conduits account for roughly 20% of all municipal bonds, they have been responsible for about 70% of all defaults in the municipal bond market in recent years, according to Income Securities Advisors, a Florida research firm. Over the last two years, the five municipal bond issuers with the most troubled bonds have all been conduit bond issuers.

Conduits constitute a brilliant boondoggle for everybody except the taxpayers who end up out of pocket. You want to build a parking lot next to Yankee Stadium? That’s probably not a great idea, as is evidenced by the fact that this season the lots are only 31% full on game days. Clearly Yankees fans are more than capable of attending games without needing to use anything like the 9,000 parking spots that Yankees management pushed for when they negotiated their new stadium. And parking lots are inherently ugly and unhappy things; Bronx borough president Ruben Diaz’s idea to build a hotel on some of that land instead is clearly a good one.

There’s no public interest in having all that space taken up with empty parking spots. So why on earth did New York State subsidize the construction of the lots by issuing $237 million of bonds whose interest payments are exempt from all state and federal income taxes? The people who bought those bonds financed a commercial venture and hoped to make a profit by doing so. If they did make a profit, there’s no reason at all for them not to pay income tax on that income.

Popper’s concerns about conduits in general go in spades for these parking-lot bonds:

“A lot of these are corporate bonds disguised as municipal bonds,” said Michael Lissack, a former municipal investment banker at Smith Barney who is now a critic of the industry. “How is this a good use of our tax expenditures? I would prefer to use that money seeing that kids get vaccinated or learn to read.”…

Frank Hoadley, who is in charge of selling traditional municipal bonds for the state of Wisconsin, said that the riskiness of conduit bonds has driven up borrowing costs for cities and states. He said Wisconsin paid $4 million more in annual interest than it would otherwise have had to on new bonds issued in January because of investor fears about the municipal market.

“Government issuers like Wisconsin are swept up in the smear that is tarnishing the whole municipal market because of conduit borrower problems,” said Hoadley, Wisconsin’s capital finance director.

The parking-lot project was particularly risky because it was structured with no equity. (Much like Goldman Sachs’s notorious Abacus deal, come to think.) All the money to build the lots came from tax-free bond investors, rather than the owner of the project, a tiny mom-and-pop nonprofit 100 miles from the Bronx which has a history of defaulting on tax-exempt bonds. Parking projections are notoriously error-prone at the best of times, but in this case the project was financed with a debt service ratio of just 1.2: the projections didn’t need to be far off before the lots ran into serious financial trouble.

The biggest winners in this story are the Yankees. They are luxuriating in the presence of endless parking infrastructure, they didn’t need to pay a penny for it, and they can offset the blame for misuse of public land by saying that it’s not their project and they don’t own the land. Even the bondholders will probably come out alright in the end. The losers are the general public, twice: first by dint of having to live with far too much parking provision, which serves no useful purpose in this urban environment, and second because of the tax break we gave the buyers of the bonds.

As a general rule, conduit bonds are always a bad idea. I’m no great fan of the tax exemption on muni bonds at the best of times — if the federal government wants to subsidize the states, there are much easier and more direct ways of doing that. But giving the tax exemption out for boondoggles like this is, well, mind-boggling. Let’s hope the latest wave of defaults helps speed their demise.


What risk to the taxpayer? Unless there is an explicit guarantee by some taxing authority, there is no risk.

There are plenty of problems in the municipal market–like bid-rigging, off-balance-sheet instruments designed to disguise payola, and outright misstatement of finances. But conduits? Seriously?

Yes, conduits default at a higher rate than GO bonds. Moody’s studied defaults from 1970-2010 and found of the 18,000 issues rated, 54 defaulted. Three were GO bonds. Okay, point conceded. But it’s not much of a point.

But anyone that blames the sell-off in the muni market earlier this year on conduit bond defaults is a moron. A certain 60 Minutes interview with a certain Brown University graduate had a lot more to do with December’s sell-off and the 30 billion in mutual fund net withdrawals that followed over the next 6 months than any conduit default. Where is that wave of defaults, BTW?

Yes, I remember Felix also confidently asserting that California was about to go bankrupt and would receive another Federal bailout because it is Too Big To Fail. How’s that working out?

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Why UBS should return to Manhattan

Felix Salmon
Jun 8, 2011 16:07 UTC

Charles Bagli has an interesting take on the news that UBS is considering moving back to Manhattan from Greenwich Stamford:

The move would be the latest sign that New York has regained its allure as a caldron for the young and creative.

Are investment bankers really “young and creative”? And if so, is that a good thing? My feeling is that they should be old and boring.

Still, even if Greenwich Stamford is more appealing to the old-and-boring set while Lower Manhattan is better for the young and creative, it makes all the sense in the world for UBS to be in Manhattan — and especially in Richard Rogers’s Tower 3 of the World Trade Center, the most architecturally interesting tower on the site.

For one thing, UBS will be closer to its clients, and the there’s also an “out of sight, out of mind” aspect to UBS. When I run down my mental list of big investment banks, I start downtown, with Goldman, Deutsche, and Citi, and then mentally move to midtown, with Morgan Stanley, Bank of America, JP Morgan, and Barclays. I often forget about UBS, just because it’s so far away; if I do remember it, it’s only because of its small outpost on Park Avenue.

I actually really like the UBS trading floor in Greenwich, a huge column-free space with soaring white ceilings and none of the claustrophobia one finds on other trading floors in New York. But there’s a good reason why every other major investment bank is in Manhattan. If UBS’s investment bank is to be taken seriously, especially if it’s an independent entity, it needs to be here too.


I find it no coincidence that the UBS story is concurrent with this one:

http://www.nytimes.com/2011/06/08/nyregi on/democratic-rule-remakes-connecticuts- legislative-face.html

It is a historical fact that a major chunk of high finance decamped to Connecticut to escape a perceived unfavorable business climate. Connecticut is apparently removing its advantage.

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The Port Authority’s good deal with Condé Nast

Felix Salmon
May 18, 2011 13:17 UTC

Many congratulations to the Port Authority of New York and New Jersey, which is about to snare the most glamorous and high-profile anchor tenant possible for its flagship 1 World Trade Center property. But the Port Authority is getting more than just the whiff of high fashion here. Charles Bagli reports that Condé Nast is going to pay “an estimated $2 billion over 25 years” for 1 million square feet in the building: that’s a lot of money.

$2 billion for 1 million square feet is $2,000 per square foot. That’s an impressive average price of $80 per square foot per year. And even from day one, Condé’s getting no bargain here:

The publisher is expected to move about 5,000 employees to Floors 20 through 41 at 1 World Trade Center sometime in 2014, when its annual rent will start at a little more than $60 per square foot, or roughly the same amount it is paying today at 4 Times Square…

Its rent is somewhat higher than those in recent deals at 7 World Trade Center or the World Financial Center, according to real estate brokers.

It seems that Condé is agreeing to 2% annual rent increases here: you need an initial rent of $62.44 per foot in order to get to $2,000 over 25 years. That’s a good 20% over what Moody’s agreed to pay to anchor 7 World Trade Center next door, back in August 2007 before the financial crisis really hit.

It looks as though Condé is getting the bottom 22 floors of the building; one assumes that the 1.6 million square feet of office space in the 48 floors above Condé will go for even more, especially now that they come with added essence of Condé. And that means, in turn, that rents from 1 World Trade should pretty easily cover its $3.3 billion in construction costs.

What about the high maintenance and security costs for the building? Back in September, Joe Nocera wrote that the Port Authority would need to “charge $130 a square foot to break even on the building” — a number that the Port Authority itself said was far too high, and which didn’t make much sense to me, either. It’s unclear how much of the security costs are going to be borne by the Port Authority rather than the NYPD. But either way, there’s no reason to make Condé pay them.

I’m looking forward, then, to the World Trade Center site becoming a vibrant and exciting neighborhood, anchored by a buzzing skyscraper at its northwest corner — just across the street from Goldman Sachs — and by a beautiful transit hub a little further east. It’s taken far too long to get there from here. But better late than never, especially if the redevelopment is now starting to pay for itself.


something else that wasn’t mentioned in comments or the quotes pulled by Felix, Port Authority had to (per the article), “agreeing to assume the last four or five years of the company’s current lease in Times Square. “

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The tragedy of Milwaukee’s bus service

Felix Salmon
Apr 6, 2011 04:33 UTC

You’re probably not going to read all 3,700 words of William Alden’s huge article about the vicious financial circle in Milwaukee, Wisconsin, where local-government cutbacks are hitting the bus service, with the knock-on effect that a lot of jobs are literally out of reach for people without cars. But it’s a great article, and a fine example of the kind of in-depth original reporting being done by HuffPo.

Alden’s story centers on Petty Schulz, a 53-year-old woman out of work for almost two years who doesn’t own a car. That was fine during the halcyon days of, say, 1999, when the American Public Transportation Association bestowed its Outstanding Achievement Award on Milwaukee County transit. But already the seeds of disaster were being sown: in 2000, when the county Board of Supervisors increased the pension multiplier which determines the percentage of final salary that an employee gets upon retirement, it made a contribution of just $600,000 to the pension fund — down from over $20 million five years earlier.

Today, the cutbacks in bus service have been so severe that even a job at the Milwaukee County Transit System required that Schulz have a car. And the cutbacks don’t just prevent the unemployed from getting new jobs, either: they also force the employed to give up good jobs and become unemployed when they can no longer make it to work.

Of course, the fewer people with work in Milwaukee, the less the city earns in taxes, the more depressed the local economy becomes, and the more the government has to cut back. This is why you can’t cut your way to growth. In the meantime, locals are left to calculate whether they can possibly afford a $25 cab ride each way to get to and from a job which pays $13 per hour. And to wonder how on earth their city can get out of its current predicament.


I’m curious as to how they make the decision to cut service rather than raise fares. If it affects people’s ability to get to work, they would pay higher fares; while I’m sure they would complain that they “can’t afford” them, they would find them quite affordable compared to this outcome.

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John Cassidy Watch, externalities edition

Felix Salmon
Mar 10, 2011 23:21 UTC

I’m beginning to think that John Cassidy must have a serious masochistic streak: he’s now back for a third round of smack-downs, after having drawn unanimous scorn for his first two attempts to demonize bike lanes.

Cassidy purports to take seriously the question of his negative externalities when he drives his Jaguar. But he gets it embarrassingly wrong:

In the case of motor vehicles, there are several negative spillovers, the most obvious of which is pollution and the associated climate threat…

A second issue is congestion…

This gets things completely backwards. The amount of pollution emitted by today’s cars is actually pretty low, while the amount of congestion they cause is enormous. I’d be happy to introduce Cassidy to Charlie Komanoff one day, the guy who’s actually done all the hard empirical math on this question. The pollution-related negative externalities associated with Cassidy’s drives into Manhattan are tiny, while the congestion-related ones are enormous — well over $100 per trip.

And Cassidy’s proposals for tackling congestion are weird indeed: carpool lanes? I have no idea how that’s meant to work on 52nd Street. Meanwhile, the one thing which does work — congestion pricing — is conspicuously absent from Cassidy’s list.

All of this rhetoric allows Cassidy to set up a classic straw man:

Some would say that reducing New York’s carbon footprint is of such importance that we need to utilize bike lanes and other techniques to further inconvenience car drivers.

Actually, John, amid all the thousands of words which have been directed at you since you embarked upon this bizarre crusade, no one said anything like that at all. Big cities like New York are already by far the carbon-friendliest places in America, as Cassidy’s colleague David Owen would be happy to explain to him.

But Cassidy drives blithely on:

I haven’t seen any cost-benefit analysis backing this up, and, frankly, I don’t think such concerns are driving the debate. If global warming disappeared tomorrow, the bike lobby would still demand more bike lanes.

Well, John, here’s a cost-benefit analysis for you. It’s a massive Excel file, It has almost nothing to do with global warming, and it’s completely compelling. The bike lobby has a solidly-grounded empirical basis for the advantages of building bike lanes. You, on the other hand, have an XJ6, an 8pm reservation on Grove Street, and an overgrown sense of entitlement.

Cassidy claims that he wants

some sort of efficiency test beyond the rule of two wheels good, four wheels bad. Do the putative gains in convenience, safety, and fuel-economy from a particular bike lane outweigh the costs to motorists (and other parties, such as taxpayers and local businesses)?

At this point it’s clear that Cassidy has no idea what this kind of analysis — which actually does get done — is involved in these things. He gets the benefits largely right, although I think that he massively underestimates the value and importance of safety gains. If you significantly reduce pedestrian fatalities, as the Prospect Park West bike lane has done, that in and of itself is reason to build it. As for the costs, there’s really very little evidence that motorists and taxpayers and local businesses bear any costs at all.

Cassidy’s in such a bizarro world here that he even wonders out loud whether the Prospect Park West bike lane might endanger pedestrians, when in fact it protects them. And when he forays into the issue of pedestrian safety — an issue which the pro-bike-lane crowd would happily make the sole deciding issue for every single lane — he decides that what’s important here is “the growing problem of cyclists terrorizing pedestrians”. Again, without any empirical evidence to back up his assertion that this problem is growing at all, and certainly without any recognition of the fact that cars are much deadlier in collisions with pedestrians than bikes could ever be.

Cassidy reckons, in his conclusion, that the question of whether to build bike lanes is not a question of a public-interest transportation facility against private-interest parking spots. Instead, he says, “it comes down to one private user versus another” — presumably the bikers on the lane, versus the car drivers who would otherwise be able to park in those spots. Well, that’s an easy balance to strike. When Cassidy plonks his Jag down on a West Village street and disappears off to dinner, he’s just using up space: he’s not serving any public interest at all, and he’s blocking that part of the road for anybody else who might want to use it. When a bicyclist travels down a bike lane, by contrast, she’s there and she’s gone. She uses up almost no space, and she immediately frees up the lane for the next cyclist to come along behind her.

On top of that, every driver who decides to bicycle on one of the new lanes is one less driver for Cassidy to compete with in crosstown gridlock. By rights, he should be loving the way that bike lanes are reducing the number of cars on the road, rather than railing against them. But for all that he claims to be “wonky” in this post, it’s clear that he’s much more interested in coming up with any conceivable justification for his already-existing prejudices than he is in dispassionate analysis. The fact is, it’s the bicyclists who have all the data on their side. The car lobby just has inchoate rants.


Cars are unique among all common modes of *urban* transportation in that their sheer size — particularly in cities, which by definition have limited, expensive ground area for a large population to share — leads to a competitive, vicious circle of congestion when they’re overused. When more people drive, congestion gets worse for everyone, potentially destroying the positive economic effects of agglomeration, and as such the state has a vested interest in reducing congestion by discouraging driving.

Cycling, walking, and transit use are so much more space-efficient that, at typical urban densities, they are subject to a cooperative, virtuous circle of congestion that reinforces the positive externalities of urban agglomeration. More cyclists make for safer cycling conditions [P.L. Jacobsen, Inj Prev 2003;9:205-209], more foot traffic leads to lower crime rates, more transit riders creates demand for more frequent service. Looked at another way, each of these modes is subject to much higher thresholds where the virtuous circle turns vicious. The space occupied by three cars can easily fit 30 bicycles, one bus with 70 passengers, or hundreds of pedestrians.

Drivers tend to blindly bring their competitive outlook to all urban transportation, which is why Cassidy and others end up with such inane arguments.

Posted by PaytonC | Report as abusive