Nathaniel Hood

Nathaniel Hood is a transportation planner and blogger living in St. Paul. He writes for Strong Towns and Streets.MN.

Life After Public Purpose

Posted by: Nathaniel Hood under Best Buy, Politics and government, Politics Updated: August 27, 2013 - 3:35 PM

 The Star Tribune recently ran an article about Minnesota’s 2006 law change that prevents cities from pursuing eminent domain for public purpose economic development schemes. It prevents cities from condemning property and reassembling it for projects (such as the Best Buy Corporate Campus along I-35 and I-494),

“It used to be that … you could use eminent domain to assemble some or all of that [redevelopment] site, and resell it for private use,” said Larry Lee, Bloomington’s community development director. “We can’t do that now.

“What cities still have eminent domain for is to use it for a public purpose: a city hall, a fire station, a park, a trail.”

Quick refresher. Prior to 2006 in Minnesota, eminent domain allowed for the public taking of private land for a public use and public purpose. The “public purpose” has been removed from the equation, and probably for the better. It had a very malleable definition, as one could argue that a public purpose was to take property for economic development, jobs and increased property tax revenue.

It appears as if the law is working as intended and cities are now only using eminent domain for projects that fit a public use, such as utility upgrades, street improvements, sidewalk expansions, bike trails, etc.

Eminent domain has had a spotty history across the country. The most tragic being the use of land takings in Connecticut, where City of New London (pop. 26,000) acquired vast amounts of property and tore down a historic neighborhood so drug-giant Pfizer could move in (see Kelo v. New London). The company spent $294 million on a 750,000 square foot suburban complex only to abandon it 8 years later (the New York Times has brilliant coverage on the story and Strong Towns covers the issue well).

Here’s what New London looks like today, post-public purpose eminent domain: http://www.dr5.org/kelo-v-new-london-the-aftermath/.

The Best Buy story isn’t as tragic, yet. However, Best Buy has been experiencing trouble and has reduced its workforce from around 9,000 to around 4,500 employees at the corporate campus in Richfield. Rumor has it that one of the four towers on site has never been occupied.

The problem with ‘public purpose’ eminent domain is that it typically aims to provide the silver bullet approach; one big project comes into town and the next thing you know, a town’s got jobs and tax revenue! Reality is a little harsher as these projects, as they fail, typically leave the municipalities who championed them holding the ball when all hits the fan. Pfizer can always relocate and Best Buy close-up shop and dissolve assets to shareholders, whereas the City of Richfield and New London aren’t going anywhere.

When it comes to economic development, our thinking is too 1995. One quote from Richfield’s Community Development Director in the Star Tribune article stands out as an example of this;

“… [the Director] said if Best Buy were looking for big plot of land today, without a tool like eminent domain Richfield probably couldn’t compete with an outer-ring suburb that could point the company to a cornfield.

Now that the economy is picking up, Stark said, it could be just a matter of time before legislators begin looking at cities and asking why certain areas are suffering from disrepair and disinvestment.

If Best Buy were looking to relocate today, they certainly would not be looking at a cornfield in Lakeville or wetlands in Chanhassen. They’d be looking for office space in downtown Minneapolis. The tables have turned and the competitive advantage is no longer cheap land, its amenity.

The mega suburban corporate campus is a dying model that, once empty, is hard to lease. It’s also a model of development that is insular and has few positive spillover effects. Why no spillover effects? Because it’s designed to keep employees under one-roof and to not engage them in the wider economic activities of a metropolitan area. This model kills innovation by eliminating casual encounters and knowledge spillovers.

It’s also wrong to think that disrepair and disinvestment in cities or inner-ring suburbs are a result of a lack of large economic development projects. Cities that can’t grow out must grow up, both literally and figuratively. The economic gardening approach, which is safer, lower-risk economic development approach, needs to be the status quo – not the exception. Whatever the case, a city needs to create a template for incremental growth; which includes small-scale density improvements over time, transit and transportation access, urban design improvements, the growth of existing business and the welcoming of small, growing businesses.

The cities that have been the most successful over the course of the last 20 to 30 years are those that have embraced small business growth through innovation, and those that have been nimble, urban and welcoming to change. And, eminent domain that supports large, insular development such as corporate campuses (or large master-planned development, football stadium, etc.) is likely to not add much to a community in the long-run.

Eminent domain for a public use is only fair; although I’m confident it’s been used for bad projects. Nonetheless, there are certainly good and reasonable uses for it. The broad-ranging public purpose, which is now a relic of the past, is something entirely different. It’s the taking of land for what essentially amounts to a gamble; that a baseball stadium or convention center or corporate campus will help revive a town that’s too lethargic to put in the hours and grow from the ground up.

[Read some great comments on this topic at Streets.MN]

Convention Centers: It's a race to the bottom

Posted by: Nathaniel Hood under Physical infrastructure Updated: August 21, 2013 - 8:45 PM

There was a haunting piece of information in The Atlantic Cities that should send shivers down the spines of city leaders across the country.

Over the last 20 years, convention space in the United States has increased by 50 percent; since 2005, 44 new convention spaces have been planned or constructed in this country alone. That boom hasn’t come cheap. In the last ten years, spending on convention centers has doubled to $2.4 billion annually, much of it from public coffers. [Is It Time to Stop Building Convention Centers?]

The desire for convention centers is simple: it brings in visitors with outside money who consume things that are taxed at higher rates (alcohol, hotel rooms, rental cars, etc). From the city’s perspective, it appears to be a win-win. But, these investments come at a cost. In this case, the cost is increased competition.

The article continues,

There aren’t really enough conventions to go around. The actual number of conventions hosted in the U.S. has fallen over the last decade. Attendance at the 200 largest conventions peaked at about 5 million in the mid-1990s and has fallen steadily since then. [Is It Time to Stop Building Convention Centers?]

The number of conventions and total number of people going to conventions has decreased since it peaked in the mid-1990s. The situation we have now is that of more cities are competing for fewer dollars.

It's a classic race to the bottom.

The problem with convention center developments are numerous: there are usually a lot of bad urban design outcomes, they’re large buildings that are essentially single-use that don’t lend much to street life, and they cost local governments a lot of money.

Here’s the bigger problem. Convention centers aren’t limited to just our major cities. Most mid-size cities have them, too. In Minnesota – it’s not just Minneapolis and St. Paul, it’sMankatoSt. CloudDuluthRochester and even Bemidji!

The State pays for most of them. The confusing part is why a State would subsidize Bemidji’s convention center that will directly compete with its other State-aided convention centers in Mankato, St. Cloud, Duluth and Rochester. The cities are competing against each other to provide more space for fewer events and fewer people?

Minneapolis and St. Paul may struggle to make payments on conventions center operating cost overruns or debt service payments, but are big enough to absorb some bad decisions. But, towns like Mankato (pop. 40,000) and Bemidji (pop. 15,000) shouldn’t be risking economic growth on a convention center (or convention center expansions, of which is being seriously considered in Mankato).

I’m going to pick on Bemidji’s new convention-entertainment center. It cost $75 million.

[Image from www.ci.bemidji.mn.us website. Click to enlarge]

The problems here are numerous. Much has been written on convention centers andsporting arenas and their failures at delivering even the most modest of economic gains. This is a concern. But, I wanted to take a different angle.

It’s not just that these projects are economic losers. They more than often destroy prime parcels of real estate with little or nothing to show for it except lots of parking.

Here’s the location.

It’s approximately 1.4 miles from the center of town, occupies a large parcel of prime land on the south shore of Lake Bemidji, doesn’t add any real value to the adjacent neighborhood and won’t pay any property taxes. A better use of this land could be doing something as simple as just continuing the street grid and added single family homes.

This is a sample of 10 blocks of mostly taxpaying single-family homes that will easily fit on the parcel. Coincidentally, this is approximately the same space dedicated to parking.

To make matters worse, it’s about the same size as Bemidji’s charming and loveable downtown. Financing of the project aside, we need to scale down the size of our developments – especially those in small towns.

Continuing to expand convention center space is the economic development equivellent of gambling aginst someone with a stacked deck. It's not going to end well.

Dinkytown: How a City Ought to Grow

Posted by: Nathaniel Hood under Society, Government, Physical infrastructure Updated: August 5, 2013 - 11:08 AM

Great places evolve over time. This is a healthy and historic form of urban growth.

The events that unfolded during the House of Hanson debate tell us a lot about Minneapolis. It uniquely touched on many facets of city life, and interestingly enough, these were cultural mêlées and nostalgic memories as much as they were land use battles. Dinkytown and Stadium Village are neighborhoods undergoing tremendous change as apartments and new spaces are built to accommodate the growing demand for student housing.

All of this is healthy.

Dinkytown’s newest addition is exactly how a city ought to grow; at least, based upon historical precedence. What started as a humble corner store on 5th St and 14th Ave. in 1932 will eventually transition into a six story brick building. It’s textbook successional urbanism; the idea that you start nimble and incrementally grow.

house0

[Original House of Hanson, Sketch, Cultural Construct blog]

house1

[Original House of Hanson & Flooded street, Star Tribune]

The first House of Hanson corner market wasn’t designed to be a permanent fixture. Made of wood, it was built to be cheap, efficient and to delivery food at the lowest possible cost. After about 40 years in business, it turned itself into a more permanent brick building.

house2

[House of Hanson, as seen today, Star Tribune]

The next step in the House of Hanson story is demolition. It’s being replaced by a mixed-use, six story building.

house3

Great places evolve over time. It’s a building pattern that is resilient: you begin with modest single-story buildings made of cheap materials, you improve upon that design, and when permitted by market forces, you develop upwards.

This single-story, bricked building maintained itself well over the following decades to become a memorable fixture of the Dinkytown scene. What many view as a run-of-the-mill corner store, others saw as something more;

“I come in here twice, three times a week,” said Connor Evarts, a U student from Eagan. “I like to support the Dinkytown that’s been here forever. House of Hanson was here when my parents were students, and my grandparents. None of them are happy to see it go, especially my grandfather. I’ll miss it a lot.” [Star Tribune]

The House of Hanson is not what the Evarts family care about. They are attaching a physical place to memories they had as young people. The discovery, excitement, adventure and the friendships; this is what happens during our formative years and we desire to hold onto these memories. We do so by placing them against the backdrop of place. House of Hanson is that place. It embodied the Dinkytown experience just as the new building will embody the college experience for students in the upcoming decades.

It all means that people care about this place – this dinky town – and it is this exact reason why it needs to expand.

So, I was watching HGTV ...

Posted by: Nathaniel Hood under Society, Physical infrastructure, Transportation Updated: July 26, 2013 - 4:07 PM

So, I was watching HGTV and there is this show called House Hunters. If I’m bored late at night, you might find me sneaking a peak at this guilt pleasure. The producers of House Hunters usually take a young couple on their first home-buying experience, drag them to three houses, tape them weighing the options and the couple picks one.

The episode last night just happened to be taking place in what I thought looked like the least sustainable community in the United StatesCape Coral, Florida. I jumped on Google and found myself both fascinated and horrified.

The red outline is an area of Cape Coral that is fully supported by road and canal infrastructure, yet – the homes are few and far between. In fact, there are so few homes relative to infrastructure that it boggles my mind on why they just kept on building it out.

The above image is not an anomaly. The majority of the landscape in Cape Coral looks like this. How are 42 houses going to support the infrastructure maintenance of the roads, sewers, electricity, canals, etc.? These are not high-end homes – most are pretty modest and range from about $80k to $200k (from a quick Trulia search). Since I couldn’t believe what I was looking at on Google Maps, I had to double-check with Bing Maps just to see that the Google imagery wasn’t out of date.

Nope. It looks like Bing gives us the same results, which is to say, not good. I’m confused here – why would they keep building roads if no one was building there? Why did they build NW 8th Terrace when they only sold one house on NW 7th Terrace? Or, better yet – why did they build NW 9th Terrace when no homes were sold or built on NW 8th Terrace?

Of course, not all of Cape Coral is empty. Approximately 1/3 is appropriately built up … in the most mind-bogglingly sprawl-ish way. The canal system might have been a good way to sell real estate, but I’m guessing it’s going to become quite the liability. In the age of climate change and rising sea waters, well – I’m curious to see what will be of this former swamp in 50 to 75 years.

And, from the looks of it – you’ll have trouble walking anywhere. At least from what I could see on House Hunters, it looked like there was a lot of free parking though! To abruptly move on, I was reading through a local Cape Coral blog, and ran into a promotional flyer that appears to sum up the community and their aspirations [speaking of which, Cape Coral even makes this suburban-disaster slide show look tolerable].

It is a flyer for a “Family Fun Walk” to celebrate the “Grand Opening” of a road! I can’t imagine anything less fun than walking with children next to a 6+ lane road. I wonder how many people turned up to the event? I did find this chunk of information though: “The total cost for the right-of-way acquisition, design and construction of both the roadway and bridges came to $42 million.” [Source].

Of course, I looked up the weather report and average winter temperatures are a little nicer.

St. Paul Saints Stadium: Number Crunching

Posted by: Nathaniel Hood under Sports, Baseball, Professional baseball Updated: July 10, 2013 - 11:08 AM

Baseball math is intense. It’s called Sabermetrics, or the specialized analysis of baseball through objective evidence. It painstakingly collects every minor tidbit of information, weighs each statistic against all known variables and computes a prediction; it even addresses margin of error.

It would be great if the City of St. Paul took this approach to analyzing it's current downtown stadium proposal.

It’s designed as system of due diligence. Running the numbers, running them again, and predicting the future outlook against all known variables. 

St. Paul is in the process of building a new $66 million stadium for an independent professional baseball team with a known $29 million construction shortfall.

Ballpark Construction Capital Cost Breakdown:

Construction $54 million
Environmental Remediation [add't] $8.8 million
Local / Utility Improvements [add't] $3.3 million
Total $66.1 million

Upfront Capital Cost Breakdown (by Municipality / Private Entity):

State of Minnesota    
Bonding $25,000,000  
Economic Development Grant $2,000,000  
Total $27,000,000  
     
City of St. Paul    
Capital Improvement Budget $1,500,000 * Redirected from local infrastructure
Neighborhood Funding (STAR) $1,500,000 * Redirected from local neighborhoods
Public Works Budget $1,500,000 * Redirected from Public Works
Riverfront TIF Fund (Redirected) $1,500,000 * Redirected from Riverfront TIF Area
Sale of Previous Stadium $3,000,000 * Sale to Port Authority (PPP)
* Spending $700k to demolish old stadium
Total $9,000,000 * Agreed to provide $17 million
     *($8 million shortfall)
St. Paul Saints Organization    
Upfront Downpayment $1,500,000  
Total $1,500,000  
     
Total Monies Available $37,500,000

* $66.6m Total Cost with
$37.5m Avail. in 2013 = $29m shortfall

The St. Paul Saints have promised a $10 million contribution: $1.5 million will be paid upfront for stadium development, while the other $8.5 million will be paid in rent over the next 25 years; approximately $340,000 per year (or around $6,800 rent per game). The St. Paul Saints won’t own the stadium, so the $6,800 per game contribution is more akin to a rent. In the financing scheme, the baseball team has the advantage as they are able to spread their contribution (and financial risk) over 25 years while accuring no debt [more here].

When looking to mitigate risk and maximize public return on investment, finding long-term, sustainable funding sources for infrastructure is essential. In this case, St. Paul has a funding shortfall of $8 million from it’s promised $17 million. Where the remainder of funds is coming from is currently unknown. If a city isn’t able to cover upfront capital costs, how confident are you that they will be able to afford on-going, long-term maintenance costs of the infrastructure without pulling resources from other city essentials?

A question that reaches beyond scrutinizing numbers: why would you break ground on a stadium site in 5 days without a clear understanding of how to address an $8 million funding shortfall? (The $8 million municipal shortfall still doesn’t include the additional $8.8 million in unfunded environmental cleanup liabilities).

Running quasi-sabermetrics on the game-to-game operations doesn’t yield great returns either. The Saints currently average an attendance of approximately 4,911 per game (current capacity = 6,069). Let’s give them the benefit of the doubt that they can add an average of 1,000 additional people into the seats per game in the new stadium.

(5,911 people x $10 ticket) x 48 home games = $2.83 million ticket sales per year

These aren’t new ticket sales, so the $2.8 million is deceiving. Under the assumption of an additional 1,000 fans per game, the number reveal much fewer ticket sales.

(1,000 people x $10 ticket) x 48 home games = $480,000 new ticket sales per year

$480,000 of additional revenue will be generated per year; most of which will go to the St. Paul Saints. Even considering sales tax, this is not an economic windfall considering the City will be effectively paying $680,000 per year (amortized over 25 years) for what amounts to a 16 percent increase in ticket sales revenue. For St. Paul to make up its end of the financing bargain, they would need to immediately impose a $1.13 tax per ticket sold over the next 25 years, not accounting for debt service payments.

Let’s see how the numbers work:

Revenue Generated [Beer]    
MN Liquor Excise Tax Per Gallon $.08 per gallon * 8 pints per gallon ($.01 per beer)
MN Sales Tax .09 percent * Percentage is rounded up
Cost of Beer $4.00 * Estimated average beer price

 

Per pint of beer, the tax revenue works out to be approximately $.36 cents. Now, let’s assume each $1,000 additional fan buys 1 beer; that’s $360 in new revenue generated from alcohol sales per game. Over the course of 50 games, this generates around $18,000 in new revenue. Yet, when you examine the long-term liabilities of stadium financing and costs, does this number even move the dial?

You run the numbers. Do they add up?

Baseball, and sports for that matter, play an integral role in our lives. I coach baseball, play in numerous Rec Leagues and have friends who write ridiculously detailed (and occasionally insightful) pieces for major online publications covering everything (for example; Power Ranking Every Minnesota Vikings Team of the Past Decade). Sports are an important element of society, but that doesn’t mean we shouldn bend over backwards to accommodate if we’re not in a position to afford it.

Of all the stadium deals out there, St. Paul isn't the worst. There are bigger fish to fry. The stadium is tucked into a part of downtown unlikely to see development and it will add a social element to downtown that can't be rivaled at the current stadium. It's not a bad design either. I just wish I was writing this under circumstances where the financing was under control.

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