But there is a dark side to this vision. In order to succeed, Portland residents will face the greatest coercion ever applied to an American city.
I too have a vision. I call it People 2000 because it is not based on a fifty-year plan that is certain to be wrong. Instead, it gives people tools to solve problems today.
People 2000 is a vision of a city that people choose for themselves, rather than one chosen for them by planners who are fallible as anyone else. People 2000 manages growth through incentives rather than coercion, by insuring that people pay the costs of their own activities rather than paying high taxes for transportation and other systems they don't use. Under People 2000,
People 2000 will work for Portland or any large, urban area. Many details can be altered and no doubt improved, but my purpose is to show that we solve the problems of our cities without coercion and expensive-but-useless public-works projects; that in fact central planning, coercion, and subsidies won't work as well as self determination, incentives, and user fees.
People 2000 has the same goals as Metro's: to protect this region's quality of life by minimizing congestion and pollution and protecting open space. But People 2000 places a high priority on individual freedom and efficiency--two goals that Metro pays lip service to but, by its actions, does not particularly value.
Where People 2000 differs from Metro's 2040 plan is in the means--the tools used to achieve the goals.
The problem with coercive tools such as zoning is that they often lead to unintended consequences. One such consequence is that zoning does not allow for a reasonable transition to other land uses when changes in tastes and property values might call for such a change. Another is that idealistic agencies such as Metro can use zoning to force their New Urban vision on people and neighborhoods rather than let people choose what they want their neighborhood to be like.
The solution is to create a large number of neighborhood associations, each consisting of the property owners in that neighborhood. Each association would have the authority to determine land uses in the neighborhood and to make improvements to the area.
Each association would write their own protective covenants similar to those used in most Houston neighborhoods. According to the Nobel-prize winning economist Robert Coase, Houston's system "not only secures many of the advantages which are supposed to be achieved only with zoning but manages to do so without some of the disadvantages that zoning brings with it."
In his book on Houston, Bernard Siegan writes,
There is a temptation to say that economics is not enough; there should be some additional limitations, perhaps just enough to insure that the strips along roads and highways will be more aesthetically pleasing. One might then ask: aesthetically pleasing to whom? But the bigger problem comes from entrusting this power to some person or some groups who necessarily have their own values and beliefs--and this is the reason why no one could possibly qualify for this trust in the areas of speech, press, religion. Better zoning is no more the answer to no zoning than better censorship is to no censorship.Rather than entrust neighborhood protection to a distant zoning board or an even more distant regional agency such as Metro, this proposal would vest authority solely in the hands of the property owners in each neighborhood.
Such neighborhood associations are extremely common in many parts of the country, particularly southern California, Arizona, and other sunbelt states. Joel Garreau describes them as "shadow governments" because they have many of the powers of government but are run solely by neighborhood residents.
Neighborhood associations would work by having local jurisdictions outline tentative boundaries for all neighborhoods. For six months after the tentative boundaries were drawn, any borderline property owner could change their property to an adjacent neighborhood. Borderline owners could continue to change neighborhoods after the six months, but only with the permission of adjacent property owners.
Neighborhoods would range from a few acres to a few tens of acres in size and would be largely homogeneous. A neighborhood of quiet streets, for example, would not include any commercial or busy streets.
Property owners in each neighborhood would be encouraged to meet to decide how to structure their association. Alternative structures might include a board of directors, "town meetings," or no structure at all.
The association would then be free to write any and all rules for neighborhood use and development. The rules might be as simple as zoning with a minimum of 5,000-square-foot lots, or they might be much more specific, requiring people to tend their lawns and not to leaving motor vehicles in their front yards. Preexisting uses would be "grandfathered" in so no one would be required to tear down a building others don't like without compensation.
The neighborhood association would also receive funds from a real estate transfer fee proposed on page 57. These funds would be dedicated to neighborhood improvements, such as the purchase of land for parks, the purchase and obliteration of preexisting eyesores, or the installation of sidewalks or other pedestrian-friendly facilities. The association could also decide to use some of the fees to purchase scenic easements elsewhere in the region.
Neighborhood transition could take place with the consent of the neighborhood association. Suppose someone wants to build a multifamily dwelling in a single-family neighborhood. The neighborhood association might allow such a development provided the developer pays each of the other members of the association a fee. Commercial uses might also be brought in, with fees varying to the extent that the property owners agree that such uses benefit or harm their area.
An alternative that is worth considering is a system of tradable development rights. Under this system, every property owner is given a tradable development credit, based perhaps on existing zoning. Anyone who wants to develop their property beyond existing zoning would have to purchase development credits from someone else.
Under this system, certain areas could be protected from further development by downzoning them, yet leaving the tradable credits in the hands of property owners. While the owners could not develop their land, they could sell their credits to others who have the right to develop other lands.
The problem with tradable credits is that it still requires a central planning authority to monitor credits, determine zoning, and decide which areas need further protection. The neighborhood association program is much more decentralized and more responsive to local desires to protect livability.
In sum, such neighborhood associations would completely replace zoning. They could protect neighborhoods not only from unwanted new developments on private property but from government imposition of developments that the neighborhood does not want. Yet they could allow orderly neighborhood transitions without people feeling that their land had been devalued without compensation.
The solution is to charge a road-use fee that varies depending on the time of day. The fee would be highest during rush hour, while it would be very low or zero at night.
Such congestion pricing is common in ordinary business:
Transponders are inexpensive: For less than the cost of building one mile of light rail, Portland can provide a transponder for every car and truck in the area. Drivers would then associate the transponder with their credit card or prepay to make the transponder a debit card. The prepay option would resolve privacy questions because no one would ever know who was using a prepaid transponder.
Toll stations would be set up at "choke points" distributed around the city. For example, virtually all traffic from Portland to Milwaukie, Oak Grove, and Oregon City must travel on highway 99E in Milwaukie--there are no reasonable alternative routes. Other Portland choke points would include bridges across the Willamette and Columbia rivers and the five or six major roads that cross the Tualatin Hills west of downtown Portland.
Congestion pricing is successfully being used by a private road company in Orange County, California. The company has built a two-lane highway paralleling a crowded freeway. Tolls range from 25cents at night to $2.50 during rush hour. Cars with three or more people or disabled plates are free. The company has sold nearly twice as many transponders as it predicted and highway users claim they can save 20 to 45 minutes in each direction. San Diego will add congestion pricing to a freeway in August.
To make congestion fees politically palatable, the fees collected should be partly offset by a reduction in state gasoline taxes. For maximum appeal and flexibility, the fees might apply only to certain "congestion-free" lanes, similar to high-occupancy vehicle lanes. Congestion fees would be used for highways, roads, and streets, and could also be spent on transit improvements.
Metro is studying congestion pricing, but only because it received a federal grant to do so. Its 2040 planning documents never mention the idea. In what is probably an echo of Metro's feelings, the Oregonian says that "At best congestion pricing is a solution that might supplement light rail."
"Congestion pricing could be implemented within the next 5 years, without the need for Congressional pork-barrelling, and solve most congestion problems virtually overnight," says John Charles of the Oregon Environmental Council. "But Metro would rather focus 2040 on rail lines for which there is no apparent method of financing."
In contrast to Metro, Oregon's Department of Transportation is enthusiastic about congestion fees. A recent agency report says that such fees "should be the highest priority consideration for financing new facilities to solve congestion problems."
As a reasonable target, fees should be adjusted to reduce peak traffic by 20 percent. Since 40 percent of morning rush-hour traffic and 60 percent of afternoon traffic is not commuter traffic, reducing traffic by 20 percent should be easily accomplished without disrupting anyone's work schedule.
Such a target is easily attainable. During the 1970s "energy crisis," many predicted that fuel consumption would continue to rise at exponential rates. In fact, with higher prices, people bought fuel-efficient cars, and the "energy crisis" of the 1980s was one of low oil prices due to a drop in demand.
In a fast-growing city such as Portland, congestion fees would not end the need for new roads--nothing will do that. Assuming an 80-percent increase in overall auto traffic and a 20-percent decrease in peak-hour demand, Portland will need about a 44 percent increase in highway capacities over the next fifty years or less than a 1 percent increase per year. That should be feasible if the city does not drop most of its transportation dollars down the light-rail drain.
According to the Texas Transportation Institute, the Portland area currently has about 560 lane-miles of freeways and expressways and 580 lane-miles of arterial (mostly four lane) streets. At a cost of about $5 million per lane-mile for freeways (including interchanges) and $2.5 million for arterials, the region will have to spend about $55 million per year to keep congestion at current levels. Over the next fifty years, the total cost would be about $2.7 billion--less than the south-north light rail alone.
The difference is even greater than it looks since this cost is spread out over fifty years while the south-north cost would be spent in just ten. At 7 percent interest, the present value of $2.85 billion spread over ten years is $2 billion. But the present value of a $55 million annual cost for fifty years is just $760 million.
An alternative to congestion fees would be the complete privatization of Portland's road network. This would effectively produce the same end result, since many private road owners would use congestion pricing. Privatization is too big a change to be politically realistic. But Portland could offer private business the chance to build and charge tolls for some of the new roads Portland will need over the next few decades.
In sum, congestion fees treat the source of the problem by creating incentives to minimize peak-hour congestion and giving both decentralized highway users and highway providers feedback about when and where to travel and build roads.
Federal rules governing pollution control devices have probably gotten about as strict as they are going to get for the time being. As the number of people living in Portland rises, the sheer number of autos may swamp the benefits of reduced pollution per auto, leading Portland to again violate federal pollution control standards. All of Metro's alternative concepts are predicted to violate those standards by the year 2015.
The Environmental Protection Agency's response to pollution has been to require vehicle inspections in major urban areas. The agency recently mandated a more expensive, more time-consuming test. Yet vehicle inspections have two major problems. First, it does not target the dirtiest cars, since vehicles need only be as clean as federal laws required at the time they were made. Second, even the new test fails to diagnose many heavily polluting cars. A California study showed that random inspections found more than three times as many violations as scheduled inspections. Another study found that 42 percent of vehicles failed the test when they were randomly checked within three months of their scheduled inspection.
The best solution to an open-access resource is to vest the ownership and responsibility for that resource in one entity, so that those who benefit from it cannot shift the cost onto others. It may not be possible for anyone to "own" the air, but it is possible to charge people fees for the rights to use that air.
The solution to automotive air pollution is to charge a pollution fee based on the amount of pollution each car produces per mile times the number of miles the car is driven each year. The fee could be paid at the time owners update their registration, which in Oregon is every two years.
Auto air pollution is a function of three things: the car, the number of miles the car is driven, and how it is driven and maintained. Cold cars, for example, pollute more than after they have warmed up, so two one-mile trips each starting cold may pollute more than one ten-mile trip.
This proposal would charge based on the first two factors but not the third. Someone who doesn't maintain their car or who takes many short trips will pollute more than someone who maintains their car or takes mainly longer trips. For administrative simplicity, the emission fees would be based on an average.
According to one economic study, the public health cost of auto air pollution averages about 3cents per mile. However, it is much more for Diesels and cars made before federal air pollution laws and much less for brand new gasoline vehicles. Portland's pollution fees might range from 1cents to 10cents per mile depending on the type of vehicle. At these rates, someone who drives 10,000 miles a year would have to pay $100 to $1,000 per year in pollution fees, with the average being about $300. This difference in fees would give people clear incentives to replace polluting cars with cleaner autos.
Income from the pollution fees could be dedicated to two funds. First, since congestion causes cars to triple the amount of pollution they emit, the larger share of the revenues could be used for congestion-reduction programs. These might include mass transit, building more highways, or building bicycle and pedestrian facilities.
Second, a smaller share of the revenues could be used to purchase and destroy particularly polluting engines. This might include pre-1975 autos. It could also include some two-cycle engines, since these typically pollute far more than new cars. For example, Metro recently gave purchasers of electric lawnmowers a $40 rebate for turning in a functioning gasoline mower. This rebate was limited to the first 500 mowers turned in, so had a minimal effect. But a larger rebate of around $100 would essentially make electric mowers the same cost as gasoline ones. With no limit on the number of rebates, this could significantly reduce the pollution from two-cycle engines.
Two alternatives to this proposal could greatly improve the incentives. While they are more complex, they could be used in the future as technology improves and growth causes more pollution problems.
First, pollution fees could be based on actual emissions, rather than a formula based on the number of miles driven, by distributing emissions sensors in various locations around the city. Sensors have been developed that can calculate the amount of pollution a car is producing as the car drives by. Couple these sensors with the radio transponder used for congestion pricing and you have a mechanism for charging for actual pollution.
A second alternative relies on tradable pollution permits rather than pollution fees. All car owners would be given a permit to pollute as much as their car is legally allowed to pollute. Make those permits tradable so that anyone who buys a new car will be required to buy a permit for the amount of pollution that car would be expected to produce. An owner of a pre-1975 car can junk their car and sell their permit to more than a dozen purchasers of brand new cars.
Tradable permits might be politically palatable because they don't require fees paid to the state. It also has the advantage that the government--or anyone--can systematically reduce overall pollution by buying permits and not using them.
But as described here, tradable permits may be unfair because older cars aren't driven as many miles as newer ones. While older cars pollute more on a per mile basis, they tend to produce less pollution each year than newer cars because they go fewer miles. This alternative might be worth considering if the administrative and social problems of incorporating mileage into the permit can be resolved.
In sum, pollution emission fees can give people incentives to drive cleaner automobiles and generate funds that can be used to reduce pollution and pollution-causing activities such as congestion.
The subsidies have had a side effect of making the agencies so top heavy with bureaucracy that they are inflexible and slow to respond to changing transportation patterns and new technologies. Tri-Met gets 78 percent of its funding for operations and overhead from taxes. Most of this comes from a regional payroll tax, which is an income tax that workers are only dimly aware of because it is paid by their employers and does not appear as a deduction on their paystubs.
On top of that, Oregon--along with many other states--grants transit agencies legal monopolies on public transportation. Except for licensed taxis and non-profit organizations, no one is allowed to run transit services competitive with the public agencies.
"When a single company can capture 80 percent of its revenues through taxation, and is protected from any direct competition, there is no incentive to provide services that people really want," says the Oregon Environmental Council's John Charles. "The services are totally politicized; we get whatever the pork market will bear."
The solution is to deregulate mass transit so that private operators can compete against the local public transit agency. This would allow at least two different innovations: competitive tendering and demand jitneys.
Under competitive tendering, the public transit agency would contract out selected bus routes to private operators. Tri-Met would determine the fares, routes, schedules, and safety standards and ask for bids for three- to five-year contracts. Anyone, including existing transit employees, could bid on the contracts. In most cases, the routes would still be subsidized, but by paying the low bidder the agency could save huge amounts over its current costs.
Several cities in the U.S. and elsewhere are using this system to save money and improve transit service. San Diego is contracting out about a third of its bus routes. With the money saved on those bus routes, the city has significantly expanded its services in other areas. Some cities, such as Las Vegas and Indianapolis, are using competitive tendering to operate their entire transit systems.
Demand jitneys are small buses or minivans that carry people from doorstep to doorstep. Like a taxi, they respond to a phone call and pick you up at your door. Like a bus, they make other stops until the jitney is full. Then they drop people off at their destinations. With computerized dispatching, jitneys are significantly faster than ordinary buses yet significantly less expensive than taxis.
The city of Miami created a jitney service that now carries well over 40,000 people per day--three-quarters of whom were previously driving cars. Riders say they like it because it is fast, convenient, and inexpensive.
In addition to deregulation, John Charles suggests giving some of the revenue from congestion pricing to transit users in the form of vouchers. "If Tri-Met had to compete with other jitney and bus companies for millions of dollars of voucher revenues held by consumers," says Charles, "we would see a very different type of agency."
One change that would certainly happen is that Metro and Tri-Met would stop planning and building any more light rail lines. While that might disappoint rail advocates, it would save taxpayers billions, some of which money could be used to improve transit in far better ways than building more inflexible rail lines.
An alternative is to have the transit agencies themselves run demand jitneys. Many transit agencies, including Portland's Tri-Met, already run jitneys--but only for disabled passengers. While the agencies could expand this service, they could not do it as efficiently as private operators. Since jitneys are potentially profitable, they could be operated privately at no cost to the public.
A major advantage private operators have over public agencies, other than lower overheads, is that they can hire non-union employees. Virtually all public transit agencies have union contracts that pay significantly higher wages than private industry--sometimes higher even when the private industry is unionized. Thus, unions can be expected to oppose public transit deregulation.
In sum, if the goal is to get people out of their cars, public transit deregulation will do far more than building an expensive, inflexible light-rail system. While unions may object, deregulated transit systems will carry far more people--and in turn employ far more drivers and other workers--than current transit systems.
Efforts to protect open space through zoning or growth boundaries can be highly inequitable. Why should one person make tens of thousands of dollars per acre selling their land, while identical land next door is nearly worthless because it is on the other side of an invisible growth or zoning boundary? Changes in the boundary can make some people rich, yet reduce others' property values because their windows that once looked upon scenic vistas soon view houses and other developments.
The solution is to protect scenery and open space by purchasing scenic easements from the owners of farms, forests, and other open space. Easements can insure that the land remains open forever, not just until a government agency changes a zone or growth boundary. Landowners who sell such easements can continue to use their land for, say, farms and forestry, but they are compensated for not being allowed to do other things, such as subdividing or building shopping malls.
The best way to pay for such easements is through a real estate transfer fee. Since the most valuable real estate tends to be the land with the best views, the costs of open space will be paid mostly by those who benefit the most.
The real-estate transfer fee would work by charging a fee of, say, 3 percent with each real-estate sale. Half of the fee would go into a scenic trust fund that could buy open space easements throughout the region. The other half would go to the neighborhood association in which the property was located. If there were no working association for that neighborhood, then the scenic easement fund would get all of the fee. In 1995, Portland-area real estate transactions for residences alone exceeded $3.2 billion, so a 3 percent fee would generate more than $100 million per year.
The scenic easement trust fund would set regional priorities for purchases of easements. In addition to scenic easements, it might also purchase public access easements in some areas, perhaps for trails or bike paths. In some cases, it might purchase land outright for parks. The neighborhood associations could spend their share of the funds on easements in their neighborhoods or on other neighborhood improvements such as parks or pedestrian facilities.
The real estate transfer fee will not generate enough funds to buy easements on all 98 percent of Oregon that is undeveloped. But it won't have to. The scenic trust fund would purchase easements in the areas of highest regional priority. Neighborhood associations could purchase easements in areas that are priorities to them. State and local highway departments might purchase easements along particularly scenic roads. Many areas would be left open for development, but would be developed only if development profits outweighed what someone would pay to retain open space.
In some cases, the cost of easements might be a significant percentage of the total land value, especially when development is fast approaching that particular piece of land. One way to keep costs down is to buy easements well in advance of development. Another way is to buy easements from a group of property owners. Easements can actually increase the value of a property if adjacent properties also have easements.
An alternative to the real-estate fee would be a system of tradable development credits, briefly described on page 56. Such a system could be designed to protect the region's most scenic areas. Yet it would still require a zoning system and would be incompatible with the neighborhood self-determination described in the previous proposal.
In sum, the real-estate transfer fee is an equitable way of protecting open space and scenery. Unlike the urban-growth boundary, it does not impose the cost of open space on some while allowing others to enjoy the benefits. Unlike Oregon's land-use planning laws, it insures long-lasting, if not permanent, protection for the region's most valuable scenery and open space.
Metro claims to be resolving this problem through good planning. Yet Metro's planning is not accompanied by any rigorous calculation of the costs of providing services under any of the alternative concepts Metro considered. Nor did Metro attempt to find a least-cost concept. In fact, Metro's 2040 plan is likely to significantly increase the tax burden for existing residents.
The solution is to encourage local sewer, water, and other districts to impose a development fee on each new development based on the cost of that development to each district. Developers could negotiate with each district to design a development that is both marketable and yet keeps fees reasonably low.
Developers already pay some fees. But Washington County estimates that the amounts developers pay for sewer hook ups only cover about a third of the costs to the county.
Metro traces its origins to worries that the more than 200 sewer, water, and other local districts was a major problem. In fact, the more local the districts, the more likely they are to want to charge appropriate fees to new developments--especially since most of those districts are governed by board elected by current residents of the districts.
Development fees should not be seen as a growth-control measure. After all, most newcomers to an area buy an existing house, while most new houses are built by people who have already lived in the area for some time. So development fees that are too high will mainly hurt existing residents. At the same time, imposing the true costs of development on buyers of new homes and other buildings will discourage development where services may be most expensive, such as outside of the urban area.
In sum, development fees would give developers incentives to minimize the costs of sprawl. They would also insure that existing residents don't have to pay an unfair large share of the costs of new developments--unless they themselves are buying into such a development.
But one cost remains: the subsidies that states and localities sometimes give to corporations to build factories, offices, or other facilities in those areas. Until about a decade ago, Oregon mostly stayed out of the race to "bid" for new jobs with tax breaks and other subsidies. But the recession of the early 1980s led Oregon voters to pass a lottery whose receipts were dedicated to economic development.
In the lottery's first decade, revenues grew from $60 million to $600 million per year. Fortunately for growth opponents, the money appears to have been poorly spent. An investigation by the Oregonian found that the fund's officials rarely, if ever, bothered to check if the grants and loans provided by the lottery were actually used to create new jobs.
In the early 1990s, Oregon's economy was booming and the biggest new employers were electronics and computer companies such as Intel and Hewlett-Packard. Oregon's quality of life attracted these companies to building plants in the state even though Oregon did not offer them property tax breaks that they could get in other states.
But in 1993, Intel convinced the state legislature to allow counties to give tax breaks to companies building huge silicon chip factories. Since then, a dozen companies have decided to build more than $10 billion worth of facilities in the Portland area. More than half of those companies applied for and received tax breaks totaling well over $200 million.
It is not clear that such tax breaks were really needed to convince the companies to build in Oregon. Several of the companies did not even bother applying for the breaks. One that applied for the break but didn't get it decided to build in Oregon anyway (but later changed its mind for other reasons). Another got a break but then made it clear it would have built even without it.
Growth subsidies end up being a vicious circle. People move in so we have to create jobs for them. We subsidize factories to provide jobs so more people move in. It is particularly absurd to try to keep Oregon income levels equal with other places. If Oregon's quality of life is so much better than other places, then people will be willing to earn less to live here.
The solution is to stop giving tax breaks and other subsidies to agents of growth. If people want to move here, let them. If companies want to build their offices or factories here, let them. But all must pay their own way.
Lotteries are regressive taxes, but if Oregon chooses to keep one, the funds can be dedicated to education or something else that will benefit the people who are already here, not those who want to move here.
In sum, ending subsidies to growth is a crucial part of any plan that is designed to make people pay the full costs of their activities.