For most people this sounds like good news, and in general it is. The second most important thing a city can do to revitalize is to provide job training. So MCCC’s decision to increase classes in Trenton where they can be easily accessed by Trenton residents is a great thing.

So why in the world would a guy like me who does almost nothing but lobby for smart revitalization in Trenton complain?

Because, the school is making dumb revitalization claims. MCCC argues that in addition to promoting the benefits of education to Trentonians, it is also providing an economic stimulus. They are not.

By expanding their programs, the college claims that more students will be milling around downtown presumably buying things. Here’s where MCCC logic breaks down. They are arguing that by students shifting their spending from one part of Trenton to the downtown it will have a marked effect on our economy. Somebody at MCCC needs to retake Economics 101.

The second point MCCC makes is that they will be spending money on construction on the expansion. I should remind readers that MCCC is funded with taxpayer dollars and that the proposed expansion will be tax exempt. So even though over half of Trenton’s property is tax exempt we’re going to get even more at the expense of Mercer County taxpayers.

I’ll give a couple of examples of what’s happened in downtown Trenton. Several years ago I made an offer on a building that’s since become part of the Daylight Twilight School. I was outbid by the school system. My project would have paid taxes, the school does not. The same happens with MCCC, they will outbid private investors using taxpayer money and we’ll be left with no new revenue. We’re also building an expensive new County courthouse on Market Street and county officials have the nerve to call this revitalization as well. Trentonians need to stop drinking the Kool-Aid of government spending. We need to elect officials who understand this and will be skeptical to the point of being openly hostile to the idea of anymore tax exempt development in our city.

That said, job training is a still a good thing. However the article on MCCC points to unclear thinking about what is really important in Trenton’s revitalization. We can’t afford to be vague.

Desegregation in our state was done on a city-wide basis, unlike in southern states which were integrated at a county level. The differences in effects are stark. Southern schools achieved racial integration because county districts limited white flight. In New Jersey, white families simply moved over a city line and created their own new racially segregated school districts, like West Amwell, Hamilton, and Ewing.

As a result, New Jersey has 590 school districts for a population of 8.7 million people while North Carolina has 115 districts for a population of 9.4 million people. This is how schools became comparatively “separate”.

This system of city-wide integration gave rise to New Jersey’s current level of segregation, which ranks the state as 12th in black-white segregation and 6th in Hispanic-white segregation according to a study at the University of Michigan based on US Census data.

The 1985 “Abbott vs. Burke” decision by the NJ Supreme Court further adjusted New Jersey’s educational landscape. It mandated that poor districts receive equal funding to rich districts. This is how schools became “equal”.

For those who aren’t students of civil rights history, the US Supreme Court ruled in 1954 that “separate but equal” wasn’t good enough. While school systems across the country and particularly in the South resisted integration, forced school busing in these new county-wide districts, in many ways saved southern cities from the white flight that drained resources from their northern counterparts. It was a blessing in disguise.

Rather than propose ways to finish the job of racial integration in New Jersey, Senator Mike Doherty of Hunterdon County proposes to gut our “separate but equal” system of educational apartheid and replace it with a “separate and unequal” system.

Senator Doherty’s plan is called Fair School Funding. It seeks to equalize school funding from the State to a formula that equates to $7,400 per student no matter what school system that student lives in. In Senator Doherty’s PowerPoint presentation, he compares West Amwell (which is mostly white) to Asbury Park (which is mostly black). In his example, West Amwell would receive an additional $6000 per student from the State while Asbury Park would lose $17,000 per student. West Amwell could then spend $20,000 but Asbury Park could afford to spend only $10,000.

In the presentation given to a West Amwell Town Hall meeting, Senator Doherty uses a particularly “high handed” statistic that says 85% of school districts will get more money. However, I suspect that 50% of students will benefit and 50% will not because the large urban districts like Newark, Trenton and Asbury Park would be the losers.

The Fair School Funding web site is very well done and happily reports how much money every school district in the State would gain or lose. Trenton would lose over $130,000,000 (about 45% of its total) and Newark would lose over $370,000,000. Meanwhile, Princeton will gain over $23,000,000.

It takes a lot for me to call a thing racist but this plan just is. It’s based on the notion that it’s good that our schools are separate and furthermore that children in New Jersey’s poor (mostly black and Hispanic) districts don’t deserve the same public education afforded those in wealthy (mostly white) districts. If it weren’t, Doherty might have a Trenton or Newark co-sponsor to explain why property taxes would have to triple in those cities to make up for the loss in funding.

I fully expect Senator Doherty to trot out New Jersey’s Home Rule laws to defend his bill, much like George Wallace used “states rights” arguments to defend racial segregation. America has moved forward, leaving New Jersey behind, and now Doherty wants to take us all the way back to 1954.

Neither a State nor a civilization should want to institute a radical plan like Doherty’s Fair School Funding as it would effectively close urban schools. This proposal is like a “final solution” to the black and Hispanic urban populations.

If nothing else, this proposal shows how messed up New Jersey really is. The fact that a State Senator is proposing this should concern us even more. Senator Doherty needs to be called out. He apparently hopes to rise in the Republican Party and seek state-wide office. This should not happen.

It’s clear though that New Jersey needs to rethink how it wants to govern its society in order to overcome the fear and loathing that has bred Mike Doherty.

It’s fine to think that Asbury Park and Trenton need to do better at running their cities, they do. But really, other forces have caused West Amwell to be like it is and Asbury Park to be like it is. None of those forces have anything to do with how those cities are currently managed.

There are better ways to deal with schools and school funding and I call on Republicans of good will to lead the charge for a better New Jersey.

I’ll offer my counter-proposals.

New Jersey needs to fix its social fabric before the economic fabric of its cities and suburbs can work well together. The people of New Jersey need to reject segregationists like Doherty and embrace the goal of twenty-one modern, efficient and integrated public school systems.

References

Fair School Funding web site – http://www.fairschoolfunding.com/

University of Michigan Institute for Social Research – http://www.psc.isr.umich.edu/dis/census/segregation.html

Over the years, state and federal governments have adopted policies favoring the creation of suburbs:  most notably road building, tax advantaged mortgages for single family homes and electrification.  Technology also played an important role in making urban centers less important as telecommunications, trains, power generation and eventually container shipping spread manufacturing out of town. [1]

These policies and technologies, among others, led to urban decline over the last 50 years.  Urban renewal and the riots in the late 60s were just nails in the coffin.

These are powerful mega-trends but their influence is waning and new mega-trends are taking over:

1. Cities are more energy efficient than suburbs and going forward this is important for our economy
2. Half-full cities are dangerous places.  Witness the difference in crime rates between half-full Detroit and Camden vs. full Dallas and Knoxville.
3. Food production has become super efficient allowing a very low proportion of the population to be involved in agriculture
4.  Humans are more innovative together than apart.  This has always been the case and recent research proves and quantifies the point.  [2]

Given that our future evolution as a society centers on the city, how can New Jersey, as one of our country’s most dense states, lead the way in reforming our urban economies? 

There are “Four Big ideas” for how the State could Re-invent Trenton and New Jersey’s other urban centers

Any one of these big ideas would turn around a city like Trenton and be far less expensive that providing aid year after year.

• Create integrated county-wide school systems
• Fund urban development tax credits
• Create Urban Income Tax Zones
• Squash the criminal gangs

Let’s integrate schools at the county level. 

No one talks about this, but integrated county-wide schools would take away the single biggest impediment to Trenton’s success.  I’ve made this argument before and it’s still a basic truth that our Governor should consider.  I know that suburbanites might recoil at racial integration, but we have a Republican Governor.  Like Nixon going to China, only a man of the suburbs can make this happen.

The positives for a large reduction in school districts are many.

Integrating the schools will increase not only racial diversity but also socio-economic diversity.  This will even out performance levels in county schools but the theory is that the positive impact on urban schools will be greater than the negative impact on suburban schools.  It’s not necessarily the schools themselves that provide a sub-par education; it’s really the impact of the students in the school.  Change the mix of students and you’ll change the success of the school.  And we have to remember that just because a school’s test score average goes down, that doesn’t mean students, individually or as a whole go down as well. 

Twenty-one County districts in New Jersey will be less expensive than 591 independent districts.  However, given that the bulk of education expense is for classroom teaching and buildings, we shouldn’t expect financial miracles.  We’ll still need administrators and if we integrate, our dependence on busing should go up, not down.  But there will be savings.

The state role in funding education should go down as the county’s goes up.  State funding, in particular Abbott funding, is only one mechanism for redistribution of wealth.  With county-wide schools, this funding redistribution would happen naturally.  It’s a good thing to untangle the intermingling of funding between levels of government.   Both cities and the state would be mostly out of the school business.  Therefore our income tax burden in New Jersey would be reduced with an offsetting increase in property tax.  The state could restrict its role to oversight and perhaps some subsidization for poorer counties.   Suburbs will get the benefit of trading state control of their tax dollar spent on urban schools in return for local control of their spending. 

Other than the fears of suburbanites it’s difficult to justify New Jersey’s current system of independent school districts.  Southerners and other opponents of desegregation tried in the 50s and 60s and we decided as a country then that separate but equal (i.e. Abbott) was not in our interest.  Fifty years later, it’s still not right and not right for the future of New Jersey and the urban districts that are its future.

Stop funding urban low income housing and provide investment tax credits instead

Today’s state and federal funding regime for urban areas, centers on affordable housing.  For instance much of New JerseyMFHA’s funding has income restrictions tied to it. RCA payments are still being made to cities by suburbanites.  The federal government is still funding low income urban housing like HOPE VI.  Unsophisticated local governments are taking this money without understanding that it costs them more to support the eventual development in the form of municipal and school services than they collect in taxes.  

We’ve created an affordable housing industry in New Jersey and the US that is now perpetuating itself.  This industry will lobby for the continuation of government funding long after it’s shown to be harmful to cities. 

This is wrong headed and the state will do Trenton and other New Jersey cities a big favor by eliminating this kind of funding in favor of investment tax credits.

Tax credits aimed at stimulating non-income restricted housing in cities would change the balance of growth in our state.

With $500M in tax credits spread over the next 5 years, developers could leverage that money up to $2.5B in ratables for Trenton.  This level of investment would allow the state to discontinue aid to Trenton within the next 10 years and make it a better place to live in the balance.  A wise Governor will find a way to redirect funds that would have gone to big infrastructure projects like the ARC to rebuild taxpaying urban centers in our state.

The Fix Trenton’s Budget Committee has modeled Trenton’s budget going forward and it is clear that without a shot in the arm of investment, Trenton will have trouble achieving the kind of escape velocity it needs to be self-sustaining.

Create Urban Income Tax Zones in New Jersey 

The Governor and all 8.7M New Jersey citizens know that our income taxes are on the wrong end of the Laffer curve.  The Laffer curve is the economic principal that describes why low taxes don’t maximize government revenue and neither do high taxes.  New Jersey is on the high tax side of the curve and we’re reducing revenues by forcing residents out of the state.

We can fix this.

Just as the state has created UEZs (Urban Enterprise Zones), it can also create UITZs (Urban Income Tax Zones).  These zones will serve to attract new residents and new investment to cities like Trenton. 

What if in a UITZ, the income tax rate was only 2% for the $150,000 income range?   Higher income New Jerseyeans and tax refugees from surrounding states would flock to Trenton and other cities.  The low tax rate might not convince everybody, certainly not those with school aged children, but it would certainly make a difference.  Of course we don’t know exactly how much of an effect it would make, but shouldn’t we try it?  I believe I can speak for the citizens of Trenton and the Mayor in volunteering Trenton to be the test market for New Jersey’s low tax experiment.

The math works as follows.  The 2010 New Jersey income tax rate for middle income citizens (earning $75K to $500K) is 6.37%.  For a $150K / year professional that would be $9.6K / year. 

At 2%, the same $150K/year professional would now pay $3K. 

The impact of an UITZ in Trenton on state revenue is not that high.  There are 20K households in Trenton with an average income of $35K.  Assume an average income tax rate in the city is 5% as we don’t have many households making over $75K.  In our UITZ, the state would take a 3% hit (5% – 2%) on income tax collections.  This amounts to 20K x $35K x 3% or $21M / year.

For just $21M / year, less than  transitional aid, New Jersey could create an income tax oasis right in the middle of the state.  We would attract high income residents from the rest of the state and from other states.  UITZ cities would become economic engines rather than drains.

If just 1000 families moved to Trenton with household incomes of $150,000 the impact would be enormous.  Those people would buy homes 3 times their salary (the typical ratio) or $450,000 a piece.  Each home would yield municipal property tax at an effective rate of 3.5% of $15,750 a piece.  For 1000 homes this amounts to $15.8M in property tax revenue to Trenton.  But more importantly, each home that is sold in Trenton makes the home next to it more attractive and also draws more retail business into the city which has a knock-on impact on property values.  Anything the state can do to stimulate immigration of middle and upper middle class residents in to the capitol city is worth doing.   New Jersey will spend less to support a population centered in urban cities that it does today to support a sprawling population.

My hope is that creative thinking will play a part in our government’s attempt to re-invent how our state interacts with our cities.  I don’t claim that my analysis or math is perfect, but I’m pretty certain that what we’ve been doing won’t work and we need big ideas that fundamentally change the rules in New Jersey.

Squash the gangs

Every urban center in New Jersey, and Trenton is not an exception, has a gang problem.  The gang problem isn’t just a neighborhood or city problem, the big gangs are statewide and many are national. 

As many have said before me, gangs are much more of a terroristic threat to our country than are radicals in Somalia.  It seems that gangs, not Islamic radicals, should be our state’s number one public safety priority. 

Solving the problem is under-resourced.  In fact, Trenton is currently operating without a gang task force.  If the New Jersey State Police with the support of the federal government could step up to own the gang problem in the New Jersey, we would have taken a quantum leap in revitalizing all of our cities.   If New Jersey could own and fix the gang problem at the state level, Trenton and our other cities would have their number one issue resolved.

In addition to policing the problem, the state has a role to play in toughening sentencing guidelines and in expanding prison and rehabilitation programs.  The economic research is clear on the benefit of keeping criminals off the street. 

New Jersey needs to come out of the shadow of being the Sopranos state and into the light of being the most hostile place on earth for a criminal gang to operate.

We Hope to Seriously Develop and Propose Ideas Like These 

With its state aid severely cut, the City of Trenton will be on the forefront of redefining how it and possibly other urban centers interact with the state and the counties.  This is important work not just for New Jersey but for the country as a whole.

[2]  “A Physicist Solves the City” by Jonah Lehrer, New York Times Magazine, Dec. 17, 2010.

In the late 60s when most school systems including the ones in New Jersey were going through racial integration, New Jersey dropped the ball.  Sure enough the schools were integrated but at a city level and with predictable results.  With racist fear in their hearts parents began leaving Trenton and stepped across city lines to Ewing, Lawrence and Hamilton.  That drain of stability and capital led to a gradual decline in both school performance and the tax base necessary to fund basic services.  Like it did in many school systems across the state and nation, a vicious cycle of decline set in.

We are where we are.  Now there is no way that an inner city school system like Trenton will reach academic success levels better than the surrounding townships in our lifetime.  Anyone who says it’s possible, hasn’t been paying attention to the failed efforts over the past 30 years.

Meanwhile, in the South, schools were integrated at the county level rather than city.  This made all the difference and it wasn’t because southern governors were enlightened, instead they were forced at gunpoint by the federal government.

In cities like my hometown of Winston-Salem, kids were bussed all over the county to achieve racial balance. It was expensive, messy and uncomfortable.  However, it also helped to avoid “white flight” because there was no where to which to fly.

Today, cities like Winston-Salem and Charlotte have grown in population and have retained much of their economic vibrancy.  Neighborhoods have remained stable and over the years, as the country and the South have become more racially tolerant, neighborhoods have become integrated.

I’ve previously referenced a Harvard study on school segregation that finds the most integrated schools to be in the South.  That same study lists New Jersey as the fourth most segregated in the country.  This shouldn’t be a surprise to the calm and rational social observer.

Had New Jersey’s state leaders been more enlightened they would have followed the Southern model.

Governor Christie is proposing to cut the cord on the very cities that have felt the brunt of New Jersey’s failure as a state to practically integrate schools.  I caution our suburban neighbors not to do that as the results will create vast holes of lawlessness that will spill over at alarming rates into the adjoining suburban sprawl.  It isn’t far-fetched to remember Mario Van Peebles’ 1991 movie, New Jack City as a point of social reference.

There are options for turning the tide in Trenton but none of them involve a dramatic reduction in funding.  Rather the goal should be a gradual reduction in state aid over the next 20 years.

One of the options on the table should be State tax credit investment in urban market rate development.  The current investment climate is a non-starter for private urban development.  The market has simply been made too risky by a combination of city and state policy.  Large, market shaping investment on the order of $100s of millions of dollars is necessary to stimulate any kind of meaningful increase in Trenton’s ratables at this point.

However there are two other less expensive and potentially more socially beneficial options that the Governor and legislature have so far ignored.

1. Consolidate our schools into 21 county-wide school systems
2. Offer vouchers in urban districts

Either option fundamentally changes the picture in urban centers like Trenton.

County-wide consolidation is the most straight-forward approach and has the advantage of 40 years of experience.  With a stroke of a pen and a modest investment in transportation, Governor Christie could simultaneously reduce overall school costs in the state through shared service, eliminate the #1 reason for disinvestment in urban centers and improve race relations.

Whenever this topic is mentioned, well meaning people say our suburban neighbors will never go for it and home rule prevents it.  I’ll remind the naysayers that the South didn’t exactly go quietly.  Southern leaders didn’t go for it at all and their main argument (i.e. excuse) was “state’s rights”.  History has proven them wrong.  New Jersey is wrong as a state to simultaneously create dangerous hotbeds of social unrest and spend excessively in the process.

Integration will cause students with non-education focused backgrounds to mix with students who have education as a family priority.  The blending will be uncomfortable for both but students who have the ability to succeed in a positive environment will for the first time have one.  Students who are bused out of their suburbs into the city will find a new appreciation for diversity that will help them live a more meaningful life (the writer speaks from experience).

The transportation necessary for this transition won’t be cheap but will pail in comparison to the cost of the social unrest the Governors current plan will unleash.  And we’ll be a better State for it.

The second option is vouchers. Offering vouchers to families in urban cities will not likely improve overall achievement, rather it will create a stimulus for families to move into the city.  The beauty of an urban voucher program is that a $5000 / child voucher would reduce overall spending on public schools.  Spending $5000 per child and having the parent pay the balance of a private school education is a bargain compared to a $16,000 public education.

Overall spending on education doesn’t go down and neither does the demand for teachers, rather the spending is shifted to parents who are seeking to find more affordable housing options in cities like Trenton and will gladly make up the difference in school tuition over and above a voucher amount.

The exact amount of the voucher is important but whether its $5000, $10,000 or even $15,000 the effect is the same.  We would reduce overall spending per pupil and stimulate new investment in the urban centers where the program is offered.  It’s a nifty, no cost way of revitalizing cities like Trenton.

Of course the education unions have spent decades opposing any new thinking in educational funding.  As a society we can no longer stand for that attitude.  Trenton’s schools are not what we want and its time for the unions to get out of the way.

“Reinvent Trenton” takes and economic view towards revitalization and sometimes that means taking aim at the elephant in the room.  Perhaps this is right time and right Governor to make the most important change in the way our state operates.

Almost, to a person, the political elite in Trenton will tell you that investment in business is the top priority. I’ve had this debate countless times and you can see it in the political rhetoric of our candidates. However, when pushed by the logic of residential development, they’ll eventually say, “well it’s really a chicken and egg” problem.

What they’re saying is “I really don’t know”. It’s a bit daft to call something like this chicken and egg in the first place. If you believe in creationism then the chicken came first. If you believe in evolution, then the egg did. Either way there is a correct answer. Just like there is for business vs. residential.

Politicians are so conditioned to tell you Trenton needs jobs that they’re blind to the economics of the situation. I’m going to attempt, without the support, of hard economic analysis to convince you that residential development comes before business.

First let’s frame the problem.

All business aren’t the same. They fall in to two big buckets: retail and commercial.

Retail obviously includes shops and grocers, but it also includes restaurants, law offices and doctors. These businesses supply goods and services to the local population. The more and better selection of retail business we have, the better our quality of life. However, retail businesses won’t go anywhere near a city without disposable income to spend.

Commercial businesses make products or deliver services that can be exported out of the region. Trenton used to have lots of this and now I’m hard pressed to come up with current examples. Manufacturers, big banks and machine part businesses count as commercial. Cities need commercial businesses in order to create wealth and jobs. Commercial business won’t locate in cities without an educated workforce, nice homes for its executives and amenities (i.e. retail) for the workers.

Residential investments includes home improvements, new developments both rental and for sale and of course the purchase of a house. Residential development depends on retail to some extent but in general homeowners will buy for many reasons other than proximity to shopping. In a region like Central Jersey, close proximity to a job is entirely unimportant.

First consider the decision making process for each type of investment.

Renters take very little risk when they move to Trenton. If they don’t like it they can leave. As long as landlords can keep their costs low (read low taxes) they can attract bargain hunting renters to Trenton.

Homeowners take a bit more risk but also are more prone to make uneconomic decisions. A quick survey of 30 or so new Trenton homeowners found driving reasons like: being close to a black church, being near a gay community, affinity for urban living and availability of interesting architecture. Homebuyers all take a risk, but their home is a somewhat fungible commodity and can be sold in a well organized market.

Of course both renters and homeowners value retail amenities. The availability of retail amenities both makes the real estate more expensive and attracts new residents.

However, retailers make much more sound business decisions on where to locate (as do their banks). It would be a questionable decision for an upscale retail shop to open in Trenton. The few residents with disposable income are spread throughout the city and can easily shop in nearby towns. A new movie theater, hotel or restaurant will never bet that residents will follow them in to Trenton. Rather they’ll happily open a new store in Hamilton or Ewing and hope to attract some Trenton residents.

Commercial businesses are even more careful. Typically they look for an educated workforce (which Trenton doesn’t have), a favorable business climate (Trentononians helped to drive away several large industries) and a great site with (we’ve got some brownfields). We really don’t have much going for us and this shows in our anemic economy. Commercial businesses are more likely to locate in a city with a variety of housing stock, retail amenties and low crime. I recall attempting to convince my former company which was then in Plainsboro and considering a move, to look at Trenton. I got laughed at.

Because residential investors are not making purely economic decisions, they are the most likely to invest in Trenton.

New residential development will beget new retail. In addition new residents, especially high wealth residents, are most likely to form and invest in new commercial business.

Residential development, especially high income development, lays the foundation for everything. And, because residents don’t worry about risk so much they’re easier to attract.

However all residents aren’t created equal. We need new residents who don’t consume expensive city services like schools, social services and jail cells. Empty nesters, gay couples and young professional are the typical target segment a city attempts to attract.

These market segments demand specific types of homes. They aren’t looking for large detached single family homes. Rather they want smaller homes with less upkeep or a more exotic home that reflects a certain lifestyle.

Trenton has relatively little housing that will appeal to these market segments. Hiltonia, Glen Afton, Cadwalder Heights, Berkely Sq and Mill Hill would appeal to this market but represent a relatively small portion of Trenton’s housing stock. They couldn’t possibly absorb the 20,000 or so new high income residents we need to make Trenton attractive to new retail. Also, we couldn’t possibly expect a large commercial enterprise to locate in Trenton if its mid-managers couldn’t find a place to live.

In order to create the chicken (economic development) we need to lay the egg (residential investment).

As politicians craft their economic plans and voters review them. Look for stimulating upscale residential development at the top of the list. If you don’t see it run the other way, the politician has another agenda besides fixing Trenton.

I’ve taken the opportunity to restate the debate here.  It’s a useful discussion for policymakers and I thank Jim Coston for being the kind of Councilman that is open to challenging his own assumptions.

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Mr. Coston’s June 17^th blog on income distribution (southtrenton.com)

I had the opportunity to discuss Trenton with its resident sociologist last week. The census is a once a decade endeavor. The 2000 data is out of date. It will get updated next year.

In the mean time, some very insightful and statistically sound community surveys have taken place. Their results are startling.

Within the past few years, Trenton’s upper class, those defined as making greater than $75,000/year, has risen by 60%. This is due in some part to the State’s Live Where You Work program. It may also be due to a societal shift toward urban living. This is, by and large, good news for Trenton. It raises our average educational level. It increases the amount of disposable income in the City. Good news for the most part.

However, there was bad news. Trenton’s middle class continues to shrink. The families earning between $30,000 and $75,000 decreased by a high percentage. Increasing property taxes, concerns about public education and other housing opportunities account for some of this decline.

The danger moving forward is that Trenton will become stratified between the upper class and the lower class, the haves and the have nots.

Trenton‘s overall population has dropped. The 2000 census put us at 85,000. The community survey posited 75,000. The South Ward is the only ward in the city with population growth; this growth is concentrated in children under the age of 7. The rest of the city is shrinking.

A declining population means less $ for schools, less federal $ for the City and less voting power.

Is there a mechanism to change these trends? Excellent question. The primary task, I suspect, for the next administration will be to build up Trenton’s middle class. The middle class enables mixed income neighborhoods. The middle class is invested in public schools and education. Trenton needs to become a place where the middle class wants to live.

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Dan’s reaction to the blog was as follows

Jim, Your “class” analysis from June 17^th is a bit skewed.

I understand that you use $75K as the line between middle and upper class with tongue in cheek.  However, the distinction between what upper class really means “is” the point.

What spread or average of economic power amongst its citizens, does Trenton actually need in order to be a functioning city?

• This is difficult math and I’ve been working on it for the past several weeks without conclusion.
• However, we can presume that “average” per capita income for the state of NJ is a good guess.
• I’ve written about this before when I posited the goal of being as wealthy Clifton, NJ (a very average city).

http://www.trentonspace.com/1editorialbody.lasso?-token.folder=comm/2004/08/01&-token.story=41397.112115&-token.subpub=

I came to the conclusion that Trenton would have to absorb 16.5 x the population of relatively affluent Lambertville in order to get near the NJ average.  When I wrote the article, Lambertville had a per capita income of around $35K which translates into about $80K in per household income.

The reality is that Trenton doesn’t have “any” rich people (not really rich anyway) and very few ( under 20) real upper income citizens using the Obama definition of $250K/year.  An average NJ city would have a population distribution that includes all income ranges not just the poor and middle class.  In fact, according to the data below, we lag NJ and Clifton substantially in incomes over $100K and severely in incomes over $200K.

Source: 2007 Household Income,  US Census, American Factfinder

As you well know, our tax basis is strained by both a lack of property value (which is driven by incomes) and an over-demand for services (which is driven by low income).

Therefore, as politically incorrect as it may seem, we don’t need more $35K households with kids (who consume services such as schools), we need more wealthy $200K households with no kids.  Its these folks with lots of disposable income that keep restaurants, shops, arts institutions and other non-profits afloat.  There’s a reason Trenton has only one, sort of nice, restaurant.

Until we can admit to ourselves the simple truth of this math, we’ll continue roll around in the muck of being a poor city and a ward of the state.

Mr. Coston wondered, with the above analysis in hand

“If Trenton doesn’t actually have retail that would benefit from upper class residents, what’s the point?”

It’s true Trenton doesn’t have retail establishments (restaurants, shops, car dealerships) that cater to the middle or upper classes.

Dan’s counter-argument is as follows

It’s a chicken and egg.

I’ve long posited that in the urban revitalization chicken and egg contest, residential folks have to come first.  This is because both retail and commercial businesses make sounder economic decisions.  Will I find customers there?  Will I find skilled workers there or will my employees enjoy working there.

Residents have many more drivers many of which aren’t rational (some are).  For instance: “It’s near the train”,  “It’s inexpensive”,  “It’s near Aunt Mildred”,  “Other gay people live there”.

In a world where we have to make money bets and you can’t just say, “I’ll bet on both the chicken and the egg to come first”,  I bet on the resident.  I think you do too.  If that logic is true, then we need to bet on high income resident that drive new retail.

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Mr Coston also argued that we don’t need to worry about school aged children

“since Trenton doesn’t really pay for our own school costs then I shouldn’t worry about the mix of children and adults we attract to Trenton.”

Dan’s counter-argument on school cost is

We need to think about an  future Trenton that pays its fair share of school costs.  My central thesis is that we in Trenton should strive to pay our own way like most other cities. If we don’t, then our children’s education will be supported on the whim of state legislators.

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Mr Coston and Dan both want to see an analysis of disposable income by income range. It should show the impact of disposable income on retail vitality. We agreed that a better understanding of this dynamic would highlight the relative importance of attracting one income group over another to Trenton.

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With just a bit more effort I found the data that Jim and I were looking for. It’s at the Bureau of Labor Statistics.

BLS takes survey data over a large population (these are US numbers) and breakdown spending by type.

• BLS tells us that higher income residents (>$150K) spend 5-7 times as much as lower / middle income (<$70K)
• The biggest differences are in important retail categories such as: restaurants, clothing stores, furniture, entertainment.
• Importantly, contributions are also about 7 times higher for the >$150K income range.

My central point in all of this is that retail spending is greatly affected by income level and in dramatic disproportion to the per capita cost of services.

Comparing the highest income bracket household (>$150K) to the lower end (<$70K):

• Higher income have twice as many children (.9 vs. .5)
• Higher income spend 4 times as much on non-grocery retail ($38.7K vs. $9.7K) retail sales translate into property tax of storefronts and quality of life.
• Higher income pay 5 times as much in property tax

Of course, Trenton population isn’t necessarily the same as the US.  If Trenton can target high income households without children we come out way ahead in terms of municipal and school budget impact.

There’s no reason to think Trenton can’t attract higher income residents without public school children

• I can tell you that of all the new Trenton Ferry residents (I can only guess at their incomes) none have children.
• The household size in relatively affluent Mill Hill (which is actually middle class)  is much lower than average Trenton (~2 vs. 2.75)  (2000 US Census)

Therefore targeting high(er) income in Trenton appears to pay off.

]]> http://livingonthenet.com/wordpress/councilman-coston-and-dan-debate-the-role-of-income-distribution-on-revitatilization/feed 1 http://livingonthenet.com/wordpress/the-case-for-teacher-support-of-school-choice http://livingonthenet.com/wordpress/the-case-for-teacher-support-of-school-choice#comments Thu, 14 May 2009 13:55:14 +0000 admin http://livingonthenet.com/wordpress/?p=40 I come from a family of teachers. My mother, father, both sets of grandparents, brother and aunts are all teachers. You can imagine the fun family discussions we have when I suggest that the NEA (National Education Association) is bad for them.

I’m well aware that many Republicans have strong opposition to the NEA. But at its root, the NEA is just another union. There is a natural conflict between unions and management as unions attempt to take control away from managers. The Republican party generally shares the sensibilities of managers and therefore doesn’t get much support from the union movement including the NEA.

However I do support a person’s right to form a union and to bargain collectively. It’s a free country.

The education unions just have it all wrong.

My mother and I were having a particularly heated discussion about the NEA when I finally asked her, “You’ve been in the NEA for many years now and you’re still complaining, so how’s it been working for you”. This has pretty much stopped the argument.

Opposition to school-choice has been a central position of the NEA for years. This policy position is bad for students, teachers and even unions.

Of course students are better off through the discipline of competition among schools. One only has to observe the desperate measures parents of children in underperforming districts, like Trenton, will take to sneak their kids into better systems. School systems won’t crumble either, they’ll just get smaller or maybe larger depending on how they perform. What I really want to concentrate on is the argument that choice is good for teachers.

Consider the logic:
If you are negotiating with an employer and it’s the only employer in town, then you have very little leverage because quitting is not an option for you. You would much prefer to have several employers bidding for your valuable services. While there are a small number of private and charter schools operating today, there is essentially only one employer of K-12 teachers since schools are supported by the state.

Naturally you as an employee would unionize in order to increase your bargaining position against this monolithic employer. However, you would also hope like mad that another employer would come into town. In non-governmental industries this almost always happens because a competitor knows it can poach poorly paid employees. This drives up salaries.

Even unions themselves are better off with competition. Think about the AFL-CIO’s negotiations with the auto manufacturers. They pick the most vulnerable company and target it for negotiation thereby setting the contract standard for the industry.

School-choice has been a hot topic for many years and is a key difference between Democratic and Urban Republican viewpoints. Because choice is good for both teachers and the inner-city students they serve, the Democratic agenda is out of touch with the needs of urban America.

It’s an industry without the risk of the car business. It attracts sought after  middle class workers. And, it’s inherently good for the community.

What’s this wonder industry? And more importantly what do we need to do to attract it?

Education can be Trenton’s next great economic engine, all we have to do is break the monopoly government has on it.

We spend $290M on education annually in Trenton. This is a vast amount of money that’s spent on entrenched interests with no motivation or legal ability to grow and attract students from beyond the city’s boundaries. Creating a voucher system to allow parental choice, will change the educational and business landscape in Trenton and NJ.

Rather than perpetuating a stagnant bureaucracy that rules over teacher contracts and poor schools, let’s open it up and grow a network of independent schools. New independent schools will fight to serve our children, will work to attract suburban kids to the city and will provide options for the teaching profession.

Trenton’s first salvo in to what I hope will be a growth business is the River City School in downtown. The school’s central premise is that an urban environment can be a classroom for teaching. There’s merit in this kind of thinking.

A downtown Trenton school has direct access to the civics lesson that is state government. It is the ultimate classroom for the history of the American Revolution. Within close distance to the downtown location is a textbook of business history. And nearby are lessons in biology, geology and environmental science. 

Education happens when its brought to life for kids. Who doesn’t remember the field trips of their early school days. The new school will provide many such valuable learning experiences within walking distance from the classroom.

River City School will be funded through tuition set to a very low $10,000 through the efforts of a core group of volunteers. My deep hope is that a portion of the $16,000 we spend per student in Trenton can be used in the form of vouchers to help parents pay for their children to go to River City.

Moreover, I hope for the sake of our kids and for Trenton’s economy that we can unlock economic power of the $16,000 per student we spend to start up other independent schools that will attract more children to Trenton.

A vibrant market for education in Trenton will attract education workers to our city, will attract young scholars from throughout the region and will provide an attractive reason for parents to move back in to the city.

Link to River City School’s web site

In “Invest the Trenton Water Works proceeds in the future not the past” I argued that the proceeds from the sale of the Water Works should not be applied directly to the 2010 and 2011 budgets. I allowed that it was too late to fix the 2009 budget and therefore $20M of the proceeds should be used to patch this year’s gaping budget hole.

If a group of Trenton citizens have their way, the sale will be delayed until a public vote can be taken and it’s not certain at all that the public will go along with the administration’s plan. We’d be left with a huge problem. Therefore, we’d better come up with plan B for patching the 2009 budget.

No, make that plan C. Plan A would have been to for the city to have been serious about managing the risk in its budgets starting 10 years ago when times were good. Trenton’s voters never demanded accountability for the long term fiscal health of the city and look where it’s gotten us. We pay only 14% of our total municipal and school costs and that’s just not tenable. (see “Trenton’s budget is in worse shape than you think”).

We’ve been hooked on the drug of state aid for far too long!

Let’s review how big a $20M budget gap is. There are roughly 26,500 households in Trenton (US Census bureau). So, our budget gap equates to $750 per household. That’s a staggering amount of money. To be clear, no matter what happens with the Water Works sale, Trentonians will eventually face this additional tax burden given the city’s current cost structure.

Mayor Palmer has argued that by not selling the Water Works, taxes will have to go up over 1000% from ($90 to $1090 per $100,000 of assessed value) and that by selling it we avoid the problem. That’s not quite true. The Mayor’s proposal is to avoid the tax hike for the next 3 years, but after that (and presumably when the Mayor’s out of office) we’ll face an even larger $30M budget deficit (according to administration numbers). Furthermore, state law prohibits such large swings in taxes anyway.

However, we need to make some big changes, no matter what. The problem is that to fix 2009 we’ll have to take drastic action if the citizen initiative succeeds.

So, what to do?

Cede the schools to the state

Of the $291M Trenton school budget, we currently pay only $21M or roughly 7.2%. Stopping payment on our portion will force hardship on the school system and will likely force the state to take it over. But, it’s possible our children will be in better care. It’s sort of like a mother giving up her child. Since she knows she can’t take of it, it’s in the best interest of the child to let someone else have it.

Hopefully, the state will have additional resources from the Obama stimulus plan to provide direct school aid. We can only hope that our Education President and Education Governor can find the money to take care of our kids.

Some day, when we get our budget back under control and have built a local economy strong enough to support education, maybe we can have another chance. But we’re a long way from that. Our local economy needs (as measured by assessed value) to grow by 300% before we are out of fiscal danger. Until then, every year we are at the mercy of a fickle state budget, inflation and an uncertain economy. We’ve got a lot of work to do to get ourselves clean and off the drug of state subsidy. Unfortunately, just like an addicted parent, it’s going to be better to go through rehab alone so we don’t endanger our kids any further.

I know this proposal sounds draconian. However, let’s face the fact that we could go bankrupt and now have no where else to turn. Parents and elected officials have to realize that the options at this point are horrid. We can gut the basic functioning of the city which will prevent any hope of revitalization or we can cut the police and fire departments and risk falling into anarchy. Allowing a state takeover of the schools is the safer alternative.