Councilman Coston referenced in his blog, an email discussion he and I had about the impact of income distribution on Trenton. Mr. Coston’s blog can be found at, SouthTrenton.com.

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 The 2000 data is out of date.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.

	Trenton	NJ	Clifton
100-150K	6.1%	16.6%	14.8%
150K – 200K	1.4%	7.1%	5.6%
> 200K	0.8%	7.2%	2.4%
	8.3%	30.9%	22.8%

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.

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