Trenton’s Most Foolish Ordinance Yet

Even the State of NJ thinks the recently passed   “New Jersey Economic Opportunity Act of 2013” is a bad idea.  However, the Act was confirmed by Trenton’s   City Council and made applicable to Trenton by Ordinance 13-58.

The Act is meant to stimulate certain types of investment and create jobs in NJ. However, it does so at a high price of over $400,000 per job in tax credits and the loss of local property tax revenue for 20 years.  It is targeted at four NJ cities including Trenton and requires those cities to forego substantial taxes that would otherwise be collected from property owners.   The State’s Office of Legislative Services (OLS) did an economic analysis of the Act which estimates that in the best of circumstances the State’s   investment would return 10% over 20 years.   That’s .05% per year.     We’d be better off investing in a savings account.

The OLS summarizes its findings below:

The Office of Legislative Services finds that the revenue impact of the substitute (the Act) is indeterminate with certain revenue losses due to tax incentive agreements which may or may not be fully offset by revenue increases from expanded business activity. The magnitude of the revenue losses from tax incentive agreements cannot be known because ERG and GROWNJ have no aggregate award cap from January 1, 2014 through the program expiration on July 1, 2018.

What’s worse is that the .05% yearly return assumes that the alternative is that no new   jobs are created unless this Act is in place.  That’s a horrible assumption and the OLS so much as admits it.  Read the full analysis here.

So why did our City Council sign on for a bill that is so terrible for both the State and the City of Trenton?

It’s hard to say and there has been much speculation amongst activist.  Some of facts surrounding the passage the Ordinance are as follows:

  • Council passed it in a hurry with little to no public comment and on a Friday evening when the public was not likely to be in attendance at the meeting.  This was suspicious.
  • One person who did make it to the meeting was a developer from Robert Torricelli’s Woodrose development who stands to benefit from the Act.
  • Days  later  that same Woodrose development  handed  out  500 free Turkeys at their  development site  in Trenton and invited local politicians Marge Caldwell-Wilson and  Eric  Jackson  to  be seen as  having something to do with the gift.
  • Robert  Torricelli was  reprimanded in the US  Senate for corruption

So on the surface this deal is smelly and reeks of connected developers getting rich on the backs of taxpayers.

Given the OLS’ analysis it’s clear that NJ taxpayers are being shafted.  The question is, “are Trenton taxpayers getting any benefit?”

First, we have to assume that Trenton taxpayers are suffering from this bad investment in a similar manner to our suburban friends.    Our State income tax dollars are being wasted.

Then there’s the matter of lost property taxes that many in the activist community have complained about.   This is trickier.

The deal is that a developer would pay no new taxes on improvements to a property for 10 years.   During years 10 – 20 taxes on improvements would gradually be raised to reach 100% by year 20.

So this could stimulate new taxes, just not in some of our lifetimes.    There is no guarantee that any property in Trenton could ever be developed (many abandoned properties have negative value).   So getting something on those difficult plots of land  and having the State stimulate that future tax benefit does have a positive benefit.  Perhaps that’s what our Council members are reacting to (I’m giving them the benefit of a doubt).

But here are the problems:

The deal is unfair

This tax break is not available to all citizens or even all types of investment.  For instance, there are exclusions on retail investment such as stores and restaurants.  The deal is not available to homeowners or even condo owners.    You and I can’t benefit from this Act and are in fact subsidizing those that do. The state and city should not be in the business of preferring one type of investment and one type of investor. They’re not that smart.

The deal will have unintended consequences

Trenton does not have unlimited developable land.  The Act heavily incents developers to build non-retail commercial space or residential rental property.  If all the prime development spots were taken for these purposes, then the price of retail and owner occupied development will go up.   Many in Trenton’s revitalization community believe that if anything, Trenton needs to over index on owner-occupied housing and new retail amenities.  This bill is likely to make that more difficult.  In this regard we’re shooting ourselves in the foot.

There are better alternatives

A maxim in real estate development is that a building or land should find its highest and best use.   This Act warps that concept by preferring only certain developers with certain kinds of projects.   A better alternative is to establish a standard PILOT agreement and stimulus that are available to anyone investing  in our cities.  One such PILOT plan would offer a very high tax rate on land but a very low rate on improvements thereby rewarding high value or high density development no matter what type it is.  This PILOT could even be made optional to existing landowners.  This would be especially beneficial to home owners seeking to improve their homes.    It could do away with existing abatements and negotiated PILOTs (long an opportunity for abuse).    The state could directly and more transparently provide tax credits on the total value of a project of say $200,000 or more.  This standard subsidy gets the   State out of the dicey business of trying to manipulate the economy.

I suspect that the City of Trenton did not have a real voice at the table when this scheme was cooked up.  Certainly it was foisted on the citizens of Trenton in a rush.  This is a big problem as there is no evidence the State is acting in best interest of Trentonians.

An Act and Ordinance of this scale and importance (it fundamentally   changes our tax structure) should never be considered in the current political situation where a Mayor indicted on corruption charges related to real estate development has only 6 months left in his term.   Rather we need to let the next administration determine whether this deal fits into a strategic plan for Trenton.   Let’s vote on it by making it one of the issues in the upcoming election.

Our City Council has done the citizen of a Trenton a disservice by allowing us to be bullied into the deal. There is an online petition being run to show opposition to Ordinance 13-58. I encourage all to sign it.

Petition to Oppose Ordinance 13-58

My choice for Trenton’s next Mayor

After 24 years of mayoral leadership that has gone from bad to worse, we once again have the chance to change direction in Trenton.  Like we did in 2010, we’ll have a crowded field of candidates.  Unlike 2010, in 2014 we have several viable options.

In this very difficult time in Trenton’s history, we as citizens need to be equipped to make a smart choice.   We’ve all seen how poor choices at the voting booth can materially damage our city.  This time around:

  • Voters need to consider all aspects of what will make a good Mayor, and
  • The campaigns need to communicate clearly to voters.

The question I have for myself is, what can I do to help this process?  What can I do differently in 2014 to help elect a leader that will chart a more productive direction for Trenton?

I’ve tried quite a few approaches to improving Trenton.

  • I’ve blogged for years trying to bring new ideas for revitalization to the city.  The evidence will show that my blogging hasn’t helped.
  • I formed Fix Trenton’s Budget to provide an economic point of view in the 2010 election and later assist Mayor Mack in setting budget and economic policy.  The evidence shows that didn’t help.
  • I helped form The Majority for a Better Trenton in order to create an unaligned political force in the city.  It turns out the group had organizational challenges, so that didn’t help.
  • All along I’ve been an outspoken critic on Facebook, in the press, at City Council and on my blog.  Sometimes that makes me feel better, but it hasn’t helped.

As I’ve often said, doing the same things over and over again in Trenton and expecting better results is the definition of insanity.  So this election cycle I’ll do something I’ve not done before.

This election cycle I’m going to choose one candidate to not only support but also to volunteer for during the campaign.   This implies quite a bit.

It implies that I will have to make my own informed decision about the candidates well ahead of walking into the voting booth.   I’ve done some homework in preparation for my decisions.  I have:

  • Talked to each of the candidates I would consider,
  • Read their websites, and
  • Reviewed their track record in Trenton.

To put all of these conversations, impressions and histories into perspective I created an objective scorecard to help.  The scoring approach rates the candidates along several dimensions and weights the scores based on how important that dimension is for a good Mayor.  It’s like coming up with GPA for the candidate but allowing the flexibility to weight one course as more important than another.

Being numbers driven seems appropriate for me as I’m constantly encouraging city leaders to be objective, unemotional and fact driven in their approaches to our problems.   It’s sometimes hard to do but often provides clarity where a muddle of data and opinion cloud the issues.

For each dimension I scored the candidate 1-10.  The dimensions and weighting are as follows:

Table ‑1 Candidate Selection Criteria

Dimension Weight Description
Approach to Strategy 9% Thinks critically about cause and effect.  Is data and fact driven.  Results focused.
Planning 15% Organized, clear and thoughtful about actions and timing.  Considers risks.
Campaign 12% Well run campaign with people who share a focus on revitalization and diversity.
Motivations 9% Setting an example for urban revitalization in small post-industrial cities.
Management Style 12% Disciplined.  Has an air of gravitas.  Reads people well.  Transparent.
Track Record 12% Has participated in thoughtful activism in Trenton.
Budget awareness 15% Understands the budget and what drives it.  Appreciates its role as the central policy tool.
General Capability 9% Smart.  Hard working.   Well written and well spoken.  Well educated.
Sacred Cows 9% Has revitalization minded positions on regionalization, residency, reassessment, etc.
100%

To be fair I didn’t talk to all of the candidates.  Walker Worthy’s strict partisanship and lack of presence in Trenton politics ruled him out as an option.   Kathy McBride’s frequent missteps, support for Tony Mack and lack of interest in policy rule her out.   Bucky Leggett was so uninspiring the last time he ran that I voted for Doug Palmer.  Each of the other four candidates:  Patrick Hall, Eric Jackson, Jim Golden and Paul Perez are fine people by all accounts, including my own.   They deserved serious consideration.

Of course, whoever I support may very well not win the election.  That’s not the end of the world and we have good options.   I certainly hope that even if I wind up on a losing campaign team, the winning Mayor will take me up on my offer to do whatever I can to help his administration succeed.  I made that offer to Tony Mack, he just didn’t follow through.

Also, I’m not going to say anything negative about any of the other candidates except maybe to critique a policy idea here and there.

After several months of talking and thinking about the next Mayor of Trenton I’ve decided I’d like to support Jim Golden to be our Mayor.

Jim is seeking to bring the best thinking in the country to bear on Trenton’s revitalization problems.  He has good initial insights especially on our crime issues. He has good experience in running large organizations.   He’s been openly committed to setting measurable goals and setting up feedback mechanisms to track our progress.

Jim was an early and vocal critic of Tony Mack and actively supported the recall effort.  He’s conscious of the budget and its limitation, especially the biggest component, police.

In every conversation I’ve had with Jim, he’s sought to think through pragmatic steps towards making Trenton more livable while eventually lowering our tax burden.  Finally, his motivations are simple and clear, he’s a retired resident of Trenton who wants a better town in which to live, so do I.

I’ll enjoy working with him both on the campaign and the transition into office.   I know his heart is in the right place and that he has the right skills and temperament.  Most importantly for me, he did the best in my candidate qualification scorecard, earning 7.7 out of 10 points.

I look forward to working with Jim and his campaign but wish all the candidates well.

Harsh Urban Truth …. Indeed

In its October 22nd editorial, “Furthermore…. Harsh Urban Truths”, The Trentonian lays out what we in the activist community have known for some time:   Trenton is a sick city and our primary care physicians like it that way.

We’ve pondered for years the very same ideas The Trentonian brings up.  We’ve considered embarking on a journey to change our government philosophy including changing our charter. We even proposed a simple change to stagger elections that the incumbents hated.  We’ve noted author Jane Jacobs’ ( The Death and Life of Great American Cities) philosophy that government power is destructive in cities.  We’ve pointed out every bad union contract (4 on 4 off police contract), government subsidized boondoggle (Rush Crossing, LYDC Hotel) and widespread dysfunction (lack of tax base, terrible graduation rate and top ten murder rate) in Trenton.

But perhaps the biggest favor The Trentonian has done is to crystalize and put in print what’s really going on.   Something that, for the most part, we only talk about amongst ourselves.

The “Ruling Class” likes Trenton just the way it is!

People and politicians can indeed get rich on the carcasses of dying cities.  I’ve called Trenton a “company town for the underclass”.  If you can invent a program that feeds on the guilt of the wealthy and has a populist pull for politicians, then Trenton is your spot.  If you can then work the system to abuse the rules (Kahan, Mack, Penrose Properties) then you can make some money.

A poor and uninformed voting base works in your favor.  If Trenton all of a sudden had an “average” per capita income, then that money would dry up.    The opportunity for corrupt officials and the developers, contractors and others that seek to keep them in power would go away.

There are those in Trenton who are part of the “underclass economy” and think they are doing “good”.   Isles thought it was doing “good” when it developed subsidized affordable housing in the Hanover / Academy area, instead they created a ghetto.  I’m sure there are some at the Trenton Housing Authority that think they are doing “good” when they build another over-priced, out of control housing project.  I’m sure the people running methadone clinics and halfway houses think they are doing “good”.  In total, they are making Trenton a mecca for the poor.   They’re concentrating poverty in Trenton, the one place in Mercer County that can’t afford it.

But Trenton’s working and unemployed poor love it. They love subsidized housing.  Some love an overwhelmed police force.  So when a politician tells them “what there government will do for them”, promises a block party or perhaps pays them to vote or work on the campaign, they love it.  There are thousands of voters in Trenton that are easily swayed by hope and promise or maybe even a little cash on Election Day.   Thousands more trust ministers with interests that may conflict with a healthy economy, after all you can’t get a government grant to help the poor in rich cities.

We all vote with our wallets and many Trenton voters are simply voting in their interest to keep Trenton as a mecca for the poor.  So we keep electing leaders that will feed their addiction to government and non-profit support.

The only way this will change in 2014 is for three things to happen.

1)      Credible Mayoral candidates with revitalization on their minds will have to run

2)      Trenton’s tax paying middle class will need to vote in large numbers

3)      A sensible message will need to be made that shows why it’s in the best interest of the poor to vote to improve Trenton’s economy

In my opinion we’re doing pretty well on #1.   We have at least 3 candidates who appear to be honest and hell bent on revitalization with at least some approach in mind to make it happen.   This is light years beyond where we have been in the last 12 years.

As for #2 and #3, we’ll see.  It’s going to take a great campaign from each of these candidates and perhaps even a united front against the pretenders that may enter the race.   I’m hoping for a three-horse race.  I’ll support and work for one of the candidates but I won’t be crushed if either of the other two wins either (More on this later).

For the first time in a long time, I’m optimistic.

Hoping for a pro-regionalization campaign

I can’t think of any urban city in New Jersey which one would classify as truly “great”.   A great city provides the intellectual, creative and financial juice to form new companies that fuel economic growth and the resulting high quality of life.

There are large cities in America that do this like Boston, San Francisco and New York.    There are small cities that have done it as well; Raleigh and Austin come to mind.

As we wonder what it will take to make Trenton great again, we’d be foolish to think we could copy any of those cities.  After all we live in a unique state at a unique time.  But surely the ingredients for greatness are within our reach.

Much has been said about regionalization in New Jersey and how it can help.  But let’s be honest, Princeton is a poor comparable for Trenton, Passaic, Irvington and Camden.

The question is what does regionalization mean for Mercer, Essex, Passaic and Camden counties?  Does a rising tide raise all ships in those places?  Will a regionalized police force lead to lower crime rates and is that a measurably good thing for not only the urban centers but the suburbs as well?  What about schools?  What about economic development?

My suspicion is “Yes”?  Let’s seriously explore being a great county.

The analysis I have read about regionalization points to cost savings from combining operations.   This is obviously a good thing.  However, best guesses are that this amounts to around a 10% overall savings.  This is nothing to sneeze at but given the severe imbalance in property taxes vs. cost of services between a poor city like Trenton and its wealthy neighbors, it may not be worth the risk.

If, on the other hand, we saw an overall reduction in crim, county wide and not just in the urban center, then that kind of improvement would certainly grab a safety conscious suburbanite’s attention.

Schools could benefit too.   As it stands, suburbs currently fund not only their own schools but the lion’s share of the cost of urban schools.  Those urban schools produce generally poor results for a premium dollar.   But what if by integrating schools on a county level we were able to reduce the overall cost of providing a decent education?   There are thousands of examples of where this has happened in the USA.  If I lived in West Windsor, I’d much rather have a vote on how my money was spent in Trenton than not.  And as I’ve said many times, I’m the product of an integrated public urban school that I’d gladly compare to Princeton High.

But the real benefit could come from economic development.  Our suburbs struggle to attract ratables while at the same time fight the ugliness and hassle of sprawl.   But what if they benefitted from development in urban centers which typically have a surplus of developable land and welcome it?  Couldn’t that be a home run?  Imagine what would happen if county leaders could, in good conscious, focus their development efforts on cities knowing that the ratables their efforts generate would fund county-wide budgets.
This all sounds good but there is quite a bit of work to do to turn these ideas into real plans for action.  The fortunate thing in our favor is that a lot of the work has been done by State regionalization task forces and our current State administration is solidly behind those plans.

What is needed are Mayors and City Councils who are willing to lead their municipalities into a form of government that give up traditional autonomy in favor of a more balanced regional economy.   A strong leader in Trenton will need to find and sell the benefits of regionalization not only to the city but to suburbanites as well.

We’ll have to recognize that there is a good bit of well-deserved fear involved in a suburban town throwing in with a city like Trenton.  And Trentonians would have to realize that they would no longer call their own shots.

My hope is that at least one Trenton campaign in the 2014 election sets as its centerpiece, mutually beneficial county-wide regionalization.  Let’s explore sharing our library, Cadwalader park, our communication center, our schools and our developable land with our neighbors in return for becoming integrated back in to the region’s economy.

Reengaging with Trenton’s Revitalization

Earlier this year I become so upset about politics that I took a leave of absence from Trenton political scene. (Giving up on Reinventing Trenton).   My reasons reflected frustration with working to make Trenton a better place including:

  • The inability of city activists to create and maintain an independent political organization (Majority for a Better Trenton),
  • The no-show park rangers we paid for at the 2012 Alexander’s Run
  • The lack of thinking that went into ceding the Glen Cairn Arms property to a non-profit
  • My inability to help the LYDC board think analytically about the city’s hotel

However, the past 12 months have been downright tragic for Trenton

  • Our Mayor has been indicted on corruption charges
  • Our tax base declined, forcing us to increase tax rates
  • Our hotel has come within inches of closing
  • Our murder rate is set to shatter the single year record
  • Police response has declined to the point of being dangerous

It seems that absolutely nothing can go right in Trenton and that we’re on track to become an East Coast Detroit.

Trenton’s problems hurt my family in many ways, some big and some small. Our property values are kept low by the high crime rate and continuing lack of amenities in the city.  Our property taxes are crushing and make our rental properties unprofitable.  It’s hard to invite suburban friends to our home (guests at one party had their SUV tagged).  Babysitters are afraid to come to Trenton.  This is not a healthy environment and for those of us hoping to live a full life in Trenton

I have three choices going forward:

1)      I can move. However this would involve a substantial financial loss given that we have invested so much money in the city. Also we desperately want to stay close to our first son’s grave in Riverview Cemetery and our memory of him in Trenton.

2)      I can close my eyes and hope for the best.  I have to imagine that this is what the vast majority of Trentonians are doing.  They complain from the sidelines or just suffer in silence perhaps because they don’t know or haven’t been told how to help.

3)      I can reengage in some useful way. There are many options and I’ve tried several of them. I’ve worked to become an independent resource for revitalization thinking. I’ve tried to help start a political group (Majority for a Better Trenton).  I’ve helped start a non-profit arts organization and I’ve helped lead election debates.   One option I’ve not tried is to become involved with a mayoral campaign in a meaningful way.

But the fact is, if I can’t move and sticking my head in the sand won’t work, then I’m better off trying to help one candidate be the best that he or she can possibly be.   I’ve never expected a Mayoral candidate to have all the answers.  I do expect them to lead in an intelligent way and bring serious thinking to what amounts to world class problems.  I expect them to turn away from those who have led us to the place we’re in and to embrace new thinking about revitalization.
So with all of this said, I’m in the market for a transformational Mayoral campaign.  I can write.  I can research.   I can stuff envelopes and I can debate.   I wouldn’t mind doing a little door to door, though I’m sure I’m about the least likely person in this city to connect with the average voter.  I know that.  But I do want to start putting a real revitalization plan into language all of us can understand.
My positions on policy are clear.  They’ve been posted on Reinventtrenton.com for many years.  I should be a known quantity by now.

So, here’s how I’d like to proceed.  I’ll email you and let’s set a time to talk.  Let me hear your approach and your positioning.  Rest assured that political platitudes and dubious promises won’t work with me.  I know the budget and its issues pretty well and I’ve been studying Trenton and urban revitalization for a while now.   I’ll be difficult and I have a reputation as an angry taxpayer.  However, if you want: policy development help, logistical help and to be seen as a pro business, pro taxpayer candidate, it might be worth the trouble.

Giving up on Reinventing Trenton

For over five years now and really much before that I’ve studied the issues and policies surrounding urban revitalization especially as they pertain to small post-industrial cities.  In that time I’ve written numerous articles published on this site, commented extensively on Facebook and elsewhere and started up two volunteer groups meant to education the public and potential leaders about the policies that would make a difference in Trenton.

The effort has taken quite a bit of time

And the results have been miserable.  As Trenton has failed and our leaders steadfastly refused to pursue any of the policies recommended on these pages, I must come to the conclusion that I have failed.

I have a lot of critics.  They say I don’t make things simple enough or that I’m arrogant.  They complain that math and analysis aren’t everything. I have theories about what’s really going on and perhaps that’s why I need to step away.

I’m sure we will continue our downward spiral.  My taxes will go up.  My property will continue to lose value and my family will be less safe.  We will continue to shop outside of Trenton.  It’s very depressing.

We own a home that we can’t easily sell and our son is buried here.  We have good friends that have supported us over the years and we sponsor a 5K to raise money for scholarships for Trenton kids.  We’re tied to the community, but that doesn’t mean I have to keep banging my head against City Hall.

Meanwhile, I’ll focus on making more money to pay for the taxes and to fortify our home against the increasingly bold thugs and bums who wander like zombies up and down our streets.

I do thank those that have gone along with me on this journey with me especially Bob Lowe, Jim Carlucci and Kevin Moriarty.  Carlos Avilla and Michael Goldstein also have unique voices in the city.   But it’s tough.  These guys are ignored by the un-thinking and shouted down by the pompous.

We’re a city of people who feel entitled to be wrong year after year.  What really pushed me over the edge was the recent debate over Thomas Edison State College’s proposal to develop a parcel of city owned land.  The same empty suits that pushed the hotel, the ballpark and the arena on us as revitalization measures (that clearly didn’t work) were at it again.  In a city that says we have too many state buildings, we rushed to build another one. And our City Council who posits themselves as new thinkers just went along with the old thinking like sheep to a slaughter.

We can forgive ourselves the mistake that is Tony Mack, but when the rest of Trenton’s leadership rushes to follow his lead and that of the cast of characters that has provided poor advice to this city since I’ve lived here, well I guess there’s no hope.

Our budget is a mess.  Our tax system is anti-development.  Our police force is understaffed and demoralized.   Our Mayor is a crook.   And we own a hotel that is bleeding us dry.   Our schools are failing and corrupt (by many accounts).   A single shopping center in Hamilton dwarfs Trenton’s total retail sales. There is no corporate base. A third of our housing is subsidized. Our tax base is shrinking.  In every way we are moving backwards.

As for my role, I can’t point to one suggestion that I’ve made over the years that has been enacted.  No Land Value Tax. No targeted development strategy. No Priority Based Budgeting. No transparency.   We’ve elected the politicians who did the worst on the Fix Trenton’s Budget economic scorecard.  We’ve not sold the hotel.   We’ve not even made our government transparent as evidenced by Jim Carlucci’s cottage industry in OPRA requests.   Our inspections department stands in the way of development.   We have NO strategic plan.  We’ve not lifted a finger to sensibly address State funding (the Mayor doesn’t even understand it).   We’ve not taken bold steps to encourage new development.   We’ve not created a methodology to evaluate the break-even on development projects.

If this were a business, our lack of insightful management would have bankrupted us years ago.  But we’re not, we’re a government with the power to tax in order to cover up our mistakes.  So that’s what we do.  We tax and then increase the tax some more.

It doesn’t make sense for me to continue being an activist.  I’m a volunteer but there are professionals lined up to hatch dumb ideas like the TESC deal, one right after another, and they get paid by taxpayers to do it.  I can’t compete with that.  The cards are stacked against me and the other activists hoping to make Trenton a better place for no other reason than to have a better place in which to live.

That’s what the non-activists don’t get.  The volunteers that complain about City Hall don’t have a political purpose other than to have a better life in Trenton.   It’s the city official or Mayor that has something to hide, a status quo to protect and, as it turns out prison to avoid.

Maybe sometime in the future I’ll find a role that will let me apply what gifts I do have (tact is not one of them) to the important work of revitalizing the city.  It certainly won’t be in an elected role, I’m not cut out for that.  However, the people of Trenton are going to have to “wise up”.  Electing the likes of Tony Mack because “we know him from the hood” just can’t happen again.  We’re a national laughing-stock because of our gullibility as an electorate.  We let Doug Palmer drive Trenton’s economy into the ground, but we invited Mack to put a stake into our heart.

Listen to the activists I mentioned.   They can help.  They know the issues and they understand what leadership qualities are needed to turn the city around.

Dan

Causes and Effects: A Guide to disciplined policy discussion

The world is made up of causes and effects.  Hurricanes cause storm surges.  Hitting a cue ball hard into a break causes pool balls to scatter.  A bad earnings report causes a company’s stock to go down.  And so it goes in business, sports, life and cities.  High crime rates cause visitors to stay away from a city.  High taxes slow development.  High college acceptance rates attract students to schools.  This is what economists spend their time thinking about.

Most people think about these causes and effects abstractly.  Common sense tells them that one thing ought to affect another.   For instance, an after school program keeps kids off the streets and therefore should reduce the crime rate because kids on the streets sometimes commit crimes.    Another example might be, making a city’s inspections process less expensive to lower development costs and stimulate investment.   Or perhaps, opening a new museum will increase tourism.

Most people are comfortable making statements like the above, but generally don’t know the details.  For instance, they can’t answer questions like:  If we spend $1,000,000 on foot patrols how many FBI index crimes will be avoided?  Or, if we lower inspections fees by 50%, how much incremental investment should the city expect to see over the next 5 years?   These are fair and important questions.  Most citizens can come nowhere close to answering these types of questions, and that would be OK but sadly, most policy-makers in a city like Trenton can’t answer them either.

So how can normal citizens get better at thinking through the policy issues that face us every day?

Without researching every policy assertion that’s ever made, how can we begin to really understand causes and effects?

We make better choices by knowing whether a policy has a 1st order or 2nd order effect and whether the effect is strong or weak. Of course we need to start with clarity on our goals (investment, crime, education, population, income). But after being clear on goals we must carefully consider causes and effects so we can begin to decide whether policy assertions are important.  This kind of thinking is often called “systems” thinking and is used to better understand complex things, like cities.

There’s a difference between 1st and 2nd order effects

In pool, when the cue ball strikes another ball and knocks it directly into a pocket, we call that a 1st order effect.  One thing caused another.  However that same pool shot may have left the cue ball well positioned to allow the player to sink the next ball.  That’s a 2nd order effect.  The difference is that  in order for the good “leave” to have happened, many more effects of physics had to take place over and beyond the just hitting the first ball in.  The cue ball had to be deflected just so, the spin had to be just right and perhaps the cue ball needed to bounce off the bumper with just the right angle.  The good “leave”, assuming it was intentional, had a much less likely chance of success than hitting the first ball in.

And so it is with city policies.  An afterschool program will most definitely get some kids off the street.  Getting kids off the streets is a 1st order effect and can be measured fairly simply.  It’s the number of kids in the program minus the percentage of those kids who would have otherwise stayed at home or in the library.  For instance: of the 100 kids in the after school program we might say 40 of them would have been home.  So the program got 60 kids off the street.

But how does an after-school program affect crime?  It’s not likely that a kid staying home would cause a crime.  But what about the 60 who would have hung out on street corners.  It’s a bit harder to say because crime reduction is a 2nd order effect.  For example, not all of those 60 kids would have ever committed a crime.  Of the several who might be inclined to commit a crime they might do it when they weren’t in the after-school program.    But then again, maybe the program has a long term effect on the child, or maybe it doesn’t.  As you can see, the 2nd order effects begin to get murky.  This is why sophisticated policy makers don’t depend on them and often point to 2nd order effects as “potential side benefits”.

In Trenton, we shouldn’t base our important policy decisions on 2nd order side effects.

Strong vs. weak effects and the importance of context

Even when causes and effects are 1st order, the linkage between the two can be weak.  For instance in buying a used car, high mileage may not dissuade you from buying it.  This is a 1st order effect but not a strong one because you’ve already decided you could accept a few miles on the car.  However, dented side panels may just completely turn you off.  The big dents might be a strong 1st order effect and keep you from buying the car.

It’s the same with public policy.  Let’s return to inspection fees for a new home.  Let’s say we want to stimulate growth by reducing the fee from $1000 to $300.  That’s a big drop.  And because it directly affects the price of the house, it’s a 1st order effect.  However, that $700 drop in cost is fairly small in comparison to the $300,000 that you’ll eventually spend on the house.  Other things like lumber, labor, land and property taxes easily dwarf the inspection cost.  So while the reduction in inspection fees may be annoying to the builder, it has a weak effect (though 1st order) on the eventual buyer.

2nd order effects can be weak and strong as well.  For instance, we can imagine a school retention program that lowers the high school drop-out rate.  This program might have a good 1st order effect on education but also a 2nd order effect on crime reduction.  That 2nd order effect might be considered strong because we know there’s such a high correlation between high school graduation and likelihood of committing a crime in the future.  Compare that to an after-school basketball program which should have a 2nd order effect on crime reduction (as we discussed above) but that effect may be weak.  Certainly the research and evidence linking graduation to crime reduction is stronger than that linking basketball to crime reduction.  That’s not to say there’s no effect, it’s just not likely to be as strong.

The cause and effect of crime also varies widely.  Economists have shown that each incremental index crime in a city leads to one person moving away.  However, the rate of emigration is 5 times higher for high income people and 3 times higher for families with children.  Poor, single people are much less likely to move away due to a high crime rate.    Therefore we can say that a high crime rate has a strong effect on high income people leaving a city but a weak effect on the poor leaving (likely because they have fewer choices).

Just understanding this differences in the effects of crime, even in the abstract, should have a profound impact on how we think about policy in a city like Trenton.  Sadly, you’ve never heard a government official make the above distinction.

It might be good to focus on strong 1st order effects rather than weak 2nd order ones.

In the world of policy making and particularly in a cash-strapped city like Trenton, we need to make hard choices.  We don’t have either the money or the man-power to do everything we’d like.  So it’s important for citizens to lobby for the most important policies and for government officials and activists to help clarify 1st and 2nd effects and strong vs. weak linkages.

We can use crime reduction as an example of a good objective.  Criminologists know that high rates of incarceration have a beneficial effect on the crime rate (most people get this).  There is a strong 1st order cause and effect between building good cases against criminals that lead to long sentences.   On the other hand, we may spend the same money we would have spent on an extra detective on a mentoring program.  The mentoring might have a 2nd order effect on crime reduction and likely a weak one at best.

When we talk about programs and policies in Trenton politics, we need to keep these things straight and always keep our core goals in mind as well as cost-benefit.

Policies that have multiple 1st and 2nd order effects are generally more impactful than others

Finally we should remember that sometimes policies can have multiple effects.  You’d likely trade a $1,000,000 program to reduce crime that has single strong and effect on the crime goal, for a $1,000,000 program to stimulate development that might have a strong 1st order effects on the economic growth goal, a strong 2nd order effect on the crime goal and a weak 2nd order effect on the education goal.  Some policies give us broader “bang for the buck”.

Policies that positively affect multiple goals in Trenton (investment, crime, education, population growth and income growth) will not only strengthen the city and stretch our dollars, but will find broader political support.

Every minute of every day, Trentonians have policy discussion on Facebook, at barber shops, in civic association meetings, over drinks and at City Hall.  We discuss crime, trash pick-up, taxes, parades and any number of topics.  It’s important for Trentonians to move past sentimentality and misguided assumptions in our discourse.  We need to get on the same page.  To do that, not only do we need shared goals, but we need a common vernacular for discussing policy.  To the extent we can begin to discipline our thinking by keeping our goals clear and then breaking causes and effects down into 1st and 2nd order and then strong vs. weak, we’ll have a more constructive civic dialogue.

Note:  I wrote this article for my blog 2 weeks ago, before the TESC deal for Glen Cairn Arms came up and was having it edited.  I had no way of knowing we would be having a important policy debate about this very subject.  I held off publishing it in favor of reporting on and  providing thoughts about the proposed TESC deal.  However now is a good time to start talking about causes and effects in policy discussion.

The Fix Is In

On Friday afternoon, (Jan. 11, 2013) Trenton first heard that Thomas Edison State College was to acquire the former Glen Cairn Arms (GCA) building at 301 W. State St.

The deal is that they pay a one-time fee of $300K and then never another dime to Trenton for all eternity.  TESC wants to construct a nursing school on the site.

To those of us that have observed the RFP process for GCA and the city’s broader attempts to market the city over the years, we know that our failure to interest a developer was due to lack of imagination, financial acumen and hubris.   The city under Doug Palmer had paid a substantial amount of money to acquire and settle lawsuits regarding the building, in excess of $3M.   We always thought we were better than any developer thought we were.  A Walgreen’s wasn’t good enough or a developer wouldn’t pay enough of the demo cost.  Or maybe other payments weren’t made.

In 6 tries over 16 years the city has not found a proposal that it liked enough to accept.  They’ve turned down proposals that would have had a positive return on investment for the city (i.e. paid more in taxes that our cost to make the site read).   And meanwhile, they never presented a plan to make the area around the site attractive to developers.  Over the years both Palmer and Mack have slowly let the city deteriorate in general both in its ability to fight crime but also to function as a working government.

So here we are.

In comes George Pruitt to present a deal to the city for the site that gives us nothing and for all time.

Tonight’s City Council meeting was obscene in the degree to which those of us working to help fix our approach to government were dismissed.  It was as if we were on the wrong side of the negotiating table with TESC, City Council and the administration lined up jointly to oppose us.

George Pruitt and his subjects threw out comment after comment hoping to convince, I don’t know who, that the project was a good idea.  They didn’t need to convince Council because they’d already been dealt with before the deal was announced.   Council and the city administration have given up on the city’s ability to affect change in marginal areas of the city.

This is a scary thought.  By giving up on Glen Cairn Arms, which has quite a bit going for it in terms of location, they’re saying that they don’t know what to do in any marginal part of the city.  They don’t know how to stimulate development.   It’s a hard thing to accept especially when the city administration and council don’t even know that’s what they’ve done.

But back to Dr. Pruitt’s comments on the numerous benefits to the proposed project:  Bob Lowe called them second order effects, which is what they are if you could even prove that.

For instance, he insists that by erecting a shiny new building property values would go up.  However, there’s no evidence in Trenton to suggest that.  It didn’t happen with the ballpark, hotel or arena in the so-called opportunity triangle.  It didn’t happen with the Hughes Justice Complex and it’s not happening with the new County courthouse.   The theory just isn’t supportable with the evidence.  And even if it was, it wouldn’t help our revenues because we don’t revalue our property, ever.

Second, Diana Rogers of the CCRC strongly supported the project.  Well that’s wonderful but who cares.  Ms. Rogers’ contribution to the “logic gone wild show” was to suggest that students at the nursing school would move to Trenton.   Wow! That was a doozy.   So what she thinks is that nursing student from around the world will pass by all of the other nursing schools in between them and Trenton just to come to TESC so that when they get here they’ll need a place to stay.   It’s hard to believe that a person that calls herself a redevelopment professional actually said that in public.

Next we hear the obligatory jobs argument, both construction jobs and permanent jobs.  I’d like for just once somebody to put pen to paper and show exactly how that translates into municipal revenue.  Unless new workers are being recruited from other areas of the country and need housing, and then when they get her happen to decide they want to live in Trenton, new jobs don’t equal new revenue.   Or maybe Dr. Pruitt thought that TESC would be hiring unemployed homeless people already in Trenton.  I don’t know what he was thinking other than he knew the public would like hearing it.

Finally we hear the nursing school compared favorably to other schools like Princeton, Rutgers and The Naval Academy.  The argument goes that those schools spin off industry and stimulate the economies of their host cities.  There is evidence that research universities have contributed to the development knowledge economies.   There just isn’t any evidence that nursing schools do that.  If there was then wouldn’t we be experiencing the boon Dr. Pruitt and others predict given that Mercer County Community College already has a nursing school in downtown Trenton.  I’ve read a lot about the linkage between universities and economic development.  I just haven’t come across the same linkage for nursing schools.

So we’ve got $16.7M in state spending that will make Trenton look a little prettier, give students another nursing option and construction workers another 6 months’ worth of work.  But Trenton gets nothing.

But we expected those banal arguments.  It’s what people say when they have to run away from the hard truth that a public project won’t benefit the host community.  We’ve heard this story too many times to count in Trenton.

What we didn’t expect to hear was the outright hostility to the idea that maybe we should take some time to think about this idea before we act.  I suggested that we form a group to look into the claims that were made by TESC and their paid contractors.   Shouldn’t we verify that there is no hope for site?  Shouldn’t we calculate the city’s cost in supporting this building for all eternity?  Shouldn’t we find a way to determine how nursing student lunches will translate into municipal revenue?   TESC made a lot of claims and didn’t provide any calculations to show how the city would actually benefit.  Shouldn’t we look into that?

And what about the city?  How is it that an economic development department can go 16 years and not figure out how to turn around one of the most trafficked blocks in the city?   How is it that a Business Administrator can’t figure out that a demolition loan at 2% would be a bargain if it generated a 4% return in taxes?  It’s not hard math.

Shouldn’t we do a little due diligence?

Nope rather than allow citizens to help look into these questions, our city council angrily shut the door on meaningful analysis and research.  They literally suggested that if we wanted to, we could  try to come up with something on our own. We could, but we’ve only got two weeks.   I’m sorry but we have jobs.  TESC told the Council that they had been working on this plan for two years.  Trenton taxpayers working as volunteers have only two weeks.

And to top it off, it was suggested that if we as taxpayers were so concerned why we didn’t do something about it before.  With whom?   Tony Mack hasn’t had the same person in the same job for more than 6 months for the past 2 ½ years.  Activists have tried to work constructively with the administration but it’s like walking on quicksand.   Further, I’ve been writing about this very subject for years.   I’ve written post after post about how to deal with land that has negative value.  I’ve proposed that we subsidize demo costs as early as 2008.  I’ve written extensively about neighborhood level development and land value tax.  These are measures to which the Palmer or Mack administrations or Council could have listened.  But instead they’ve chosen to chase business as usual and cede more Trenton land to the State of NJ.  They’ve chosen to be influenced by the same people who have influenced Trenton into the hole it’s in.  They’ve chosen to make us more dependent on the State, not less.

The lack of questions, the suspension of logic and the shutting out of meaningful public comment is proof positive that once again, in Trenton, the fix is in.

Other blogs/write-ups on the subject:

Jim Carlucci’s write-up of the Council meeting

Reasons to be Cheerful. Not.

Glengarry Glen Cairn

Tony Mack’s Worst Deal Yet

Tony Mack’s Worst Deal Yet

Today, Tony F. Mack announced that he wanted to give the Glen Cairn Arms building to Thomas Edison State College (TESC).  They want to put a $16.7M nursing school of some sort on the property.   Right off the bat, unsophisticated Trentonians started messaging that this was progress.

It’s not progress; it’s more of the same.

Every single politician and activist in Trenton for the last 12 years has complained that the State of New Jersey doesn’t pay its fair share in Trenton.  And this deal is simply more untaxed State land.  Do we need another tax exempt property?

Let’s do the math

TESC wants to give Trenton a one-time payment in lieu of taxes (PILOT) of $300,000.  One time!  That’s essentially free.

That $300,000 is to cover taxes for all time on a $16.7M building? Spread over 10 years that’s a 0.2% tax rate. Spread over 20 years that’s 0.1%.  Trenton’s tax rate for the rest of us is 5.5%.   Put another way, the State would be paying 1/50 of what you and I and every other private property owner pays in taxes. That’s essentially nothing.    Many private homeowners in Trenton pay more in taxes than this deal will yield.   It comes nowhere near the cost of paying for the police, fire and public works costs to support the building.  The new building’s direct support costs for just those services would be around $700K per year.

Trenton’s City Council should NOT approve this.

Instead, City Council should do what Fix Trenton’s Budget recommended two years ago and approve a standard PILOT for all new development in Trenton.  That standard PILOT should be based on taxing land at 30% of assessed value and improvements at 1.5% of assessed value. This PILOT should be available to all developers.   A standard PILOT like this would be welcome by developers and go a long way to encouraging new taxable investment in Trenton.   It would also serve as a reasonable basis for PILOTs for non-profits and eventually for a Land Value Tax for the rest of us.   This is important in our effort to have our tax system work for us rather than against us.

“Isn’t something better than nothing?”

It’s true that Glen Cairn Arms has sat vacant for many years.  But, as the math above shows, we lose money on this deal.   So no, “Something is NOT better than nothing”

Why hasn’t the building sold?

The City of Trenton owns the building and has been unsuccessful in selling it for many reasons:

1)    The City has maintained a poor development environment for many years due to crime, ineptitude in city government and lack of a plan to improve.

2)    The city always tried to sell it rather than give it away.  It’s obvious the building is a mess and therefore has no value and maybe negative value.

3)    We don’t have a standard PILOT that makes sense for a developer. I’ve proposed one above.

4)    We may have to demolish it ourselves (i.e. because as the building stands it has negative value)

There are several options

  • We sell it to TESC using a standard PILOT. The current assessed value of the land is $500K. With a $16.7M improvement and using the suggested standard PILOT rate, we receive $400k/ year in revenue. This is what we should get.   It still doesn’t cover all of our direct costs, but it’s closer.
  • We sell it to a private developer with a new package. We would spend the ~$1.4M * it would take to demolish the building in anticipation of a private developer putting a $5M building on the land. With the standard PILOT in place that would yield $225K a year in tax revenue.  This is a 16% return on investment and a pay-back of 6 years.
  • However, we should NEVER approve another tax exempt property deal. Increasing ratables in Trenton should be our #1 priority. This deal with the State of NJ is the opposite of that.

But there’s more

Do we as citizens really want to let Tony Mack negotiate development deals for us?  Time and again, we’ve seen in New Jersey that government money is rife with corruption.  Tony Mack has provided us a case in point.  We have no reason to trust him and every reason not to.

Our Indicted Occupant of the Mayor’s office will do anything to make himself look good to unsophisticated voters.  In this case, it appears that he’s working to curry favor with TESC and let that organization’s patina rub off on him.   The leadership at TESC should know better.   Furthermore TESC and Mack are using State money as part of this scheme.

But I’m really confused about the choice of Glen Cairn Arms?
Trenton has a large unused medical facility with multiple buildings that could certainly be converted into a nursing center.  Why not encourage TESC to purchase all or part of the Capital Health Mercer campus.   Isn’t this exactly the use we’ve all talked about for that site?

Finally …

This deal has been presented to citizens without any economic impact assessment.   Certainly our City Council has come too far with this corrupt and incompetent Mayor to allow him to get by with this. But more importantly, if you support this deal, then you have no business complaining about the State not paying its fair share in Trenton. This is just making it worse.

* I originally estimated $300K based on numbers from a previous bid, but understand that TESC thinks the cost is $1.4M so I’ll use their number to be conservative.

Embrace and Extend: Revitalizing Trenton’s S. Broad St.

This last week, a meeting was held of building owners and stakeholders representing a stretch of Trenton’s busy S. Broad Street from downtown to the Sun Bank arena. I’m one of those building owners.  If you’re familiar with Trenton at all, you know that this is an extremely visible and potentially important stretch of road.

There were around 40 people at the meeting and it’s the first time I’ve ever been in the same room with so many of my fellow S. Broad owners.  It was an important first step in the conversation to revitalize this part of Trenton.  I was skeptical of the meeting at first as I’ve been to a few failed attempts in the past and haven’t been able to get myself organized enough to hold a similar event.

The Old Mill Hill Society gets credit for getting this ball rolling and in particular Kari Brookhouse, Phil DeRose, Pete Kasabach and Craig Shofed.  They got the Mercer County Improvement Authority (MCIA) to fund an architectural firm to do some visioning work.  This was the impetus for the meeting.

To be honest I suspect some of the owners were there because they thought someone was handing out façade grants, but nonetheless they were there.  At the meeting we all got a visual overview of the area and then talked about what would make it better.

If you’ve driven or walked on S. Broad recently you’ll be able to guess that the #1 topic of discussion was trash.  Yep, somehow this busy commercial street has become a dumping ground.  We don’t know why but the architects pointed out that there wasn’t a trash can on the 300 block of S. Broad and yet that’s where all the restaurants are.  This is a problem.

Parking was the other big issue.  We’re a commercial area with no access to off street parking.  One of MCIA’s drivers for being involved in the meeting is that workers and visitors to the new county courthouse near S. Broad and Market St. will have to walk 2 blocks on S. Broad from parking lots at the arena.

Other issues such as crime and Mercer County’s nebulous plans for the “old” county courthouse also weighed on the group.  However, I’m hopeful.

The meeting got me thinking about what would make a difference in these 5 blocks of Trenton.  Together they represent $58M in assessed value but only $12 M of it is taxable.  So, as well trafficked and important as these 5 blocks are, they generate only $600 K in tax revenue.  That’s a problem.

My hope is that if we can continue to get ourselves organized, we can turn this around.

Keeping this part of Trenton clean should not be beyond our grasp.   Dumping enforcement, trash cans, street sweeping, public education about trash pick-up times and maybe some anti-litter marketing could help.  We discussed several small street-calming tactics that should be within our reach  such as trees and decorating the Rt. 1 bridge.   Furthermore, if we’re talking as a group, we’re also sharing business ideas and helping each other attract investment to the corridor.  That’s a good thing.

But what I really want to see happen is that we organize ourselves just enough so we can set a goal to grow from $12 M in value to $18 M over the next 2 years.    It’s not unattainable.  We’re not dependent on the city to grow, though the city could certainly do several things to avoid being in the way.  And, it would help us all.

If you know this corridor, then you know that it has an interesting mix of stakeholders.  On one side is one of Trenton’s nicest neighborhoods, Mill Hill.  On the other is a public works project, Kingsbury. Mercer County owns large buildings on either end of the corridor and there are large regional churches in the middle.

My attitude towards revitalization in this corridor is to “embrace and extend”.  As building owners we need to find business tenants that can embrace both Kingsbury and Mill Hill.  This might not be easy as the demographics are radically different.  This happens to an extent already but as we think about marketing our corridor we need to know more about the buying trends of the two neighborhoods.  Furthermore, why not create an environment in which churchgoers and arena visitors would like to linger. Most of the churchgoers on this block do NOT live in Trenton. Let’s make them feel welcome.

Secondly, we need to aid the extension of the corridor.  My hope is that Mercer County does NOT hold on to the old courthouse and instead sells it to private developers.  Also in the works are development of the former Hill Motel site, a plot of empty land near the arena and an infill lot in the middle of the 300 block.  As a group we will need to support these developments and help them succeed.

By embracing what we have now and then extending through new development, we can meet a goal of increasing values on S. Broad St. and doing our part to revitalize the city.