City Council, October 12th - Economic Opportunities Analysis

Council meets on Monday, and there's not much of great import on the agenda. At two different times, parts of the Economic Opportunities Analysis and Housing Needs Analysis will be discussed.

EOA-HNA draft Report - Jan 2015
(graph added from CO2 Now)

Before Council proper there will be a work session on the "Housing Needs Analysis."

At Council proper there will be a Public Hearing on the "Economic Needs Analysis." The Staff Recommendation is to advance it to a second reading for formal adoption as a "support" document to the Salem Area Comprehensive Plan.

(Both the EOA and HNA can be found here at the City's combined EOA-HNA site. And here are previous blog posts on the EOA-HNA process and memos.)

The great over-riding criticism of the plan is that it ignores greenhouse gas emissions and climate change. In a few years it seems clear that accelerating climate change and our regulatory environment will require a completely thorough revision of both documents. The City missed a great opportunity to begin to anticipate ways the plan will need to change and ways the City today could begin mitigating and reducing carbon, methane, and greenhouse gas emissions generally.

To take an example out of the headlines: Pot. Apparently pot isn't very green at all, and is an incredible energy hog. How do we manage that at the city level?

Powering pot: Growers will gobble electricity http://t.co/ZUZKCIOF6c pic.twitter.com/ZUKeFIMJ1x

— The Oregonian (@Oregonian) September 5, 2015

Or water. How does our water policy, pricing, and infrastructure work in an era of increasing drought and water scarcity?

The main conclusion of the analysis as written is that the City currently "has 907 acres more of industrial land than is needed to accommodate projected employment growth over the 2015 to 2035 period." The analysis also finds City has "a deficit of 271 acres of commercial land." So this study will function as a formal reason to rezone industrial land to commercial or residential as lots come to the Planning Commission with requests.

You can see the nut here: What does "industrial land" mean in a much lower-carbon and drought-frequent future?  

It is also interesting to consider the absence of "transit" or "Cherriots" in the study.

The main discussion of it is buried on page B-37 in "Appendix B: Economic Trends and Factors Affecting Future Economic Growth in Salem."

From the full EOA

In a subsection, "Availability of Transportation Facilities," it mentions "multiple weekday-operating bus lines" but does not assess the extent to which the lack of evening and weekend service is an asset or problem for Salem economic activity. It makes no comment on the adequacy of transit and its significance for our work force.

(The housing study is similarly hampered by insufficient attention to climate change as well as more narrow questions of transportation.)

Something of a Digression

Somewhat related - just going to horn this in - look at this drab thing. "Statement No. 77 of the Governmental Accounting Standards Board: Tax Abatement Disclosures." Back in August the GASB released it, and it seems like some of the difficulty we are having in assessing the costs of a proposed payroll tax for Cherriots, or the costs of its principal alternative a property tax, is that we don't actually have very good reporting on the companies and property tax abatements that the City and other governmental entities have already given out. Right now claims about harms to businesses by one tax or another are mostly mythic or anecdotal, resting on prior commitments rather than real evidence.

That's not a subject to dive into here. Maybe one of you readers is a CPA type and would find a deep dive into this a congenial topic. Reporting on local subsidies to business would help a lot in policy analysis and debate. If we could analyze them as investments, some of which will be reasonable and clearly beneficial, rather than simply as subsidies, which always sound dodgy and an instance of cronyism, we could assess them so much better.

The Third Bridge would extract 10x the taxes and fees

For example, this letter to the editor in the paper today makes an important point. We have a number of deferred and proposed projects for which we will need to raise revenues, principally by come kind of tax package.

• A proposed $500 million "Third Bridge"
• A proposed $50 million Police Facility
• A proposed $5 million for weekend and evening bus service
• Seismic upgrades for City Hall and the Library
• Seismic upgrades for the Marion and Center Street bridges
• Seismic upgrades for our smaller bridges across Mill and Pringle Creeks and around the Hospital
• and so on

But there are a couple of problems here because we don't have a very good analysis of them as investments. Right off is the problem of magnitudes and opportunity cost.

The unmentioned Third Bridge is a lot bigger than the others! And to compare the Cherriots proposal with the Police proposal, we should have an apples-to-apples comparison of proposed tax packages. Comparing $5 million a year for Cherriots with $50 million bonded total for the Police isn't a very good comparison. We don't sort and assess by size very well.

The second problem is - maybe you economists will have a better word for this, but I think of it as a Keynesian one: Some capital investment funded by taxes will create new business and new revenue, so it's not always true that "the healthy circular flow of money is always disrupted when you add new taxes." The failures of austerity programs have attested to this. Isn't Bonneville Dam, for example, tax funded capital investment that created enormous prosperity in the Pacific Northwest with cheap electricity? Or the Interstate Highway system?

In an on-going way healthy transit system may contribute more to the Salem economy than a new Police Facility, actually. (But of course after the earthquake comes, if we are without critical law and order institutions, then the reverse will be true.)

Finally, we probably need at a high, strategic level to start enumerating these big buckets of deferred projects, and really to start prioritizing them with cost estimates. It doesn't make sense to pick them off one at a time as they seem politically feasible. With climate change, water scarcity, changing geopolitical realities, some big challenges are coming at us, and we should be thinking more about resiliency.