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The State of California is finally about to hit the wall, after a failed initiative that attempted to cut social services and school funding to balance the budget. No budget passed as of today, and the State will begin issuing IOU's. How did this state of affairs come about?
The revenue structure has been so tortured and abused since Prop 13 was passed, that it's no longer structurally viable. What Prop 13 did was create a "layer cake" of revenue tiers that broke up the accountability that the simple local property tax had prior to 1978, per the diagram above (click to enlarge). Ultimately what evolved out of this is a revenue system that pits business growth against residents.
Since all revenue went to Sacramento, which was ostensibly then responsible for returning it to the communities, the bureacracy expanded each year to consume more tax revenue, which was withheld from the residents who pay the tax. As more revenue was captured by State programs, the cities were then forced to rely on increased local business taxes to fund their operations, hence the development binge. Further initiatives by the voters to fund community and social services and force Sacramento to spend the monies in communities resulted in a legislature that is unable to allocate funds in a normal accounting process (maybe a good thing, given Sacramento's prorities). Now the State is holding back revenue from the schools as well as payments to businesses and nonproftis that provide infrastructure and social services, we see a wave of local school district bonds and parcel taxes, which are passed in a panic and facilitated by County administrative practices.
So the whole state is driven by the need to drive growth to gain revenue, rather than living within its means. It bet all the chips on growth in real estate and sales revenue of products shipped in to the ports. The environmental and pollution consequences of growth were abandoned to the "public sector" in a classic "tragedy of the commons" scenario. An LA Times commentary here from John Vasconcellos summarizes the scope of the problem.
The structure has evolved into such a dysfunctional mess that the legislature is no longer able to deal with it. It's not a matter of fixing a few parts. If California is to become a leader ever again, it must change its structure before the voters create an initiative to dissolve the government. This does, however, present an opportunity to create a state that works on a highly streamlined and effective model of "Design with Nature" instead of destroying it. Accounting practices would have to follow this model, instead of booking development losses as positive GDP investments, and so forth.
I'd vote for that.
Small is Beautiful: Economics As If People Mattered by by E. F. Schumacher is over 25 years old now, but its premise is now more valid than ever. It's a simple, straightforward approach that takes into consideration the way measuring strictly by patterns of consumption create dysfunctional systems that ignore human and natural capital. It has a very Buddhist bent, but that world view encompasses the risk factors ignored by our current system that's beancounter-based solely on amounts of consumed product.
Nouriel Roubini is a professor of economics at the New York University Stern School of Business and the chairman of an economic consulting firm. He affirms this approach after examining the global fiscal structure that has approached collapse because of this fundamentally flawed view and the necessary emergence of a new global economic structure. An excerpt:
Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.
This business of "going green" is not only an issue of the global survival, but a fundamental issue of "appropriately risked" global economics as well. How an economic system is constructed to best produce return on investment and improve the quality of life for people in their communities is the measure of its success. Here's a definition from The Concise Encyclopedia of Economics, David R. Henderson, ed
"Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material."
As you can see from the spinogram above from Miller-McCune, the financial and service industries have become the drivers of the massive growth bubbles and unsustainable business practices that are so globally destructive in the long run. This represents "more cooking", and it shows in the large shifts of those sectors to the top of the US GDP from 1965 to the present. We're at a point where, as Roubini states, there needs to be a different growth model, and more than just a shift in economic sectors. Thomas Friedman talks about “Market to Mother Nature” which takes our economic system back to rational production processes and systems that create profit at the same time they align with human capital and natural systems.
Many voices are now speaking to this issue of environmental and human capital that must be part of a functioning economic system. In addition, California has very particular problems that have to be addressed because of the toll this recession has taken on the state. It's no longer business as usual. A report from the Economic Roundtable, Ebbing Tides in the Golden State, examines in detail the challenges that the State faces in rebuilding its economy. It echoes Roubini and Friedman in its emphasis that human capital and natural resources must be the focus of rebuilding a new and productive economic structure. We need to see true leadership emerge from all across California, and seek collaborative reform of what has become a dysfunctional system. It's a window of opportunity if we do this right.
What has the graphic above got to do with SB 375? It's the whole enchilada.
SB 375 essentially establishes unofficial growth boundaries in California (similar to Portland's urban boundary strategies) but in exchange it strips local governments of the protections under CEQA for projects that have transportation or housing elements within urban boundaries, and enforces the imposed housing numbers developed by SCAG. Devil's bargain, just like Prop 13 has turned out to be. Major proposed regional transit projects (which are actually cargo transit networks) that induce local growth would no longer be stoppable by small communities using CEQA, it strips cities of local control. It pits anticipated regional economic growth against the integrity of the local communities.
An analysis of the bill shows the following:
Opposition to this bill (many transit agencies and Counties) stated:
"SB 375 changes the well-established criteria for funding transportation projects through the STIP by imposing new, limiting criteria to determine if a project qualifies for funding. That new criteria focuses primarily on the location of a project. If a project is located within a preferred growth area it will likely qualify for funding. If the project is outside of a preferred growth area it doesn't even qualify to be considered for funding."
Author's amendments: The author proposes the following amendment to allow the individual counties within the SCAG area to develop transportation objectives to serve their own county residents, providing an option to having the preferred growth scenario independently developed through SCAG's regional governance perspective: Within a multi-county regional transportation agency, a county and the cities within the county may propose to the regional transportation agency a preferred growth scenario for that county. The regional transportation planning agency may adopt the county preferred growth scenario as part of the region's preferred growth scenario provided that the region's preferred growth scenario is consistent with the other provisions subparagraph (b)(2)
US National policy is now aimed at local supply of food and energy, not at the "supply import scenario" that this model for SB 375 is based upon. This agenda by SCAG is to increase the shipping and cargo infrastructure from the Port in San Pedro, a major contributor to carbon emissions and the underlying cause of massive amounts of energy use, pollution and waste generation, as well as the significant water consumption created by construction projects. SCAG is simply chasing the regional profits at the expense of the residents - the usual model of privatize profit, push the consequences to the public sector. Except that's building for an economy that happened in the decade behind us, not the decades that will be ahead of us.
The "Strength of Cities" approach outlines an appropriate Federal Urban public policy to reinforce the health of the big urban centers, focused on pedestrian transport linkages, walkability, green open spaces and an emphasis on regenerative strategies. This is a rebuild and streamline scenario that reduces consumption, not an economic growth model of "more building". Over investing in housing is financially leveraging the most unproductive form of capital.
Nouriel Roubini is quoted by James Fallows in the Atlantic July/August issue: "You know, the potential for our future growth is going to be lower, because of the excesses we've had. Sustainable growth may mean investing slowly in infrastructures for the future, and rebuilding our human capital. Renewable resources. Maybe nanotechnology? We don't know what it's going to be. There are parts of the economy we can expect to be more sustainable and less bubble-like growth. But it's going to be a challenge to find a new growth model. It's not going to be simple."
You know the old game. Paper can beat a rock, it can also beat water supplies. In the ficitious California water allocation system paper wins every time. Except when the scissors come out and the allocation is subject to judicial political whim. The consequence of this is not only massive water rate inceases, but also shifts in allocation from farms and residents to the developers. To cite a letter published in today's Star-News:
Your commentary on water rates just touched the surface of the problem. May I ask why you and I should be penalized for our elected leaders' continuous approval of new condo and housing developments? This is going on throughout our state.
Rather than try to force the considerate water users to do more, or penalize them by raising their water rates, why don't we just declare a statewide moratorium on new development, until we get the supply of water worked out to meet everyone's needs.
As a former land developer I always had to get a "will serve" letter from the local water purveyor saying that they "could and would" supply water to the new development, before I could get my plans approved.
Frankly, if the water shortage is such that we have to ration water and use punitive water rates to reduce water usage, there must be a real shortage of water. How then, can water purveyors say they have enough water to supply new developments?
Locally, on the east side of Pasadena, we have a number of nurseries protecting our "open space." Is our punitive water rating system going to allow those nurseries to stay in business? I am a nurseryman and next to rent, payroll cost and insurance, water is my biggest single expense. I would like to see my business grow, but will the proposed water rationing program allow that to happen?
Our open space is threatened, my business is threatened, our streets are getting more crowded, and all because we are giving waterto newcomers when we do not have enough water for our current population.
Bert Tibbet, Magic Growers, Inc. Pasadena
To answer his question, it's because in spite of legislation authored by Sheila Kuehl in the State Senate (SB 221) signed into law in Oct 2001 to stop this practice, water is continually sold to the highest bidder on paper despite the lack of water allocation to Southern California. This is all about getting as much construction in place as possible. And again, the entire state economy rides on imaginary future population numbers pushed by SCAG, which has led to the implosion of the real estate industry due to the SCAG policies and massive overbuilding fed by financial funny numbers in a system originated by Countrywide, a local mortgage bank. These imaginary numbers were based upon a thesis prepared by USC's Population Dynamics Research Group. They are now "outmigration deniers."
So now it's Oil, Paper, Scissors. The Judge is on to something...
(Hint: It's not the smelt fish)
Summer is kicking in with a blast in LA, after a cool spring that didn't bring much rain (again). It's noticeable in wide flunctuations of temperature, as well as some new temperature records. It's also evident in gardens and parks, where blight and fungal infections are on the rise as heat and humidity hit the water-stressed landscape. Oaks dying of fungus, azaleas disintegrating, foliage turning black from root rot, landscapes drying out - sycamores dying of thirst - and becoming infested with more insect pests that were once held at bay. Not a pretty picture. At least we don't have the massive flooding seen on the east coast and midwest, but we seem to be heading for the opposite extreme, per the Global Climate Change Impacts report released on June 16. This will trigger changes in the debate in this country about the actual impacts of global warming, and how to plan for future infrastructure by not propping up the old systems, but adapting them to new realities.
Since it's critical to get it right this time, the impacts of all human activities must necessarily be considered in this new future we now have. If the financial meltdown of the last year has taught us anything, it's that the consequences of not accounting for the actual impacts of things will absolutely lead to collapse. Thomas Freidman wrote an article emphasizing that on March 31.
There's a hope that some of the efforts coalescing in the Los Angeles area for sustainability, such as the LA River restoration, water conservation and reconstruction of wetlands and aquifers, LA City green building initiatives, cleaning up the port pollution, reclamation of industrial sites, etc. will begin to reverse the damage of miles of asphalt, urban sprawl and destruction of the natural landscape.
However, LA doesn't hold a candle to San Francisco and the Bay area, which is showing tremendous leadership in this area. Mayor Gavin Newsom is out in front with it, and it will probably pay off for him in the future Governor's race. It's tremendously encouraging to see the change in the dialoge, both locally and nationally, after the belligerence of the Bush years on environmental issues in order to protect private profits for the corporations.
A major shift in US values is necessary to accomplish this, and an approach to this new kind of thinking and economics can be found in Riane Eisler's book, "The Real Wealth of Nations". She proposes a complete system of accountability in all sectors of the real world, including people and community as well as the environmental issues, rather than rewarding destructive growth practices.
The economic crisis in the California budget has put the spotlight on School District funding. With Sacramento pulling monies from schools and cities (Prop 13 "protection" for the voters), local jurisdictions are imposing spiralling taxes and fees. San Marino, as an prime example, is a nexus of County and local interjurisdictional conflict that plays out with expansionist strategies that drive growth in order to generate revenue, creating unsustainable fiscal structures. It has become a model for other local wealthy communities in the money grab. Precedents for this approach are described here. The use of interdistrict transfers allowed under State law are described here.
The map of the SMUSD area above shows how this plays out. SMUSD finally succeeded in mobilizing the parents to pass a large parcel tax last month which is imposed in the district boundaries (purple outline) which officially includes areas outside the city boundaries (blue area). This was done with a problematic mail-in only ballot, and the results were predictably skewed. The District boundaries are officially mapped rather distinctly, but there are areas (in pink) that get "fuzzy" despite battles in the past between districts to prevent annexation of neighborhoods for the revenue (famously Greenwood). These areas are County and also part of the North San Gabriel Neighborhood, a census-designated place (CDP) as defined by the County. The Los Angeles County Committee (LACC) on School District Organization is the overseeing agency for state policies at this level for the schools.
This particular CDP has historically been the San Gabriel Township comprised of Alhambra, Monterey Park (1920, part), Pasadena, Rosemead (1940, part) San Gabriel, San Marino, South Pasadena, Temple City (1940, part) and Wilmar. It is now a defined census tract used in public policy decisions (legislative districts, school districts, police, fire and sheriff, hospital, social and emergency services) at the County level. The CDP shows how the County influence brings to bear the methods used by a small, built-out community to expand its services and footprint in the face of declining enrollment and the flight of young families since the 1980's, due to costs of living here. This includes the Recreation Department and the Library as well as the School District.
How accurate this census is, or will be in the future, is to be determined (the ACORN site is here). The "porting over" of San Marino and La Canada Flintridge to Republican districts after Schiff won the district from Rogan raises issues based upon the 2000 census overseen by the County.
This area has become the major draw for this new business model, which concerns the representation involved with a parcel tax inside SMUSD boundaries that provides regional services; it's now a County model that places REGIONAL burdens on small city resources. For example, the parcel tax does not cover the unofficial school district areas, interdistrict transfers from Pasadena, Alhambra, Sierra Madre, San Gabriel (now being lobbied to continue the "School of Choice" model), families of City and SMUSD employees, and the hundreds of over-65 property owners that are taking advantage of the exemption from the tax - per the San Marino Tribune - used to pass the measure. Thus the burden falls once again on the young families, which are still in decline because of the costs of living in this community. This has led to the SMUSD practice of permitting families to retain their attendance in spite of only renting for one year in the SMUSD area (around 400 in the city itself - 10% of households - despite City regulations to the contrary) after which they relocate to less expensive home rentals in other areas. Hence, there is no incentive to participate in the schools or the community as a dwindling percentage of households actually have children in the schools as the "imported" student body grows.
The burden of this County growth model has the potential of dissolving the community and its connections, historically grounded in families. Without the buy-in of community, it's all business, and this leads to the over development and spiraling costs that degrade the scale and sustainable quality of life that is characteristic of these small communities.
I wanted to post a small memorial to a good friend who passed away suddenly on June 3: Dick Edwards (on the right) Co-Founder of Space Settlement Design Competitions for high school students in 1984. His volunteer service in Southern California included active membership and officer responsibilities in the American Institute of Aeronautics and Astronautics, engineering honor society Tau Beta Pi, and the Judging Policy Advisory Committee of the California State Science Fair. Space Settlement Design Competitions have grown to involve over 1000 students annually on six continents; Dick literally traveled around the world to help conduct Competitions for students. An engineer for the Boeing Space Shuttle program now based in Houston, he'll be deeply missed by students, friends, colleagues and of course the Grand Canyon River Rats.
In today's world of high costs for construction and facility operation, it makes sense to strive for public use of buildings that would otherwise be single-purpose. Given this rationale, one of the early successful integrations of this for a nature-focused organization is the Natural Resources Defense Council headquarters in Santa Monica which achieved a Platnimum LEED rating in about 2004, the first public museum to achieve this rating (photo above). It's close to public transportation and has other "New Urbanist" qualities, since it was adapted from an existing building in the heart of downtown. That's the kind of green building that should be most encouraged, not new construction buildings in far-flung, transit-unfriendly, pedestrian-unfriendly areas.
The "museum as boardroom" idea caught on, and the MWD found it to be a useful strategy for its own purposes. The recent Center for Water Education in Hemet, also billed as the "first LEED Platinum Museum" was constructed as part of the MWD water storage facility for its headquarters use, then expanded to include a non-profit museum, which has become problematic. It is also far away from any transit, urban centers, commercial activity, and has to expend additional energy and money to bus visitors in from the LA region. It would seem to be counter to the philosophy of LEED that large structures can justify isolated project locations by attempting to shrink the footprint. The pioneering retrofit of its existing facilities by the NRDC for its New York offices provided the cutting-edge rationale for "in-place greening" in 1989.
Now another attempt to impose large "nature museum" structures in green clothing is being objected to by the public, to be located in the Whittier Narrows wildlife sanctuary. A proposed $30 million nature museum in Whittier Narrows moves forward in public hearing. According to the Star-News, "The project has now grown into this enormous museum for the entire watershed, and the actual nature center part of it is completely gone. The entire building is a showplace for the water districts. Why should that be put in a bird sanctuary?" said Grace Allen, lead docent at the nature center and member of Friends of the Whittier Narrows Natural Area - the group formed to oppose the project. They have offered alternatives to a large, environmentally destructive project.Thus "public education" can be transformed into a form of greenwash using public dollars to create bureaucratic edifices. At least the MTA Headquarters building made no such pretense of its gilded palace, with its immense scale in contrast to all the transit facilities around it.
Global energy shifts are becoming clearly evident as China asserts itself in the global community with its financial resources and rapidly rising consumption rate. It's already famous for its pollution and the massive Three Gorges Dam project on the Yangtze river, which will silt up before its useful lifetime as a power generator is complete, not to mention powerfully destructive impacts on the local region's existing environment. For this reason, its Ministry of Environmental Protection has become more sensitive to public opinion.
Recently, China and the US have agreed to cooperate as the global community is discussing climate treaties this year. This is a crucial step towards balancing costs and supplies so that sustainable human activity can continue without the environmental destruction that has resulted from the development in both of these countries. However, China has refused emissions cuts at this time.
A report from Tomgram highlights the energy shifts taking place and being projected out in the next year by the US Energy Information Administration, and concludes:
At first glance, the International Energy Outlook for 2009 hardly looks different from previous editions: a tedious compendium of tables and text on global energy trends. Looked at another way, however, it trumpets the headlines of the future -- and their news is not comforting.
The global energy equation is changing rapidly, and with it is likely to come great power competition, economic peril, rising starvation, growing unrest, environmental disaster, and shrinking energy supplies, no matter what steps are taken. No doubt the 2010 edition of the report and those that follow will reveal far more, but the new trends in energy on the planet are already increasingly evident -- and unsettling.
Nothing concentrates the mind like an execution in the morning.
From CSR wire: The biggest consumer of energy in the US is not transportation, but rather the 64 billion square feet of real estate. The US building sector consumes 40 percent of the country’s energy, and is responsible for the same percentage of its greenhouse gas (GHG) emissions. Specifics on addressing this problem are here.
This references a new study by WBCSD that conforming to the new Global energy targets is an immediate and crucial action worldwide.
New modeling by the World Business Council for Sustainable Development (WBCSD) shows how energy use in buildings can be cut by 60 percent by 2050 – essential to meeting global climate change targets – but this will require immediate action to transform the building sector.A pan-european system has emerged which is being rapidly adoped in the face of this challenge. It is a global standard being developed by european real estate concerns that will create an issue for the LEED and BREEAM standards here in the US. Much like the discord over the metric vs the english system of measurement, the question of universal adoption of any of these will depend upon how well these systems are able to audit project performance and enable the building industry to grow in a different way than it has in the past.New approaches to planning, building, economics and resource management, as well as conservation of natural processes and territories, will necessarily come to the forefront of city redevelopment and human societies, in the interests of protecting what's left of the web of life.
The current economic crisis has slowed the progress on international cooperation by the G20 on the objectives outlined by the Intergovernmental Panel on Climate Change. However, the IPCC is moving ahead with its scoping meeting in July in Venice, and there's a global movement afoot to use sustainable strategies to create a viable foundation for global financial reinvestment. From their website:
The IPCC is a scientific intergovernmental body set up by the World Meteorological Organization (WMO) and by the United Nations Environment Programme (UNEP). Its constituency is made of :
* The governments: the IPCC is open to all member countries of WMO and UNEP. Governments of participate in plenary Sessions of the IPCC where main decisions about the IPCC workprogramme are taken and reports are accepted, adopted and approved. They also participate the review of IPCC Reports.
* The scientists: hundreds of scientists all over the world contribute to the work of the IPCC as authors, contributors and reviewers.
* The people: as United Nations body, the IPCC work aims at the promotion of the United Nations human development goals
The evolving strategies are outlined by Peterson Institute for International Economics Monitor, and basically commit to tackling the economic crisis and the climate crisis as a synergistic manifestation of the out-of-control industrial and financial practices of the past:
"Excessive US consumption financed by excessive Chinese savings and investment is reflected in both countries' burgeoning carbon footprints, as well as current economic challenges. American consumers purchased SUVs and McMansions on the back of cheap credit while Chinese industry over-invested in steel, cement, and aluminum production on the backs of Chinese household savings."
This page references Testimony before the Select Committee on Energy Independence and Global Warming, US House of Representatives on January 15, 2009. This approach appears to be headed towards becoming offical US and global policy, which means that regulations, funding and US government strategies will move towards supporting the crucial and necessary major reduction of carbon emissions from the largest current global source, the USA. Our government has now accepted responsibility for its role in producing most of the carbon implicated in global warming, which becomes an opportunity for leadership by the US in sustainable economic growth. Accordingly, local planning and financial structures will be able to follow regenerative strategies that produce sustainable communities. This will also spur other countries such as Canada that have hooked their compliance with emission levels to US targets.
So what does this have to do with Southern California? Think Inland Empire housing bust. The "roof farm" housing tracts for the LA urban centers are no longer viable, not that they ever really were before the "growth vision" bubble popped.
Detroit has been depopulating because the old single-sector company industrial production model no longer exists, hence large swaths of the city are abandoned and decaying. This presents one of the best opportunities for sustainable redevelopment in the country. Here are the opportunities for restoration of natural processes, linked public transit, clean utilities, multiple land uses (including "local food") and myriad commercial and "new industry" centers. This more closely mimics the natural structure of complex ecosystems and biodiversity necessary to sustain living systems. An article discussing the "shrinking city" is here in new geography.
The concept being put forward per the image above (click to enlarge) is discussed in the local Detroit free press (FREEP) involving a complete redevelopment of the old industrial areas, using "smart growth" to establish infrastructure that can replace the old, useless industrial infrastructure and connections. Coal usage was the base source of energy from the early industrial age, and now this is an opportunity to restructure the city with many strategies for clean energy generation that fits the new scale of habitation. Technology can be implemented to vastly reduce consumption and waste, given the opportunity for developers to install these systems and attract diverse businesses that employ people locally and develop a new financial base and appeal to a better quality of life.
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