The Oregon State Land Board on Tuesday agreed to move forward with the sale of scattered tracts of the Elliott State Forest, reports OPB. Gov. John Kitzhaber, Secretary of State Kate Brown and State Treasurer Ted Wheeler—who make up the State Land Board—unanimously backed the plan.
They said the board needs to balance conservation concerns against a constitutional requirement that the land generate money for public schools. Kitzhaber said the state needs to go forward with accepting bids to determine the value of the 2,700 acres, whether the land is sold to timber companies or conservation groups.
Three years ago, I testified before the State Land Board and presented evidence that the state was violating its fiduciary duty to manage the Elliott State Forest for the benefit of Oregon’s K-12 schools. In 2009, the Elliott State Forest contributed $6.4 million to the state’s Common School Fund. Fast forward to 2013 and land management in the Elliott State Forest will cost the state about $3 million, according to the Oregonian.
In other words, under state management, the Elliott State Forest went from making a modest contribution to Oregon schools to effectively taking money from Oregon schools.
I suggested that the state sell or lease the Elliott State Forest, place the proceeds with the Oregon Investment Council, and use the investment returns to fund K-12 schools. Using the Council’s history of returns I performed a Monte Carlo simulation to develop a range of potential investment returns. I assumed that the state would annually fund schools with the greater of (1) one-half of the annual growth in the fund, or (2) 2.5 percent of the outstanding value of the fund. The chart below show how much would be distributed under the median scenario produced by the Monte Carlo process.
It’s hard to see in the figure above, but under the median scenario, investment returns from a sale or lease of the Elliott State Forest was projected to provide an average of $34.6 million a year to Oregon K-12 schools for the first 10 years after the sale/lease. Which is a whole lot better than taking $3 million away from schools.
In the Portland State University Center for Real Estate single family housing report, RMLS student fellow Evan Abramowitz reports that all major US metropolitan markets have seen appreciation in the last year, and foreclosure activity is at the lowest level since before the recession in 2008. Portland remains one of the hottest markets in the United States, with the year on year appreciation at 14.1% using National Association of Realtor data, 12.4% using the Case-Shiller repeat sales index, and 22.0% using Abramowitz’ analysis of RMLS data for the three-county region. Unlike most US markets, prices in Portland market are higher today than prior to the recession. At the same time, this increase in prices hasn’t led to a robust recovery in construction activity. While building permits have risen in the last year, they remain less than half the level in the boom period of 2003-07.
Outside of the three-county Portland area, Abramowitz finds sharp increases in housing prices in all the major markets in the state and region, with the following median levels: Portland area, $334,350; Bend, $280,000; Vancouver suburbs, $279,900; Benton County, $248,000; Eugene-Springfield, $244,300; City of Vancouver, $231,140; Redmond, $180,900; Salem $177,000, Marion County, $170,000, and Linn County, $155,000. Abramowitz discovered that new home prices in Portland in the last quarter only barely exceeded those of existing homes ($334,350 vs. $327,000), suggesting that developers have focused on constructing smaller homes than previously. Historically, new homes have sold for a premium of approximately $50,000 over existing homes.
In the multi-family housing report, Abramowitz reports the Portland-area apartment vacancy rates have remained low at 3.1%, considerably below the national average of 4.3%. Abramowitz finds that multi-family permit activity is rising quickly and cites the work of Portland apartment specialists, Mark and Patrick Barry, who see an accelerating new apartments being proposed, permitted, built, and opened, particularly in close-in East Portland neighborhoods. They anticipate vacancy rates reaching 5.5% by the end of 2015.
In the office market report, Oregon Association of Realtors Student Fellow Geoff Falkenberg finds that the office market has experienced a fourth year of positive net absorption with only a 0.2% increase in the stock of space in the last year. As a result, rents are rising by 5% for CBD class A space and 4.5% for Class B. Vacancy rates for the CBD remain lower (8.7%) than suburban markets like the Sunset Corridor (12.5%) and Kruse Way (15.4%). These patterns may change as the Edith Green redevelopment and the Park Avenue West projects are completed.
In his industrial report, Falkenberg reports that vacancy rates have remained at a low level of 6.7% in the Portland market, the lowest level since 2008, and much lower than rates in Seattle, 15.5%; San Francisco, 9.1%; and Los Angeles 16.7%. While rents haven’t moved much, the tight conditions are leading to new construction. Falkenberg reports the groundbreaking by Capstone Partners of the first speculative industrial warehouse in the Portland market since 2007.
In his retail report, Falkenberg finds that vacancy rates for retail space have remained stubbornly high at 6.15%, However, average rents have remained at the $16.00 per square foot rate for the last two years, well below the $18.00 per square foot level they commanded in 2008-09. This suggests that landlords are keeping their space active by cutting rents. In that environment, little new construction activity is anticipated.
A little less than a year ago, Michigan became the 24th state to enact right-to-work legislation, a development that has been closely associated with the temperature of Hades dropping. Since then, right-to-work supporters have sought to enact similar legislation throughout the United States. Even here in the Northwest.
In Oregon, the Public Employee Choice Act would provide right-to-work protections to public employees. With the Boeing’s machinists recent rejection of a new contract and the company’s drift toward more business-friendly states, there has been some speculation that the state of Washington may consider right-to-work legislation in order to hang on to key employers.
What is right-to-work?
Right-to-work policies liberalize labor market conditions by loosening some of the most restrictive features of labor legislation enacted during the Great Depression. In 1935, at the depths of the Great Depression job losses, Congress passed the National Labor Relations Act (also known as the Wagner Act). This act permitted closed union shops which require employees to join a union and/or pay union dues as a condition of employment.
The widespread impact of coal miner strikes through the late 1940s led some to conclude that the Wagner Act had conferred too much power on organized labor. The Taft-Hartley Act — enacted in 1947 over President Truman’s veto — modified the impact of the Wagner Act by affirming the right of states to prohibit certain union shop restrictions enabled by the Wagner Act. Specifically, Taft-Hartley indicates that states can pass laws that prohibit unions and employers from making union membership or the payment of union dues a condition of employment. These state statutes are referred to as “right-to-work” laws because they give employees the right to work without the being forced to join a union or handover a portion of their paychecks to unions in the form of dues or fees.
A boost to employment
Right-to-work has gained attention in the wake of the past recession because such laws can be a key component of a pro-investment and pro-employment package that encourages firms to locate and expand in a state. Indeed, a large body of research has found that as a group, right-to-work states have enjoyed more rapid employment growth, better job preservation, and faster recoveries from recession than states without right-to-work laws in place.
For example, the figure below shows that since 1950, states with right-to-work laws have seen their employment grow at roughly double the rate of non-right-to-work states.
While right-to-work laws can be a key component of a pro-investment and pro-employment package that encourages firms to locate and expand in a state, it would not be fair to conclude that all the employment gains can be assigned to right-to-work.
Indeed, there are many factors that contribute to employment growth. For example, some have argued that one of the biggest predictors of employment/population growth is climate: People tend to migrate toward nicer weather. Harvard economist Edward Glaeser, explains:
But the connection between January temperature and growth reflects more than just the weather. Sixty years ago, income and productivity in the South lagged significantly below that in Northern states. There has been a remarkable convergence of incomes since then, as manufacturing firms moved to lower wage areas that gradually became higher wage. Right-to-work laws in Southern states seem to have significantly attracted new industry (Holmes, 1998). Indeed, one can quite plausibly argue that the South had far worse institutions for economic growth before the Civil Rights Era, but that today, fewer regulations and lower taxes makes the Sunbelt more pro-growth
Statistical analysis can account for these other factors and separate out the relationship between right-to-work laws and employment growth. My research finds that, if Oregon were to enact right-to-work legislation, the state’s employment would grow one-half of one percent faster than it is currently projected to grow.
Now, one-half of one percent does not sound like a lot. But, over time, even tiny changes in the growth rate can have large long-run impacts.
For example, the figure below shows that if Oregon adopted right-to-work legislation that went into effect in 2015, then five years later the state would have 56,000 more people working than without right-to-work.
A boost to pay
Opponents of right-to-work argue that enacting a right-to-work law would gut Oregon incomes, calling it “right-to-work for less.” In fact, however, research that controls for other factors that affect wages, finds that right-to-work states have average wages that are “significantly higher” (more than six percent higher) than in non-right-to-work states.
The statistical analysis I conducted shows that wage and salary growth under right-to-work would keep pace or outpace employment growth. In other words, wages would grow as fast or faster than employment. That means that, based on the experience across multiple states over many years, right-to-work laws do not lead to lower wages and are likely to improve pay over time.
A fiscal free lunch
Right-to-work legislation may be the only economic development policy that comes at zero cost to state government. Enacting right-to-work does not require any new taxes and does not demand any new spending and would provide the state a permanent structural advantage in attracting employers and employment to the state.
You may not have ever heard of Bill McDonald, but you have probably heard his jokes. A profile of McDonald explains that, from his Southeast Portland home, McDonald writes jokes for “Tonight Show” host Jay Leno and for about 140 radio stations around the world that feed McDonald’s quips to their on-air staffs—jokes like these from a few years ago:
I’m a little suspicious of these electronic voting machines. They even showed President Bush ahead in Fallujah.
Ricky Williams was asked if he preferred playing on grass or AstroTurf, and he replied, “I don’t know. I never smoked AstroTurf.’”
McDonald also has a keen eye for economic absurdities. His latest target: “Business” and “employment” taxes. In a recent comment he highlights the Portland region’s peculiar payroll tax used to fund its public transit system, a situation that many taxpayers in many regions face:
Let’s say I wrote jokes that were sent out of state, examined, and then bought outside the state. There is a form called TSE-AP with “Sales Factor Only” on it and “Total within district” where you compute the percentage of sales here versus outside the district.
Stay with me. I assumed that sales within the district would mean….wait for it…the sales within the district. If nobody bought any of my jokes in the state of Oregon and the district was in Oregon that would be zero…..
But what it really means is if you wrote the joke in the district and sold it anywhere in the world, you were to be taxed here so that a train or light rail or bus could be funded, because OF COURSE, I need a bus or train to sit in my basement and write jokes.
Ironically, if I had taken a car out of the district, wrote the joke there, and then sold the jokes to the Mayor of Portland sitting in the heart of the district, that would not be a sale within the district because…oh never mind….
I’ve been around long enough to know why our transit district taxes payrolls the way it does, but McDonald shows that, many times, the difference between what can be taxed and what should be taxed is much like the difference between grass and AstroTurf.
Economists often have something interesting to say. However, they often do a terrible job of making their points in a way that those outside of economics can understand.
For some time, I’ve developed an admiration for the approach preached by Edward Tufte. He is widely considered a pioneer in the field of data visualization—also know as making-tables-and-graphs.
I won’t go into Tufte’s approach here, but I thought I’d show how using his approach can radically improve the presentation of economic data. In this example, I’m trying to show Oregon’s unemployment record relative to the rest of the U.S.
This first figure, below, shows unemployment for Oregon and the U.S. as a whole. The chart was made in Excel by highlighting the three relevant columns (month, Oregon unemployment, and U.S. unemployment) and clicking the line chart button.
The result is a standard ugly Excel chart. Even worse, it does not tell an especially interesting story about Oregon’s unemployment. Oregon seems to have slightly higher unemployment than the U.S. as whole, but also seems to track U.S. unemployment fairly closely. Big whoop.
The problem with the figure above is that it does not say anything about unemployment in the other states individually.
The next set of figures use a much bigger dataset. It reflects the unemployment rate for each state in each month from January 1976 through October 2012. That’s more than 22,500 observations.
The figure below is better, but not much better. Oregon’s unemployment is the heavy black line. The gray background represents the range between the state with the highest unemployment and the state with the lowest unemployment.
Notice that the graph removes much of what Tufte calls “chart junk”—a frame around the graph, ugly and unnecessary gridlines, a legend, and the month of “Jan” in the x-axis.
While the graph above is much cleaner and better looking, it is fatally flawed. With a few exceptions, Oregon looks to be in the middle of the range of unemployment rates across the states.
I know this is not true.
In fact in 213 out of 442 months (48 percent of the time), Oregon has been in the top 10 for high unemployment among the states. The figure above does not adequately show this fact.
The figure below is a major improvement. It shows the percent unemployment for each state represented by tiny gray dots, with Oregon represented by the red dots. (I would have preferred a red line for Oregon, but Excel layers dots over lines. Thus a red line would be “under” gray dots and looks amateurish.)
With the figure below, it is easier to see the point that I am trying to make: Oregon’s unemployment tends to be among the worst in the country for many points in time. This can be seen pretty easily in the years 2001 through 2005. But the point is not as well made in 1981 and 1981 when Oregon’s unemployment was the fourth or fifth highest in the U.S.
The figure below is another improvement. The black line is Oregon’s unemployment (the black line is darker than the gray dots, so Excel’s layering problem goes away.) The red dots represent months in which Oregon’s unemployment is in the top 10.
While the graph is much better and makes the point I was looking to make, something about it bothers me and I feel it is cluttered.
The fact that Excel does some weird thing that makes it look like there are white gridlines really bugs me.
Here we go. One last improvement.
In the figure below, I went back to the gray background representing the range between the state with the highest unemployment and the state with the lowest unemployment. The black line is Oregon’s unemployment and the red dots represent months in which Oregon’s unemployment is in the top 10.
The final figure seems to best make the point I was trying to make. We see Oregon’s unemployment, we see the range of unemployment among the states, and we see how often (and when) Oregon’s unemployment was among the worst in the U.S.
For much of human history, mass transit has had the utilitarian goal of quickly moving people from place to place. Even Portland’s early streetcars were designed with speed in mind.
Advertisements touted how quickly people could get around by streetcar. One ad from 1920 boasted that University Park in North Portland was only 20 minutes from downtown by streetcar. That works out to a speed of more than 15 miles an hour.
Times have changed. Modern streetcars have become the pleasure boats of public transit: flashy, expensive and slow.
Today, Portland’s streetcars quietly glide through the streetscape at a leisurely pace. Portland’s new Central Loop covers 3.3 miles in about an hour and a half. At 2.5 miles an hour, that’s slower than most people walk.
If streetcars don’t improve transit times, then what do streetcars do?
Many ascribe the development of Portland’s heralded Pearl District to the streetcar. In truth the streetcar was more of an afterthought. The Pearl’s success began with a few pioneering developments that took advantage of historic building tax abatements to convert warehouses into condos. The success of these pioneering developments attracted other investments and more developments.
After these successes, an urban renewal area was created and the streetcar came along a few years after the birth of the urban renewal area. Development made the streetcar possible, not the other way around.
It’s impossible to find a clear-cut example of where streetcars are the single factor driving development. It’s impossible because streetcars are always just one part of a complex development package. The packages can include roadway improvements, tax abatements, rezoning and environmental cleanup. There is no way to determine whether a streetcar system is just one of many factors that boost development potential or is a vital linchpin without which development would be impossible.
Supporters argue that streetcars and other rail projects provide a magic key that unlocks zoning and uses of an area. They point to the “condotopia” that grew out of the banks of the Willamette River in Portland’s South Waterfront urban renewal area, now served by a streetcar and an aerial tram.
As early as the mid-1990s, however, private developers had their eyes on Portland’s South Waterfront. Yet, every single effort was shot down or stifled by the city’s planning process. One development didn’t follow a city commissioner’s vision for an ideal street pattern. Another development would have exceeded the city’s maximum allowable building height at the time (35 feet, or about three stories).
Even so, Portland’s planning class continues to argue that the aerial tram and streetcar have magically unlocked the ability to build waterfront skyscrapers.
In reality, there is nothing magical about streetcars and trams. City commissioners held — and still hold — the keys to unlock an area’s development potential. If rail and tram expenditures had been invested in roadway improvements, the South Waterfront would be celebrating its 15th anniversary of redevelopment instead of suffering round after round of fire sale condo auctions.
It remains to be seen whether the streetcar’s Central Loop can breathe life into Portland’s Central Eastside, Convention Center and Lloyd District. Large-scale rezoning to unlock development potential doesn’t need a streetcar. Investments in roadway improvements best serve the way the people actually travel, rather than the way we wish they would travel.
A streetcar by itself does nothing without these other key improvements.
Coming up next on HGTV … “Buying the Box” — Where home buyers shop for the smallest living space possible.
In Portland, folks live in a house the size of dining room and in New York, the mayor is pushing apartments no bigger than a few refrigerator boxes taped together.
OPB’s Think Out Loud radio show interviews the Portland owner of a “house” that is 128 square feet and was built on a 16′ x 8′ trailer. It has a stove that uses alcohol as fuel, a free-standing electric-oil heater, and a simple plumbing set-up. The tenants share wireless internet with the land owners. They don’t have a refrigerator or a shower.
New York mayor, Michael Bloomberg, apparently likes the idea. The week he announced a competition for architects to submit designs for apartments measuring just 275 to 300 square feet to address the shortage of homes suitable and affordable for the city’s growing population of one- and two-person households. While the apartments would be twice the size of the Portland house-on-a-trailer, there’s a good chance the New Yorkers would get fridge and a shower.
The big question: Is this just a curious new fad, or has the housing market taken such a big turn that tiny houses are the new McMansions?
We’ve noted the moving target better known as the Portland Public Schools earmark in the mayor’s proposed “Education” Urban Renewal Area. The original earmark of $14.5 million was dropped to $10 million, with much of the money shifted to support the city’s “Cluster Development Strategy.” Lost in the money shuffle, however, has been any description of exactly what the $10 million is going to be used on.
Peyton Chapman, Lincoln’s principal, said the URA could benefit the school’s long-term plan to build a new facility, 1,682 workforce housing units and a large parking garage. Chapman recognizes that a number of bonds would have to be passed for the plan that could cost $130 million; however, she said the URA is necessary to establish essential partnerships.
A parking garage?
Who need’s a parking garage in a multi-modal Mecca served by TWO light rail stops?
Only soccer fans and members of the ultra-posh Multnomah Athletic Club (initiation fee $10,200):
Chapman said the structures proposed in the plan could be used by other schools and area businesses. For example, the proposed two-story parking structure could be used by PGE Park and the Multnomah Athletic Club.
Now you know why we use the quotation marks around education in the “Education” Urban Renewal Area.
In an earlier post, we asked why Portland’s toniest high school was jumping to the head of the line to get rebuilt out of urban renewal dollars.
Now it seems that in less than two weeks, about one-third of that money has been taken away from the Portland Public Schools earmark. The money appears to have been transferred to Portland State University and added to the porkbarrel better known as the city’s (somewhat silly) “Cluster Development Strategy.”
Where is the urban renewal at Lincoln High School?
This is one of the bigger mysteries of the “Education” Urban Renewal Area. It’s no secret that PPS, Lincoln parents, and the construction industry are eager to rebuild Lincoln High School.
Even so, no one seems to know what the city plans to do with the $14.5 million $10 million earmarked for PPS. In particular, no one wants to admit that the money would go toward rebuilding the city’s public ivy. Here’s a tweet I got from PPS government relations:
Edu URA doesn’t guarantee a rebuild of LHS, inclusion of site merely allows for leverage & flexibility, if needed.
Portland’s League of Women Voters believe the blank check aspect the PPS earmark runs afoul of state law:
According to the Plan, $10 million will be spent on Lincoln High School redevelopment. There is no explanation of what is envisioned for the redeveloped site. We understand there are proposals for reconfiguring the school facilities to allow for possible condominium and commercial development. As noted above, ORS 457 requires that the Plan include descriptions of the projects, timing, costs and source of moneys. Council should insist that Portland Public Schools provides that information for inclusion in the Plan before adoption.
What’s taken away with one hand is given with the other
Even more curious is that Portland’s mayor has announced that he is “looking under every rock” to come up with $5 million to hand over to Portland Public Schools to stave off massive teacher layoffs in the beleaguered school district at the same time he’s taken $4.5 million away from the districts urban renewal earmark.
One of the curious pieces of the proposed “Education” Urban Renewal Area is a chunk of money flowing to Lincoln High School. The ins-and-outs of how that money will flow to the school district have not been made public and there is some concern that any giveaways to the district may run afoul of state property tax limits.
The biggest question of all remains: Why rebuild Lincoln High School?
While the district get’s $14.5 million from the urban renewal area, it will be on the hook for another $100 million (give or take) to rebuild a school that does not need to be rebuilt.
Take a look at the figure below. Sure, Lincoln is crowded. It is one of the most crowded schools in district’s portfolio. But, the condition of the Lincoln building is one of the best in the district’s portfolio.
Crowding is not a building problem, it’s a school assignment problem. Many Lincoln students actually live closer to Roosevelt High School. A simple transfer will relieve the crowding and save about $100 million.