Brookings: Topics - Los Angeles

How Metropolitan Areas Can Recharge Manufacturing

Bruce Katz and Richard M. Daley — Wed, 09 May 2012 00:00:00 -0400

Perhaps the only silver lining to the Great Recession is that it triggered a new focus on manufacturing in the United States. After 25 years of being sold a shiny vision of a service-dominated post-industrial economy, the U.S. is rediscovering how important it is to actually make things in order to spur innovation, raise wages, drive exports and lower the trade deficit.

Corporate cost calculations undergird the newfound appreciation of U.S. manufacturing. The offshoring of manufacturing was rooted in harsh economic realities: rock-bottom wages in nations such as China and the aggressive attraction and infrastructure strategies of foreign governments. Yet labor costs are rising in China, and concerns persist about the protection of American intellectual property there. Energy can be cheaper here, and more reliable. The tsunami in Japan, supplier of many high-tech components, revealed the fragility of far-flung supply chains for many U.S. companies.

As corporations reevaluate their bottom lines, national leaders must reassess the critical role of manufacturing. Its jobs pay 20% more on average than non-manufacturing work and are more likely to provide benefits. It employs a disproportionately high number of less-educated workers and tends to spark job growth in service-based industries. And, in the words of Andrew Liveris, chairman and CEO ofDow Chemical Co.: "Where manufacturing goes, innovation inevitably follows."

That reality has cost the U.S. dearly. In the electronics sector alone, 90% of R&D now occurs in Asia, in large part because of the steady offshoring of manufacturing by U.S. companies since the 1980s. That must not happen in other advanced industries.

And it doesn't have to. The key to reviving manufacturing and exports in the U.S. can already be found in metropolitan areas like Los Angeles and Chicago.

The phrase "urban manufacturing" evokes images of a sooty skyline, cramped sweatshops or the massive automotive assembly lines of mid-20th century Detroit. But urban manufacturing today involves small, specialized firms that rely on advanced technology and workers with different skill sets than in the past.

In Torrance, for example, Pelican Products produces high-performance protective cases and portable lighting equipment used by law enforcement and the defense, aerospace and entertainment industries. In 2010, Pelican employed 600 people at its home-base Torrance facility. (It has four other plants — two more in the U.S. and two in Europe.) Pelican sells products to more than 100 countries. In the last two years, its export sales have grown 25%, driven by demand in Europe and Asia.

As other companies chased low-wage labor by offshoring manufacturing capacity, Pelican chose to remain primarily in the U.S. In Torrance, it could readily benefit from a skilled workforce and a strong and flexible supply chain. Pelican's 12-year relationship with neighboring Victory Foam highlights the benefits of proximity to suppliers. Victory provides Pelican with next-day order fulfillment, which greatly reduces the time required for production. Daily interactions between the two companies allow for rapid adjustments to meet market demands while providing opportunities for collaboration on new products. Together, these firms are key components of a thriving regional innovation and manufacturing ecosystem.

These are the sorts of ripple effects and mutual benefits that only cities, with their density and diversity, can supply. As one industry feeds another, productivity improves, entrepreneurship is encouraged and employment and wages increase in the region.

What do firms like Pelican need to thrive? It's not rocket science.

A functioning federal government matters. It can deliver the big stuff: enhancing access to foreign markets, enforcing trade agreements and protecting intellectual property. It can also provide expertise on emerging markets through U.S. consulates, help match firms with potential customers, provide export promotion support and commit resources to modernizing key logistics hubs like the ports of Los Angeles and Long Beach.

Local governments and institutions also have a role to play in recharging American manufacturing and creating a more prosperous economy.

Small and medium-sized manufacturing firms need a steady supply of skilled workers that can be supplied by local community colleges and even specialty high schools that reinvent vocational education for a new century.

Firms also need a safe, stable place to do business. Chicago met this demand by creating industrial districts. Supported by financing based on the tax increases that redevelopment would bring, the city secured industrial land from rezoning and invested in infrastructure to improve freight transport.

Finally, firms need business advice close to home and more connections abroad. In Los Angeles, the USC and UCLA business schools have given Pelican access to MBA students, who are designing a distribution system for the company's booming trade with China and other Asian nations. This is a model partnership that needs to be replicated.

U.S. cities and metropolitan areas still possess significant manufacturing capability and, by extension, innovation capacity. A rich industrial heritage has endowed American cities and metros with the companies, skilled workers, educational and advanced research institutions, and production strength essential for moving toward a new economic vision.

The Great Recession was a wake-up call to the nation. Let's heed it.

Authors

Bruce Katz
Richard M. Daley

Publication: Los Angeles Times

Image Source: © CHRIS KEANE / Reuters

Going Global: The Future of Metro Economies

Amy Liu — Fri, 04 May 2012 00:00:00 -0400

Editor’s Note: During the opening breakfast event for Los Angeles’ 86th Annual World Trade Week, Amy Liu delivered a presentation and remarks describing how the region can build on its local assets to boost exports.

It is a real honor to be asked to help you kick off your 86th Annual World Trade Week. After 86 years, it is not a surprise that this is a region that is quite globally aware and globally engaged, thanks to the leadership of the L.A. Area Chamber, the L.A. and Long Beach ports, the city, and many, many others.

Recent speakers have come before you reinforcing the importance of the trade economy and the critical need to modernize the trade infrastructure here in the region and the state, building a truly effective freight/logistics and supply chain management system. That is no doubt imperative if we are to keep the L.A. region a trade hub of choice in an increasingly competitive global environment.

The winners in the next economy will be those who strengthen global assets and tap new sources of aggregate demand

This morning, I want to build on those messages. First, it is important to recognize that it is metro areas that are the true economic units of the global economy so they must act with intention to maximize the opportunities presented by expanding markets abroad. Yet, to act regionally, we need strong civic infrastructures — of business, political, civic, university, nonprofit leaders who must work effectively together to leverage and integrate all of the assets that will help the L.A. region prosper. The good news is that the new Los Angeles Regional Export Council and its regional export plan embody that kind of proactive, cross-sector partnership that will position this region well for success. And Brookings is pleased to have been advisor of that effort.

It is often said that collaboration is an unnatural act. Yet, those regional export partnerships and initiatives must succeed and not just be plans on paper. There are new rules of economic growth post-recession. To be clear: the regions that adapt well … with focus, intention and collective action … will be those who will excel in the new global economic order.

Times have changed. The U.S. economy is undergoing a major economic restructuring which demands a structural response. The Great Recession was not the same as its predecessors. The job loss this time was steeper, the impact deeper, and the recovery slower because this was a structural recession.

The core structural problem: Nearly all of the incremental job growth over the last two decades came from non-tradable sectors, such as real estate, retail, and government. This was the eye-popping stat issued by Nobel economist Michael Spence. In short, we stopped innovating and producing jobs in value-added industries that create wealth, grow local industries, and make our American marketplace distinct from our competitors.

The other big structural shift: Economic growth is increasingly taking place outside the U.S.

In 2010, the combined global GDP of the BIC nations surpassed that of the U.S. for the first time, making up one-fifth of the world economy. That shift is expected to accelerate in the coming years while the U.S. share of global GDP is forecasted to stay the same.

The rise of the BICs is also in part a reflection of the rise of global metros. Rapid industrialization has been matched by rapid urbanization. More than half of the world’s population now lives in cities, and that share is expected to grow to 60 percent in 2030 and 70 percent by 2050.

With rapid urbanization comes the rise of the global middle class which is driving the growth of consumption. OECD predicts that, despite the recession, consumption is expected to rise from $21 trillion today to $31 trillion by 2020, mostly due to the growth in Asia and Latin America.

We view these trends as less a threat but a market opportunity.

Against this back drop, let me tell you what the data is telling us. The winners in the next economy will be those who strengthen global assets and tap new sources of aggregate demand.

The leaders in the next economy will innovate in manufacturing. While manufacturing has contracted as a share of the overall economy, it is becoming leaner and more advanced. Thus, manufacturing jobs are recovering faster than the economy as a whole, at 2.3 percent in the third quarter of last year compared to 1.4 percent nationally. The manufacturing sector has added about 350,000 jobs in the last two years.

For those who remain skeptical about U.S. competitive advantage in manufacturing, this is not the industry of yesterday. The U.S. is the third largest manufacturing exporter in the world because manufacturing remains a critical part of our innovation cycle. U.S. manufacturing employs 35 percent of all of our scientists and engineers, invests 68 percent of all R&D; and generates 90 percent of all patents.

Leaders will also need to innovate in services. In fact, services, such as business consulting, education, architecture and planning, are the fastest growing segment of our export economy, and the U.S. has a trade surplus in services.

Within the services sector, expenditures of foreign students in U.S. colleges is growing steadily. We now have more than 720,000 international students studying in the United States, led by those from China, India, and Korea. That sector represents $21.2 billion in U.S. service exports.

Leaders in the next economy will also invent and deploy clean economy goods and services.

Rapid urbanization worldwide has pushed up the global demand for environmentally friendly goods and services, such as energy efficient appliances and building technologies, smart grid, sustainable land use planning and infrastructure, and organic foods. We are meeting that demand. In fact the U.S. has a sizeable clean economy, representing 2.7 million jobs.

The upshot: U.S. clean economy products generated $54 billion in exports, two times more value per job than the typical U.S. export.

Additionally, the regions that prosper will be those that take advantage of global demand. The post-recession reality has made that more urgent.

According to our recent Global MetroMonitor, 90 percent of the fastest growing markets among the 200 largest world cities were located outside of the U.S., Western Europe, and earthquake-ravaged Japan.

In fact, there are more than 20 markets around the globe that did not experience this last recession or have already fully recovered— Shanghai, Shenzhen, Mumbai in Asia ... Istanbul in Europe … Santiago and Buenos Aires in Latin America.

Bottom line: If we are to grow, our firms must look outside of the U.S. and tap emerging markets and global consumption as a source of growth here at home.

And here is the evidence: Those firms who embraced international sales drove our economic recovery. Exports were responsible for 46 percent of US GDP growth between 2010 and 2011 … which is remarkable since exports make up only 13 percent of the GDP of the U.S. … compared to much higher shares in China, Canada, and the entire EU.

Going global pays off for small and mid-sized firms. Those who exported saw their revenues grow, by 37 percent, through 2009, compared to just 7 percent among non-exporters.

Selling globally simply makes good business sense.

Second, it will be metro areas like Los Angeles that will drive the transition to the next economy.

Metro areas are the engines of the global economy b/c they aggregate and integrate the very market assets that drive growth. Even though the 100 largest metro areas sit on just 12 percent of the nation’s land area, they dominate in innovation, by attracting 94 percent of the nation’s venture capital. They are the producers of our trade economy, generating 75 percent of all services exports. And they are the hubs of supply chains and goods movements, handling 82 percent of the nation’s air freight.

As a result of those assets, the 100 largest metro areas generate 75 percent of the nation’s GDP.

And metro areas generate the majority of export activities in 30 out 50 states.

Let’s take a quick aerial trip to this metro area and showcase the unique components of your trade economy, which is truly regional in nature.

You are the largest metro exporter in the country, with $80b in export sales, and exports make up a larger share of this economy at 11 percent than the typical metro area or even the nation as a whole.

Your export economy is more service oriented than the national average … driven by royalties, travel and tourism, and business and professional services.

That’s not surprising. Ask anyone what they think L.A. produces: Hollywood is the first thing that comes to mind. In 2010, royalties were a $12.4 billion export industry, powered by film and television.

Yet L.A. does not just make films, it makes things. Close to 60 percent of your exports comes from the manufacturing sector, and you have over 106,000 direct export manufacturing jobs.

In Torrance, southwest of downtown, we find Luminit, a small manufacturer of advanced lighting products that are used in a broad range of applications. Luminit’s production center houses some of the world’s most advanced equipment for R&D, engineering, and the manufacturing of optics. In the last two years, the firm’s exports have grown 68 percent.

Just to the south of Luminit is Pelican Products, a firm that produces high-performance protective cases and advanced portable lighting equipment used by law enforcement, defense, aerospace, and the entertainment industry. Exports make up 35 percent of Pelican’s total business, and the firm sells its products to over 100 countries. As with Luminit, Pelican has experienced significant export growth in the past few years, driven by strong demand in Europe and Asia.

Both Pelican and Luminit benefit from their partnership with USC’s Center for International Business Education and Research and UCLA. One works with CIBER to help determine where to locate distribution centers in Asia. And the other benefits from the Export Champions program, a collaboration also with the L.A. Area Chamber of Commerce, which deploys MBA students to small firms to help them integrate international sales and markets into their business plans.

Further, these universities are service exporters themselves, attracting nearly 39,000 international students who purchase their top notch educational programs.

USC and UCLA are joined by Mayor Antonio Villaraigosa at City Hall, the L.A. Area Chamber of Commerce, and others, such as the Ports of L.A. and Port of Long Beach, the Los Angeles World Airports and regional business associations in being part of a larger regional group—the Los Angeles Regional Export Council which was formed last November to bring greater coherence and focus in helping L.A. firms expand effectively in to global markets.

Finally, as you know well, the ports of Los Angeles and Long Beach play particularly critical roles in the movement of goods produced by firms like Pelican and Luminit to markets throughout the world, especially to Asia. Taken together, these two ports form the busiest complex in the Western Hemisphere, and the sixth busiest port complex in the world.

The L.A. story reveals why it is not just the city but the entire metro area that powers our economy: these hyper-linked networks of private firms, universities and public and nonprofit institutions rely on each other to fertilize ideas, extend innovation, enhance competitiveness, and collaborate to catalyze economic growth for the entire region. These actors also make up the civic infrastructure needed to make sure the economy doesn’t just grow by luck but with purpose and vision.

That leads me to my final point, given all these assets, this region is poised to lead in the global economy.

First, you are innovating locally. And you must not only because of increased competition abroad but because partisan gridlock in Washington and the fiscal straightjacket in Sacramento demand that you drive your own fortunes in this global economy.

This region is one of four metro areas in the country piloting some of the nation’s first metro export plans. Your leadership in this space, alongside Portland, Minneapolis-St. Paul and Central New York, will likely spawn copycatting among state, city, and regional leaders who are eager to better orient their economies for export growth. Further, this state, and federal trade-related agencies, like ITA, SBA, Ex-Im Bank, are all committed to better align their state and federal activities with this region’s ambitions.

To develop its plan, this region conducted a market assessment of its export position, using data analysis and surveys and interviews of companies.

Leaders here worked hard to set exporting goals and objectives, devise strategies to meet those goals, and establish metrics to gauge progress.

And lastly and noted before, this plan was prepared by a consortium of corporate, government, university and civic institutions who “collaborated to compete” globally.

What I like about these plans is that it exemplifies exactly why you can not double exports nationally from the top but instead from the bottom up. The L.A. region and each of the other metros set a goal of doubling exports in five years. But each is meeting that goal with very different strategies, built on their unique competitive advantages. There is no one size fits all approach to doubling exports.

This region has established a Los Angeles Regional Export Council. The council, to be formal and funded, will be held accountable for ensuring that existing efforts and new programs are coordinated, unified, and sustained in ways that will increase the number and volume of exporters in this region.

The focus will be helping export ready companies in 12 target industries, like aerospace and energy/green technologies, connect to priority markets like the Pacific Rim.

In short, this proactive effort to bring more companies into the trade economy is good for all parts of greater L.A., such as for both ports and area airports, so they are shipping not just any goods but more products made in L.A.

To take this metro innovation to scale, Mayor Villaraigosa, in his capacity as head of the U.S. Conference of Mayors, put out an Export Challenge to America’s cities and metros: “Design strategies that build from your special export strengths.”

Soon, other metro areas will be joining you in developing innovative approaches to trade.

But, as you know, as much as you innovate locally, the states and federal leaders matter to the success of your efforts. So, you must advocate nationally.

Local leaders in China, Germany, South Korea, Spain, Brazil, and Columbia are working in partnership with their regional and national governments to make transformative investments in world class ports, high speed rail, research and innovation.

We must do the same here at home.

So what does this region want in a state and federal partnership to make a regional export and trade strategy a success?

First, at the state level, it has been helpful to have a state partner in the governor’s new Office of Business and Economic Development. The governor announced the opening of a new California-China Trade and Investment Office, while in L.A. during the Chinese vice president’s visit earlier this year.

That global presence is critical. But the state can do more at a time when other states are aggressively ramping up their state export capacity. It can re-establish the California Export Finance Office to provide small exporting firms with short-term financing, a self-generating program with little cost to tax payers. It should commit long term funding to the critical CITD program, the Centers of International Trade and Development, which trains firms on exporting but currently on a financial lifeline. Or it can establish a competitive grant program for metro area, as done in other states, so regions like L.A. can implement their own trade strategies

At the federal level, one of the few bipartisan successes was the passage of the free trade agreements. Hopefully, for the remainder of the year, we will also pass the reauthorization of the Ex-Im Bank, and maybe a short term national transportation bill.

But when this election is over, this region should demand real action:

No matter who is president, there is a good chance that the federal government will streamline and reorganize federal trade agencies and services. And the business community is demanding it. Metros also need to play an enormous role.

President Obama, for example, has proposed consolidating six agencies in this federal apparatus involved in trade activities: the U.S. Department of Commerce’s core business and trade functions, the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, and the Overseas Private Investment Corporation.

Yet consolidation would be a failure if it just moved agency boxes around in Washington D.C.

The key to success is to integrate activities on the ground. As I have heard Carlos urge often… local representatives of the federal export agencies must operate as a unified export team themselves– with one set of export objectives, one set of performance metrics, in alignment with a region’s ambitions and puts businesses first.

Finally, beyond innovating locally and advocating nationally, U.S. metros must network globally—creating and stewarding close working relationships with trading partners in both mature and rising nations.

Strong connections already exist:

Metros with concentrations in financial services, like New York, are forming tight, interlocking networks with similarly focused metros around the world.

Metros with concentrations in advanced manufacturing, like Detroit, are similarly linking with metros in both developed and rising nations.

And port metros like Los Angeles-Long Beach are making key connections with the world’s air, rail and sea hubs.

These networks obviously start with firms and ports that do business with each other.

But, over time, they must extend to supporting institutions— governments, universities, regional business groups—that provide support for companies at the leading edge of metropolitan economies.

The goal is to revive the way the global economy evolved before the rise of nation states when historical trade routes flowed through cities … like the 15^th century Silk Road that connected Asian cities and silk, tea, spices, they produced to cities in Europe, Mediterranean and Africa.

* * *

In closing, I want to urge you to not rest on your rankings. You may be the largest exporter in the U.S., and the busiest port hub in the U.S., but the L.A. economy lags on the global stage in the extent to which its firms are selling and engaging globally. To stay on top of the global game, you need to work together as one region, with one global vision, engaging with other markets around the world. Leveraging and building up the assets of a globally connected economy—cutting edge innovation in manufacturing and services, strong firms and sectors, skilled workers, freight/passenger logistics, immigrant gateways, FDI—can not be the sole responsibility of one jurisdiction or one organization. The export council and export plan is a promising start to working together. So please join these and other regional efforts and commit to their success. Only then will you be able to bring home the fruits of global trade to all firms, workers, and neighborhoods in the L.A. region.

Downloads

Going Global: The Future of Metro Economies (Full Presentation)

Authors

Amy Liu

Image Source: © Lucy Nicholson / Reuters

Los Angeles and the Next Economy

Bruce Katz — Wed, 21 Mar 2012 00:00:00 -0400

Editor's Note: During a forum hosted by the Global Cities Initiative in Los Angeles, Bruce Katz delivered a presentation and remarks describing why the metropolitan area must increase trade and boost exports.

Video Clip—Metropolitan Exports and the Los Angeles Profile:

Full Video of Bruce Katz's Presentation:

Remarks by Bruce Katz:

Thank you for that introduction Peter, and for spearheading our partnership with JPMorgan Chase. And, thank you Mayor Daley for chairing this new initiative and giving us the benefit of your long experience and leadership in the global arena.

As both Peter and Mayor Daley plainly said, the primary goal of this effort is to dramatically enhance the global fluency of U.S. city and metropolitan leaders so that their economies can realize their full potential. This initiative and this forum could not be more timely.

For the past three years, the Brookings Metro Program has been boringly consistent about the economic challenges facing our country.

At the most basic level, the U.S. needs more jobs – 11.4 million by one estimate – to recover the jobs lost during the downturn and keep pace with population growth and labor market dynamics. Beyond pure job growth, we need better jobs to grow wages and incomes for lower and middle class workers and reverse the troubling decades-long rise in inequality.

There is no easy fix to achieve these twin goals. But one thing is clear: we will need to purposefully restructure our economy from one focused inward and characterized by excessive consumption and debt to one globally engaged and driven by production and innovation.

Today, I will make three main points:

First, in the aftermath of the Great Recession, the U.S. must pursue a different growth model, a “next economy” that is driven by exports and global engagement, powered by low carbon and advanced energy, fueled by innovation (both ideas and manufacturing), and rich with opportunity. This is a vision where we export more and waste less, innovate in what matters, produce and deploy more of what we invent, and ensure that the economy actually works for working families.

Second, the next economy will be largely metropolitan, in form and function. Our major metropolitan areas already generate more than three quarters of gross domestic product, concentrate the production of advanced goods and services that we sell abroad and are the logistics hubs of the global trading system. As you will see, L.A.’s export profile – what you trade, who you trade with – is highly distinct.

Finally, metros are driving innovation — in practice, in policy, in the formation of global trade links. Los Angeles is part of this innovative wave and is actually leading a group of metropolitan areas that are determined to build their export economies from the bottom up by: innovating locally, advocating nationally, and networking globally.

So let me begin by offering a vision for the next American economy.

Visualize an economy where more firms in more sectors trade more goods and services seamlessly with the world, particularly with nations that are rapidly urbanizing and industrializing.

Why exports?

Because we have crossed an economic Rubicon.

Together, Brazil, India and China (the BICs) accounted for about a fifth of the global GDP in 2009, surpassing the United States for the first time. By 2015, the BIC share will grow to more than 25 percent. The rise of the BICs reflects the rise of metros. For the first time in recorded history, more than half of the world’s population lives in cities and metropolitan areas. By 2030, the metro share will surpass 60 percent. Rising nations and their rapidly growing metros now power the world economy and drive global demand.

The locus of economic power in the world is shifting. The top 30 metro performers today are almost exclusively located in Asia and Latin America. The 30 worst metro performers are nearly all located in Europe, the United States and earthquake-ravaged Japan.

The U.S. needs to reorient our economy to take advantage of this new demand. In 2010, exports made up only 13 percent of the GDP of the U.S. compared to 30 percent in China, 29 percent in Canada, and higher levels in India, Japan, and the entire EU.

The movement of freight in the United States is compromised, undermined by transport networks that are clogged and congested and an infrastructure that is third class. And, culturally, Americans don’t get out much. Only 28 percent of our population have passports.

Can we get back into the export game? The answer is decidedly “yes.”

We are having a mini export renaissance in the U.S. Export sales grew by more than 11 percent in 2010 in real terms, the fastest growth logged since 1997. Incredibly, exports were responsible for 46 percent of GDP growth between 2009 and 2011.

For all the talk of a post-industrial economy, the U.S. remains a manufacturing powerhouse, exporting $944 billion in manufactured goods in 2010. This made us the third largest manufacturing exporter in the world, behind China and Germany. We still manufacture a range of advanced goods that the rest of the world wants including air craft, space craft, electrical machinery, precision surgical instruments, and high quality pharmaceutical products.

To paraphrase the old motto for Trenton: what the U.S. makes, the world takes.

But this is not just about the advanced manufacturing of high value goods. America is the top exporter of private services in the world, exporting $518 billion in services in 2010, which gave us a $160 billion trade surplus in services. In 2010, U.S. exports of private services represented 14 percent of global service exports, more than double the share of Germany, the second ranking country.

America’s potential for exports is hidden in plain sight. President Obama’s 2010 challenge to double exports in five years was exactly the kind of ambitious, far reaching goal we need post-recession.

Low carbon is the second hallmark of the next U.S. economy. Let’s imagine a world where America is the vanguard of the clean, green industrial revolution. Everything is changing: the energy we use, the infrastructure we build, the homes we live in and the office and retail buildings we frequent, and the products we buy are all shifting from modes that are outdated to systems that are smarter, faster, more technologically enabled and more environmentally sound. Our competitors – China, Germany, Brazil – have embraced the clean economy, creating markets, growing jobs and stimulating investment.

Can the U.S. even play in the low carbon revolution?

Our research shows that we already have a strong base of 2.7 million clean economy jobs, in sectors ranging from renewable energy to pollution reduction. To put that number in perspective: the clean economy is nearly twice the size of the biosciences field and 60 percent of the 4.8 million strong IT sector. As you can tell, the clean economy also has more jobs than fossil fuel related industries.

For our purposes today, the clean economy is also an export powerhouse: in 2009, clean economy establishments exported almost $54 billion.

Significantly, clean economy establishments are twice as export intense as the national economy — a solid platform to serve the demand for sustainable growth as rising nations continue to urbanize.

So this leads naturally to a discussion of innovation. The U.S. must be the world’s “innovation nation,” a hot house of invention and the platform for advanced production.

Over the past two decades, the discussion of innovation has narrowed, positioning it as something only conducted in the ivory tower or among exceptional entrepreneurs like Steve Jobs. We forgot something early generations intuitively understood: the inextricable link and virtuous cycle between innovation and manufacturing.

While only about 9 percent of all U.S. jobs are in manufacturing, about 35 percent of all engineers work in manufacturing.

Although the manufacturing sector comprises only 11 percent of GDP, manufacturers account for 68 percent of the spending on R&D that is performed by companies in the United States. And manufacturing is responsible for 90 percent of all patents in the United States.

Can the U.S. seize the future and realize its potential as an “innovation nation”?

We now place just 45th out of 93 countries in the share that science and engineering degrees make up of bachelor’s degrees. Going forward, we will innovate less if we do not fully embrace science and technology. The U.S. lags on the conversion of innovation into home grown production. We have gone from running a trade surplus in advanced technology products to running a trade deficit over the past decade. Going forward, we will innovate less if we do not produce more. We must make things again.

It is time to rediscover our innovation mojo: in our vocational and tech schools, in our research labs, on our factory floors, in the trade-able goods and service sectors that drive wealth creation and sustainable growth.

Finally, the next economy has the potential to be opportunity rich.

Research shows that firms in export-intense industries pay workers more and are more likely to provide health and retirement benefits. Yet building the next economy will require the United States to get real smart, real fast.

Over the next several decades, African Americans and Hispanics will grow from about 25 percent to nearly 40 percent of the working-age population. Yet the rates of educational attainment are lowest among these fast-growing groups. In 2010, only 19 percent of Hispanics and 25 percent of African Americans had completed an associate’s degree or higher, contrasting sharply with the rates for whites and Asians. In the decades ahead, upgrading the education and skills of our diverse workforce is no longer just a matter of social equity. It is fundamentally an issue of national competitiveness and national security.

So here is my second proposition: the next economy will be largely metropolitan, in form and function.

Here is the real heart of the American economy: 100 metropolitan areas that after decades of growth take up only 12 percent of our land mass, but harbor 2/3 of our population and generate 75 percent of our gross domestic product.

These communities form a new economic geography — enveloping cities and suburbs, exurbs and rural towns. And they pack a powerful punch.

Metro areas generate the majority of GDP in 47 of the 50 states, including such “rural” states as Nebraska, Iowa, Kansas and Arkansas.

On exports, the top 100 metros dominate. In 2010, they produced an estimated 65 percent of U.S. exports, including 75 percent of service exports, and 63 percent of manufactured goods that are sold abroad. Given their edge in sectors like chemicals, consulting and computers, the top 100 metros are on the front lines of commerce with China, Brazil and India.

The top 100 metros drive exports for another good reason. They are our logistical hubs, concentrating the movement of people and goods by air, rail and sea. Metro economies, of course, do not exist in the aggregate; they have distinctive starting points and distinctive assets, attributes and advantages.

Every U.S. metro presents a different economic face to the world. Our research digs deep to unveil the export (and innovation) profile of each of the top 100 metro areas.

Here you see our super-sized export performers: Los Angeles and New York, which both exported nearly $80 billion in 2010, and Chicago and Houston, which topped $48 billion that year. The top 10 metro exporters — including Dallas, San Francisco, Seattle, Philadelphia, Boston and Detroit — all exceeded $26 billion in exports. Taken together, these metros account for 28 percent of U.S. exports.

But this is not just about the large, diversified economies.

These 10 metropolitan areas saw the fastest manufacturing-driven export growth, all having more than 88 percent of their 2009-2010 export expansion coming from goods production.

A completely different set of metropolitan areas, mostly in the Northeast, are implicated by the rapid rise in education exports. Boston leads with education providing 4.8 percent of their total exports.

The export economy, unlike the consumption economy, is highly differentiated.

A Walmart outside Los Angeles is the same as a Walmart outside Las Vegas. Same design. Same footprint. Same goods.

A housing subdivision outside of Denver is the same as one outside Detroit.

But what makes Los Angeles special is different from what drives Las Vegas or Denver or Detroit.

Let’s take a quick trip to explore and experience what makes you a truly global metropolis. You are the largest metro exporter in the country and your export intensity is above the top 100 metro average, which is remarkable for a place of your size. Your export economy is more service oriented than the national average — driven by royalties, travel and tourism and business and professional services.

Yet L.A. does not just make films, it makes things: Close to 60 percent of your exports comes from the manufacturing sector, and you have over 106,000 direct export manufacturing jobs.

Pelican is partnering with the University of Southern California’s Center for International Business Education and Research to help determine where to locate distribution centers in Asia. Additionally, the business schools at USC and UCLA have collaborated with the L.A. Area Chamber of Commerce to create the Export Champions program, which will provide small firms the opportunity to partner with MBA students to develop growth-oriented export business plans.

USC and UCLA are part of a larger regional group – the Los Angeles Regional Export Council which was formed last November to assist L.A. firms that want to begin or expand exporting.

This council is a region-wide collaboration between Mayor Antonio Villaraigosa at City Hall, the L.A. Area Chamber of Commerce, and others, such as the Port of L.A., Los Angeles World Airports and regional business associations.

The Ports of Los Angeles and Long Beach play particularly critical roles in the movement of goods produced in L.A. to markets throughout the world, especially to Asia. Taken together, these two ports form the busiest complex in the Western Hemisphere, and the 6th busiest port complex in the world.

The L.A. story reveals why cities and metro areas power our economy: hyper-linked networks of private firms, universities, and public and nonprofit institutions that fertilize ideas, extend innovation, enhance competitiveness, and collaborate to catalyze economic growth for the entire region.

That leads to our final point, namely that metros are driving innovation – in practice, in policy, in the formation of global trade links and networks.

This is a major structural shift. Setting and stewarding a strong export economy has traditionally been almost the exclusive role of the federal government, given its powers over trade, taxes and currency and investments in innovation, human capital, infrastructure and export promotion and finance.

Yet with partisan gridlock, even the easy stuff has become extraordinarily difficult.

In this polarized environment, metros, already the engines of the national economy, are doing double duty and helping set a strong pro-trade platform for an Export Nation.

Three things are happening.

First, metros are innovating locally with export plans that exploit their distinctive competitive advantages in the global economy.

Over the past year, Brookings has worked closely with leaders in Los Angeles and three other metropolitan areas – Portland, Minneapolis-St. Paul and Syracuse – to invent and pilot actionable export plans. This activity has been done in close partnership with the International Trade Administration, and supported at the local level by the U.S. Commercial Services, the SBA and Ex-Im Bank.

The elements of export planning and action are fairly simple and straightforward.

Each metropolis does a market assessment of their unique export profile and potential: what goods and services they trade, which nations they trade with, where trade trends are likely to head given market dynamics here and abroad.

Armed with this information, metros then set exporting goals and objectives that build on their distinct advantages, devise strategies to meet those goals and establish metrics to gauge progress.

All these efforts are undertaken by a consortium of corporate, government, university and civic institutions that cut across jurisdictions, sectors and disciplines, and “collaborate to compete” globally.

L.A.’s plan is distinctive in multiple respects. As I mentioned before, you have created a new Los Angeles Regional Export Council to identify and proactively support export-ready firms in your leading sectors. Your plan is smartly focused – targeted on boosting exports in 12 industries, including aerospace, computers, pharmaceuticals, professional services and film and television.

These export plans are not an anomaly. They are, in fact, the beginning of a new wave of local and metropolitan economic development. Several months ago, Mayor Villaraigosa, in his capacity as head of the U.S. Conference of Mayors, put out an Export Challenge to America’s cities and metros: design strategies that build from your special export strengths.

This is bottom-up economy shaping of the first order.

Having innovated at home, metros have the legitimacy to advocate nationally for federal and state policies and practices that boost metropolitan exports.

What do metros want? On one level, they want the federal government and the states to set a solid platform for export growth generally.

At the same time, they want federal and state policies to be nimble enough to align specifically with the distinctive visions and strategies of disparate metros.

California’s metros now have a partner at the state level with the governor’s new Office of Business and Economic Development. First order of business: create a California presence in China, beginning with Shanghai and Beijing.

This is a new day and a new attitude in California – but you still have some work to do.

Other states have been more aggressive in export promotion and are working more closely with their metro engines.

The Commonwealth of Pennsylvania has a Center for Trade Development with 22 foreign trade offices located throughout the world. In 2010, it assisted 1,350 companies generating $483 million in new export sales.

Closer to home, Washington State has a new State Export Initiative that helps clusters of firms build their export capacity. The goals are ambitious: increase the number of WA exporters by 30 percent over the next five years.

Beyond these platform setting efforts, Minnesota is working to align its resources and policies to the distinct export plan of Minneapolis-St. Paul. Incredibly, the state trade office was a lead organization in their metro export initiative.

With partisan gridlock, the federal lift will be heavier than the states.

Assume little happens this year—hopefully the reauthorization of the Ex-Im Bank, and maybe a short term national transportation bill.

When this election is over, U.S. metros should demand real action:

A new round of trade agreements that open up foreign markets to U.S. goods and services;
Fierce protection of intellectual property rights of American businesses around the world;
A true national freight strategy that modernizes our air, rail, sea and land hubs and corridors

One other thing: metros should play an enormous role in the streamlining of federal trade agencies and services.

President Obama, for example, has proposed consolidating six agencies involved in trade activities – the U.S. Department of Commerce’s core business and trade functions, the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, and the Overseas Private Investment Corporation.

Yet consolidation would be a failure if it just moved agency boxes around in Washington DC.

The key to success is to integrate activities on the ground so that local representatives of the federal export agencies operate as a unified team with metropolitan organizations – with one set of export objectives, one set of performance metrics and a clear system of referring clients and sharing information.

There is one final piece to the export puzzle.

Beyond innovating locally and advocating nationally, U.S. metros are starting to network globally – creating and stewarding close working relationships with trading partners in both mature economies and rising nations.

Strong connections already exist: Metros with concentrations in financial services, like New York, are forming tight, interlocking networks with similarly focused metros around the world. Metros with concentrations in advanced manufacturing, like Detroit, are similarly linking with metros in both developed and rising nations. And port metros like Los Angeles are making key connections with the world’s air, rail and sea hubs.

These networks obviously start with firms and ports that do business with each other.

But, over time, they extend to supporting institutions – governments, universities, business associations – that provide support for companies at the leading edge of metropolitan economies.

In many respects, these 21st century networks are not new.

They harken back to the way the global economy evolved before the rise of nation states, when historical trade routes flowed through cities, and deep trading relationships were forged between cities.

Between the dawn of the Common Era and the 15th Century, a flourishing Silk Road connected cities in East, South and Western Asia with their counterparts in the Mediterranean and European world as well as parts of North and East Africa. Each city had distinctive concentrations and specialties.

Cities in China traded silk, teas and porcelain. Cities in India traded spices, ivory, textiles and pepper. Cities in the Roman Empire exported gold, silver, glassware, wine, carpets and jewels

You get the lesson: like today, the city economies of the Ancient and Medieval worlds were distinct economies and places grew and flourished as they built on their special strengths and distinctive locations.

Conclusion

As we begin the Global Cities Initiative, let me end with this tantalizing prospect.

A “new silk road” is emerging as we enter what is clearly an “urban age” and “metropolitan century.”

Cities and metropolitan areas are not only the economic engines of nations, but the spatial backbone of global trade and exchange.

In a world where people and societies now live, operate, communicate and engage through networks, the “new silk road” is emerging as a super network of trading cities and metros that are economically collaborative, and globally fluent.

For the United States, the New Silk Road is a path back to shared prosperity—sane and sensible growth that works for companies, cities and consumers. For the world, it is a path towards reducing poverty and generating wealth.

Let us build it, nurture and extend it to all corners of the earth.

Slide Presentation by Bruce Katz:

Authors

Bruce Katz

Publication: Global Cities Initiative Forum, University of Southern California, Davidson Conference Center

Going Global: Boosting the Economic Future of Greater Los Angeles

Wed, 21 Mar 2012 08:30:00 -0400

Event Information

March 21, 2012
8:30 AM - 2:00 PM EDT

Davidson Conference Center
University of Southern California

Los Angeles, CA

As we emerge from the Great Recession, it is clear that our economy must be purposefully restructured from one focused inward and characterized by excessive consumption and debt to one that is globally engaged and driven by production and innovation.

A growing chorus of leaders is calling for a new growth model, one that creates more and better jobs by engaging rising global demand and attracting global talent and capital. These leaders recognize that only by harnessing the power of cities and metropolitan areas can we hope to foster job growth in the near term and restructure our economy for the long haul.

This new imperative forms the basis for the Global Cities Initiative.

On March 21, the Global Cities Initiative hosted a forum in Los Angeles focused on global competitiveness. Speakers and panelists provided context on the position of Greater Los Angeles in the global marketplace and offered insight into how state and metropolitan leaders can work together with international partners to expand global trade and enhance the economic prosperity of the region.

IN THE NEWS
Nationwide Push to Boost Exports is Launching in Los Angeles
Los Angeles Times, March 21, 2012

San Diego's Economic Lifeline: Exports
San Diego Union-Tribune, March 22, 2012

U.S. Global Economic Push Enlists San Diego
NBC San Diego, March 22, 2012

Chase Looks to Help Cities Boost Job Creation
Fox Business, March 26, 2012

EVENT IMAGES — Click on thumbnail photograph for full view

The Port of Los Angeles.

Michael "Mickey" Kantor, former Secretary of Commerce and U.S. Trade Representative, and Richard Daley, former Chicago mayor and Midwest Chairman of JP Morgan Chase, at the Global Cities Initiative event in Los Angeles.

Peter Baker, California Chairman of JP Morgan Chase, speaks at the Global Cities Initiative event in Los Angeles.

Event Materials

Participants

Panelists

C.L. Max Nikias

President, University of Southern California

Honorable Richard M. Daley

Former Mayor, City of Chicago
Senior Advisor, JPMorgan Chase

Peter L. Scher

Executive Vice President, Head of Corporate Responsibility, JPMorgan Chase

Moderator: Dr. Ernest Wilson III

Dean, USC Annenberg School of Journalism

Richard Drobnick

Director, Center for International Business Education and Research, USC Marshall School of Business

Scott Ermeti

Vice President of International Business, Pelican Products, Inc.

Robert M. Hertzberg

Chairman of the Board, Los Angeles County Economic Development Corporation

Nancy McFadden

Executive Secretary for Legislation, Appointments and Policy, Office of California Governor Jerry Brown

Matthew K. Rose

Chairman & Chief Executive Officer, BNSF Railway

Moderator: Honorable Michael "Mickey" Kantor

Former Secretary of Commerce and U.S. Trade Representative

Honorable David Carden

Ambassador, U.S. Mission to ASEAN

Honorable Chan Heng Chee

Ambassador of Singapore to the United States

Honorable Zhang Shaogang

Minister Counselor, Embassy of the People's Republic of China

Peter Barker

California Chairman, JPMorgan Chase

Honorable Antonio Villaraigosa

Mayor, City of Los Angeles

How to Keep U.S. Exports (and Jobs) Growing

Amy Liu — Fri, 17 Feb 2012 11:14:00 -0500

U.S. exports, a bright spot in the lethargic economic recovery, have now expanded for 10 straight quarters—two-and-a-half years. Alongside an improving jobs picture, the trend offers further evidence of an economy on the mend.

Yet, as the economy improves and the dollar strengthens, how to keep export momentum going, and the good paying jobs exports create at home, needs to be a long-term focus of American growth and competitiveness goals.

To get there, national efforts to reduce trade barriers or reorganize trade programs, while helpful, are not enough. The United States needs to empower metropolitan areas, the front lines of American business activity, to help more firms become new exporters and lay the foundation for greater global engagement.

Post-recession, the steady surge in U.S. exports can be credited, in part, to the low value of the dollar and the efforts of sophisticated multinational companies specializing in such products as motor vehicles, aircraft, and petroleum. The benefits of these big exporters to their domestic suppliers and local-serving industries cannot be overstated.

Yet, the share of U.S. firms that sell a product or good outside our borders has not budged past 1 percent, despite decades of domestic and overseas services and programs dedicated to helping companies export.

Exporting is simply not in the American DNA.

We need a massive culture shift. While President Obama’s national export challenge has garnered much support and attention, the results remain sobering on the ground. Too many company executives remain unaware of global opportunities, fear to leave the comforts of the domestic market, and do not know what services exist (and who provides them) to help them navigate the export course.

However, several innovating metropolitan areas are stepping up to more aggressively orient their economic ecosystem for global trade. Recently, the greater Portland, Oregon, area released its “ExPort Portland” plan, which leverages the region’s strengths in computer electronics and clean technology services to meet global demand. In the coming weeks, the Los Angeles, Minneapolis-Saint Paul, and the Syracuse/Central New York regions will issue and begin implementing their own plans to boost exports and trade.

These metro export strategies strengthen state and federal export activities in a number of ways.

First, the plans reflect that metro areas are the crucible of exporting. They are our nation’s centers of innovation, producers of tradable goods and services, magnets of talent, and hubs of freight and passenger movement. The 100 largest metro areas produce the majority of exports for the nation, including generating more than three-quarters of all service exports. Los Angeles, Portland, Minneapolis-Saint Paul, and Syracuse respectively rank 1st, 12th, 14th and 72nd among metro areas in export volume. These strategies will measurably increase our nation’s export capacity.

Second, many of these plans involve metro chambers of commerce, port authorities, regional civic groups, or regional economic development agencies that have strong direct relationships with firms. They are well-positioned to proactively reach out to target companies, perhaps within priority industries, and help them become export-ready, thereby building the nation’s pipeline of quality exporters.

Further, few regional economic development officials promote global trade as an expansion strategy for businesses. Engaging them as partners is essential to making exports more the norm than the exception.

Third, leaders in these metro areas are bringing together the vast network of export service providers and champions around a unified goal and strategy for boosting exports. This has the added benefit of ensuring that all players—government, business, financial, civic, university, and nonprofit leaders—are working in concert toward a shared ambition versus all-too-common fragmentation. Firms will also benefit from a coordinated system of services that will give them the confidence that exporting is the right investment.

Finally, exports in these metros represent just the beginning of a more comprehensive game plan for greater global engagement. Metro leaders are aligning strategies in foreign direct investment, manufacturing innovation, freight and transportation modernization, and immigrant outreach so they build a more globally fluent economy.

Only then can American firms truly tap the immense demand arising from emerging markets around the world and innovate and grow at home.

Authors

Amy Liu

Image Source: © Sean Gardner / Reuters

Los Angeles Doubles Down on Exports

Bruce Katz and Judith Rodin — Thu, 19 Jan 2012 00:00:00 -0500

In March 2010, President Obama established a National Export Initiative to help American companies meet the administration’s goal of doubling U.S. exports by 2015.

Why focus on boosting exports? In a word: jobs. Because every $1 billion in exported goods and services supports roughly 5,400 jobs, an increase in American exports would bring much needed job creation to communities throughout the U.S.

Even as the federal government moves to increase exports, regional leaders from the public, private and academic worlds are taking action to foster higher levels of exports in their areas. Los Angeles has pledged to do its part through the newly established Los Angeles Regional Export Council (LARExC). Housed in the Los Angeles Area Chamber of Commerce, this public-private partnership aims to double regional export levels in five years by expanding access to export training and market research, streamlining export services, and providing networking opportunities for export-ready companies in twelve key industries. [Full disclosure: The Brookings-Rockefeller Project on State and Metropolitan Innovation provided some advisory support to LARExC before it launched.]

“We in Los Angeles are not waiting for Washington to create jobs,” says Mayor Antonio Villaraigosa. “We are launching the Los Angeles Regional Export Council to help local businesses find the export assistance they need to grow their businesses and create new jobs.”

The Los Angeles region has a number of strengths when it comes to exports. With established connections to Asian and Latin American economies on the Pacific Rim and infrastructure to move freight by land, sea and air, it’s little wonder that the region is second only to the New York City metro area when it comes to total exports by dollar value. LARExC aims to build upon these assets by creating a regional export support network that connects area firms to local, state and federal services.

Export-ready companies looking to enter new markets often need some extra help at first; this is especially true of smaller firms, which often lack the resources and know-how needed to begin exporting. LARExC’s MBA Export Champions program, a joint effort of the USC Marshall School of Business and the UCLA Anderson School of Management, aims to support new-to-export and new-to-market firms through this transition by connecting companies with local MBA students, who will provide market research as well as export plan development assistance. In addition, the Export Trade Assistance Program, administered through the state community college system, offers workshops to business executives interested in learning the basics of exporting.

“When companies in L.A. tap into opportunities overseas,” says Los Angeles Chamber Senior Vice President Carlos Valderrama, “it presents an opportunity for job creation and economic growth.” By improving the quality, availability and coordination of export support services, LARExC hopes to ensure that export-ready firms in the region can get the assistance they need to compete in the global marketplace, strengthening the regional economy in the process.

Authors

Bruce Katz
Judith Rodin

Publication: The Atlantic Cities

Los Angeles' 30/10 Transportation Program and the Next Metropolis

Robert Puentes — Thu, 26 Aug 2010 15:53:00 -0400

Earlier this week Mayor Antonio Villaraigosa invited me and a small group of Los Angeles’ business, labor, and environmental leaders to discuss his plan to accelerate the construction of a dozen transit projects in his region. The goal is to build in 10 years what they initially planned to do in 30, hence the plan moniker “30/10.” California’s junior senator and chair of the Environment and Public Works Committee, Barbara Boxer, was the featured guest since new kinds of federal help is a key part of the plan.

No doubt 30/10 is a big idea and one that could transform the partnership between the federal government and our metropolitan areas when it comes to transportation funding and finance. My remarks there focused on this point.

The core of the initiative is based on the fact that, in November 2008, voters in the city and county of Los Angeles approved a half-cent sales tax increase. Revenue from the tax will fund a set transit and highway projects to be constructed there over the next 3 decades. But since Los Angeles is one of the weakest performing metros since the start of the recession, and transportation problems persist as the economy does begin to recover—and since metro leaders there are an impatient lot—they’ve put together a detailed and innovative package of bonds, loans, grants, and other agreements so the shovels will hit the ground sooner rather than later. The transit agency has a refreshingly clear and transparent run down of the plan and what they’re seeking from the federal government here.)

We discussed the real and tangible benefits from 30/10 ranging from construction jobs created in the short term, to the economic benefits to the region down the line, to the transportation impacts once the projects are online, and the environmental effects especially in terms of carbon reduction. This is all somewhat intuitive—if done right—but it is admittedly hard to assess with any great deal of precision.

Even harder to quantify—and harder to do right—is to make sure that Los Angeles uses the tremendous opportunity presented by 30/10 to remake the physical shape of its metropolitan area that reflects the transformative economic, demographic and technological changes underway in our country. How our nation thinks about its physical future has enormous implications for our economy and will demand that we change not just the infrastructure we build, but the buildings we live in, and the way our metro areas are growing. (And, no, I don’t mean we need to make them animal and fruit-shaped).

Los Angeles has always been on the front lines of debates about metropolitan growth and development. Like many other places, L.A.’s growth was driven by cheap or low cost land, water, and energy. American development patterns over the last several decades followed the same sprawling, consumption-oriented style as our national economy. Yet the fiscal, carbon, and natural resource constraints of the 21st century mean we need not just new policies, but a different approach to building and strengthening the next American metropolis.

Accommodating future growth will require a long-time partnership of all relevant actors—public, private, and non-profit—to design the kinds of accessible and sustainable communities the market is increasingly demanding. The work underway in L.A. can help by making sure that metro area—not just the core of the city—creates, and benefits from, a multiplier effect that results from linking human capital, innovative activity, infrastructure, and value-creation in goods and services in dense geographies. Yet it is important to keep in mind that transit investments like those in 30/10 are an important, but not the only, way to help achieve this goal.

Authors

Robert Puentes

Publication: The Avenue, The New Republic

Image Source: © Staff Photographer / Reuters

New Partnerships for Accelerating Infrastructure Investments In Los Angeles

Robert Puentes — Mon, 23 Aug 2010 17:02:00 -0400

Thank you very much Mayor Villaraigosa. I am pleased to be here and very much appreciate your invitation to discuss Los Angeles’ 30/10 Initiative and transportation reform with you and Senator Boxer. As you know, the proposal is profoundly important to the future health and prosperity of the Los Angeles metropolitan area. But its effects will also be felt throughout the country. Not just because the regional economy of Los Angeles is the nation’s second largest, but because metropolitan leaders are looking at innovative proposals like 30/10 as a new direction for transportation that reorients the federal partnership with states and metropolitan leaders, along with local governments and the private sector.

The 30/10 plan is a prime example of the kind of 21st century compact that this country needs. It at once challenges our nation’s state and metropolitan leaders to develop deep and innovative visions to solve the most pressing transportation problems. At the same time, the federal government must become a permissive partner that also holds these places accountable for advancing their tailor-made, bottom-up vision. The reauthorization of the nation’s surface transportation law presents an important opportunity to put in place several key components of this new partnership.

There are also several megatrends that make this a salient and critical conversation today:

Our national economy is in the midst of broad and intensive restructuring. This is partially unintentional and precipitated by the most severe economic crisis in more than a generation. The reverberations from the Great Recession are still strongly felt. In response, major attention is being given to moving away from the over-leveraged, consumption-driven economy that preceded the recession to one focused on globalization, technology, and production.[1] Los Angeles exemplifies this trend with its post-recession emphasis on exports, low carbon infrastructure, and innovation.[2]

At the same time, the U.S. is undergoing the most remarkable socio-demographic changes it has seen in nearly a century. The number of seniors and boomers already exceeds 100 million, and racial and ethnic minorities accounted for 83 percent of our population growth this last decade. But unlike our international counterparts in Europe and parts of Asia, the U.S. is also growing rapidly overall. Our population exceeded 300 million in 2006, and we are on track to hit 350 million in the next 15 years.[3]

Cities and large metropolitan areas—Los Angeles, in particular—are leading this transformation and will, in many ways, determine the path forward. America's 100 largest metros already account for two-thirds of our population and generate 75 percent of our gross domestic product. Comparing Los Angeles’ metro economy to that of other entire nations, it is just about the size of Turkey: the world’s 17th largest.[4] What is more is that most of the future growth of the U.S. is expected to occur in these places. About 60 percent of the future residential growth will be in just the 50 largest metros. Any path to prosperity will run directly through our metropolitan areas.[5]

The challenge is for us to connect this macro vision to metro reality, the macro to the metro. We need to leverage the market energy and creativity found in our metros with smart, game-changing federal and state actions. Because how, where, and in what form we build in the future carries far-reaching implications for the health of our environment, our energy and economic security, and will continue to be a barrier to our metropolitan areas' economic success and our ability to compete globally.

But it also demands that we follow a different path than the one pursued in the past decade. Significant new constraints have emerged that will require us to throw out the old 20th century playbook and devise fundamentally new approaches for how we think about the built environment, growth and development patterns, and the quality of place.

One is the imperative of lower carbon. The world economy is rapidly moving away from carbon-based fuels and towards new sources of energy, driven in part by state, national, and international goals and agreements. Current discussions are too narrow have obscured how profound and market-driving a transition this will be.

Another is our nation’s current fiscal situation. After several years of national economic uncertainty, a tense new climate of austerity has sharpened debates over government spending, economic development, and the physical growth of states and metropolitan areas. Leaders in this environment are eager for fiscally prudent ways to simultaneously invest in what matters, stimulate their economies, create and retain jobs, and operate smarter and more efficiently.

The U.S. is also facing unprecedented constraints when it comes to its natural resources. Driven by cheap land, abundant water, and low cost energy, American development patterns over the last several decades followed the same sprawling, consumption-oriented style as our national economy. Accommodating future growth will require a long-time partnership of all relevant actors—public, private, and non-profit—to design the kinds of accessible and sustainable communities the market is increasingly demanding.

This is where the 30/10 Initiative comes in. While promoted as a short-term creator of much-needed construction jobs, it represents far more than that. It also gives Los Angeles and the watching nation an opportunity to redefine the physical form of metropolitan areas in light of these significant economic, technological, environmental, demographic, and fiscal imperatives and opportunities. Moreover, it is emblematic of the unusual kind of 21st century self-help that the federal government should explicitly recognize and embrace.

Increasingly, metropolitan areas around the country are acting on their own to envision, design, and finance the next generation transportation system in America. Those places—especially in the west—are taxing themselves, dedicating substantial local money, and effectively contributing to the construction of the nation’s critical infrastructure system.[6]

Transit projects like FasTracks in Denver, RailRunner in New Mexico, and FrontLines and Trax in the Salt Lake area are all substantially financed by voter-authorized payroll or sales tax increases and so epitomize the new spirit of bottom-up initiative. In metropolitan Phoenix, for example, voters in Maricopa County approved Proposition 400 in 2004 which extended a half-cent sales tax for regional transportation for another 20 years. That bit of local effort will generate over $11 billion over time to expand regional transit service (including the expansion of the region’s new light rail system) but, like Los Angeles’ Measure R, it will also dedicate billions for freeway upgrades, additional lanes, and improved interchanges, including substantial improvements to the national interstate system.

In the Las Vegas area, Clark County taxpayers have poured some $1.3 billion into construction of the Bruce Woodbury Beltway, a 53-mile freeway that will be added to the interstate system. Other major metro areas like Salt Lake, Charlotte, St. Louis, Oklahoma City, Seattle, and Milwaukee have also gone to their voters for approval of ballot initiatives to fund a mix of light rail and bus lines, highway projects, commuter rail and corridor preservation. A coalition of business and civic leaders in the Dallas Metroplex, for that matter, is pushing state legislature to give metros in Texas the authority to do the same.

In short, metropolitan areas across the country are laboring hard to keep up with system maintenance, enhancement, and expansion needs—even along national corridors—on which they are investing substantial local resources. Metros like Los Angeles need some sort of recognition from Washington that it takes local as well as federal funding to co-produce a sound national transportation system.

So as Congress continues to develop its plans for the reauthorization of the nation’s surface transportation law it should support metro areas that raise their own revenue for the long term. Though a new partnership, the federal government should provide incentives to metropolitan areas that secure long-term and substantial regional funding sources approved for a minimum of 20 years and that equal a significant (one-third to one-half) portion of the annual federal transportation funding received. As to the incentives, a possible menu of options might include: more direct funding to metropolitan planning organizations (MPOs), more flexible “mode neutral funding,” more streamlined planning processes, more direct reporting to federal agencies, and reduced bureaucracy.[7]

Clearly there are many details to work out and vet under such as scheme. Legitimate questions can be raised, for one thing, about whether the “new partnership” would lead to new reliance on sales tax funding sources that are at once regressive and susceptible to volatility. Likewise, some metros will quibble with the specifics of the eligible local funding and the 20-year and funding thresholds. However, the sales tax is but one potential source of funding and all funding options and timeframes should be on the table for discussion.

Beyond the particulars of the funding source, a critical element of any new federal-metro partnership should be enhanced accountability and adherence to national performance goals. To that end, the federal government could supplement its funding to MPOs (and states, for that matter) that demonstrate progress toward meeting such goals. In other words, the primary measure of MPO quality should not just be how well it raises money, but how well they optimize returns on their investments.

And as part of the proposed “vertical” partnership between the federal and metro level, MPOs should also strive to build on the “horizontal” partnerships between related policy areas of housing, transportation, and environment. The metropolitan transportation plans already mandated by federal law should be explicitly coordinated with requirements for Consolidated Housing Plans, for example. Such a multi-dimensional approach would help spend scarce resources better.

But a major piece of the federal recognition of metropolitan innovation in the context of the transportation reauthorization is to help accelerate projects like those embodied in the 30/10 Initiative. There are several options.

One is to better leverage the Transportation Infrastructure Finance and Innovation Act program for major initiatives like 30/10. TIFIA dates from 1998 and was created to help finance transportation projects of national or regional significance. The program is managed by the Federal Highway Administration and provides three forms of credit assistance – secured (direct) loans, loan guarantees, and standby lines of credit to a wide range of public and private entities. The allure of TIFIA financing comes from its low and fixed interest rate that is equivalent to the Treasury rate, and from the fact that TIFIA loans are often subordinate to other senior obligations.

TIFIA has been successful in supporting a wide range of project-specific applications such as roads that are directly supported by toll revenues. However, its utility would be greatly enhanced if TIFIA were amended to support applications that contain multiple projects such as requested by 30/10. Today, the TIFIA program deals with applications on a project basis But when those projects are part of one holistic package and funded primarily by the same revenue source (such as a regional sales tax) the federal government should be able to provide one upfront credit commitment.

However, a revised TIFIA should take steps to ensure that the spirit of the program—to fund projects of national or regional significance that transcend state and local boundaries—is not undermined by allowing packaged smaller projects to be eligible. Therefore, it is critical to add more clarity and specificity to recent U.S. Department of Transportation efforts to apply performance metrics to their assessment of TIFIA projects. Goals need to be made explicitly clear and transparent so applicants have confidence they can assemble projects that fit with the program’s objectives.

The other problem is that TIFIA has become so attractive in recent months that it is now oversubscribed with a record 39 loan applications for a range of transportation projects. Combined, the applicants are seeking $13 billion in finance assistance to support $41 billion in projects which is far more than the program’s $1 to $2 billion dollar annual capacity.[8] Large-scale programmatic applications, such as what the 30/10 is proposing, are outsized for TIFIA’s annual budget authority of $122 million. So after the critical reforms around eligibility and performance, TIFIA should be expanded in accordance with the widespread interest in the program outside of Washington.

In fact, the federal government should take steps to streamline and coordinate existing federal transportation credit assistance programs overall. The U.S. DOT’s new Office of Innovative Delivery manages several finance tools that issue assistance in the form of loan subsidies, loan guarantees, and bond issuances. As that office matures, it should strive to coordinate programs in addition to TIFIA such as Railroad Rehabilitation & Improvement Financing (RRIF), and Private Activity Bonds (PABs) so public and private sector actors can help package up a variety of federal credit tools. Applicants could be able to apply to more than one program at the same time, and be able to receive notification of awards at the same time.

As with the reformed TIFIA program, these programs should fund projects on the basis of demonstrable merit and analytical performance measures. The coordinated evaluation teams should take lessons from the TIGER program and apply common intermodal standards to all applications. If all this is done correctly, the federal government will create more “bang for its buck” through relatively inexpensive reforms, economies of scale, and well-aligned goal setting. Fortunately, there is already precedent for this sort of coordinated, cross-financing approach. Denver’s recent Union Station makeover is as an example of loan program coordination as it was the first project to receive both RIFF and TIFIA funding.[9]

These critical fixes to the federal transportation program have the potential to unleash a new kind of innovation, experimentation, and creativity that resides closest to the ground. The 30/10 Initiative is one of those unique proposals. It already stands as a symbol of what’s possible when we rethink old, siloed models for infrastructure investment.

[1] Bruce Katz and Jennifer Bradley, “Growth Through Innovation: A Vision of the Next Economy,” Brookings, June 2010.
[2] For Los Angeles’s economic performance during the recession see Howard Wial and Richard Shearer, “Tracking Economic Recession and Recovery in America’s 100 Largest Metropolitan Areas,” Brookings, June 2010.
[3] Alan Berube and others, “State of Metropolitan America: On the Front Lines of Demographic Transformation,” Brookings, May 2010.
[4] Brookings calculation based on 2009 figures from Moody’s Economy.com, 2010, and the International Monetary Fund, The World Economic Outlook Database, April 2010.
[5] Alan Berube, “MetroNation: How U.S. Metropolitan Areas Fuel American Prosperity,” Brookings, 2007.
[6] Mark Muro and Robert Puentes, “Helping Those Who Help Themselves,” The New Republic, The Avenue, May 27, 2010. http://www.tnr.com/blog/the-avenue/75191/helping-those-who-help-themselves.
[7] Maricopa Association of Governments, “United States Department of Transportation and Metropolitan Planning Organizations: A New Partnership,” Phoenix, 2010. http://www.mag.maricopa.gov/detail.cms?item=11970.
[8] Roy Kienitz, Testimony before the Committee on Environment and Public Works, United States Senate, Hearing on “Federal, State and Local Partnerships to Accelerate Transportation Benefits,” March 11, 2010.
[9] “Transportation Secretary Ray LaHood Announces $300 Million for Denver Union Station Redevelopment,” U.S. Department of Transportation Press Release, DOT 143-10, July 23, 2010.

Authors

Robert Puentes

Publication: Metropolitan Los Angeles' 30/10 Initiative, City of Los Angeles

The Third California: The Golden State's New Frontier

William H. Frey and Joel Kotkin — Thu, 01 Mar 2007 00:00:00 -0500

Extending from the outer suburbs of greater Los Angeles to the foothills of the high mountains of Northern California, the "Third California" contains virtually all the state's fast-growing regions—from Riverside-San Bernardino in the south to the burgeoning suburbs around Sacramento. However, this growth comes with serious collective challenges on how to capitalize on job and population increases while addressing workforce and environmental concerns.

Downloads

Download

Authors

William H. Frey
Joel Kotkin

To Shelter Katrina's Victims, Learn from the Northridge Quake Zone

Bruce Katz and Mark Muro — Mon, 12 Sep 2005 00:00:00 -0400

As the Gulf Coast struggles to respond to the magnitude of Hurricane Katrina's wrath—with some 700,000 Americans displaced and hundreds of thousands of homes devastated—the search is on for an aggressive, innovative, and rapid response to a housing catastrophe.

The good news is, one already exists.

After the 1994 earthquake near Los Angeles, the federal Department of Housing and Urban Development mounted an effort that was both successful and replicable. While the scale was smaller—20,000 Angelenos homeless, and over 55,000 residential structures damaged—a consensus approach emerged that brought the federal government, the state, landlords, and the region's leaders together to solve a massive problem.

The day after the quake, HUD was in L.A. with a plan that put the poorest victims on a path to recovery quickly and humanely. What happened next was unprecedented. Within days, Congress appropriated $200 million to support a HUD plan to provide special Section 8 housing vouchers good for use anywhere in California.

Within a week, the first of 22,000 of the lowest-income displaced families were moving not into trailers and convention centers, but into stable apartments in safer and better neighborhoods than they had left.

And within a month, HUD had conducted a major landlord-recruitment forum to encourage landlords to take in quake victims.

In short, government intervened boldly and effectively in a shattered housing market to help the un-housed rebuild their lives through their own choices.

And now it should do so again. With more than half a million people homeless in the Gulf region, HUD should be funded to distribute 100,000 or more one- or two-year housing vouchers to the neediest of Katrina's homeless victims, just as it did 11 years ago in Los Angeles.

The gains would be compelling. As much as the Federal Emergency Management Administration's cash assistance, vouchers would help hundreds of thousands of people quickly. Meanwhile, renewable certificates of one or two years' duration would buy families real stability for periods long enough to allow them to begin re-building their lives.

Nor do we have to create a new program to achieve these gains. One already exists. Currently HUD's Section 8 Housing Choice Voucher Program serves two million American families throughout the country and taps into a broad, capable, and preexisting network of housing agencies and private sector landlords—many located in areas now receiving families evacuated from the flood. With appropriate waivers to shorten administrative procedures and encourage landlords to take in voucher bearers, HUD could again turn its standard program into a powerful, rapid-response variant for use right now along the Gulf Coast.

Yet there is another advantage of such an approach. Employing housing vouchers on a massive scale responds to the crying need to promote residential and economic mobility and end the unacceptably sharp concentration of poverty that has for decades hobbled New Orleans' long-term prospects.

As the entire world now knows, New Orleans is one of the poorest cities in the United States. But it's the concentration of poverty—the bunching together of poor families in spatially isolated neighborhoods—that has the most pernicious impact on residents and the city.

Before the hurricane, about one in five poor people in New Orleans, and one in three poor blacks, lived in neighborhoods of extreme poverty with rates over 40 percent—the fifth-highest rate of concentrated poverty in the country. Dozens of census blocks had even higher concentrations.

While many of these families were the working poor—minimum wage workers employed by hotels and restaurants—many more were unemployed. Their neighborhoods—catch basins of poverty that were some of the first inundated in the rising flood waters—had always made it harder for residents to find jobs, because jobs tended to be elsewhere. And they made it difficult to educate their children, since schools and teachers were overwhelmed by the concentration of poor kids in the classroom.

More broadly, this concentration of poverty also crippled the ability of New Orleans to reach its true economic potential, because it stifled market investment, driving away the middle class and draining tax resources.

An infusion of housing vouchers, however, would give displaced residents from the city an opportunity they've never really had: to move to places—either near New Orleans or far away—that have plentiful jobs, good schools, and safe streets.

And that may prove critical to New Orleans' future as well. Supporting households in their quest for better neighborhoods, better jobs, and better schools would aid and abet the reinvention of New Orleans as a place of economically integrated communities with a healthier mix of quality housing, small businesses, and families located there by choice with a wider range of incomes.

In sum, Congress and the Bush Administration have in their belt a housing tool—tried and tested in the Los Angeles earthquake—for remaking the social landscape of New Orleans and improving the lives of tens of thousands of the most destitute Americans across the Gulf Coast.

Will they use it?

Authors

Bruce Katz
Mark Muro

Access to Social Services: The Changing Urban Geography of Poverty and Service Provision

Scott W. Allard — Sun, 01 Aug 2004 00:00:00 -0400

Findings

An examination of neighborhood variation in access to social services in three metropolitan areas—Chicago, Los Angeles, and Washington, D.C.—finds that:

On average, poor populations in urban centers have greater spatial access to social services than poor populations living in suburban areas. In all three metropolitan areas, tracts with higher poverty rates are located in closer proximity to social service providers than tracts with lower poverty rates. On average, tracts with low poverty rates are within 1.5 miles of one-third, one-fifth, and one-quarter as many providers in metropolitan Chicago, Washington, D.C., and Los Angeles respectively, as tracts with high poverty rates.
While spatial access to social service providers is greatest in central city areas, potential demand for services is also much greater in central city areas than in suburban areas. Service providers in the city of Chicago are in proximity to ten times as many poor households as providers in suburban Chicago. Social service providers located in the District of Columbia are proximate to about six times more poor households than service providers in suburban Washington, depending on the particular service area. Because poverty is less centralized in Los Angeles, however, potential demand facing social service providers in central city is only about twice that of the potential demand in suburban areas.
The location of social service providers does not always match well to the changing demographic compositions of cities. Central city tracts that transitioned to a higher poverty status between 1990 and 2000 generally have less access to providers than tracts where poverty rates remained high over the past decade. In all three cities, suburban tracts experiencing significant increases in poverty rates between 1990 and 2000 were proximate to far fewer service providers than central city tracts experiencing such increases in the poverty rate.
High poverty central city tracts with large percentages of Hispanics are located within the greatest proximity to service providers. Access disparities also exist between whites and African-Americans in Los Angeles and Washington. These findings appear in large part to be a product of the patterns and degree of racial and ethnic segregation in each city.

Governmental and non-governmental social service providers offering assistance to low-income populations locate in urban centers, near where disadvantaged populations are most concentrated and where services can be delivered most efficiently. However, the shifting geography of concentrated poverty, and the transformation of governmental assistance from cash to services, increases the importance of the location of these facilities, requiring greater attention from policymakers and service providers.

Downloads

Download

Authors

Scott W. Allard

The Congress Shares Responsibility for War

Joseph Cirincione and Michael E. O'Hanlon — Wed, 19 Nov 2003 00:00:00 -0500

In recent days, Senate Democrats took heavy flak from Republicans when a memo they intended to keep private became public. In it, Democratic staff from the Intelligence Committee suggested that the committee's review of the work of the intelligence community before the Iraq war should also assess how the White House used or abused that intelligence information.

The Democrats are right to want to reexamine the actions the administration took before the war. But to be credible and honest, they should also be willing to examine their own complicity—and that of Congress generally—in last fall's truncated debate about Iraqi weapons of mass destruction.

The issue here must not be just whether the CIA or Defense Intelligence Agency should have done a better job of figuring out whether Saddam Hussein had imported uranium from Africa or whether he had purchased aluminum tubes for use in enriching uranium. Intelligence is never created or used in a vacuum. It is always an input to political debates. How it is used or misused in those debates is of paramount importance to how the country makes its national security policy.

In particular, the country has a right to know whether the Bush administration deliberately exaggerated the threat posed by Hussein to justify a rapid march to war that it already wanted for a host of other reasons. But we also deserve to know whether members of Congress had the same information available to them but failed to stand up publicly to debate the war.

It is not just the executive branch but also Congress that has access to findings of the intelligence community, a responsibility for overseeing the work of that community and a solemn responsibility to interpret and explain that information.

The Senate leadership and members of the intelligence community see a great deal of the information that goes to the president, vice president, secretary of Defense and secretary of State. They can provide independent assessments of what the executive branch is saying. They can challenge the president and his national security team if and when they disagree.

And it is this last action that was generally not taken last summer and fall in the prelude to war. Few members of Congress made an effort to independently assess the intelligence information they were provided. That gave free rein to the administration and served the nation poorly as a result.

To be sure, we all thought Hussein had some capability for chemical and biological weapons. That was true within the U.N., the European community and the Democratic Party as well as the Bush administration.

Given his track record of building weapons of mass destruction, using them in war and against his own populations and impeding the work of inspectors charged with destroying them after Desert Storm, there was every reason to think that he still had such agents last year. It now appears this conventional wisdom may have been wrong.

However, of much greater concern were two other aspects of the alleged threat: Hussein's possible progress toward reconstituting a nuclear weapons program and his links to Al Qaeda. On both points, the Bush administration hyped the threat, and Congress let the administration get away with this "spin." The result was a more rapid and unilateral rush to war than was necessary or prudent. And on both matters, there was sufficient evidence to know the administration was probably wrong at the time, as we both wrote last fall.

Congress knew from unclassified briefings and findings from the intelligence community that the Al Qaeda link and the nuclear capabilities charge were being distorted by the administration. Even the president has since repudiated the 9/11 connection. Nuclear weapons programs require large, fixed infrastructures that would have been hard to hide from U.N. inspectors. Furthermore, the intelligence community voiced unusually strong dissents to claims in the National Intelligence Estimate in October 2002 that Iraq had restarted a nuclear program.

The administration and the Congress both failed the American people. The investigation spotlight needs to shine on both branches.

Authors

Joseph Cirincione
Michael E. O'Hanlon

Publication: Los Angeles Times

The Trajectory of Poor Neighborhoods in Southern California, 1970-2000

Shannon McConville and Paul Ong — Sat, 01 Nov 2003 00:00:00 -0500

Findings

An analysis of poor neighborhoods in the Los Angeles region between 1970 and 2000 indicates that:

The poor population in the Los Angeles region has become more geographically concentrated over the past three decades. The proportion of the region's poor individuals who live in poor neighborhoods—with poverty rates of at least 20 percent—doubled over 30 years, from 29 percent in 1970 to 57 percent in 2000.

Areas outside inner-city Los Angeles experienced the most rapid increases in poor neighborhoods, especially during the 1990s. Between 1970 and 2000, the percentage of poor neighborhoods in suburban Los Angeles County quadrupled; it tripled in surrounding counties, and remained relatively constant in inner-city Los Angeles.

The racial-ethnic and immigration characteristics of poor neighborhoods changed markedly over the three decades, reflecting regionwide changes. The Latino proportion of the population living in very poor neighborhoods—with neighborhood poverty rates of at least 40 percent—increased more than threefold between 1970 and 2000, while the black share of the population living in very poor neighborhoods declined dramatically.

More of the region's neighborhoods became poor in the 1990s than in prior decades. International migration to the Los Angeles region played a major role in the development of poor neighborhoods in the 1970s and 1980s, but contributed far less to their growth in the 1990s.

Employment in very poor neighborhoods increased considerably in the 1980s and 1990s, while single parenthood declined. The labor force participation gap between very poor and non-poor neighborhoods shrank by one-half over the three decades.

In the past three decades, the Los Angeles region has witnessed a large-scale spatial reorganization of poverty. Where once concentrated poverty was confined to neighborhoods in the inner-city, it has since spread to the suburbs. This shifting concentration of poor neighborhoods is driven mainly by immigration and broader changes in the regional economy. Increasing economic mobility for second and subsequent generations of immigrants through education is the region's key challenge.

Downloads

Download

Authors

Shannon McConville
Paul Ong

Sprawl Hits the Wall: Confronting the Realities of Metropolitan Los Angeles

Thu, 01 Mar 2001 00:00:00 -0500

Preface

For more than a century, Los Angeles has been regarded as an exception to the rules governing American urban growth. Starting out as a region with little or no apparent urban potential, Southern California has grown with remarkable speed into one of the world’s most important metropolitan areas. At the beginning of the 21st Century, the region faces new challenges that inevitably accompany emergence from a short, turbulent metropolitan adolescence. These challenges require a new way of seeing ourselves and our city-region, and fresh ways of working together to confront them.

The Los Angeles metropolitan region originally emerged as a series of decentralized and self-contained towns, each with its own complement of housing, jobs, and shopping. The outlying counties grew to prominence by deliberately establishing identities separate from Los Angeles proper. The region’s almost 200 individual cities likewise sought to serve their residents by viewing themselves locally, even parochially, rather than as part of some larger whole.

Historically, then, the entire region was built on a kind of “suburban” assumption: that individuals and communities could best thrive by creating multiple, discrete centers of political, economic and social life, rather than focusing on a single dominant core (as happened in most other American cities).

These assumptions no longer hold true. All indicators suggest that the suburban idyll in metropolitan Los Angeles is long past. New communities are still being built on the metropolitan fringe, but little land or natural resources remain for more outward expansion. Most people live in existing urban areas that are aging rapidly and densifying. Many neighborhoods, old and new, are quickly stratifying in ways that increase the separation of affluent and poor residents. And as previously separate communities abut and coalesce, the need for collaborative political approaches to the problems of an emerging world city becomes paramount.

In 1998, the Southern California Studies Center of the University of Southern California began a two-year investigation into the problems and opportunities facing the region. With generous support from The James Irvine Foundation, a group of researchers and practitioners committed themselves to diagnosing the health of the region, and opening up a conversation about our future.

As this work unfolded, we also entered into a collaboration with The Brookings Institution Center on Urban and Metropolitan Policy, a national research organization committed to understanding and responding to the complex mix of issues that confront cities and metropolitan areas. The Southern California Studies Center joined a nation-wide project with scholars from other major cities, convened by Brookings, to examine the role of government policies in shaping metropolitan growth and development trends. The findings in this report have been informed by that national network, and will be incorporated into a separate book to be published by The Brookings Institution Press.

Our hope is that Sprawl Hits the Wall will contribute to emerging local, regional, and national debates about our urban future. What happens in Los Angeles affects the turn of events throughout the world, just as global events have an impact on LA’s neighborhoods. We must be careful to protect those qualities that for more than two centuries have made Southern California the destination of choice for millions of immigrants; yet at the same time, we cannot afford to squander the opportunities opening up to a world city of the 21st century. As a consequence, we face some tough challenges and choices, which are spelled out very directly in this document. We need to grow smarter, grow together, grow greener, and grow more civic-mindedly. This report spells out why these actions are necessary, and begins a conversation about how we may achieve those goals.

Michael Dear
Director
Southern California Studies Center
University of Southern California

Downloads

Download

Publication: Southern California Studies Center at USC and Brookings Center on Urban and Metropolitan Policy

America's Urban Agenda: A View From California

Antonio R. Villaraigosa — Thu, 01 Jun 2000 00:00:00 -0400

A generation ago, pundits, professors, politicians, and policymakers debated what to do about the "urban crisis." Today the discussion is about the metropolitan predicament. The terms have evolved because our urban areas have been transformed. At the dawn of the 21st century, most Americans live in suburbs. But they have not exactly left the cities behind.

Cities and suburbs alike face daunting challenges. Our suburbs—from wealthy gated communities, to gritty blue-collar bungalow and industrial communities, to new housing tract developments on the urban fringe—are inexorably linked to the fate of nearby cities. In fact, many of the places we call suburbs are really small cities. They, too, confront serious problems: fiscal challenges, poverty, environmental concerns, crime, housing shortages, traffic congestion, ethnic tensions, and struggling public schools. The question is whether cities and suburbs can recognize and build on their common ground, working together instead of competing in the struggle for public resources and governmental attention.

Since the 1960s, helping cities has been perceived as a matter of political ideology. How much help they get has largely depended on which political party was in power in Washington and whether it thought its friends were in the cities or in the suburbs. It's time to accept the fact that cities, like suburbs, are too important to be political footballs.

As the federal government has reduced its role in urban policy, states are becoming more important sources of creative thinking on how to address metropolitan concerns. Over the past 20 years, Congress—in what some academics have described as "fend-for-yourself federalism"—has given states responsibility for addressing many issues that most vex cities and suburbs. Although we cannot let Washington off the hook when it comes to strengthening metropolitan areas, including central cities, the reality is that states will be wielding significant new power. The question is how they will use it.

More than any other state, California reflects the nation's changing demographic, economic, and political realities. If metropolitan-wide approaches are the wave of the future, then nowhere is that strategy more appropriate than in California. California practically invented the "metroplex" concept. In the San Francisco Bay Area and in Los Angeles—Orange County—Inland Empire, it is hard to know where the cities end and the suburbs begin. The state is home to 4 of the nation's 25 largest metropolitan areas—the San Francisco Bay Area, the metro Los Angeles—Orange County—Inland Empire, greater San Diego, and the Sacramento—Yolo County area. California has 56 cities with populations over 100,000, including 4 of the nation's 25 largest cities: Los Angeles, San Diego, San Jose, and San Francisco. Many California cities were small towns, even rural communities, only a decade or so ago.

States can play at least three important roles in improving metropolitan areas. First, they can help cities and suburbs address their fiscal dilemmas. Second, they can help make communities more livable by dealing with infrastructure, traffic congestion, pollution, and parks. Finally, states can help support working families, especially those on the bottom rungs of the economic ladder, many of whom live in distressed neighborhoods in cities and older suburbs.

Helping Cities Pay Their Bills

Many localities are in a fiscal bind. Improving management can help, but in most cases cities' fiscal problems are structural. Increasingly, municipal governments' needs are greater than their resources. States can and should help local governments stabilize and improve their financial condition. California's landmark Proposition 13, passed in 1978, shifted control over property tax revenues from the local government to the state. It left local jurisdictions dependent on sales tax revenues, along with state subventions, to pay their bills. As a result, local governments tend to favor retail land uses over housing and industry, often triggering controversies over shopping malls and "big box" stores (such as WalMart).

Proposition 13 also has led to self-defeating competition between jurisdictions for taxable investment. In The Reluctant Metropolis, Bill Fulton described the bidding wars among three adjacent Southern California cities (Oxnard, Ventura, and Camarillo) to entice shopping centers and auto malls with public subsidies and tax breaks. After several years of this competition, an Oxnard council member declared in frustration, "This is not about creating new business. This is about spending $30 million to move two stores three miles." State government should help municipalities avoid bidding wars that undermine the fiscal health of all. Cities need the resources to shape their own destinies and provide basic services that people expect from local government. Changing the rules on revenue distribution can relieve some of the pressure that forces California cities to fight over sales taxes.

If we can help localities become fiscally independent, some 80 percent of our cities would be at least a little better off overnight and a lot better off in the long run. During my term as speaker, my office sponsored a statewide, bipartisan blue-ribbon task force on fiscal reform, which delivered its findings to the legislature earlier this year. Among its recommendations are returning to local jurisdictions a portion of property tax revenues in exchange for a portion of sales tax revenues, whose fluctuations the state is better equipped to accommodate, and returning to cities and counties some of the revenues diverted in the early 1990s to keep the state budget in balance during the recession.

While some communities, in California and elsewhere, agitate for increased local control, another movement, spurred in part by the rise of "smart growth," argues for regional cooperation in planning and fiscal matters. If, as some claim, only regionalism can secure the services, infrastructure, and quality of life that residents demand, these factions must call a cease-fire. Here is another role for the state. Its preemptive statutory role in land use planning, environmental protection, and transportation, and in certain kinds of infrastructure planning and finance, gives it the authority to force warring local factions to the table. Whether the state has the moral authority (or gumption) to exercise its legal authority remains to be seen.

More Livable Communities

The land use, infrastructure, and transportation planning powers described above are often viewed as the boring minutiae of government, but they are critical to any state effort to build livable communities. There are those who view suburban sprawl and traffic gridlock as the inevitable consequence of our desire for a single-family house, a yard, and a picket fence. Challenging the tendency toward sprawl first requires removing incentives that encourage it and making urban communities more appealing for families with choices.

States have a key role in addressing the growing public concern for more livable communities. For example, they can invest in infrastructure that helps rebuild cities and nearby older suburbs. For several decades, California allowed its physical foundation to deteriorate, primarily because of anti-tax, anti-"big government" politics, but also because of earthquakes and other natural disasters. It is time to repair the damage, a task that will be easier if the state is not forced to spend limited resources building new facilities to service sprawl communities.

Fortunately, California is beginning to look at infrastructure planning from a "big picture" strategic, anti-sprawl angle. A task force appointed by Governor Gray Davis is working on a plan that is likely to focus future infrastructure in existing communities. State budget analysts predict that California must spend nearly $100?150 billion to meet its current and future infrastructure needs, but this spending, which will generate many jobs, will also be a substantial investment in the state's future.

Federal and state policies have long favored private autos over public transit. More people will use public transit if it is convenient and affordable, but mass transit systems have long been underfunded, discouraging people from getting out of their cars. California now appears ready—building on tentative, sometimes controversial steps taken in the 1990s—to step up funding for urban mass transit projects. The governor and legislature recently announced a three-year $5 billion transportation spending plan, half of which is devoted to mass transit. An ambitious proposal for statewide high-speed rail, which could reduce traffic gridlock in urban areas, is in the works as well.

In the mid-1990s, the Los Angeles County Metropolitan Transportation Authority bit off more than it could chew in its plan envisioning a spiderweb of subways and light rail throughout the county. A chastened agency now struggles to improve bus service and provide more modest corridor rapid transit in parts of the urban area, while the San Francisco Bay Area takes similar steps. The bottom line is that both the state and its major metroplexes acknowledge that without comprehensive improvement to the mass transit system, California risks choking on its own traffic, air pollution, and the economic dislocation that can result from both.

In the past few years California has also become more active in environmental protection that relates to cities. Voters recently approved an unprecedented $2.1 billion park bond and its companion, a $1.9 billion water bond, nearly half of which will go to enhance recreation and open space in urban areas. To address the last remaining unregulated mobile source of vehicular pollution, we launched a program to subsidize the replacement of dirty diesel truck and bus engines with cleaner technologies. After more than a decade and a half of disinvestment in commercially and environmentally valuable natural resources, California is turning the corner.

Helping Working Families

A state's responsibility to deal with wide disparities between the haves and have-nots has broad implications for cities. According to Pulling Apart, a recent Center on Budget and Policy Priorities report, in 46 states the income gap between the richest and poorest one-fifth of the population is wider today than it was two decades ago. More than one-fifth of America's children, increasingly concentrated in urban ghettos, live in poverty, with inadequate health care and housing. Millions more live on poverty's edge.

California reflects these national trends. It ranks fifth in terms of the disparity between rich and poor. A recent United Way report described the L.A. region as a "tale of two cities." It is "the nation's poverty capital" but also houses a larger share of high-income households than either the state or the nation. It has, in particular, many working poor families—those who work hard but struggle to make ends meet with low-wage jobs. These economic gaps are reflected in many ways: the continuing crisis of our public schools; lack of access to decent health care for a growing number of people, including many working poor families; and the deepening shortage of affordable housing for the middle class as well as the poor.

After a 20-plus year drift from near the top to the bottom of state rankings in per-pupil education spending, California has begun the long climb back toward respectable investment in schools. Two years ago I sponsored a $9.2 billion school bond measure, the largest in U.S. history and the first in California history to guarantee substantial investment in urban school districts.

This measure is only a down payment on the state's $40 billion school facility repair needs, but it reverses decades of state school finance policy that favored suburban school districts (thus underwriting sprawl). By earmarking a major portion of the funds for use by urban school districts, the initiative helps ease difficulties cities face in getting access to funds because of costly land acquisition and environmental requirements not typically confronted by wealthier suburban districts.

California has the nation's highest proportion of people without health insurance, most of whom live in cities. This drains municipal coffers when public hospital emergency rooms become these families' primary care providers. In response, the legislature created the Healthy Families Program in 1997 and expanded it last year. It combines federal and state dollars to extend health insurance coverage to the children of California's working poor who don't quality for Medi-Cal (the state's Medicaid program) and can't afford their own insurance. Although California still needs to push harder to enroll all eligible children in this program, the legislation made a good start.

Too often state and local governments provide grants to businesses without adequately considering the kind of jobs these public investments create. In recent years, at least two dozen cities and counties around the country, including several in California, have enacted "living wage" laws to guarantee that firms receiving government subsidies, contracts, or tax breaks pay their employees enough to raise a family and provide health insurance. State and local governments could broaden this principle to link all forms of public investment?tax breaks, grants, and loans, among them?to living wages, particularly in jobs in growing industries that offer a career ladder.

Many California business leaders recognize that the housing shortage—the most severe in the nationhurts the overall business climate and neighborhood commercial areas. Skyrocketing housing prices make it difficult for corporations, hospitals, and universities to attract and retain employees. When families spend more than one-third or one-half of their incomes just to keep a roof over their heads, they have little discretionary income to pay for other essentials. This undermines family life (for the middle class and the poor) and hurts local economies. After years of neglect, California is now back in the housing business. State Assembly leaders recently proposed a $1 billion housing program to expand homeownership and provide affordable rental housing for the work force. I expect that business, labor, civic, and religious leaders will rally behind this initiative. Meanwhile, the state could do still more to help cities cope with homelessness and slum housing.

Good Business

Revitalizing our urban areas is good business. Not only will our private sector thrive by doing much of the work, it will reap the benefits of communities where employees enjoy a better quality of life and can be more productive on the job. One of the best kept secrets in state politics has been that, to the extent California has lost employers and jobs to other states, it has been over quality-of-life issues, such as congestion, housing costs, poor schools, and poor air quality, as much as over tax and regulatory concerns.

For much of the past two decades, Washington turned its back on the nation's metropolitan areas. Despite recent improvements, cities are still the orphans in our federal family. We need a new partnership between the federal government and our metropolitan areas—to set ground rules to promote metropolitan-wide cooperation (the federal Clean Air Act is a good example), to level the economic playing field (by renewing some kind of targeted revenue-sharing to localities with structural fiscal problems), and to provide funding for mass transit, health care, and housing.

But metropolitan reform is not just about money or policy agendas. It is also about attitude. State government officials must use their bully pulpit to help people think about cities and their place in society. If we're all in the same boat, it matters little whether the boat starts to leak at the urban end or the suburban end. Eventually, all of us will be treading water. To avoid that scenario, we need strong leaders, realistic resources, and a commitment to work together.

Authors

Antonio R. Villaraigosa