The Latest in Economic Development

This week’s blog explores manufacturing’s resurgence, making a place “creative,” and keeping and attracting foreign entrepreneurs and students. Comment below or send to mcfarland@nlc.org.

Get the last edition of “The Latest in Economic Development” here.

Chatter about manufacturing’s resurgence in the U.S. is being fueled by moves to “reshore” production facilities, growth in advanced manufacturing sectors and increases in goods exports.  “The top factors for bringing these jobs home cited by these executives surveyed by Boston Consulting Group: Higher labor costs in Asia (57 percent), ease of doing business (29 percent), and proximity to customers (28 percent),” notes The Global Post.  What will manufacturing’s comeback mean for local economies? The ripple effects of manufacturing are huge, especially when accounting for foreign investment: each job supports another five jobs, based on economic activity that is tied to suppliers and spending by employees of U.S. units of foreign companies and their suppliers, Reuters reports.

But as the Wall Street Journal details, there is reason to be skeptical of this good news: lagging wages in the U.S. are propping up the industry and have negative consequences for the economy.  “Sluggish wages are squeezing workers’ incomes and spending. That, in turn, hurts retailers who target middle-income earners and restrains the vigor of the economic recovery.”

“Musical” interlude, data debate, and big boxes going small.

Although most have abandoned the notion of becoming the next Silicon Valley, communities across the country are trying to figure out just the right mix of what spurs innovation and creativity. Rural towns like Greeley, Sherman and Valley County, NE think the answer lies not necessarily in hard assets, but in the soft ones. “It’s far harder to create communities of people driven by values like trust, fairness, dreaming big, and willingness to risk and fail.” Get those components right, reports the Daily Yonder, and younger entrepreneurs will stay.  Youth entrepreneurship must become a priority within a community’s economic development strategy, and according to the Center for Rural Entrepreneurship, includes interactive entrepreneurship education, supportive community environment, peer networking and pathways from education to opportunity.

Even places like Silicon Bayou (aka New Orleans) and Denver that are targeting high-tech are using strategies grounded in local assets, particularly their talent. They are leveraging existing industries and top universities and colleges and working to encourage collaboration among entrepreneurs, investors and government agencies, notes MSN Business on Main.

But what if your town has no people? That’s right…no people. Fast Company puts the spotlight on a new city in New Mexico named CITE (The Center for Innovation, Testing and Evaluation) being developed with the hopes of being one of the most innovative places in the world, with no plans for permanent residents. CITE is “a 15-square mile, fully functioning but empty town next door, unlike any other R&D facility in the world, that will be used to test everything about the future of smart cities, from autonomous cars to new wireless networks.”

Foreign students and entrepreneurs have also been lauded as key assets for growth. It’s no wonder that recent news (Fiscal Times) of an exodus of foreign students has prompted “a bipartisan group of senators to introduce legislation that would seek to make it easier for foreign students who hold post-graduate degrees in math, science or engineering from American colleges to remain in the U.S. after they finish their studies,” notes Wall Street Journal’s Washington Wire blogger Corey Boles.

While there is a high likelihood of U.S. legislation getting bogged down in an immigration debate, The Telegraph details Canada’s plans to move full force on attracting foreign entrepreneurs and building a “fast and flexible” economic immigration system. According to Citizenship, Immigration and Multiculturalism Minister Jason Kenney, “We need to proactively target a new type of immigrant entrepreneur who has the potential to build innovative companies that can compete on a global scale and create jobs for Canadians.” See these NLC resources for more on local roles to support entrepreneurs and foreign students.

“My pride is back”: Ending the shame of Veteran homelessness

With Memorial Day approaching, we may find our thoughts drifting to enjoying a few days with family and friends away from the rush of everyday life. But hopefully, for a least a moment, we will reflect on why this three-day weekend in late-May happens. For the more than 22 million veterans, this weekend is a time to remember and honor friends and fellow soldiers, sailors, airmen and Marines whose lives were given for our country.

Yesterday on Capitol Hill, leaders of federal agencies charged with coordinating the government’s work to end veteran homelessness spoke about the resources available and what communities can do to achieve this goal by 2015. In his opening remarks, Senator Burr of North Carolina talked about how federal agencies cannot accomplish this goal alone. He pointed out that community resources along with local coordination and leadership were keys to success.

The Opening Doors plan by the U.S. Interagency Council on Homelessness outlines the federal government’s strategic efforts to bring data-driven responses to prioritized populations. The work toward ending veteran homelessness is already showing promise. From 2010 to 2011, the number of homeless veterans fell by 11.5%, from 76,329 to 67,495. A renewed commitment by Congress and the Administration can claim some credit. Resources such as HUD-VASH vouchers and the newer Supportive Services for Veteran Families (SSVF) provide communities with flexible resources to meet the needs of veterans and their families. But to make sure these resources are effective, it is important that the right population uses the right resources at the right time.

Yesterday, speakers talked about developing a “no wrong door” model and using a “veteran-centric” approach. What do these terms mean pragmatically in our cities and towns? It means making sure the community is ready and able to meet the needs of veterans whenever and wherever they turn for help. But this presents real challenges. How is it possible to make sure everyone in a community knows about all of the resources available when things are constantly changing?

A key to success is making sure your community is not passively arranging resources and waiting for veterans to come. City leaders and municipal staff need to develop partnerships among the key stakeholders that can help reach veterans in a more proactive fashion. The old adage of an ounce of prevention being worth more than a pound of cure comes to mind.

When a veteran comes to the local VA Medical Center, are they asked about their living situation? When someone seeks assistance with housing, healthcare, transportation, childcare, or food, are they asked about whether or not they are a veteran? Who is talking with local American Legion’s, Veterans of Foreign Wars and other military service organizations? When someone is discharged from a prison or hospital, are they asked about their veteran status and housing situation? Do area faith communities know where to turn when someone comes to their doors? These are not the only questions we need to ask, but they can be the beginning of a locally coordinated effort to align local priorities with those set by federal agencies such as the Veterans Administration, the Department of Housing and Urban Development and the Department of Labor.

The final speaker yesterday was Ms. Eloise Wormley, a veteran who was homeless in Washington, DC. After her service, she didn’t know how to get re-established at home. Living with her mother and friends were only temporary solutions and she found herself on the streets grappling with physical and mental health issues. Fortunately, outreach workers asked about her veteran status and she was directed to a local non-profit that used SSVF funds to provide her with a home.

“I can’t say enough about what it means to have a key to my own home,” Ms. Wormley said. “I can stay on top of things now. I have two jobs and my pride is back.”

Local leadership and coordination is what enabled Ms. Wormley’s pride to come back. Federal resources do no good without local know-how.

What is your community doing to end veteran homelessness? Share your stories, successes and challenges below and join NLC’s work to help meet the needs housing needs of all veterans by emailing me at harig-blaine@nlc.org.

Who’s Afraid of Renters?

Perceptions seem to be changing but there remains an unfortunate bias against renters. In a recent essay in the Wall Street Journal (May 4, 2012) author Daniel Gross [Better, Stronger, Faster: The Myth of American Decline and the Rise of the New Economy] offers this characterization. “In the American mind, renting has long symbolized striving – striving, that is, well short of achieving.”

Millions of Americans rent; some 34% of them in fact. According to the Census Bureau’s Current Population survey, 42% of renters are under 30 years of age and 17% are over 65. How is it that anyone can lump together so many seniors and Millennials and then suggest that somehow they are not essential elements of the American mainstream that deserve choices in housing?

Renters are transient and disconnected the critics argue. To be sure, renters without children, both young and old, may be disconnected indeed from schools; the one basic hometown institution mostly supported by property taxes. However, from this observation it is a far and dramatic leap to suggest that renters by their very nature are disconnected from the community at large. What models of citizenship are we promoting that equate the value of contributions to a society by the dollars collected through a tax on real property?

Today renters are helping to stabilize and even save neighborhoods devastated by foreclosures just by the act of moving in.  Beyond their physical presence, renters bring income, purchasing power and the foundations of community.

People chose to live in the best place that they can afford.  That best place often has a mix of employment opportunities, welcoming neighbors, and some amenities such as open space or retail shops or entertainment venues.

Being welcoming to new residents regardless of their housing preferences is an act of good faith by a city. By using an inclusive approach, a city can demonstrate that it seeks to attract people of energy and talent to build a life for themselves and for those they hold dear. Such an attitude proudly declares that a community wishes to serve and support a diverse and unique corps of residents.

Congressional Appropriators Side with NLC, Local First Responders on DHS Grants

Over the past week, both the House and Senate Committees on Appropriations marked up legislation that would reject a proposal from the Administration to consolidate 16 targeted homeland security grants into one state-centric grant program called the National Preparedness Grant Program (NPGP).  For the National League of Cities, our members, and first responders across the nation, this is good news.  By rejecting a plan that would have shifted homeland security grants from local preparedness and response activities to statehouses, DHS will need to enter into a more extensive dialogue with first responders and local governments regarding the future of this ongoing intergovernmental partnership that helps keep our nation secure.

Proposed in the President’s FY 2013 budget, NPGP would only require states to only pass funding to high-threat urban areas.  The remainder of the funds—of which more than 80 percent is currently required to be “passed through” to local jurisdictions—would have gone to the state to be distributed based on state and national threat and risk assessments. This includes grants for transit and port security, urban search and rescue, metropolitan medical response, pre-disaster mitigation grants, and a number of other standalone programs that targeted funds at specific threats.  No requirements existed for local participation in the risk assessment or the decision-making process for distribution.

Since the consolidation was proposed, NLC and its allies have been meeting with key stakeholders in Congress and the Administration urging a more inclusive and deliberative approach to reform that includes the voices of local governments and first responders.  Meetings with FEMA did not provide NLC enough detail to ensure the needs of localities would be met under NPGP.  After a series of meetings and numerous letters to both Congress and the Administration, both the House and Senate Appropriations Committees agreed with NLC and rejected the proposal in their spending bills.

The House Committee on Appropriations cited lack of detail from DHS and insufficient stakeholder engagement as reasons for rejecting the proposal in their committee report (p. 113), and Senator Landrieu (D-LA), Chair of the Committee on Appropriation’s Subcommittee on Homeland Security, stated similar concerns in her opening statement (discussion of the grant programs begin at the ~70 min and 30 sec mark).

NLC appreciates the House and Senate Appropriators’ efforts to ensure that the Administration takes a deliberative, inclusive approach to state and local grant reform that includes working directly with local stakeholders.  We all want to ensure future reform guarantees local governments the tools to prevent, respond to, and mitigate against all hazards.  This means putting first responders first, and ensuring preparedness grants do not become lost in a state budget.

To learn more about what NLC, local governments, and local first responders think of the Administration’s proposal, click here.

How can cities best help disabled veterans?

During the Iraq and Afghanistan wars, more than 48,000 men and women have been injured. To put that in some perspective, this is about the same number of people living in cities such as Concord, NH, Salina, KS or Olympia, WA. With both of these wars winding down, veterans are in need of homes that allow them to become fully integrated into their communities.

In Glastonbury, Connecticut, a national non-profit partnered with the Rotary club and city officials to bring together hundreds of volunteers to provide a new home for a Marine Corps Corporal disabled by an improvised explosive device (IED) in Afghanistan. The collective effort created a new, affordable and barrier-free home for under $35,000 in a county where the median price of an owner-occupied home is nearly $250,000.

How was this accomplished? What are the lessons learned? Can this be replicated?

There are several reasons why this effort came together. First, the Town offered municipally-owned land to the effort for $1. Generally speaking, the most expensive part of any real-estate deal is the land. With this cost essentially eliminated, the project’s affordability is based on the annual property tax. Since tax amounts are based on a property’s assessed value and this home was being built from the ground up, architects deliberately kept the basement unfinished, designed hallways to be wheelchair accessible but not over-sized, and used stone veneer to minimized the assessed value.

Other factors that allowed this project to succeed were community buy-in and translating goodwill into action. When you talk to someone about providing housing for disabled veterans, particularly veterans disabled in the line of duty, who is going to say no? No one. Everyone will say yes in some way. But saying yes and making things happen are two different things.

In Glastonbury, credit is due to the leadership shown by the town’s elected officials. The Town Council and Town Manager were committed to ensuring that the property benefit a veteran. The challenge facing these officials was balancing this benevolent intent with the need to protect the town’s future fiduciary interests. By being forthright about responsibilities and honest about intents, stakeholders from both sides were able to solve a sensitive but critically important issue in a collaborative manner. The result was an agreement legally structured in a way that met the needs and interests of everyone.

The final element that made this project possible was volunteer management. We often hear about the “Sea of Goodwill” that Americans have for our veterans. All too frequently, the challenge is tapping into the goodwill in a meaningful and timely manner. When the local Rotary heard about this project, they took it on as part of their community service. They quickly realized their real value would be in coordinating and managing the nearly 400 volunteers who wanted to be a part of the effort. This is a critical role. To meet the varying needs that our veterans have requires a community agent with the exclusive role of playing “match maker”. Faith communities, service-based groups, and military service organizations are well-positioned to play this role. When needed, non-profits can step in. In all instances, leadership and coordination are paramount to success.

To read more about this project and NLC’s work on housing for disabled veterans, click here.

Digitizing Financial Literacy?

Last month, the National Foundation for Credit Counseling released its annual Consumer Financial Literacy Survey. The results added a bit of color to the picture that has been emerging since the recession of Americans’ financial literacy and stability, and it’s not necessarily pretty. According to the latest survey, more than half (56%) of adults do not have a household budget, and 22% of those individuals say they do not track their spending. In 2011, 28 percent of adults reported not paying their bills on time, but in 2012, that proportion rose to one-third (33%) of Americans not paying their bills on time. When it comes to savings, the bright spot is that more than half (59%) of survey respondents indicated that they were putting aside savings. The bad news is that proportion dropped from 67% in 2010. In addition, a full 39% do not have any retirement savings.

This, of course, is a straightforward survey, not a study designed to explore the reasons behind America’s state of financial literacy and saving habits or determine correlation or causality. But it can certainly be useful, especially in assessing the need for services to help Americans become more financially literate.

There is an array of local financial literacy programs supported by cities across the country, from the professional financial coaching provided through New York City’s Financial Empowerment Centers to Seattle-King County’s Financial Education Providers Network. Given the importance of family financial stability to local economic vitality, city leaders should continue to champion financial literacy programs and connect residents to these valuable resources. But there is also a growing set of web-based financial literacy supports that represent a whole new opportunity for Americans to improve their financial capabilities. In a world increasingly turning to technology, is financial literacy something we can effectively digitize? Will it have the same impacts – and can we measure them effectively – as person-to-person financial coaching? Then there’s the issue of whether or not residents will have the ease of access, to say nothing of the motivation and accountability needed, to ensure robust and meaningful participation in digitized efforts to improve financial literacy.

Some cities are forging ahead and leveraging web-based financial literacy tools in their financial education and empowerment efforts. The City of Houston, for example, created an iPhone app for its Bank On Houston initiative that will help users (ideally, previously underbanked residents) get a better handle on their money. This endeavor was supported by the Improving Data Collection in Municipal Bank On Initiatives project sponsored by NLC’s Institute for Youth, Education and Families.

Bank On DC, a program led by the Mayor’s Office of Planning and Economic Development, has incorporated an online tool called MyStartingPoint into its financial education offerings for Bank On customers. Created by the Washington, D.C.-based Community Financial Education Foundation, the web-based MyStartingPoint program is free of charge and open to any user.  The program identifies a user’s current state of financial wellness and then customizes a learning path based on her financial “starting point.” It provides access to all kinds of interactive resources, including budgeting tools, checklists, calculators, financial worksheets, savings tips, credit tips and credit resources.

HelloWallet is another online tool that is drawing the attention of some cities working in the financial empowerment space. While not free of charge, HelloWallet is a robust and innovative online personal finance tool. The company also has a growing community-based portfolio in which it donates free access to HelloWallet to qualified community groups, and is currently partnering with Bank On programs in Washington, D.C., and Los Angeles, with several others in the works. HelloWallet is an interesting tool because it was created with the goal of “democratizing access to honest, high-quality financial guidance.” It’s a bit like having a personal financial planner, in digital form.

Technology is certainly an intriguing tool for financial literacy, with both great potential but also its own set of shortfalls. Regardless, it seems important that experts at all levels-local, state and national-should be invested in finding solutions to the current deficiencies in Americans’ financial capabilities.

What can demonstration projects teach us about sustainability?

Large- scale demonstration projects—ones that are focused on combining and testing various physical systems within a confined geography– are increasingly gaining popularity with cities interested in pushing the sustainability envelope.   As someone who readily transitioned from architecture to urban planning (eager to address some of the larger-scale systems questions that a section drawing didn’t quite get to), I am tremendously excited by the ways that cities and their partners are using demonstration projects as testing grounds for innovation and experimentation.  While there is undoubtedly value in singular sustainability efforts, such as weatherizing a building or greening a rooftop (these singular efforts add up to have tremendous impacts on city-wide outcomes), there seems to be an increased recognition that combining and integrating various systems may in fact be the key to scaling up, or at least getting a better handle on, sustainability.  By weaving various individual systems together—be it transportation, infrastructure, or energy—demonstration projects show us that cities can track, measure, and monitor the aggregate performance of systems that historically have worked in isolation.

At the Good Jobs, Green Jobs Regional Conference in Philadelphia last month, I had the opportunity to learn more about the Energy Efficient Buildings Hub (known until very recently as the Greater Philadelphia Innovation Cluster).  The EEB Hub is a “regional innovation cluster,” funded primarily by the Department of Energy with additional funding from the Economic Development Administration, the National Institute of Standards and Technology, and the Small Business Administration.  The mission of the EEB Hub is to improve the energy efficiency of buildings while promoting regional economic growth and job creation.  Twenty-two organizations, including DOE laboratories, academic institutions, community colleges, and private sector agencies are working together at Philadelphia’s Navy Yard to demonstrate the significant energy efficiency reductions that result from integrating the design, construction, commissioning, and operation of whole building systems.  By using the Navy Yard as a lab, the EEB Hub is modeling the types of energy (and cost) savings that can result from embracing partnerships, utilizing technology, and maintaining a holistic approach to building systems performance and analysis– all the while identifying policies to accelerate the market adoption of energy efficiency retrofits and actively creating and promoting “green” jobs throughout the Philadelphia region.

On a different scale, we see that cities are similarly experimenting with the impacts of concentrating (technology-driven) sustainable solutions to infrastructure, energy and transportation challenges.  During NLC’s International Sustainability Exchange to Germany and Sweden, Mayor Chris Coleman, of Saint Paul, spoke about the Energy Innovation Corridor.  An eleven mile stretch between the Twin Cities (adjacent to a light-rail line under construction) serves as a showcase of the cities’ clean energy and transportation efforts, including electric transportation startups; smart energy technologies; and advanced energy efficiency and renewable energy programs.  Local businesses, non-profit organizations, energy utilities, local governments, and residents are working together to develop the corridor into a model of integrated land use practices that the rest of the state, and nation, might one day emulate.  (This map shows the various demonstration projects taking place within the Corridor, including solar arrays, electric car charging stations, bike lanes, and residential retrofit projects.)  While I’m unsure of how cumulative impacts are currently measured within the corridor, it is exciting to see two cities and their constituents working towards and understanding the value of a land use model that intentionally pulls so many pieces together.

With rapidly emerging technologies that comprehensively measure and monitor data, cities and their partners have more flexibility to innovate and experiment.  Within this context, demonstration projects are perhaps the first tangible step towards proving that the long-term “success” of sustainability lies at the nexus of various singular initiatives.

The Latest in Economic Development

This week’s blog highlights the results of a new small business survey, identifies how occupational licenses potentially hurt job growth, explores Oregon’s economic gardening strategy, and looks at the “Whole Foods Effect” and the implications of its new store in Detroit. Comment below or send to common@nlc.org.

Get the last edition of “The Latest in Economic Development” here.

This week, Thumbtack.com and the Kauffman Foundation released a small business survey that ranks cities’ and states’ small business environments. A look into the findings reveals:

-          Licensing requirements were nearly twice as important as tax-related regulations in determining their state or city government’s overall business-friendliness.

-          An important predictor of small business friendliness was whether small business owners are aware of the state of local government offering training programs for small businesses.

-          Women were 9% more likely than men to feel supported by their state governments

Get the press release here, or the full report here.

The survey above finds that licensing requirements are important in determining business-friendliness; one example is occupational license requirements, which are a low-hanging regulatory fruit that could potentially boost employment if picked. Dick Carpenter and Lisa Knepper write that “Since the 1950s, the number of US workers needing an occupational license… has grown from one in 20 to nearly one in three.” What these requirements do is restrict supply by increasing barriers to entry for a whole host of jobs and professions, including barbers, interior designers, and message therapists. Carpenter and Knepper explain that the barriers “make it harder for people – particularly minorities and those of lesser means and with less education – to find jobs and build new businesses.” (Wall Street Journal)

The Grow Oregon Council is formally supporting an “economic gardening” strategy, launching its pilot program this past March.   Originating in Littleton, Colorado, and featured in NLC’s recent small business and entrepreneurship publication,  economic gardening focuses on developing home-grown, second-stage companies, rather than allocating resources to attract large businesses from outside the community. In Portland, where local “companies grew by 63.6 percent while nonresidents (headquartered outside of Portland) declined by 8.9 percent” from 1999 to 2009, pursuing and economic gardening strategy seems like a natural fit. One of the key factors of the strategy involves firms gaining playing field leveling market intelligence which Christine Hamilton-Pennell defines as “a process that enables growth-oriented companies to access and use high-level technical expertise and strategic market information to explore new markets and growth strategies.” (neighborhoodnotes.com)

Recent history has been kind to communities where Whole Foods has planted roots. This transformation, known as the “Whole Foods Effect,” has made its mark on communities in New Orleans, Washington DC, and Boston; can it happen in Detroit? Will Doig details why the grocer seems to have a knack for being a catalyst for economic and community development. First is the “seal of approval” Whole Foods brings to the neighborhood. Now known as a symbol of gentrification, when the retailer moves in, people take notice. Second is the “evidence of success that (Whole Foods) generates” by computing tangible metrics (foot traffic, consumer data, etc.) when it enters a market. Developers are able to access this data since Whole Foods is a public company, enabling them to justify further development of the area to potential investors. And third is the retailer’s knack for choosing neighborhoods that are already on their way up. In Midtown, where it plans to open its Detroit store, the average household income of new home buyers is the highest in the city; it is also where the College for Creative Studies is located, which is “packed with free-range foodies.” (Salon)

Cybersecurity: A Crucial Issue for Local Governments

Right now, Congress is considering a myriad of bills on cybersecurity.  The most pitched public debate has surrounded the private sector, civil liberty, and privacy concerns.  However, state and local government participation is crucial to securing our citizens’ safety.  That’s why NLC and other state and local organizations sent leading stakeholders in Congress a letter with “key principles and values” to consider in any cybersecurity legislation.

While the Administration has taken many steps on its own, new legislation is necessary to codify how federal, state, and local actors share information, and what steps the federal government can take to secure cyberspace.  That is why NLC passed a resolution at its 2011 Congress of Cities urging further federal action and intergovernmental collaboration to improve our defense against cyber threat at all levels.

The internet was built as an open resource sharing platform to foster innovation.  Forty years removed from its humble roots as an academic curiosity on a few university campuses and government labs, the internet has infested every facet of our lives.  With more than half of wireless phone subscribers now on a “smartphone,”  the only place it did not impact lives – when we walked out the front door – has officially been removed.

State and local governments are as reliant on the internet as their citizens.  Municipalities utilize the internet to ease access to city services such as driver’s licenses, manage employee affairs, help first responders communicate, and implement efficiencies in the delivery of everything from unemployment services to water and electricity.  While the internet has afforded us astounding conveniences and efficiencies, it also has forced us into a compromising situation.  If the services we rely on to control traffic lights and send colleagues and loved ones crucial information is built on an open platform built for sharing information, how do governments protect sensitive data and crucial systems from bad actors?

It’s an issue all those who provide services are coping with, and because of this dilemma, municipal governments are at risk.
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Does it Pay to Charge?

No one wants to pay to travel.  But if it means less traffic and quicker travel times, I could get on board with the idea.  In fact, I am on board.  I live in Montgomery County, Maryland where I have access to the recently opened MD 200, the Intercounty Connector, or ICC as it’s more commonly called.  This newly created highway connects various parts of Montgomery County to the northwestern parts of Prince George’s County in addition to several other highways, including Interstate 95.  Prior to the opening of ICC, these areas were only connected by busy major roads, complete with rush hour, traffic lights, school buses, Metro buses and accidents which, at times, would shut down roads.  The ICC is convenient to access and easy to use.  Fares, which vary based on the time of day, are paid via E-ZPass, which makes getting on and off the ICC virtually seamless.

MnPass, a very similar but slightly different system, offers for-pay travel for solo drivers on high occupancy vehicle lanes on two highway systems in the Minneapolis, Minnesota region.  Like the ICC, MnPass has a variable toll rate based on current traffic conditions and where trips start and end.  The lanes are free during off peak hours and for cars with more than one person and transit vehicles.  While fares are collected electronically, it is not via a nationally-used system such as E-ZPass.  The transponder for the MnPass system is available from the Minnesota Department of Transportation and costs drivers $1.50 a month to lease.  Still, the region is seeing a favorable response to the MnPass system in its usage and impact on congestion.

Charging for car travel – whether it is by tolling or congestion pricing – is fast becoming a way to manage traffic and generate revenues to operate and maintain transportation systems.  Drivers who do not want to pay to use the more congested routes can choose other modes of travel, such as transit or other roads, as is being demonstrated in Maryland and Minnesota.

But it doesn’t always work or have the desired implications.

Look at the floating bridges in the Seattle region, two bridges connecting similar areas, one free and one fee-based.  Once the toll was instituted on one of the bridges, traffic on that bridge dropped 40%.  However, traffic on the other bridge rose 10%.  Perhaps not the desired outcome?  As the author in this article about the Seattle bridges points out, charging for driving isn’t a burdensome tax, it’s an at-will fee for the use of a premium service.  The benefits of this method can impact the user, the collector of the fee (to use that to reinvest in the transportation system) and non-users who would presumably be traveling on less congested roads because there are people willing to pay to use other roads with the same access.  But in Seattle, this wasn’t the case, as the toll bridge just pushed traffic from one bridge to another.

It comes down to an argument of effectiveness – is tolling always a good option for managing traffic?  You would think so.  But when a cheaper (free!) option is so readily available (like the competing Seattle bridge), who would agree to pay?  And when it’s so blatantly in your face, it raises the issue of equity.  Is it fair to provide people who can afford to pay a toll with a reduction in congestion and punish those who can’t with more traffic?

There is no universal answer, and the effectiveness and equity of tolling options must be evaluated on a case-by-case basis.  This video clip, for example, makes the argument that while it is seemingly an unfair system, the generated revenues from the toll go back into the system to create benefits across the board for all users in the form of road repairs and improved maintenance to name a few.

But at the end of the day users will ultimately go with whatever option is most convenient for them – whether it is in the form of time or cost savings.