Sunday, December 20, 2015

Two Triad Cities: Comparing Greensboro and Winston-Salem

I have spent most of my life in the Triad, and have become familiar with the three large cities that give it that name, as well as the many other niche communities. I grew up in Lexington, NC, and now commute regularly between Greensboro and Winston-Salem for work. So, when I had the opportunity to sit with my District 4 city council representative Nancy Hoffmann at Scuppernong Books, I was pleased that she was interested in my experiences with and impressions of both cities.

Background

In order to understand some of the current differences between the two cities, I will provide a little bit of historical context. I apologize in advance to scholars and lifelong residents of both cities!

Winston-Salem

The city was founded in 1913 as the result of the merger between the towns of "Winston" and "Salem". The town of Salem was a Moravian settlement and one of the oldest communities in the Piedmont (going back to before the Revolution). The area has retained its distinct identity with the popular historical attraction of Old Salem and Salem Women's College. Until the turn of the 20th century, Tobacco had the largest footprint in its economy. One of the features of its downtown skyline is the old RJ Reynolds tobacco headquarters and factory.

The city has a population near 250k, of which a majority are White, but there is also a large  (nearly 40%) African-American minority. It also has a council-manager form of government similar to Greensboro's (see my previous post). Today some of its notable features are that it is the headquarters of Hanesbrands and BB&T, continues to have a thriving arts culture with the NC School of the Arts, and is home to the private University of Wake Forest.

Greensboro 

Founded in 1808, Greensboro as a City is older than Winston-Salem, but in terms of settled communities it is actually slightly younger. Similar to the Moravian history of Salem, Greensboro's New Garden area has a history as a Quaker settlement, of which Guilford College is an example of that legacy. In terms of industry, Greensboro had a larger concentration of Textiles, with firms such as Cone Mills and Burlington Industries playing a large role in its economic development.

Greensboro is a slightly larger city than Winston-Salem, with a population near 300k, and is also majority White with a large African-American minority. I have discussed some of the distinctive features of Greensboro in my previous post.

Modern Comparison

As someone who lives in Greensboro and works in Winston-Salem, I have noticed some of the differences, pros, and cons, of both areas.

Road Systems

Anyone who commutes between Greensboro and Winston-Salem can opine on the differences in the quality of the road systems in certain areas.

  • Winston-Salem
    • Highway 52 intersects both Business and Interstate 40 fairly close to downtown Winston-Salem.
    • The area where 52 intersects Business 40 is a known problem spot, and has been under continued construction for nearly a decade. 
    • Winston has no urban loop, like what one finds in Charlotte or Raleigh, which may less necessary due to its smaller size.
    • Winston has been experimenting with traffic circles in order to ease congestion in certain areas.
    • Aside from Business 40, Stratford Road and Hanes Mall Boulevard are also hot areas for shopping and dining, but the traffic system has not kept pace with their development, and accidents as well as volume contribute to significant delays.
    • Bonds passed in 2014 combined with DOT funding should continue to allow the city to improve its traffic situation.
  • Greensboro
    • Highway 40 passes under Wendover and Gate City Boulevard with relative ease, although there is some congestion in the northern party of the city where it meets with I-85.
    • Greensboro has a partially completed urban loop, and DOT funding should allow its full completion before the end of the decade.
    • Traffic congestion is possible on Wendover and Battleground Avenues, but it is normally brief and road capacities as well as stop light switching appear to be better when compared to Winston-Salem.
    • There's considerable construction along Gate City Boulevard towards High Point, and at sites where the loop is being completed, but the overall congestion and delay is less than that experience in Winston-Salem around 52 and Business 40. 
    • The downtowns of Winston and Greensboro both have a grid system, but the grid system is much more extensive in Greensboro and seems to go much further outside of downtown. 
Overall, I think the traffic system of Greensboro is ahead of Winston-Salem in terms of capacity and design, but both cities are making improvements.

Urban Revival

Both cities have experimented with reviving downtown life as a means of helping the whole city recover from the losses of their key industries. In these areas, both cities have shown some success while focusing on different areas. 
  • Winston-Salem
    • Winston has several large downtown convention centers that are excellent for large corporate gatherings. On several days out of the year I've seen the downtown flooded with employees from local and out-of town companies, which is good for business. 
    • Craft Brewing: Downtown Winston is home to Foothills Brewery, which is a popular local restaurant and brewing company. Overall, craft brewing has helped revive the downtown bar and dining scene. 
    • Innovation Quarter: This area is part of the former RJ Reynolds site. The City has spent a lot of time, money, and effort on recruiting technology firms such as INMAR, along with the University of Wake Forest, to fill this site with so-called New Economy jobs. I know several people who work in this area, and it has made a considerable amount of progress. Only time will tell, but this has certainly started to turn that section of the city around. 
    • Downtown Living: Several developers have also spent considerable resources on refashioning older downtown buildings into upscale apartments for downtown living. As a strategy for keeping younger people interested in information-type jobs and convenient living, it seems like a necessary investment. 
  • Greensboro


    • Greensboro lacks the large-scale convention center capacity that Winston-Salem has, at least for downtown. However, the plans for building larger Hotels may address this shortcoming in the near future.
    • Greensboro has ridden the Craft Brewing wave a lot further than Winston-Salem has thus far. With Natty Green's, the Pig Pounder, Red Oak Brewing, etc. it is in a similar league with Asheville in driving the Craft Brewing boom.
    • Greensboro has also experimented with using historical tax credits as a means of reviving some of its older downtown buildings for young people and new economy jobs. In terms of creating a better downtown experience, this has so far been successful.
    • The revival of Revolution Mills, is a hopeful story of success in the making analogous to the Innovation Quarter in Winston-Salem. 
    • In terms of Parks and Recreation, the Greensboro parks and Greenway currently exceed anything like what Winston-Salem has near its downtown, and Greensboro plans to continue their expansion. 
I think the City Government of Winston-Salem has had more direct involvement with their downtown revival than the City of Greensboro. This has advantages in terms of power and resources, but can have drawbacks in terms of debt loads for taxpayers and the economic sustainability of projects. Greensboro has taken a more indirect approach, with the use of historical tax credits, partnerships with local developers, and the development of the Greenway as a way to create an atmosphere that will draw more businesses to the City.  

Conclusion

I enjoyed the opportunity to meet Councilwoman Hoffmann (who set me off on this comparison). For those of you in District 4, I will have you know that she answers your emails at 3am, because she apparently requires very little sleep! Overall, I'm pleased to live in Greensboro and commute to Winston-Salem (although I hope the commute to Winston will improve in the near future!). I also applaud the effort both cities have made to find a new competitive focus and to revive their downtowns. One of my concerns is that, during a period of economic expansion, it is sometimes difficult to find out what approaches and organizations are truly profitable. To the extent that the City Government subsidizes or invests heavily in a private enterprise, it may not be until the next recession that we discover that our investment (a taxpayer investment) was a poor one. Hopefully this admittedly brief analysis will help others to organize their own thoughts, and to keep the revival going through the good times and the inevitable bad times. 

Friday, September 25, 2015

City Management and Economic Development in Greensboro, NC


I devote my time on this blog to interpretations of classic books related to economics. However, I think it is also important to focus on tangible applications of economics. After all, economics boils down to real people making decisions about real things (roads, buildings, i-phones, banks, etc.). To that end, I'd like to spend some time on my own town of Greensboro, NC. The current City Manager, Jim Westmoreland, was kind enough to sit down with me for lunch, where we discussed many of the recent economic developments in Greensboro. I'm going to combine our discussion with some information on the city's institutions to give an overall picture of how Greensboro is run and in what direction(s) it seems to be headed.
North Downtown

Some Institutions of Greensboro 

The Council-Manager Form of Government

The first characteristic of Greensboro's government than an ordinary citizen would need to understand is that there is a separation between political leadership and the city employee leadership. This is a specific style of city government called the "Council-Manager" system. Under this system, a city council and mayor are elected by the citizens, but this council then appoints a City Manager to oversee government services (water, sewer, roads, police, etc). This differs from the other common system, where the Mayor is both the political and administrative head of the city government. Mr. Westmoreland, in this case, is appointed by the Council and serves at their pleasure. 

The Greensboro City Council

The City Council is a unique governing body, which has been the product of decades of referendums and compromises. It currently consists of nine people. Five are elected from districts that span the city, while the rest (including the Mayor) are elected by the general population (which is called At Large). In the past, the entire council and mayor were elected by the At Large method, and it wasn't until the 1980s that a hybrid district/at large system was set in place. The question of the balance between district and At Large representation remains in flux to this day.

City Departments

Lake Brandt Reservoir
While this isn't meant to be exhaustive, the City has many departments under the purview of the City Manager. They are funded largely by user fees and property taxes, and I will list them by size according to the Budget. In 2016 it was about $488 millions dollars or about $1,700 per resident based on a population estimate of 290 thousand. 
  1. Infrastructure: This is 53% of the budget, and consists of Water, Sewer, Road, Garbage, and Transportation expenses. It's funding comes primarily from user fees e.g. water bills.
  2. Public Safety: 27% of the budget consisting of police, fire and 911. Greensboro's fire department has a Class I ISO rating, which translates into lower insurance costs for homeowners and landlords. 
  3. General Government and Debt Expense and Other: The remaining 13% funds administrative functions and interest/principal payments on debts from bond referendums as well as other borrowing. Greensboro's bonds have a AAA rating, which means borrowing costs are low. 
  4. Community Service: 7% of the budget, goes towards the library system, park system, human relations, and neighborhood development. Greensboro has a major library downtown and six satellite branches. Also funded are six major parks, three lake parks, and numerous neighborhood parks and greenways. 
Education

UNCG Campus
The city of Greensboro is unique it terms of the structure of the education system and the large number of higher education institutions. It should be noted that there is no separate City school system (it was absorbed by the county in past decades). In terms of higher education, there are two major public universities within the city limits (UNC Greensboro and NC A&T), and three private institutions (Bennett College, Guilford College, and Greensboro College). In terms of specialty educational institutions, Elon law school and Guilford Technical Community College also reside near or within the city limits.

The Community Foundation of Greater Greensboro (CFGG)

CFGG is a non-profit organization whose mission is to strengthen the Greensboro community. This mission sounds purposefully broad, because it engages in almost every imaginable area of Philanthropy. Education, the arts, hunger, women's health, parks and recreation, and many other areas are the target of this large endowment fund. 

Economic Development in Greensboro

The list of institutions certainly isn't exhaustive, and neither are the many projects designed to increase the wealth of the city residents, but discussing a few of them with Mr. Westmoreland left me with an impressive picture of what the next few years could bring. 
  1. The Greensboro Urban Outer Loop: A North Carolina Department of Transportation Project: The Loop has been decades in the making, and its purpose is to complete a major four lane highway that circles the City of Greensboro. At present, major interstates I-40 (East-West) and I-85 (North-South) funnel a great deal of traffic close by downtown. During rush hour, this area can be come quite congested. Part of the loop has already been constructed, with another major round scheduled to be completed in 2018, and a final round sometime in the early 2020s. This will make Greensboro one of only three major cities in NC with a similar highway loop. It should ease overall traffic and make access to the airport and other areas of the city quicker. 
  2. Greensboro Airport (GSO)
  3. The Tanger Performing Arts Center and Lebauer Park: Two large adjacent projects are in the works downtown, the Performing Arts Center and Lebauer Park. The city is overseeing construction of the Arts Center, while CFGG is managing construction of the park. These facilities sit next to each other downtown near the bottom right of the image above. The Arts Center will increase the space downtown for large arts events such as plays and festivals, while the park will allow more space for community enjoyment in general. 
  4. Craft Brewing and Burgers: I've personally been impressed with the number and quality of craft beer and burger joints that have been springing up in the city over the past few years. To name a few: Natty Green's, Gibb's Hundred Brewing Company, and the Pig Pounder have been some of my favorite breweries, with Hops Burgers and Burger Warfare some of my favorite newer burger spots. 
  5. Downtown Development: Aside from the Arts Center and Lebauer Park, there are plans for continued development downtown. Some projects that Mr. Westmoreland mentioned included a Wyndham Hotel, which would dovetail nicely with the Wyndham Championship by connecting visitors with the tournament to downtown. There are also plans for continued construction of high-end apartments near the relatively new Grasshopper Stadium, as well as an additional hotel. With hotel occupancy rates near all-time highs, these appear to be wise investments. 
  6. Airport Expansion: Outside of Raleigh and Charlotte, the Piedmont Triad International Airport (GSO) is another asset of the city that continues to receive attention. The completion of the loop should make it easier to reach, it is the corporate headquarters of HondaJet, and there are plans to add an expanded shopping and dining center close to its location. 
  7. Say Yes to Education: As of September 2015, Guilford County was selected to be a Say Yes community. This will create an endowment to help provide after school activities for children and to provide last dollar scholarships for those accepted to institutions of higher education. Given the large footprint of higher education in Greensboro already, this should bode well for the community overall. 
  8. Revolution Mills: I visited this location, which was a major manufacturing center of the Cone Mills empire. It was abandoned in the past several decades as manufacturing moved overseas, causing Greensboro to struggle as other cities did with job losses and a declining tax base. However, this large set of structures is being renovated for apartments and office space. Not only do I think the history of the space will give it a unique flavor, but it may also serve as an example of the ability of Mill towns to finally recover from the economic damage of the 1980s and early 1990s. 
My Lunch Lessons

I could describe my lunch with the City Manager with one word - formative. I don't mean that he covered every topic I've mentioned here in detail (some of it I've actually heard him cover at other events), but there was definite value in sitting down and listing all the things going on in the city. Some of my observations were the following:
  • Notice that most, if not all of these developments are not the sole initiative of the City of Greensboro. They are composed of an entire orchestra of non-profits, private corporations, state entities, schools, churches, and private individuals. 
  • Many of these projects have been decades in the making, and are the result of not one person or one career, but many people over many careers. 
  • While some of the projects are complete or nearly complete, many are still under construction.
  • They are not the only projects that are currently possible, nor should we forget what they will make possible for the city in the coming decades.
  • Individuals in City Government will sit down and talk to you if you ask. 
  • I wonder what Greensboro is going to look like in 2025!?
Mr. Westmoreland underscored the importance of communication between all these groups, and a hope that they will be able to work together to keep Greensboro moving in a positive direction. This brings me back to a fundamental economic lesson, which is that: real wealth is built among individuals freely engaging in mutually beneficial transactions of goods and services. Even at the small level of a City, one can see the incredibly complex structure of public and private entities that these individuals act through to make this wealth building possible (material as well as cultural). For those who participate in or lead these institutions, I hope knowing this will serve as a reminder that no one body or interest has all the answers or knows the whole story of the community, and that they are far more effective when they peak over the fence every once in a while to see how their neighbors are doing. 

Monday, August 31, 2015

Hazlitt in One Lesson: Or, How I Learned to Stop Worrying and Love the Market




Although this book may be a little dated (first published in 1946), let me first say that in terms of brevity and clarity, it is a wonderful introduction to Economics. You can purchase it here. For the casual reader, or the die-hard Econometrician that's gotten so far into proofs about the consistency of esoteric estimators under never-to-be-satisfied conditions, it's a nice reminder of why carefully reasoned economic analyses are important.

The book examines and unravels common economic fallacies by showing them to be violations of a common lesson, which is: "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all group." (pp. 17). Some of these fallacies include the following:

  1. The Broken Window Fallacy: This is the belief that destructive activities are necessarily beneficial to society, because they create business. Hazlitt uses the case of a child who breaks a window, which then must be replaced by the window-maker, who may use the proceeds to buy shoes from the shoemaker etc. etc. While this may seem like destruction creates business, what is ignored is what the window owner might have done if he hadn't been forced to replace the window. We could create the same chain of transactions, only these would be voluntary, and in all likelihood represent a more efficient chain of production. Thus, from burning crops to destroyed homes in the aftermath of WWII, he argues that those who see this as a boon for new business are mistaken, because they ignore what might have happened instead.

  2. Forgetting that Public Works Require Taxes: This might fall under ignore the "There's no such thing as a free lunch," dictum. Government spending is usually thought of as being financed through two channels:
    • Taxes: money taken directly from the public by adding on to the price of goods, charging fees, taxing income, etc. 
    • Bonds: borrowing money through financial institutions.

    Hazlitt points out that taxes must come directly from the public (reducing their choices of consumption). Furthermore, the bonds must eventually be repaid, and the only way to repay them is...some form of tax on the public. So we must remember, under normal circumstances, an increase in government spending comes at the cost of a decrease in private spending. It's easy to see the jobs, roads, bridges, etc. that this can create, but we also shouldn't forget those things other people might have chosen to build or buy if those resources had never been diverted. 

  3. The Limited Work Fallacy: This fallacy shows up mostly on the employment side. In short, workers throughout the ages have been afraid of technology and machines, because they are afraid that as their jobs are automated or production becomes easier, that they themselves become less valuable or necessary. This had led to laws that can severely limit work hours, make the production of some goods purposefully cumbersome, or has led to outright violence where machines are destroyed. Hazlitt, however, reminds us that the purpose of economics is the study of scarcity, the simple fact that humans seem to have unlimited wants but limited means with which to meet them. It seems absurd then to think that there's some limited amount of work. If machines make work easier, then it seems more logical that workers would move on to other occupations where this isn't the case. There are also cases, as we commonly saw in the industrial revolution, where the machines required armies of workers to service them, and increased the demand for labor. Thus, while painful adjustments sometimes occur when new machines or technologies are implemented, there are no signs yet that production is so great as to satisfy mankind's unquenchable thirst for more stuff!

  4. Forgetting that Prices and Profits are Signals: If you've kept up this long, I promise I'm going to wrap it up. This last point is my personal summary of a lot of his case studies. There is a knee jerk reaction in many circles to see "high" prices and "high" profits as somehow immoral. By "high" we often mean above what they have been in the recent past. Hazlitt makes an often overlooked and valuable point that before we judge a price or profit margin, we should attempt first to understand why it came to be this way. Rising prices usually indicate an increase in demand for a product, or an increase in the cost to produce it (limes may get more expensive if there's a bad crop harvest, for example). Rising profits can indicate the same thing, or that a firm or industry has found a more cost effective way of producing goods at the same price. While companies can use things like market power, government fiat, or asymmetric information to achieve high prices and/or profits in the short-term (and these are mostly bad), it is usually not a long-term phenomenon. So before we attempt to "fix" a price or levy a tax on "windfall profits", we should first try to understand why they currently exist. What are the prices and profits telling us?
There's a lot more in the book, so I would encourage you read it for yourself. Also, at the end, I'll insert my personal take which may explain my tongue-in-cheek title. While I enjoyed the book and think the arguments are important and meaningful, I think the author is often guilty of whitewashing some of the real world complications that occur while we fight our way towards the "long run".

  • Maybe breaking windows and burning crops doesn't create prosperity, but what about that piece of property with the old gas station and ruptured gas tank under the ground? Who wants to buy it and convert it into its next best use? Should we charge the current owner for the cleanup, who only remembered that his father closed it 20 years ago? What if he/she can't pay?
  • All government spending must eventually be paid by business. But when millions of people are temporarily unemployed and banks are unwilling to finance many business ventures because they're unsure how long the downturn will last, is leaving millions of hours of manpower and billions of dollars in capital idle while the private sector sorts its prices the best our public officials can do?
  • For the time being, our projections may indicate that moving manufacturing to another nation will increase profits for shareholders and lower costs for consumers, while only a segment of the population will be unemployed and require retraining in another line of work. But what if the wages were kept low by pressure from a corrupt and undemocratic government? What if the manufacturing base were moved to a nation that later seized it and used it to make war on the nation that financed that very venture? Can we ask our own displaced workers to quietly accept the loss of their own earning power so their neighbor can buy what they used to make for a lower price? 
These situations are not hypothetical. They have occurred in the past, occur today, and will occur in the future. So, my takeaway is to return to Hazlitt's point of focusing on the long-term consequences of all involved parties, and to know when we can count on the time-tested rules of commerce to apply, and when we should be skeptical.